The Tennessee Valley Authority announced today it has sold a majority stake in one of its power plants to its distributors.

TVA said a new corporation formed in Chattanooga by the municipalities and cooperatives that distribute TVA-generated power paid $325 million last week to buy a nearly 70 percent stake in the Southaven Power Plant, an 810-megawatt combined-cycle electric generating facility TVA recently acquired out of bankruptcy.

Despite the troubled credit market, the Seven States Power Corp., an affiliate of the Chattanooga-based Tennessee Valley Public Power Association, borrowed $325 million from a consortium of banks, including JPMorgan Chase Bank, N.A., CoBank, ACB and Branch Banking and Trust Company.

TVA will lease the plant back from Seven States and operate the power plant to generate power across its seven-state region.

Jack Simmons, president of Public Power Association in Chattanooga and CEO of Seven States Power, said the agreement for the first time will give distributors an ownership in the power-generating assets they help pay through their rates to TVA.

“This is the first such arrangement, but we hope to eventually have more,” Mr. Simmons said.

TVA has agreed to repurchase Seven States’ stake in the plant if a permanent financing arrangement is not put in place by April 2010.

“We believe this agreement is an important first step toward long-term shared ownership of some of TVA’s assets to help reduce our costs and keep wholesale rates as low as possible,” TVA spokesman John Moulton said.

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