Tennessee Valley Authority 10-K

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in millions except where noted) The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader understand the Tennessee Valley Authority ("TVA"), its financial condition, results of operations, and cash flows, and its present business environment. The MD&A is provided as a supplement to, and should be read in conjunction with, TVA's consolidated financial statements and the accompanying notes thereto contained in Item 8, Financial Statements and Supplementary Data of this Annual Report on Form 10-K for the fiscal year ended September 30, 2025 (the "Annual Report"). See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in TVA's Annual Report on Form 10-K for the year ended September 30, 2024, filed with the Securities and Exchange Commission ("SEC") on November 13, 2024, for a discussion of variance drivers for the year ended September 30, 2024, as compared to the year ended September 30, 2023. The MD&A includes the following sections: • Business and Mission — a general description of TVA's business, objectives, strategic priorities, and core capabilities; • Executive Overview — a general overview of TVA's activities and results of operations for 2025; • Results of Operations — an analysis of TVA's consolidated results of operations for 2024 and 2025; • Liquidity and Capital Resources — an analysis of cash flows, a description of aggregate contractual obligations, and an overview of financial position; • Key Initiatives and Challenges — an overview of current and future initiatives and challenges facing TVA; • Critical Accounting Estimates — a summary of significant estimates, judgments, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes; • Legislative and Regulatory Matters — a summary of laws and regulations that may impact TVA; and • Risk Management Activities — a description of TVA's risk governance and exposure to various market risks. Business and Mission Business TVA operates the nation's largest public power system. At September 30, 2025, TVA had 62 directly served customers, which include seven federal agency customers, and 153 local power company customers ("LPCs") that serve approximately 10 million people in parts of seven southeastern states. TVA generates nearly all of its revenues from the sale of electricity, and in 2025 revenues from the sale of electricity totaled $13.5 billion. As a wholly-owned agency and instrumentality of the United States ("U.S."), however, TVA differs from other electric utilities in a number of ways: • TVA is a government corporation. • The area in which TVA sells power is limited by the Tennessee Valley Authority Act of 1933, as amended (the "TVA Act"), under a provision known as the "fence"; however, another provision of federal law known as the Anti-Cherrypicking Amendment ("ACPA") generally protects TVA from being forced to provide access to its transmission lines to others for the purpose of delivering power to customers within substantially all of TVA's defined service area. • The rates TVA charges for power are set solely by the TVA Board of Directors ("TVA Board") and are not set or reviewed by another entity, such as a public utility commission. In setting rates, however, the TVA Board is charged by the TVA Act to have due regard for the primary objectives of the TVA Act, including the objective that power be sold at rates as low as feasible. 54 Table of Contents • TVA is not authorized to raise capital by issuing equity securities. TVA relies primarily on cash from operations and proceeds from power program borrowings to fund its operations and is authorized by the TVA Act to issue bonds, notes, or other evidences of indebtedness (collectively, "Bonds") in an amount not to exceed $30.0 billion outstanding at any given time. Although TVA's operations were originally funded primarily with appropriations from Congress, TVA has not received any appropriations from Congress for any activities since 1999 and, as directed by Congress, has funded essential stewardship activities primarily with power revenues. TVA's Mission of Service TVA was built for the people, created by federal legislation, and charged with a unique mission - to improve the quality of life in a seven-state region through the integrated management of the region's resources. TVA's mission focuses on three key areas: ENERGY ENVIRONMENT ECONOMIC DEVELOPMENT • Energy — Delivering reliable and low cost energy; • Environment — Caring for the region's natural resources; and • Economic Development — Creating sustainable economic growth. While TVA's mission has not changed since it was established in 1933, the climate in which TVA operates continues to evolve. The business and economic environment has become more challenging due to economic conditions, changing environmental standards, new technologies, and emerging, non-traditional competition. TVA is focused on unleashing American energy, while working together with partners to meet electricity needs, protect resources, and grow the region's economy. TVA's mission sets the stage for its strategic planning process that includes strategic priorities, strategic elements, initiatives, and scorecards for performance designed to provide clear direction for improving TVA's core business. TVA's five strategic priorities are below. TVA's strategic priorities may be revisited for future years once a Board quorum is restored. Linking the Mission to Performance TVA has formulated key performance measures to support its strategic priorities. The intent of these measures is to align employees to TVA's mission by focusing its collective efforts on operational excellence, fiscal responsibility, economic development, and environmental stewardship. The measures are designed to promote teamwork, encourage high performance behaviors, and motivate TVA employees to achieve goals aligned with TVA's mission and values. The 2025 corporate results compared with targets for these key measures are reflected in the chart below, and the subsequent chart reflects the 2026 approved corporate measures. See Part III, Item 11, Executive Compensation — Compensation Discussion and Analysis for information regarding how the 2025 measures are calculated. 55 Table of Contents 2025 Corporate Measure Weight Actual Threshold Target Stretch Strategic Business Unit ("SBU") Controllable / Operating and Maintenance ("O&M") and Base Capital Spend ($ millions) (1) 40% $4,623 $5,187 $5,061 $4,935 Transmission Performance Indicator (2) 15% 94 50 100 200 Nuclear Performance Indicator (3) 15% 9.84% 2.77% 2.00% 1.23% Power Operations Performance Indicator (4) 15% 193 50 100 200 Serious Injury Incident Rate (5) 15% 0.01 0.04 0.02 0.00 Notes (1) Strategic Business Unit ("SBU") Controllable Operating & Maintenance ("O&M") and Base Capital Spend equals the total Non-Fuel O&M and Base Capital expenses for corporate and operational SBU organizations (excludes Board of Directors). (2) Transmission Performance Indicator is an aggregate measure of the overall reliability of TVA's transmission system. (3) The Nuclear Performance Indicator is the Annualized Online Reliability Loss Factor, which is the 12-month ratio of all generation losses minus refueling outage ("RFO") and exempt losses to reference energy generation minus RFO and exempt losses in a normal fuel cycle period, per standard industry guidelines. This measure monitors performance between refueling outages to obtain high unit and energy production reliability. (4) The Power Operations Performance Indicator is an aggregate measure of the overall reliability of TVA's power operations generation fleet based on key performance measures in Gas, Hydro, and Coal that are intended to ensure that TVA's fleet of power operations generation assets is available and reliable to meet system demand. (5) The Serious Injury Incident Rate is a mathematical calculation used by Edison Electric Institute that quantifies the extent of injury for serious injuries and fatalities from events within the control of the employee and/or the employer. 2026 Corporate Measure (1) Weight Threshold Target Stretch SBU Controllable O&M and Base Capital Spend 40% 2% SBU O&M / 4% Capital Over Budget 2026 Budget 2% SBU O&M / 4% Capital Under Budget Serious Injury Incident Rate 15% 0.03 0.01 0.00 Transmission Performance Indicator 15% 50 100 200 Generation Performance Indicator 15% 50 100 200 Nuclear Performance Indicator 15% Equidistant from Target 2% Comparable Fleet Top Quartile 24-month average as of September 2025 Note (1) All measures are the same as 2025; however, the Power Operations Performance Indicator is now named the Generation Performance Indicator. Executive Overview TVA's operating revenues were $13.7 billion and $12.3 billion for the years ended September 30, 2025 and 2024, respectively. Operating revenues increased for the year ended September 30, 2025 as compared to the prior year, primarily as a result of higher effective fuel rates, higher effective base rates, and increased sales volume. Higher effective fuel rates were due primarily to using higher cost coal and natural gas generation due to less availability of nuclear generation as compared to the same period of the prior year. Effective base rates were higher primarily due to the TVA Board of Directors' ("TVA Board") action to approve a 5.25 percent wholesale base rate increase effective October 1, 2024. The increased sales volume was primarily driven by higher sales to residential and small commercial and industrial customers as well as increases within the data processing, hosting, and related services sector. Total operating expenses increased $1.0 billion for the year ended September 30, 2025, as compared to the prior year, primarily due to an increase in fuel and purchased power expense. Fuel and purchased power expense increased $732 million for the year ended September 30, 2025, as compared to the same period of the prior year, primarily due to higher demand for purchased power as a result of less availability of nuclear generation, higher effective fuel rates, and higher purchased power market prices. Depreciation and amortization expense increased $133 million primarily as a result of increases in the amortization expense of decommissioning costs recovered in rates and amortization expense of finance leases, the decision to retire Kingston Fossil Plant ("Kingston"), and additions to net completed plant. In addition, there was a $76 million increase in Operating and maintenance expense primarily due to increases in payroll and benefit costs related to severance costs associated with Enterprise Transformation Program ("ETP") efforts, labor escalation for cost of living increases, and higher medical claims, partially offset by a decrease in nuclear outage expense primarily due to fewer nuclear refueling outages. Commercial operations began on Johnsonville Aeroderivative Combustion Turbine Units ("CTs") 21-30 in 2025, and TVA has ongoing natural gas projects at its Cumberland Fossil Plant ("Cumberland") site and Kingston site, an aeroderivative CT project at TVA's Allen CT site, and a new Caledonia simple cycle CT project on TVA land. TVA is also evaluating natural gas projects for the replacement generation for the second unit at Cumberland and a new CT project at TVA's Lagoon Creek site. In the third quarter of 2025, TVA submitted a construction permit application to the Nuclear Regulatory Commission ("NRC") for a BWRX-300 reactor at the Clinch River Nuclear Site, and in July 2025, the NRC accepted the application for review. On January 22, 2025, TVA reached an all-time record high peak power demand of approximately 35,430 megawatts ("MW"). This peak was over 800 MW greater than TVA's previous all-time peak set in January 2024. 56 Table of Contents TVA's economic development efforts and programs continued to help attract or expand businesses and industries in the Tennessee Valley. These companies announced projected capital investments of over $6.6 billion and are expected to create 9,316 jobs and retain 43,254 jobs. These amounts are forward-looking and are subject to various uncertainties. Amounts may differ materially based upon a number of factors, including, but not limited to, economic downturns or recessions. See Forward-Looking Information and Part I, Item 1A, Risk Factors for a discussion of additional factors, and see Part I, Item 1, Business — Economic Development Activities for definitions of "new jobs" and "retained jobs." Results of Operations Sales of Electricity Sales of electricity were 167,612 million and 162,933 million kilowatt hours ("kWh") for 2025 and 2024, respectively. The total sales of electricity in 2025 included 99 thousand kWh of pre-commercial generation at Johnsonville Aeroderivative CT Units 21-30. The total sales of electricity in 2024 included 137 thousand kWh of pre-commercial generation at Paradise CTs 5-7. TVA sells power at wholesale rates to LPCs that then resell the power to their customers at retail rates. TVA also sells power to directly served customers, consisting primarily of federal agencies and customers with large or nonstandard loads. In addition, power exceeding TVA's system needs is sold under exchange power arrangements with certain other power systems. The following chart compares TVA's sales of electricity by customer type for the years ended September 30, 2025 and 2024: Sales of Electricity For the years ended September 30 (millions of kWh) 57 Table of Contents The following charts show a breakdown of TVA's energy load: Note Information included in the charts above was derived from energy usage of directly served customers and customers served by LPCs during calendar year ("CY") 2024, and these graphs will continue to be updated on a CY basis. Weather affects both the demand for TVA power and the price for that power. TVA uses degree days to measure the impact of weather on its power operations. Degree days measure the extent to which the TVA system 23-station average temperatures vary from 65 degrees Fahrenheit. Degree Days Variation from Normal Change from Prior Period 2025 Normal Percent Variation 2024 Normal Percent Variation Change Percent Change Heating Degree Days 2,888 3,132 (7.8) % 2,801 3,152 (11.1) % 87 3.1 % Cooling Degree Days 1,888 1,824 3.5 % 1,954 1,824 7.1 % (66) (3.4) % Sales of electricity increased approximately three percent for the year ended September 30, 2025, as compared to the prior year. The increased sales volume was primarily driven by higher sales to residential and small commercial and industrial customers as well as increases within the data processing, hosting, and related services sector. Financial Results The following table compares operating results for 2025 and 2024: Summary Consolidated Statements of Operations For the years ended September 30 (in millions) 2025 2024 Change Percent Change Operating revenues $ 13,672 $ 12,314 $ 1,358 11.0 % Operating expenses 11,103 10,086 1,017 10.1 % Operating income 2,569 2,228 341 15.3 % Other income, net 92 71 21 29.6 % Other net periodic benefit cost 105 98 7 7.1 % Interest expense 1,196 1,066 130 12.2 % Net income $ 1,360 $ 1,135 $ 225 19.8 % Operating Revenues. Operating revenues for the years ended September 30, 2025 and 2024, were $13.7 billion and $12.3 billion, respectively. The following table compares TVA's operating revenues for the periods indicated: 58 Table of Contents Operating Revenues by Customer Type For the years ended September 30 (in millions) 2025 2024 Change Percent Change Operating revenues Local power companies $ 12,334 $ 11,138 $ 1,196 10.7 % Industries directly served 1,017 868 149 17.2 % Federal agencies and other 139 125 14 11.2 % Revenue capitalized during pre-commercial plant operations (1) (4) (3) (1) 33.3 % Other revenue 186 186 — — % Total operating revenues $ 13,672 $ 12,314 $ 1,358 11.0 % Note (1) Represents revenue capitalized during pre-commercial operations at Johnsonville Aeroderivative CT Units 21-30 in 2025 and Paradise CT Units 5-7 in 2024. TVA's two largest LPCs — Memphis Light, Gas and Water Division ("MLGW") and Nashville Electric Service ("NES") — have contracts with a five-year and a 20-year termination notice period, respectively. Sales to MLGW and NES accounted for nine percent and eight percent, respectively, of TVA's total operating revenues during both the years ended September 30, 2025 and 2024. TVA's rate structure uses pricing signals to indicate seasons and hours of higher cost to serve its customers and to capture a portion of TVA's fixed costs in fixed charges. The structure includes three base revenue components: time of use demand charges, time of use energy charges, and a grid access charge ("GAC"). The demand charges are based upon the customer's peak monthly usage. The energy charges are based on time differentiated kWh used by the customer. Both of these components can be significantly impacted by weather. The GAC captures a portion of fixed costs and is offset by a corresponding reduction to the energy rates. The GAC also reduces the impact of weather variability to the overall rate structure. TVA has a Partnership Agreement option that better aligns the length of LPC power contracts with TVA's long-term commitments. Under the partnership arrangement, the LPC power contracts automatically renew each year and have a 20-year termination notice. The partnership arrangements can be terminated under certain circumstances, including TVA’s failure to limit rate increases to no more than 10 percent during any consecutive five-fiscal-year period, as more specifically described in the agreements. Participating LPCs receive benefits including a 3.1 percent wholesale bill credit in exchange for their long-term commitment, which enables TVA to recover its long-term financial commitments over a commensurate period. As of September 30, 2025, 148 LPCs had signed the 20-year Partnership Agreement with TVA. In addition to base revenues, the rate structure includes a separate fuel rate that includes the costs of natural gas, fuel oil, purchased power, coal, emission allowances, nuclear fuel, and other fuel-related commodities; realized gains and losses on derivatives purchased to hedge the costs of such commodities; and payments to states and counties in lieu of taxes ("tax equivalents") associated with the fuel cost adjustments. See Part I, Item 1, Business — Rates — Rate Methodology . The changes in revenue components are summarized below: Changes in Revenue Components For the years ended September 30 (in millions) 2025 2024 Change Percent Change Base revenue Energy revenue $ 5,471 $ 5,065 $ 406 8.0 % Demand revenue 4,238 3,891 347 8.9 % Grid access charge 646 622 24 3.9 % Long-term partnership credits for LPCs (231) (215) (16) 7.4 % Other charges and credits (1) (709) (638) (71) 11.1 % Total base revenue 9,415 8,725 690 7.9 % Fuel cost recovery 4,068 3,398 670 19.7 % Off-system sales 7 8 (1) (12.5) % Pre-commercial operations (2) (4) (3) (1) 33.3 % Revenue from sales of electricity 13,486 12,128 1,358 11.2 % Other revenue 186 186 — — % Total operating revenues $ 13,672 $ 12,314 $ 1,358 11.0 % 59 Table of Contents Notes (1) Includes economic development credits to promote growth in the Tennessee Valley, hydro preference credits for residential customers of LPCs, and demand response credits allowing TVA to reduce industrial customer usage in periods of peak demand to balance system demand. See Note 18 — Revenue. (2) Represents revenue capitalized during pre-commercial operations at Johnsonville Aeroderivative CT Units 21-30 in 2025 and Paradise CT Units 5-7 in 2024. Operating revenues increased $1.4 billion for the year ended September 30, 2025, as compared to the prior year, primarily due to a $690 million increase in base revenue. The $690 million increase in base revenue was driven by a $400 million increase attributable to higher effective base rates and a $290 million increase attributable to higher sales volume. The increase in effective base rates was primarily due to the TVA Board action to approve a 5.25 percent wholesale base rate increase effective October 1, 2024. The higher sales volume was driven primarily by higher sales to residential and small commercial and industrial customers as well as increases within the data processing, hosting, and related services sector. In addition, there was a $670 million increase in fuel cost recovery revenue driven by a $572 million increase attributable to higher effective fuel rates and a $98 million increase attributable to higher sales volume. The higher effective fuel rates were due primarily to using higher cost coal and natural gas generation due to less availability of nuclear generation as compared to the prior year. See Sales of Electricity above for further discussion of the change in the volume of sales of electricity and Operating Expenses below for further discussion of the change in fuel expense. Operating Expenses. Operating expense components as a percentage of total operating expenses for 2025 and 2024 consisted of the following: Operating Expenses For the years ended September 30 (in millions) 2025 2024 Change Percent Change Operating expenses Fuel $ 2,376 $ 2,169 $ 207 9.5 % Purchased power 2,106 1,581 525 33.2 % Operating and maintenance 3,717 3,641 76 2.1 % Depreciation and amortization 2,271 2,138 133 6.2 % Tax equivalents 633 557 76 13.6 % Total operating expenses $ 11,103 $ 10,086 $ 1,017 10.1 % 60 Table of Contents The following table summarizes TVA's expenses for various fuels for the years indicated: Fuel Expense for TVA-Operated Facilities (1) For the years ended September 30 (in millions) Fuel Expense By Source Cost per kWh (4) 2025 2024 2025 2024 Coal (2) $ 826 $ 770 3.27 3.53 Natural gas and/or oil-fired (3) 1,244 1,062 2.95 2.76 Nuclear fuel 288 341 0.51 0.52 Total fuel $ 2,358 $ 2,173 1.91 1.73 Notes (1) Excludes effects of the fuel cost adjustment in the amounts of $18 million and $(4) million for the years ended September 30, 2025 and 2024, respectively. (2) Fuel expense related to oil consumed for startup at coal-fired facilities was $32 million and $23 million for the years ended September 30, 2025 and 2024, respectively. (3) Fuel expense related to oil consumed for generation at natural gas and/or oil-fired facilities was $6 million and $8 million for the years ended September 30, 2025 and 2024, respectively. (4) Total cost per kWh is based on a weighted average. Fuel expense increased $207 million for the year ended September 30, 2025, as compared to the prior year. An increase of $194 million was due primarily to higher effective fuel rates related to using higher cost coal and natural gas generation due to less availability of nuclear generation as compared to the prior year. Additionally, fuel expense increased $22 million due to the recovery of prior year deferrals of unplanned coal costs, and gas prices being lower than forecasted during the summer of 2025. Partially offsetting these increases was a decrease of $9 million due to more availability of hydro generation as compared to the prior year. Purchased power expense increased $525 million for the year ended September 30, 2025, as compared to the prior year. This increase was primarily due to higher demand for energy and less availability of TVA nuclear generation, resulting in an increase of $305 million. Additionally, purchased power expense increased $173 million due to higher purchased power market prices as compared to the prior year. Finally, purchased power expense increased $47 million due to the recovery of prior year deferrals of unplanned purchased power costs, and gas and purchased power prices being lower than forecasted during the summer of 2025. Operating and maintenance expense increased $76 million for the year ended September 30, 2025, as compared to the prior year. This increase was primarily due to $136 million of increased payroll and benefit costs primarily due to labor escalation for cost of living increases, severance costs associated with ETP efforts, and higher medical claims. Partially offsetting these increases was a $48 million decrease in outage expense primarily due to fewer nuclear refueling outages. Depreciation and amortization expense increased $133 million for the year ended September 30, 2025, as compared to the prior year. The increase was primarily driven by an increase of $43 million related to amortization expense of decommissioning costs recovered in rates and amortization expense of finance leases and an increase in depreciation expense of $18 million related to the decision in April 2024 to retire Kingston. Additionally, there was an increase due to depreciation of additions to net completed plant. See Note 1 — Summary of Significant Accounting Policies — Property, Plant, and Equipment, and Depreciation — Depreciation . Tax equivalents expense increased $76 million for the year ended September 30, 2025, as compared to the prior year. This change was primarily driven by an increase in TVA's revenue from sales of electricity in 2024, which is used as the basis for calculating tax equivalent expense. Additionally, tax equivalents expense increased due to an increase in the tax equivalents collected in the fuel cost recovery. 61 Table of Contents Generating Sources. The following tables show TVA's generation and purchased power by generating source as a percentage of all electrical power generated and purchased (based on kWh) for the periods indicated: Total Power Supply by Generating Source For the years ended September 30 (millions of kWh) 2025 2024 Nuclear 56,157 33 % 65,235 39 % Natural gas and/or oil-fired (1) 42,013 24 % 38,390 23 % Coal-fired 25,180 15 % 21,752 13 % Hydroelectric 13,741 8 % 12,284 7 % Total TVA-operated generation facilities (2)(3) 137,091 80 % 137,661 82 % Purchased power (natural gas and/or oil-fired) (4) 17,405 10 % 17,144 11 % Purchased power (other renewables) (5) 3,267 2 % 3,644 2 % Purchased power (coal-fired) 5,593 4 % 2,207 1 % Purchased power (wind) (6) 3,642 2 % 2,286 2 % Purchased power (hydroelectric) 3,472 2 % 2,751 2 % Total purchased power (3) 33,379 20 % 28,032 18 % Total power supply 170,470 100 % 165,693 100 % Notes (1) The generation for 2024 includes 99 thousand kWh of pre-commercial generation at Johnsonville Aeroderivative CT Units 21-30. The generation for 2024 includes 137 thousand kWh of pre-commercial generation at Paradise CT Units 5-7. (2) Generation from TVA-owned renewable resources (non-hydroelectric) is less than one percent for all periods shown and therefore is not represented in the table above. (3) Raccoon Mountain Pumped-Storage Plant net generation is allocated against each TVA-operated generation facility and purchased power type for both the year ended September 30, 2025, and the year ended September 30, 2024. See Part I, Item 1, Business — Power Supply and Load Management Resources — Hydroelectric Pumped-Storage for a discussion of Raccoon Mountain Pumped-Storage Plant. (4) Purchased power (natural gas and/or oil-fired) includes generation from Caledonia CC, which is currently a leased facility operated by TVA. Generation from Caledonia Combined Cycle Plant ("Caledonia CC") was 5,464 million kWh and 4,798 million kWh for the years ended September 30, 2025 and 2024, respectively. (5) Purchased power (other renewables) includes purchased power from the following renewable sources: solar, wind, biomass, and renewable cogeneration. TVA acquires Renewable Energy Certificates ("RECs") in connection with certain purchased power transactions and sells some of these RECs to customers. (6) At September 30, 2024, 2,286 MWs previously classified as Purchased power (other renewables) has been reclassified to Purchased power (wind) to conform to current year presentation. In addition to power supply sources included here, TVA offers energy efficiency programs that effectively reduce energy needs. In 2025, TVA invested $94 million on its energy efficiency programs and effectively reduced 2025 energy needs by approximately 257 gigawatt hours of net incremental energy efficiency savings. Interest Expense . Interest expense and interest rates for 2025 and 2024 were as follows: Interest Expense and Rates For the years ended September 30 2025 2024 Percent Change Interest expense (1) $ 1,196 $ 1,066 12.2 % Average blended debt balance (2) $ 22,604 $ 20,936 8.0 % Average blended interest rate (3) 5.06 % 4.90 % 3.3 % Notes (1) Includes amortization of debt discounts, issuance, and reacquisition costs, net. (2) Includes average balances of long-term power bonds, debt of VIEs, and discount notes. (3) Includes interest on long-term power bonds, debt of VIEs, and discount notes. Total interest expense increased $130 million for the year ended September 30, 2025, as compared to the prior year. This increase was primarily driven by a $97 million increase from higher average balances and rates on long-term debt, and a $51 million increase in interest on other financing leases, primarily driven by the lease financing arrangement with Johnsonville Aeroderivative Combustion Turbine Generation LLC ("JACTG"). This increase was partially offset by an $18 million decrease in interest on short-term debt primarily due to lower average balances and rates. Other Income, Net Other income, net increased $21 million for the year ended September 30, 2025, as compared to the prior year. This increase was driven by increases in external services primarily due to additional transmission projects as a result of economic 62 Table of Contents development and higher interest income on cash investments due to a higher balance of cash held during the year, partially offset by lower short-term rates earned on that cash. Other Net Periodic Benefit Cost Other net periodic benefit cost increased $7 million for the year ended September 30, 2025, as compared to the prior year. The increase is primarily due to the decreases in the discount rates used to measure net periodic benefit cost for the year ended September 30, 2025, as compared to the prior year. Other net periodic benefit cost is subject to significant economic assumptions, such as changes in the discount rate, COLA, and the rate of return on plan assets, that can materially impact TVA. See Note 21 — Benefit Plans . Liquidity and Capital Resources Sources of Liquidity TVA depends on various sources of liquidity to meet cash needs and contingencies. TVA's primary sources of liquidity are cash from operations and proceeds from the issuance of short-term debt in the form of discount notes, along with periodic issuances of long-term debt. TVA's balance of short-term debt typically changes frequently as TVA issues discount notes to meet short-term cash needs and pay scheduled maturities of discount notes and long-term debt. TVA had $1.4 billion of power bonds mature in November 2025. TVA's next significant power bond maturity is $1.0 billion in February 2027. The periodic amounts of short-term debt issued are determined by near-term expectations for cash receipts, cash expenditures, and funding needs, while seeking to maintain a target range of cash and cash equivalents on hand. TVA may hold higher cash balances from time to time in response to potential market volatility or other business conditions. In addition, cash balances may include collateral received from counterparties. In addition to cash from operations and proceeds from the issuance of short-term and long-term debt, TVA's sources of liquidity include four revolving credit facilities totaling $2.7 billion, a $150 million credit facility with the United States Department of the Treasury ("U.S. Treasury"), and proceeds from other financings. See Note 15 — Debt and Other Obligations — Credit Facility Agreements. TVA issued $4.0 billion and $1.0 billion of power bonds during 2025 and 2024, respectively. In addition, TVA redeemed $1.0 billion of power bonds during both 2025 and 2024 due to maturity. The TVA Board authorized TVA to issue power bonds and enter into other financing arrangements in an aggregate amount not to exceed $3.0 billion during 2026. For additional information about TVA debt issuance activity and debt instruments issued and outstanding at September 30, 2025 and 2024, including rates, maturities, outstanding principal amounts, and redemption features, see Note 15 — Debt and Other Obligations — Debt Securities Activity and Debt Outstanding . Other financing arrangements may include, but are not limited to, lease financings, energy prepayments from customers, and other similar agreements. In the first quarter of 2025, TVA entered into an $800 million construction management agreement and lease financing arrangement with Johnsonville Aeroderivative Combustion Turbine Generation LLC ("JACTG"). TVA may also engage in other alternative forms of financing such as sales of receivables, or loans, from time to time. The TVA Act authorizes TVA to issue bonds, notes, or other evidences of indebtedness (collectively, "Bonds") in an amount not to exceed $30.0 billion outstanding at any time. Bonds outstanding, excluding unamortized discounts and premiums and net exchange gains from foreign currency transactions, at September 30, 2025 and 2024, were $22.1 billion (including current maturities) and $20.2 billion (including current maturities), respectively. The balance of Bonds outstanding directly affects TVA's capacity to meet operational liquidity needs and to strategically use Bonds to fund certain capital investments as management and the TVA Board may deem desirable. Other options for financing not subject to the limit on Bonds, including certain lease financings (see Lease Financings below and Note 12 — Variable Interest Entities ), could provide supplementary funding if needed. Currently, TVA expects to utilize a combination of Bonds, other financings, or potentially additional power revenues through power rate increases to meet its ongoing operational liquidity needs while making planned capital investments. TVA may also utilize available funding through the Inflation Reduction Act of 2022 ("IRA") and the Bipartisan Infrastructure Law ("BIL"), other federal funding opportunities, or other third-party financing arrangements. See Lease Financing s, Key Initiatives and Challenges — Funding Opportunities , Note 12 — Variable Interest Entities , and Note 15 — Debt and Other Obligations for additional information. TVA may from time to time seek to retire or purchase its outstanding debt through cash purchases and/or exchanges for securities, in open market purchases, privately negotiated transactions, or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, TVA's liquidity requirements, contractual restrictions, and other factors. The amounts involved may be material. Debt Securities . TVA's Bonds are not obligations of the U.S., and the U.S. does not guarantee the payments of principal or interest on Bonds. TVA's Bonds consist of power bonds and discount notes. Power bonds have maturities of between one and 50 years. At September 30, 2025, the average maturity of long-term power bonds was 13.82 years, and the weighted average interest rate was 4.87 percent. Discount notes have maturities of less than one year. Power bonds and discount notes have a first priority and equal claim of payment out of net power proceeds. Net power proceeds are defined as the remainder of TVA's gross power revenues after deducting the costs of operating, maintaining, and administering its power properties and tax equivalents, but before deducting depreciation accruals or other charges representing the amortization of 63 Table of Contents capital expenditures, plus the net proceeds from the sale or other disposition of any power facility or interest therein. In addition to power bonds and discount notes, TVA had long-term debt associated with certain VIEs outstanding at September 30, 2025. See Lease Financing below, Note 12 — Variable Interest Entities , and Note 15 — Debt and Other Obligations for additional information. Power bonds and discount notes are both issued pursuant to Section 15d of the TVA Act and pursuant to the Basic Tennessee Valley Authority Power Bond Resolution adopted by the TVA Board on October 6, 1960, as amended on September 28, 1976, October 17, 1989, and March 25, 1992 (the "Basic Resolution"). The TVA Act and the Basic Resolution each contain two bond tests: the rate test and the bondholder protection test. Under the rate test, TVA must charge rates for power which will produce gross revenues sufficient to provide funds for operation, maintenance, and administration of its power system; tax equivalents; debt service on outstanding Bonds; payments to the U.S. Treasury in repayment of and as a return on the government's appropriation investment in TVA's power facilities (the "Power Program Appropriation Investment"); and such additional margin as the TVA Board may consider desirable for investment in power system assets, retirement of outstanding Bonds in advance of maturity, additional reduction of the Power Program Appropriation Investment, and other purposes connected with TVA's power business, having due regard for the primary objectives of the TVA Act, including the objective that power shall be sold at rates as low as are feasible. See Note 24 — Related Parties . The rate test for the one-year period ended September 30, 2025, was calculated after the end of 2025, and TVA met the test's requirements. Under the bondholder protection test, TVA must, in successive five-year periods, use an amount of net power proceeds at least equal to the sum of the depreciation accruals and other charges representing the amortization of capital expenditures and the net proceeds from any disposition of power facilities, for either the reduction of its capital obligations (including Bonds and the Power Program Appropriation Investment) or investment in power assets. The bondholder protection test for the five-year period ended September 30, 2025, was calculated after the end of 2025, and TVA met the test's requirements. TVA must next meet the bondholder protection test for the five-year period ending September 30, 2030, and expects to meet the test. TVA uses proceeds from the issuance of discount notes, in addition to other sources of liquidity, to fund short-term cash needs and scheduled maturities of long-term debt. The following table provides additional information regarding TVA's short-term borrowings. Short-Term Borrowings (in millions) At September 30, 2025 For the year ended September 30, 2025 At September 30, 2024 For the year ended September 30, 2024 Gross Amount Outstanding (at End of Period) or Average Gross Amount Outstanding (During Period) Discount notes $ — $ 538 $ 1,168 $ 787 Maximum Month-End Gross Amount Outstanding (During Period) Discount notes N/A $ 1,541 N/A $ 1,205 Weighted Average Interest Rate Discount notes — % 4.37 % 4.76 % 5.37 % TVA ended the year at September 30, 2025, with a lower balance of short-term debt as compared to September 30, 2024. The decrease was primarily due to higher redemptions of short-term debt compared to the previous year, and the timing of cash flows, including higher cash from issuance of long-term bonds in the fourth quarter in anticipation of cash needed to pay bond maturities in November 2025. TVA generally uses proceeds from the issuance of power bonds to refinance maturing power bonds or other financing obligations, as necessary, or for other power system purposes. The total balance of power bonds may decline in periods where redemptions of power bonds exceed issuance due to net positive cash flow from operating and investing activities. At this time, TVA anticipates the balance of Bonds and other financing obligations will increase in future years due to an expected increase in capital expenditures. TVA Bonds are traded in the public bond markets and are listed on the New York Stock Exchange ("NYSE") except for TVA's discount notes, and the 2009 Series B power bonds. TVA's Putable Automatic Rate Reset Securities ("PARRS") are traded on the NYSE under the exchange symbols "TVC" and "TVE." Other bonds listed on the NYSE are assigned various 64 Table of Contents symbols by the exchange, which may be noted on the NYSE's website. TVA has also listed certain bonds on foreign exchanges from time to time, including the Luxembourg, Hong Kong, and Singapore Stock Exchanges. See Part I, Item 1A, Risk Factors — Financial, Economic, and Market Risks for additional information regarding the market for TVA's Bonds. Although TVA Bonds are not obligations of the U.S., TVA, as a corporate agency and instrumentality of the U.S. government, may be impacted if the sovereign credit ratings of the U.S. are downgraded. According to statements made by the credit rating agencies, the U.S. credit rating may face additional downward pressure if policymakers are unable to respond to the country's growing fiscal challenges, if it appears deterioration in debt affordability or fiscal strength is likely to undermine U.S. economic strength or the role of the U.S. dollar or U.S. Treasury bond market, or if a weakening of governance were to occur. Additionally, TVA may be impacted by how the U.S. government addresses situations of approaching its debt limit. On November 10, 2023, Moody's Investors Service, Inc. ("Moody's") revised the outlook on the U.S. government's credit ratings from stable to negative, and subsequently determined on November 13, 2023, to revise the outlook on TVA's ratings from stable to negative due to the change in the government rating outlook. On May 16, 2025, Moody's downgraded the U.S. government's credit rating from Aaa to Aa1, and on May 19, 2025, Moody's subsequently downgraded TVA's rating from Aaa to Aa1, and the outlook was revised to stable. TVA was not required to post additional collateral due to the downgrade. The outlook on the ratings of TVA is also currently stable with Fitch Ratings, Inc. ("Fitch") and S&P Global Ratings ("S&P"). TVA's rated senior unsecured Bonds are currently rated Aa1, AA+, and AA+, by Moody's, Fitch, and S&P, respectively. TVA's short-term discount notes are not rated. TVA is not able to predict the outcome of any rating changes on the U.S. government or any actions that may be taken on TVA because of actions on the government. Lease Financings . TVA has entered into certain leasing transactions with special purpose entities ("SPEs") to obtain third-party financing for its facilities. These SPEs are sometimes identified as VIEs of which TVA is determined to be the primary beneficiary. TVA is required to account for these VIEs on a consolidated basis. See Note 12 — Variable Interest Entities. Summary Cash Flows A major source of TVA's liquidity is operating cash flows resulting from the generation and sale of electricity. Cash, cash equivalents, and restricted cash totaled $1.6 billion and $523 million at September 30, 2025 and 2024, respectively. A summary of cash flow components for the years ended September 30 follows: Cash provided by (used in): Operating Activities . TVA's cash flows from operations are primarily driven by sales of electricity, fuel expense, and operating and maintenance expense. The timing and level of cash flows from operations can be affected by the weather, changes in working capital, commodity price fluctuations, outages, and other project expenses. Net cash flows provided by operating activities increased $321 million for the year ended September 30, 2025, as compared to the same period of the prior year. The increase was primarily due to higher revenue collections. Revenue collections increased primarily due to the increase in the 2025 wholesale base rate in addition to higher sales volume and higher effective fuel rates. This increase was partially offset by higher payroll and benefit-related payments in addition to higher fuel and purchased power payments as compared to the same period of the prior year. Investing Activities . The majority of TVA's investing cash flows are due to investments to acquire, upgrade, or maintain generating and transmission assets, including environmental projects and the purchase of nuclear fuel. Net cash flows used in investing activities increased $1.1 billion for the year ended September 30, 2025, as compared to the same period of the prior year, driven by increased expenditures for capacity expansion projects, primarily related to natural gas builds and upgrades to the nuclear fleet. 65 Table of Contents Financing Activities . TVA's cash flows provided by or used in financing activities are primarily driven by the timing and level of cash flows provided by operating activities, cash flows used in investing activities, and net issuance and redemption of debt instruments to maintain a strategic balance of cash on hand. Net cash flows provided by financing activities increased $1.8 billion for the year ended September 30, 2025, as compared to the prior year, primarily due to higher debt issuances and proceeds from debt of variable interest entities. Higher net cash flows provided by both financing and operating activities were partially offset by higher net cash used in investing activities. This net activity contributed to the need for debt issuances to maintain higher targeted cash balance levels at year end due to the timing of debt maturities. TVA anticipates a need to increase debt in the coming years as it continues to invest in power system assets, which may result in positive net cash flows provided by financing activities in future periods. Cash Requirements Actual capital expenditures and future planned capital expenditures for property, plant, and equipment additions, including environmental projects and new generation, and nuclear fuel are as follows: Capital Expenditures For the years ended September 30 (in millions) Actual Estimated Capital Expenditures (1) 2025 2026 2027 2028 2029 2030 Capacity expansion expenditures $ 2,957 $ 2,669 $ 2,279 $ 1,557 $ 687 $ 1,170 Environmental expenditures (2) 94 239 296 172 122 36 Nuclear fuel 234 277 282 365 594 885 Transmission expenditures 720 669 711 745 834 897 Other capital expenditures (3) 959 824 776 777 784 784 Total capital expenditures $ 4,964 (4) $ 4,678 $ 4,344 $ 3,616 $ 3,021 $ 3,772 Notes (1) Currently, TVA expects to utilize a combination of Bonds, other financings, or potentially additional power revenues through power rate increases to meet its ongoing operational liquidity needs while making planned capital investments. TVA may also utilize available funding through the IRA and the BIL, other federal funding opportunities, or other third-party financing arrangements. Estimated capital expenditures only include expenditures that are currently planned. Additional expenditures may be required, among other things, for TVA to meet growth in demand for power in its service area or to comply with new environmental laws, regulations, or orders. (2) The table includes the capital portion of estimated environmental expenditures. See Part I, Item 1, Business — Environmental Matters — Estimated Required Environmental Expenditures for total estimates on projects related to environmental laws and regulations. (3) Other capital expenditures are primarily associated with short lead time construction projects aimed at the continued safe and reliable operation of generating assets. (4) The numbers above include the change in construction in progress and nuclear fuel expenditures included in Accounts payable and accrued liabilities of $283 million. TVA continually reviews its capital expenditures and financing programs. The amounts shown in the table above are forward-looking amounts based on a number of assumptions and are subject to various uncertainties. Amounts may differ materially based upon a number of factors, including, but not limited to, changes in assumptions about system load growth, environmental regulation, rates of inflation, total cost of major projects, and availability and cost of external sources of capital. See Forward-Looking Information and Part I, Item 1A, Risk Factors . TVA has certain obligations and commitments to make future payments, including contracts executed in connection with certain of the planned construction expenditures. TVA estimates total commitments and contingencies at September 30, 2025, are approximately $6.7 billion for the year ended September 30, 2026, and $55.5 billion for the years thereafter, of which $4.6 billion and $28.0 billion, respectively, are set forth in the table below. See Note 9 — Leases , Note 12 — Variable Interest Entities , Note 15 — Debt and Other Obligations , Note 21 — Benefit Plans, and Note 23 — Commitments and Contingencies for the obligations and commitments attributable to leases, VIEs and membership interests of VIEs subject to mandatory redemption, debt and leaseback obligations, the retirement plan, and unconditional purchase obligations, respectively, for remaining amounts. 66 Table of Contents Other Commitments and Contingencies Payments due for the years ending September 30 (in millions) 2026 2027 2028 2029 2030 Thereafter Total Interest payments relating to debt (1) $ 1,143 $ 1,082 $ 1,046 $ 1,021 $ 1,017 $ 11,767 $ 17,076 Interest payments relating to debt of VIEs 83 80 79 75 74 817 1,208 Interest payments relating to membership interests of VIEs subject to mandatory redemption 1 1 1 1 1 1 6 Purchase obligations Power (2) 610 447 273 209 177 1,024 2,740 Fuel (3) 1,831 1,340 1,043 649 576 4,404 9,843 Other (4) 900 441 69 47 25 235 1,717 Total $ 4,568 $ 3,391 $ 2,511 $ 2,002 $ 1,870 $ 18,248 $ 32,590 Notes (1) Includes the effects of interest rate derivatives employed to manage interest rate risk. (2) Includes commitments for energy and/or capacity under power purchase agreements ("PPAs") from hydroelectric, diesel, renewable, and gas-fired facilities, as well as transmission service agreements to support purchases of power from the market. Certain PPAs are accounted for as leases and have lease and non-lease components. For these contracts, the lease component is included in lease obligations (see Note 9 — Leases ) and the non-lease component is included in power purchase obligations in the table above. For PPA contracts containing a lease component that have not commenced, the entire commitment amount is included in the table above. (3) Includes commitments to purchase nuclear fuel, coal, and natural gas, as well as related transportation and storage services. (4) Primarily includes long-term service contracts, contracts that contain minimum purchase levels for the purchase of limestone along with related storage and transportation, and contractual obligations related to TVA's load control program. EnergyRight ® Program. TVA purchases certain loans receivable from its LPCs in association with the EnergyRight ® program. Depending on the nature of the energy-efficiency project, loans may have a maximum term of five years or 10 years. The loans receivable are then transferred to a third-party bank with which TVA has agreed to repay in full any loan receivable that has been in default for 180 days or more or that TVA has determined is uncollectible. At September 30, 2025, the total carrying amount of the loans receivable, net of discount, was $57 million. Such amounts are not reflected in the Other Commitments and Contingencies table above. The total carrying amount of the financing obligation was $66 million at September 30, 2025. See Note 10 — Other Long-Term Assets and Note 13 — Other Long-Term Liabilities for additional information. Key Initiatives and Challenges Capacity TVA is focused on building an American energy future — one that provides energy security and national security. Additional load growth for the foreseeable future is expected to challenge TVA's capacity position. New capacity will be needed to support this load growth, replace retiring and expiring capacity, and enable further electrification of the economy. TVA continues to evaluate adding flexible gas plants as a strategy to maintain reliability. TVA is also committed to investing in the future of nuclear with the evaluation of emerging advanced nuclear technologies, such as small modular reactors ("SMRs"), and developing projects such as a solar cap system on closed coal combustion residual ("CCR") facilities. In addition, TVA issued a request for proposal ("RFP") in April 2025 for up to 2,250 MW of new build energy resources for potential PPAs. Energy resources that may participate in this RFP are utility-scale natural gas, battery energy storage systems ("BESS"), solar plus BESS, and solar generation that demonstrate the ability to be commercially operable by CY 2031. TVA is currently evaluating proposals related to the RFP and plans to issue awards in 2027. Natural Gas-Fired Units. TVA continues to evaluate adding flexible gas plants as a strategy to maintain reliability. TVA approved an aeroderivative CT project at TVA’s Johnsonville site for $652 million. Pre-commercial plant operations began on Johnsonville Aeroderivative CT Units 25-28 in the first quarter of 2025 and began on Units 21-24 and 29-30 in the second quarter of 2025. Commercial plant operations began on Units 21-25 and 27-30 on May 6, 2025, and Unit 26 on August 20, 2025. The units have a total summer net capability of 530 MW. As of September 30, 2025, TVA had spent $646 million on this project, and TVA expects to spend an additional $6 million on this project. TVA is replacing generation for one unit at Cumberland with a 1,450 MW combined cycle plant that is expected to be operational by the end of CY 2026. See Coal-Fired Fleet below. As of September 30, 2025, TVA had spent $1.8 billion on this project, and expects to spend an additional $312 million through CY 2026. In addition, as of September 30, 2025, TVA had spent $184 million on long lead time equipment in connection with the potential project to replace generation for the second unit at Cumberland. However, this equipment could be used at other TVA sites if the final project is not approved. TVA could spend up to an additional $1.2 billion on this potential project. To operate the Cumberland Combined Cycle Plant, TVA has contracted for the transportation of gas from a gas pipeline that will need to be constructed. To construct the pipeline, the pipeline company, Tennessee Gas Pipeline Company, L.L.C. 67 Table of Contents (“Tennessee Gas”), obtained permits from various state and federal agencies and a certificate of public convenience and necessity from the Federal Energy Regulatory Commission (“FERC”). Challenges to two permits were brought in the United States Court of Appeals for the Sixth Circuit ("Sixth Circuit"), and on October 11, 2024, the Sixth Circuit issued orders staying the permits until the court could review the merits of these cases. On April 4, 2025, the Sixth Circuit denied the petitions for review in both cases, and on April 15, 2025, the Sixth Circuit lifted the temporary stay. A challenge to the FERC certificate is pending before the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”). The D.C. Circuit heard oral arguments on the merits on March 4, 2025, and on September 30, 2025, the D.C. Circuit issued an opinion upholding FERC's decision to issue the certificate of public convenience for the pipeline. See Note 23 — Commitments and Contingencies — Legal Proceedings — Case Involving Cumberland Combined Cycle Plant for a discussion of another lawsuit involving this project. To replace the nine coal-fired units at Kingston, TVA is constructing a 1,500 MW combined cycle plant that is expected to be operational by the end of CY 2027. See Coal-Fired Fleet below. As of September 30, 2025, TVA had spent $1.8 billion on this project and expects to spend an additional $1.1 billion through CY 2027. In addition, in March 2025, TVA issued an RFP for battery storage related to the Kingston energy complex and is currently evaluating proposals related to the RFP. To operate the Kingston Combined Cycle Plant, TVA has contracted for the transportation of gas from a gas pipeline that will need to be constructed. To construct the pipeline, the pipeline company, East Tennessee Natural Gas, LLC ("East Tennessee"), has obtained permits from various state and federal agencies and a certificate of public convenience and necessity from FERC. See Note 23 — Commitments and Contingencies — Legal Proceedings — Challenge to Kingston Construction Permit for information about a challenge to the Kingston construction permit. TVA is constructing a 500 MW New Caledonia simple cycle CT project on TVA land following the completion of environmental reviews under the National Environmental Policy Act ("NEPA") and other applicable laws . The draft Environmental Impact Statement ("EIS") for New Caledonia was made available for public comment in July 2024, the final EIS was published in January 2025, and TVA documented its final decision with the Record of Decision on February 13, 2025. As of September 30, 2025 , TVA had spent $300 million on the New Caledonia project and could spend up to an additional $565 million. TVA is also constructing a 200 MW aeroderivative CT project at TVA's Allen site following the completion of environmental reviews under NEPA and other applicable laws . The draft EIS for Allen was made available for public comment in March 2025, the final EIS was published in July 2025, and TVA documented its final decision with the Record of Decision on September 25, 2025. As of September 30, 2025, TVA had spent $231 million on the project at Allen and could spend up to an additional $132 million. TVA is exploring a 350 MW project at TVA's Lagoon Creek site for four additional CTs. TVA completed an EIS for 16 units at the site prior to construction of the currently operational 12 units, and TVA is evaluating the existing EIS for NEPA adequacy. As of September 30, 2025, TVA had spent $1 million on the project at Lagoon Creek and could spend up to an additional $669 million. Nuclear. Amid growth in energy-intensive sectors including artificial intelligence and data centers, TVA is exploring a diverse range of advanced nuclear technologies to help shape the most effective, scalable, secure solutions for the region's growing economy. TVA continues to evaluate these nuclear technologies for potential deployment across TVA's seven-state region as directed by the TVA Board through the establishment of the New Nuclear Program. TVA is strategically partnering with innovative companies to advance the development of new nuclear technologies and to develop a technology, a supply chain, a delivery model, and an industry that can unleash American energy and attract and support companies. Small Modular Reactors . In December 2019, TVA became the first utility in the nation to successfully obtain approval for an early site permit from the Nuclear Regulatory Commission ("NRC") to potentially construct and operate SMRs at TVA’s Clinch River Nuclear Site. The permit is valid through 2039 and therefore provides TVA a great deal of flexibility to make new nuclear decisions based on energy needs and economic factors. In 2021, TVA initiated a Programmatic EIS ("PEIS") that evaluated a variety of alternatives for a proposed advanced nuclear technology park at the Clinch River Nuclear Site and will provide additional flexibility for future decision making. The Record of Decision was signed in 2022. In the second quarter of 2025, TVA requested public comment on a draft Supplemental EIS that addresses the potential environmental effects associated with site preparation, construction, operation, and decommissioning of one SMR at the Clinch River site. In May 2025, TVA submitted a construction permit application to the NRC for an SMR at the Clinch River Site, and the NRC accepted the application for review in July 2025. In addition, while evaluating alternatives for potential advanced nuclear at the Clinch River Nuclear Site, TVA is exploring the feasibility of applying a similar approach that could deploy additional SMRs at Clinch River and other TVA-owned properties. The TVA Board has approved up to $350 million to explore advanced reactor technology options under the New Nuclear Program. Of this amount, TVA had spent $251 million as of September 30, 2025. In addition, TVA and a consortium of co-applicants applied for a U.S. Department of Energy ("DOE") grant to support the future development of a small modular reactor at TVA's Clinch River site in January 2025 and submitted a revised application in April 2025. See Funding Opportunities below. The New Nuclear Program provides a systematic roadmap for TVA’s exploration of advanced nuclear technology, and collaboration with other interested parties will be an important aspect of this program. In December 2022, TVA entered into a multi-party collaborative arrangement to advance the global deployment of the GE Vernova Hitachi Nuclear Energy ("GVH") 68 Table of Contents BWRX-300 SMR. GVH is responsible for standard design development. See Note 22 — Collaborative Arrangement for additional information. See also Other Nuclear below. The decision to potentially build SMRs continues to be part of the ongoing discussion as part of the asset strategy for TVA’s future generation portfolio, and any future decision to construct any reactor, advanced or otherwise, would require approval by the TVA Board and the NRC. As of September 30, 2025, TVA had spent $342 million to date on work regarding SMRs, including work to complete the early site permit application for the Clinch River Nuclear Site and work associated with the New Nuclear Program above. Of these amounts, the DOE had reimbursed TVA $29 million. Additional expenditures will be determined based on future project development. Nuclear Fleet License Extensions . Subject to the completion of all appropriate environmental reviews, TVA is seeking to renew all nuclear generation units' licenses for an additional 20 years. The first license renewal application was submitted to the NRC in January 2024 for the three units at Browns Ferry Nuclear Plant. As of September 30, 2025, TVA had spent $37 million to support the subsequent license renewal ("SLR") of the three units at Browns Ferry and could spend up to an additional $5 million to complete the Browns Ferry SLR. Other Nuclear . In 2025, TVA signed a PPA to purchase up to 50 MW of electricity from the Kairos Power Hermes 2 Plant in Oak Ridge, Tennessee. The capacity is anticipated to come online as early as 2030. In addition, in 2025, TVA and ENTRA1 Energy signed an agreement to explore the development of plants that could provide TVA with up to 6 gigawatts of new nuclear power generation in TVA's seven-state region through the deployment of six ENTRA1 Energy Plants utilizing NuScale's SMR technology. TVA is also supporting the development of Type One Energy's stellarator fusion reactor at TVA's former Bull Run Fossil Plant ("Bull Run"). In 2025, Type One Energy entered into a service contract with TVA under which TVA's Power Service Shops will develop custom welding and fabrication techniques and create parts for Type One's project. Type One Energy's fusion project aims to supply the Tennessee Valley with secure, reliable, and clean energy. TVA has also signed an agreement with Oklo Inc. to explore the feasibility of recycling TVA’s used fuel at the company’s planned facility in Oak Ridge, Tennessee and pathways for TVA to purchase energy from Oklo Inc.’s proposed SMRs. Coal-Fired Fleet. TVA is evaluating the impact of retiring the balance of the coal-fired fleet by 2035, and that evaluation includes environmental reviews and TVA Board of Directors ("TVA Board") approval. TVA is also reviewing how recent executive orders ("EOs"), the evolving regulatory environment, and overall system performance are impacting the operation of its coal-fired fleet. An evaluation of the continued operation of coal-fired units is being conducted and will consider material condition, plant performance, system flexibility needs, environmental requirements, grid support, and other factors. TVA plans to retire the two coal-fired units at Cumberland, which, at September 30, 2025, accounted for 2,470 MW of TVA's summer net capability. TVA plans to replace generation for one unit with a 1,450 MW combined cycle plant that is expected to be operational by the end of CY 2026 when the first unit is scheduled to be retired. The second unit is scheduled to be retired by the end of CY 2028, and TVA is exploring potential sites for the proposed construction and operation of facilities to replace part of that generation. TVA plans to retire the nine coal-fired units at Kingston by the end of CY 2027 and replace the retired generation with an energy complex that includes at least 1,500 MW of natural gas, 100 MW of battery storage, and 3-4 MW of solar. See Natural Gas-Fired Units above. Hydroelectric Pumped-Storage. New hydroelectric pumped-storage is one of several technologies that TVA is exploring to help meet peak demands and allow more baseload generation while ensuring the reliability and resiliency of the grid. In 2023, TVA announced sites for a potential future pumped-storage facility and, in May 2025, a draft EIS was made available for public comment. The preferred alternative would have at least four pump-turbines with a total generation capacity between 1,200 MWs and 1,600 MWs. TVA will determine whether to move forward on the preferred alternative based on a wide range of environmental, social, and technical factors, and need. Exploratory drilling is ongoing. Solar. In November 2022, the TVA Board approved the opportunity for TVA to explore the development of an additional utility-scale solar project, contingent on successfully completing environmental reviews under NEPA and other applicable laws and obtaining the necessary state permits. The project would utilize TVA land, deploying a solar cap system on the closed CCR facility at the TVA Shawnee Fossil Plant ("Shawnee") in Paducah, Kentucky. As of September 30, 2025, TVA had spent $161 million on the project and expects to spend an additional $101 million through 2029. The project's capacity is 99 MW; however, there is an estimated maximum of 96 MW that will be available for distribution due to interconnection limits. Cost Reduction Initiatives TVA must continue to drive efficiencies and cost savings across the enterprise to provide low-cost, reliable power, while funding the capital investment needed to meet growing demand. TVA has undertaken a cost optimization initiative designed to reduce planned cost increases by approximately $950 million during the three-year period from 2024 to 2026. TVA met its reduction targets for 2024 and 2025 and has plans to meet the targets set for 2026. This effort has evolved into an Enterprise Transformation Program ("ETP") designed to enable TVA to deliver at least $500 million of sustainable reductions to planned cost increases in 2026 and beyond to support future fleet investments needed to meet growing demand. TVA's ETP is focused on improving financial health, enhancing asset performance, automating 69 Table of Contents processes, optimizing third-party spend through supply chain, and making the workforce more efficient. As part of these efforts, certain employees are eligible for severance payments. See Note 3 — Restructuring . The organizational design efforts associated with the ETP were complete as of September 30, 2025; however, the ETP is ongoing as TVA executes the focus areas described above. Funding Opportunities TVA continues to evaluate and pursue funding opportunities under the IRA and the BIL to help offset the cost of qualifying projects. In many cases, TVA is directly or indirectly eligible to seek BIL funded opportunities through agency-sponsored and implemented funding opportunities. This exploration does not guarantee that TVA or its partners will receive funds. The IRA makes certain tax-exempt entities, including TVA, eligible for a direct-pay option for certain tax credits for zero-emission energy projects or generation. Obtaining these credits requires TVA to meet certain requirements, to submit tax returns to the Internal Revenue Service ("IRS"), and to retain adequate books and records to support its filings. For TVA to receive direct pay under the IRA for projects beginning construction on or after January 1, 2026, TVA will be required to meet domestic content requirements, unless a cost or availability exception can be established. At September 30, 2025, TVA recorded $72 million in Accounts receivable, net related to these tax credits. On January 20, 2025, the President issued EO 14154, “Unleashing American Energy,” which in part instructed agencies to pause the disbursement of funds appropriated under the IRA and BIL. On January 21, 2025, the Office of Management and Budget issued Memorandum M-25-11, which clarified that EO 14154 requires agencies to pause disbursement of funds appropriated under the IRA or the BIL only for programs that are inconsistent with the policy of section 2 of EO 14154, related to the Green New Deal, including consumer mandates on electric vehicles and appliances. While the IRA and BIL funding freeze under EO 14154 likely does not apply to funding that TVA is seeking, other governmental actions and funding restrictions may delay any award of grants for which TVA has applied under these acts. Furthermore, the President and Administration have taken a number of other actions that may impact TVA, and multiple court decisions may affect the implementation of these actions. TVA is currently reviewing these actions and related court decisions to evaluate the impact to TVA and is updating its policies and programs as appropriate. On July 4, 2025, the President signed into law the budget reconciliation bill referred to as the One Big Beautiful Bill Act ("Act"). Among other things, the Act introduces significant changes to a range of federal tax credit programs under the IRA, many of which are directly relevant to TVA’s ongoing and planned energy initiatives. These changes include terminations, modifications, and new restrictions on various clean energy and efficiency credits and could directly affect the financial viability of clean-energy alternatives and the cost or availability of power acquired through solar PPAs. TVA continues to evaluate its energy portfolio to actively develop long-term plans to take into consideration these changes, which may impact future decisions related to the mix of energy sources TVA utilizes. TVA is currently evaluating the impact of these legislative changes. In October 2024, a TVA-led coalition that includes 10 LPCs was selected by the DOE to enter negotiations for the Grid Resilience and Innovation Partnerships grant. This $250 million grant, of which TVA would receive approximately 70% for TVA projects, would provide funds for more than 80 TVA and LPC transmission and distribution projects that are designed to increase grid capacity and mitigate extreme weather risks. The upcoming phase will focus on concluding negotiations around terms and conditions and aligning on implementation and compliance processes for the award. In January 2025, TVA and a consortium of co-applicants applied for a U.S. DOE grant to support the potential development and future deployment of an SMR at TVA’s Clinch River site. The potential development and any future deployment of an SMR at the Clinch River site are subject to TVA Board approval. TVA is following a structured planning process that advances the Clinch River project in phases at which the TVA Board will evaluate and consider approving any next steps. This funding could support not only the deployment of this first of-a-kind technology, but also help establish the supply chain for advanced nuclear and support future deployment of the reactor across the United States. In April 2025, TVA and the consortium of co-applicants submitted a revised application to address new DOE guidance regarding the grant. Integrated Resource Plan The Integrated Resource Plan ("IRP") is a risk-informed, comprehensive study of TVA's energy resources and how TVA plans to meet future electricity demand across the service territory. The IRP considers a range of potential future scenarios as well as resource deployment strategies that TVA could employ within those futures. The IRP meets TVA’s requirements for a least cost planning program under Section 113 of the Energy Policy Act of 1992. In May 2023, TVA issued a Notice of Intent to initiate development of a new IRP and associated Programmatic EIS. TVA published a draft IRP and EIS in September 2024 and received public comments on these draft documents. The final IRP was expected to be published in 2025; however, publication of the final IRP has been delayed. Fiber Optic Network In 2017, the TVA Board authorized up to $300 million to be spent over the next 10 years, subject to annual budget availability and necessary environmental reviews, to build an enhanced fiber optic network that will better connect TVA's operational assets. Fiber is a vital part of TVA's modern communication infrastructure. The new fiber optic lines will improve the 70 Table of Contents reliability and resiliency of the generation and transmission system while enabling the system to better accommodate distributed energy resources ("DER") as they enter the market. As of September 30, 2025 , TVA had spent $278 million on installation of the fiber optic lines and expects to spend an additional $22 million through 2027. System Operations Center A new system operations center was approved by the TVA Board. The new secured facility is being built to accommodate a new energy management system and adapt to new regulatory requirements, and will improve reliability, have improved physical security from the previous center, and be flexible to help accommodate operational growth requirements, including future renewables. Construction of the facility was completed in FY 2025, and the facility is expected to be fully operational in CY 2026. As of September 30, 2025, TVA had spent $326 million on the project and expects to spend an additional $4 million. Energy Management System A new energy management system was approved by the TVA Board. As the current energy management system is nearing the end of its life cycle, this project will replace the existing analog system with a digital system. The new digital system will have higher capacity and speed for communications with the TVA grid and for inputs from monitoring equipment, will network the new control center with existing locations, and will enable better remote visibility and control to help mitigate reliability challenges. The system is expected to be complete in CY 2027. As of September 30, 2025, TVA had spent $95 million on the project and expects to spend an additional $13 million. Sequoyah Nuclear Plant Unit 2 Sequoyah Unit 2 tripped on July 30, 2024, due to failure of the main generator. As a result, the project to restack and rewind the main generator was pulled forward in the Nuclear Life Extension ("NLE") plan. In June 2025, the unit returned to service, and as of September 30, 2025, TVA had spent $133 million related to this project and could spend up to an additional $8 million. In October 2025, TVA received $48 million of property loss insurance proceeds related to this project. Coal Combustion Residuals Coal Combustion Residuals Facilities . TVA is pursuing a programmatic approach to address environmental impacts related to the previous storage, use and disposal of its CCR in accordance with applicable law (“CCR Program”). Under the CCR Program, TVA performed stability remediation of all at-risk facilities, completed the conversion of all operational coal-fired plants to dry CCR storage, and ceased operation of wet CCR storage facilities. Dry generation and dewatering projects . TVA has accomplished the conversion from wet to dry handling of CCR materials at all operating coal plants with the completion of dry generation and/or dewatering projects at Bull Run, Cumberland, Gallatin Fossil Plant ("Gallatin"), Kingston, and Shawnee. Landfills . TVA has made strategic decisions to build and maintain lined and permitted dry storage facilities on TVA-owned property at some TVA locations, enabling these facilities to generate CCR beyond existing dry storage capacity. Lined and permitted landfills are operational at Bull Run, Gallatin, Kingston, and Shawnee. TVA received a State of Tennessee permit for the construction and operation of a new lined landfill at Gallatin, and construction started in 2022. TVA received a State of Tennessee permit for a new lined landfill at Cumberland in 2023, and TVA is currently evaluating the need for construction. Construction of additional lined and dry permitted storage facilities may occur to support future business requirements . CCR facilities closures . TVA is working to close CCR facilities in accordance with federal and state requirements. Closure project schedules and costs are driven by the selected closure methodology (such as closure-in-place or closure-by-removal) and associated regulatory requirements. Through implementation of applicable state and federal requirements, TVA anticipates that the predominant closure methodology for its CCR units is closure in place. TVA issued a PEIS in June 2016 that programmatically evaluated the closure of CCR impoundments at TVA's coal-fired plants. TVA issued its associated Record of Decision in July 2016. The PEIS assessed the potential environmental effects associated with various modes of impoundment closures and through subsequent NEPA documents specifically evaluated and addressed closure methods at 10 impoundments. TVA subsequently decided to close those impoundments. The method of final closure for each of these facilities will depend on various factors, including approval by appropriate regulators and applicable closure requirements of state and federal regulations. Additional site-specific NEPA studies will be conducted, as warranted, as other facilities are considered for closure. See Note 14 — Asset Retirement Obligations . Groundwater monitoring . Compliance with EPA's CCR rule ("CCR Rule") requires implementation of a groundwater monitoring program and ongoing analysis. In compliance with the CCR Rule, TVA published the results of the 2024 groundwater testing at its CCR facilities during the second quarter of 2025. Similar to prior years, the tests identified certain CCR units with constituents at statistically significant levels above site-specific groundwater protection standards. TVA has completed an assessment of corrective measures ("ACM"), which analyzes the effectiveness of potential corrective actions, and has published ACM reports to its CCR Rule Compliance Data and Information website. Based on the results of the ACM, TVA is required to 71 Table of Contents select a remedy as soon as feasible. TVA has selected remedies for two of its plants: a groundwater pump and treat system at the Allen East Ash Disposal Area and monitored natural attenuation at Shawnee. TVA continues to investigate and evaluate remedies for its other plants and will continue posting semi-annual progress reports on the status of remedy selection until the final remedy is selected. The cost of these final remedies cannot reasonably be predicted until investigations and evaluations are complete and remedial methods are selected. The final Part A revision to the CCR Rule became effective September 28, 2020. Among other things, the final Part A rule requires unlined CCR surface impoundments to stop receiving CCR and non-CCR waste streams and to initiate closure or retrofit by no later than April 11, 2021. TVA ceased sending CCR and non-CCR waste streams to, and initiated closure of, unlined CCR surface impoundments by the specified deadline. As of September 30, 2025, TVA had spent approximately $3.5 billion on its CCR Program. Through 2030, TVA expects to spend an additional $2.1 billion on the CCR Program. Estimates for these amounts and costs after 2030 may change depending on the final closure method selected for each facility. While the conversion portion of the CCR Program is completed, TVA will continue to undertake CCR closure and storage projects, including building new landfill cells under existing permits and closing existing cells once they reach capacity. TVA was involved in two lawsuits concerning the CCR facilities at Gallatin. One case was resolved by the entry of a consent order, under which TVA agreed to close the existing ash facility by removal, either to an on-site landfill or to an offsite facility. The removal plan and the Environmental Assessment Report ("EAR") were approved by Tennessee Department of Environment and Conservation ("TDEC") in 2023. TVA submitted the Gallatin Ash Pond Complex Corrective Action/Risk Assessment ("CARA") Plan to TDEC in January 2024. See Note 14 — Asset Retirement Obligations . In October 2019, TDEC released amendments to its regulations which govern solid waste disposal facilities, including TVA's active CCR facilities covered by a solid waste disposal permit and those which closed pursuant to a TDEC approved closure plan. Such facilities are generally subject to a 30-year post-closure care period during which the owner or operator must undertake certain activities, including monitoring and maintaining the facility. The amendments, among other things, add an additional 50-year period after the end of the post-closure care period, require TVA to submit recommendations as to what activities must be performed during this 50-year period to protect human health and the environment, and require TVA to submit revised closure plans every 10 years. On May 8, 2024, EPA published its legacy coal combustion residual rule ("Legacy CCR Rule"), which expanded the scope of the regulatory requirements of the 2015 CCR Rule to include two additional classes of units: legacy CCR surface impoundments ("Legacy SIs") and CCR Management Units ("CCRMUs"). As a result of the enactment of the final rule, during 2024, TVA recorded additional estimated AROs of $3.1 billion and recorded a corresponding regulatory asset of $3.1 billion due to these AROs being associated with closed sites and asset retirement costs having been fully depreciated. These amounts are forward-looking and are subject to various uncertainties, and actual amounts may differ materially based upon a number of factors, including, but not limited to, the outcome of legal challenges to the Legacy CCR Rule, ongoing evaluations of the number and scope of newly regulated units, and determinations on final closure requirements and performance standards. In 2025, TVA recorded a net decrease of $500 million related to the final Legacy CCR Rule for updated cost estimates. See Part I, Item 1, Business — Environmental Matters — Cleanup of Solid and Hazardous Wastes — Coal Combustion Residuals, Part I, Item 1A , Risk Factors — Regulatory, Legislative, and Legal Risks , and Note 14 — Asset Retirement Obligations. Allen Groundwater Investigation . The CCR Rule required TVA to implement a comprehensive groundwater monitoring program at units subject to the rule. As a result of this groundwater monitoring program, TVA reported to TDEC in 2017 elevated levels of arsenic, lead, and fluoride in groundwater samples collected from two shallow-aquifer groundwater monitoring wells around the Allen East Ash Disposal Area. TVA, under the oversight of TDEC, conducted a remedial investigation into the nature and extent of the contamination. The remedial investigation confirmed that the high arsenic, fluoride, and lead concentrations are limited to the shallow alluvial aquifer in the north and south areas of the Allen East Ash Disposal Area. These areas are not adversely impacting the Memphis aquifer, which is the source of the public drinking water supply. All samples taken from the Memphis aquifer through TVA production wells were within the EPA drinking water standards. As the result of a pumping test conducted on TVA production wells at the nearby Allen Combined Cycle Plant ("Allen CC") by the United States Geological Survey and the University of Memphis, TVA has committed to not using these production wells until additional data is generated that supports safe use. TVA constructed water tanks on site and is purchasing cooling water from MLGW in lieu of utilizing the production wells. Purchasing cooling water in combination with the use of water tanks, rather than wells, could impose some operational limitations, such as limitations on capacity, on the Allen CC due to lower availability of cooling water. Pursuant to a remedial action plan that has been approved by TDEC, TVA has installed a groundwater pump and treat system at the Allen East Ash Disposal Area. In addition, TVA is taking steps to close both the East Ash Disposal Area and the nearby West Ash Disposal Area at Allen. On November 29, 2021, after obtaining the necessary approvals from TDEC, TVA began removing CCR materials to an offsite, lined landfill, and removal and closure activities are expected to continue through 2031. 72 Table of Contents Real Property Portfolio TVA engages in ongoing Tennessee Valley-wide real property portfolio evaluations of buildings, structures, and land as part of the strategic real estate program, which focuses on reducing cost, right-sizing the portfolio, and aligning real estate holdings with TVA's strategic direction. TVA is evaluating its use of the Chattanooga Office Complex. In February 2025, the TVA Board voted to surplus the Missionary Ridge and Blue Ridge buildings at the Chattanooga Office Complex, subject to Chief Executive Officer ("CEO") determination of disposal. Subject to such further CEO determination, these buildings will remain in operation until the system operations center becomes fully operational, which is expected in CY 2026. Supply Chain and Inflation Pressures TVA continues to experience supply chain pressures resulting from inflation, tariffs and other trade restrictions, material constraints, and labor availability. These factors have contributed to project delays, limited availability of critical materials, and increased costs for both materials and labor. To help mitigate these risks, TVA actively manages its supply chain through strategic contracting, demand management strategies, and proactive supplier engagement and support. While most tariff-related impacts have been minor to date, prolonged or project-specific tariffs could have more significant long-term effects. TVA anticipates that inflationary and tariff pressures will persist into 2026. Although these challenges have been managed with limited disruption to business operations thus far, continued or escalating pressures could result in more substantial operational impacts and increased pressure on power rates. Safeguarding Assets Physical Security — Non-Nuclear Asset Protection. TVA utilizes a variety of security technologies, security awareness activities, and security personnel to prevent sabotage, vandalism, and thefts. Any of these activities could negatively impact the ability of TVA to generate, transmit, and deliver power to its customers. TVA's Police and Emergency Management personnel are active participants with numerous professional and peer physical security organizations in both the electric industry and law enforcement communities. TVA works with the North American Electric Reliability Corporation ("NERC"), the SERC Reliability Corporation, the North American Transmission Forum, and other utilities to implement industry approved recommendations and standards. Nuclear Security . Nuclear security is carried out in accordance with federal regulations as set forth by the NRC. These regulations are designed for the protection of TVA's nuclear power plants, the public, and employees from the threat of radiological sabotage and other nuclear-related terrorist threats. TVA has security forces to guard against such threats. Cybersecurity. TVA operates in a highly regulated environment with respect to cybersecurity. TVA's cybersecurity program aligns or complies with the Federal Information Security Modernization Act, the NERC Critical Infrastructure Protection requirements, and the NRC requirements for cybersecurity, as well as industry best practices. As part of the U.S. government, TVA coordinates with and works closely with the U.S. Department of Homeland Security's Cybersecurity and Infrastructure Security Agency ("CISA"). CISA serves as the agency assisting other federal entities in defending against threats and securing critical infrastructure. The U.S. Computer Emergency Readiness Team functions as a liaison between the U.S. Department of Homeland Security and the public and private sectors to coordinate responses to security threats. The risk of cybersecurity events such as malicious code attacks, unauthorized access attempts, and social engineering attempts is intensifying across all industries, including the energy sector. TVA continues to see increases in malicious activity including phishing campaigns, malicious websites, distributed denial of service attacks, and activity related to business partner compromise, among others. These types of malicious activity have also been observed by TVA's external vendors, stakeholders, and partners, which has caused the need for heightened awareness and preparedness. See Part I, Item 1C, Cybersecurity for a description of TVA's cybersecurity program and integrated risk management process. See also Part I, Item 1A, Risk Factors — Cybersecurity and Information Technology Risks — TVA's facilities and information infrastructure may not operate as planned due to cyber threats to TVA's assets and operations . Critical Accounting Estimates TVA's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. ("GAAP"), which require management to make estimates, judgments, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Each of these estimates varies in regard to the level of judgment involved and its potential impact on TVA's financial results. Estimates are deemed critical either when a different estimate could have reasonably been used, or where changes in the estimate are reasonably likely to occur from period to period, and such use or change also would materially impact TVA's financial condition, results of operations, or cash flows. TVA's critical accounting policies are discussed in Note 1 — Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements. 73 Table of Contents TVA believes that its most critical accounting estimates relate to AROs, fair value measurements, and pension and other post-retirement benefits. Management has discussed the development, selection, and disclosure of critical accounting estimates with the Audit, Risk, and Cybersecurity Committee of the TVA Board. While TVA's estimates and assumptions are based on its knowledge of current events and actions it may undertake in the future, actual results may ultimately differ from these estimates and assumptions. Asset Retirement Obligations TVA recognizes legal obligations associated with the future retirement of certain tangible long-lived assets. These obligations relate to TVA's generating facilities, including coal-fired, nuclear, hydroelectric, and natural gas and/or oil-fired. They also pertain to coal ash impoundments, transmission facilities, and other property-related assets. Activities involved with the retirement of these assets could include decontamination and demolition of structures, removal and disposal of wastes, and site restoration. TVA periodically reviews its estimated asset retirement obligation ("ARO") liabilities. Revisions to the ARO estimates are made whenever factors indicate that the timing or amounts of estimated cash flows have changed. Any change to an ARO liability is recognized prospectively as an equivalent increase or decrease in the carrying value of the capitalized asset. Any accretion or depreciation expense related to these liabilities and assets is charged to a regulatory asset. See Note 11 — Regulatory Assets and Liabilities — Nuclear Decommissioning Costs and Non-Nuclear Decommissioning Costs and Note 14 — Asset Retirement Obligations for explanations of changes in estimates. The initial obligation is measured at its estimated fair value using various judgments and assumptions. Fair value is developed using an expected present value technique that is based on assumptions of market participants and that considers estimated retirement costs in current period dollars that are inflated to the anticipated decommissioning date and then discounted back to the date the ARO was incurred. Changes in assumptions and estimates included within the calculations of the value of the AROs could result in different results than those identified and recorded in the financial statements, including amortization of the regulatory assets. Nuclear Decommissioning . Decommissioning cost studies are updated for each of TVA's nuclear unit's long-lived assets at least every five years. At September 30, 2025, the estimated future nuclear decommissioning cost recognized in the financial statements was $4.0 billion and was included in AROs, and the unamortized regulatory asset related to nuclear decommissioning ARO costs of $149 million was included in Regulatory assets. The following key assumptions can have a significant effect on estimates related to the nuclear decommissioning costs reported in TVA's nuclear ARO liability: Timing and Method – In projecting decommissioning costs, two assumptions must be made to estimate the timing of plant decommissioning. First, the date of the plant's retirement must be estimated. At Browns Ferry and Sequoyah, the estimated retirement date is based on the unit with the longest license period remaining. At Watts Bar, the estimated retirement date is based on each unit's license period. Second, an assumption must be made on the timing of the decommissioning. TVA has ascribed probabilities to two different decommissioning methods related to its nuclear decommissioning obligation estimate: the DECON method and the SAFSTOR method. The DECON method requires that radioactive contamination be removed from a site and safely disposed of or decontaminated to a level that permits the site to be released for unrestricted use shortly after it ceases operation. The SAFSTOR method allows nuclear facilities to be placed and maintained in a condition that allows the facilities to be safely stored and subsequently decontaminated to levels that permit release for unrestricted use. TVA bases its nuclear decommissioning estimates on site-specific cost studies, which are updated for each of TVA's nuclear units at least every five years. Changes in probabilities ascribed to the assumptions or the timing of decommissioning can significantly change the present value of TVA's obligations. Cost Estimates – There is limited experience with actual decommissioning of large nuclear facilities. Changes in technology and experience as well as changes in regulations regarding nuclear decommissioning could cause cost estimates to change significantly. TVA's cost studies assume current technology and regulations. Cost Escalation Rate – TVA uses expected inflation rates over the remaining timeframe until the costs are expected to be incurred to estimate the amount of future cash flows required to satisfy TVA's decommissioning obligations. Discount Rate – TVA uses its incremental borrowing rate over a period consistent with the remaining timeframe until the costs are expected to be incurred to calculate the present value of the weighted estimated cash flows required to satisfy TVA's decommissioning obligations. The actual decommissioning costs may vary from the derived estimates because of changes in current assumptions, such as the assumed dates of decommissioning, changes in regulatory requirements, changes in technology, and changes in the cost of labor, materials, and equipment. A 10 percent change in TVA's forecasted costs for nuclear decommissioning activities at September 30, 2025, would have affected the liability by approximately $398 million. 74 Table of Contents Non-Nuclear Decommissioning. At September 30, 2025, the estimated future non-nuclear decommissioning cost recognized in the financial statements was $6.4 billion and was included in AROs, and the unamortized regulatory asset related to non-nuclear decommissioning ARO costs of $5.6 billion was included in Regulatory assets. This decommissioning cost estimate involves estimating the amount and timing of future expenditures and making judgments concerning whether or not such costs are considered a legal obligation. Estimating the amount and timing of future expenditures includes, among other things, making projections of the timing and duration of the asset retirement process and predicting how costs will escalate with inflation. These costs are predominantly CCR closure, CCR post-closure care and monitoring, and plant powerhouse asbestos removal. CCR closure estimates are primarily closure-in-place except for specific ponds located at Allen and Gallatin, which are closure-by-removal. CCR post-closure care and monitoring primarily includes costs for grounds maintenance, cover system and mechanical maintenance, inspections, and groundwater monitoring costs. Asbestos removal is based on cost per square foot to remove and dispose of asbestos-containing materials. TVA revises estimates of CCR closure on a project by project basis when updated cost information becomes available that causes management's expectation of cost to change materially. The following key assumptions can have a significant effect on estimates related to the non-nuclear decommissioning costs: Timing and Method – In projecting non-nuclear decommissioning costs, the date of the asset's retirement must be estimated. In instances where the retirement of a specific asset will precede the retirement of the generating plant, the anticipated retirement date of the specific asset is used. Additionally, TVA expects to incur certain ongoing costs subsequent to the initial asset retirement. TVA develops its cost estimates based on likelihood of decommissioning method where options exist in fulfilling legal obligations (e.g., closure-in-place or closure-by-removal for coal ash impoundments). The decommissioning method is determined based on several factors including available technologies, environmental studies, cost factors, resource availability, and timing requirements. As these factors are considered and decommissioning closure methods are determined, the detailed project schedules and estimates are adjusted. Non-nuclear decommissioning cost estimates, including CCR post-closure care and monitoring costs and asbestos removal, are studied for revision at least every five years, but revised more frequently if updated cost information becomes available that causes management's expectation of cost to change materially. TVA completed the study of its non-nuclear plant decommissioning obligations in September 2025, resulting in a decrease of $27 million. See Note 11 — Regulatory Assets and Liabilities — Non-Nuclear Decommissioning Costs . Technology and Regulation – Changes in technology and experience as well as changes in regulations regarding non-nuclear decommissioning could cause cost estimates to change significantly. TVA's cost estimates generally assume current technology and regulations. In April 2015, EPA published its final rule governing CCR, which regulates landfill and impoundment location, design, and operations; dictates certain pond-closure conditions; and establishes groundwater monitoring and closure and post-closure standards. On May 8, 2024, EPA published its Legacy CCR Rule, which expands the scope of the existing regulatory requirements of the 2015 CCR Rule to include two additional classes of units: Legacy SIs and CCRMUs. As a result of the enactment of the final rule, during 2024, TVA recorded additional estimated AROs of $3.1 billion and recorded a corresponding regulatory asset of $3.1 billion due to these AROs being associated with closed sites and asset retirement costs having been fully depreciated. In 2025, TVA recorded a net decrease of $500 million in the AROs related to the final Legacy CCR Rule for updated cost estimates. TVA continues to evaluate the impact of the rule on its operations, including cost and timing estimates of related projects. As a result, further adjustments to its ARO liabilities may be required as estimates are refined. Cost Escalation Rate – TVA uses expected inflation rates over the remaining timeframe until the costs are expected to be incurred to estimate the amount of future cash flows required to satisfy TVA's decommissioning obligations. Discount Rate – TVA uses its incremental borrowing rate over a period consistent with the remaining timeframe until the costs are expected to be incurred to calculate the present value of the weighted estimated cash flows required to satisfy TVA's decommissioning obligations. The actual decommissioning costs may vary from the derived estimates because of changes in current assumptions, such as the assumed dates of decommissioning, changes in the discount or escalation rates, changes in regulatory requirements, changes in technology, and changes in the cost of labor, materials, and equipment. A 10 percent change in TVA's forecasted costs for non-nuclear decommissioning activities at September 30, 2025, would have affected the liability by approximately $644 million. Fair Value Measurements Investments. Investment funds are comprised of equity securities and debt securities and are classified as trading. These securities are held in the Nuclear Decommissioning Trust ("NDT"), Asset Retirement Trust ("ART"), Supplemental Executive Retirement Plan ("SERP"), Deferred Compensation Plan ("DCP"), Restoration Plan ("RP"), and qualified benefit pension plan. Investment Funds . The assets in the NDT, ART, SERP, DCP, and RP are generally measured at fair value based on 75 Table of Contents quoted market prices or other observable market data such as interest rate indices. These investments are primarily U.S. and international equities, real estate investment trusts, fixed income investments, high-yield fixed income investments, U.S. Treasury Inflation-Protected Securities ("TIPS"), treasuries, currencies, derivative instruments, and other investments. TVA has classified all of these trading securities as either Level 1, Level 2, or Investments measured at net asset value ("NAV"). Private equity limited partnerships, private real asset investments, and private credit investments may include holdings of investments in private real estate, venture capital, buyout, mezzanine or subordinated debt, restructuring or distressed debt, and special situations through funds managed by third-party investment managers. These investments are valued at NAV as a practical expedient for fair value. There are no readily available quoted exchange prices for these investments. The fair value of these investments is based on information provided by the investment managers. These investments are valued on a quarterly basis. See Note 17 — Fair Value Measurements — Valuation Techniques for a discussion of valuation levels of the investments. Plan Investments . TVA's qualified benefit pension plan is funded with qualified plan assets. These investments are primarily global public equities, private equities, fixed income securities, public real assets, and private real assets. See Note 21 — Benefit Plans — Fair Value Measurements for disclosure of fair value measurements for investments held by the TVA Retirement System ("TVARS") that support TVA's qualified defined benefit pension plan. Pricing . Prices provided by third parties for the assets in investment funds and plan investments are subjected to automated tolerance checks by the investment portfolio trustee to identify and avoid, where possible, the use of inaccurate prices. Any such prices identified as outside the tolerance thresholds are reported to the vendor that provided the price. If the prices are validated, the primary pricing source is used. If not, a secondary source price that has passed the applicable tolerance check is used (or queried with the vendor if it is out of tolerance), resulting in either the use of a secondary price, where validated, or the last reported default price, as in the case of a missing price. For monthly valued accounts, where secondary price sources are available, an automated inter-source tolerance report identifies prices with an inter-vendor pricing variance of over two percent at an asset class level. For daily valued accounts, each security is assigned, where possible, an indicative major market index, against which daily price movements are automatically compared. Tolerance thresholds are established by asset class. Prices found to be outside of the applicable tolerance threshold are reported and queried with vendors as described above. For investment funds, TVA additionally performs its own analytical testing on the change in fair value measurements each period to ensure the valuations are reasonable based on changes in general market assumptions. TVA also performs pricing tests on various portfolios comprised of securities classified in Levels 1 and 2 on a quarterly basis to confirm accuracy of the values received from the investment portfolio trustee. For plan investments, TVARS reviews the trustee's Service Organization Controls report and the pricing policies of the trustee's largest pricing vendor. Derivatives. TVA has historically entered into various derivative transactions, including commodity option contracts, forward contracts, swaps, swaptions, futures, and options on futures, to manage various market risks. Other than certain derivative instruments included in investment funds, it is TVA's policy to enter into these derivative transactions solely for hedging purposes and not for speculative purposes. See Note 11 — Regulatory Assets and Liabilities and Note 16 — Risk Management Activities and Derivative Transactions for explanations of changes in estimates. Currency and Interest Rate Derivatives . TVA has two currency swaps and two "fixed for floating" interest rate swaps. The currency swaps protect against changes in cash flows caused by volatility in exchange rates related to outstanding Bonds denominated in British pounds sterling. TVA uses interest rate swaps to fix variable short-term debt to a fixed rate. The currency and interest rate swaps are classified as Level 2 valuations as the rate curves and interest rates affecting the fair value of the contracts are based on observable data. Commodity Contract Derivatives . TVA enters into certain commodity contract derivatives for natural gas that require physical delivery of the contracted quantity. The natural gas commodity contract derivatives are classified as Level 2 valuations based on market approaches which utilize short-term and mid-term market-quoted prices from an external industry brokerage firm. TVA maintains policies and procedures to value commodity contracts using what is believed to be the best and most relevant data available. In addition, TVA's risk management group reviews valuations and pricing data. Commodity Derivatives under the Financial Hedging Program ("FHP") . Currently, TVA is hedging exposure to the price of natural gas under the FHP. There is no Value at Risk aggregate transaction limit under the current FHP structure, but the TVA Board reviews and authorizes the use of tolerances and measures. The commodity derivatives under the FHP are classified as Level 2 valuations based on market approaches which utilize short-term and mid-term market-quoted prices from an external industry brokerage firm. Fair Value Considerations. In determining the fair value of its financial instruments, TVA considers the source of observable market data inputs, liquidity of the instrument, credit risk, and risk of nonperformance of itself or the counterparty to the contract. The conditions and criteria used to assess these factors are described below. 76 Table of Contents Sources of Market Assumptions. TVA derives its financial instrument market assumptions from market data sources (e.g., Chicago Mercantile Exchange and Moody's Investors Service, Inc. ("Moody's")). In some cases, where market data is not readily available, TVA uses comparable market sources and empirical evidence to derive market assumptions and determine a financial instrument's fair value. Market Liquidity . Market liquidity is assessed by TVA based on criteria as to whether the financial instrument trades in an active or inactive market. A financial instrument is considered to be in an active market if the prices are fully transparent to the market participants, the prices can be measured by market bid and ask quotes, the market has a relatively high trading volume, and the market has a significant number of market participants that will allow the market to rapidly absorb the quantity of the assets traded without significantly affecting the market price. Other factors TVA considers when determining whether a market is active or inactive include the presence of government or regulatory control over pricing that could make it difficult to establish a market-based price upon entering into a transaction. Nonperformance Risk . In determining the potential impact of nonperformance risk, which includes credit risk, TVA considers changes in current market conditions, readily available information on nonperformance risk, letters of credit, collateral, other arrangements available, and the nature of master netting arrangements. TVA is a counterparty to derivative instruments that subject TVA to nonperformance risk. Nonperformance risk on the majority of investments and certain exchange-traded instruments held by TVA is incorporated into the exit price that is derived from quoted market data that is used to value the investment. Nonperformance risk for most of TVA's derivative instruments is an adjustment to the initial asset/liability fair value. TVA adjusts for nonperformance risk, both of TVA (for liabilities) and the counterparty (for assets), by applying a credit valuation adjustment ("CVA"). TVA determines an appropriate CVA for each applicable financial instrument based on the term of the instrument and TVA's or the counterparty's credit rating as obtained from Moody's. For companies that do not have an observable credit rating, TVA uses internal analysis to assign a comparable rating to the company. TVA discounts each financial instrument using the historical default rate (as reported by Moody's for CY 1983 to CY 2024) for companies with a similar credit rating over a time period consistent with the remaining term of the contract. All derivative instruments are analyzed individually and are subject to unique risk exposures. The application of CVAs resulted in a less than $1 million decrease in the fair value of assets and a $3 million decrease in the fair value of liabilities at September 30, 2025. Collateral. TVA's interest rate swaps, currency swaps, and commodity derivatives under the FHP contain contract provisions that require a party to post collateral (in a form such as cash or a letter of credit) when the party's liability balance under the agreement exceeds a certain threshold. See Note 16 — Risk Management Activities and Derivative Transactions — Other Derivative Instruments — Collateral for a discussion of collateral related to TVA's derivative liabilities. Pension and Other Post-Retirement Benefits TVA sponsors a defined benefit pension plan that is qualified under section 401(a) of the Internal Revenue Code and covers substantially all of its full-time annual employees hired prior to July 1, 2014. TVARS, a separate legal entity governed by its own board of directors (the "TVARS Board"), administers the qualified defined benefit pension plan. TVA also provides a SERP to certain executives in critical positions, which provides supplemental pension benefits tied to compensation levels that exceed limits imposed by IRS rules applicable to the qualified defined benefit pension plan. Additionally, TVA provides post-retirement health care benefits for most of its full-time employees who reach retirement age while still working for TVA. TVA's pension and other post-retirement benefits contain uncertainties because they require management to make certain assumptions related to TVA's cost to provide these benefits. Numerous factors are considered including the provisions of the plans, changing employee demographics, various actuarial calculations, assumptions, and accounting mechanisms. Certain key actuarial assumptions critical to the pension and postretirement accounting estimates include expected long-term rate of return on plan assets, discount rates, projected health care cost trend rates, cost of living adjustments ("COLA"), and mortality rates. Every five years, a formal actuarial experience study that compares assumptions to the actual experience is conducted. Additional ad-hoc experience studies are performed as needed to review recent experience and validate recommended changes to the actuarial assumptions used based upon TVA's last experience study in 2023. See Note 21 — Benefit Plans for explanations of changes in assumptions and estimates. Expected Return on Plan Assets . The qualified defined benefit pension plan is the only plan that is funded with qualified plan assets. In determining the expected long-term rate of return on pension plan assets, TVA uses a process that incorporates actual historical asset class returns and an assessment of expected future performance and takes into consideration external actuarial advice, the current outlook on capital markets, the asset allocation policy, and the anticipated impact of active management. In June 2025, the TVARS Board approved a new asset allocation policy, but had no changes to the 6.50 percent expected return on assets assumption adopted in 2022. 77 Table of Contents TVA recognizes the impact of asset performance on pension expense over a three-year phase-in period through a market-related value of assets ("MRVA") calculation. The MRVA recognizes investment gains and losses over a three-year period and is used in calculating the expected return on assets and the recognized net actuarial loss components of pension net periodic benefit cost. A higher expected rate of return assumption decreases the net periodic pension benefit costs, whereas a lower expected rate of return assumption increases the net periodic pension benefit cost. The plan's actual rate of return for 2025 was 4.90 percent compared to the assumption of 6.50 percent. The difference between the expected and actual return on plan assets resulted in an actuarial loss of $93 million that is recognized as an increase in the related regulatory asset and an increase in the pension benefit obligation at September 30, 2025. Discount Rate. TVA's discount rates are derived by identifying a theoretical settlement portfolio of high quality corporate bonds of Aa quality or higher sufficient to provide for the projected benefit payments. The model matches the present value of the projected benefit payments to the market value of the theoretical settlement bond portfolio with any resulting excess funds presumed to be reinvested and used to meet successive year benefit payments. A single equivalent discount rate is determined to align the present value of the required cash flow with the value of the bond portfolio. The resulting discount rates are reflective of both the current interest rate and the distinct liability of the pension and post-retirement benefit plans. The discount rate is somewhat volatile because it is determined based upon the prevailing rate of long-term corporate bonds as of the measurement date. A higher discount rate decreases the plan obligations and correspondingly decreases the net periodic pension and net post-retirement benefit costs for those plans where actuarial losses are being amortized. Alternatively, a lower discount rate increases net periodic pension and net periodic post-retirement benefit costs. The discount rates used to determine the pension and post-retirement benefit obligations were 5.47 percent and 5.62 percent, respectively, at September 30, 2025. Health Care Cost Trends. In establishing health care cost trend rates for the post-retirement obligation, TVA reviews actual recent cost trends and projected future trends considering health care inflation, changes in health care utilization, and changes in plan benefits and premium experience. The pre-Medicare eligible per capita claims costs and per capita contributions trend rates are both reset to the initial rate of 7.75 percent, declining 0.50 percent in 2026 and 0.25 percent per year thereafter until they reach the ultimate trend rate of 5.00 percent in 2036. The post-Medicare current health care cost trend rate is zero percent for years 2025 through 2028, reaching the ultimate rate of 4.00 percent in 2029. TVA recognized a $28 million gain from the change in post-Medicare health care cost trend rate due to the Medicare supplement insurance premiums on the private exchange escalating at a lower rate than previously assumed. Additionally, TVA recognized an $18 million actuarial gain to reflect changes in the observed and anticipated pre-Medicare per capita claims costs and contributions. The net actuarial gains from health cost trends and observed and anticipated plan experience are recognized as an increase in the related regulatory liability and a decrease in the post-retirement obligation at September 30, 2025. Cost of Living Adjustments. COLAs are an increase in the benefits for eligible retirees to help maintain the purchasing power of benefits as consumer prices increase. This assumption is based on the long-term expected future rate of inflation, which is based on the capital market outlooks, economic forecasts, and the Federal Reserve policy. See Note 21 — Benefit Plans — Plan Assumptions — Cost of Living Adjustment for further discussion on the calculation of the COLA. The actual COLA for CY 2025 was 2.77 percent. The CY 2026 COLA is assumed to be 2.49 percent, and for years thereafter the COLA is assumed to be 2.00 percent. A higher COLA increases the pension benefit obligation whereas a lower COLA assumption decreases the obligation. The actual CY COLA and the long-term COLA assumption are used to determine the benefit obligation at September 30 and the net periodic benefit costs for the following fiscal year. Mortality . TVA's mortality assumptions are based upon actuarial projections in combination with actuarial studies of the actual mortality experience of TVARS's pension and post-retirement benefit plan participants taking into consideration the Society of Actuaries ("SOA") mortality table and projection scales as of September 30, 2025. TVA continues to monitor the availability of updates to mortality tables, longevity improvement scales, and mortality reviews and experience studies to consider whether these updates should be reflected in the current year mortality assumption. 78 Table of Contents The following tables illustrate the estimated effects of changing certain of the critical actuarial assumptions discussed above, while holding all other assumptions constant and excluding any impact for unamortized actuarial gains and losses: Sensitivity to Certain Changes in Pension Assumptions (in millions) Actuarial Assumption Actual Assumption Change in Assumption Impact Effect on 2025 pension expense: Discount rate 4.95 % (0.25) % $ 12 Expected return on assets 6.50 % (0.25) % 19 COLA 2.00 % 0.25 % 20 Effect on benefit obligation at September 30, 2025: Discount rate 5.47 % (0.25) % $ 241 COLA 2.00 % 0.25 % 168 Sensitivity to Changes in Assumed Health Care Cost Trend Rates 1% Increase 1% Decrease Effect on total of service and interest cost components for 2025 $ 4 $ (4) Effect on end-of-year accumulated post-retirement benefit obligation at September 30, 2025 35 (32) New Accounting Standards and Interpretations See Note 2 — Impact of New Accounting Standards and Interpretations for a discussion of recent accounting standards and pronouncements that were issued by the Financial Accounting Standards Board ("FASB"), became effective for TVA, or were adopted by TVA during the presented periods. Legislative and Regulatory Matters For additional discussion on legislative and regulatory matters, including a discussion of environmental legislation and regulation, see Part I, Item 1, Business — Environmental Matters, Part I, Item 1, Business — Regulation, and Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges. TVA does not engage, and does not control any entity that is engaged, in any activity listed under Section 13(r) of the Securities Exchange Act of 1934 (the "Exchange Act"), which requires certain issuers to disclose certain activities relating to Iran involving the issuer and its affiliates. Based on information supplied by each such person, none of TVA's directors and executive officers are involved in any such activities. While TVA is an agency and instrumentality of the U.S., TVA does not believe its disclosure obligations, if any, under Section 13(r) extend to the activities of any other departments, divisions, or agencies of the U.S. Environmental Matters See Part I, Item 1, Business — Environmental Matters, which discussion is incorporated by reference into this Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. Legal Proceedings From time to time, TVA is party to or otherwise involved in lawsuits, claims, proceedings, investigations, and other legal matters ("Legal Proceedings") that have arisen in the ordinary course of conducting its activities. As of September 30, 2025, TVA had accrued approximately $11 million with respect to Legal Proceedings. No assurance can be given that TVA will not be subject to significant additional claims and liabilities. If actual liabilities significantly exceed the estimates made, TVA's results of operations, liquidity, and financial condition could be materially adversely affected. For a discussion of certain current material Legal Proceedings, see Note 23 — Commitments and Contingencies — Legal Proceedings , which discussions are incorporated into this Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations . Risk Management Activities TVA is exposed to various market risks. These market risks include risks related to commodity prices, investment prices, interest rates, currency exchange rates, inflation, and counterparty credit and performance risk. To help manage certain of these risks, TVA has entered into various derivative transactions, including commodity option contracts, forward contracts, 79 Table of Contents swaps, swaptions, futures, and options on futures. Other than certain derivative instruments in its trust investment funds, it is TVA's policy to enter into these derivative transactions solely for hedging purposes and not for speculative purposes. See Note 16 — Risk Management Activities and Derivative Transactions . Risk Governance The Enterprise Risk Council ("ERC") is responsible for the highest level of risk oversight at TVA and is also responsible for communicating enterprise-wide risks with policy implications to the TVA Board or a designated TVA Board committee. The ERC is comprised of the Executive Council and the Chief Risk Officer ("CRO"), who acts as Chair. ERC members may invite additional attendees to meetings as non-voting participants. The ERC has also established subordinate committees, consisting of business unit leaders, to assist in the oversight of fuel and power procurement, DER programs and products, security, artificial intelligence, privacy, and technology risks, and general risk management. TVA has a designated Enterprise Risk Management ("ERM") organization within its Finance organization responsible for (1) establishing enterprise risk management policies and guidelines, (2) developing an enterprise risk profile aligned with TVA's strategic objectives, (3) performing annual risk assessments across all TVA business units, (4) monitoring and reporting on identified enterprise risks and emerging risks, (5) facilitating enterprise risk discussions with the risk subject matter experts across the organization and at the ERC and TVA Board levels, and (6) developing and improving TVA's risk awareness culture. TVA has cataloged major short-term and long-term enterprise level risks across the organization. A discussion of significant risks is presented in Part I, Item 1A, Risk Factors. Commodity Price Risk TVA is exposed to effects of market fluctuations in the price of commodities that are critical to its operations, including electricity, coal, and natural gas. The magnitude of exposure to these risks is influenced by many factors including contract terms and market liquidity. TVA's commodity price risk is substantially mitigated by its cost-based rates, including its total fuel cost adjustment, and long-term fixed price commodity contracts. Commodity Contract Derivatives. TVA manages risk with commodity contract derivatives for natural gas that require physical delivery of the contracted quantity. An immediate 10 percent decline in the market price of natural gas on both September 30, 2025 and 2024, would have resulted in decreases of less than $1 million in the fair value of TVA's natural gas derivative instruments at these dates. Commodity Derivatives under the FHP. TVA manages risk with commodity derivatives under the FHP by hedging exposure to the price of natural gas. An immediate 10 percent decline in the market price of natural gas on September 30, 2025 and 2024, would have resulted in a decrease of approximately $106 million and $72 million, respectively, in the fair value of TVA's natural gas derivative instruments under the FHP. Investment Price Risk TVA's investment price risk relates primarily to investments in TVA's NDT, ART, pension plan assets, SERP, DCP, and RP. Nuclear Decommissioning Trust. The NDT is generally designed to achieve a return in line with overall equity and debt market performance. The assets of the trust are invested in debt and equity securities, private partnerships, and certain derivative instruments including forwards, futures, options, and swaps, and through these investments the trust has exposure to U.S. equities, international equities, real estate investment trusts, natural resource equities, high-yield debt, domestic debt, U.S. TIPS, treasuries, private real assets, private equity, and private credit strategies. At September 30, 2025 and 2024, an immediate 10 percent decrease in the price of the investments in the trust would have reduced the value of the trust by $371 million and $333 million, respectively. Asset Retirement Trust. The ART is presently invested to achieve a return in line with overall equity and debt market performance. The assets of the trust are invested in debt and equity securities, private partnerships, and certain derivative instruments including options, and through these investments the trust has exposure to U.S. equities, real estate investment trusts, natural resource equities, high-yield debt, domestic debt, TIPS, treasuries, private real assets, private equity, and private credit strategies. At September 30, 2025 and 2024, an immediate 10 percent decrease in the price of the investments in the trust would have reduced the value of the trust by $173 million and $152 million, respectively. Qualified Pension Plan . In June 2025, based on current market conditions and updated capital market assumptions, the asset allocation policy was modified to progress towards the goal of reducing risk and volatility in the TVARS investment portfolio. TVARS investments will be reallocated in a prudent manner over time to move toward the new asset allocation targets. The TVARS asset allocation policy for qualified pension plan assets has targets of 68 percent fixed income assets, 20 percent equity assets, and 12 percent real assets. Pursuant to the TVARS Rules and Regulations, any proposed changes in asset allocation that would change TVARS's assumed rate of investment return are subject to the review and veto of the TVA Board. 80 Table of Contents As set forth above, the qualified pension plan assets are invested across fixed income, equities, and real assets. The TVARS asset allocation policy includes permissible deviations from target allocations, and action can be taken, as appropriate, to rebalance the plan's assets consistent with the asset allocation policy. At September 30, 2025 and 2024, an immediate 10 percent decrease in the value of the net assets of the fund would have reduced the value of the fund by approximately $859 million and $867 million, respectively. Supplemental Executive Retirement Plan . The SERP is a non-qualified defined benefit pension plan similar to those typically found in other companies in TVA's peer group and is provided to selected employees of TVA. TVA's SERP was created to recruit and retain key executives. The plan is designed to provide a competitive level of retirement benefits in excess of the limitations on contributions and benefits imposed by TVA's qualified defined benefit plan and Internal Revenue Code Section 415 limits on qualified retirement plans. The SERP currently targets an asset allocation policy for its plan assets of 64 percent equity securities, which includes U.S. and non-U.S. equities, and 36 percent fixed income securities. The SERP plan assets are presently invested to achieve a return in line with overall equity and debt market performance. At both September 30, 2025 and 2024, an immediate 10 percent decrease in the value of the SERP investments would have reduced the value of the investments by $10 million. Deferred Compensation Plan. The DCP is designed to provide participants with the ability to defer compensation to future periods. The plan assists in the recruitment of top executive talent for TVA. As in other corporations, deferred compensation can be an integral part of a total compensation package. Assets currently include deferral balances. The default return on investment of the accounts is interest calculated based on the composite rate of all marketable U.S. Treasury issues. Executives may alternatively choose to have their balances adjusted based on the return of certain mutual funds. At both September 30, 2025 and 2024, an immediate 10 percent decrease in the value of the deferred compensation accounts would have reduced the value of the accounts by $2 million. Restoration Plan . The RP is a non-qualified excess 401(k) plan designed to allow certain eligible employees whose contributions to the 401(k) plan are limited by IRS rules to save additional amounts for retirement and receive non-elective and matching employer contributions. The plan is designed to provide a competitive level of retirement benefits and assist in the recruitment of executive talent for TVA. The default return on investment of the accounts is interest calculated based on the composite rate of all marketable U.S. Treasury issues. Executives may alternatively choose to have their balances adjusted based on the return of certain mutual funds. At both September 30, 2025 and 2024, an immediate 10 percent decrease in the value of the RP accounts would have reduced the value of the accounts by less than $1 million. Interest Rate Risk TVA's interest rate risk is related primarily to its short-term investments, short-term debt, long-term debt, and interest rate derivatives. Investments. At September 30, 2025, TVA had $1.6 billion of cash and cash equivalents, and the average balance of cash and cash equivalents for 2025 was $898 million. The average interest rate that TVA received on its short-term investments during 2025 was 4.36 percent. If the rates of interest that TVA received on its short-term investments during 2025 were 3.36 percent, TVA would have received $9 million less in interest from its short-term investments. At September 30, 2024, TVA had $502 million of cash and cash equivalents, and the average balance of cash and cash equivalents for 2024 was $600 million. The average interest rate that TVA received on its short-term investments during 2024 was 5.39 percent. If the rates that TVA received on its short-term investments during 2024 were 4.39 percent, TVA would have received approximately $6 million less in interest from its short-term investments. In addition to affecting the amount of interest that TVA receives from its short-term investments, changes in interest rates could affect the value of the investments in its NDT, ART, pension plan assets, SERP, DCP, and RP. See Risk Management Activities — Investment Price Risk above. Short-Term Debt . At September 30, 2025, TVA's current maturities of power bonds and debt of variable interest entities were $1.4 billion. Based on TVA's interest rate exposure at September 30, 2025, an immediate one percentage point increase in interest rates would have resulted in an increase of $14 million in TVA's short-term interest expense. At September 30, 2024, TVA's short-term borrowings were $1.2 billion, and the current maturities of power bonds and debt of variable interest entities were $1.1 billion. Based on TVA's interest rate exposure at September 30, 2024, an immediate one percentage point increase in interest rates would have resulted in an increase of $22 million in TVA's short-term interest expense. Long-Term Debt. At September 30, 2025 and 2024, the interest rates on all of TVA's outstanding long-term debt were fixed (or subject only to downward adjustment under certain conditions). Accordingly, an immediate one percentage point increase in interest rates would not have affected TVA's interest expense associated with its long-term debt. When TVA's long-term debt matures or is redeemed, however, TVA typically refinances debt in whole or in part by issuing additional debt. Accordingly, if interest rates are high when TVA issues this additional debt, TVA's cash flows, results of operations, and financial condition may be adversely affected. This risk is somewhat mitigated by the fact that TVA's debt portfolio is diversified in terms of maturities and has a long average life. At September 30, 2025 and 2024, the average life of TVA's debt portfolio was 13.82 years and 13.96 years, respectively. At September 30, 2025 and 2024, the average interest rate of TVA's debt portfolio was 4.87 percent and 4.69 percent, respectively. See Note 15 — Debt and Other Obligations — Debt Outstanding for a schedule of TVA's debt maturities. 81 Table of Contents Interest Rate Derivatives. Changes in interest rates also affect the mark-to-market ("MtM") valuation of TVA's interest rate derivatives. See Note 16 — Risk Management Activities and Derivative Transactions — Derivatives Not Receiving Hedge Accounting Treatment — Interest Rate Derivatives . TVA had two interest rate swaps outstanding at both September 30, 2025 and 2024. Net unrealized gains and losses on the swaps are reflected on TVA's Consolidated Balance Sheets in a regulatory liability or asset account, and realized gains and losses are reflected in earnings. Based on TVA's interest rate exposure at September 30, 2025 and 2024, an immediate one percentage point decrease in interest rates would have increased the interest rate swap liabilities by $253 million and $293 million, respectively. Currency Exchange Rate Risk Over the next several years, TVA plans to spend a significant amount of capital on clean air projects, capacity expansion, and other projects. A portion of this amount may be spent on contracts that are denominated in one or more foreign currencies. Additionally, TVA's two issues of Bonds denominated in British pounds sterling are hedged by currency swap agreements. If not effectively managed, foreign currency exposure could negatively impact TVA's counterparty risk, cash flows, results of operations, and financial condition.