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News Release

TECO Energy reports third quarter earnings per share up 11 percent to $.72 per share

TAMPA, October 18, 2001


TECO Energy, Inc. (NYSE:TE) today reported third quarter earnings of $.72 per share, up 11 percent from $.65 per share in the third quarter of 2000. Net income for the quarter was $97.3 million, 19 percent higher than the $82.0 million recorded in the 2000 period.

Year-to-date earnings per share increased 17 percent to $1.79 from $1.53 per share in the first nine months of 2000. Net income for the nine-month period increased 24 percent to $238.9 million, compared with $193.0 million for the same period last year.

TECO Energy Chairman and CEO Robert Fagan said, "TECO Energy had another great quarter, delivering the growth that we targeted earlier this year. TECO Power Services is growing rapidly this year with the acquisition of the Frontera Power Station, the second phase of Commonwealth Chesapeake Power Station, and four new projects under construction. Our Florida operations are continuing to grow at rates that are the envy of most regions of the country. Supported by our strong earnings, we increased our dividend earlier this year for the 42nd consecutive year, and are proud of our record of a secure dividend that has grown consistently over time."

Operating Segment Results

Results for the third quarter and year-to-date periods reflected the continued strong customer growth in the retail electric and gas businesses, higher earnings from TECO Power Services' (TPS) wholesale generating projects, and higher realized gas prices at TECO Coalbed Methane. Year-to-date results also reflected increased synthetic fuel production at TECO Coal in the first half of the year and higher coal prices.

Three months

Ended 9/30

Nine months

Ended 9/30

Twelve months

Ended 9/30

 

(in millions)

Net Income Summary

2001

2000

2001

2000

2001

2000

Tampa Electric

$56.8

$ 54.6

$125.4

$118.9

$ 151.0

$142.7

Peoples Gas System

2.6

3.4

17.3

15.9

23.2

22.4

Regulated Businesses

$59.4

$ 58.0

$142.7

$134.8

$ 174.2

$165.1

TECO Power Services

$15.5

$ 3.7

$ 24.8

$ 16.3

$ 31.3

$ 18.8

TECO Transport

6.9

8.2

21.5

22.7

28.0

29.1

TECO Coal

12.9

14.6

40.6

21.4

52.8

24.8

Other Unregulated Companies

6.0

9.7

27.4

20.8

34.6

28.9

Unregulated Businesses

$41.3

$36.2

$ 114.3

$ 81.2

$ 146.7

$101.6

       

Parent / Other

$ (3.4)

$(12.2)

$ (18.1)

$ (23.0)

$ (24.1)

$ (27.4)

Net Income Before Charges

$97.3

$ 82.0

$ 238.9

$193.0

$296.8

$239.3

Charges

- -

- -

- -

- -

- -

(3.5)

Net Income

$97.3

$ 82.0

$ 238.9

$193.0

$296.8

$235.8

Segment net income includes internally allocated financing costs. Individual company results for the same periods last year have been restated to reflect the allocation of financing costs.

Tampa Electric's net income for the third quarter was $56.8 million, compared with $54.6 million for the same period in 2000. The company showed improved results from customer growth and retail energy sales growth of about 3 percent. Sales to residential and commercial customers increased 3.3 percent to more than offset reduced sales to the low-margin industrial phosphate customers. Operating expenses increased due to higher depreciation expense from normal plant additions and higher operations and maintenance expenses for generating unit maintenance.

Tampa Electric's year-to-date net income was $125.4 million, compared with $118.9 million last year, reflecting strong customer growth and over 4 percent higher retail energy sales as a result of a growing local economy and favorable winter weather. Allowance for funds used during construction (AFUDC) (or interest and allowed equity cost capitalized to construction) associated with the repowering of the Gannon Station increased to $5.6 million from $1.9 million for the same period last year. Operating expenses, excluding recoverable fuel and purchased power, increased primarily due to higher depreciation expense from normal plant additions and generating unit maintenance.

Peoples Gas System reported net income of $2.6 million for the quarter, compared with $3.4 million for the same period last year. These quarterly results reflected higher operating expenses that were only partially offset by customer growth of almost 4 percent and higher residential and commercial sales. Peoples Gas System reported almost 9 percent higher year-to-date net income of $17.3 million, reflecting continuing customer growth and higher residential and commercial usage early in the year as a result of favorable winter weather. Decreased volumes for low-margin transportation of gas for electric power generators, interruptible customers and off-system sales earlier in the year reflected the higher cost of gas for customers who have the ability to switch to alternate fuels or alter consumption patterns. The price differential between natural gas and alternative fuels once again favors natural gas. Customers are returning to natural gas as alternative fuel inventories are exhausted and contractual commitments expire.

TPS' net income for the quarter was $15.5 million, compared with $3.7 million last year. Results for the quarter reflected increased earnings from its Guatemalan generation and distribution operations, return on its investments in the Panda Texas projects added in September 2000, operation of the Frontera Power Station acquired in March 2001, and operation of the Commonwealth Chesapeake Power Station where the 177 MW second phase of peaking capacity began commercial operation in the quarter. These increases were partially offset by increased financing costs.

TPS' year-to-date net income increased 52 percent to $24.8 million, reflecting the same factors described above and strong winter and summer utilization of both phases of the Commonwealth Chesapeake Power Station. The improved operating performance was offset by increased financing costs and a $6.1-million after-tax valuation reserve recognized in the first quarter for TPS" second quarter sale of its minority interests in Energ’a Global International, Ltd. (EGI) which owned small projects in Central America.

TECO Transport reported net income of $6.9 million in the quarter, compared with $8.2 million for the same period last year. Lower shipments of government grain and steel related products more than offset higher phosphate shipments and higher Tampa Electric volumes. Year-to-date net income of $21.5 million reflected higher volumes of northbound petroleum coke, cross-gulf phosphate and Tampa Electric coal, and lower fuel and tax expenses. These improvements were, however, offset by higher operating expenses and lower government grain shipments. Results for last year included an after-tax gain of approximately $1.5-million associated with the disposition of equipment.

TECO Coal achieved net income of $12.9 million in the third quarter, compared with $14.6 million last year. Higher conventional coal production costs and slightly lower synfuel production more than offset increased conventional coal production and prices, and better margins on synfuel sales. Higher year-to-date net income reflected increased conventional coal production and prices, and higher synfuel sales.

TECO Energy's other unregulated companies recorded third quarter net income of $6.0 million, compared to $9.7 million for the same period in 2000. Last year's third quarter results reflected the $8.3-million gain on the US Propane and subsequent Heritage Propane transactions and the $3.8-million charge to adjust property values at TECO Properties. For the quarter, TECO Coalbed Methane achieved higher earnings, as higher realized gas prices more than offset normal production declines. Year-to-date net income of $27.4 million reflected higher gas prices throughout the period at TECO Coalbed Methane and increased earnings at TECO Solutions.

Non-operating Items

Financing costs were higher for the year-to-date period, reflecting higher borrowing levels primarily associated with the expansion of the independent power business. Beginning this year, a portion of financing costs were allocated to the respective operating subsidiaries by TECO Energy. Segment results for 2001 reflect these allocated financing costs; prior periods have been restated to reflect pro forma financing costs as if the costs had been similarly allocated. Higher net income was not fully reflected in higher earnings per share due to increased average shares outstanding resulting from the issuance of 8.625 million shares of common equity in March of this year.

Cash from operations was $166.6 million for the quarter, compared with $138.3 million in 2000. Cash used for investing activities was $294.7 million, compared with $217.7 million last year. Net cash received from financing activities was $132.4 million, compared with $78.1 million last year, including dividend payments of $46.9 million in the third quarter of 2001, compared with $42.1 million last year.

Year-to-date cash from operations was $399.2 million, compared with $333.3 million in 2000. Cash used for investing activities was $754.8 million, compared with $605.4 million last year. Net cash received from financing activities was $333.8 million, compared with $201.0 million last year, including dividend payments of $136.1 million in the first nine months of 2001, compared with $125.2 million last year.

Outlook

In April 2001, TECO Energy targeted 15 percent annual earnings growth above last year's $1.99 per share, and the company is maintaining that target despite the challenges of a slowing economy and lower energy prices.

While TECO Energy achieved 17 percent earnings growth in the first nine months of this year, including 11 percent in the third quarter, the rate of growth is expected to slow in the fourth quarter. Challenges in the remainder of the fourth quarter will be gas prices for the small, unhedged portion of TECO Coalbed Methane's production, and planned generating unit outages and higher interest expense at TPS. The sale of 3.5 million shares of common stock in October will have a minimal effect on 2001 earnings, but will reduce 2002 earnings by about $0.03 per share.

The Florida operations continue to experience good customer and volume growth. Florida's service-based economy has only a small percentage of industrial load and is not expected to be impacted by an economic slowdown to the same degree as areas of the country that are based on manufacturing. TECO Coal continues to benefit from increased conventional coal production and prices, and from increased volume and better margins from synfuel sales. TECO Coalbed Methane realized net gas prices of $3.10 per thousand cubic feet for the third quarter and has hedged almost 75 percent of fourth quarter production at prices of about $2.50 per thousand cubic feet. Compared to 2000, it expects to produce higher earnings from higher realized gas prices. TPS expects to achieve the significant net income growth for the year, even after the $6.1 million after tax asset valuation adjustment in the first quarter.

TECO Energy has targeted long-term, average annual earnings growth of 10 percent. This target is expected to be challenging in 2002, as a result of the general slowdown in the U.S. economy and continued weakness in energy prices. However, most of TECO Energy's businesses are relatively well protected from many of these factors and there remain drivers for good growth in 2002 and significantly higher growth in 2003 and beyond. TECO Energy expects earnings per share growth in 2002 of 5 to 10 percent due to continued customer additions at the Florida utilities and increased coal prices at TECO Coal. In addition, Tampa Electric expects increased AFUDC associated with the repowering of its Bayside Power Station. The year 2002 is the transition year at TPS, where growth is expected from the first full year of operations of some of its projects. Significant earnings growth is expected at TPS in 2003 as the major new plants now under construction enter commercial operation.

Additional financial information related to the company's results through September 30, including unaudited financial statements; segment revenues and operating income; and electric and gas volumes, is available at the Investor Relations section of TECO Energy's web site at www.tecoenergy.com.

TECO Energy is a diversified energy-related holding company headquartered in Tampa. Its principal businesses are Tampa Electric, Peoples Gas System, TECO Power Services, TECO Transport, TECO Coal, TECO Coalbed Methane, TECO Propane Ventures and TECO Solutions.

Note: This press release contains forward-looking statements, which are subject to the inherent uncertainties in predicting future results and conditions. Certain factors that could cause actual results to differ materially from those projected in these forward-looking statements include the following: general economic conditions, particularly those in Tampa Electric's service area affecting energy sales; weather variations affecting energy sales and operating costs; potential competitive changes in the electric and gas industries, particularly in the area of retail competition; regulatory actions affecting Tampa Electric, Peoples Gas System or TECO Power Services; commodity price changes affecting the competitive positions of Tampa Electric and Peoples Gas System as well as the margins at TECO Coalbed Methane and TECO Coal; energy price changes affecting TECO Power Services" merchant plants; changes in and compliance with environmental regulations that may impose additional costs or curtail some activities; TECO Power Services" ability to successfully develop, construct, finance and operate its projects on schedule and within budget; TECO Energy's ability to find and successfully implement attractive investments in unregulated businesses; TECO Power Services' ability to sell the output of the merchant plants under construction at volumes and rates to recover the investment, the ability of TECO Energy's subsidiaries to operate equipment without undue breakdowns or failures, interest rates and other factors that could impact TECO Energy's ability to obtain access to sufficient capital on satisfactory terms; and TECO Coal's ability to successfully operate its synthetic fuel production facilities in a manner qualifying for Section 29 federal income tax credits, which credits could be impacted by changes in tax law or interpretive action by the U. S. Treasury. Some of these factors are discussed more fully under "Investment Considerations" in the company's Quarterly report on Form 10-Q for the period ending June 30, 2001, and reference is made thereto.

Summary Information (as of September 30)

 

Three months

Ended

Nine months

Ended

Twelve months

Ended

 

(millions except per share amounts)

      
 

2001

2000

2001

2000

2001

2000

Revenues

$678.8

$614.7

$1,993.2

$1,698.7

$2,589.7

$2,188.8

Net income
(after non-recurring charges)

$97.3

$82.0

$238.9

$193.0

$296.8

$235.8

       

Earnings per share — basic

$0.72

$0.65

$1.79

$1.53

$2.26

$1.86

       

Earnings per share — diluted

$0.71

$0.65

$1.78

$1.53

$2.24

$1.86

       

Average common shares outstanding — basic

136.0

125.6

133.0

125.8

131.4

126.7

       

Average common shares outstanding — diluted

136.9

126.1

134.1

125.9

132.5

126.7

       

Net income (loss)(before non-recurring charges)

$97.3

$82.0

$238.9

$193.0

$296.8

$239.3

       

Earnings per share — basic
(before non-recurring charges)

$0.72

$0.65

$1.79

$1.53

$2.26

$1.89

Operating income for TECO Power Services was net of interest costs on the company’s limited recourse debt. Operating income for TECO Coalbed Methane included a tax credit on coalbed methane production.

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