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TECO looks to unload its shipping business

The energy company is considering the sale to pay down the debt from disastrous investments in out-of-state power plants.

By STEVE HUETTEL
Published February 6, 2007


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TAMPA — TECO Energy may sell its longtime shipping business within six months to pay down debt from disastrous investments in out-of-state power plants.


The parent of Tampa Electric Co. has retained investment bank Morgan Stanley to help evaluate “strategic opportunities’’ for TECO Transport, executives said Tuesday.

“This is not a decision taken lightly, as TECO Transport has a long history as a solid and profitable performer in the TECO Energy family,’’ chief executive Sherrill Hudson said in a prepared statement.

TECO Transport employs 185 workers locally and has a fleet of 12 ocean-going vessels, 20 river towboats and about 650 inland barges. It also owns a transfer terminal at the mouth of the Mississippi River.

The disclosure came during earnings presentations, where TECO reported a 10-percent annual drop in earnings last year to $246.3-million, and a fourth-quarter profit of $48.9-million, 6 percent below the year-earlier quarter.

Shipping companies are fetching strong prices as the business consolidates. Maritrans Inc., a Tampa-based petroleum and crude oil shipper, was bought out last year by Overseas Shipping Group of New York for

$455-million, a 47-percent premium over its share price.

Proceeds from a sale of its shipping arm would let TECO accelerate plans to retire $500-million in debt, now set for 2008 through 2010. That would free up cash for a new Tampa Electric power plant in Polk County and improvements to the utility’s transmission system.

The debt remains from TECO’s investments in power plant projects in Texas, Arizona and Arkansas designed to sell wholesale electricity. The deals went sour as spot market prices collapsed and some states backed away from deregulating their electricity markets.

TECO Transport carries dry bulk commodities, primarily coal and grain from the Appalachians and Midwest and phosphate mined in Hillsborough and Polk counties.

Towing, shipping and terminal companies that worked for Tampa Electric since the late ’50s and early ’60s were purchased and incorporated in the new parent TECO Energy in 1981.

The shipping company’s work for the utility has touched off controversy.

In 2004, state regulators ordered Tampa Electric to absorb more than $15-million in coal transport cost it planned to pass on to consumers. The decision came after consumer advocates argued Tampa Electric unfairly favored TECO Transport in bidding for a coal-hauling contract.

In a conference call Tuesday with analysts, executives said profits took a hit last year mostly from decreased sales of synthetic fuels, a special coal treatment that carries tax benefits. TECO suspended production last summer as oil prices spiked and federal tax subsidies evaporated.

Also, an unusually warm winter and not-too-hot summer cut into electric consumption. Two other factors contributed: consumers used less power as electricity rates rose and more condos, which require less electricity, came on the market.

Steve Huettel can be reached at huettel@sptimes.com or (813) 226-3384.

[Last modified February 6, 2007, 22:12:27]


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