Tennessee Valley Authority

There have been no material changes to the key initiatives and challenges described in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations— Key Initiatives and Challenges of the Annual Report, except as described below.

Capacity

Natural Gas Fired Units. TVA is constructing a 200 MW aeroderivative CT project at TVA's Allen site. An approved construction air permit was received in December 2025. As of March 31, 2026, TVA had spent $254 million on the project at Allen and could spend up to an additional $109 million.

TVA is constructing a 350 MW project at TVA's Lagoon Creek site for four additional CTs. TVA completed an Environmental Impact Statement ("EIS") for 16 units at the site prior to construction of the currently operational 12 units, and in December 2025, TVA deemed that the existing EIS fulfilled National Environmental Policy Act ("NEPA") requirements for the additional CTs. As of March 31, 2026, TVA had spent $2 million on the project at Lagoon Creek and could spend up to an additional $668 million.

As of September 30, 2025, TVA had 10 idled units at the Johnsonville Combustion Turbine Facility (Units 1-10). In the first quarter of 2026, TVA made the decision to continue operating these units, with a total summer net capability of 500 MWs. The continued operation of these units is subject to real-time bulk electrical system operating constraints including transmission line loading limitations, fuel availability such as coal and gas, seasonal river reservoir levels, fuel blend, severe weather events, environmental and/or other regulatory constraints, transmission system outages, generator outages, or generator derates.

Pre-commercial plant operations began on Cumberland Combined Cycle Plant Unit 1 in April 2026.

Nuclear. Amid growth in energy-intensive sectors, including artificial intelligence and data centers, TVA is exploring a

diverse range of nuclear technologies to help shape the most effective, scalable, and secure solutions for the region's

growing economy. TVA will continue to work with the current Administration to unleash American energy and provide energy security for the nation.

Small Modular Reactors. 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 April 2026, the final Supplemental EIS was issued.

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. A license renewal application was submitted to the NRC in January 2024 for the three units at Browns Ferry, and the renewal was approved by the NRC in December 2025.

Coal-Fired Fleet. In February 2026, TVA published final supplemental EISs with the preferred alternatives of continued operations of the Kingston and Cumberland Fossil Plants in conjunction with the other capacity projects being constructed at the Kingston and Cumberland sites. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations —Key Initiatives and Challenges —Capacity —Natural Gas-Fired Units and —Coal-Fired Fleetin the Annual Report.

In addition, in February 2026, the TVA Board separately authorized TVA, at the direction and discretion of the CEO, to operate the Kingston and Cumberland Fossil Plants in accordance with all applicable laws and regulatory requirements, including all requirements imposed by any applicable permits, and directed TVA staff to apply for any permits that may be applicable for TVA to continue to operate the coal units along with the new gas units. In March 2026, TVA submitted requests to the Tennessee Department of Environment and Conservation (“TDEC”) for modifications of the National Pollutant Discharge Elimination System permits for the Kingston and Cumberland Fossil Plants that would allow continued operations past December 31, 2028. In addition, TVA is developing its Prevention of Significant Deterioration (“PSD”) permit applications for the new gas units being constructed at the Kingston and Cumberland sites. TVA will need to obtain these PSD permits in order to operate the coal units along with the new gas units in the absence of regulatory relief.

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. In May 2025, a draft EIS was made available for public comment, and the final EIS was published in November 2025.

Battery Energy Storage. During the six months ended March 31, 2026, TVA signed two battery energy storage system agreements which are expected to commence by the summer of 2029. The terms of the agreements are 20 years and capacity payments over the terms of the agreements are expected to total over $1.3 billion.

Funding Opportunities

TVA continues to evaluate and pursue funding opportunities under the IRA and the BIL to help offset the cost of qualifying projects. 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. As of March 31, 2026, TVA had recorded $112 million in Accounts receivable, net related to these tax credits. In addition, TVA received $26 million during the six months ended March 31, 2026, related to these credits.

In January 2025, TVA and a consortium of co-applicants ("consortium") applied for a U.S. DOE grant to support the potential future deployment of a small modular reactor ("SMR") at TVA’s Clinch River site. In December 2025, TVA and the consortium were selected by the DOE to enter negotiations for an approximate $400 million grant to accelerate the deployment of SMRs. The upcoming phase will focus on fund allocation in addition to establishing terms and conditions.

Coal Combustion Residuals

On February 10, 2026, EPA published a final rule that provides additional time to complete facility evaluation reporting requirements for identifying CCR management units ("CCRMU") and to comply with associated groundwater monitoring provisions. In addition, this final rule makes conforming changes to the remaining CCRMU compliance requirements and deadlines. As a result of the enactment of the final rule, TVA recorded a decrease of $146 million to the ARO liability during the three months ended March 31, 2026. 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. See Forward-Looking Information in this Quarterly Report and Part I, Item 1A, Risk Factors in the Annual Report for a discussion of additional factors. See also Note 12 —Asset Retirement Obligations.

In addition, on April 13, 2026, EPA issued a proposed rule that would revise existing federal CCR regulations. Specifically, EPA proposed, among other things, changes to the regulations that could authorize permitting authorities to approve alternative closure standards, timelines, methods, and points of compliance. EPA is soliciting feedback during the public comment period that could support significant additional changes when the proposed rule is finalized. TVA is evaluating the potential impact of the proposed rule. See Part I, Item 1, Business –Environmental Matters – Cleanup of Solid and Hazardous Wastes —Coal Combustion Residuals in the Annual Report.

Corporate Governance

Board. In January 2026, Jeff Hagood, Arthur Graham, Mitch Graves, and Randall Jones took their oath of office and began their service as members of the TVA Board. With these new Board members, the TVA Board now has a quorum. In addition, in January 2026, the TVA Board approved committee assignments, and the current assignments are as follows: Audit, Risk, and Cybersecurity Committee members are Mitch Graves (Chair), Arthur Graham, and Robert P. Klein; Finance, Rates, and Portfolio Committee members are A. Wade White (Chair), Arthur Graham, and Randall Jones; External Stakeholders and Regulation Committee members are Randall Jones (Chair), A. Wade White, and Jeff Hagood; Operations and Nuclear Oversight Committee members are Robert P. Klein (Chair), Arthur Graham, Mitch Graves, and A. Wade White; and People and Governance Committee members are Jeff Hagood (Chair), Robert P. Klein, and Mitch Graves.

On February 24, 2026, William J. Renick resigned as a member of the TVA Board. On February 27, 2026, the TVA Board approved the selection of Mitch Graves as Chair of the TVA Board. Mr. Graves assumed the role of Chair on February 27, 2026, and his role ends on April 1, 2027. In addition, the TVA Board also approved the selection of Jeff Hagood to serve as Chair Elect and to serve as Chair for a term ending on May 18, 2029. Mr. Hagood's term as Chair will begin on the earlier of April 1, 2027, or the date that Mr. Graves is unable to serve as Chair.

Management. Effective January 15, 2026, Rebecca C. Tolene was no longer performing the duties of TVA’s Executive Vice President and General Counsel and will be departing TVA. In addition, effective March 2, 2026, Jeremy P. Fisher was no longer performing the duties of TVA’s Executive Vice President and Chief Business Officer and will be departing TVA.

On April 3, 2026, Donald A. Moul notified TVA and the TVA Board of his intention to retire on July 1, 2026. On April 7, 2026, TVA entered into a separation and release agreement with Mr. Moul under which he is entitled to severance and retirement benefits that are materially consistent with the benefits described in TVA’s Executive Severance Plan and Long-Term Incentive Plan ("LTIP"). See Part III, Item 11, Executive Compensation in the Annual Report for additional information.

On April 24, 2026, TVA announced that Michael D. Skaggs had been appointed as TVA’s new Interim President and Chief Executive Officer, succeeding Mr. Moul. Mr. Skaggs started on April 24, 2026, and his appointment ends on April 24, 2027, with the option to extend the term based on the agreement of the parties.

Compensation Actions. On February 11, 2026, the TVA Board approved the replacement of the Carbon-Free Performance Indicator measure and related goals under the LTIP with a new Project Milestones measure and related goals for the 2024 - 2026, 2025 - 2027, and 2026 - 2028 performance cycles.

Presidential Memorandum Regarding Compensation Practices at TVA. On March 11, 2026, President Trump issued a Presidential Memorandum directing the TVA Board, as appropriate and if consistent with its annual survey of prevailing compensation, to adopt and implement policies establishing a maximum total annual compensation limit of $500,000 for all TVA employees, including the CEO. The memorandum directs the TVA Board to consider whether to adopt such policies within 90 days of the date of the memorandum. The TVA Board is currently considering the memorandum in consideration of its obligations under the TVA Act. See Part III, Item 11, Executive Compensation —Compensation Discussion and Analysis in the Annual Report for a discussion of the TVA Board’s obligations under the TVA Act with respect to compensation matters.