TECO Energy accelerates 2003 budget process, calls cash flow and dividend “top priorities”
TAMPA, September 9, 2002
TECO Energy today announced that it has accelerated its 2003 budgeting process, which is currently underway. In the next few weeks, the company will respond definitively to recent market reports questioning its future earnings and dividend payment prospects. In doing so, the company will provide updated information to the public.
Chairman and CEO Robert Fagan said, “The market events of the last week have been extremely difficult for the company and its shareholders, management and employees. We remain completely dedicated to doing the right things for our shareholders in these challenging times, including maintaining the dividend.
Fagan cited recent actions the company has taken to demonstrate its commitment to shareholder value. The company has:
Raised the majority of external financing needed for the major construction program at Tampa Electric and TECO Power Services through equity and equity-like securities, strengthening the company’s balance sheet;
Completed the bulk of its construction program, with significantly less capital expenditures expected in 2003 compared to previous years;
Produced its 11th consecutive quarter of earnings growth;
Filed its CEO/CFO financial certifications for 2001 and the first half of 2002 with no exceptions; and
Increased its dividend for the 43rd consecutive year. The company “recognizes that the dividend is an important source of income to our shareholders,” said Fagan.
Senior Vice President and CFO Gordon Gillette said, “We regularly report detailed financial information on five of our core businesses – Tampa Electric, Peoples Gas, TECO Transport, TECO Coal and TECO Power Services – and would normally provide updated information on our outlook for the coming year upon completion of our budget process. We have said for some time that we expect the first four of those businesses to grow in 2003 but that, due to currently projected low power prices, TPS will be challenged with its new projects. Consequently, the recent negative reports, preempting our customary communications and challenging the fundamentals of our business, including the dividend, came as a surprise.”
Gillette further added that these current projections have been caused by a number of factors, including the failure of deregulation in California, as well as a substantial reduction in the number of participants in the power market and recent milder weather.
Fagan said that despite this difficult environment, “we are making considerable progress. Our major generating projects at TPS do not begin operating until next year, and we are continuing to work diligently to secure power contracts for a material portion of those projects. I’m happy to report that we already have contracts in place for portions of the output in each of the regions we will serve, including Texas, Arizona and the Entergy region,” said Fagan.
“The timing of recent market events is particularly difficult for us while we are in the midst of our budgeting process for next year and engaged in negotiations for power contracts, the results of which will affect our budget. Our original plan was to complete these activities and provide a full update to shareholders and the financial community in mid-October. However, given the concerns in the marketplace, we will provide this information earlier,” said Gillette.
Gillette added that the company intends to provide a business update in the next few weeks, including plans addressing cash requirements, potential earnings volatility and the dividend.
“We are working overtime to do the right things for our shareholders, including maintaining the dividend. Trading of our stock over the past few weeks has been disappointing. We believe that this is due in large part to the activities of non-traditional market players who have no long-term investment in our company. We will provide our shareholders and the financial community an update in the next few weeks,” said Fagan.
TECO Energy (NYSE: TE) is an S&P 500 Index energy-related holding company based in Tampa, Florida. Its principal businesses are Tampa Electric, Peoples Gas System, TECO Power Services, TECO Transport, TECO Coal, TECO Coalbed Methane and TECO Solutions.
For more information, visit online: www.tecoenergy.com.
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 projects; TPS’ ability to sell the output of the merchant plants operating or under construction at volumes and rates to recover the investment and to obtain power contracts to reduce earnings volatility; 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).