Tennessee Valley Authority

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.

(“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 Permitfor 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")

BWRX-300 SMR. GVH is responsible for standard design development. See Note 22 —Collaborative Arrangementfor 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 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 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 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.

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.