TECO touts balance-sheet improvement, $1 billion reduction of debt

By Paul Deckelman

New York, Sept. 21 - TECO Energy Inc. has seen "significant" balance-sheet improvements in the last few years, its chief executive officer said on Wednesday, including the retirement of more than $1 billion of debt during that time.

The retired debt was at the parent holding company level and the Tampa, Fla.-based utility operator's TECO Finance Inc. funding subsidiary level, CEO John B. Ramil told attendees at the Bank of America Merrill Lynch Power & Gas Leaders Conference in New York.

In the company's most recent 10-Q quarterly filing with the Securities and Exchange Commission last month, TECO showed consolidated long-term debt as of the end of the second quarter on June 30 of $2.95 billion - all but $28 million classified as recourse debt - versus $3.15 billion at the end of the 2010 fiscal year on Dec. 31, 2010 and $3.32 billion for the year-earlier second quarter.

The company and its subsidiaries had consolidated liquidity as of June 30 of $704.1 million, consisting of $61.8 million of cash and short-term investments plus $642.3 million available under its credit facilities after taking into account $32.7 million of credit facility draws and outstanding letters of credit. Most of the availability is from two facilities, totaling $475 million, at its main operating division, Tampa Electric Co.

Consolidated liquidity stood at $737.9 million on Dec. 31, 2010 and $688.2 million on June 30, 2010.

Ratings agencies take note

"The ratings agencies have recognized those improvements as well," Ramil said. He noted that the parent company is "now a solid BBB" and Tampa Electric is even better at BBB+. All three of the major agencies - Moody's Investors Service, Standard & Poor's and Fitch Ratings - upgraded the company's ratings this spring.

When it raised TECO's ratings at the end of May, S&P cited the company's improved credit protection measures and the expectation that TECO's financial condition will continue to strengthen, noting its "ongoing commitment to improving its credit quality by shedding some of its unregulated businesses, restoring its balance sheet and focusing on better financial performance through regulatory initiatives and cost controls amid less-attractive economic conditions."

The company's finances have been helped by what the CEO termed "significant" free cash flow, "now and in the future, for further investment in the utility."

Ramil said that was coming not only from actual operations, but from the financial impact of "significant" net operating losses the company booked from its independent power investments, which he said are expected to last through 2015.

Having experienced "strong" earnings growth since 2009, Ramil said that TECO is expecting 2011 full-year per-share earnings of between $1.25 and $1.40. It expects its two regulated divisions - Tampa Electric and its gas utility, Peoples Gas System - to earn the return on equity allowed to them by Florida utility regulators, which is 10.25% to 12.25% for Tampa Electric and 9.75% to 11.75% for Peoples Gas.

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