TECO Energy is exiting the coal business, an industry rapidly losing its environmental appeal as a domestic provider of fuel for power plants. The Tampa power company and parent of Tampa Electric and two gas companies, said it has closed the sale of its coal mining subsidiary, TECO Coal LLC, to Cambrian Coal Corp., a Booth Energy company.
How much did it sell for? Possibly nothing.
TECO Energy said there is no "up-front purchase payment" but said the sale does include future contingent consideration of $60 million tied to the price of coal over the next five years. Bloomberg News reports Booth Energy will pay nothing up front for TECO's coal assets but could pay $60 million later — if coal hits a certain price, which Bloomberg suggests is unlikely given the plummeting value of the mined fuel.
TECO Energy also said that while most TECO Coal liabilities were transferred in the transaction, TECO Energy will retain personnel liabilities including pension liability and severance agreements.
TECO Energy itself announced this month that it will be acquired for $10.4 billion in equity and debt by Canadian power company Emera. That deal promised the disposition of TECO Coal prior to its closing. TECO's on-again, off-again deal to sell TECO Coal to Cambrian in the past year included an agreed-upon sale price of $170 million but that sum appeared to plummet as the demand for coal continues to swoon.
"The closing of this (TECO Coal) sale results in a complete exit from the coal mining business," TECO Energy CEO John Ramil said. He credited TECO Coal for its strong contribution to the company's earnings in the past, when Tampa Electric officials routinely boasted of their utility's high dependence on coal as a reliable and cheap fuel to generate electricity to customers in Tampa and some surrounding counties.
Those days are long gone given the rising concerns over climate change, public health and the rise of natural gas as a low-cost and less polluting fuel, as well as increasing gains from solar and other sustainable energy sources. Indeed, TECO said that in the third quarter of 2015, TECO Coal will record a previously disclosed charge of about $8 million related to liabilities from black lung, the occupational disease caused by inhaling coal dust.
TECO Coal's facilities in Virginia and Kentucky are run by its Premier Elkhorn Coal, Perry County Coal and Clintwood Elkhorn Mining subsidiaries.