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News Release

TECO Energy reports first quarter results

TAMPA, April 28, 2004

TECO Energy, Inc. (NYSE:TE) today reported first quarter net income of $2.5 million, compared with net income of $2.7 million in the first quarter of 2003. Earnings per share for the quarter were $0.01, compared with earnings per share of $0.02 in the first quarter of 2003. The first quarter net income from continuing operations was $28.7 million, compared with a loss from continuing operations of $20.3 million for the same period in 2003. Earnings per share from continuing operations were $0.15 for the quarter, compared with a per-share loss of $0.12 in the 2003 period. Discontinued operations in the quarter reflect the operating results from the Union and Gila River power stations. The number of common shares outstanding was seven percent higher for the quarter than it was for the same period in 2003.

Chairman and CEO Robert Fagan said, “We had some challenges this quarter, primarily due to mild weather which impacted our electric utility operations and some operating setbacks at TECO Transport, but our coal operations performed well, and we see opportunities for improvement over these results as we progress through the year. Normal weather for the remainder of the year would allow Tampa Electric to improve, and TECO Transport is back on track with normal operations. In addition, we are seeing signs that the stronger U.S. economy will contribute to improved results over the remainder of the year at many of our businesses, especially coal and transportation.”

Charges and Gains:

First quarter results from continuing operations in 2004 include a $10.6 million after-tax gain on the sale of TECO Energy’s interest in its propane business, partially offset by a $3.4 million after-tax charge due to a valuation adjustment at TECO Solutions and an $0.8 million after-tax valuation adjustment at TECO Transport. First quarter results from continuing operations in 2003 included a $48.9 million after-tax charge for turbine purchase cancellations at Tampa Electric, a $15.3 million after-tax charge for non-merchant turbine purchase cancellations, (which was reflected in the Other Unregulated Companies segment), and a $1.1 million charge for the cumulative effect of a change in accounting principle associated with the adoption of FAS 143, Accounting for Asset Retirement Obligations .

First quarter highlights:

· Completed Bayside repowering project – final phase in service January 15, 2004;

· Signed a non-binding letter of intent to transfer the Union and Gila River projects to the lending bank group;

· Signed a non-binding memorandum of understanding to sell an additional 40 percent ownership interest in our synfuel production facilities; and

· Completed the sale of several smaller non-core energy services businesses.

Non-GAAP Earnings

First quarter net income from continuing operations, excluding the charges and gains identified in the table below, was $22.3 million, compared to $41.0 million for the 2003 period.

The table below reconciles quarterly net income after elimination of the charges and gains referred to above. Management believes that this non-GAAP presentation supplies useful supplemental information by providing a measure that is more closely related to the company’s ongoing operations.



Net Income Reconciliation:

($ millions)

Three months ended

Mar. 31

Twelve months ended

Mar. 31


2004

2003

2004

2003

GAAP net income (loss)

$2.5

$2.7

($909.5)

$257.4

Add change in accounting (FAS 143)

--

1.1

3.2

1.1

Exclude discontinued operations

(26.2)

24.1

(940.6)

67.8

GAAP net income (loss) from continuing operations

$28.7

($20.3)

$34.3

$190.7






Add ECKG valuation adjustment

--

--

--

5.8

Add 2002 debt extinguishment

--

--

--

20.9

Add unutilized tax credits

--

--

9.7

--

Add TWG cancelled project write-offs

--

--

9.0

--

Add corporate restructuring costs

--

--

15.2

10.9

Add TMDP arbitration reserve

--

--

26.7

--

Add Hamakua FIN 46 accounting

--

--

3.2

--

Add FAS 142 adjustments

--

--

74.0

--

Add turbine write-offs

--

64.2

13.2

64.2

Subtract Hardee gain on sale

--

--

(34.6)

--

Subtract Hardee operating results

--

(2.9)

(6.0)

(9.8)

Add TECO Solutions valuation adjustment

3.4

--

11.3

--

Add TECO Transport valuation adjustment

0.8

--

0.8

--

Subtract gain on propane business sale

(10.6)

--

(10.6)

--

Non-GAAP net income from continuing operations (1)( 2)

$22.3

$41.0

$146.2

$282.7

(1) Excludes adoption of FAS 143, FAS 142 adjustments and items noted in table above.

(2) A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flow that includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure GAAP so calculated and presented.

Discontinued Operations

Discontinued operations in the first quarter of 2004 include the operating losses for the Union and Gila River power stations. Discontinued operations for the same period in 2003 include the results from Union and Gila River which were more than offset by the gain on the final installment of the sale of the coalbed methane gas production assets.

Segment Reporting:

Effective with year-end 2003 reporting, the TPS segment has been replaced by the TECO Wholesale Generation (TWG) Merchant segment which includes the results of operations for the merchant facilities, including Frontera, Commonwealth Chesapeake, Dell and McAdams, as well as the equity investment in the Odessa and Guadelupe (TIE) power plants, and TECO EnergySource (TES), the energy marketing operation for the merchant plants. The non-merchant power operations are comprised of the interests in the Hamakua Power Station in Hawaii, the San José and Alborada power stations in Guatemala and the minority interest in the Guatemalan distribution utility, EEGSA. The non-merchant results are now reported in the Other Unregulated Companies segment.

Results for unregulated business segments include internally allocated interest expense. Interest is not, however, allocated to discontinued operations but remains at the TECO Energy parent level.

Operating Results:

Segment Information

Three Months

Ended Mar. 31

Twelve Months

Ended Mar. 31

(in millions)

Net Income (Loss) Summary

2004

2003

2004

2003

Tampa Electric(1)

$23.9

($9.0)

$131.8

$126.7

Peoples Gas System

12.8

11.9

25.4

26.4

Total regulated

36.7

2.9

157.2

153.1

TWG Merchant

(18.7)

(11.8)

(154.5)

(13.0)

TECO Transport (2) (3)

1.1

4.6

11.8

18.7

TECO Coal (2) (4)

15.4

25.7

66.9

84.7

Other Unregulated Companies (1) (5)

18.7

(2.2)

15.4

15.3

Parent/other (6)(7)

(24.5)

(39.5)

(62.5)

(68.1)

Total unregulated

(8.0)

(23.2)

(122.9)

37.6

Net income from continuing operations before cumulative effect of an accounting change

28.7

(20.3)

34.3

190.7

Discontinued operations

(26.2)

24.1

(940.6)

67.8

Cumulative effect of an accounting change

--

(1.1)

(3.2)

(1.1)

Total net income (loss)

$2.5

$2.7

($909.5)

$257.4

1) 2003 results include the effects of $48.9 million and $15.3 million charges related to turbine purchase cancellations in the first quarter at Tampa Electric and Other Unregulated Companies, respectively.

2) 2003 results exclude the $0.8 million and $0.3 million effects of the adoption of FAS 143 at TECO Transport and TECO Coal, respectively, which are included in cumulative effect of an accounting change.

3) 2004 results include $0.8 million of charges related to valuation adjustments.

4) 2003 results exclude the effects of tax credit deferrals, which were recorded at the TECO Energy level.

5) 2004 results include the $10.6 million gain on the sale of TECO Propane Ventures and the $3.4 million valuation adjustment at TECO Solutions.

6) 2003 results include the deferral of $25.9 million of Section 29 tax credits.

7) Interest expense that was previously internally allocated to the Union and Gila River power stations is now reflected as a TECO Energy parent company expense.

Tampa Electric

Tampa Electric’s net income for the first quarter was $23.9 million, compared with $39.9 million for the same period in 2003, excluding the 2003 $48.9 million after-tax turbine purchase cancellation charge. The 2004 results reflect lower earnings from the equity component of AFUDC (which represents allowed equity cost capitalized to construction costs); lower base revenues from milder weather than 2003; higher interest expense; and increased employee-related expenses (primarily pension expense). The lower AFUDC equity earnings were driven primarily by the Gannon/Bayside repowering project, for which AFUDC equity earnings decreased to $0.7 million for the quarter, down from $7.6 million for the same period in 2003, reflecting the completion of Bayside Station Unit 1 in April 2003 and Unit 2 in January 2004.

R etail energy sales increased 1 percent, as a verage c ustomer growth of 2.6 percent was partially offset by mild weather. Total heating and cooling degree-days for the Tampa area in the quarter were almost 6 percent below normal and more than 15 percent below 2003 levels. Although retail energy sales increased, total base revenues decreased as the milder weather reduced sales to residential customers.

Peoples Gas

Peoples Gas System reported net income of $12.8 million for the quarter, compared with $11.9 million in the same period in 2003. Quarterly results reflected customer growth of 5.0 percent and higher therm sales to residential and commercial customers. Peoples Gas is only sensitive to heating degree days during the winter months, and statewide heating degree days for the period were above normal but below 2003 levels. Sales of low-margin transportation service for interruptible customers and electric power generators declined due to the persistent high gas prices. These customers are sensitive to the commodity price of gas, and many have the ability to switch to alternative fuels or to simply alter consumption patterns.

TECO Coal

TECO Coal achieved first-quarter net income of $15.4 million, compared to $25.7 million reported in the same period in 2003, which excluded a $0.3 million after-tax charge due to the adoption of FAS 143. TECO Coal’s 2004 results reflect no Section 29 tax credits due to TECO Energy’s expected tax losses in 2004. Results in 2004 also reflect an increased third-party ownership interest in its synfuel production in the quarter and higher prices for conventional coals, offset by higher mining costs due, in part, to the use of marginal coals for the production of synfuel. Results in 2003 included Section 29 tax credits at the operating segment level related to the production of synthetic fuel, $25.9 million of which were deferred at the TECO Energy parent level in the first quarter of 2003. In the first quarter of 2003, TECO Coal owned 100 percent of the synfuel production; ownership by third parties approximated 90 percent in the same period in 2004.

TECO Transport

TECO Transport recorded net income of $1.9 million in the first quarter, excluding $0.8 million of valuation adjustments on ocean-going equipment, compared with $4.6 million for the same period last year. These results reflect significantly lower Tampa Electric volumes as a result of the Bayside repowering, where a disproportionate share, approximately two-thirds, of the reduction in Tampa Electric tonnage occurred in the first quarter. In addition, quarterly results were affected by a five-day shut down of the lower Mississippi River to shipping traffic, which impacted all of TECO Transport’s businesses; and by a heavy shipyard schedule which idled ocean-going equipment and resulted in higher repair costs. Results in 2003 exclude an $0.8 million after-tax charge due to the adoption of FAS 143.

TWG Merchant

TWG merchant operations recorded a first-quarter loss of $18.7 million, compared with a loss of $11.8 million for the same period in 2003. The lower results reflect primarily lower energy prices in the Texas market which affected first quarter comparisons for the TIE plants. Additionally, the Frontera Station was off-line for maintenance during most of the quarter in 2004.

Other Unregulated Companies

TECO Energy’s other unregulated companies, which now include the Guatemalan and Hamakua non-merchant power investments, recorded net income of $18.7 million for the first quarter, compared to a loss of $2.2 million for the same period in 2003. The net income for the non-merchant power operations was $11.1 million, compared to net income of $12.4 million, excluding the $15.3 million after-tax charge for turbine purchase cancellations in 2003. The non-merchant results included continued strong results from the Guatemalan operations including the electric distribution utility operations, which benefited from higher rates. The Other Unregulated results also include the $10.6 million after-tax gain from the sale of the propane business partially offset by the $3.4 million valuation adjustment at TECO Solutions for its minority interest in a fiber optics business (Litestream) that is in bankruptcy.

Non-operating Items Affecting Net Income

Results for the quarter include the non-operating gains and charges described above. Interest expense increased due to decreased interest expense credit for AFUDC-borrowed funds at Tampa Electric and higher overall levels of debt in support of TECO Energy’s and Tampa Electric’s capital investment programs. Interest expense in the first quarter of 2003 reflected capitalized interest of $10.0 million associated with the Union and Gila River projects; no interest was capitalized in 2004 following completion of these projects, which are now held for sale.

Results for both the 2004 and 2003 quarters include the non-operating gains and charges discussed in each operating company results.

Liquidity

TECO Energy’s consolidated cash and cash equivalents, excluding all restricted cash, totaled $107.6 million at Mar. 31, 2004. The cash balance at Mar. 31 excludes the San José and Alborada project’s cash balances of $28.3 million, as these companies were deconsolidated due to the adoption of FIN 46R, Consolidation of Variable Interest Entities, effective Jan. 1, 2004. Restricted cash of $36.8 million includes $29.2 million from the sale of the 49 percent interest in the synthetic coal production facilities, held in escrow due to TECO Energy’s current credit rating.

In addition, at Mar. 31, 2004, availability under bank credit facilities totaled $526.5 million, net of letters of credit of $44.1 million outstanding under the TECO Energy facility and $50.0 million of loans under the Tampa Electric facilities. Thus, at the end of the first quarter, total liquidity was $634.1 million, including $216.5 million at Tampa Electric.

Financial Update

TECO Energy plans to Webcast an update on its 2004 financial plans and outlook during its presentation at the American Gas Association Financial Forum at 10:00 AM on Tuesday May 4, 2004. The Webcast can be accessed by following the link on TECO Energy’s Website 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 Coal, TECO Transport and TECO Wholesale Generation. Additional information on the company is available on its website www.tecoenergy.com

Note: This press release may be deemed to contain forward-looking statements, which are subject to the inherent uncertainties in predicting future results and conditions. Important factors that could impact actual results include general economic conditions in Tampa Electric’s service area affecting energy sales; economic conditions both national and international, that affect the demand for TECO Transport’s water borne transportation services; weather variations affecting energy sales and operating costs at Tampa Electric and TWG; commodity price changes affecting the margins at TWG and TECO Coal; the ability of TECO Energy’s subsidiaries to operate equipment without undue accidents, breakdowns or failures; and energy prices in the markets served by TWG facilities. Additional information is contained under “Investment Considerations” in the company’s Annual Report on Form 10-K for the period ended December 31, 2003.


Three Months

Ended Mar. 31

Twelve Months

Ended Mar. 31


(millions except per share amounts)






2004

2003

2004

2003

Revenues

$642.3

$651.8

$2,730.4

$2,717.0

Net income (loss)from continuing operations

$28.7

($20.3)

$34.3

$190.7

Net income (loss) from discontinued operations

(26.2)

24.1

(940.6)

67.8

Total net income (loss) before cumulative effect of change in accounting principle

2.5

3.8

(906.3)

258.5

Cumulative effect of change in accounting principle

--

(1.1)

(3.2)

(1.1)

Net income

$2.5

$ 2.7

($909.5)

$257.4






Earnings (loss) per share from continuing operations- basic

$0.15

($0.12)

$0.19

$1.18

Earnings per share from discontinued operations- basic

($0.14)

0.14

(5.15)

0.42

Earnings (loss) per share from cumulative effect of change in accounting principle – basic

--

--

( 0.02)

(0.01)

Earnings (loss) per share – basic

$0.01

$0.02

($4.98)

$1.59






Total earnings (loss) per share – basic

$0.01

$0.02

($4.98)

$1.59

Total earnings (loss) per share – diluted

$0.01

$0.02

($4.97)

$1.59

Average common shares outstanding – basic

188.0

175.9

182.7

161.6

Average common shares outstanding – diluted

188.6

175.9

183.0

161.6

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