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

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.

TECO Energy acquires New Mexico Gas Co. for $950M

On Tuesday, TECO Energy Inc. (NYSE: TE) closed on its $950 million acquisition of New Mexico Gas Intermediate (NMGI), the parent company of New Mexico Gas Co. (NMGC).

Follow Power Engineering on Twitter

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.

Latest News

Shutterstock coal production trucks

Weekly Coal Production

The Weekly Coal Production shows how much coal is being produced across the U.S.

Federal Reserve Bank of Dallas Weekly Economic Indicators financial business

The Federal Reserve Bank of Dallas' Economic Indicators

The Federal Reserve Bank of Dallas offers a glimpse into how the markets are doing domestical...

Kvaerner awarded contract for gas-fired power plant in Delaware

Kvaerner North American Construction Inc. and its joint venture partner, Parsons Brinckerhoff...

Canadian Solar purchases two solar projects

Canadian Solar Inc. has acquired a majority interest in two utility-scale solar power project...

Operators Restart Unit 2 at PPL Susquehanna

Unit 2 at the PPL Susquehanna nuclear power plant near Berwick, Pa. resumed generating electr...

Settlement agreement limits cost recovery at Edwardsport

The Indiana Utility Regulatory Commission (IURC) on Dec. 27 modified and approved a settlemen...

Toshiba in talks to sell portion of Westinghouse nuclear unit

Toshiba Corp is in talks  to sell up to 16% of its stake in the Westinghouse Electric Co...

Utah nixes nuclear waste storage facility

Plans to park radioactive waste at a storage facility in Utah have been officially called off.

Archived Articles

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

Power Engineering Current Issue

10/01/2014
Volume 118, Issue 10
1410pe-cover

Power Industry Wire News

Magnum Hunter Resources Announces Closing of New Credit Facilities and Refinancing of Prior Revolving Credit Facility

Magnum Hunter Resources Announces Closing of New Credit Facilities and Refinancing of P...

Gehrlicher Solar America Corp. Grabs Top Spot on Solar Power World's 2014 Top 400 Solar Commercial Contractors List

Gehrlicher Solar America Corp. Grabs Top Spot on Solar Power World's 2014 Top 400 Solar...

Welocalize Sponsors and Exhibits at Localization World 2014 in Vancouver

Welocalize Sponsors and Exhibits at Localization World 2014 in Vancouver

Falconridge Oil Technologies Corp. Discusses Mission Statement for Growth of Terra Slicing Alternative Fracking Technology

Falconridge Oil Technologies Corp. Discusses Mission Statement for Growth of Terra Slic...

Semitech Debuts Single-Chip, Grid-Connected Signal Controller for IoT Applications

Semitech Debuts Single-Chip, Grid-Connected Signal Controller for IoT Applications

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 >>


Power Engineering Newscasts

EPA chief: carbon caps will boost economy
Australia, Russia enter nuclear power agreement with Argentina
Largest battery energy storage in North America now operational
EPA chief: carbon caps will boost economy Largest battery energy storage in North America now operational Australia, Russia enter nuclear power agreement with Argentina Texas’ Panda Temple combined cycle plant up and running
Siemens agrees to acquire Dresser-Rand
Safety concrete poured at UAE nuclear reactor power project
Foster Wheeler to upgrade natural gas-fired power plant’s emission controls
GE, TransCanada partner on natural gas turbine design
Energy storage global market to grow to $15.6B by 2024; DOE awards $2M to support taller wind turbine towers; Hinkley Point C nuclear project have financial incentives approved; N.J. company building waste-to-energy project in Ireland