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TECO Energy, parent of Tampa Electric, says it may put itself up for sale

A popular feature at TECO's Big Bend Power Station is the Manatee Viewing Center in Apollo Beach. The power station has four coal-fired units with a combined output of more than 1,700 megawatts. Warm water discharged from Unit 4 attracts manatees to the area.[Times (2012)]
A popular feature at TECO's Big Bend Power Station is the Manatee Viewing Center in Apollo Beach. The power station has four coal-fired units with a combined output of more than 1,700 megawatts. Warm water discharged from Unit 4 attracts manatees to the area.[Times (2012)]
Published Jul. 17, 2015

TAMPA — The parent of the Tampa Electric Co. and Peoples Gas said Thursday that it is exploring a potential sale, an announcement that provided an immediate boost to the company's stock.

A sale of TECO Energy would affect its 700,000 customers who are mostly in Hillsborough and Polk counties, in addition to 350,000 Peoples Gas Systems customers throughout Tampa Bay and Florida.

TECO released a terse statement late in the afternoon confirming it is considering a sale, a response to a report about a potential sale by the news website, SparkSpread.

"While it is the long-standing policy of TECO Energy Inc. not to confirm or deny market rumors," the company said in a statement "that it is exploring strategic alternatives" and had retained Morgan Stanley to do so.

TECO, which has a market value of more than $4.4 billion, said the statement would be the company's only comment on the issue "given the preliminary nature of this exploration."

"No assurance can be given that the company will determine to pursue a potential sale or enter into any definitive sale agreement," TECO said. "The company does not intend to make any further press release or announcement regarding these matters unless and until it enters into a binding, definitive agreement with respect to a sale."

The news report of a potential sale earlier in the day sparked TECO shares, which rose as high as $21.95 before closing at $21.48, a hike of more than 15 percent.

The news comes as no surprise to energy analysts who have long speculated that a relatively small utility such as TECO is a ripe for acquisition.

"They could be getting pressure from some of their larger stockholders to sell," said Roger Conrad, a utility analyst who operates the website, Conrad's Utility Investor. "They've been something of an underperformer, not just from a stock point of view but also when you look at their rate of return and the return on equity."

Two of the state's utility giants, Duke Energy Florida and Florida Power & Light, surround TECO's electricity service area, which sets up speculation that one of those players might acquire the Tampa-based utility.

A smaller utility is seen as being particularly appealing to bigger neighbors eying an opportunity to consolidate operations and bolster revenue.

Conrad said Duke is certainly a possible suitor, though he said TECO might be attractive to a range of players.

"Duke Energy does not comment on market rumors and speculation," said Duke Energy spokesman Dave Scanzoni when asked about the possibility.

TECO's Tampa Electric, besides its large base in Hillsborough and Polk, also serves a handful of customers in the Oldsmar area of Pinellas and a small number in eastern Pasco.

The company also operates the New Mexico Gas Co., serving 510,000 customers and has a hand in the coal business with its subsidiary, TECO Coal.

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In recent months, TECO has moved to sell off its coal business, which operates coal-production facilities in Kentucky, Tennessee and Virginia.

The utility announced a sale of that asset in the fall for $170 million to Cambrian Coal. But that deal fell through, despite a $50 million drop in price, and a July 3 deadline on a purchase with a second unidentified buyer passed without a sale.

Conrad said TECO seemed particularly eager to unload its coal business, which he said has been a drag on the company's stock.

Contact William R. Levesque at levesque@tampabay.com or (813) 226-3432.

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