TECO Energy Inc. (TE) filed Quarterly Report for the period ended 2009-09-30.
TECO Energy Inc. is a diversified energy-related holding company. Its principal businesses are Tampa Electric Peoples Gas Florida's largest natural gas distributor; TECO Power Services an independent power company; TECO Transport a river and ocean transportation company; TECO Coal producer of coal and synthetic fuel; and TECO Solutions an energy services/engineering company. (Company Press Release) Teco Energy Inc. has a market cap of $3.01 billion; its shares were traded at around $14.07 with a P/E ratio of 14.8 and P/S ratio of 0.9. The dividend yield of Teco Energy Inc. stocks is 5.7%.
Highlight of Business Operations:
TECO Energy, Inc. reported third quarter net income of $64.8 million or $0.30 per share, compared to $58.2 million or $0.28 per share in the third quarter of 2008. Third quarter net income included $20.8 million of charges, which included $15.4 million of restructuring charges at Tampa Electric, Peoples Gas and TECO Energy, the write-off of $5.2 million of project development costs at Tampa Electric primarily related to the Polk Unit 6 IGCC plant, and $0.2 million charge associated with the sale of student loan securities in the third quarter.
Year-to-date net income and earnings per share were $160.4 million or $0.75 per share in 2009, compared to $140.4 million or $0.67 per share in the same period in 2008. In addition to the third-quarter items, year-to-date net income in 2009 included an $8.7 million net gain on the sale of TECO Guatemala’s 16.5% interest in the Central American fiber optic telecommunications provider Navega, and a $3.8 million valuation adjustment charge to student loan securities held at TECO Energy. Year-to-date 2008 net income included a $0.6 million charge for adjustments to previously estimated costs associated with the sale of TECO Transport.
Tampa Electric reported net income for the third quarter of $54.3 million, compared with $50.6 million for the same period in 2008. Third quarter net income included $11.1 million of restructuring charges and the $5.2 million write-off of project development costs primarily related to the Polk Unit 6 IGCC project. Results for the quarter reflected 15.0% higher base revenues due to the increase in base rates effective May 7, 2009, higher earnings on nitrogen oxide (NOx) control projects, a 0.1% lower average number of customers, and slightly higher operations and maintenance expenses. Net income included $2.5 million of Allowance for Funds Used During Construction (AFUDC)—equity, which represents allowed equity cost capitalized to construction costs, related to the installation of NOx control equipment, coal rail unloading facilities and combustion turbines for peak loads, compared with $1.3 million in the 2008 period.
Year-to-date net income was $121.1 million, compared with $106.7 million in the 2008 period. In 2009, year-to-date net income included the third-quarter items noted above. These results were driven primarily by the higher base revenues from the new base rates and higher earnings on NOx control projects, partially offset by 0.2% lower average number of customers and higher operations and maintenance expenses. Net income included $8.3 million of AFUDC—equity related to the installation of NOx control equipment and combustion turbines for peak loads, compared with $4.3 million in the 2008 period. Sales volumes to other utilities declined 47% from the 2008 period, reflecting lower demand. In the 2009 year-to-date period, there was no reduction in net income due to the waterborne transportation disallowance for the transportation of solid fuel, compared to a $6.3 million reduction in the 2008 period.
In the 2009 year-to-date period, total retail energy sales decreased 1.8% compared to the 2008 period, driven primarily by the economy, weather in the second quarter and the 0.2% decline in the average number of customers. Total degree days in Tampa Electric’s service area were 3% above normal and 8% above the prior year; however, extended periods of rain reduced sales in the second quarter. Colder winter weather in the first quarter contributed to a 0.8% increase in sales to the weather-sensitive residential customer class, while sales to commercial and industrial customers declined, primarily due to economic conditions. Operations and maintenance expense, excluding all FPSC-approved cost recovery clauses and non-GAAP items noted in the third quarter, increased $5.1 million. The increase included the write-off of $0.6 million of disallowed rate case expenses, $1.8 million higher employee-related expenses, $1.6 million higher tree trimming expense, $1.0 million higher transmission and distribution system storm damage reserve accrual and $1.2 million higher power generating unit maintenance partially offset by cost reductions in other operating areas. Bad-debt expense was $0.4 million higher in the 2009 year-to-date period than in 2008.
PGS reported net income of $3.4 million for the third quarter, compared to $2.6 million in the same period in 2008. Third quarter net income included $2.8 million of restructuring costs, compared to $6.2 million in the third quarter of 2008. Quarterly results reflect a 0.3% lower average number of customers due to the weak Florida housing market, decreased sales to residential customers and increased sales to commercial customers due to several higher volume new customers and conversion of propane customers to natural gas. Base revenues increased due to the higher permanent base rates that became effective Jun. 18, 2009. Gas transported for power generation customers increased in 2009, compared to the third quarter of 2008 when high natural gas prices reduced demand for natural gas for power generation. Lower sales volumes to industrial customers reflected economic conditions and reduced operations by industries sensitive to the housing market, such as cement plants. Off-system sales volumes, which are very low margin sales, decreased due to lower spot sales to power generation customers. Excluding restructuring charges, non-fuel operations and maintenance expense was essentially unchanged from 2008 levels due to cost control efforts by the operating areas. Results also reflect increased depreciation expense due to routine plant additions.
TE is in the portfolios of David Dreman of Dreman Value Management, Brian Rogers of T Rowe Price Equity Income Fund, Brian Rogers of T Rowe Price Equity Income Fund.
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