Moody's Investors Service warned Wednesday that it may cut the debt rating of TECO Energy Inc. If the debt rating agency makes good on that threat, the troubled Tampa utility may have to come up with hundreds of millions of dollars in financing.
Moody's placed the debt ratings of TECO Energy, Tampa Electric Co. and TECO Finance Inc. on review for possible downgrade, citing concerns about the pace of TECO's efforts to sell assets, poor conditions in wholesale power markets and worries about the amount of cash flow that can be expected from the company's wholesale plants in 2003 and 2004. Debt ratings help lenders gauge the risk profile of companies seeking financing.
A cut in TECO's rating would deliver a blow to the company's already precarious finances because it would trigger large financial commitments for its two largest wholesale power plants, the 2,300-megawatt Gila River Power Station near Gila Bend, Ariz., and the 2,220-megawatt Union Power Station in El Dorado, Ark.
TECO owns a 50 percent interest in both plants as part of a joint venture with Panda Energy International Inc. of Dallas. Both plants are being completed and are expected to be fully operational later this year.
Under its financing arrangements for the two plants, a one-notch downgrade from TECO's current debt ratings with either Moody's or Standard & Poor's Ratings Service could force the company to come up with about $450-million in letters of credit to secure the financing for the two plants.
"We have the resources to do that between cash and lines of credit we've already established," TECO spokesman Laura Plumb said.
Plumb said a one-notch downgrade wouldn't be a devastating blow because TECO's debt rating would still be at investment-grade and because its regulated utility operations are projected to generate 75 percent of the company's net income in 2003.
TECO chief financial officer Gordon Gillette said the company has completed more than 70 percent of a $900-million cash generation plan, which has included cutting capital spending, issuing stock and selling assets.
The Moody's announcement came after Wednesday's stock market close. TECO's shares, which have recently traded around their lowest levels in a decade and a half, finished Wednesday at $10.71, up 55 cents.
_ Louis Hau can be reached at hausptimes.com or (813) 226-3404