TECO Energy Inc.’s subsidiary Tampa Electric Company announced its plan to increase power generation capacity of Polk Power Station by approximately 460 megawatts. In line with this expansion, the company plans to file for requisite approvals from the Florida Public Service Commission and a Site Certification Application with the Florida Department of Environmental Protection.
TECO Energy intends to do this generation capacity expansion to meet higher-than-expected power demand for 2017. The demand will increase due to a rise in the number of customers and expiration of purchased-power agreements with power providers.
For quite a long time, TECO Energy has been looking for prospective alternatives to meet forthcoming electricity demand. Accordingly, the company reviewed several bids from other electricity generators. But later, TECO Energy changed its plan and intended to generate electricity with the help of its own generation facilities. The company expects this plan will be lesser capital intensive than taking third-party assistance.
After completion of this project, TECO Energy will not depend on third party electricity vendors for handling its customer-demand pressure. In addition, this expansion will switch the four existing simple-cycle natural gas divisions to an extra proficient combined-cycle part within January 2017.
At the same time, this expansion project will detain waste heat of the existing combustion turbines and boost the output of the gas-fired units by 70% without acquiring additional land.
This project will also have social, economic and environmental benefits. As far as socio-economic development is concerned, TECO Energy’s Polk Power Station expansion project is expected to produce roughly 500 local jobs. As a whole, this will help to improve the economic condition of Florida. On the other hand, this new system will reduce emissions of nitrogen oxide and carbon dioxide and supply clean energy to its users.
We believe this initiative will enable TECO Energy to control its expenses and resources, while positively impacting its financial as well as operating performance in terms of smooth supply of safe and reliable power to approximately 100,000 homes.
In second-quarter 2012, Tampa Electric reported net income of $52 million versus $58.4 million in the prior-year quarter. The decline in net income was due to mild weather, higher operating expenses and increase in depreciation costs.
As of June 30, 2012, TECO Energy had cash and cash equivalents of $117.4 million compared with $44 million as of December 31, 2011. On top of its financial strength, the company comfortably continues with its plant upgrade and infrastructure development activities.
During second-quarter 2012 earnings call, TECO Energy lowered its full-year 2012 earnings guidance to $1.20 - $1.30 per share from the prior estimate of $1.30 - $1.40 per share due to the negative effect of mild weather.
As per the Zacks Consensus Estimates, TECO Energy’s earnings for the third-quarter and full-year 2012 are currently pegged at 41 cents per share and $1.25 per share, respectively.
We believe that strong customer growth along with improvement in Florida economy will act as a positive catalyst for TECO Energy’s forthcoming financial performance. However, we are concerned about natural disasters and extreme weather conditions, which might hamper smooth functioning of TECO Energy’s operations.
TECO Energy Inc. currently holds a Zacks #4 Rank, which translates into a short-term Sell rating.
Tampa, Florida-based TECO Energy Inc. is involved in regulated utility operations. Through its subsidiaries, the company generates, transmits, distributes, purchases and sells electric energy in Florida and Guatemala. The company mainly competes with Wisconsin Energy Inc. (WEC - Free Report) .