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Is TECO on verge of unplugging plants?

By Times Staff
Published January 5, 2004

[Last modified January 4, 2004, 10:08:45]

Is TECO Energy Inc. on the verge of ditching its two largest wholesale power plants?

That's what the smart money on Wall Street thinks. The speculation was sparked by the troubled utility when it told analysts in October that it could withstand a write-off of its $1.1-billion investment in the mammoth, 2,220-megawatt Union power station in Union County, Ark., and the 2,145-megawatt Gila River station near Gila Bend, Ariz. Both are generating losses in power markets with a glut of electricity.

Even with the write-off, TECO said it would still have an $800-million cushion to write off investments in other wholesale plants while still maintaining the debt-to-total-capital ratio required by creditors.

If TECO opts for a write-off, it's likely to do so in a matter of weeks. On Feb. 1, an expiring agreement between the utility and its creditors could trigger a loan default on the Union and Gila River plants.

And Standard & Poor's warned in November that TECO's failure to either sell or write off the plants by March 1 would result in the immediate downgrade in TECO's debt ratings. S&P, like other leading ratings agencies, already rates TECO's key long-term debt rating as "junk," or subinvestment grade.

Company spokeswoman Laura Plumb declined to comment on when the company would provide another update on the Union and Gila River plants. But analysts will no doubt scour TECO's Jan. 27 fourth-quarter earnings release for more hints.

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