TECO Energy updates earnings outlook for 2002 and beyond for investors
NEW ORLEANS, October 30, 2001
In its presentation at the Edison Electric Institute's annual financial conference today, TECO Energy is updating its earnings growth outlook for 2002 and beyond. The company is expanding the information provided in its third quarter earnings statement, including reaffirming the company's 15 percent earnings growth target for 2001.
TECO Energy Chairman, President and CEO Robert Fagan said, "TECO Energy is committed to 10 percent average annual earnings growth over the long term, despite the fact that economic and energy market conditions will make 2002 a challenging year. Even so, I see TECO Energy as different from many others in the current environment. We expect good growth in our regulated businesses in Florida, we expect improved results at TECO Power Services and in our portfolio of other unregulated businesses, we see the opportunity to deliver real earnings growth of 5 to 10 percent next year."
"The year 2002 will be a transition year for us, as we focus on construction of major generating projects and bring them into commercial service. The year 2003 should be a breakout year for us with the commercial operation of the four major power plants that TECO Power Services is now building, and the first phase of the Bayside repowering coming on line, " added Fagan.
The Florida operations are expected to produce good growth from customer additions and increased per customer energy usage. Historically Florida's service-based economy has been less sensitive to economic downturns than other areas of the country.
In 2002, Tampa Electric expects more than 2.5 percent customer growth and 3 percent energy sales growth, with summer peak demand expected to rise more than 100 megawatts. Earnings are expected to grow at a rate greater than customer growth due to a significant rise in AFUDC earnings from 2001's expected level of more than $8 million to almost $30 million in 2002.
In 2002, Tampa Electric will continue its repowering at the Gannon Station. The additional capital cost to complete the repowering is expected to be about $450 million. The completed repowering will provide an additional 1,050 megawatts of highly efficient natural gas-fired capacity to Tampa Electric's generating mix and is on schedule to be in-service by the middle of 2004.
Peoples Gas expects to grow its customer base by 5 percent with net income growing at a faster rate due to a favorable customer mix and higher per customer use. Over the past three years, Peoples Gas has made significant investments in system expansion throughout Florida to open untapped markets to natural gas, and the company is now connecting increasing numbers of customers to the system.
TECO Solutions, the energy services and gas marketing subsidiary, expects to grow net income from increased demand for energy engineering, design and construction services and from gas management services for a growing number of large commercial customers taking advantage of Florida's unbundled gas market.
TECO Power Services expects to produce significant growth next year from a complete year of operation of the full capacity of the Commonwealth Chesapeake Power Station in Virginia, the Frontera Power Station in Texas, and the initial operations of the first two phases of the Union Power Station in Arkansas late in the year.
At the other unregulated companies, TECO Coal expects increased earnings from higher steam coal prices. TECO Transport expects to produce earnings at or above the 2001 level, from a more normal pattern of government grain shipments, a modest improvement in phosphate shipments and better utilization of covered barges in southbound river business. Based on current gas price futures, TECO Coalbed Methane is expected to record lower earnings due to lower natural gas prices and normal production declines.
Capital expenditures for the 2001 through 2004 time frame are expected to total almost $4.2 billion, including $1.9 billion for the announced projects at TECO Power Services and more than $1.1 billion for the repowering of the four units at the Bayside Power Station.
Cash flow from operations is expected to be $2.7 billion during this period. Dividends during the period are expected to be $0.8 billion with the current policy. The company expects external financing requirements to be $2.3 billion in the 2001 through 2004 period. The external financings are expected to be achieved through roughly equal amounts of debt and equity or equity-like products. In 2001, TECO Energy has already raised $325 million of equity through the sale of 12 million shares of common stock.
In 2003, TECO Energy expects double-digit growth primarily from the continued good growth in the Florida operations, including higher equity AFUDC earnings at Tampa Electric, and the major new generating projects entering service in the first half of the year at TECO Power Services. The increased earnings from TECO Power Services is expected to more than offset the elimination of the Section 29 tax credits after 2002 at TECO Coalbed Methane.
TECO Energy (NYSE:TE) is a diversified, energy-related holding company headquartered in Tampa. Its principal businesses are Tampa Electric, Peoples Gas, 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.