Fitch Ups Long-Term View on Teco

In order to recognize the improved financial condition of TECO Energy Inc. (TE - Analyst Report) and its utility subsidiary, Tampa Electric Co., the Fitch ratings upgraded the long-term outlook of the companies to ‘Positive’ from ‘Stable’.
 
Fitch altered its long-term outlook as the company continues to strengthen its balance sheet by repaying debts using the tax benefits and boosting revenues from the higher electric rates.  Moreover, through the recent corporate restructuring, Tampa Electric slashed back on its operating expenses.
 
Fitch’s long-term outlook on TECO also takes into consideration the financial strength of Tampa Electric, from which the parent company derives stable and consistent cash flows, self-funding coal mining and improving Guatemalan businesses, which provide limited additional dividend support to the parent company.
 
However, Fitch retained the rating BBB- for TECO and BBB for Tampa Electric. Fitch rates TECO's Issuer Default Rating (IDR) one notch below that of Tampa Electric due to the former’s high debt levels. Fitch expects TECO to steadily reduce debt over the next several years resulting in leverage, which will be consistent with an IDR in the 'BBB' category.
 
During the first quarter earnings call, Teco Energy reaffirmed the adjusted earnings expectation for 2010. The company expects earnings to be in the range of $1.20 to $1.35 per share. TECO ended the quarter with consolidated liquidity of $882 million, with $232 million in cash and short-term investments and $650 million of availability under credit facilities. At the utilities there are no maturities until 2012 when $650 million is due at Tampa Electric.
 
Based in Tampa, Florida, Teco Energy, through its subsidiaries, engages in the generation, purchase, transmission, distribution, and sale of electric energy in Florida. The major competitors of the company are FPL Group Inc. (FPL), Progress Energy Inc. (PGN - Analyst Report) and Southern Co. (SO - Analyst Report).  On a competitive landscape, the long-term, debt-to-capital ratio of TECO is highest among its peers; hence we maintain a Neutral outlook on the company.
 

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