FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
X Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996
OR
Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period _____ to _____
Commission File Number 1-8180
TECO ENERGY, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-2052286
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
TECO Plaza
702 N. Franklin Street
Tampa, Florida 33602
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813) 228-4111
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, $1.00 par value New York Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendments to this Form 10-K. X
The aggregate market value of the voting stock held by nonaffiliates
of the registrant as of February 28, 1997 was $2,866,541,608.
Number of shares of the registrant's common stock outstanding as of
February 28, 1997 was 117,601,707.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Definitive Proxy Statement relating to the 1997 Annual
Meeting of Shareholders of the registrant are incorporated by
reference into Part III.
PART I
Item 1. BUSINESS.
TECO ENERGY
TECO Energy, Inc. (TECO Energy) was incorporated in Florida in
1981, as part of a restructuring in which it became the parent
corporation of Tampa Electric Company (Tampa Electric).
TECO Energy currently owns no operating assets but holds all of
the common stock of Tampa Electric and the other subsidiaries listed
below. TECO Energy is a public utility holding company exempt from
registration under the Public Utility Holding Company Act of 1935.
TECO Energy has eight directly owned subsidiaries:
Tampa Electric, a Florida corporation and TECO Energy's
largest subsidiary, is an electric utility that serves more than
513,000 retail customers in west central Florida with a net system
generating capability of 3,650 megawatts (MWs).
T E CO Diversified, Inc. (TECO Diversified), a Florida
corporation formed in 1987, has four subsidiaries that conduct a
substantial portion of the diversified activities of TECO Energy: TECO
Coal Corporation (TECO Coal), TECO Coalbed Methane, Inc. (TECO Coalbed
Methane), TECO Properties Corporation (TECO Properties) and TECO
Transport & Trade Corporation (TECO Transport).
TECO Power Services Corporation (TECO Power Services), a
Florida corporation formed in 1987, has subsidiaries that own and
operate independent power projects in Florida and in Guatemala. TECO
Power Services also seeks other opportunities principally in the
southeastern United States and Latin America to develop independent
power and cogeneration projects.
T E CO Investments, Inc. (TECO Investments), a Florida
corporation formed in 1987, invests capital in short- and long-term
securities and financial instruments. TECO Energy does not expect to
expand this business.
TECO Finance, Inc. (TECO Finance), a Florida corporation
formed in 1987, is a source of debt capital primarily for the
diversified activities of TECO Energy.
TeCom Inc. (TeCom), a Florida corporation formed in 1994, is
marketing advanced energy management, automation and control systems.
TECO Oil & Gas, Inc. (TECO Oil & Gas), formerly named TECO
Gas & Oil, Inc., a Florida corporation formed in 1995, is involved in
the exploration and development of oil and gas in the shallow gulf
waters off Texas and Louisiana, and on-shore in the Permian Basin area
of west Texas.
- B o sek, Gibson and Associates, Inc. (BGA), a Florida
corporation acquired in 1996, provides engineering and energy services
to customers primarily in Florida and California.
For financial information regarding TECO Energy's significant
business segments see Note J on pages 59 and 60.
TECO Energy and its subsidiaries had 4,358 employees as of Dec.
31, 1996.
TAMPA ELECTRIC
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Tampa Electric was incorporated in Florida in 1899 and was
reincorporated in 1949. Tampa Electric is a public utility operating
within the state of Florida and is engaged in the generation,
purchase, transmission, distribution and sale of electric energy. The
retail territory served comprises an area of about 2,000 square miles
in west central Florida, including substantially all of Hillsborough
County and parts of Polk, Pasco and Pinellas Counties, and has an
estimated population of over one million. The principal communities
served are Tampa, Winter Haven, Plant City and Dade City. In addition,
the utility engages in wholesale sales to other utilities. Tampa
Electric has three electric generating stations in or near Tampa, one
electric generating station in southwestern Polk County, Florida and
two electric generating stations located near Sebring, a city located
in Highlands County in south central Florida.
Tampa Electric had 2,798 employees as of Dec. 31, 1996, of which
1,142 were represented by the International Brotherhood of Electrical
Workers (IBEW) and 292 by the Office and Professional Employees
International Union.
In 1996, approximately 48 percent of Tampa Electric's total
operating revenue was derived from residential sales, 29 percent from
commercial sales, 9 percent from industrial sales and 14 percent from
other sales including bulk power sales for resale.
The sources of operating revenue for the years indicated were as
follows:
(millions) 1996 1995 1994
Residential $ 539.7 $ 523.3 $ 505.5
Commercial 321.3 316.1 316.8
Industrial-Phosphate 59.6 61.7 58.3
Industrial-Other 43.3 45.0 50.0
Other retail sales
of electricity 83.5 82.0 80.7
Sales for resale 93.3 80.0 70.4
Deferred revenues (34.2) (50.8) --
Other 6.4 35.0 13.2
$1,112.9 $1,092.3 $1,094.9
No significant part of Tampa Electric's business is dependent
upon a single customer or a few customers, the loss of any one or more
of whom would have a significantly adverse effect on Tampa Electric,
except for IMC-Agrico, a large phosphate producer representing four
percent of Tampa Electric's 1996 operating revenues.
In May 1996, IMC-Agrico issued a request for proposals (RFP) for
electric power to serve load currently served by Tampa Electric and
others. Tampa Electric has made load-retention proposals that it
believes are competitively priced and attractive because of the
flexibility offered. Tampa Electric continues to have discussions with
IMC-Agrico. While it is unclear how this process will develop, the
ultimate impact on Tampa Electric is not expected to be significant.
See further discussion on page 23.
Tampa Electric's business is not a seasonal one, but winter peak
loads are experienced due to fewer daylight hours and colder
temperatures, and summer peak loads are experienced due to use of air
conditioning and other cooling equipment.
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Regulation
The retail operations of Tampa Electric are regulated by the
Florida Public Service Commission (FPSC), which has jurisdiction over
retail rates, the quality of service, issuances of securities,
planning, siting and construction of facilities, accounting and
depreciation practices and other matters.
Tampa Electric is also subject to regulation by the Federal
Energy Regulatory Commission (FERC) in various respects including
wholesale power sales, certain wholesale power purchases, transmission
services and accounting and depreciation practices.
Federal, state and local environmental laws and regulations cover
air quality, water quality, land use, power plant, substation and
transmission line siting, noise and aesthetics, solid waste and other
environmental matters. See Environmental Matters on pages 7 and 8.
TECO Transport, TECO Coal and TECO Power Services subsidiaries
sell transportation services, coal, and generating capacity and
energy, respectively, to Tampa Electric and to third parties. The
transactions between Tampa Electric and these affiliates and the
prices paid by Tampa Electric are subject to regulation by the FPSC
and FERC, and any charges deemed to be imprudently incurred may not be
allowed to be recovered from Tampa Electric's customers. See Utility
Regulation on pages 33 through 36. Except for transportation services
performed by TECO Transport under the U.S. bulk cargo preference
p r ogram, the prices charged by TECO Transport and TECO Coal
subsidiaries to third-party customers are not subject to regulatory
oversight. See also TECO Power Services on pages 11 and 12.
Competition
Tampa Electric s retail business is substantially free from
direct competition with other electric utilities, municipalities and
p u blic agencies. At the present time, the principal form of
competition at the retail level consists of natural gas for residences
and businesses and the self-generation option available to larger
users of electric energy. Such users may seek to expand their options
through legislative and/or regulatory initiatives that would permit
competition at the retail level. Tampa Electric intends to take all
appropriate actions to retain and expand its retail business,
including managing costs and providing high quality service to retail
customers. Such action could, with the approval of the FPSC, include
the use of load retention and/or economic development service
contracts and tariffs to reduce the loss of existing load and/or
acquire additional load. Tampa Electric does not expect the effect of
such actions to have a significant affect on its operations. See the
description of the IMC-Agrico request for proposals on page 23.
There is presently active competition in the wholesale power
markets in Florida, and this is increasing largely as a result of the
Energy Policy Act of 1992 and related federal initiatives. This act
removed certain regulatory barriers to independent power producers,
and required utilities to transmit power from such producers,
utilities and others to wholesale customers as more fully described
below. Tampa Electric s wholesale business is largely dependent on
access to transmission systems owned by others and it has generally
supported the regulatory efforts described below to implement open
access to transmission. Tampa Electric is also continuing its efforts
to reduce costs, again with the view of increasing its wholesale
business in an increasingly competitive market.
In April 1996 the Federal Energy Regulatory Commission (FERC)
issued its Final Rule on Open Access Non-discriminatory Transmission
Stranded Costs, Open Access Same-time Information System (OASIS) and
Standards of Conduct. These rules work together to open access for
wholesale power flows on transmission systems. Utilities owning
transmission facilities (including Tampa Electric) are required to
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provide services to wholesale transmission customers comparable to
those they provide to themselves on comparable terms and conditions
including price. Among other things, the rules require transmission
services to be unbundled from power sales and owners of transmission
systems must take transmission service under their own transmission
tariffs.
Transmission system owners are also required to implement an
OASIS system providing, via the Internet, access to transmission
service information (including price and availability), and to rely
exclusively on their own OASIS system for such information for
purposes of their own wholesale power transactions. To facilitate
compliance, owners must implement Standards of Conduct to ensure that
personnel involved in marketing of wholesale power are functionally
separated from personnel involved in transmission services and
reliability functions. Tampa Electric, together with other utilities,
has implemented an OASIS system and believes it is in compliance with
the Standards of Conduct.
Retail Pricing
In general, the FPSC's pricing objective is to set rates at a
level that allows the utility to collect total revenues equal to its
cost of providing service, including a reasonable return on invested
capital.
The costs of owning, operating and maintaining the utility
system, other than fuel, purchased power, conservation and certain
environmental costs, are recovered through base rates. The costs
intended to be covered by base rates include operation and maintenance
expenses, depreciation and taxes, as well as a return on Tampa
Electric's investment in assets used and useful in providing electric
service (rate base). The rate of return on rate base, which is
intended to approximate Tampa Electric's weighted cost of capital,
includes its costs for debt and preferred stock, deferred income taxes
at a zero cost rate and an allowed return on common equity. Base
prices are determined in FPSC price setting hearings which occur at
irregular intervals at the initiative of Tampa Electric, the FPSC or
other parties. See the discussion of the FPSC-approved agreements
covering 1995 through 1999 on pages 33 through 35.
Fuel, conservation, certain environmental and certain purchased
p o w e r costs are recovered through levelized monthly charges
established pursuant to the FPSC's fuel adjustment and cost recovery
clauses. These charges, which are reset semi-annually in an FPSC
hearing, are based on estimated costs of fuel, environmental
compliance, conservation programs and purchased power and estimated
customer usage for a specific recovery period, with a true-up
adjustment to reflect the variance of actual costs from the projected
charges.
The FPSC may disallow recovery of any costs that it considers
imprudently incurred.
Fuel
About 98 percent of Tampa Electric's generation for 1996 was from
its coal-fired units. About the same level is anticipated for 1997.
Tampa Electric's average fuel cost per million BTU and average
cost per ton of coal burned have been as follows:
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Average cost
per million BTU: 1996 1995 1994 1993 1992
Coal $ 2.01 $ 2.15 $ 2.22 $ 2.26 $ 2.23
Oil $ 3.68 $ 2.76 $ 2.49 $ 2.69 $ 2.76
Gas -- -- -- $ 3.52 $ 2.43
Composite $ 2.05 $ 2.16 $ 2.22 $ 2.27 $ 2.24
Average cost per ton
of coal burned $46.71 $50.97 $53.39 $54.55 $53.65
Tampa Electric's generating stations burn fuels as follows:
Gannon Station burns low-sulfur coal; Big Bend Station burns coal of a
somewhat higher sulfur content; Polk Power Station burns high-sulfur
coal which is gasified; Hookers Point Station burns low-sulfur oil;
Phillips Station burns oil of a somewhat higher sulfur content; and
Dinner Lake Station, which was placed on long-term reserve standby in
March 1994, burned natural gas and oil.
Coal. Tampa Electric burned approximately 8.0 million tons of
coal during 1996 and estimates that its coal consumption will be
7.9 million tons for 1997. During 1996, Tampa Electric purchased
approximately 58 percent of its coal under long-term contracts with
six suppliers, including TECO Coal, and 42 percent of its coal in the
spot market or under intermediate-term purchase agreements. About 16
percent of Tampa Electric's 1996 coal requirements were supplied by
TECO Coal. During December 1996, the average delivered cost of coal
(including transportation) was $42.59 per ton, or $1.87 per million
BTU. Tampa Electric expects to obtain approximately 60 percent of its
c o al requirements in 1997 under long-term contracts with six
suppliers, including TECO Coal, and the remaining 40 percent in the
spot market. Tampa Electric's long-term coal contracts provide for
revisions in the base price to reflect changes in a wide range of cost
factors and for suspension or reduction of deliveries if environmental
regulations should prevent Tampa Electric from burning the coal
supplied, provided that a good faith effort has been made to continue
burning such coal. Tampa Electric estimates that about 12 percent of
its 1997 coal requirements will be supplied by TECO Coal. For
information concerning transportation services and sales of coal by
affiliated companies to Tampa Electric, see TECO Coal on pages 8 and 9
and TECO Transport on page 10.
In 1996, about 64 percent of Tampa Electric's coal supply was
deep-mined, approximately 33 percent was surface-mined and three
percent was a processed oil by-product known as petroleum coke.
Federal surface-mining laws and regulations have not had any material
adverse impact on Tampa Electric's coal supply or results of its
operations. Tampa Electric, however, cannot predict the effect on the
market price of coal of any future mining laws and regulations.
Although there are reserves of surface-mineable coal dedicated by
suppliers to Tampa Electric's account, high-quality coal reserves in
Kentucky that can be economically surface-mined are being depleted and
in the future more coal will be deep-mined. This trend is not expected
to result in any significant additional costs to Tampa Electric.
Oil. Tampa Electric had supply agreements through Dec. 31, 1996
for No. 2 fuel oil and No. 6 fuel oil for its four combustion turbine
units, Polk Station, Hookers Point Station and Phillips Station at
prices based on Gulf Coast Cargo spot prices. Contracts for the supply
of No. 2 and No. 6 fuel oil through Dec. 31, 1997 are expected to be
finalized in early 1997. The price for No. 2 fuel oil deliveries taken
in December 1996 was $31.90 per barrel, or $5.50 per million BTU. The
price for No. 6 fuel oil deliveries taken in December 1996 was $21.98
per barrel, or $3.48 per million BTU.
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Franchises
Tampa Electric holds franchises and other rights that, together
with its charter powers, give it the right to carry on its retail
business in the localities it serves. The franchises are irrevocable
and are not subject to amendment without the consent of Tampa
Electric, although, in certain events, they are subject to forfeiture.
Florida municipalities are prohibited from granting any franchise
for a term exceeding 30 years. If a franchise is not renewed by a
municipality, the franchisee has the statutory right to require the
municipality to purchase any and all property used in connection with
the franchise at a valuation to be fixed by arbitration. In addition,
all of the municipalities except for the cities of Tampa and Winter
Haven have reserved the right to purchase Tampa Electric's property
used in the exercise of its franchise, if the franchise is not
renewed.
Tampa Electric has franchise agreements with 13 incorporated
municipalities within its retail service area. These agreements have
various expiration dates ranging from December 2005 to September 2021,
including the agreement with the city of Tampa, which expires in
August 2006. Tampa Electric has no reason to believe that any of these
franchises will not be renewed.
F r a nchise fees payable by Tampa Electric, which totaled
$20.1 million in 1996, are calculated using a formula based primarily
on electric revenues.
Utility operations in Hillsborough, Pasco, Pinellas and Polk
Counties outside of incorporated municipalities are conducted in each
case under one or more permits to use county rights-of-way granted by
the county commissioners of such counties. There is no law limiting
the time for which such permits may be granted by counties. There are
no fixed expiration dates for the Hillsborough County and Pinellas
County agreements. The agreements covering electric operations in
Pasco and Polk counties expire in September 2010 and March 2004,
respectively.
Environmental Matters
Tampa Electric's operations are subject to county, state and
f e deral environmental regulations. The Hillsborough County
Environmental Protection Commission and the Florida Environmental
Regulation Commission are responsible for promulgating environmental
regulations and coordinating most of the environmental regulation
functions performed by the various departments of state government.
T h e Florida Department of Environmental Protection (FDEP) is
responsible for the administration and enforcement of the state
regulations. The U.S. Environmental Protection Agency (EPA) is the
primary federal agency with environmental responsibility.
Tampa Electric has all required environmental permits. In
addition, monitoring programs are in place to assure compliance with
permit conditions. Tampa Electric has been identified as one of
numerous potentially responsible parties (PRP) with respect to seven
Superfund Sites. While the total costs of remediation at these sites
may be significant, Tampa Electric shares potential liability with
other PRPs, many of which have substantial assets. Accordingly, Tampa
Electric expects that its liability in connection with these sites
will not be significant.
Expenditures. During the five years ended Dec. 31, 1996, Tampa
E l e c tric spent $159.3 million on capital additions to meet
environmental requirements, including $102.7 million for the Polk
Power Station project. Environmental expenditures are estimated at $6
million for 1997 and $8 million in total for 1998 through 2001. These
totals exclude amounts required to comply with the 1990 amendments to
the Clean Air Act.
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Tampa Electric is complying with the Phase I emission limitations
imposed by the Clean Air Act Amendments which became effective Jan. 1,
1995 by using blends of lower-sulfur coal, controlling stack emissions
and using emission allowances.
In 1995 Tampa Electric successfully integrated Big Bend Unit
Three into the existing scrubber on Big Bend Unit Four. This resulted
in an additional scrubbed unit at a fraction of the cost of a new
scrubber. Also as part of its Phase I compliance plan, Tampa Electric
has a long-term contract for the purchase of low-sulfur coal.
Tampa Electric is currently evaluating options to comply with
Phase II sulfur dioxide emission standards imposed by the Clean Air
Act Amendments set for the year 2000. The options include potentially
having to scrub additional capacity. The company is evaluating
equipment and technologies to accomplish compliance in the most cost
effective manner. Tampa Electric is also evaluating options to comply
with Phase II of the Clean Air Act Amendments for nitrogen oxide
reductions. These options include combustion modifications and
retrofit control technology. While Tampa Electric s capital
expenditure estimates for the 1997-2001 period, discussed on page 32,
include $30 million for compliance with Phase II of the Clean Air Act
Amendments, the actual level of required expenditures is uncertain at
this time. The cost of compliance with Phase II is expected to have
little impact on Tampa Electric's prices.
In addition to recovering certain prudently incurred
environmental costs through base rates, Tampa Electric may petition
the FPSC for recovery of certain other environmental compliance costs
on a current basis pursuant to a statutory environmental cost recovery
procedure.
TECO DIVERSIFIED
TECO Diversified owns all of the common stock of TECO Coal, TECO
Coalbed Methane, TECO Properties and TECO Transport. It is a holding
company that owns no operating assets. TECO Diversified and its
subsidiaries had 1,349 employees as of Dec. 31, 1996.
TECO Coal
TECO Coal, a Kentucky corporation, owns no operating assets but
holds all of the common stock of Gatliff Coal Company (Gatliff), Rich
Mountain Coal Company (Rich Mountain), Clintwood Elkhorn Mining
Company (Clintwood), Pike-Letcher Land Company (Pike-Letcher) and
Premier Elkhorn Coal Company (Premier). TECO Coal's subsidiaries own
and/or operate surface and underground mines and coal processing and
loading facilities in Kentucky and Tennessee.
In 1996, TECO Coal subsidiaries sold 5.9 million tons of coal,
with approximately 80 percent sold to third parties and 20 percent
sold to Tampa Electric. Rich Mountain has no reserves; it mines coal
reserves owned by Gatliff. About 62 percent of Gatliff's production
and third-party purchases were sold to Tampa Electric. This specialty
coal has low-ash fusion temperature and low-sulfur characteristics
specifically suited for Tampa Electric's Gannon Station units. The
majority of production from Clintwood and Premier is sold to third
parties.
Tampa Electric is reducing its coal purchases from TECO Coal as a
result of its efforts to reduce costs and its successful fluxing of
conventional steam coal from other sources. TECO Coal's objective is
to more than offset the effects of this reduction by increasing the
amount of coal sold to third parties, principally from the reserves
being developed by Premier.
Primary competitors of TECO Coal's subsidiaries are other coal
suppliers, many of which are located in Central Appalachia.
The operations of underground mines, including all related
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surface facilities, are subject to the Federal Coal Mine Safety and
Health Act of 1977. TECO Coal's subsidiaries are also subject to
various Kentucky and Tennessee mining laws that require approval of
roof control, ventilation, dust control and other facets of the coal
mining business. Federal and state inspectors inspect the mines to
ensure compliance with these laws. TECO Coal's subsidiaries are in
compliance with the standards of the various enforcement agencies. It
is unaware of any mining laws or regulations having a prospective
effective date that would materially affect the market price of coal
sold by its subsidiaries.
TECO Coal's subsidiaries have not experienced difficulty in
complying with federal, state and local air and water pollution
standards in their mining operations. In 1996 approximately $1.6
m i llion was spent on environmental protection and reclamation
programs. TECO Coal expects to spend about $1.5 million in 1997 on
these programs.
The coal mining operations are also subject to the Surface Mining
Control and Reclamation Act of 1977 which places a charge of $.15 and
$.35 on every net ton mined of underground and surface coal,
respectively, to create a fund for reclaiming land and water adversely
affected by past coal mining. Other provisions establish standards for
the control of environmental effects and reclamation of surface coal
mining and the surface effects of underground coal mining, and
requirements for federal and state inspections.
TECO Coalbed Methane
TECO Coalbed Methane, an Alabama corporation, participates in the
production of natural gas from coalbeds located in Alabama's Black
Warrior Basin. TECO Coalbed Methane has invested $207 million as the
principal investor in three ventures that control, in the aggregate,
approximately 100,000 acres of lease holdings. At the end of 1996,
TECO Coalbed Methane had interests in 749 wells that were operational
and producing gas for sale. These wells are operated by Taurus
Exploration, a unit of Energen Corporation, and, to a much lesser
extent, by other third-party operators.
A non-conventional fuel tax credit is available on all production
through the year 2002. The tax credit, a major economic factor,
escalates with inflation and could be limited by domestic oil prices.
In 1996, domestic oil prices would have had to exceed $46 per barrel
for this limitation to have been effective.
All production from these wells is committed for the life of the
reserves based on spot prices which are tied to the price of on-shore
Louisiana gas.
TECO Coalbed Methane s operations are subject to federal, state
and local regulations for air emissions and water and waste disposal.
Its operations are in substantial compliance with all applicable
environmental laws and regulations.
TECO Properties
TECO Properties, a Florida corporation, has $35.7 million
invested in six projects, by itself or as a limited partner, and in
undeveloped land in the Tampa area. TECO Properties plans to continue
a conservative investment approach.
TECO Transport
TECO Transport, a Florida corporation, owns all of the common
stock of four subsidiaries that transport, store and transfer coal and
other dry bulk commodities. TECO Transport currently owns no operating
assets.
All of TECO Transport's subsidiaries perform substantial services
9
for Tampa Electric. In 1996, approximately 49 percent of TECO
Transport's revenues were from third-party customers and 51 percent
were from Tampa Electric. The pricing for services performed by TECO
Transport's operating companies for Tampa Electric is based on a fixed
price per ton, adjusted quarterly for changes in certain fuel and
price indices. Most of the third-party utilization of the ocean-going
b a r ges is for domestic phosphate movements and domestic and
international movements of other dry bulk commodities. Both the
terminal and river transport operations handle a variety of dry bulk
commodities for third-party customers.
A substantial portion of TECO Transport's business is dependent
upon Tampa Electric, industrial phosphate customers, export coal and
grain customers, and participation in the U.S. cargo preference
program.
Primary competitors of TECO Transport's barge subsidiaries,
Gulfcoast Transit Company (Gulfcoast), which transports products in
the Gulf of Mexico and worldwide, and Mid-South Towing Company
(Mid-South), which operates on the Mississippi, Ohio and Illinois
rivers, are other barge and shipping lines and railroads. There are a
number of companies offering transportation services on the waterways
served by TECO Transport's subsidiaries. To date, physical and
technological improvements have allowed barge operators to maintain
competitive rate structures with alternate methods of transporting
bulk commodities when the origin and destination of such shipments are
contiguous to navigable waterways.
Electro-Coal Transfer Corporation (Electro-Coal) operates a major
transfer and storage terminal on the Mississippi River south of New
Orleans. Demand for the use of such terminals is dependent upon
customers' use of water transportation versus alternate means of
moving bulk commodities and the demand for these commodities.
Competition consists primarily of mid-stream operators and another
land-based terminal located nearby.
The business of TECO Transport's subsidiaries, taken as a whole,
is not subject to significant seasonal fluctuation.
The Interstate Commerce Act, as amended in December 1973, exempts
from regulation water transportation of dry bulk commodities that were
transported in bulk as of June 1, 1939. In 1996, all transportation
services provided by TECO Transport's subsidiaries were within this
exemption.
TECO Transport's subsidiaries are also subject to the provisions
of the Clean Water Act of 1977 that authorize the Coast Guard and the
EPA to assess penalties for oil and hazardous substance discharges.
Under this Act, these agencies are also empowered to assess clean-up
costs for such discharges. Compliance with this Act has had no
material effect on TECO Transport's capital expenditures, earnings or
competitive position, and no such effect is anticipated. In 1996, TECO
Transport spent $.7 million for environmental control. Environmental
expenditures are estimated at $.7 million in 1997, primarily for work
on solid waste disposal and storm water drainage at the Electro-Coal
facility in Louisiana and for expenses related to oil and bilge water
disposal at its river-barge repair facility in Illinois.
TECO POWER SERVICES
TECO Power Services, a Florida corporation, has subsidiaries that
own and operate independent power projects in Florida and in
Guatemala. TECO Power Services also seeks opportunities to develop
other independent power and cogeneration projects. It had 53 employees
as of Dec. 31, 1996.
Hardee Power Partners Limited (Hardee Power), a Florida limited
partnership whose general and limited partners are wholly owned
subsidiaries of TECO Power Services, owns the Hardee Power Station, a
295-MW combined cycle electric generating facility located in Hardee
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County, Florida, which began commercial operation on Jan. 1, 1993.
Hardee Power has 20-year power supply agreements, for all of the
capacity and energy of the Hardee Power Station, with Seminole
E l e c tric Cooperative (Seminole Electric), a Florida electric
cooperative that provides wholesale power to 11 electric distribution
cooperatives, and with Tampa Electric. Under the Seminole Electric
agreement, Hardee Power has agreed to supply Seminole Electric with an
additional 145 MWs of capacity during the first 10 years of the
contract, which it is purchasing from Tampa Electric's coal-fired Big
Bend Unit Four for resale to Seminole Electric, and at the option of
Seminole Electric, to expand the Hardee Power Station's capacity by
145 MWs for the second 10 years of the contract. Tampa Electric also
has the right under its agreement to require the expansion of the
Hardee Power Station, subordinate to Seminole Electric's expansion
option.
The Hardee Power Station is fueled by natural gas or No. 2 fuel
oil and has contracted for the supply and transportation of natural
gas through June 30, 1997. It is currently in the process of obtaining
a new contract for periods beyond that date. About 96 percent of the
Hardee Power Station's generation for 1996 was from natural gas.
Hardee Power's average fuel cost per million BTU has been as
follows:
Average cost
per million BTU: 1996 1995 1994 1993
Oil $ 4.61 $ 4.64 $ 3.68 $4.86
Gas $ 3.60 $ 2.70 $ 2.02 $2.51
Composite $ 3.65 $ 2.71 $ 2.40 $2.74
The price for natural gas deliveries taken in December 1996 was
$5.08 per thousand cubic feet, or $4.84 per million BTU. The price for
fuel oil deliveries taken in March 1996 was $25.55 per barrel, or
$4.39 per million BTU. There were no fuel oil deliveries taken in 1996
subsequent to that date.
Through its ownership and operation of a wholesale generating
facility in the U.S., TECO Power Services is subject to regulation by
the FERC in various respects. Depending upon the nature of the
project, FERC may regulate, among other things, the rates, terms and
conditions for the sale of electric capacity and energy.
Like Tampa Electric, the U.S. operations of TECO Power Services
are subject to federal, state and local environmental laws and
regulations covering air quality, water quality, land use, power
plant, substation and transmission line siting, noise and aesthetics,
solid waste and other environmental matters.
Tampa Centro Americana de Electricidad, Ltd. (TCAE), an entity
98.15-percent owned by TPS Guatemala One, Inc. (TPS Guatemala One), a
subsidiary of TECO Power Services, has a U.S. dollar-denominated power
sales agreement to provide 78 MWs of capacity to an electric utility
in Guatemala for a 15-year period ending in 2010. The project (the
Alborada Power Station) consists of two combustion turbines with a
total cost of approximately $50 million. TECO Power Services has
obtained political risk insurance from the Overseas Private Investment
Corporation (OPIC), an agency of the U.S. government, for currency
inconvertibility, expropriation and political violence covering up to
90 percent of its equity investment and economic returns.
TCAE began commercial operation of the Alborada Power Station on
Sept. 14, 1995. The power sales agreement between TCAE and the power
purchaser, Empresa Electrica de Guatemala, S.A. (EEGSA), provides for
a capacity charge and operations and maintenance expense payments. The
capacity charge is subject to adjustment due to output, heat rate and
availability. EEGSA is responsible for providing the fuel for the
11
plant with TECO Power Services providing assistance in fuel
administration.
EEGSA, a private distribution and generation company formed in
1894, serves more than 400,000 customers. Approximately 92 percent of
this company is owned by the Guatemalan central government through the
Ministry of Finance, with the remaining 8 percent owned by private
Guatemalan investors. EEGSA s service territory includes Guatemala
City.
12
In January 1997, TECO Power Services secured $29 million of non-
recourse financing for the Alborada Power Station from OPIC.
In 1996, Central Generadora Electrica San Jose (CGESJ), an entity
in which TECO Power Services has a 46 percent ownership interest,
signed a U.S.-dollar denominated power sales agreement with EEGSA to
provide 120 MWs of capacity for 15 years beginning in 1999. The
project consists of a single unit pulverized coal baseload facility
(San Jose Power Station) including port modifications to accommodate
the importation of coal, as well as the construction of approximately
30 miles of transmission line to connect the San Jose Power Station to
the Alborada substation. The total cost of the project approximates
$175 million. At Dec. 31, 1996 46 percent of CGESJ was owned by
another U.S. independent power producer (a subsidiary of The Coastal
Corporation) and 8 percent was owned by the same Guatemalan business
group that TECO Power Services partnered with for the Alborada Power
Station project. The U.S. partners have obtained a commitment for
political risk insurance from OPIC for inconvertibility, expropriation
and political violence covering up to 90 percent of the equity
investment and economic returns.
TECO INVESTMENTS
T E CO Investments' assets consist of short- and long-term
financial investments. The portfolio includes a continuing investment
in leveraged leases of $63 million. At Dec. 31, 1996, the net
leveraged lease investment had essentially a zero balance. TECO Energy
does not expect to expand this business.
TECO FINANCE
TECO Finance raises short- and long-term debt capital primarily
for the diversified activities of TECO Energy. It has its own credit
ratings, based on a guarantee by TECO Energy. TECO Finance owns no
operating assets.
TECO OIL & GAS
TECO Oil & Gas was formed in 1995 to enter into joint ventures
with several partners to explore for oil and gas in the shallow gulf
waters off Texas and Louisiana. The joint ventures have successfully
bid for a number of offshore lease blocks at federal auctions and have
negotiated drilling rights on other blocks. Making extensive use of 3-
D seismic imaging technology, the joint ventures successfully
completed six of the nine exploratory wells drilled as of Dec. 31,
1996. Three wells began producing in 1996, but one has since been
abandoned. In early 1997, the other three successful exploratory wells
b e g a n producing and two additional wells were drilled, one
successfully. TECO Oil & Gas s share of 1996 production was two Bcf.
The company expects to invest $25 to $30 million per year for the next
few years for exploration and production. Sales of gas are at spot
prices.
In 1997, TECO Oil & Gas began an on-shore exploration program in
the Permian Basin area of west Texas using 3-D seismic imaging
technology. In this venture, TECO Oil & Gas will hold a 65-percent
working interest and be the operator.
TeCom
TeCom, formed in 1994, is marketing advanced energy management,
a u tomation and control systems for residential and commercial
applications, called the InterLane system. TeCom had 31 employees as
o f Dec. 31, 1996. Several utilities are engaged in projects
demonstrating and testing the InterLane product.
13
Because of a continued high level of product enhancement
activity, TeCom capitalized $4.9 million pretax of product development
costs in 1996. The product development costs capitalized in 1996 and
those to be capitalized in 1997 are expected to be amortized starting
in 1998 when TeCom anticipates its products will be available for
general distribution.
Bosek, Gibson and Associates
I n November 1996 TECO Energy acquired Bosek, Gibson and
Associates, Inc. (BGA), an engineering energy services company, for
about $3 million in common stock in a merger accounted for as a
purchase transaction. BGA, headquartered in Tampa, has seven offices
in Florida and two in California, and had 93 employees as of Dec. 31,
1996.
It provides design, engineering and construction services to more
than 300 customers, including public schools, universities, health
care facilities and other governmental facilities throughout Florida
and California.
Merger of TECO Energy and Lykes Energy, Inc.
In November 1996, TECO Energy announced an agreement with Lykes
Energy, Inc. (Lykes Energy) to merge that company into TECO Energy in
a tax-free, stock-for-stock transaction with an equity value of $300
million. The number of TECO Energy shares to be issued will depend on
the average market price during a specified period prior to the
closing, subject to a collar. Based on TECO Energy s common stock
closing price of $24.375 on Feb. 28, 1997, approximately 12.3 million
shares would be issued, representing about a 10 percent increase in
shares outstanding.
This merger, to be accounted for as a pooling of interests, was
approved by both companies boards of directors and in December by the
Lykes Energy shareholders. Approval by TECO Energy s shareholders is
not required.
The principal subsidiary of Lykes Energy is Peoples Gas System
(PGS), a regulated retail natural gas distributor in Florida. PGS is
Florida s largest natural gas distribution company with retail
operations in all of the state s major metropolitan communities and
over 200,000 customers. It recorded annual sales of 86 Bcf of natural
gas in fiscal 1996. It will be merged into Tampa Electric but will be
operated as a separate business unit.
Also continuing operations as separate businesses will be Peoples
Gas Company, a propane business, and another unit involved in natural
gas marketing.
TECO Energy expects some cost savings and efficiencies as a
result of the merger. Savings are mainly expected to be derived from
the elimination of duplicative overhead and administrative activities,
improved operating efficiencies and lower interest costs. In addition,
TECO Energy expects to benefit from expanding energy demand in areas
already served by these businesses and from opportunities to secure
new customers in other areas.
The merger is subject to certain closing conditions with closing
expected by mid-year 1997.
Item 2. PROPERTIES.
TECO Energy believes that the physical properties of its
operating companies are adequate to carry on their businesses as
currently conducted. The properties of Tampa Electric and the
subsidiaries of TECO Power Services are generally subject to liens
securing long-term debt.
14
TAMPA ELECTRIC
At Dec. 31, 1996, Tampa Electric had five electric generating
plants and four combustion turbine units in service with a total net
winter generating capability of 3,650 MWs, including Big Bend (1,745-
MW capability from four coal units), Gannon (1,205-MW capability from
six coal units), Hookers Point (212-MW capability from five oil
units), Phillips (34-MW capability from two diesel units), Polk (250-
MW capability from one integrated gasification combined cycle unit
(IGCC)) and four combustion turbine units located at the Big Bend and
Gannon stations (204 MWs). The capability indicated represents the
demonstrable dependable load carrying abilities of the generating
units during winter peak periods as proven under actual operating
conditions. Units at Hookers Point went into service from 1948 to
1955, at Gannon from 1957 to 1967, and at Big Bend from 1970 to 1985.
The Polk IGCC unit began commercial operation in September 1996. In
1991, Tampa Electric purchased two power plants (Dinner Lake and
Phillips) from the Sebring Utilities Commission (Sebring). Dinner Lake
(11-MW capability from one natural gas unit) and Phillips were placed
in service by Sebring in 1966 and 1983, respectively. In March 1994,
Dinner Lake Station was placed on long-term reserve standby.
T a m pa Electric owns 180 substations having an aggregate
transformer capacity of 16,235,857 KVA. The transmission system
c o n s ists of approximately 1,208 pole miles of high voltage
transmission lines, and the distribution system consists of 6,866 pole
miles of overhead lines and 2,538 trench miles of underground lines.
As of Dec. 31, 1996, there were 513,117 meters in service. All of this
property is located in Florida.
All plants and important fixed assets are held in fee except that
title to some of the properties are subject to easements, leases,
contracts, covenants and similar encumbrances and minor defects, of a
nature common to properties of the size and character of those of
Tampa Electric.
Tampa Electric has easements for rights-of-way adequate for the
m a i ntenance and operation of its electrical transmission and
distribution lines that are not constructed upon public highways,
roads and streets. It has the power of eminent domain under Florida
law for the acquisition of any such rights-of-way for the operation of
transmission and distribution lines. Transmission and distribution
lines located in public ways are maintained under franchises or
permits.
Tampa Electric has a long-term lease for its office building in
downtown Tampa that serves as headquarters for TECO Energy, Tampa
Electric and certain other TECO Energy subsidiaries.
TECO COAL
TECO Coal, through its subsidiaries, controls over 100,000 acres
of coal reserves and mining property in Kentucky and Tennessee.
Pike-Letcher controls in excess of 43,000 acres in Pike and
Letcher Counties, Kentucky. These properties contain estimated proven
and probable reserves in excess of 110 million tons.
Premier owns and operates a preparation plant and unit-train
loadout facility in Pike County, Kentucky and conducts surface and
deep mining operations of reserves which are leased from Pike-Letcher.
Premier does not own any coal reserves.
Clintwood has 25,000 acres of coal reserves held under long-term
leases in Pike County, Kentucky. These properties contain estimated
proven and probable reserves of 30 million tons. Clintwood owns and
operates a rail tipple and a coal preparation plant near the mines.
Gatliff has 65,000 acres of coal reserves and mining property in
Knox and Whitley Counties, Kentucky and Campbell County, Tennessee.
Gatliff owns 9,300 acres in fee and leases 55,700 acres under
15
long-term leases. These properties contain estimated proven and
probable coal reserves of 15 million tons. This coal, which combines
low-sulfur and low-ash fusion temperature characteristics, is found in
both deep and surface mines. Gatliff owns and operates a rapid-loading
rail tipple and a coal preparation plant near its deep mines. In 1996,
TECO Coal closed certain of its older Gatliff mines.
Rich Mountain operates a surface mine for Gatliff in Campbell
County, Tennessee, and does not own any coal reserves.
TECO COALBED METHANE
TECO Coalbed Methane's interest in proven gas reserves at Dec.
31, 1996 was independently estimated to be 190.5 billion cubic feet
for 657 wells.
TECO Coalbed Methane's share of gas production for 1996 was
19.8 billion cubic feet.
TECO TRANSPORT
Electro-Coal's storage and transfer terminal is on a 1,070-acre
site fronting on the Mississippi River, approximately 40 miles south
of New Orleans. Electro-Coal owns 342 of these acres in fee, with the
remainder held under long-term leases.
Mid-South operates a fleet of 15 towboats and 578 river barges,
nearly all of which it owns, on the Mississippi, Ohio and Illinois
rivers. Mid-South owns 15 acres of land fronting on the Ohio River at
Metropolis, Illinois on which its operating offices, warehouse and
repair facilities are located. Fleeting and repair services for its
barges and those of other barge lines are performed at this location
and on the upper Mississippi River near the mouth of the Kaskaskia
River.
At Dec. 31, 1996, Gulfcoast owned and operated a fleet of 11
ocean-going tug/barge units and a 30,000 ton ocean-going ship, with a
combined cargo capacity of over 372,000 tons. An additional tug/barge
unit was chartered in early 1997.
TECO POWER SERVICES
Hardee Power has a 22-year lease for approximately 1,300 acres of
land in Hardee and Polk Counties, Florida on which the Hardee Power
Station is located.
In addition, a TECO Power Services' subsidiary had a 98.15-
percent ownership interest in a project entity, TCAE, which owns 7
acres in Guatemala on which the Alborada Power Station is located.
TECO OIL & GAS
TECO Oil & Gas had 37 federal off-shore leases at Dec. 31, 1996
and, in early 1997, was the successful bidder for five additional off-
shore leases. It has six successful off-shore wells. Net proven
reserves at Dec. 31, 1996 were 11.0 billion cubic feet from two wells.
TeCom
In 1996, TeCom was issued its first patent covering the system
design concept for the InterLane products; other patent applications
are pending.
16
Item 3. LEGAL PROCEEDINGS.
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted during the fourth quarter of 1996 to a
vote of TECO Energy's security holders, through the solicitation of
proxies or otherwise.
17
EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the current executive officers of TECO Energy
is as follows:
Current Positions and Principal
Name Age Occupations During Last Five Years
Timothy L. Guzzle 60 Chairman of the Board and Chief
Executive Officer, July 1994 to
date; and prior thereto, Chairman
of the Board, President and Chief
Executive Officer.
Girard F. Anderson 65 President and Chief Operating
Officer, July 1994 to date; and
prior thereto, Executive Vice
President-Utility Operations and
P r esident and Chief Operating
Officer of Tampa Electric Company.
Keith S. Surgenor 49 President and Chief Operating
Officer of Tampa Electric Company,
July 1995 to date; Vice President-
Human Resources, and President and
Chief Operating Officer of Tampa
Electric Company, July 1994 to
July 1995; and prior thereto, Vice
President-Human Resources.
Roger H. Kessel 60 Senior Vice President-General
Counsel and Secretary, April 1995
to date; and prior thereto, Vice
President-General Counsel and
Secretary.
Alan D. Oak 50 Senior Vice President-Finance and
Chief Financial Officer, April
1995 to date; and prior thereto,
Senior Vice President-Finance,
T r easurer and Chief Financial
Officer.
Roger A. Dunn 54 Vice President-Human Resources,
July 1995 to date; and prior
thereto, Senior Vice President-
H u man Resources and Corporate
Affairs of LTV Corporation (steel
manufacturer), Cleveland, Ohio.
__________________________
There is no family relationship between any of the persons named
above. The term of office of each officer extends to the meeting of
t h e Board of Directors following the next annual meeting of
shareholders, scheduled to be held on April 16, 1997, and until his
successor is elected and qualified.
18
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The following table shows the composite high, low and closing
sale prices for shares of TECO Energy common stock, which is listed on
the New York Stock Exchange, and dividends paid per share, per
quarter.
1st 2nd 3rd 4th
1996
High $27 $25 1/4 $25 1/4 $25 3/8
Low $23 3/4 $23 $23 $23 1/4
Close $24 7/8 $25 1/4 $23 3/4 $24 1/8
Dividend $.265 $.28 $.28 $.28
1995
High $22 1/8 $22 3/4 $23 1/2 $25 3/4
Low $20 $20 1/2 $21 1/4 $23 1/8
Close $21 $22 $23 1/2 $25 5/8
Dividend $.2525 $.265 $.265 $.265
___________________
The approximate number of shareholders of record of common stock
of TECO Energy as of Feb. 28, 1997 was 30,047.
TECO Energy's primary source of funds is dividends from its
operating companies. Tampa Electric's Restated Articles of
Incorporation and certain of the supplemental indentures relating to
different series of its First Mortgage Bonds contain restrictions as
to the payment of dividends on the common stock of Tampa Electric and
as to the purchase or retirement of capital stock of Tampa Electric.
Substantially all of Tampa Electric's retained earnings were available
for dividends throughout 1996.
Recent Sales of Unregistered Securities
On Nov. 27, 1996, TECO Energy issued 119,231 shares of its common
stock (the Shares) in connection with its acquisition of Bosek, Gibson
and Associates, Inc. (BGA) pursuant to the Agreement and Plan of
Merger dated as of Nov. 27, 1996 (the Merger Agreement) among TECO
Energy, a wholly owned subsidiary of TECO Energy, BGA and the
shareholders of BGA. Under the Merger Agreement, TECO Energy s wholly
owned subsidiary merged into BGA and as a result all of the
outstanding capital stock of BGA was exchanged for the Shares. The BGA
stock was held by eleven individuals, each of whom was active in the
business of BGA.
The Shares were issued without registration under the Securities
Act of 1933, as amended, in reliance upon the exemption provided in
Section 4(2) thereof. Reliance upon this exemption was based upon the
nature of the transaction, the number of shareholders of BGA, their
relationship to BGA and investment representations made by each.
19
Item 6. SELECTED FINANCIAL DATA.(6)
Year ended Dec. 31, 1996 1995 1994 1993 1992
Revenues(1)(2) $1,473.0 $1,392.3 $ 1,350.9 $1,283.9 $ 1,183.2
Income before
cumulative effect of change in
accounting
principle(1) $ 200.7 $ 186.1 $ 153.2(5) $ 150.3 $ 149.0
Cumulative effect
of change in
accounting
principle(1) -- -- -- 11.2 --
Net income(1) $ 200.7 $ 186.1 $ 153.2(5) $ 161.5 $ 149.0
Earnings per averageshare outstanding:
Before cumulative
effect of change
in accounting
principle(3) $ 1.71 $ 1.60 $ 1.32(5) $ 1.30 $ 1.30
Cumulative effect
of change in
accounting
principle(3) -- -- -- .10 --
Earnings per average
common share
outstanding(3) $ 1.71 $ 1.60 $ 1.32(5) $ 1.40 $ 1.30
Common dividends
paid per share(3) $ 1.105 $ 1.0475 $ .9975 $ .9475 $ .8975
Total assets (1)(4) $3,560.7 $3,473.4 $3,312.2 $3,123.3 $3,020.6
Long-term debt(1)(4) $ 996.3 $ 994.9 $1,023.9 $1,038.8 $1,044.9
_________________
(1) Millions of dollars.
(2) Amounts shown in 1996 and 1995 are after deferred revenues of $34.2
million and $50.8 million, respectively, in accordance with the FPSC-
approved plans described in the Utility Regulation section on pages 33
through 35.
(3) Restated to reflect a two-for-one stock split on Aug. 30, 1993.
(4) The total asset and long-term debt balances for 1993 and 1992 have
been restated to reflect the current year presentation.
(5) Includes the effect of a corporate restructuring charge which reduced
net income by $15 million and earnings per share by $.13. See Note H
on page 57.
(6) See the discussion of the pending merger between TECO Energy and Lykes
Energy, Inc. on pages 30 and 31.
20
Item 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
This Management s Discussion and Analysis contains forward-looking
statements. These forward-looking statements are subject to the
inherent uncertainties in predicting future results and conditions.
Certain factors that could cause actual results to differ materially
from those projected in these forward-looking statements are set forth
below in the Investment Considerations section.
EARNINGS SUMMARY
TECO Energy achieved earnings of $1.71 per share in 1996 compared
to $1.60 in 1995, a 6.9 percent increase. These 1996 results were
achieved after the deferral of $34.2 million of revenues at Tampa
Electric under agreements approved by the Florida Public Service
Commission (FPSC) described in the Utility Regulation section. Results
in 1995 reflect the deferral of $50.8 million of revenues at Tampa
Electric under the 1995 agreement approved by the FPSC described in
the Utility Regulation section. Earnings in 1994 were $1.32 after a
13-cent charge for corporate restructuring which included a reduction
in staffing levels and other cost reductions, primarily at Tampa
Electric.
Earnings growth in 1996 and 1995 was driven by strong performance
at the diversified companies as well as continued growth in energy
sales, lower operations and maintenance expenses, and higher levels of
capitalized financing costs (AFUDC), primarily associated with the
investment in the Polk Power Station at Tampa Electric.
Earnings Per Share 1996 Change 1995 Change 1994
Earnings per share $ 1.71 6.9% $ 1.60 21.2% $ 1.32
Restructuring charge - - - - .13
Earnings per share before
restructuring charge $ 1.71 6.9% $ 1.60 10.3% $ 1.45(1)
Earnings per share:
Tampa Electric $ 1.19 6.3% $ 1.12 8.7% $ 1.03(1)
Diversified companies
and other .52 8.3% .48 14.3% .42(1)
Total earnings per share $ 1.71 6.9% $ 1.60 10.3% $ 1.45(1)
Net Income $200.7 7.8% $186.1 21.5% $153.2
Net income before
restructuring charge
(millions) $200.7 7.8% $186.1 10.4% $168.6(1)
Average common
shares outstanding
(millions) 117.2 .6% 116.5 .5% 115.9
Return on average
common equity 15.6% 15.5% 14.8%(1)
(1) Excludes the effect of the corporate restructuring charge.
21
OPERATING RESULTS
TECO Energy's Operating Results
Operating income growth in 1996 reflected strong performance by
the diversified companies, particularly TECO Coalbed Methane and TECO
Power Services, and continued growth at Tampa Electric. Consolidated
operating income rose in 1996 despite the deferral of $34.2 million of
revenues at Tampa Electric under agreements approved by the FPSC
described in the Utility Regulation section. Higher consolidated
operating income in 1995 was the result of the strong performance of
the diversified companies, particularly TECO Transport & Trade, and
growth at Tampa Electric. The improved 1995 results were achieved even
after the deferral of $50.8 million of revenues at Tampa Electric
under the agreement approved by the FPSC described in the Utility
Regulation section.
The following table identifies the unconsolidated revenues and
operating income of the significant operating groups.
Contributions by operating group (unconsolidated)
Revenues 1996 Change 1995 Change 1994
(millions)
Tampa Electric $1,112.9(1) 1.9% $1,092.3(1) -.2% $1,094.9
Diversified
companies $ 562.5 11.2% $ 505.7 7.4% $ 470.9
Operating income
(millions)
Tampa Electric $ 244.0 6.3% $ 229.5 1.6% $ 225.8(3)
Diversified(2)
companies $ 106.5 12.5% $ 94.7 33.2% $ 71.1(3)
(1) 1996 and 1995 Tampa Electric revenues were net of $34.2 and $50.8
million of revenues, respectively, deferred under agreements described
in the Utility Regulation section.
(2) Operating income includes items which are reclassified for
consolidated financial statement purposes. The principal items are the
n o n -conventional fuels tax credit related to coalbed methane
production and interest expense on the non-recourse debt related to
the independent power operations. In the Consolidated Statements of
Income, the tax credit is part of the provision for income taxes and
the interest is part of interest expense. Certain 1995 amounts have
been restated to conform to current year presentation.
(3) Excludes the effects of a 1994 corporate restructuring which
reduced operating income $ 21.3 million at Tampa Electric and $2.5
million at the diversified companies.
Tampa Electric's Operating Results
Tampa Electric's 1996 operating income increased more than six
percent after the deferral of $34.2 million of revenues under the
agreements described in the Utility Regulation section. Two-percent
customer growth and colder than normal weather early in the year
contributed to five percent higher total energy sales. Non-fuel
operations and maintenance expenses were one percent below 1995
levels, despite a full quarter of operations of the Polk Power
Station, reflecting the continued focus on aggressive cost management
throughout the company. Tampa Electric s operating income also
increased because of the inclusion of the Polk Power Station in rate
base for earnings purposes upon commencement of commercial operation
late in the third quarter.
22
In 1996 Tampa Electric successfully completed the construction of
the 250-megawatt, state-of-the-art, clean-coal technology Polk Power
Station. The addition of this facility will cause an increase in Tampa
Electric s 1997 operating expenses. However, during the first two
years of operations the U. S. Department of Energy (DOE) will provide
funding that will offset a portion of the non-fuel operations and
maintenance expenses associated with the facility. Agreements approved
by the FPSC allowing full recovery of capital costs and operations and
maintenance expenses associated with the plant described in the
Utility Regulation section, are in place.
Tampa Electric's 1995 operating income increased two percent over
1994 s. Higher base revenues from retail customer growth, favorable
weather and an improved economy together with lower operating expenses
contributed to the improved results after the deferral of $50.8
million of revenues.
Tampa Electric Results 1996 Change 1995 Change 1994
(millions)
Revenues $1,112.9(1) 1.9% $1,092.3(1) -.2% $1,094.9
Operating expenses 868.9 .7% 862.8 -3.1% 890.4
Operating income 244.0 6.3% 229.5 12.2% 204.5
Restructuring charge
(included in operating
expenses above) -- -- -- -- 21.3
Operating income before
restructuring charge $ 244.0 6.3% $ 229.5 1.6% $ 225.8
(1) 1996 and 1995 Tampa Electric revenues are net of $34.2 million and
$50.8 million, respectively, of revenues deferred under agreements as
described in the Utility Regulation section.
Tampa Electric's Operating Revenues
Tampa Electric s 1996 revenues increased almost two percent to $1.1
billion, after the deferral of $34.2 million of revenues, reflecting
customer growth of more than two percent and increased retail energy
usage. Tampa Electric's 1995 revenues decreased slightly as the
deferral of $50.8 million of revenues offset increased energy sales.
The economy in Tampa Electric's service area continued to grow in
1996 due to increased employment from corporate relocations and
expansions. Combined residential and commercial energy sales grew by
more than three percent in 1996. Non-phosphate industrial sales
declined in 1996 due to the closure of a brewery at the end of 1995.
Sales to the phosphate industry decreased in 1996 reflecting the
closure of some depleted phosphate mines and reduced production at
several processing plants. Energy sales to the phosphate industry are
expected to increase in 1997 over 1996 levels from increased
production to meet continued strong domestic and international demand
for phosphate products. After 1997 sales are expected to decline
slowly as mining activity migrates out of Tampa Electric's service
area. In 1996 sales to the phosphate customer group represented about
five percent of total operating revenues.
23
In May IMC-Agrico, a large phosphate producer representing four
percent of 1996 revenues, issued a request for proposals (RFP) for
electric power to serve load currently served by Tampa Electric and
others. Some portions of the services identified in the RFP are not
permitted under current Florida laws and utility regulation. Tampa
Electric has made load-retention proposals that it believes to be
competitively priced and attractive because of the flexibility
offered, and continues to have discussions with IMC-Agrico. While it
is unclear how this process will develop, the ultimate impact on Tampa
Electric is not expected to be material. For a general description of
competition see the Utility Competition section.
Tampa Electric s and independent forecasts indicate that in 1997
the Tampa Electric service area economy is expected to grow moderately
at rates higher than the country as a whole. The local economy
continues to benefit from a good labor market, available land, good
access through airport and port facilities and aggressive economic
development activities by the communities served by Tampa Electric.
Based on the expected continued growth of the local economy with
both population and business activity increases, Tampa Electric
projects retail energy sales growth of more than two percent annually
for the next five years. This forecast includes combined energy sales
growth in the residential and commercial sectors of almost three
percent annually as the Tampa Electric service area economy becomes
more service oriented. Growth in energy sales to non-phosphate
industrial customers is expected in 1997 after the 1996 decline.
Non-fuel revenues from sales to other utilities were $36 million in
1996, $34 million in 1995 and $33 million in 1994. Energy sold to
other utilities increased in 1996 due to weather-related demand and
lower Tampa Electric fuel costs. A shift from broker system economy
sales to longer-term, higher-margin wholesale power sales resulted in
a seven percent increase in revenues in 1996. In 1995 energy sold to
o t h e r utilities increased because of higher generating unit
availability and lower fuel costs at Tampa Electric.
Signing additional longer-term wholesale power sales agreements
remains a priority at Tampa Electric, where in recent years 11 bulk
power sales contracts of varying size and duration have been added.
Competitive pricing of coal-fired generation has allowed Tampa
Electric to market available capacity successfully.
Tampa Electric Megawatt-Hour Sales:
1996 Change 1995 Change 1994
(thousands)
Residential 6,607 4.0% 6,352 6.8% 5,947
Commercial 4,815 2.2% 4,710 2.8% 4,583
Industrial 2,304 -2.4% 2,362 3.7% 2,278
Other 1,203 2.3% 1,176 4.6% 1,124
Total retail 14,929 2.3% 14,600 4.8% 13,932
Sales for resale 3,241 19.8% 2,706 28.7% 2,102
Total energy sold 18,170 5.0% 17,306 7.9% 16,034
Retail customers 506.0 2.2% 495.2 2.0% 485.7
(average)
24
Tampa Electric's Operating Expenses
Effective cost management and improved efficiency continue to be
principal objectives at Tampa Electric. Non-fuel operations and
maintenance expenses declined in 1996 from the continuing focus on
managing costs in all areas of the company and the restructuring
actions taken in 1994.
Operating Expenses:
1996 Change 1995 Change 1994
(millions)
Other operating expenses $164.1 .5% $163.3 -4.8% $171.6
Maintenance 65.5 -5.9% 69.6 -4.5% 72.9
Depreciation 120.2 6.1% 113.3 -1.6% 115.1
Taxes, other than income 87.0 -1.0% 87.9 1.3% 86.8
Operating expenses 436.8 .6% 434.1 -2.8% 446.4
Restructuring charge - - -. - 21.3
Fuel 383.1 -.3% 384.3 -1.3% 389.3
Purchased power 49.0 10.4% 44.4 32.9% 33.4
Total fuel cost 432.1 .8% 428.7 1.4% 422.7
Total operating expenses $868.9 .7% $862.8 -3.1% $890.4
A g g ressive cost management reduced non-fuel operations and
maintenance expenses more than one percent in 1996, despite the
additional expenses related to the operation of the Polk Power
Station. In 1995 non-fuel operations and maintenance expenses declined
almost five percent from 1994 levels before the restructuring charge.
The $11.6-million reduction in 1995 was primarily from lower payroll
and employee-related expenses as a result of 217 fewer positions than
in 1994.
In both 1996 and 1995 Tampa Electric achieved lower costs from
equipment redesign and enhancements, work redesign efforts including
the streamlining of maintenance programs, the sharing of manpower
r e sources in power generation facilities and the use of new
technologies throughout the company.
In 1996 the savings realized from these efforts more than offset
increased operations and maintenance expenses from the Polk Power
Station. Over the next several years, non-fuel operations and
maintenance expenses are expected to remain at 1996 levels.
During the first two years of operations, when specified domestic
coals will be evaluated for use in the gasifier, Tampa Electric will
receive up to a total of $20 million from DOE for operations and
maintenance expenses of the Polk Power Station. Based on current
forecasts this funding is expected to offset a significant portion of
the non-fuel operating costs of the new plant during this period.
Total operating expenses in 1994 included the $21.3 million
restructuring charge discussed in the Earnings Summary section and the
first annual $4.0-million charge to a transmission and distribution
property storm-damage reserve in accordance with regulatory directives
described in the Utility Regulation section.
Depreciation expense increased $6.9 million in 1996 from normal
plant additions and the completion of the Polk Power Station.
Depreciation expense in 1995 decreased as certain shorter-lived assets
were fully amortized. This decrease more than offset the impact of
normal additions to plant and equipment. Tampa Electric s efforts to
reduce capital investment in recent years have limited additions to
all asset classes. Depreciation expense is projected to increase again
in 1997 as a result of a full year of depreciation of the Polk Power
Station.
Changes in taxes other than those on income reflected increased
state gross receipts taxes and franchise fees associated with higher
25
energy sales, changes in property values and decreases in payroll
related taxes as a result of the 1994 restructuring. Taxes other than
those on income are expected to increase in 1997 as a result of the
property taxes associated with the Polk Power Station.
Total system fuel cost in 1996 was less than one percent higher
than in 1995 despite a five-percent increase in total energy sales.
The success in controlling fuel cost is a result of Tampa Electric's
use of lower-priced coals and the mix in operating generating units.
Average coal costs, on a cents-per-million BTU basis, declined more
than six percent in 1996 after a three-percent decrease in 1995. Fuel
and purchased power cost rose one percent in 1995 despite a five-
percent rise in retail energy sales.
Tampa Electric purchased more power in both 1996 and 1995 primarily
to meet weather-related demand. Substantially all fuel and purchased
power expenses were recovered through the fuel adjustment clause.
Nearly all of Tampa Electric's generation in the last three years
has been from coal, and the fuel mix will continue to be substantially
coal. External forecasts indicate relatively stable coal prices during
the next few years compared to oil or gas prices. Tampa Electric
continues to work to reduce its fuel cost through effective contract
management, use of non-traditional fuels such as petroleum coke and
tire-derived fuel, and increased purchases of coal in the lower-cost
spot market.
Diversified Companies' Operating Results
The diversified companies achieved operating income of $106.5
million in 1996 compared with $94.7 million in 1995 and $71.1 million
in 1994 before the restructuring charge.
The improved results in 1996 were driven by higher gas prices
throughout the year at TECO Coalbed Methane as well as TECO Power
Services full year of operations at the Alborada Power Station in
Guatemala. The increase in 1995 was the result of strong performances
at all of the diversified companies, led by TECO Transport & Trade.
Increased third-party sales at TECO Coal and TECO Power Services
Guatemalan power project were other important contributors.
Diversified Companies Results (unconsolidated)
1996 Change 1995(2) Change 1994
(millions)
Revenues $562.5 11.2% $505.7 7.4% $470.9
Operating expenses 456.0 10.9% 411.0 2.2% 402.3
Operating income (1) 106.5 12.5% 94.7 38.0% 68.6
Restructuring charge
(included in operating
expenses above) - - - - 2.5
Operating income before
restructuring charge(1) $106.5 12.5% $ 94.7 33.2% $ 71.1
26
(1) Operating income includes items which are reclassified for
consolidated financial statement purposes. The principal items are the
n o n -conventional fuels tax credit related to coalbed methane
production and interest expense on the non-recourse debt related to
independent power operations, both of which are included in operating
income for the diversified companies. In the Consolidated Statements
of Income the tax credit is part of the provision for income taxes and
the interest is part of interest expense.
(2) Certain 1995 amounts have been restated to conform to the current
year presentation.
TECO Coalbed Methane's 1996 operating income increased as a result
of average gas prices almost 60 percent higher than 1995 levels. Gas
prices rose in 1996 on extreme winter weather and lower than normal
levels of natural gas inventories at the end of the 1995/1996 heating
season. Production declined slightly to 19.8 billion cubic feet (Bcf)
from 20.3 Bcf in 1995.
TECO Coalbed Methane has an active program of reworking and
enhancing existing wells to increase production, extend the life of
the wells, and add to reserves. These efforts have reduced the decline
in production to about three percent per year, half of the originally
estimated rate of decline. At year-end 1996 proven reserves were
estimated to be 190 Bcf.
In 1995 operating income increased, despite gas prices that were
significantly lower than in 1994, as production rose to 20.3 Bcf, up
from 19.5 Bcf in 1994. Lower 1995 gas prices were more than offset by
a five-percent increase in production, a 10-percent reduction in
operating costs, and a $4.4-million pretax settlement related to the
termination of a gas sales contract and related agreements.
In both 1994 and 1995 TECO Coalbed Methane acquired interests in
additional reserves in Alabama s Black Warrior Basin through the
purchase of royalty interests in wells located on or near TECO Coalbed
Methane's existing holdings. The company continually seeks additional
investment opportunities to add to its holdings, but no acquisitions
were made in 1996.
Production from TECO Coalbed Methane s reserves are eligible for
non-conventional fuels tax credits under Section 29 of the Internal
Revenue Code through the year 2002. The credit, which grows with
inflation, was estimated at $1.02 per thousand cubic feet (Mcf) in
1996.
All gas produced is sold under contract at spot market prices for
the life of the reserves. Natural gas prices have been subject to
significant volatility since late 1994, but have generally trended
upward. The Section 29 tax credits provide some degree of stability to
TECO Coalbed Methane s operating results. To date, financial market
instruments have not been used to manage exposure to gas price
volatility.
TECO Power Services achieved higher operating income in 1996 from a
full year of operation of the Alborada Power Station in Guatemala. The
Station commenced commercial operation and began contributing to
earnings in September 1995.
The station supplies 78 megawatts of power to a local distribution
utility under a 15-year power sales agreement. Early in 1996 TECO
Power Service increased its percentage of ownership from 87 percent to
98 percent. The $29-million non-recourse project debt financing for
the project was completed in January 1997.
27
In 1996 TECO Power Services formed a partnership with the same
Guatemalan business interest it partnered with for the Alborada Power
Station and with Coastal Corporation to build, own and operate a 120-
megawatt pulverized coal-fired power plant, the San Jose Power Station
in Guatemala. The partnership signed a 15-year power supply agreement
with the same Guatemalan distribution utility.
Design and engineering for the $175 million plant are underway and
construction is scheduled to be completed by mid-1999.
TECO Power Services domestic project, the Hardee Power Station in
west central Florida, continues to operate reliably, supplying power
to Seminole Electric Cooperative and Tampa Electric.
TECO Transport & Trade achieved higher operating income in 1996 in
both the ocean-going business and at the transfer terminal. The river
business benefited from strong demand and increased northbound
business, but higher fuel prices more than offset the higher revenues.
The addition of 48 new barges increased the fleet size to almost 600
barges.
The ocean-shipping business increased its capacity, adding a 30,000
ton ship in mid-year. It moved higher volumes of coal to Tampa
Electric and phosphate. The effects of this growth were partially
offset by higher costs from severe weather delays and fuel. The
transfer terminal handled slightly lower quantities of export coal as
a result of changes in shipping rates for international coal shipments
between the Far East and Europe. This impact was more than offset by
improved pricing on the coal moved for export and increased tonnage of
coal transferred for Tampa Electric.
The ocean-shipping business expects to benefit from the continued
strong demand for phosphate products world-wide, and from further
diversification into new markets and cargoes in 1997. The significant
factors which could influence results are weather, commodity grain
prices and economic activity both domestically and overseas.
The conditions affecting favorable pricing and strong demand at the
river company in 1995 returned to normal in late 1996 as a result of
lower grain inventories and reduced grain shipments, partially offset
by new demand created by the steel industry. The pricing and demand
conditions experienced on the Mississippi River in late 1996 are
expected to continue in 1997. Transfers of export coal are expected to
i n crease in 1997 from increased shipments of U. S. coal to
international markets.
TECO Transport & Trade s operating income increased significantly
in 1995 reflecting improved results in all of its businesses. The
river business in particular had an excellent year as a result of
higher volumes and prices. Improved fleet utilization and increased
levels of northbound shipments contributed to increased volumes. A
strong demand for northbound movements and a record 1994 grain harvest
together with a better balance in the supply and demand for barges
caused stronger prices throughout the industry. The transfer facility
at the mouth of the Mississippi River handled more coal tonnage for
Tampa Electric and third-party export business. The ocean shipping
business benefited from increased shipments of phosphate and higher
shipments of coal to Tampa Electric in 1995.
TECO Coal s 1996 operating income was lower primarily due to a
$5.2-million pretax gain from a road condemnation settlement in 1995.
In 1996 the effects of strong growth in third-party sales and some
improvement in prices for coal from the newer Premier mines were more
than offset by higher production costs, lower shipments to Tampa
Electric and $1.5 million of pretax expenses related to closing
certain older Gatliff mines.
Success in burning more conventional and lower-cost steam coals has
enabled Tampa Electric to adopt a competitive strategy of phasing down
coal shipments from TECO Coal for the last several years. Shipments to
Tampa Electric declined by about 20 percent in both 1995 and 1996.
Because of this decrease and high production costs, Gatliff closed
28
several mines in 1996. Shipments to Tampa Electric are expected to
decline by 17 percent in 1997.
Shipments to other customers continued to increase in 1996 with
total tonnage up more than 11 percent to 5.9 million tons, compared to
5.3 million tons in 1995 and 4.9 million tons in 1994. Growth from
sales of steam coal to other utilities and metallurgical and stoker
coal to industrial customers, more than offset reduced tonnage to
Tampa Electric.
I n September 1996 TECO Coal acquired 25 million tons of
metallurgical grade coal reserves contiguous to its existing Clintwood
operations, and began construction of a new preparation plant. This
facility will support an additional 1 million tons of annual
production when it goes in service in mid-1997. Metallurgical coal has
unique characteristics and is sold primarily to the steel industry
both domestically and internationally. TECO Coal expects to use the
additional production to increase its share in this market segment.
TECO Coal expects sales to third parties to increase again in 1997
as eastern utilities meet increasing demand for electric power with
existing coal-fired generating capacity and use low-sulfur coal to
comply with the Clean Air Act Amendments.
Substantially all of the production from the Premier mines is
committed through 1997. Shipments from the Premier mines and the
Clintwood expansion are expected to more than offset the impact of
reduced tonnage to Tampa Electric in 1997.
TECO Oil & Gas was formed in 1995 to participate in joint ventures
in the exploration and development of oil and gas in the shallow gulf
waters off Texas and Louisiana. TECO Oil & Gas made significant
progress in 1996 and operated at almost break-even in its first full
year of operation. TECO Oil & Gas accounts for its operations on the
successful efforts basis, expensing unsuccessful exploratory wells
currently.
Making extensive use of 3-D seismic imaging technology the joint
ventures successfully completed six of nine exploratory wells in 1996.
Three wells began producing in 1996, but one has since been abandoned.
The other three successful exploratory wells began producing early in
1997. Also in early 1997, two additional wells were drilled, one
successfully. TECO Oil & Gas s share of 1996 production was two Bcf
and its net proven reserves at Dec. 31, 1996 were 11 Bcf from two
wells. Based on current production rates and test results, TECO Oil &
Gas s share of 1997 production is expected to exceed 10 Bcf. TECO Oil
& Gas had 37 federal off-shore leases as of Dec. 31, 1996 and, in
early 1997, was the successful bidder for five additional federal
leases.
The joint ventures expect to expand the offshore exploration
activities in 1997; a new on-shore exploration program has been
launched in the Permian Basin area of west Texas. In this venture TECO
Oil & Gas will hold an increased interest and will be the operator.
The company expects to commit $20 million to $30 million per year
during the next few years for further exploration and development.
TeCom, a subsidiary organized in 1995, is marketing an advanced
energy management, automation and control systems for residential and
commercial applications, called the InterLane system.
Several utilities are engaged in projects demonstrating the
InterLane product. In 1996 TeCom was issued its first patent covering
the system design concept for the InterLane products; other patent
applications are pending.
Because of a continued high level of product enhancement activity,
TeCom capitalized $4.9 million pretax of product development costs in
1996. In accordance with accepted accounting practices, product
development costs capitalized in 1996 and those to be capitalized in
1997 are expected to be amortized starting in 1998 when TeCom
anticipates its products will be available for general distribution.
General distribution of the product will depend on a number of factors
29
including market acceptance.
Diversified Companies' Operating Revenues
In 1996 the diversified companies achieved an 11 percent increase
in revenues. The largest increases occurred at TECO Coal from higher
sales to third parties, at TECO Coalbed Methane from higher gas
prices, and at TECO Power Services from a full year of operations at
the Alborada Power Station in Guatemala.
Diversified companies 1995 revenues also increased significantly
reflecting improved performance at all of the companies. Revenues in
1995 also included $5.8 million at TECO Coal from the sale of land and
mineral rights under a condemnation settlement with the state of
K e ntucky, and $4.4 million at TECO Coalbed Methane from the
termination of a gas sales contract.
Diversified Companies' Operating Expenses
Diversified companies operating expenses increased almost 11
percent in 1996. Difficult underground mining conditions at TECO
Coal s Gatliff mines increased costs and led to the closing of several
mines. Higher fuel prices at TECO Transport & Trade, and a full year
of operations at TECO Oil & Gas and TECO Power Services Alborada
Power Station also contributed to increased operating expenses.
Diversified companies operating expenses increased two percent in
1995. TECO Power Services incurred higher expenses because of
increased power generation at the Hardee Power Station and the new
Alborada Power Station in Guatemala.
The diversified companies recorded a charge of $2.5 million for
corporate restructuring in 1994 related to reductions in staffing
levels and other costs.
NON-OPERATING ITEMS
Other Income (Expense)
Other income consisted mostly of allowance for other funds used
during construction (AFUDC) of $16.5 million in 1996, $13.7 million in
1995, and $3.5 million in 1994. With the construction of Tampa
Electric's Polk Unit One now complete, AFUDC will decline to minimal
levels for the next several years.
Interest Charges
Interest charges were $86.9 million in 1996, up four percent from
1995 primarily due to the expiration of an interest rate swap
agreement. Interest charges in 1995 were $83.2 million, up eight
percent from 1994 due to higher short-term debt balances and rates.
Income Taxes
Income tax expense increased in 1996 and 1995 primarily from
increases in pretax income. Income tax expense as a percent of income
before taxes was 26 percent in 1996, 24 percent in 1995 and 23 percent
in 1994. Pretax income in 1994 was affected by the restructuring
charge.
Total income tax expense was reduced by the federal tax credit
related to the production of coalbed methane. These tax credits
totaled $19.6 million in 1996, $20.6 million in 1995 and $19.6 million
in 1994. The tax credit rate was estimated at $1.02 per Mcf in 1996,
up from $1.01 in 1995 and $1.00 in 1994. This rate escalates with
inflation and could be limited by domestic oil prices. In 1996
domestic oil prices would have had to exceed $46 per barrel for this
limitation to have been effective. The federal tax credit on
production of coalbed methane is available through the year 2002.
MERGER AND ACQUISITION ACTIVITIES
30
Lykes Energy Inc.:
In November TECO Energy announced an agreement with Lykes Energy
t o merge it into TECO Energy in a tax-free, stock-for-stock
transaction with an equity value of $300 million. The number of TECO
Energy shares to be issued will depend on the average market price
during a specified period prior to the closing, subject to a collar.
Based on TECO Energy s common stock closing price of $24.375 on Feb.
28, 1997, approximately 12.3 million shares would be issued,
representing about a 10 percent increase in shares outstanding.
This merger, to be accounted for as a pooling of interests, was
approved by both companies boards of directors and in December by the
Lykes Energy shareholders. Approval by TECO Energy s shareholders is
not required.
The principal subsidiary of Lykes Energy is Peoples Gas System, a
regulated retail natural gas distributor in Florida. Peoples Gas
System is Florida s largest natural gas distribution company with
retail operations in all of the state s major metropolitan communities
and over 200,000 customers. It recorded annual sales of 86 Bcf of
natural gas in fiscal 1996. It will be merged into Tampa Electric but
operated as a separate business unit.
Also continuing operations as a separate business will be Peoples
Gas Company, a propane business, and another unit involved in natural
gas marketing.
TECO Energy expects some cost savings and efficiencies as a result
of the merger. Savings are mainly expected to be derived from the
elimination of duplicative overhead and administrative activities, as
well as improved operating efficiencies and lower interest costs. In
addition, TECO Energy expects to benefit from expanding energy demand
in areas already served by these businesses and from opportunities to
secure new customers in other areas.
The merger is subject to certain closing conditions with closing
expected by mid-year 1997.
Effects of the Merger
TECO Energy anticipates that the merger with Lykes Energy will
initially be slightly dilutive to earnings with favorable future
growth prospects. The merger will further TECO Energy's strategy of
p u rsuing growth in energy-related businesses. It will provide
opportunities for growth in new energy markets by adding natural gas
and propane distribution and commodity sales to the company s existing
w h o l esale and retail electric operations and gas production
activities. Additional growth opportunities will arise from geographic
expansion beyond Tampa Electric s 2,000 square mile service area
through participation in the gas energy markets in all major
metropolitan areas of Florida. TECO Energy expects to take advantage
of possible growth opportunities by supporting a larger capital
construction program for Peoples Gas System.
The merger will also permit the company to better meet its
customers' needs through a broader range of energy services. In
particular, it will allow full service with either gas or electric
energy to wholesale customers in peninsular Florida and to retail
customers in the limited area served by both Tampa Electric and
Peoples Gas System, as well as facilitate energy services offerings
and expanded power marketing activities.
Below are certain financial highlights of Lykes Energy for its past
three fiscal years ended September 30.
31
Lykes Energy Financial Highlights
(Thousands) 1996 1995 1994
Revenues $299,585 $254,001 $267,071
Net Income $ 15,950 $ 12,754 $ 11,779
Total Assets $327,839 $312,172 $300,803
Equity $106,634 $ 95,244 $ 86,766
Natural gas sold &
transported - therms 859,799 980,992 819,634
Retail customers (average) 201 196 191
Bosek, Gibson and Associates, Inc.:
In November 1996 TECO Energy acquired Bosek, Gibson and Associates,
Inc. (BGA), an energy services company, for about $3 million in stock
in a purchase transaction. BGA is headquartered in Tampa and has seven
offices in Florida and two in California.
It provides design, engineering and construction services to more
than 300 customers, including public schools, universities, health
care facilities and other governmental facilities throughout Florida
and California.
TECO Energy s 1996 results only include the results of BGA
subsequent to the acquisition.
ACCOUNTING STANDARDS
Stock Options
In 1995 the Financial Accounting Standards Board issued FAS 123,
Accounting for Stock Options, effective for fiscal years beginning
after Dec. 15, 1995. FAS 123 encourages, but does not require,
companies to recognize compensation expense based on fair value of
grants of stock, stock options and other equity instruments to
employees. Although expense recognition for employee stock-based
compensation is not mandatory, FAS 123 requires non-adopting companies
to disclose pro forma net income and earnings per share. TECO Energy
has continued to apply the prior accounting rules, and the pro forma
adjustments to net income and earnings per share are shown in Note B
on page 51 of the Notes to Consolidated Financial Statements.
FAS 121
FAS 121, Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of (FAS 121), effective for years
beginning after Dec. 15, 1995, requires that long-lived assets and
certain intangibles to be held and used by the company be reviewed for
impairment. The company periodically assesses whether there has been a
permanent impairment of its long-lived assets, in accordance with FAS
121. No write-down of assets due to impairment was required in 1996.
CAPITAL EXPENDITURES
TECO Energy's 1996 capital expenditures of $268 million consisted
of $203 million for Tampa Electric, which included $23 million of
AFUDC, and $65 million for the diversified companies.
Tampa Electric spent $75 million in 1996 on construction of the
Polk Power Station, a 250-megawatt coal-gasification plant which
entered commercial service late in the third quarter. The capital cost
of the plant to Tampa Electric including AFUDC was $508 million, which
is net of the construction funding from the Department of Energy under
its Clean Coal Technology Program.
Tampa Electric spent an additional $105 million in 1996 for
equipment and facilities to meet its growing customer base and for
generating equipment improvements.
32
TECO Transport & Trade invested $34 million in 1996 for the
purchase of a 30,000 ton ship, 48 jumbo river barges, a program of
b a rge enlargement and refurbishment, and for normal equipment
replacement. TECO Coalbed Methane invested $4 million in 1996 for well
enhancements and normal equipment replacement. TECO Coal spent $13
million for an expansion of its Clintwood operations and new mining
equipment. TECO Power Services spent $4 million to increase its
ownership interest in the Alborada Power Station in Guatemala from 87
percent to 98 percent and for initial design work for the San Jose
Power Station in Guatemala. TECO Oil & Gas invested $13 million for
natural gas exploration and development.
TECO Energy estimates total capital expenditures for ongoing
operations to be $185 million for 1997 and $763 million during the
1998- 2001 period. Of these amounts, Tampa Electric expects to spend
$116 million in 1997 and $470 million during the 1998-2001 period,
mainly for distribution facilities to meet customer growth and
generation reliability programs. At the end of 1996, Tampa Electric
had outstanding commitments of about $7 million for capital programs.
Tampa Electric s capital expenditure projections include about $30
million over the 1997-2000 period to comply with Phase II of the Clean
Air Act as described in the Environmental Compliance section. The
level of capital expenditures which will actually be required for
compliance is uncertain at this time.
The diversified companies expect capital expenditures of about $69
million in 1997 and $293 million during the 1998-2001 period for: a
new coal preparation plant at Clintwood, other coal mining equipment
and mine development; exploration and production of oil and gas;
acquisition of river barges and ocean transportation equipment, and
normal asset replacement. At the end of 1996, $9 million had been
committed.
Included in these estimates is $34 million at TECO Power Services
for the construction of the San Jose Power Station in Guatemala over
the next three years. TECO Power Services is seeking debt financing
for the remainder of its share of the construction costs.
Capital requirements for Peoples Gas System and Peoples Gas Company
are not reflected in the above projections. In recent years, the
capital invested by these companies was about $25 million annually.
Capital expenditures are expected to be above historical levels as
opportunities to grow these business are identified. However, since
the capital investment plans for these companies are still being
developed, the actual level of investment is uncertain.
ENVIRONMENTAL COMPLIANCE
TECO Energy and its subsidiaries are subject to various
environmental regulations. TECO Energy believes that all subsidiaries
are substantially in compliance with the currently applicable
standards of the respective environmental enforcement agencies and
that potential environmental liabilities are not material.
Tampa Electric is complying with the Phase I emission limitations
imposed by the Clean Air Act Amendments which became effective Jan.
1, 1995 by using blends of lower-sulfur coal, controlling stack
emissions and owning emission allowances.
In 1995 Tampa Electric successfully integrated Big Bend Unit Three
into the existing scrubber on Big Bend Unit Four. This resulted in an
additional scrubbed unit at a fraction of the cost of a new scrubber.
Tampa Electric is currently evaluating options to comply with Phase
II sulfur dioxide emission standards set for the year 2000. The
o p tions include scrubbing additional capacity. The company is
evaluating equipment and technologies to accomplish compliance in the
most cost effective manner. Tampa Electric is also evaluating options
to comply with Phase II of the Clean Air Act Amendments for nitrogen
oxide reductions. These options include combustion modifications and
r e trofit control technology. While Tampa Electric s estimates
33
reflected in the Capital Expenditure section include up to $30 million
for compliance with Phase II of the Clean Air Act Amendments, the
actual level of required expenditures is uncertain at this time. The
cost of compliance with Phase II is expected to have little impact on
Tampa Electric's prices.
UTILITY REGULATION
Return on Equity (ROE) and Other Regulatory Agreements:
1994
In March 1994 the FPSC issued an order which changed Tampa
Electric's authorized ROE to an 11.35-percent midpoint with a range of
10.35 percent to 12.35 percent, while leaving in effect the rates it
had previously established. The FPSC also ordered a $4.0-million
annual accrual to establish an unfunded storm damage reserve for
transmission and distribution property.
In July 1994 the FPSC issued an order approving an agreement
between its staff and Tampa Electric to cap the utility s authorized
regulatory ROE at 12.45 percent for calendar year 1994 with any
earnings above that amount to be used to increase the storm damage
reserve. Tampa Electric did not exceed the 12.45-percent cap in 1994
and therefore accrued only $4.0 million to the storm damage reserve.
Rate Stabilization Strategy
Building on the 1994 approach, Tampa Electric s objective has been
to place the Polk Power Station in service without increasing the
total price for electric service while securing the opportunity to
earn a fair return. A number of actions, discussed in the Tampa
Electric Operating Expenses section, were taken to manage costs.
Another key component of the strategy to accomplish this objective has
been the deferral of certain revenues. With the agreements approved by
the FPSC in 1995 and 1996, the objectives of stabilizing prices
through 1999 and securing fair earnings opportunities during this
period were accomplished.
1995
In 1995 the FPSC approved a plan submitted by Tampa Electric to
defer certain revenues for 1995. Under this plan Tampa Electric s
allowed ROE increased to an 11.75-percent midpoint with a range of
10.75 percent to 12.75 percent. For 1995 an initial $15 million of
revenues were deferred as well as 50 percent of actual revenues in
excess of a ROE of 11.75 percent up to a net earned ROE of 12.75
percent and all actual revenues above a ROE of 12.75 percent. In 1995
Tampa Electric deferred $50.8 million of revenues under this plan. The
deferred revenues accrue interest at the 30-day commercial paper rate
specified in the Florida Administrative Code.
Also as part of this plan Tampa Electric s oil backout tariff was
eliminated Jan. 1, 1996, an annual revenue reduction of about $12
million.
1996 - 1999
In May 1996 the FPSC issued an order approving an agreement among
Tampa Electric, the Florida Office of Public Counsel (OPC) and the
Florida Industrial Power Users Group (FIPUG) on a multi-year base rate
freeze and refund plan. Under this plan, base rates were frozen
through 1998 and Tampa Electric s customers began receiving a $25-
million refund starting in October 1996 over a 12-month period. The
refund consists of $10 million of revenues deferred from 1995 and $15
million of 1996 revenues.
In addition, the agreement set forth a multi-year plan for
allocating revenues based on Tampa Electric s ROE. For the years 1996
through 1998 Tampa Electric retains all revenues contributing to a ROE
34
up to 11.75 percent. Any additional revenues will be allocated
according to a formula.
In 1996, 40 percent of any actual revenues contributing to a ROE in
excess of 11.75 percent were included in 1996 revenues. The remaining
60 percent were deferred for use in 1997 and 1998. Under this
allocation $34.2 million of 1996 revenues were deferred. About $65
million of revenues deferred from 1996 and 1995, after the effect of
the $25-million refund are available for use in 1997 and 1998. It is
expected that Tampa Electric will recognize $30 million to $35 million
of previously deferred revenues in 1997.
In 1997 40 percent of any revenues that contribute to a ROE in
excess of 11.75 percent up to 12.75 percent will be included in 1997
revenues. The remaining 60 percent will be deferred for use in 1998 as
will any revenues contributing to a ROE in excess of 12.75 percent.
The same 40 percent allocation will be made in 1998 after taking into
account any deferred revenues not used in previous years. The
remaining 60 percent, as well as any revenues contributing to a ROE in
excess of 12.75 percent will be refunded to customers in 1999.
In October 1996 the FPSC unanimously approved an agreement among
Tampa Electric, OPC and FIPUG that resolved all pending regulatory
issues associated with the Polk Power Station.
The agreement allows the full recovery of all of the expected
capital costs, and operations and maintenance expenses associated with
the Polk Power Station. The agreement also calls for an extension of
the base rate freeze established in the May agreement through 1999.
Tampa Electric has the option of filing an application with the FPSC
on or after July 1, 1999 for authorization to adjust base rates after
Jan. 1, 2000.
Under the October agreement, the $25-million refund established in
the May agreement remains intact and, in addition, customers will
receive a $25-million temporary base rate reduction to be reflected as
a credit on customer bills over a 15-month period beginning Oct. 1,
1997. This temporary base rate reduction will be netted against any
refunds that otherwise might have been made in 1999 under the May
agreement.
The October agreement closely parallels the ROE formula in the May
agreement. In 1999, 60 percent of the revenues contributing to a ROE
in excess of 12.0 percent will be refunded to customers in 2000 along
with any 1999 revenues which contribute to a ROE above 12.75 percent.
Tampa Electric agreed to remove from rate base the $5-million
investment made in land at Port Manatee. This land has value for uses
other than as a power plant site, and will continue to be recorded as
an asset of Tampa Electric. A citizens task force recommended using
previously mined land in Polk County over the Manatee site as the
preferred location for the Polk Power Station.
Environmental Cost Recovery Clause
In August the FPSC approved the recovery of $3.0 million of Tampa
Electric s environmental compliance costs through the environmental
cost recovery clause. These are new costs incurred by Tampa Electric
to comply with environmental regulations enacted subsequent to its
most recent full regulatory price setting proceeding but not included
in current rates. Tampa Electric plans to seek continuing recovery of
these types of costs through this clause until the next full
regulatory price setting proceeding. Under the October 1996 agreement
the earliest any such new prices could be in effect is in the year
2000.
Utility Competition:
Tampa Electric s retail business is substantially free from direct
competition with other electric utilities, municipalities and public
agencies. At the present time, the principal form of competition at
the retail level consists of natural gas for residences and businesses
35
and the self-generation option available to larger users of electric
e n ergy. Such users may seek to expand their options through
l e g i s lative and/or regulatory initiatives that would permit
competition at the retail level. Tampa Electric intends to take all
appropriate actions to retain and expand its retail business,
including managing costs, and providing high quality service to retail
customers. Such action could, with the approval of the FPSC, include
the use of load retention and/or economic development service
contracts and tariffs to reduce the loss of existing load and/or
acquire additional load. See the description of the IMC-Agrico request
for proposals in Tampa Electric s Operating Revenues section.
There is presently active competition in the wholesale power
markets in Florida, and this is increasing largely as a result of the
Energy Policy Act of 1992 and related federal initiatives. This Act
removed certain regulatory barriers to independent power producers and
required utilities to transmit power from such producers, utilities
and others to wholesale customers as more fully described below. Tampa
Electric continues its cost reduction efforts to increase its
wholesale business, which is dependent on access to transmission
systems owned by others.
In April 1996 the Federal Energy Regulatory Commission (FERC)
issued its Final Rule on Open Access Non-discriminatory Transmission,
Stranded Costs, Open Access Same-time Information System (OASIS) and
Standards of Conduct. These rules work together to open access for
wholesale power flows on transmission systems. Utilities owning
transmission facilities (including Tampa Electric) are required to
provide services to wholesale transmission customers comparable to
those they provide to themselves on comparable terms and conditions
including price. Among other things, the rules require transmission
services to be unbundled from power sales and owners of transmission
systems must take transmission service under their own transmission
tariffs.
Transmission system owners are also required to implement an OASIS
system providing, via the Internet, access to transmission service
i n f o rmation (including price and availability), and to rely
exclusively on their own OASIS system for such information for
purposes of their own wholesale power transactions. To facilitate
compliance, owners must implement Standards of Conduct to ensure that
personnel involved in marketing of wholesale power are functionally
separated from personnel involved in transmission services and
reliability functions. Tampa Electric, together with other utilities,
has implemented an OASIS system and believes it is in compliance with
the Standards of Conduct.
FERC Proceedings:
In July 1996 FERC s final rule on open access mandated that all
public utilities file transmission service tariffs with terms and
conditions that conform with FERC s pro forma tariffs. Tampa
Electric received interventions and protests from various parties to
the implementing tariffs it filed. On Jan. 29, 1997, FERC ordered
minor revisions in the terms and conditions of these tariffs. The
rates proposed by Tampa Electric had previously become effective on
July 10, 1996, subject to refund.
Tampa Electric has intervened and protested the rates filed by
Florida Power and Light Company and Florida Power Corporation.
INVESTMENT ACTIVITY
At Dec. 31, 1996 TECO Energy had $12.2 million in cash, cash
equivalents and short-term investments versus $42.5 million at year
end 1995, reflecting the liquidation of the investment in a hedged-
equity utility portfolio, and the use of the proceeds to reduce short-
term debt balances.
The company also has a continuing investment in leveraged leases of
36
$63.2 million. At Dec. 31, 1996 the net leveraged lease investment had
essentially a zero balance and all leases were performing on a current
basis. The company has made no investment in leveraged leases since
1989.
FINANCING ACTIVITY
TECO Energy's 1996 year-end capital structure, excluding the effect
of unearned compensation, was 50 percent debt, 49 percent common
equity and one percent preferred equity. The company's objective is to
maintain a capital structure over time that will support its current
credit ratings.
Credit Ratings/Senior Debt
Duff & Phelps Moody's Standard & Poor s
Tampa Electric AA+ Aa2 AA
TECO Finance/TECO Energy AA- A1 AA-
In December 1996 the Polk County Industrial Development Authority
issued $75 million of Solid Waste Disposal Facility Revenue Bonds for
the benefit of Tampa Electric. The bonds were issued at a tax-exempt
rate of 5.85% and will mature on Dec. 1, 2030. The proceeds of the
issue were used to repay short-term debt incurred during the
construction of the Polk Power Station.
TECO Energy raised $9.2 million of common equity in 1996, $9.4
million in 1995 and $10.6 million in 1994 from the sale of common
stock through its Dividend Reinvestment and Common Stock Purchase Plan
(DRP). In 1997 the DRP will purchase shares of TECO Energy stock on
the open market for plan participants in lieu of issuing new shares.
In April 1996 Tampa Electric retired $35 million aggregate par
value 8.0% Series E and 7.44% Series F preferred stock at redemption
prices of $102.00 and $101.00, respectively.
As a part of its risk management program, during 1995 TECO Energy
entered into an interest rate exchange agreement to moderate its
e x posure to short-term interest rate changes. This three-year
agreement effectively converted the interest rate on $100 million of
short-term debt from a floating rate to a fixed rate. TECO Finance
pays a fixed rate of 5.8% and receives a floating rate based on a 30-
day commercial paper index. The benefits of this agreement are at risk
only in the event of non-performance by the other party to the
agreement, which the company does not anticipate. The costs of this
agreement did not have a significant impact on interest in 1996 or
1995. The company has no other derivative instruments.
LIQUIDITY, CAPITAL RESOURCES
TECO Energy and its operating companies met cash needs during 1996
largely with internally generated funds with the balance from the sale
of long- and short-term debt, short-term investments and from equity
raised through the DRP.
At Dec. 31, 1996 TECO Energy had bank credit lines of $370 million,
of which $367 million in credit was available.
TECO Energy anticipates meeting its capital requirements for
o n going operations in the 1997-2001 period substantially from
internally generated funds. In early 1997 TECO Power Services secured
$29 million of non-recourse financing for the Alborada Power Station
in Guatemala. TECO Power Services expects to finance the San Jose
Power Station with non-recourse project financing upon completion of
construction.
Based upon anticipated revenue growth and effective cost management
in all of its businesses, dividend payout levels and identified
capital expenditures, TECO Energy expects to generate between $400
million and $500 million of free cash flow through the year 2000. This
would be available to further grow the business and strengthen the
balance sheet.
37
INVESTMENT CONSIDERATIONS
The following are certain of the factors which could affect TECO
Energy s future results. They should be considered in connection with
evaluating forward-looking statements contained in this Management s
Discussion and Analysis and elsewhere in this Report and otherwise
made by or on the behalf of TECO Energy since these factors, among
others, could cause actual results and conditions to differ materially
from those projected in these forward-looking statements.
General Economic Conditions. The company s businesses are dependent
on general economic conditions. In particular, the projected growth in
Tampa Electric s service area is important to the realization of Tampa
Electric s forecasts for annual energy sales growth for 1997 and
beyond. An unanticipated downturn in the area s economy could
adversely affect Tampa Electric s performance through time.
The activities of the diversified businesses, particularly TECO
Transport & Trade and TECO Coal, are also affected by general economic
conditions in the respective industries and geographic areas they
serve both nationally and internationally.
Weather Variations. Most of TECO Energy s businesses are affected
by variations in general weather conditions and unusually severe
weather. Tampa Electric s energy sales are particularly sensitive to
variations in weather conditions. It forecasts energy sales on the
basis of normal weather, which represents a long-term historical
average. Significant variations from normal weather could have a
material impact on energy sales. Unusual weather, such as hurricanes,
could also have an effect on operating costs as well as sales.
Variations in weather conditions also affect the demand and prices
for the commodities sold by TECO Coalbed Methane, TECO Oil & Gas and
TECO Coal. TECO Transport & Trade is also impacted by weather because
of its effects on the supply of and demand for the products
transported. Severe weather conditions that could interrupt or slow
service and increase operating costs also affects each of these
businesses.
Potential Competitive Changes. The electric industry has been
undergoing certain restructuring. Competition in wholesale power sales
has been introduced on a national level. Some states have mandated or
encouraged competition at the retail level. While there is active
wholesale competition in Florida, the retail electric business has
remained substantially free from direct competition. Changes in the
competitive environment occasioned by legislation, regulation or
market conditions, however, particularly with respect to retail
competition, could adversely affect Tampa Electric s business and its
performance.
Regulatory Actions. Tampa Electric operates in a highly regulated
industry. Its retail operations, including the prices it charges, are
regulated by the FPSC, and its wholesale power sales and transmission
services are subject to regulation by FERC. Changes in regulatory
requirements or adverse regulatory actions could have an adverse
affect on Tampa Electric s performance.
Commodity Price Changes. Most of TECO Energy s businesses are
sensitive to changes in certain commodity prices. Such changes could
affect the prices they charge, their operating costs and the
competitive position of their products and services.
In the case of Tampa Electric, fuel costs used for generation are
mostly affected by the cost of coal. Tampa Electric is able to pass
the cost of fuel through to retail customers, but increases in fuel
costs affect electric prices and therefore the competitive position of
electricity against other energy sources. On the wholesale side, the
ability to make sales and the margins on power sales are affected by
the cost of coal to Tampa Electric, particularly as it relates to the
cost of gas and oil to other power producers.
At the diversified companies, changes in gas and coal prices
38
directly affect the margins at TECO Oil & Gas, TECO Coalbed Methane
and TECO Coal.
Environmental Matters. TECO Energy s businesses are subject to
regulation by various governmental authorities dealing with air, water
and other environmental matters. Changes in and compliance with these
regulations may impose additional costs on the company, or result in
the curtailment of certain activities.
39
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
No.
Report of Independent Accountants 40
Consolidated Balance Sheets, Dec. 31, 1996 and 1995 41
Consolidated Statements of Income for the years ended
Dec. 31, 1996, 1995 and 1994 42
Consolidated Statements of Cash Flows for the years
ended Dec. 31, 1996, 1995 and 1994 43
Consolidated Statements of Common Equity for the years
ended Dec. 31, 1996, 1995 and 1994 44
Notes to Consolidated Financial Statements 45-61
Financial Statement Schedules have been omitted since they are not
required, are inapplicable or the required information is presented in
the financial statements or notes thereto.
40
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of TECO Energy, Inc.,
We have audited the consolidated balance sheets of TECO Energy,
Inc. and subsidiaries as of Dec. 31, 1996 and 1995, and the related
consolidated statements of income, common equity and cash flows for
each of the three years in the period ended Dec. 31, 1996. These
f i n ancial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
s t atement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of TECO Energy, Inc. and subsidiaries as of Dec. 31, 1996 and 1995,
and the consolidated results of their operations and their cash flows
for each of the three years in the period ended Dec. 31, 1996, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Certified Public Accountants
Tampa, Florida
Jan. 15, 1997
41
CONSOLIDATED BALANCE SHEETS
(millions)
Assets
Dec. 31, 1996 1995
Current Assets
Cash and cash equivalents $ 12.2 $ 10.3
Short-term investments -- 32.2
Receivables, less allowance for uncollectibles 190.1 163.5
Inventories, at average cost
Fuel 62.2 76.7
Materials and supplies 55.9 49.0
Prepayments 8.9 9.6
329.3 341.3
Property, Plant and Equipment, at Original Cost
Utility plant in service 3,784.7 3,174.5
Construction work in progress 45.4 479.6
Other property 891.5 836.4
4,721.6 4,490.5
Less accumulated depreciation (1,765.0) (1,616.2)
2,956.6 2,874.3
Other Assets
Other investments 86.4 86.3
Deferred income taxes 76.7 65.9
Deferred charges and other assets 111.7 105.6
274.8 257.8
$3,560.7 $3,473.4
Liabilities and Capital
Current Liabilities
Long-term debt due within one year $ 76.7 $ 31.3
Notes payable 305.7 361.4
Accounts payable 150.3 146.3
Customer deposits 52.9 51.3
Interest accrued 16.2 13.3
Taxes accrued 9.8 11.7
611.6 615.3
Other Liabilities
Deferred income taxes 426.7 396.6
Investment tax credits 56.2 61.3
Regulatory liability-tax related 35.7 47.5
Other deferred credits 152.1 136.1
Long-term debt, less amount due within one year 996.3 994.9
Preferred Stock of Tampa Electric 20.0 55.0
Capital
Common equity 1,332.8 1,240.9
Unearned compensation related to ESOP (70.7) (74.2)
$3,560.7 $3,473.4
The accompanying notes are an integral part of the consolidated financial
statements.
42
CONSOLIDATED STATEMENTS OF INCOME
(millions)
Year ended Dec. 31, 1995 1995 1994
Revenues $ 1,473.0 $ 1,392.3 $ 1,350.9
Expenses
Operation 737.4 684.6 670.8
Maintenance 92.2 101.3 101.1
Restructuring charge and
other cost reductions -- -- 25.0
Depreciation 185.2 174.7 174.0
Taxes, other than income 115.3 114.0 110.2
1,130.1 1,074.6 1,081.1
Income from Operations 342.9 317.7 269.8(1)
Other Income (Expense)
Allowance for other funds used
during construction 16.5 13.7 3.5
Other income (expense), net 1.4 .6 6.4
Preferred dividend requirements of
Tampa Electric (1.8) (3.6) (3.6)
16.1 10.7 6.3
Income Before Interest and
Income Taxes 359.0 328.4 276.1
Interest Charges
Interest expense 93.3 88.8 79.3
Allowance for borrowed funds
used during construction (6.4) (5.6) (2.2)
86.9 83.2 77.1
Income Before Provision for
Income Taxes 272.1 245.2 199.0
Provision for income taxes 71.4 59.1 45.8
Net Income $ 200.7 $ 186.1 $ 153.2(1)
Average common shares
outstanding during year 117.2 116.5 115.9
Earnings per Average Common Share
Outstanding:
Earnings per average common share
outstanding $ 1.71 $ 1.60 $ 1.32 (1)
The accompanying notes are an integral part of the consolidated financial
statements.
(1) Includes the effect of a corporate restructuring charge which reduced
operating income by $25 million, net income by $15 million and earnings per
share by $0.13. See Note H.
43
CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
Year ended Dec. 31, 1996 1995 1994
Cash Flows from Operating Activities
Net income $200.7 $186.1 $153.2
Adjustments to reconcile net
income to net cash
Depreciation 185.2 174.7 174.0
Deferred income taxes 7.5 (17.3) (12.1)
Restructuring charge and other
cost reductions -- -- 25.0
Investment tax credits, net (5.1) (5.3) (6.8)
Allowance for funds used
during construction (22.9) (19.3) (5.7)
Amortization of unearned
compensation related to ESOP 5.4 4.9 5.7
Deferred revenue 34.2 50.8 --
Deferred recovery clause 4.0 (12.4) 19.9
Fuel cost settlement -- -- --
Refund to customers (6.0) -- (2.4)
Coal contract buyout and amortization 2.7 2.0 (25.5)
Receivables, less allowance for
uncollectibles (24.5) (18.9) (10.5)
Inventories 7.6 25.8 (23.7)
Taxes accrued (2.0) 11.5 (1.0)
Interest accrued 2.9 (2.1) .6
Accounts payable (15.2) 1.0 30.0
Other (2.0) 25.7 17.5
372.5 407.2 338.2
Cash Flows from Investing Activities
Capital expenditures (267.7) (432.7) (309.1)
Allowance for funds used
during construction 22.9 19.3 5.7
Investment in short-term investments 32.3 68.4 12.5
Other non-current investments 2.8 17.5 (6.0)
(209.7) (327.5) (296.9)
Cash Flows from Financing Activities
Common stock 13.9 11.1 11.1
Proceeds from long-term debt 78.1 .6 .7
Repayment of long-term debt (32.1) (6.5) (19.0)
Net increase in short-term debt (55.8) 11.5 84.1
Redemption of preferred stock (35.5) -- --
Dividends (129.5) (121.9) (115.6)
(160.9) (105.2) (38.7)
Net increase (decrease) in
cash and cash equivalents 1.9 (25.5) 2.6
Cash and cash equivalents at
beginning of year 10.3 35.8 33.2
Cash and cash equivalents at end of year $ 12.2 $ 10.3 $ 35.8
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for:
Interest (net of amounts capitalized) $ 82.2 $ 86.8 $ 85.1
Income taxes $ 79.6 $ 66.5 $ 69.2
The accompanying notes are an integral part of the consolidated financial
statements.
44
CONSOLIDATED STATEMENTS OF COMMON EQUITY
(millions)
Additional Total
Common Paid-in Retained Unearned Common
Shares(1) Stock(1) Capital(1) Earnings Compensation Equity
Balance, Dec. 31, 1993 115.6 $ 115.6 $ 321.0 $ 675.8 $ (84.8) $1,027.6
Net income for 1994 153.2 153.2
Common stock issued .6 .6 10.5 11.1
Cash dividends declared
($.9975 per share) (115.6) (115.6)
Amortization of unearned
compensation related
to ESOP 5.7 5.7
Tax benefits-ESOP dividends 2.2 2.2
Balance, Dec. 31, 1994 116.2 116.2 331.5 715.6 (79.1) 1,084.2
Net income for 1995 186.1 186.1
Common stock issued .5 .5 10.6 11.1
Cash dividends declared
($1.0475 per share) (121.9) (121.9)
Amortization of unearned
compensation related
to ESOP 4.9 4.9
Tax benefits-ESOP dividends
and stock options .1 2.2 2.3
Balance, Dec. 31, 1995 116.7 116.7 342.2 782.0 (74.2) 1,166.7
Net income for 1996 200.7 200.7
Common stock issued .9 .9 17.8 (1.9) 16.8
Cash dividends declared
($1.105 per share) (129.5) (129.5)
Amortization of unearned
compensation 5.4 5.4
Premium on redemption of
preferred stock (.5) (.5)
Tax benefits-ESOP dividends
and stock options .3 2.2 2.5
Balance, Dec. 31, 1996 117.6 $ 117.6 $ 360.3 $ 854.9 $ (70.7) $1,262.1
The accompanying notes are an integral part of the consolidated financial
statements.
(1)TECO Energy had 400 million shares of $1 par value common stock authorized
in 1996, 1995 and 1994.
45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Summary of Significant Accounting Policies
Principles of Consolidation
The significant accounting policies for both utility and diversified
operations are as follows:
The consolidated financial statements include the accounts of TECO
Energy, Inc. (TECO Energy) and its wholly owned subsidiaries.
The equity method of accounting is used to account for investments in
partnership arrangements in which TECO Energy or its subsidiary companies
do not have majority ownership or exercise control.
The proportional share of expenses, revenues and assets reflecting
TECO Coalbed Methane's and TECO Oil & Gas s undivided interest in joint
venture property is included in the consolidated financial statements.
All significant intercompany balances and intercompany transactions
have been eliminated in consolidation.
Basis of Accounting
Tampa Electric maintains its accounts in accordance with recognized
policies prescribed or permitted by the Florida Public Service Commission
(FPSC) and the Federal Energy Regulatory Commission (FERC). These policies
conform with generally accepted accounting principles in all material
respects.
The impact of Financial Accounting Standard (FAS) No. 71, Accounting
for the Effects of Certain Types of Regulation, has been minimal in Tampa
Electric's experience, but when cost recovery is ordered over a period
longer than a fiscal year, costs are recognized in the period that the
regulatory agency recognizes them in accordance with FAS 71. Also as
provided in FAS 71, Tampa Electric has deferred revenues in accordance
with various regulatory agreements approved by the FPSC in 1995 and 1996.
In the future, these revenues will be recognized as allowed under the
terms of the agreements.
Tampa Electric's retail and wholesale businesses are regulated by the
FPSC and the FERC, respectively. Prices allowed by both agencies are
generally based on recovery of prudent costs incurred plus a reasonable
return on invested capital.
The use of estimates is inherent in the preparation of financial
statements in accordance with generally accepted accounting principles.
Revenues and Fuel Costs
Revenues include amounts resulting from cost recovery clauses which
provide for monthly billing charges to reflect increases or decreases in
fuel, purchased capacity, oil backout, conservation and environmental
costs. These adjustment factors are based on costs projected by Tampa
Electric for a specific recovery period. Any over-recovery or under-
recovery of costs plus an interest factor are taken into account in the
process of setting adjustment factors for subsequent recovery periods.
Over-recoveries of costs are recorded as deferred credits and under-
recoveries of costs are recorded as deferred debits.
In August 1996, the FPSC approved Tampa Electric's petition for
r e c o v ery of certain environmental compliance costs through the
environmental cost recovery clause.
On May 10, 1995, the FPSC approved the termination of the oil backout
clause effective Jan. 1, 1996. Any oil backout project costs incurred
beginning Jan 1, 1996 were no longer recovered through the cost recovery
clause.
In December 1994, Tampa Electric bought out a long-term coal supply
contract which would have expired in 2004 for a lump sum payment of $25.5
million and entered into two new contracts with the supplier. The coal
supplied under the new contracts is competitive in price with coals of
comparable quality. As a result of this buyout, Tampa Electric customers
will benefit from anticipated net fuel savings of more than $40 million
through the year 2004. In February 1995, the FPSC authorized the recovery
of the $25.5 million buy-out amount plus carrying costs through the Fuel
and Purchased Power Cost Recovery Clause over the ten-year period
46
beginning April 1, 1995. In 1996 and 1995, $2.7 million and $2 million,
respectively, of buy-out costs were amortized to expense.
Certain other costs incurred by Tampa Electric are allowed to be
recovered from customers through prices approved in the regulatory
process. These costs are recognized as the associated revenues are billed.
Tampa Electric accrues base revenues for services rendered but
unbilled to provide a closer matching of revenues and expenses.
In May 1996, the FPSC issued an order approving an agreement among
Tampa Electric, the Office of Public Counsel (OPC) and the Florida
Industrial Power Users Group (FIPUG) regarding 1996 earnings. This
agreement provides for a $25-million revenue refund to customers to be
made over the 12-month period beginning Oct. 1, 1996. This refund consists
of $15 million of revenues deferred from 1996 and $10 million of revenues
deferred from 1995, plus accrued interest.
In October 1996, the FPSC approved an agreement among Tampa Electric,
OPC and FIPUG that resolved all pending regulatory issues associated with
the Polk Power Station. The agreement allows the full recovery of all of
the expected capital costs and operations and maintenance expenses
associated with the Polk Power Station, and calls for an extension of the
base rate freeze established in the May agreement through 1999. Under the
October agreement, the $25-million refund established in the May agreement
remains intact and customers will receive a $25-million temporary base
rate reduction to be reflected as a credit on customer bills over a 15-
month period beginning Oct. 1, 1997.
Depreciation
TECO Energy provides for depreciation primarily by the straight-line
method at annual rates that amortize the original cost, less net salvage,
of depreciable property over its estimated service life. The provision for
utility plant in service, expressed as a percentage of the original cost
of depreciable property, was 3.9% for 1996 and 1995, and 4.2% for 1994.
The original cost of utility plant retired or otherwise disposed of
and the cost of removal less salvage are charged to accumulated
depreciation.
Asset Impairment
FAS 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets Disposed Of (FAS 121), effective for years beginning
after Dec. 15, 1995, requires that long-lived assets and certain
intangibles to be held and used by the company be reviewed for impairment.
The company periodically assess whether there has been a permanent
impairment of its long-lived assets, in accordance with FAS 121. No write-
down of assets due to impairment was required in 1996.
Foreign operations
The functional currency of TPS Guatemala One, Inc. s partnership in
Guatemala is the U.S. dollar. Transactions conducted in Guatemala in the
local currency, the quetzal, are remeasured to the U.S. dollar for
financial reporting purposes with aggregate transaction gains or losses
included in net income. The aggregate transaction losses included in net
income in 1996 and 1995 were not significant.
The partnership is protected from any significant currency gains or
losses by the terms of the power sales agreement in which payments are
defined in U.S. dollars.
Deferred Income Taxes
TECO Energy utilizes the liability method in the measurement of
d e ferred income taxes. Under the liability method, the temporary
differences between the financial statement and tax bases of assets and
liabilities are reported as deferred taxes measured at current tax rates.
Tampa Electric is a regulated enterprise, and its books and records
reflect approved regulatory treatment, including certain adjustments to
accumulated deferred income taxes and the establishment of a corresponding
regulatory tax liability reflecting the amount payable to customers
through future rates.
47
Investment Tax Credits
Investment tax credits have been recorded as deferred credits and are
being amortized to income tax expense over the service lives of the
related property.
Allowance for Funds Used During Construction (AFUDC)
AFUDC is a non-cash credit to income with a corresponding charge to
utility plant which represents the cost of borrowed funds and a reasonable
return on other funds used for construction. The rate used to calculate
AFUDC is revised periodically to reflect significant changes in Tampa
Electric's cost of capital. The rate was 7.79% for 1996 and 1995, and
7 . 28% for 1994. The base on which AFUDC is calculated excludes
construction work in progress which has been included in rate base.
Capitalized Development Costs
TeCom, a subsidiary of TECO Energy, is developing for market an
advanced energy management and home automation system for residential and
commercial applications. In 1996, TeCom capitalized $4.9 million of
product development costs. The costs capitalized in 1996 and those
anticipated to be capitalized during the product enhancement period are
expected to be amortized over the life of the product, estimated to be
three years, starting in 1998 when TeCom anticipates its products will be
available for general distribution.
Interest Capitalized
Interest costs for the construction of TECO Coal's preparation plant
and loadout facility, and TECO Power Services Alborada Power Station were
capitalized and will be depreciated over the service lives of the related
property. Such interest costs capitalized in 1995 and 1994 were not
significant.
Short-Term Investments
Short-term investments at Dec. 31, 1995 included $32.2 million of
trading securities, which had a cost basis of $31.4 million. These
investments were liquidated in 1996. The estimated fair market value for
1995 was based on quoted market prices. Trading securities consist of a
hedged equity investment in a utility portfolio. Realized gains and losses
were determined on the specific identification cost basis. The change in
net unrealized gains and losses on trading securities included in earnings
in 1996 and 1995 was not significant.
Other Investments
Other investments include longer-term passive investments, primarily
leveraged leases.
Coalbed Seam Gas Properties
TECO Coalbed Methane, a subsidiary of TECO Energy, has developed
jointly the natural gas potential in a portion of Alabama's Black Warrior
Basin.
TECO Coalbed Methane utilizes the successful efforts method to
account for its gas operations. Under this method, expenditures for
unsuccessful exploration activities are expensed currently.
Capitalized costs are amortized on the unit-of-production method
using estimates of proven reserves. Investments in unproven properties and
major development projects are not amortized until proven reserves
associated with the projects can be determined or until impairment occurs.
Aggregate capitalized costs related to wells producing and under
development at Dec. 31, 1996 and 1995 were $207.1 million and $203.3
million, respectively. Net proven reserves at Dec. 31, 1996 and 1995 were
as follows:
48
Net Proven Reserves - Coalbed Methane Gas
(billion cubic feet) 1996 1995
Proven reserves,
beginning of year 184.0 172.7
Production (19.8) (20.3)
Purchases of minerals in place -- 5.0
Revisions of previous estimates 26.3 26.6
Proven reserves, end of year 190.5 184.0
Number of wells 657 556
Conventional Oil and gas Properties
TECO Oil & Gas, a subsidiary of TECO Energy, has entered into joint
ventures with several partners to explore for oil and gas in the shallow
gulf waters off Texas and Louisiana.
TECO Oil & Gas utilizes the successful efforts method to account for
its oil and gas operations. Under this method, expenditures for
unsuccessful exploration activities are expensed currently.
At Dec. 31, 1996 aggregate capitalized costs were $19.5 million. Net
proven reserves at Dec. 31, 1996 were 11.0 billion cubic feet from two
wells.
Reclassifications and Restatements
Certain 1995 and 1994 amounts were reclassified or restated to
conform with current year presentation.
B. Common Equity
Stock-based Compensation
In April 1996, the shareholders approved the 1996 Equity Incentive
Plan (the "1996 Plan"). The 1996 Plan superseded the 1990 Equity Incentive
Plan (the "1990 Plan") which superseded the 1980 Stock Option and
Appreciation Rights Plan (the "1980 Plan") and no additional grants will
be made under the superseded Plans. The rights of holders of outstanding
options under the 1990 Plan and the 1980 Plan were not affected. The
purpose of the 1996 Plan is to attract and retain key employees of the
company, to provide an incentive for them to achieve long-range
performance goals and to enable them to participate in the long-term
growth of the company. The 1996 Plan amended the 1990 Plan to increase the
number of shares of common stock subject to grants by 3,750,000 shares,
expand the types of awards available to be granted and specify a limit on
the maximum number of shares with respect to which stock options and stock
appreciation rights may be made to any participant under the Plan. Under
the 1996 Plan, the Compensation Committee of the Board of Directors may
award stock grants, stock options and/or stock equivalents to officers and
key employees of TECO Energy and its subsidiaries. The Compensation
Committee has discretion to determine the terms and conditions of each
a w ard, which may be subject to conditions relating to continued
employment, restrictions on transfer or performance criteria.
In April 1996, under the 1996 Plan, 293,100 stock options were
granted, each with a weighted average option price of $23.69 and a maximum
term of 10 years. In addition, 79,600 shares of restricted stock were
awarded, each with a weighted average fair value of $23.69. Compensation
expense recognized in 1996 for stock grants awarded under the 1996 Plan
was $.5 million. In general, the stock grants are restricted subject to
continued employment; vesting occurs at normal retirement age.
Stock option transactions during the last three years under the 1996
Plan, the 1990 Plan and the 1980 Plan (collectively referred to as the
"Equity Plans"), are summarized as follows:
Stock Options - Equity Plans
Option Weighted Avg.
Shares Option
(thousands) Price
1996
Outstanding, beginning of year 2,263 $18.99
Granted 293 $23.69
Exercised 268 $17.42
Canceled 2 $23.56
Outstanding, end of year 2,286 $19.77
Exercisable, end of year 2,286 $19.77
Available for grant 5,314
1995
Outstanding, beginning of year 1,913 $18.48
Granted 488 $20.78
Exercised 100 $16.47
Canceled 38 $23.11
Outstanding, end of year 2,263 $18.99
Exercisable, end of year 2,263 $18.99
Available for grant 1,936
1994
Outstanding, beginning of year 1,567 $17.88
Granted 401 $19.45
Exercised 55 $14.37
Canceled -- --
Outstanding, end of year 1,913 $18.48
Exercisable, end of year 1,505 $17.10
Available for grant 2,386
As of Dec. 31, 1996, the 2.3 million options outstanding and
currently exercisable under the Equity Plans are summarized in the
following table:
Stock Options Outstanding at Dec. 31, 1996
Weighted
Weighted Avg.
Option Avg. Remaining
Shares Range of Option Contractual
(thousands) Option Prices Price Life
318 $11.5 -$14.5625 $13.11 3 Years
1,968 $17.375-$23.6875 $20.85 7 Years
The 1991 Director Stock Option Plan (the 1991 Plan ) provides grants
of stock options to non-employee directors on the first trading day
following each annual meeting of shareholders. This plan provides for an
initial grant of options for 10,000 shares to each new director, and an
annual grant of options for 2,000 shares thereafter, with an exercise
price equal to the fair market value on the date of grant and a maximum
term of 10 years. In April 1996, 40,000 options were granted, each with a
weighted average option price of $23.63. Transaction during the last three
years under the Director Stock Option Plan are summarized as follows:
50
Director Stock Option Plan
Option Weighted Avg.
Shares Option
(thousands) Price
1996
Outstanding, beginning of year 175 $19.13
Granted 40 $23.63
Exercised -- --
Canceled -- --
Outstanding, end of year 215 $19.96
Exercisable, end of year 215 $19.96
Available for grant 246
1995
Outstanding, beginning of year 171 $18.86
Granted 20 $21.13
Exercised 14 $18.13
Canceled 2 $23.40
Outstanding, end of year 175 $19.13
Exercisable, end of year 175 $19.13
Available for grant 286
1994
Outstanding, beginning of year 149 $18.72
Granted 22 $19.81
Exercised -- --
Outstanding, end of year 171 $18.86
Exercisable, end of year 149 $18.19
Available for grant 304
As of Dec. 31, 1996, the 215,000 options outstanding and currently
exercisable under the 1991 Plan with option prices of $17.7188-$23.625,
had a weighted average option price of $19.96 and a weighted average
remaining contractual life of 6 years.
In January 1997, the Board of Directors adopted the 1997 Director
Equity Plan (the "1997 Plan"), subject to shareholder approval, as an
amendment and restatement of the 1991 Plan. Upon such approval the 1997
Plan would supersede the 1991 Plan and no additional grants will made
under the 1991 Plan. The rights of the holders of outstanding options
under the 1991 Plan would not be affected. The purpose of the 1997 Plan is
to attract and retain highly qualified non-employee directors of the
company and to encourage them to own shares of TECO Energy common stock.
The 1997 Plan would be administered by the Board of Directors. The 1997
Plan would amend the 1991 Plan to increase the number of shares of common
stock subject to grants by 250,000 shares, expand the types of awards
available to be granted and replace the current fixed formula grant by
giving the Board discretionary authority to determine the amount and
timing of awards under the Plan.
51
TECO Energy has adopted the disclosure-only provisions of FAS 123,
Accounting for Stock-Based Compensation (FAS 123), but applies Accounting
Principles Board Opinion No. 25 and related interpretations in accounting
for its plans. Therefore, no compensation expense has been recognized for
stock options granted under the 1996 Plan and the 1991 Plan. If the
company had elected to recognize compensation expense for stock options
based on the fair value at grant date, consistent with the method
prescribed by FAS 123, net income and earnings per share would have been
reduced to the pro forma amounts shown below:
1996 1995
Net Income As reported $200.7 $186.1
(millions) Pro forma $200.0 $185.2
EPS As reported $ 1.71 $ 1.60
Pro forma $ 1.71 $ 1.59
These pro forma amounts were determined using the Black-Scholes
valuation model with the following key assumptions: (a) a discount rate of
6.42% for 1996 and 7.05% for 1995; (b) a volatility factor based upon the
average trading price for the 36-month periods ending Dec. 31, 1996 and
1995; (c) a dividend yield based upon the rate in effect for the 36-month
periods ending Dec. 31, 1996 and 1995; and (d) an average expected option
life of 6 years.
Dividend Reinvestment Plan
In 1992, TECO Energy implemented a Dividend Reinvestment and Common
Stock Purchase Plan (DRP). TECO Energy raised common equity of $9.2
million, $9.4 million and $10.6 million from this plan in 1996, 1995 and
1994, respectively. In 1997, the DRP will purchase shares of TECO Energy
common stock on the open market for plan participants.
Shareholder Rights Plan
In 1989, TECO Energy declared a distribution of Rights to purchase
one additional share of the company's common stock at a price of $40 per
share for each share outstanding. The Rights expire in May 1999. The
Rights will become exercisable 10 days after a person acquires 20 percent
or more of the company's outstanding common stock or commences a tender
offer that would result in such person owning 30 percent or more of such
stock or at the time the Board of Directors declares a person who acquired
10 percent or more of such stock to be an "adverse person." If any person
acquires 20 percent or more of the outstanding common stock or the Board
declares that a person is an adverse person, the rights of holders, other
than such acquiring person or adverse person, become rights to buy shares
of common stock of the company (or of the acquiring company if the company
is involved in a merger or other business combination and is not the
surviving corporation) having a market value of twice the exercise price
of each right.
The company may redeem the Rights at a price of $.005 per Right until
10 days after a person acquires 20 percent or more of the outstanding
common stock but not after the Board has declared a person to be an
adverse person.
52
Employee Stock Ownership Plan
Effective Jan. 1, 1990, TECO Energy amended the TECO Energy Group
Retirement Savings Plan, a tax-qualified benefit plan available to
substantially all employees, to include an employee stock ownership plan
(ESOP). During 1990, the ESOP purchased 7 million shares of TECO Energy
common stock on the open market for $100 million. The share purchase was
financed through a loan from TECO Energy to the ESOP. This loan is at a
fixed interest rate of 9.3% and will be repaid from dividends on ESOP
shares and from TECO Energy's contributions to the ESOP.
TECO Energy's contributions to the ESOP were $3.6 million, $4.8
million and $7.6 million in 1996, 1995 and 1994, respectively. TECO
Energy's annual contribution equals the interest accrued on the loan
during the year plus additional principal payments needed to meet the
matching allocation requirements under the plan, less dividends received
on the ESOP shares. The components of net ESOP expense recognized for the
past three years are as follows:
(millions) 1996 1995 1994
Interest expense $8.0 $8.3 $8.8
Compensation expense 4.9 4.9 5.7
Dividends (7.5) (7.1) (6.9)
Net ESOP expense $5.4 $6.1 $7.6
Compensation expense was determined by the shares allocated method.
At Dec. 31, 1996, the ESOP had 1.8 million allocated shares, .1
million committed-to-be-released shares, and 4.8 million unallocated
shares. Shares are released to provide employees with the company match in
accordance with the terms of the TECO Energy Group Retirement Savings Plan
and in lieu of dividends on allocated ESOP shares. The dividends received
by the ESOP are used to pay debt service.
For financial statement purposes, the unallocated shares of TECO
Energy stock are reflected as a reduction of common equity, classified as
unearned compensation. Dividends on all ESOP shares are recorded as a
reduction of retained earnings, as are dividends on all TECO Energy common
stock. The tax benefit related to the dividends paid to the ESOP for
allocated shares is a reduction of income tax expense and for unallocated
shares is an increase in retained earnings. All ESOP shares are considered
outstanding for earnings per share computations.
C. Preferred Stock
Preferred Stock of TECO Energy - $1 Par
10 million shares authorized, none outstanding.
Preferred Stock of Tampa Electric - No Par
2.5 million shares authorized, none outstanding.
Preference Stock of Tampa Electric - No Par
2.5 million shares authorized, none outstanding.
53
Preferred Stock of Tampa Electric - $100 Par Value
1.5 million shares authorized
Outstanding Cash Dividends
Dec.31, 1996 Paid in 1996(1)
Current
Redemption Per
Price Shares Amount(2) Share Amount(2)
4.32% Cumulative,
Series A $103.75 49,600 $ 5.0 $4.32 $ .2
4.16% Cumulative,
Series B $102.875 50,000 5.0 $4.16 .2
4.58% Cumulative,
Series D $101.00 100,000 10.0 $4.58 .5
8.00% Cumulative,
Series E -- -- -- -- .5 (3)
7.44% Cumulative,
Series F -- -- -- -- .7 (3)
199,600 $20.0 $2.1
(1) Quarterly dividends paid on Feb. 15, May 15, Aug. 15 and Nov. 15.
(2) Millions.
(3) Amounts paid in 1996 for Series E and F reflect dividends paid
through April 29, 1996, the date that these series were redeemed.
In April 1996, Tampa Electric retired $35 million aggregate par value
of 8.00% Series E and 7.44% Series F preferred stock at redemption prices
of $102.00 and $101.00 per share, respectively.
At Dec. 31, 1996, preferred stock had a carrying amount of $20.0
million and an estimated fair market value of $12.6 million. The estimated
fair market value of preferred stock was based on quoted market prices.
D. Short-term Debt
Notes payable consisted primarily of commercial paper with weighted
average interest rates of 5.43% and 5.76% at Dec. 31, 1996 and Dec. 31,
1995, respectively. The carrying amount of notes payable approximated fair
market value because of the short maturity of these instruments.
Consolidated unused lines of credit at Dec. 31, 1996 were $367 million.
Certain lines of credit require commitment fees ranging from .05% to
.1875% on the unused balances.
During 1995, TECO Finance entered into an interest rate exchange
agreement to moderate its exposure to interest rate changes. This three-
year agreement effectively converted the interest rate on $100 million of
short-term debt from a floating rate to a fixed rate. TECO Finance will
pay a fixed rate of 5.8% and will receive a floating rate based on a 30-
day commercial paper index. There would not have been a significant gain
or loss to terminate this agreement at Dec. 31, 1996. The benefits of this
agreement are at risk only in the event of non-performance by the other
party to the agreement, which the company does not anticipate. The costs
of this agreement did not have a significant impact on interest expense in
1996 or 1995.
54
E. Long-term Debt
Dec. 31,
(millions) Due 1996 1995
TECO Energy
Medium-term notes payable: 9.28% for
1996 and 1995(1) 1997-2000 $ 100.0 $ 100.0
Tampa Electric
First mortgage bonds (issuable in series):
5 1/2% 1996 -- 25.0
7 3/4% 2022 75.0 75.0
5 3/4% 2000 80.0 80.0
6 1/8% 2003 75.0 75.0
Installment contracts payable(2)
5 3/4% 2007 24.1 24.4
7 7/8% Refunding bonds(3) 2021 25.0 25.0
8% Refunding bonds(3) 2022 100.0 100.0
6 1/4% Refunding bonds(4) 2034 86.0 86.0
5.85% 2030 75.0 --
Variable rate: 3.56% for 1996 and
3.81% for 1995(1) 2025 51.6 51.6
Variable rate: 3.43% for 1996 and
3.72% for 1995(1) 2018 54.2 54.2
Variable rate: 3.67% for 1996 and
3.90% for 1995(1)(5) 2020 20.0 16.9
665.9 613.1
Diversified Companies
Dock and wharf bonds, variable rate:
3.56% for 1996 and 3.74% for 1995(1)(2) 2007 110.6 110.6
Mortgage notes payable: 7.6% 1997-2003 1.7 3.3
Non-recourse secured facility notes,
Series A: 7.8% 1997-2012 148.5 153.2
260.8 267.1
TECO Finance
Medium-term notes payable, various rates:
7.04% for 1996 and 1995(1) 1997-2002 50.0 50.0
Unamortized debt premium (discount), net (3.7) (4.0)
1,073.0 1,026.2
Less amount due within one year(6) 76.7 31.3
Total long-term debt $ 996.3 $ 994.9
(1) Composite year-end interest rate.
(2) Tax-exempt securities.
(3) Proceeds of these bonds were used to refund bonds with interest rates
of 11 5/8% - 12 5/8%. For accounting purposes, interest expense has
been recorded using blended rates of 8.28%-8.66% on the original and
refunding bonds, consistent with regulatory treatment.
(4) Proceeds of these bonds were used to refund bonds with an interest
rate of 9.9% in February 1995. For accounting purposes, interest
expense has been recorded using a blended rate of 6.52% on the
original and refunding bonds, consistent with regulatory treatment.
(5) This amount is recorded net of $3.1 million on deposit with trustee
at Dec. 31, 1995.
(6) Of the amount due in 1997, $.8 million may be satisfied by the
substitution of property in lieu of cash payments.
Substantially all of the property, plant and equipment of Tampa
Electric is pledged as collateral.
Maturities and annual sinking fund requirements of long-term
debt for the years 1998, 1999, 2000 and 2001 are $7.2 million, $28.6
million, $137.5 million, and $8.1 million, respectively. Of these
amounts $.8 million per year for 1998 through 2001 may be satisfied
55
by the substitution of property in lieu of cash payments.
At Dec. 31, 1996, total long-term debt had a carrying amount of
$996.3 million and an estimated fair market value of $1,047.1
million. The estimated fair market value of long-term debt was based
on quoted market prices for the same or similar issues, on the
current rates offered for debt of the same remaining maturities, or
for long-term debt issues with variable rates that approximate market
rates, at carrying amounts. The carrying amount of long-term debt due
within one year approximated fair market value because of the short
maturity of these instruments.
Tampa Electric had an interest rate exchange agreement, which
expired Jan. 11, 1996, to reduce the cost of $100 million of fixed
rate long-term debt. The agreement reduced interest expense by $2.3
million per year in 1995 and 1994.
F. Retirement Plan
TECO Energy has a non-contributory defined benefit retirement
plan which covers substantially all employees. Benefits are based on
employees' years of service and average final earnings.
The company's policy is to fund the plan within the guidelines
set by ERISA for the minimum annual contribution and the maximum
allowable as a tax deduction by the IRS. About 67 percent of plan
assets were invested in common stocks and 33 percent in fixed income
investments at Dec. 31, 1996.
Components of Net Pension Expense
(millions)
1996 1995 1994
Service cost
(benefits earned during the period) $ 8.5 $ 7.2 $ 8.8
Interest cost on projected
benefit obligations 18.8 17.3 15.8
Less: Return on plan assets
Actual 43.4 66.4 (3.7)
Less net amortization of unrecognized
transition asset and deferred return 18.6 43.3 (25.8)
Net return on assets 24.8 23.1 22.1
Net pension expense 2.5 1.4 2.5
Effect of restructuring charge -- -- 13.3
Net pension expense recognized
in the Consolidated Statements
of Income $ 2.5 $ 1.4 $15.8
56
Reconciliation of the Funded Status of the Retirement Plan and the
Accrued Pension Prepayment/(Liability)
(millions)
Dec. 31, Dec. 31,
1996 1995
Fair market value of plan assets $ 320.5 $ 286.7
Projected benefit obligation (262.2) (260.2)
Excess of plan assets over projected
benefit obligation 58.3 26.5
Less unrecognized net gain from past
experience different from that assumed 65.9 33.4
Less unrecognized prior service cost (11.7) (7.1)
Less unrecognized net transition asset
(being amortized over 19.5 years) 8.5 9.5
Accrued pension prepayment/(liability) $ (4.4) $ (9.3)
Accumulated benefit obligation
(including vested benefits of
$196.7 for 1996 and $193.2 for 1995) $ 220.0 $ 215.2
Assumptions Used in Determining Actuarial Valuations
1996 1995
Discount rate to determine projected
benefit obligation 7.75% 7.3%
Rates of increase in compensation levels 3.3-5.3% 3.3-5.3%
Plan asset growth rate through time 9% 9%
G. Postretirement Benefit Plan
TECO Energy and its subsidiaries currently provide certain
postretirement health care benefits for substantially all employees
retiring after age 55 meeting certain service requirements. The
company contribution toward health care coverage for most employees
retiring after Jan. 1, 1990 is limited to a defined dollar benefit
based on years of service. Postretirement benefit levels are
substantially unrelated to salary. The company reserves the right to
terminate or modify the plans in whole or in part at any time.
Components of Postretirement Benefit Cost
(millions)
1996 1995 1994
Service cost (benefits earned
during the period) $ 2.2 $ 1.9 $ 2.2
Interest cost on projected
benefit obligations 5.9 6.3 5.3
Amortization of transition obligation
(straight line over 20 years) 2.5 2.7 2.8
Amortization of actuarial (gain)/loss .4 .2 .2
Net periodic postretirement
benefit expense 11.0 11.1 10.5
Effect of restructuring charge -- -- 2.7
Net periodic postretirement
benefit expense recognized in the
Consolidated Statements of Income $11.0 $11.1 $13.2
57
Reconciliation of the Funded Status of the Postretirement Benefit
Plan and the Accrued Liability (millions)
Dec. 31, Dec. 31,
1996 1995
Accumulated postretirement benefit obligation
Active employees eligible to retire $ (4.9) $(4.8)
Active employees not eligible to retire (26.0) (30.9)
Retirees and surviving spouses (49.2) (51.9)
(80.1) (87.6)
Less unrecognized net gain/(loss)
from past experience (12.0) (19.2)
Less unrecognized transition obligation (39.7) (46.2)
Liability for accrued postretirement benefit $(28.4) $(22.2)
Assumptions Used in Determining Actuarial Valuations
1996 1995
Discount rate to determine projected
benefit obligation 7.75% 7.3%
The assumed health care cost trend rate for medical costs prior
to age 65 was 10.25% in 1996 and decreases to 5.75% in 2002 and
thereafter. The assumed health care cost trend rate for medical costs
after age 65 was 7.25% in 1996 and decreases to 5.75% in 2002 and
thereafter.
A 1 percent change in the medical trend rates would produce an 7
percent ($.6 million) change in the aggregate service and interest
cost for 1996 and an 8 percent ($6.3 million) change in the
accumulated postretirement benefit obligation as of Dec. 31, 1996.
H. Restructuring Charge
In 1994, TECO Energy implemented a corporate restructuring program
which resulted in a $25-million charge ($15 million after tax) and
reduced earnings per share by $.13. The cost of this restructuring
program reflects charges for 241 early retirements, the elimination
of other positions and other cost control initiatives. Approximately
$1.7 million of this charge was paid in 1994 and $6.3 million in
1995. No amount remained payable at the end of 1996. The impact on
pension cost resulting from the restructuring as determined under the
provisions of FAS 88, Accounting for Settlements and Curtailments of
Defined Benefit Pension Plans and for Termination Benefits, was
approximately $13.3 million. The impact on postretirement benefits as
determined under FAS 106, Accounting for Postretirement Benefits
Other Than Pensions, was approximately $2.7 million. These amounts
are included as part of the total 1994 charge of $25 million. See
Note F and Note G.
58
I. Income Tax Expense
Income tax expense consists of the following components:
(millions) Federal State Total
1996
Currently payable $ 57.8 $ 11.2 $ 69.0
Deferred 7.5 -- 7.5
Amortization of investment tax credits (5.1) -- (5.1)
Total income tax expense $ 60.2 $ 11.2 $ 71.4
1995
Currently payable $ 68.4 $ 13.3 $ 81.7
Deferred (16.6) (.7) (17.3)
Amortization of investment tax credits (5.3) -- (5.3)
Total income tax expense $ 46.5 $ 12.6 $ 59.1
1994
Currently payable $ 54.7 $ 10.0 $ 64.7
Deferred (8.3) (3.8) (12.1)
Investment tax credits (1.3) -- (1.3)
Amortization of investment tax credits (5.5) -- (5.5)
Total income tax expense $ 39.6 $ 6.2 $ 45.8
D e ferred taxes result from temporary differences in the
recognition of certain liabilities or assets for tax and financial
reporting purposes. The principal components of the company's
deferred tax assets and liabilities recognized in the balance sheet
are as follows:
(millions) Dec. 31, Dec. 31,
1996 1995
Deferred income tax assets(1)
Property related $ 54.3 $ 43.7
Other 22.4 22.2
Total deferred income tax assets 76.7 65.9
Deferred income tax liabilities(1)
Property related (465.0) (423.6)
Basis difference in oil and gas
producing properties (23.6) (22.8)
Revenue deferral plan (2) 23.1 19.6
Alternative minimum tax
credit carryforward 22.2 23.8
Other 16.6 6.4
Total deferred income
tax liabilities (426.7) (396.6)
Accumulated deferred income taxes $(350.0) $(330.7)
(1) Certain property related assets and liabilities have been netted.
(2) In 1997 an estimated $12.4 million of deferred taxes related to
deferred revenue is expected to currently reverse.
59
The total income tax provisions differ from amounts computed by
applying the federal statutory tax rate to income before income taxes
for the following reasons:
(millions) 1996 1995 1994
Net income $200.7 $186.1 $153.2
Total income tax provision 71.4 59.1 45.8
Preferred dividend requirements 1.8 3.6 3.6
Income before income taxes and
preferred dividend requirements $273.9 $248.8 $202.6
Income taxes on above at federal
statutory rate of 35% $ 95.8 $ 87.1 $ 70.9
Increase (Decrease) due to:
State income tax, net of
federal income tax 7.3 8.2 4.0
Amortization of investment
tax credits (5.1) (5.3) (5.5)
Non-conventional fuels tax credit (19.6) (20.6) (19.6)
Equity portion of AFUDC (5.8) (4.9) (1.4)
Other (1.2) (5.4) (2.6)
Total income tax provision $ 71.4 $ 59.1 $ 45.8
Provision for income taxes as a percent
of income before income taxes 26.1% 23.8% 22.6%
J. Segment Information
TECO Energy's principal business segment is Energy Services.
This segment has been separated into two components: Regulated
Electric Utility Services and Other Energy Services which includes
the transportation, coal mining, coalbed methane gas and oil and gas
production, independent power generation, energy management and
energy services subsidiaries. All other activities of TECO Energy
have been included in Other.
60
Identifiable assets are those assets used directly in a segment's operations and are
presented net of depreciation.
Income Identifiable Capital
From Assets Expenditures
(millions) Revenues Operations Depreciation at Dec. 31, for the Year
1996
Regulated electric
utility services $1,112.9 (1) $244.0 $120.2 $2,645.8 $203.3
Other energy services 556.2 103.9 (2) 64.4 879.3 68.9
Eliminations (202.0) (7.6)(2) -- (83.3) --
Energy services segment 1,467.1 340.3 184.6 3,441.8 272.2
Other and eliminations 5.9 2.6 .6 118.9 (4.5)
TECO Energy
consolidated $1,473.0 $342.9 $185.2 $3,560.7 $267.7
1995
Regulated electric
utility services $1,092.3 (1) $229.5 $113.3 $2,566.7 $334.5
Other energy services 500.4 93.5 (2) 61.1 838.3 95.8
Eliminations (205.3) (8.2)(2) -- (86.1) --
Energy services segment 1,387.4 314.8 174.4 3,318.9 430.3
Other and eliminations 4.9 2.9 .3 154.5 2.4
TECO Energy
consolidated $1,392.3 $317.7 $174.7 $3,473.4 $432.7
61
1994
Regulated electric
utility services $1,094.9 $204.5 $115.1 $2,348.7 $230.8
Other energy services 465.7 67.3 (2) 58.6 803.2 78.0
Eliminations (214.5) (6.9)(2) -- (19.8) --
Energy services segment 1,346.1 264.9 173.7 3,132.1 308.8
Other and eliminations 4.8 4.9 .3 180.1 .3
TECO Energy
consolidated $1,350.9 $269.8(3) $174.0 $3,312.2 $309.1
(1) Revenues shown in 1996 and 1995 are after the revenue deferral at
Tampa Electric of $34.2 million and $50.8 million, respectively.
(2) Income from operations includes non-conventional fuels tax credit
of $19.6 million, $20.6 million and $19.6 million in 1996, 1995
and 1994, respectively, and interest cost on the non-recourse
debt related to independent power operations of $12.0 million,
$12.4 million and $12.7 million in 1996, 1995 and 1994,
respectively. In the Consolidated Statements of Income, the tax
credit is part of the provision for income taxes and the interest
is part of interest expense.
(3) Income from operations in 1994 includes the effect of a corporate
restructuring charge of $25 million. See Note H.
62
K. Pending Merger
TECO Energy and Lykes Energy have agreed to merge in a stock-
for-stock transaction with an equity value of $300 million. The
number of TECO Energy shares to be issued will depend on the average
market price during a specified period prior to the closing, subject
to certain limitations. The principal subsidiary of Lykes Energy is
Peoples Gas System, a regulated, retail gas distributor in Florida.
This merger, to be accounted for as a pooling of interest, has been
approved by both companies' boards of directors and the shareholders
of Lykes Energy. The merger is subject to certain closing conditions
with closing expected by mid-year 1997.
L. Commitments and Contingencies
TECO Energy has made certain commitments in connection with its
continuing capital improvements program. TECO Energy estimates that
capital expenditures for ongoing businesses during 1997 will be about
$185 million and approximately $763 million for the years 1998
through 2001.
Tampa Electric's capital expenditures are estimated to be $116
million for 1997 and $470 million for 1998 through 2001 for equipment
and facilities to meet customer growth. This includes commitments of
approximately $7 million at the end of 1996.
At the diversified companies, capital expenditures are estimated
at $69 million for 1997 and $293 million for the years 1998 through
2001, primarily for asset replacement and refurbishment at TECO
Transport & Trade and TECO Coal and development of TECO Oil & Gas.
This includes commitments of about $9 million at the end of 1996.
Capital requirements for Peoples Gas System and Peoples Gas
Company, both wholly owned subsidiaries of Lykes Energy, are not
reflected in the above projections. Capital investment plans for
these companies are still being developed.
63
L. Quarterly Data (unaudited)
Financial data by quarter is as follows (unaudited):
Quarter ended
March 31 June 30 Sept. 30 Dec. 31
1996
Revenues(1) $ 341.1 $ 361.5 $ 400.9 $ 369.5
Income from operations(1) $ 68.1 $ 80.6 $ 106.4 $ 87.8
Net income(1) $ 41.5 $ 48.3 $ 65.4 $ 45.5
Earnings per average
common share $ .36 $ .41 $ .56 $ .38
Dividends paid per common
share $ .265 $ .28 $ .28 $ .28
Stock price per common
share(2)
High $ 27 $ 25 1/4 $ 25 1/4 $ 25 3/8
Low $ 23 3/4 $ 23 $ 23 $ 23 1/4
Close $ 24 7/8 $ 25 1/4 $ 23 3/4 $ 24 1/8
1995
Revenues(1) $ 319.1 $ 349.7 $ 389.1 $ 334.4
Income from operations(1) $ 66.0 $ 80.7 $ 107.1 $ 63.9
Net income(1) $ 36.5 $ 46.4 $ 63.2 $ 40.0
Earnings per average
common share $ .31 $ .40 $ .55 $ .34
Dividends paid per common
share $ .2525 $ .265 $ .265 $ .265
Stock price per common
share(2)
High $ 22 1/8 $ 22 3/4 $ 23 1/2 $ 25 3/4
Low $ 20 $ 20 1/2 $ 21 1/4 $ 23 1/8
Close $ 21 $ 22 $ 23 1/2 $ 25 5/8
(1) Millions.
(2) Trading prices for common shares.
64
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
During the period Jan. 1, 1995 to the date of this report, TECO
Energy has not had and has not filed with the Commission a report as
to any changes in or disagreements with accountants on accounting
principles or practices, financial statement disclosure, or auditing
scope or procedure.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
(a) The information required by Item 10 with respect to the directors
of the registrant is included under the caption "Election of
Directors" on pages 1 through 4 of TECO Energy's definitive proxy
statement, dated March 3, 1997, for its Annual Meeting of
Shareholders to be held on April 16, 1997 (Proxy Statement) and is
incorporated herein by reference.
(b) The information required by Item 10 concerning executive officers
of the registrant is included under the caption "Executive Officers
of the Registrant" on page 17 of this report.
Item 11. EXECUTIVE COMPENSATION.
The information required by Item 11 is included in the Proxy
Statement beginning on page 9 and ending just before the caption
"Approval of the 1997 Director Equity Plan" on page 11 and under the
caption "Compensation of Directors" on page 4, and is incorporated
herein by reference.
Item 12. S E CURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information required by Item 12 is included under the
caption "Share Ownership" on pages 4 through 5 of the Proxy Statement
and is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by Item 13 is included under the caption
"Election of Directors" on page 3 of the Proxy Statement and is
incorporated herein by reference.
65
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(a) 1. Financial Statements - See index on page 39.
2. Financial Statement Schedules - See index on page 39.
3. Exhibits
*2.1 Conformed copy of Agreement and Plan of Merger dated as
of Nov. 21, 1996, between TECO Energy, Inc. and Lykes
Energy, Inc. (Exhibit 2.1 to TECO Energy, Inc.'s
Registration Statement on S-4 filed on Nov. 22, 1996,
File No. 333-16683).
*2.2 Conformed copy of Stock Option Agreement dated as of
Nov. 21, 1996, between Lykes Energy, Inc. and TECO
E n ergy, Inc.(Exhibit 2.2 to TECO Energy, Inc.'s
Registration Statement on S-4 filed on Nov. 22, 1996,
File No. 333-16683).
*3.1 Articles of Incorporation, as amended on April 20, 1993
(Exhibit 3, Form 10-Q for the quarter ended March 31,
1993 of TECO Energy, Inc.).
*3.2 Bylaws, as amended effective July 18, 1995 (Exhibit 3,
Form 10-Q for the quarter ended June 30, 1995 of TECO
Energy, Inc.).
*4.1 Indenture of Mortgage among Tampa Electric Company,
State Street Trust Company and First Savings & Trust
Company of Tampa, dated as of Aug. 1, 1946 (Exhibit 7-A
to Registration Statement No. 2-6693).
*4.2 Thirteenth Supplemental Indenture dated as of Jan. 1,
1974, to Exhibit 4.1 (Exhibit 2-g-1, Registration
Statement No. 2-51204).
*4.3 Sixteenth Supplemental Indenture, dated as of Oct. 30,
1992, to Exhibit 4.1 (Exhibit 4.1, Form 10-Q for the
quarter ended Sept. 30, 1992 of TECO Energy, Inc.).
*4.4 Eighteenth Supplemental Indenture, dated as of May 1,
1993, to Exhibit 4.1 (Exhibit 4.1, Form 10-Q for the
quarter ended June 30, 1993 of TECO Energy, Inc.).
*4.5 Installment Purchase and Security Contract between the
Hillsborough County Industrial Development Authority and
Tampa Electric Company, dated as of March 1, 1972
(Exhibit 4.9, Form 10-K for 1986 of TECO Energy, Inc.).
*4.6 First Supplemental Installment Purchase and Security
Contract, dated as of Dec. 1, 1974 (Exhibit 4.10, Form
10-K for 1986 of TECO Energy, Inc.).
*4.7 Third Supplemental Installment Purchase Contract, dated
as of May 1, 1976 (Exhibit 4.12, Form 10-K for 1986 of
TECO Energy, Inc.).
*4.8 Installment Purchase Contract between the Hillsborough
County Industrial Development Authority and Tampa
Electric Company, dated as of Aug. 1, 1981 (Exhibit
4.13, Form 10-K for 1986 of TECO Energy, Inc.).
*4.9 Amendment to Exhibit A of Installment Purchase Contract,
dated April 7, 1983 (Exhibit 4.14, Form 10-K for 1989
of TECO Energy, Inc.).
*4.10 Second Supplemental Installment Purchase Contract, dated
as of June 1, 1983 (Exhibit 4.11, Form 10-K for 1994 of
TECO Energy, Inc.).
*4.11 Third Supplemental Installment Purchase Contract, dated
as of Aug. 1, 1989 (Exhibit 4.16, Form 10-K for 1989 of
TECO Energy, Inc.).
*4.12 Installment Purchase Contract between the Hillsborough
C o unty Industrial Development Authority and Tampa
Electric Company, dated as of Jan. 31, 1984 (Exhibit
4.13, Form 10-K for 1993 of TECO Energy, Inc.).
*4.13 First Supplemental Installment Purchase Contract, dated
as of Aug. 2, 1984 (Exhibit 4.14, Form 10-K for 1994 of
66
TECO Energy, Inc.).
*4.14 Second Supplemental Installment Purchase Contract, dated
as of July 1, 1993 (Exhibit 4.3, Form 10-Q for the
quarter ended June 30, 1993 of TECO Energy, Inc.).
*4.15 Loan and Trust Agreement among the Hillsborough County
Industrial Development Authority, Tampa Electric Company
and NCNB National Bank of Florida, as trustee, dated as
of Sept. 24, 1990 (Exhibit 4.1, Form 10-Q for the
quarter ended Sept. 30, 1990 for TECO Energy, Inc.).
*4.16 Loan and Trust Agreement, dated as of Oct. 26, 1992
among the Hillsborough County Industrial Development
Authority, Tampa Electric Company and NationsBank of
Florida, N.A., as trustee (Exhibit 4.2, Form 10-Q for
the quarter ended Sept. 30, 1992 of TECO Energy, Inc.).
*4.17 Loan and Trust Agreement, dated as of June 23, 1993,
among the Hillsborough County Industrial Development
Authority, Tampa Electric Company and NationsBank of
Florida, N.A., as trustee (Exhibit 4.2, Form 10-Q for
the quarter ended June 30, 1993 of TECO Energy, Inc.).
*4.18 Installment Sales Agreement between the Plaquemines
Port, Harbor and Terminal District (Louisiana) and
Electro-Coal Transfer Corporation, dated as of Sept. 1,
1985 (Exhibit 4.19, Form 10-K for 1986 of TECO Energy,
Inc.).
*4.19 Reimbursement Agreement between TECO Energy, Inc. and
Electro-Coal Transfer Corporation, dated as of March 22,
1989 (Exhibit 4.19, Form 10-K for 1988 of TECO Energy,
Inc.).
*4.20 Rights Agreement between TECO Energy, Inc. and The First
National Bank of Boston, as Rights Agent, dated as of
April 27, 1989 (Exhibit 4, Form 8-K, dated as of May 2,
1989 of TECO Energy, Inc.).
*4.21 Amendment No. 1 to Rights Agreement dated as of July 20,
1993 between TECO Energy, Inc. and The First National
Bank of Boston, as Rights Agent (Exhibit 1.2, Form 8-
A/A, dated as of July 27, 1993 of TECO Energy, Inc.).
4.22 Loan and Trust Agreement, dated as of Dec. 1, 1996,
among the Polk County Industrial Development Authority,
Tampa Electric Company and the Bank of New York, as
trustee.
*10.1 1980 Stock Option and Appreciation Rights Plan, as
amended on July 18, 1989 (Exhibit 28.1, Form 10-Q for
quarter ended June 30, 1989 of TECO Energy, Inc.).
*10.2 Directors' Retirement Plan, as amended effective July 1,
1995 (Exhibit 10.1, Form 10-Q for quarter ended June 30,
1995 of TECO Energy, Inc.).
*10.3 S u pplemental Executive Retirement Plan for H. L.
Culbreath, as amended on April 27, 1989 (Exhibit 10.14,
Form 10-K for 1989 of TECO Energy, Inc.).
10.4 Supplemental Executive Retirement Plan for T. L. Guzzle,
as amended and restated as of Oct. 16, 1996.
10.5 Supplemental Executive Retirement Plan for R. H. Kessel,
as amended and restated as of Jan. 15, 1997.
10.6 TECO Energy Group Supplemental Executive Retirement
Plan, as amended and restated as of Oct. 16, 1996.
10.7 TECO Energy Group Supplemental Retirement Benefits Trust
Agreement as amended and restated as of Jan. 15, 1997.
*10.8 Annual Incentive Compensation Plan for TECO Energy and
subsidiaries, as revised January 1993 (Exhibit 10.2,
Form 10-Q for quarter ended March 31, 1994 of TECO
Energy, Inc.).
*10.9 TECO Energy Group Supplemental Disability Income Plan,
dated as of March 20, 1989 (Exhibit 10.22, Form 10-K for
1988 of TECO Energy, Inc.).
*10.10 Forms of Severance Agreement between TECO Energy, Inc.
and certain senior executives, as amended and restated
67
as of March 20, 1996.
*10.11 Severance Agreement between TECO Energy, Inc. and H.L.
Culbreath, dated as of April 28, 1989 (Exhibit 10.24,
Form 10-K for 1989 of TECO Energy, Inc.).
*10.12 Loan and Stock Purchase Agreement between TECO Energy,
Inc. and Barnett Banks Trust Company, N.A., as trustee
of the TECO Energy Group Savings Plan Trust Agreement
(Exhibit 10.3, Form 10-Q for the quarter ended March 31,
1990 for TECO Energy, Inc.).
*10.13 TECO Energy, Inc. 1991 Director Stock Option Plan as
amended on Jan. 21, 1992 (Exhibit 10.26, Form 10-K for
1991 of TECO Energy, Inc.).
10.14 Supplemental Executive Retirement Plan for A.D. Oak, as
amended and restated as of Oct. 16, 1996.
10.15 Supplemental Executive Retirement Plan for K. S.
Surgenor, as amended and restated as of Oct. 16, 1996.
*10.16 Terms of T.L. Guzzle's employment, dated as of July 20,
1993 (Exhibit 10, Form 10-Q for the quarter ended June
30, 1993 of TECO Energy, Inc.).
10.17 Supplemental Executive Retirement Plan for G. F.
Anderson, as amended and restated as of Oct. 16, 1996.
*10.18 TECO Energy Directors' Deferred Compensation Plan, as
amended and restated effective April 1, 1994 (Exhibit
10.1, Form 10-Q for the quarter ended March 31, 1994 for
TECO Energy, Inc.).
*10.19 TECO Energy Group Retirement Savings Excess Benefit
Plan, as amended and restated effective Aug. 1, 1994
(Exhibit 10.21, Form 10-K for 1994 of TECO Energy,
Inc.).
10.20 Supplemental Executive Retirement Plan for R. A. Dunn,
as amended and restated as of Jan. 15, 1997.
*10.21 TECO Energy, Inc. 1996 Equity Incentive Plan (Exhibit
10.1, Form 10-Q for the quarter ended March 31, 1996 of
TECO Energy, Inc.).
*10.22 Form of Nonstatutory Stock Option under the TECO Energy,
Inc. 1996 Equity Incentive Plan (Exhibit 10.1, Form 10-Q
for the quarter ended June 30, 1996 of TECO Energy,
Inc.).
*10.23 Form of Restricted Stock Agreement between TECO Energy,
Inc. and certain senior executives under the TECO
Energy, Inc. 1996 Equity Incentive Plan (Exhibit 10.2,
Form 10-Q for the quarter ended June 30, 1996 of TECO
Energy, Inc.).
*10.24 Form of Restricted Stock Agreement between TECO Energy,
Inc. and G. F. Anderson under the TECO Energy, Inc. 1996
Equity Incentive Plan (Exhibit 10.3, Form 10-Q for the
quarter ended June 30, 1996 of TECO Energy, Inc.).
11. Computation of earnings per common share.
21. Subsidiaries of the Registrant.
23. Consent of Independent Accountants.
24.1 Power of Attorney.
24.2 Certified copy of resolution authorizing Power of
Attorney.
27. Financial Data Schedule (EDGAR filing only).
_____________
* Indicates exhibit previously filed with the Securities and
Exchange Commission and incorporated herein by reference.
Exhibits filed with periodic reports of TECO Energy, Inc. were
filed under Commission File No. 1-8180.
68
Executive Compensation Plans and Arrangements
Exhibits 10.1 through 10.11 and 10.13 through 10.24 above are
management contracts or compensatory plans or arrangements in which
executive officers or directors of TECO Energy, Inc. participate.
Certain instruments defining the rights of holders of long-term
debt of TECO Energy, Inc. and its consolidated subsidiaries
authorizing in each case a total amount of securities not exceeding
10 percent of total assets on a consolidated basis are not filed
herewith. TECO Energy, Inc. will furnish copies of such instruments
to the Securities and Exchange Commission upon request.
(b) TECO Energy, Inc. filed the following reports on Form 8-K during
the last quarter of 1996.
The registrant filed a Current Report on Form 8-K dated Oct. 9, 1996
reporting under Item 5. Other Events announcing the Florida Public
Service Commission s vote to approve the agreement among Tampa
Electric Company, the Office of Public Counsel and the Florida
Industrial Power Users Group which resolves all regulatory issues
related to a prudence review of Tampa Electric Company s Polk Power
Station, extends the current base rate freeze through 1999 and
provides for a temporary reduction in base rates.
The registrant filed a Current Report on Form 8-K dated Nov. 21, 1996
reporting under Item 5. Other Events that the registrant and Lykes
Energy, Inc. ( LEI ) entered into an Agreement and Plan of Merger
pursuant to which the registrant will acquire LEI through the merger
of LEI with and into the registrant or, subject to certain
conditions, with a wholly owned subsidiary of the registrant.
The registrant filed a Current Report on Form 8-K dated Dec. 5, 1996
reporting under "Item 5. Other Events" announcing approval by the
shareholders of LEI of the previously announced merger of LEI with
the registrant.
69
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized on the 26th day of March, 1997.
TECO ENERGY, INC.
By T. L. GUZZLE*
T. L. GUZZLE, Chairman of the Board,
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on behalf
of the registrant and in the capacities indicated on March 26, 1997:
Signature Title
T. L. GUZZLE* Chairman of the Board,
T. L. GUZZLE Director and Chief Executive
Officer
(Principal Executive Officer)
/s/ A. D. OAK Senior Vice President-
A. D. OAK Finance and Chief Financial Officer
(Principal Financial
and Accounting Officer)
G. F. ANDERSON* President, Director
G. F. ANDERSON and Chief Operating
Officer
C. D. AUSLEY* Director
C. D. AUSLEY
S. L. BALDWIN* Director
S. L. BALDWIN
H. L. CULBREATH* Director
H. L. CULBREATH
J. L. FERMAN, JR.* Director
J. L. FERMAN, JR.
E. L. FLOM* Director
E. L. FLOM
H. R. GUILD, JR.* Director
H. R. GUILD, JR.
D. R. HENDRIX* Director
D. R. HENDRIX
R. L. RYAN* Director
R. L. RYAN
W. P. SOVEY* Director
W. P. SOVEY
70
J. T. TOUCHTON* Director
J. T. TOUCHTON
J. A. URQUHART* Director
J. A. URQUHART
J. O. WELCH, JR.* Director
J. O. WELCH, JR.
*By: /s/ A. D. OAK
A. D. OAK, Attorney-in-fact
71
INDEX TO EXHIBITS
Exhibit Page
No. Description No.
2.1 Conformed copy of Agreement and Plan of Merger *
dated as of Nov. 21, 1996, between TECO Energy,
Inc. And Lykes Energy, Inc. (Exhibit 2.1 to
TECO Energy, Inc. s Registration Statement on
S-4 filed on Nov. 22, 1996, File No. 333-16683).
2.2 Conformed copy of Stock Option Agreement *
dated as of Nov. 21, 1996, between Lykes Energy, Inc.
and TECO Energy, Inc.(Exhibit 2.2 to TECO Energy,
Inc. s Registration Statement on S-4 filed on Nov. 22,
1996, File No. 333-16683).
3.1 Articles of Incorporation, as amended on *
April 20, 1993 (Exhibit 3, Form 10-Q for the
quarter ended March 31, 1993 of TECO Energy,
Inc.).
3.2 Bylaws, as amended effective *
July 18, 1995 (Exhibit 3, Form 10-Q for the
quarter ended June 30, 1995 of TECO Energy, Inc.).
4.1 Indenture of Mortgage among Tampa Electric *
Company, State Street Trust Company and First
Savings & Trust Company of Tampa, dated as of
Aug. 1, 1946 (Exhibit 7-A to Registration
Statement No. 2-6693).
4.2 Thirteenth Supplemental Indenture dated as *
of Jan. 1, 1974, to Exhibit 4.1 (Exhibit 2-g-1,
Registration Statement No. 2-51204).
4.3 Sixteenth Supplemental Indenture, dated as *
of Oct. 30, 1992, to Exhibit 4.1 (Exhibit 4.1,
Form 10-Q for the quarter ended Sept. 30, 1992 of
TECO Energy, Inc.).
4.4 Eighteenth Supplemental Indenture, dated as *
of May 1, 1993, to Exhibit 4.1 (Exhibit 4.1, Form
10-Q for the quarter ended June 30, 1993 of TECO
Energy, Inc.).
4.5 Installment Purchase and Security Contract *
between the Hillsborough County Industrial
Development Authority and Tampa Electric Company,
dated as of March 1, 1972 (Exhibit 4.9, Form 10-K
for 1986 of TECO Energy, Inc.).
4.6 First Supplemental Installment Purchase and *
Security Contract, dated as of Dec. 1, 1974
(Exhibit 4.10, Form 10-K for 1986 of TECO Energy,
Inc.).
4.7 Third Supplemental Installment Purchase *
Contract, dated as of May 1, 1976 (Exhibit 4.12,
Form 10-K for 1986 of TECO Energy, Inc.).
4.8 Installment Purchase Contract between the *
Hillsborough County Industrial Development
Authority and Tampa Electric Company, dated as of
Aug. 1, 1981 (Exhibit 4.13, Form 10-K for 1986 of
TECO Energy, Inc.).
4.9 Amendment to Exhibit A of Installment *
Purchase Contract, dated April 7, 1983 (Exhibit
72
4.14, Form 10-K for 1989 of TECO Energy, Inc.).
4.10 Second Supplemental Installment Purchase *
Contract, dated as of June 1, 1983 (Exhibit 4.11,
Form 10-K for 1994 of TECO Energy, Inc.).
4.11 Third Supplemental Installment Purchase *
Contract, dated as of Aug. 1, 1989 (Exhibit 4.16,
Form 10-K for 1989 of TECO Energy, Inc.).
4.12 Installment Purchase Contract between the *
Hillsborough County Industrial Development
Authority and Tampa Electric Company, dated as of
Jan. 31, 1984 (Exhibit 4.13, Form 10-K for 1993
of TECO Energy, Inc.).
4.13 First Supplemental Installment Purchase *
Contract, dated as of Aug. 2, 1984 (Exhibit 4.14,
Form 10-K for 1994 of TECO Energy, Inc.).
4.14 Second Supplemental Installment Purchase Contract, *
dated as of July 1, 1993 (Exhibit 4.3, Form 10-Q
for the quarter ended June 30, 1993 of TECO
Energy, Inc.).
4.15 Loan and Trust Agreement among the Hillsborough *
County Industrial Development Authority, Tampa
Electric Company and NCNB National Bank of
Florida, as trustee, dated as of Sept. 24, 1990
(Exhibit 4.1, Form 10-Q for the quarter ended
Sept. 30, 1990 for TECO Energy, Inc.).
4.16 Loan and Trust Agreement, dated as of Oct. 26, *
1992 among the Hillsborough County Industrial
Development Authority, Tampa Electric Company and
NationsBank of Florida, N.A., as trustee (Exhibit
4.2, Form 10-Q for the quarter ended Sept. 30,
1992 of TECO Energy, Inc.).
4.17 Loan and Trust Agreement, dated as of *
June 23, 1993, among the Hillsborough County
Industrial Development Authority, Tampa Electric
Company and NationsBank of Florida, N.A., as
trustee (Exhibit 4.2, Form 10-Q for the quarter
ended June 30, 1993 of TECO Energy, Inc.).
4.18 Installment Sales Agreement between the *
Plaquemines Port, Harbor and Terminal District
(Louisiana) and Electro-Coal Transfer
Corporation, dated as of Sept. 1, 1985 (Exhibit
4.19, Form 10-K for 1986 of TECO Energy, Inc.).
4.19 Reimbursement Agreement between TECO Energy, *
Inc. and Electro-Coal Transfer Corporation, dated
as of March 22, 1989 (Exhibit 4.19, Form 10-K for
1988 of TECO Energy, Inc.).
4.20 Rights Agreement between TECO Energy, Inc. *
and The First National Bank of Boston, as Rights
Agent, dated as of April 27, 1989 (Exhibit 4,
Form 8-K, dated as of May 2, 1989 of TECO Energy,
Inc.).
4.21 Amendment No. 1 to Rights Agreement dated as *
of July 20, 1993 between TECO Energy, Inc. and
The First National Bank of Boston, as Rights
Agent (Exhibit 1.2, Form 8-A/A, dated as of July
27, 1993 of TECO Energy, Inc.).
4.22 Loan and Trust Agreement, dated as of Dec. 1, 1996, 74
73
among the Polk County Industrial Development
Authority, Tampa Electric Company and the Bank of
New York, as trustee.
10.1 1980 Stock Option and Appreciation Rights *
Plan, as amended on July 18, 1989 (Exhibit 28.1,
Form 10-Q for quarter ended June 30, 1989 of TECO
Energy, Inc.).
10.2 Directors' Retirement Plan, as amended *
effective July 1, 1995 (Exhibit 10.1, Form 10-Q
for quarter ended June 30, 1995 of TECO Energy,
Inc.).
10.3 Supplemental Executive Retirement Plan for *
H. L. Culbreath, as amended on April 27, 1989
(Exhibit 10.14, Form 10-K for 1989 of TECO
Energy, Inc.).
10.4 Supplemental Executive Retirement Plan 168
for T. L. Guzzle, as amended and restated as of
Oct. 16, 1996.
10.5 Supplemental Executive Retirement Plan for 175
R. H. Kessel, as amended and restated as of Jan.
15, 1997.
10.6 TECO Energy Group Supplemental Executive Retirement 183
Plan, as amended and restated as of Oct. 16, 1996
10.7 TECO Energy Group Supplemental Retirement Benefits 194
Trust Agreement, as amended and restated as of
Jan. 15, 1997.
10.8 Annual Incentive Compensation Plan for *
TECO Energy and subsidiaries, as revised January
1993 (Exhibit 10.2, Form 10-Q for quarter ended
March 31, 1994 of TECO Energy, Inc.).
10.9 TECO Energy Group Supplemental Disability *
Income Plan, dated as of March 20, 1989 (Exhibit
10.22, Form 10-K for 1988 of TECO Energy, Inc.).
10.10 Forms of Severance Agreement between TECO *
Energy, Inc. and certain senior executives, as
amended and restated as of March 20, 1996.
10.11 Severance Agreement between TECO Energy, Inc. *
and H.L. Culbreath, dated as of April 28, 1989
(Exhibit 10.24, Form 10-K for 1989 of TECO
Energy, Inc.).
10.12 Loan and Stock Purchase Agreement between *
TECO Energy, Inc. and Barnett Banks Trust
Company, N.A., as trustee of the TECO Energy
Group Savings Plan Trust Agreement (Exhibit 10.3,
Form 10-Q for the quarter ended March 31, 1990
for TECO Energy, Inc.).
10.13 TECO Energy, Inc. 1991 Director Stock *
Option Plan as amended on Jan. 21, 1992 (Exhibit
10.26, Form 10-K for 1991 of TECO Energy, Inc.).
10.14 Supplemental Executive Retirement Plan 208
for A. D. Oak, as amended and restated as of Oct.
16, 1996.
10.15 Supplemental Executive Retirement Plan 215
for K. S. Surgenor, as amended and restated as of
Oct. 16, 1996.
10.16 Terms of T.L. Guzzle's employment, dated *
as of July 20, 1993 (Exhibit 10, Form 10-Q for
74
the quarter ended June 30, 1993 of TECO Energy,
Inc.).
10.17 Supplemental Executive Retirement Plan 222
for G. F. Anderson, as amended and restated as of
Oct. 16, 1996.
10.18 TECO Energy Directors' Deferred Compensation Plan, *
as amended and restated effective April 1, 1994
(Exhibit 10.1, Form 10-Q for the quarter ended
March 31, 1994 for TECO Energy, Inc.).
10.19 TECO Energy Group Retirement Savings Excess Benefit *
Plan, as amended and restated effective Aug. 1, 1994
(Exhibit 10.21, Form 10-K for 1994 of TECO Energy, Inc.).
10.20 Supplemental Executive Retirement Plan for R. A. Dunn, 228
as amended and restated as of Jan. 15, 1997.
10.21 TECO Energy, Inc. 1996 Equity Incentive Plan (Exhibit *
10.1, Form 10-Q for the quarter ended March 31, 1996
of TECO Energy, Inc.).
10.22 Form of Nonstatutory Stock Option under the TECO *
Energy, Inc. 1996 Equity Incentive Plan (Exhibit 10.1,
Form 10-Q for the quarter ended June 30, 1996 of TECO
Energy, Inc.).
10.23 Form of Restricted Stock Agreement between TECO *
Energy, Inc. and certain senior executives under
the TECO Energy, Inc. 1996 Equity Incentive Plan
(Exhibit 10.2, Form 10-Q for the quarter ended June
30, 1996 of TECO Energy, Inc.).
10.24 Form of Restricted Stock Agreement between TECO *
Energy, Inc. and G. F. Anderson under the TECO Energy,
Inc. 1996 Equity Incentive Plan (Exhibit 10.3, Form
10-Q for the quarter ended June 30, 1996 of TECO Energy,
Inc.).
75
11. Computation of earnings per common share. 235
21. Subsidiaries of the Registrant. 236
23. Consent of Independent Accountants. 237
24.1 Power of Attorney. 238
24.2 Certified copy of resolution authorizing Power of
Attorney. 240
27. Financial Data Schedule (EDGAR filing only).
_____________
* Indicates exhibit previously filed with the Securities and Exchange
Commission and incorporated herein by reference. Exhibits filed with
periodic reports of TECO Energy, Inc. were filed under Commission
File No. 1-8180.
76