TECO Energy’s Power Services subsidiary (TPS) has secured a muchstronger foothold in the wholesale generation market by buying astake in two huge gas-fired merchant power plants being developedby Panda Energy International. The companies announced a jointventure yesterday on the plants, which will be located in ElDorado, AR, and in Gila Bend, AZ, and will have a combined capacityto produce 4,600 MW of power. They are projected to cost $2.3billion to build. Teco’s equity committment is $960 million.

The El Dorado facility already is in the construction phase,whereas the Gila River project is in an advanced stage ofdevelopment, with siting, permitting and other agreements in place.Both projects will be similar in design, using efficient GE 7Fcombined-cycle technology.

“With this transaction, TPS is now part of the top tier ofgeneration companies. Our 1,200 MW GenPower project acquisitionannounced in October, combined with the El Dorado and Gila Riverprojects, puts TPS in the top 10 independent power companies in thenation and the top 20 independent power companies worldwide,” saidTECO Power Services President Rick Ludwig.

TECO Energy Chairman Robert Fagan said the deal gives TECO as awhole more than 10,000 MW of generation capacity.

The 2,220 MW El Dorado project is being constructed tointerconnect with Entergy-Arkansas’ transmission substation withaccess to wholesale customers throughout Arkansas and Louisiana, aswell as portions of Mississippi and Texas. The plant also will sellinto the surrounding states of Oklahoma, Missouri and Illinois.

The 2,350 MW Gila River project will be located southwest ofPhoenix, AZ, in Gila Bend. It will be interconnected with the PaloVerde substation, with plans to sell electricity to wholesalecustomers throughout Arizona, with excess energy available toSouthern California, Nevada and New Mexico. The first phase ob bothprojects should be in service by summer 2002, with the rest comingon the following summer.

TECO said the projects are expected to be neutral to itsearnings during construction and to significantly increase earningsin 2003, the first full year of operations. During construction,TPS expects to utilize 100% debt construction financing, most ofwhich will be non-recourse, as is typical of project finance in theindependent power industry. The project equity investment of $960million, which will be made by TPS at commercial operation in2002-2003, will be financed through cash flow from operations andother external financing by TECO Energy. TPS will receive apreferred return on the projects, producing higher income in theearly years of the projects.

TECO Energy CFO Gordon Gillette said the company is “on track toachieve 10% basic earnings growth in 2001 with some additionalupsides. Longer term, our new independent power projects have addeddefinition to our earlier forecast in which we targeted 10%earnings growth for 2002 and beyond.”

TECO’s principal businesses are Tampa Electric, Peoples Gas andTECO Power Services. Panda is a privately held, non-regulatedelectric generation company. Overall, Panda has more than 17,000 MWof electric generating capacity currently under advanceddevelopment.

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