Company: TVC
Filing Date: 2025-02-05
Form Type: 10-Q
Source: 0001376986-25-000011
Chunk: 243

Company: Tennessee Valley Authority
Filing Date: 2025-02-05
Form: 10-Q
Item: Part II, Item 3
Chunk 243
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 from previous requests for proposals ("RFPs") that are not yet online have been impacted by project delays and price increases.

Derivative Counterparties.  TVA has entered into physical and financial contracts that are classified as derivatives for hedging purposes, and TVA's NDT, ART, and qualified defined benefit plan ("pension plan") have entered into derivative contracts for investment purposes.  If a counterparty to one of the physical or financial derivative transactions defaults, TVA might incur costs in connection with entering into a replacement transaction.  If a counterparty to the derivative contracts into which the NDT, the ART, or the pension plan have entered for investment purposes defaults, the value of the investment could decline significantly or perhaps become worthless.  TVA has concentrations of credit risk from the banking, coal, and gas industries because multiple companies in these industries serve as counterparties to TVA in various derivative transactions.  At December 31, 2024, all of TVA's commodity derivatives under the FHP, currency swaps, and interest rate swaps were with counterparties whose Moody's credit ratings were A2 or higher.  TVA classifies forward natural gas contracts as derivatives.  At December 31, 2024, the forward natural gas contracts were with counterparties whose ratings ranged from B1 to A1.  

14.  Fair Value Measurements 

Fair value is determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the asset or liability's principal market, or in the absence of a principal market, the most advantageous market for the asset or liability in an orderly transaction between market participants.  TVA uses market or observable inputs as the preferred source of values, followed by assumptions based on hypothetical transactions in the absence of market inputs.Valuation TechniquesThe measurement of fair value results in classification into a hierarchy by the inputs used to determine the fair value as follows:Level 1— Unadjusted quoted prices in active markets accessible by the reporting entity for identical assets or liabilities.  Active markets are those in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing.Level 2 — Pricing inputs other than quoted market prices included in Level 1 that are based on observable market data and that are directly or indirectly observable for substantially the full term of the asset or liability.  These include quoted market prices for similar assets or liabilities, quoted market prices for identical or similar assets in markets that are