Moody's changes outlooks of TECO Energy and Tampa Electric Company to negative

New York, January 23, 2002 -- Moody's Investors Service has changed the outlooks of the long-term ratings of TECO Energy and Tampa Electric Company to negative in response to increased financial pressure on the companies resulting from accelerated equity contributions and a higher degree of risk being undertaken by TECO Energy at its two major independent power projects: Union Power and Gila River.

These developments have increased the level of uncertainty throughout the organization. The company has responded proactively to this increased financial pressure by trimming its capital expenditure forecast and reevaluating overall growth and expansion plans.

Affected are Tampa Electric Company's Aa3 senior secured, A1 issuer, senior unsecured and pollution control revenue bond debt; TECO Energy's A3 senior unsecured and Baa1 junior subordinated debt; and the Baa1 rating of the trust preferred securities of TECO Capital Trust I and TECO Capital Trust II.

Moody's action does not affect the P-1 commercial paper rating for Tampa Electric Company or the P-2 commercial paper rating of TECO Finance, Inc. TECO Energy has been engaged in an ambitious program to expand TECO Power Services (TPS), its unregulated power development business.

TPS has interests in a number of primarily gas fired combined cycle plants which are expected to operate in an increasingly uncertain merchant environment for 50% or more of their output.

At the same time, Tampa Electric is engaged in a large construction program of rate based generation to add capacity to meet growth requirements in Florida, increase its reserve margins, and meet environmental compliance mandates.

These substantial capital requirements have been and will continue to be a challenge for the company. Four of the projects under construction at TPS, including the large Union Power and Gila River power stations, utilize NEPCO, an Enron subsidiary, as construction contractor.

Although NEPCO has not filed for bankruptcy, and TECO Energy does not expect it to do so, Enron had guaranteed NEPCO's obligations under the construction contracts.

Enron's bankruptcy permitted the bank group financing the Union Power and Gila River projects to stop funding construction costs, although construction continued without interruption.

The banks have agreed to continue funding the two projects in exchange for TECO Energy replacing Enron as guarantor of NEPCO's obligations, payment by TECO Energy of project cost overruns (estimated at $63 million, although this can be offset by any remaining contingency amounts), and an acceleration by TECO Energy of $200 million of project equity contributions to mid-2002 from 2003.

These developments have also delayed the financing of the smaller Dell and McAdams projects. In short, TECO Energy has had to undertake additional risk and obligations with respect to various TPS projects than had been contemplated at their outset.

In response, TECO Energy has announced measures to offset the impact of these developments, including a reduction in its 2002-2004 capital expenditure budget by approximately $700 million, for the most part by delaying other generation projects at TPS and Tampa Electric, including the recently announced repowering of its Bayside Units 3 and 4.

The company also recently issued $400 million of Mandatorily Convertible Securities to be used to fund capital expenditures and to repay short-term debt. Finally, the company has indicated that it intends to finance its growth requirements with a higher proportion of equity than debt and plans to issue equity in 2003 and 2004 (on top of the $325 million of common equity issued in 2001).

Moody's believes these actions are positive and will be important to maintaining credit quality at both TECO Energy and Tampa Electric. TECO Energy is a diversified energy company headquartered in Tampa, Florida.


Sponsored by FLSmidth

Related Articles

Japan's nuclear cleanup stymied by water woes

More than three years into the massive cleanup of Japan's tsunami-damaged nuclear power plant, only a tiny fraction of the workers are focused on key tasks such as preparing for the dismantling of the broken reactors and removing radioactive fuel rods.

TECO Energy to sell coal mining business for $170mn

TECO Energy (NYSE: TE) signed an agreement to sell its coal mining unit, TECO Coal and its subsidiaries, to Cambrian Coal Corp. for $170 million.

Follow Power Engineering on Twitter

Latest News

 MS Power coal-to-gas conversion nearly complete

MS Power coal-to-gas conversion nearly complete

A coal-to-gas conversion project at a power plant operated by Mississippi Power is nearly com...
 North Anna nuclear power plant shuts down

North Anna nuclear power plant shuts down

Unit 1 of the North Anna nuclear power plant automatically tripped offline Feb. 26 as workers...
 Oklahoma leaders looking for more wind regulations

Oklahoma leaders looking for more wind regulations

With wind energy production in full swing in Oklahoma, legislative leaders are looking to imp...

Second-oldest nuclear reactor in S. Korea OK to restart

South Korea’s nuclear watchdog approved a plan to restart a 679-MW nuclear power unit that wa...
 SunEdison to bring power to 20Mn people by 2020

Video: SunEdison to bring power to 20Mn people by 2020

SunEdison, Inc. (NYSE: SUNE) announced plans to bring electricity to 20 million people in und...
02-25 Henry Hub Average Natural Gas Spot Prices

02/25 Henry Hub Average Natural Gas Spot Prices

The Henry Hub is the pricing point for natural gas futures contracts traded on the New York M...
 GDF Suez wants Areva to deliver nuclear reactors, wind turbines

GDF Suez wants Areva to deliver nuclear reactors, wind turbines

GDF Suez says it received guarantees from Areva for planned nuclear reactors in Turkey and wi...
 CB&I: We’re not liable for $247mn nuclear power project penalties

CB&I: We’re not liable for $247mn nuclear power project penalties

Chicago Bridge & Iron (CB&I, NYSE: CBI) say they should not be liable for any of the ...

Power Engineering Current Issue

03/01/2014
Volume 118, Issue 3
1403PE-cover

Products Showcase

Dynamic Fluoride Ion cleaning DFIC of industrial natural gas turbines Hi-Tech Furnace Systems

Dynamic Fluoride Ion Cleaning of IGT Parts

The Dynamic Fluoride Ion Cleaning (DFIC) Process from Hi-Tech Furnace Systems is able to clean deep, narrow cracks of oxides by cycling between negative, atmospheric, and positive pressure.

Archived Articles

2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013

Power Industry Wire News

Intergraph(R) CADWorx & Analysis University Express in India During March to Include Sessions on Designing Plants and Offshore Facilities

Intergraph(R) CADWorx & Analysis University Express in India During March to Include Se...

What's Coming to the Energy Sector in 2015?

What's Coming to the Energy Sector in 2015?

SL Series Is Tinius Olsen's New Generation of Hydraulic Universal Testing Machines

SL Series Is Tinius Olsen's New Generation of Hydraulic Universal Testing Machines

Manitok Energy Inc.'s CEO Mass Geremia Interviewed by The Energy Report

Manitok Energy Inc.'s CEO Mass Geremia Interviewed by The Energy Report

UGE International Ltd. Announces Private Placement

UGE International Ltd. Announces Private Placement

Power Engineering

Article Archives for Power Engineering Magazine

Continuing Education

Professional Development Hours

To access a course listing associated to a specific topic listed below, click on the topic of choice from the list below.

Latest Energy Jobs

View more Job Listings >>