1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
-------------
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 1-5007
------
TAMPA ELECTRIC COMPANY
------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 59-0475140
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
702 N. FRANKLIN STREET, TAMPA, FLORIDA 33602
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813) 228-4111
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 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 [ ]
Number of shares outstanding of each of the issuer's classes of common stock, as
of the latest practicable date (July 31, 2000):
Common Stock, Without Par Value 10
The registrant meets the conditions set forth in General Instruction (H)(1)(a)
and (b) of Form 10-Q and is therefore filing this form with the reduced
disclosure format.
Index to Exhibits Appears on Page 15
Page 1 of 26
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FORM 10-Q
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
In the opinion of management, the unaudited condensed consolidated
financial statements include all adjustments which are of a recurring nature and
necessary to present fairly the financial position of Tampa Electric Company as
of June 30, 2000 and 1999, and the results operations and cash flows for the
three- and six-month periods ended June 30, 2000 and 1999. The results of
operations for the three- and six-month periods ended June 30, 2000 are not
necessarily indicative of the entire fiscal year ending Dec. 31, 2000. Reference
should be made to the explanatory notes affecting the income and balance sheet
accounts contained in Tampa Electric Company's Annual Report on Form 10-K for
the year ended Dec. 31, 1999 and to the notes on pages 7 through 8 of this
report.
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FORM 10-Q
CONSOLIDATED BALANCE SHEETS
UNAUDITED
(in millions)
JUNE 30, DEC. 31,
2000 1999
--------- --------
ASSETS
PROPERTY, PLANT AND EQUIPMENT, AT ORIGINAL COST
Utility plant in service
Electric $3,928.7 $3,892.1
Gas 624.8 590.0
Construction work in progress 148.0 81.6
-------- --------
4,701.5 4,563.7
Accumulated depreciation (1,869.5) (1,818.7)
-------- --------
2,832.0 2,745.0
Other property 7.9 7.9
-------- --------
2,839.9 2,752.9
-------- --------
CURRENT ASSETS
Cash and cash equivalents 0.4 26.1
Receivables, less allowance for uncollectibles 174.6 147.1
Inventories, at average cost
Fuel 89.3 73.2
Materials and supplies 49.7 49.0
Prepayments 16.6 10.9
-------- --------
330.6 306.3
-------- --------
DEFERRED DEBITS
Unamortized debt expense 13.3 14.2
Deferred income taxes 124.8 121.6
Regulatory asset - tax related 41.8 42.9
Other 68.2 84.6
-------- --------
248.1 263.3
-------- --------
$3,418.6 $3,322.5
======== ========
LIABILITIES AND CAPITAL
CAPITAL
Common stock $1,142.1 $1,043.1
Retained earnings 300.5 283.9
-------- --------
1,442.6 1,327.0
LONG-TERM DEBT, LESS AMOUNT DUE WITHIN ONE YEAR 689.8 690.3
-------- --------
2,132.4 2,017.3
-------- --------
CURRENT LIABILITIES
Long-term debt due within one year 4.8 84.8
Notes payable 276.9 271.2
Accounts payable 159.5 163.8
Customer deposits 80.6 79.9
Interest accrued 22.2 12.9
Taxes accrued 80.5 30.9
-------- --------
624.5 643.5
-------- --------
DEFERRED CREDITS
Deferred income taxes 460.1 458.3
Investment tax credits 38.2 40.5
Regulatory liability-tax related 52.6 56.1
Other 110.8 106.8
-------- --------
661.7 661.7
-------- --------
$3,418.6 $3,322.5
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
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FORM 10-Q
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
(in millions)
FOR THE THREE MONTHS ENDED JUNE 30, 2000 1999
------ ------
REVENUES
Electric $340.3 $304.2
Gas 71.4 56.7
------ ------
411.7 360.9
------ ------
OPERATING EXPENSES
Operation
Fuel 84.7 70.1
Purchased power 41.8 41.2
Natural gas sold 36.0 23.4
Other 62.8 52.6
Maintenance 32.8 24.5
Depreciation 43.8 41.7
Taxes-Federal and state income 22.7 22.3
Taxes-Other than income 30.6 30.8
------ ------
355.2 306.6
------ ------
OPERATING INCOME 56.5 54.3
OTHER INCOME (EXPENSE) 0.7 (0.2)
------ ------
INCOME BEFORE INTEREST CHARGES 57.2 54.1
------ ------
INTEREST CHARGES
Interest on long-term debt 12.4 12.9
Other interest 5.1 3.1
------ ------
17.5 16.0
------ ------
NET INCOME $ 39.7 $ 38.1
====== ======
The accompanying notes are an integral part of the consolidated financial
statements.
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FORM 10-Q
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
(in millions)
FOR THE SIX MONTHS ENDED JUNE 30, 2000 1999
------ ------
REVENUES
Electric $632.6 $565.0
Gas 158.1 127.9
------ ------
790.7 692.9
------ ------
OPERATING EXPENSES
Operation
Fuel 164.2 137.6
Purchased power 67.6 61.6
Natural gas sold 76.7 52.7
Other 118.1 105.5
Maintenance 59.5 44.0
Depreciation 88.9 84.4
Taxes-Federal and state income 43.9 42.8
Taxes-Other than income 61.4 60.5
------ ------
680.3 589.1
------ ------
OPERATING INCOME 110.4 103.8
OTHER INCOME (EXPENSE) 1.1 0.5
------ ------
INCOME BEFORE INTEREST CHARGES 111.5 104.3
------ ------
INTEREST CHARGES
Interest on long-term debt 25.3 25.7
Other interest 9.4 5.8
------ ------
34.7 31.5
------ ------
NET INCOME $ 76.8 $ 72.8
====== ======
The accompanying notes are an integral part of the consolidated financial
statements.
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FORM 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(in millions)
FOR THE SIX MONTHS ENDED JUNE 30, 2000 1999
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 76.8 $ 72.8
Adjustments to reconcile net income to net cash
Depreciation 88.9 84.4
Deferred income taxes (3.9) 1.6
Investment tax credits, net (2.2) (2.3)
Allowance for funds used during construction (1.4) (0.2)
Deferred revenue -- 3.9
Deferred recovery clause (3.2) (13.8)
Receivables, less allowance for uncollectibles (27.5) (0.3)
Inventories (16.8) (14.4)
Taxes accrued 49.6 51.9
Interest accrued 9.3 5.1
Accounts payable (4.3) (42.5)
Other 20.1 5.9
------ ------
185.4 152.1
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (176.6) (137.4)
Allowance for funds used during construction 1.4 0.2
------ ------
(175.2) (137.2)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from contributed capital from parent 99.0 12.0
Repayment of long-term debt (80.3) (0.3)
Net increase (decrease) in short-term debt 5.7 36.7
Payment of dividends (60.3) (62.5)
------ ------
(35.9) (14.1)
------ ------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (25.7) 0.8
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 26.1 0.8
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 0.4 $ 1.6
====== ======
The accompanying notes are an integral part of the consolidated financial
statements.
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FORM 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Tampa Electric Company (the company) is a wholly owned
subsidiary of TECO Energy, Inc.
B. The company has made certain commitments in connection with
its continuing construction program. Total construction expenditures
during 2000 are estimated to be $251 million for its electric division
(referred to as Tampa Electric) and $75 million for its natural gas
division (referred to as Peoples Gas System). Tampa Electric Company is
a potentially responsible party for certain superfund sites and,
through its Peoples Gas System division, for certain former
manufactured gas plant sites. While the joint and several liability
associated with these sites presents the potential for significant
response costs, the company estimates its ultimate financial liability
at approximately $20 million over the next 10 years. The environmental
remediation costs associated with these sites are not expected to have
a significant impact on customer prices.
C. Revenues in the three- and six-month periods ended June 30,
1999 reflected the deferral for refund to customers of $2.5 million and
$3.9 million, respectively of electric revenues associated with 1999
earnings at Tampa Electric. These deferred revenues resulted from Tampa
Electric's regulatory agreement that ended on Dec. 31, 1999. Tampa
Electric expects the Florida Public Service Commission (FPSC) staff to
closely monitor the company's achieved return on equity during 2000,
but not to require Tampa Electric to negotiate a new regulatory plan.
On Aug. 1, 2000, the FPSC approved a stipulation entered into by the
Office of Public Counsel, Florida Industrial Power Users Group (FIPUG),
and Tampa Electric settling the deferred revenue refund amount for 1997
and 1998. From Sept. 1, 2000 through Dec. 31, 2000, Tampa Electric will
refund $13 million to its customers which was the amount originally
approved by the FPSC for the years 1997 and 1998. As a result, this
amount was anticipated and recorded in earnings before the FIPUG filed
its protest in which the stipulation was reached. The exact amount of
the 1999 refund is expected to be settled by year end. Tampa Electric
does not expect these refunds to have a significant impact on earnings.
D. CONTRIBUTION BY OPERATING DIVISION
(in millions) OPERATING NET
REVENUES INCOME INCOME
-------- --------- ------
THREE MONTHS ENDED JUNE 30, 2000
Electric division (1) $340.4 $ 49.4 $ 35.6
Peoples Gas System (3) 71.4 7.1 4.1
------ ------ ------
411.8 56.5 39.7
Other and eliminations (0.1) -- --
------ ------ ------
Tampa Electric Company $411.7 $ 56.5 $ 39.7
====== ====== ======
THREE MONTHS ENDED JUNE 30, 1999
Electric division (1) (2) $304.4 $ 48.1 $ 34.7
Peoples Gas System (3) 56.7 6.2 3.4
------ ------ ------
361.1 54.3 38.1
Other and eliminations (0.2) -- --
------ ------ ------
Tampa Electric Company $360.9 $ 54.3 $ 38.1
====== ====== ======
SIX MONTHS ENDED JUNE 30, 2000
Electric division (1) $633.0 $ 91.8 $ 64.3
Peoples Gas System (3) 158.1 18.6 12.5
------ ------ ------
791.1 110.4 76.8
Other and eliminations (0.4) -- --
------ ------ ------
Tampa Electric Company $790.7 $110.4 $ 76.8
====== ====== ======
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FORM 10-Q
CONTRIBUTION BY OPERATING DIVISION
(in millions) OPERATING NET
REVENUES INCOME INCOME
-------- --------- ------
SIX MONTHS ENDED JUNE 30, 1999
Electric division (1) (2) $565.2 $ 87.6 $ 62.1
Peoples Gas System (3) 127.9 16.2 10.7
------ ------ ------
693.1 103.8 72.8
Other and eliminations (0.2) -- --
------ ------ ------
Tampa Electric Company $692.9 $103.8 $ 72.8
====== ====== ======
(1) Operating income is net of income tax expense of $20.1 million
and $36.0 million, respectively, for the three and six months
ended June 30, 2000, and $20.0 million and $35.7 million,
respectively, for the three and six months ended June 30, 1999.
(2) The electric division deferred revenues of $2.5 million and
$3.9 million, respectively, for the three and six months ended
June 30, for refund to customers. (See Note C on page 7.)
(3) Operating income is net of income tax expense of $2.6 million
and $7.9 million, respectively, for the three and six months
ended June 30, 2000, and $2.3 million and $7.1 million,
respectively, for the three and six months ended June 30, 1999.
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FORM 10-Q
ITEM 2. MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains forward-looking statements
which 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 include the following:
general economic conditions, particularly those in Tampa Electric's service area
affecting energy sales; weather variations affecting energy sales and operating
costs; potential competitive changes in the electric and gas industries,
particularly in the area of retail competition; regulatory actions affecting
Tampa Electric and Peoples Gas System; commodity price changes affecting the
competitive positions of Tampa Electric and Peoples Gas System; and changes in
and compliance with environmental regulations that may impose additional costs
or curtail some activities. Some of these factors are discussed more fully under
"Investment Considerations" in TECO Energy's Annual Report on Form 10-K for the
year ended Dec. 31, 1999, and reference is made thereto.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000:
Tampa Electric Company's net income for the quarter ended June 30, 2000
was $39.7 million, up from $38.1 million for the three-month period ended June
30, 1999. The 4 percent increase over last year's net income reflects revenue
growth at Tampa Electric and Peoples Gas System. Consolidated operating income
from continuing operations was $56.5 million compared with last year's operating
income of $54.3 million.
TAMPA ELECTRIC COMPANY - ELECTRIC DIVISION (TAMPA ELECTRIC)
Tampa Electric's net income for the quarter increased approximately 3
percent, driven primarily by improved retail energy sales volumes, which were 6
percent higher for the quarter, partially offset by higher costs. Growth in
retail customers was 3 percent. Expenses for the quarter increased, reflecting
higher depreciation and accelerated maintenance expenses to enhance summer unit
availability. Prior year results were favorably impacted by U.S. Department of
Energy credits associated with the Polk Power Station, which expired at the end
of 1999. Results for the current quarter include the favorable impact of cost
recovery from the scrubber investment at Big Bend Station, which was placed into
service in December 1999. A summary of the operating statistics for the three
months ended June 30, 2000 and 1999 is below:
OPERATING REVENUES KILOWATT-HOUR SALES
(in millions, except average customers) ------------------------------ -------------------------------
THREE MONTHS ENDED JUNE 30, 2000 1999 CHANGE 2000 1999 CHANGE
------ ------ ------ ------- ------- ------
Residential $149.7 $135.5 10.5% 1,818.0 1,690.8 7.5%
Commercial 94.5 86.4 9.4% 1,412.6 1,332.5 6.0%
Industrial - Phosphate 15.8 13.8 14.8% 340.3 317.3 7.2%
Industrial - Other 16.0 13.9 15.2% 280.6 257.2 9.1%
Other sales of electricity 24.2 21.5 12.6% 343.8 313.8 9.5%
Deferred and other revenues 5.8 5.7 2.2% -- -- --
------ ------ ------- -------
306.0 276.8 10.6% 4,195.3 3,911.6 7.3%
Sales for resale 26.9 21.0 28.5% 631.2 522.2 20.9%
Other operating revenue 7.5 6.6 12.7% -- -- --
------- ------ ------- -------
$340.4 $304.4 11.9% 4,826.5 4,433.8 8.9%
====== ====== ======= =======
Average customers 557.6 540.9 3.1%
====== ======
System Net Input 4,565.2 4,308.2 6.0%
======= =======
A generator failure caused an unplanned outage at Tampa Electric's
385-megawatt Gannon Station Unit 6 on July 18, 2000. The unit is currently being
repaired and is expected to be back in service by the end of 2000. Tampa
Electric has been purchasing and expects to continue to purchase replacement
power to meet peak loads until the unit returns to service. The estimated
replacement power costs of approximately $20 million is expected to be fully
recovered through the fuel adjustment cost recovery clause.
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FORM 10-Q
It is expected that most of the repair costs will be covered by insurance and
the remaining amount will be capitalized. As a result, the outage is not
expected to have a significant impact on Tampa Electric's operating income.
TAMPA ELECTRIC - NATURAL GAS DIVISION (PEOPLES GAS SYSTEM)
Net income at Peoples Gas System (PGS) increased 19 percent to $4.1
million for the quarter ended June 30, 2000 compared with $3.4 million for the
same period last year. The increase was driven by customer growth of 4 percent
and corresponding higher volumes. Commercial volumes were up 5 percent, while
residential volumes were down slightly. Lower margin sales to interruptible
wholesale and electric power generation customers were up 23 percent.
Depreciation was higher reflecting the company's continuing expansion efforts,
while operation and maintenance expenses were essentially even with last year. A
summary of the operating statistics for the three months ended June 30, 2000 and
1999 is below:
(in millions, except average customers) OPERATING REVENUES THERMS
----------------------------- -----------------------------
THREE MONTHS ENDED JUNE 30, 2000 1999 CHANGE 2000 1999 CHANGE
----- ----- ------ ----- ----- ------
BY CUSTOMER SEGMENT:
Residential $13.5 $12.1 12.3% 9.8 10.3 -4.3%
Commercial 32.8 29.6 10.8% 67.5 64.4 4.7%
Industrial 3.6 3.0 20.2% 72.3 66.6 8.5%
Off system sales 11.2 3.4 -- 29.3 13.7 --
Power generation 3.0 2.3 29.0% 109.3 90.5 20.7%
Other revenues 7.3 6.3 16.0% -- -- --
----- ----- ----- -----
$71.4 $56.7 26.0% 288.2 245.5 17.4%
===== ===== ===== =====
BY SALES TYPE:
System supply $52.6 $42.5 23.6% 79.4 73.2 8.3%
Transportation 11.5 7.9 46.9% 208.8 172.3 21.2%
Other revenues 7.3 6.3 16.0% -- -- --
----- ----- ----- -----
$71.4 $56.7 26.0% 288.2 245.5 17.4%
===== ===== ===== =====
Average customers 258.7 247.3 4.6%
===== =====
The franchise agreement between the City of Lakeland and PGS expired on
March 12, 2000. The City has suspended negotiations for a renewed agreement;
however, normal operations in Lakeland have continued under the terms of the
expired agreement. Lakeland provided approximately $2 million of PGS' annual
operating revenues in 1999.
OTHER
Allowance for other funds used during construction (AFUDC) was $0.7
million for the three months ended June 30, 2000, up from $0.2 million for the
same period last year. AFUDC is expected to increase over the next several years
reflecting Tampa Electric's generation expansion activities.
Interest charges were $17.5 million for the three months ended June 30,
2000 compared to $16.0 million for the same period in 1999. Financing costs in
the second quarter reflected increased short-term borrowings and higher interest
rates on those borrowings.
SIX MONTHS ENDED JUNE 30, 2000:
Tampa Electric Company's year-to-date net income was $76.8 million, up
from $72.8 million for the six-month period ended June 30, 1999. The 5-percent
increase over last year's net income reflects revenue growth at Tampa Electric
and Peoples Gas System. Consolidated operating income from continuing operations
was $110.4 million compared with $103.8 million last year.
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FORM 10-Q
TAMPA ELECTRIC COMPANY - ELECTRIC DIVISION (TAMPA ELECTRIC)
Tampa Electric's year-to-date net income increased to $64.3 million,
compared to $62.1 million for the same period last year. The approximate
4-percent increase was driven primarily by improved retail energy sales volumes,
which were 7 percent higher year-to-date. Growth in retail customers was 3
percent. Year-to-date expenses increased over last year reflecting higher
depreciation and accelerated maintenance expenses to enhance summer unit
availability. Prior year results reflected U.S. Department of Energy credits
associated with the Polk Power Station, which expired at the end of 1999. A
summary of the operating statistics for the six months ended June 30, 2000 and
1999 is below:
OPERATING REVENUES KILOWATT-HOUR SALES
(in millions, except average customers) ------------------------------ -------------------------------
SIX MONTHS ENDED JUNE 30, 2000 1999 CHANGE 2000 1999 CHANGE
------ ------ ------ ------- ------- ------
Residential $281.5 $255.8 10.0% 3,410.3 3,164.9 7.8%
Commercial 177.2 164.3 7.8% 2,637.9 2,522.0 4.6%
Industrial - Phosphate 30.0 24.9 20.8% 675.2 609.8 10.7%
Industrial - Other 30.4 27.1 12.0% 539.5 503.1 7.2%
Other sales of electricity 45.7 41.7 9.6% 646.1 606.2 6.6%
Deferred and other revenues 3.8 1.1 -- -- -- --
----- ------ ------- -------
568.6 514.9 10.4% 7,909.0 7,406.0 6.8%
Sales for resale 49.0 36.7 33.4% 1,146.0 872.1 31.4%
Other operating revenue 15.4 13.6 13.8% -- -- --
------ ------ ------- -------
$633.0 $565.2 12.0% 9,055.0 8,278.1 9.4%
====== ====== ======= =======
Average customers 556.9 540.9 3.0%
====== ======
System Net Input 8,420.4 7,898.0 6.6%
======= =======
TAMPA ELECTRIC - NATURAL GAS DIVISION (PEOPLES GAS SYSTEM)
Net income at Peoples Gas System (PGS) increased 17 percent to $12.5
million for the six months ended June 30, 2000 compared with $10.7 million for
the same period last year. The increase was primarily driven by customer growth
and corresponding higher volumes. Commercial volumes and residential volumes
were up 9 percent and 11 percent, respectively, for the year. Lower margin sales
to interruptible wholesale and electric power generation customers were up 26
percent year-to-date. Depreciation was higher reflecting the company's
continuing expansion efforts while operation and maintenance expenses were
slightly higher. A summary of the operating statistics for the six months ended
June 30, 2000 and 1999 is below:
(in millions, except average customers) OPERATING REVENUES THERMS
------------------------------ -----------------------------
SIX MONTHS ENDED JUNE 30, 2000 1999 CHANGE 2000 1999 CHANGE
------ ------- ------ ----- ----- ------
BY CUSTOMER SEGMENT:
Residential $ 39.0 $ 31.1 25.2% 33.7 30.3 11.3%
Commercial 71.1 66.5 7.1% 151.8 138.8 9.3%
Industrial 7.1 7.0 1.6% 152.4 143.6 6.1%
Off system sales 20.4 3.9 -- 59.5 15.9 --
Power generation 5.5 4.8 14.5% 211.7 177.0 19.6%
Other revenues 15.0 14.6 2.5% -- -- --
------ ------ ----- -----
$158.1 $127.9 23.6% 609.1 505.6 20.5%
====== ====== ===== =====
BY SALES TYPE:
System supply $118.6 $ 97.4 21.8% 183.3 159.5 14.9%
Transportation 24.5 15.9 54.2% 425.8 346.1 23.0%
Other revenues 15.0 14.6 2.5% -- -- --
------ ------ ----- -----
$158.1 $127.9 23.6% 609.1 505.6 20.5%
====== ====== ===== =====
Average customers 258.6 247.5 4.5%
====== ======
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FORM 10-Q
OTHER
Year-to-date allowance for other funds used during construction (AFUDC)
was $1.0 million compared to $0.2 million for the same period in 1999. AFUDC is
expected to increase over the next several years reflecting Tampa Electric's
generation expansion activities.
Interest charges were $34.7 million for the year-to-date period ended
June 30, 2000 compared to $31.5 million for the same period in 1999. This
increase is a result of higher borrowing levels and interest rates.
RECENT DEVELOPMENTS
On May 3, 2000, the governor of Florida by executive order created a
commission charged with proposing a comprehensive energy plan and strategy for
the state. The 17 member Energy 2020 Study Commission will address issues
including the current and future reliability of electric and natural gas
supply, emerging energy supply and delivery options, electrical industry
competition, environmental impacts of energy supply, energy conservation, and
fiscal impacts of energy supply options on taxpayers and energy providers. The
Commission will convene its first meeting in September 2000, and will provide a
written report containing specific recommendations, including legislature
recommendations, by December 1, 2001.
ACCOUNTING STANDARDS
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
In 1998, the FASB issued FAS 133, Accounting for Derivative Instruments
and Hedging. This standard is effective for fiscal years beginning after June
15, 2000. The new standard, as amended, requires an entity to recognize
derivatives as either assets or liabilities in the financial statements, to
measure those instruments at fair value and to reflect the changes in fair value
of those instruments as either components of comprehensive income or in net
income, depending on the types of those instruments.
In preparation for adoption of this Statement effective Jan. 1, 2001,
the company has completed an analysis of the information required by FAS 133,
and is continuing to evaluate and document all derivatives and hedging
relationships. From time to time, Tampa Electric has entered into futures, swaps
and options contracts to limit exposure to gas price increases at both the
regulated natural gas utility, and to moderate its exposure to interest rate
changes. The benefits of these arrangements are at risk only in the event of
non-performance by the other party to the agreement, which the company does not
anticipate. The company does not anticipate that the adoption of FAS 133 will
significantly impact its financial statements since activity in derivatives has
been relatively minimal and short-term in duration. Management will continue to
evaluate all current and possible future uses of derivatives, including their
effectiveness for hedging, and to apply appropriate procedures and methods for
valuing them.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
Tampa Electric Company is exposed to changes in interest rates
primarily as a result of its borrowing activities. A hypothetical 10-percent
increase in Tampa Electric Company's weighted average interest rate on its
variable rate debt would not have a significant impact on Tampa Electric
Company's pretax earnings over the next fiscal year.
A hypothetical 10-percent decrease in interest rates would not have a
significant impact on the estimated fair value of Tampa Electric Company's
long-term debt at June 30, 2000.
Based on policies and procedures approved by the Board of Directors,
from time to time Tampa Electric Company may enter into futures, swaps and
option contracts to moderate exposure to interest rate changes.
Commodity Price Risk
Currently, at Tampa Electric and Peoples Gas System, commodity price
increases due to changes in market conditions for fuel, purchased power and
natural gas are recovered through cost recovery clauses, with no effect on
earnings.
From time to time, Peoples Gas System may enter into futures, swaps and
options contracts to limit the effect of natural gas price increases on the
prices it charges customers.
Tampa Electric Company does not use derivatives or other financial
products for speculative purposes.
12
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FORM 10-Q
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10.1 Form of Replacement Performance Shares Agreement between TECO
Energy, Inc. and certain officers under the TECO Energy, Inc.
1996 Equity Incentive Plan.
10.2 Form of Performance Shares Agreement between TECO Energy, Inc.
and certain officers under the TECO Energy, Inc. 1996 Equity
Incentive Plan.
12 Ratio of earnings to fixed charges
27 Financial data schedule - six months ended June 30, 2000.
(EDGAR filing only)
(b) REPORTS ON FORM 8-K
The registrant did not file any Current Reports on Form 8-K for
the quarter ended June 30, 2000.
13
14
FORM 10-Q
SIGNATURES
Pursuant to the requirements 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.
TAMPA ELECTRIC COMPANY
(Registrant)
Date: Aug. 11, 2000 *By: /s/ G. L. GILLETTE
-------------------------------
G. L. GILLETTE
Vice President - Finance
and Chief Financial Officer
(Principal Financial Officer)
14
15
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBITS PAGE NO.
10.1 Form of Replacement Performance Shares Agreement between TECO 16
Energy, Inc. and certain officers under the TECO Energy, Inc.
1996 Equity Incentive Plan.
10.2 Form of Performance Shares Agreement between TECO Energy, Inc. 21
and certain officers under the TECO Energy, Inc. 1996 Equity
Incentive Plan.
12 Ratio of earnings to fixed charges 26
27 Financial data schedule - six months ended
June 30, 2000. (EDGAR filing only) --
15