Supporting Tennessee’s Future Energy Needs… Nuclear Generation Development & Construction

1. Supporting Tennessee’s Future Energy Needs…Nuclear Generation Development & Construction Dan Pratt Manager, Pre-Construction Planning March 10, 2009

2. TVA Serves… • 159 power distributors • 62 direct serve industries • Over 8.5 million people in an 80,000 sq mile service area • Public users of land and recreational facilities • Communities with economic development assistance

3. TVA’s Diversified Generation Portfolio Combustion turbine and green power 1%(19%) Nuclear Plants Combustion Turbines Fossil Plants Nuclear 30%(21%) Hydroelectric Dams Pumped-Storage Green Power Hydro 6%(15%) Fossil/Coal 64%(45%) Generation(Capacity)

4. TVA Generating Facilities • 11 fossil sites (59 units) • 3 nuclear sites (6 units) • 29 hydro sites (109 units) • 11 combustion turbine sites (72 units) • 1 pumped storage station • 1 wind energy site • 17,000 miles of transmission line

5. Elements of TVA Generation Strategy • Use TVA resources to meet demand. • Increase energy conservation and demand reductions. • Provide cleaner, reliable, and still-affordable energy. • Fifty percent of generation from zero or low carbon emitting resources by 2020 For current planning horizon, when large amounts of new generation are required, this means nuclear for base load and natural gas for peaking

6. TVA Nuclear Plants Watts Bar Nuclear Plant Sequoyah Nuclear Plant Browns Ferry Nuclear Plant Bellefonte Site

7. TVA Has Option That Others Do Not Watts Bar Unit 2 Completion • Five-year project began October 2007 • Identical to the operating Unit 1 • Unit approximately 60 percent complete 1180 MWe Net

8. TVA Nuclear – Industry Leader in Nuclear Generation Development Under Construction Planned... Actual Watts Bar 2 Browns Ferry 1 Bellefonte 2 Units 2007 2012 2017 - 2019 Units 6 7 9 Megawatts 6,800 8,280 10,5 – 10,9

9. Developing Next Option for Baseload Bellefonte Option Bellefonte Site (Alabama) Identified Power Planning Need 2017 – 2019

10. Technology Decision For Bellefonte • Option A - Units 3 & 4 (AP1000) • Option B – Units 1 & 2 (original units)

11. BLN 1&2 /// BLN 3&4 BOD Decision BOD Decision 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 CFR Part 50 Licensing Process TVA Request CP’s Reinstated U2 License U1 License Existing Units BLN 1&2 DSEP Detailed Engineering Long Lead Procurement (2 Units) U1 Startup Site Preparation U1 Completion to Fuel Load U2 Startup U2 Completion to Fuel Load CFR Part 52 Licensing Process ITAAC Closure License Application Submitted AP1000 BLN 3&4 COL Issued Detailed Engineering Long Lead Procurement (2 Units) U3 Startup Site Excavation U3 First Concrete to Fuel Load U4 Startup U4 First Concrete to Fuel Load

12. Key Insights… So Far • Competition for talent • Value of existing plant infrastructure has increased over last few years as other options have increased in price. • Local communities supportive, but worried about short term cost and services impacts to communities (ex. schools). • Identify or recruit core team early, it takes longer to build this than you think. • Changing NRC leadership

13. Nuclear Options Being Developed Because… Reliable Energy Supply The Benefits of New Nuclear Clean Air Value Economic Development CompetitiveNon-Volatile Electric Price Less Dependence on Oil and Gas High Capacity Factors Zero Air Emissions Protection against CO2 risk ~$1 Local Benefits for every $1 Spent Up to 2000 Jobs During Construction and ~500 Per Unit During Operation ~67% of Total Cost Fixed Long-Term Costs Attractive

14. The Carbon FactorEPRI Comparative Costs in 2015 Levelized Cost of Electricity, $/MWh 120 IGCC Biomass 110 NGCC ($10/MMBtu) Wind (32.5% capacity factor) 100 90 NGCC ($8/MMBtu) 80 New Nuclear 70 NGCC ($6/MMBtu) Pulverized Coal 60 50 40 95% confidence level Rev. October 2008 30 0 10 20 30 40 50 Cost of CO2, $/Metric Ton

15. Nuclear Energy Emission Free Generation Life Cycle CO2 Emissions Analyses Tons CO2-equiv/GWeh Coal Natural Gas Nuclear Hydro Biomass Wind Solar PV Geo-thermal Nuclear Energy Is On Par with Renewables

16. U.S. New Nuclear - Sites With License Application Projects and Contracts ConstellationNine Mile Point DTE Energy Fermi PP&LBell Bend ConstellationCalvert Cliffs AmerenUE Callaway DominionNorth Anna Progress Harris TVA Bellefonte Amarillo DukeW. Lee SCE&G V.C. Summer EntergyGrand Gulf TXU Comanche Peak SouthernVogtle EntergyRiver Bend Progress Levy County NRGSouth Texas FP&L Turkey Point ExelonVictoria County COLA Announced EPC Signed

17. Key Project Siting Issues • Geologic and Seismic • Water Availability and Usage • Transmission • Population/Emergency Planning • Other Environmental (Meteorological Data)

18. New Nuclear Design Alternatives Westinghouse AP1000 AREVA EPR Hitachi-GE or Toshiba ABWR 1600 MWe 1120 MWe 1320 MWe GE- Hitachi ESBWR Mitsubishi US APWR 1700 MWe 1550 MWe

19. Simplification Eliminates Components and Reduces Cost to Construct & Operate ** 50% FewerValves 35% FewerSafety Grade Pumps 45% LessSeismic BuildingVolume 80% LessPipe 85% LessCable Passive Benefit

20. Designed to Be Built Faster Through Modular Construction Pump/Valve Module AP1000 Number 122 154 55 11 342 Module Type Structural Piping Mechanical Equipment Electrical Equipment TOTAL Structural Module Raceway Module Depressurization Module

21. Vendor Says…. Cost of plant is: $3200/kw Utility Says… Cost of plant is: $4300/kw Cost of New Nuclear Quiz Which is Correct? Wall Street Says… Cost of plant is: $5500/kw All are the same… and for the same project! Everything Including Interest During Construction Overnight Plus Owners Cost EPC Only Escalated to 2017

22. Major Hurdles for New Plant Construction Equipment Fabrication Final Design Skilled Labor Commodity Escalation

23. New Nuclear Development Approach Incremental Levels of Increased Certainty Time Manage the uncertainty in a planned deliberate manner Technology Certainty (Final Design Engineering) NRC Regulatory Certainty (COL Issuance) Project Development Certainty Working In Parallel Financial Certainty Future Uncertainty Uncertainty Today

24. Once Through Versus Closed Fuel Cycle Yucca Mountain Yucca Mountain Yucca Mountain Yucca Mountain Geologic Repository Geologic Repository Geologic Repository Geologic Repository Once Through Once Through Once Through Once Through Residual Waste Residual Waste Residual Waste Residual Waste Used Fuel Thrown Away Used Fuel Thrown Away Used Fuel Thrown Away Used Fuel Thrown Away Used Fuel Used Fuel Used Fuel Used Fuel Separations Separations Separations Separations Byproducts Waste Management Byproducts Waste Management Byproducts Waste Management Byproducts Waste Management Closed Recycle Closed Recycle Closed Recycle Closed Recycle Operating Reactors Operating Reactors Operating Reactors Operating Reactors Advanced Recycle Reactor Advanced Recycle Reactor Advanced Recycle Reactor Advanced Recycle Reactor Recycle Fuel Fabrication Recycle Fuel Fabrication Recycle Fuel Fabrication Recycle Fuel Fabrication MOX Recycle MOX Recycle Mixed Oxide Fuel Recycle Mixed Oxide Fuel Recycle

25. Where are We Headed Over Next Decade • Energy Efficiency Technologies • Grid of the Future • Nuclear Sustainability and Expansion • Cleaner Coal • Plug-in Hybrid Vehicles Accelerating Solutions

26. Summary Messages • Nuclear will provide clean competitively priced power • Provided risk can be managed in such a way as to keep cost of capital at reasonable levels. • Re-establishing the infrastructure to build plants will likely result in longer planning horizons (with extended timelines for cash flows) for the initial wave of new reactors. • Nuclear will remain a key generation source and expand as part of the energy mix for the foreseeable future.