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News Release

TECO Energy reports second quarter earnings per share up 11 percent to $.59 per share on 19 percent higher net income

TAMPA, July 18, 2002

TECO Energy, Inc. (NYSE:TE) today reported second quarter earnings of $.59 per share (basic), up 11 percent from $.53 per share in 2001. Net income for the quarter was $85.7 million, 19 percent higher than the $71.9 million recorded in the 2001 period. The average number of common shares outstanding in the second quarter was 6.3 percent higher than in the same period in 2001.

Year-to-date earnings per share increased almost 6 percent to $1.13 from $1.07 per share in the first six months of 2002. Net income for the six-month period increased 14 percent to $161.1 million, compared with $141.6 million for the same period last year.

Chairman and CEO Robert Fagan said, “We are delivering strong earnings per share growth, even while strengthening our balance sheet by issuing additional equity. The continued solid growth this quarter was led by strong results from Tampa Electric, and good results from our unregulated companies, once again demonstrating the value in our balanced portfolio of regulated and unregulated businesses.”

“Economic conditions, weather and energy prices affect all of our businesses to some extent, but we have met the challenges posed by these factors thus far this year,” Fagan added.

Operating Segment Results:

Results for the second quarter reflected continued customer growth in the electric and gas businesses, higher AFUDC at Tampa Electric, higher earnings from TECO Power Services' portfolio of generating facilities, increased synthetic fuel sales and higher coal prices at TECO Coal.

Three months
Ended 6/30/02

Six months
Ended 6/30/02
Twelve months
Ended 6/30/02

(in millions)

Net Income Summary

2002

2001

2002

2001

2002

2001

Tampa Electric

$45.4

$38.1

$81.4

$ 68.6

$166.8

$148.9

Peoples Gas System

4.4

4.2

14.2

14.7

22.6

23.9

Regulated Businesses

$49.8

$42.3

$95.6

$ 83.3

$189.4

$172.8

TECO Power Services

$ 8.9

$ 6.8

$ 13.8

$ 9.3

$ 31.4

$ 19.5

TECO Transport

4.2

6.2

11.1

14.6

24.0

29.3

TECO Coal

19.7

13.7

37.1

27.7

68.5

54.4

Other Diversified Companies

6.7

10.1

14.4

21.4

28.1

38.4

Unregulated Businesses
$39.5

$36.8

$76.4

$ 73.0

$152.0

$ 141.6

Parent / Other

$ (3.6)

$ (7.2)

$(10.9)

$(14.7)

$(18.1)

$(32.9)

Net Income $85.7

$71.9

$161.1

$141.6

$323.3

$281.5

Segment net income is reported on a basis that includes internally allocated financing costs at pretax rates of 7.0% for 2001 and 2002.

Tampa Electric’s net income for the second quarter was $45.4 million, compared with $38.1 million for the same period in 2001. The company showed improved results from customer growth of almost 3 percent and 12 percent higher retail energy sales from more-normal weather. Retail energy sales in 2001 were reduced by mild spring weather. Results for the quarter included higher depreciation expense from normal plant additions and higher operations and maintenance expense related to a small-scale employee retirement program. The equity component of allowance for funds used during construction (AFUDC) (which represents allowed equity cost capitalized to the construction costs), primarily from the Gannon to Bayside Units 1 and 2 repowering project, increased to $5.7 million for the quarter, from $1.3 million for the same period last year.

Tampa Electric’s year-to-date net income increased almost 19 percent to $81.4 million, reflecting almost 3 percent customer growth and almost 4 percent higher retail energy sales as a result of a return to more-normal spring weather. The equity component of AFUDC increased to $10.0 million from $2.1 million in the first half of 2001. Depreciation expense and operations and maintenance expenses increased as a result of the factors discussed for the quarter.

Peoples Gas System reported net income of $4.4 million for the quarter, compared with $4.2 million for the same period last year. Quarterly results reflected almost 4 percent customer growth, higher commercial sales, increased gas transportation for power generation customers and off-system sales, and lower operating expenses. Year-to-date net income was $14.2 million, compared with $14.7 million for the same period last year. Year-to-date results reflected mild winter weather partially offset by almost 4 percent customer growth, higher commercial usage and increased volumes for low margin, transportation gas for electric power generators, interruptible customers and off-system sales as lower gas prices made gas utilization more attractive for price sensitive customers.

On June 27, 2002, Peoples Gas System (PGS) filed an application for a rate increase with the Florida Public Service Commission (FPSC). In its filing, PGS has requested the FPSC to authorize interim rate relief of $5.4 million of annual gross revenues effective within 60 days of the filing. In total, PGS is seeking a permanent rate increase of $22.6 million of annual base revenue, a 9 percent increase, with an allowed return on equity of 11.75 percent, compared with the current 11.25 percent, effective within eight months from the date of the filing. Since its last rate case in 1992, PGS has added more than 100,000 customers, a 57 percent increase, nearly doubled its pipeline system to almost 9,000 miles and experienced a 30 percent increase in the consumer price index.

TECO Power Services’ net income for the quarter was $8.9 million, compared with $6.8 million last year. Results for the quarter reflected higher capacity payments due to higher prices and generation at the San José Station in Guatemala, increased earnings from construction-related and loan agreements with Panda Energy, and higher contributions from the full build-out of the Commonwealth Chesapeake Station, where the second phase began commercial operation in the second half of 2001. These improved results were partially offset by increased operating and financing costs.

Year-to-date net income at TECO Power Services was $13.8 million, compared with $9.3 million for the same period last year. These results reflected higher capacity payments due to higher prices and generation at both the San José and Alborada stations in Guatemala and increased earnings from construction-related and loan agreements with Panda Energy. The improved operating performance was partially offset by higher operations and maintenance expense and low energy prices at the Frontera Station in Texas, higher operating costs and increased financing costs. First half results in 2001 included a $6.1-million after-tax valuation reserve recognized for TPS’ sale of its minority interests in Enérgia Global International, Ltd. (EGI), which owned smaller projects in Central America.

TECO Transport reported net income of $4.2 million in the quarter, compared with $6.2 million for the same period last year. Both quarterly and year-to-date results reflected lower revenues from lower northbound river volumes and lower outside tonnage transferred at the river terminal, more than offsetting the effects of lower fuel and repair expenses and higher government grain shipments. Year-to-date net income was $11.1 million, compared with $14.6 million for the first six months last year.

TECO Coal achieved net income of $19.7 million for the quarter, up from $13.7 million last year. These results reflected increased prices for conventional coal and synthetic fuel and increased synthetic fuel production resulting in higher tax credits, partially offset by increased mining costs. Year-to-date net income was $37.1 million, compared with $27.7 million last year as a result of these same factors.

TECO Energy’s other unregulated companies recorded net income of $6.7 million for the quarter, compared to $10.1 million for the same period in 2001. These results were driven primarily by lower net income at TECO Coalbed Methane, reflecting lower gas prices and the impact of normal production declines. Year-to-date net income of $14.4 million reflected lower gas prices throughout the period at TECO Coalbed Methane, partially offset by higher earnings at TECO Solutions, which includes TECO BGA, TECO Properties, Prior Energy and TECO Gas Marketing.

Non-operating Items

Financing costs were lower for both the quarter and the first half, reflecting lower debt balances as a result of equity issuance, project financing at TPS completed in the third quarter of 2001 and lower short-term interest rates.

Cash from operations was $116.6 million for the quarter, compared with $97.2 million in 2001. Cash used for investing activities was $387.5 million, compared with $163.8 million last year. Net cash received from financing activities was $328.2 million including a $346 million equity issuance, compared with $81.7 million last year. Cash from financing activities is net of dividend payments of $49.8 million in the second quarter of 2002, compared with $46.8 million last year.

Year-to-date cash from operations was $320.2 million, compared with $232.3 million in 2001. Cash used for investing activities was $907.0 million compared with $460.0 million last year. Net cash received from financing activities was $618.5 million compared with $201.4 million last year, net of dividend payments of $98.0 million in the first six months of 2002 compared with $89.2 million last year.

Additional financial information related to the company's results through June 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 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 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 TPS’ merchant plants; changes in and compliance with environmental regulations that may impose additional costs or curtail some activities; TPS’ ability to successfully construct, finance and operate its projects on schedule and within budget; TPS’ ability to obtain project financing for its Frontera, Dell and McAdams projects; TPS’ ability to sell the output of the merchant plants operating or under construction at volumes and rates to recover the investment; the ability of TECO Energy’s subsidiaries to operate equipment without undue accidents, breakdowns or failures; interest rates and other factors that could impact TECO Energy’s ability to obtain access to sufficient capital on satisfactory terms; any unanticipated need for additional equity capital that might results from lower than expected cash flow or higher than projected capital requirements 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 could be impacted by changes in law, regulation or administration. Some of these factors and others are discussed more fully under “Investment Considerations” in the company’s Annual Report on Form 10-K for the year ended December 31, 2001, and in the company’s Registration Statement on Form S-3 (Registration No. 333-83958).

Summary Information (as of June 30) 

Three months EndedSix months Ended Twelve months Ended

(millions except per share amounts)

2002

2001

2002

2001

2002

2001

Revenues

$820.0

$641.8

$1,560.2

$1,313.0

$2,895.0

$2,528.6

Net income

$85.7

$71.9

$161.1

$141.6

$323.3

$281.5

Earnings per share – basic

$0.59

$0.53

$1.13

$1.07

$2.31

$2.18

Earnings per share – diluted

$0.59

$0.52

$1.13

$1.06

$2.30

$2.16

Average common shares
outstanding - basic
 

144.2

135.7

142.3

131.7

139.9

129.0

Average common shares
outstanding - diluted
  

144.7

136.9

142.7

132.9

140.4

129.9

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