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Investors say TECO hid risks of ventures

A class-action suit filed against the Tampa utility says it misrepresented the stability of its wholesale power business.

TAMPA - TECO Energy Inc. is the target of a class-action shareholder lawsuit that alleges the Tampa utility hid the extent of the risks associated with its unregulated wholesale power business.

The suit, filed Tuesday in U.S. District Court in Tampa, says the company "concealed the problems with several independent power plant construction ventures ... and the vulnerability of the company's large cash dividend, causing TECO's common shares to trade at artificially inflated levels."

The suit argues that if shareholders had been aware of the full extent of TECO's financial woes, they "would not have purchased TECO publicly traded securities at the prices they paid, if at all."

The NECA-IBEW Pension Trust Fund of Decatur, Ill., is the lead plaintiff in the suit, which was filed by the San Diego law firm of Lerach Coughlin Stoia Geller Rudman Robbins LLP. The complaint was filed as a class action on behalf of TECO shareholders who had purchased stock between Oct. 30, 2001, and Feb. 4, 2003.

The suit also names former TECO chairman and chief executive Robert Fagan and chief financial officer Gordon Gillette as co-defendants.

The suit says TECO's statements about its financial status did not adequately reflect the utility's "dangerously high" debt levels, the frailty of business partner Panda Energy International of Dallas, the extent of the company's exposure to the bankruptcy of Enron Corp. and "the extremely high likelihood that TECO's dividend was not only at risk, but that a cut would become inevitable."

The suit argued that TECO "disseminated or approved the false statements specified ... which they knew or recklessly disregarded were materially false and misleading in that they contained material misrepresentations."

TECO spokeswoman Laura Plumb said Wednesday the company hadn't yet been served with the lawsuit.

"Once that happens, we will be able to evaluate what we will do in response," she said.

TECO's troubled investments in unregulated wholesale power contributed to a sharp drop in the company's stock price and a 46 percent cut in the company's dividend in April 2003. TECO's debt was also downgraded to "junk," or noninvestment grade, and the company's writeoff of its $762-million investment in its two largest wholesale power plants was the chief component of its huge net loss of $909.4-million in 2003.

TECO's shares closed Wednesday at $13.16, up 22 cents. The company's stock had traded above $30 a share as recently as mid 2001.