Projects, FL Growth Improves TECO's Outlook
TECO Energy raised its earnings forecast for this year and next, saying its core businesses are expected to post 10% growth, leading to a 2000 upside for the company at 10 to 15 cents per share.
"Since we announced our three-pronged business strategy last fall, our earnings growth has been even higher than anticipated. Each of our core businesses, our independent power business, our Florida operations and our transportation business, is well-positioned to deliver solid growth going forward," said TECO Energy Chairman Robert Fagan. "Based on our outstanding results so far in 2000, and the prospects for delivering strong results again in 2001, we are setting a target of 10% core business growth again for 2002 and beyond."
TECO's independent power business, TECO Power Services, is expected to double its earnings per share in 2000 and increase earnings by 25% again in 2001. The subsidiary yesterday announced a $93 million investment with an affiliate of Panda Energy International on two Texas projects totaling 2,000 gross megawatts. The gas-fired power projects are expected to be brought online in phases beginning December, with all the capacity in-service in the third quarter of 2001. The deal provides TPS with an opportunity for an economic interest in 50% of both projects. The investment is expected to be slightly accretive to TECO Energy earnings in 2000 and 2001, and to provide meaningful contributions beyond. TPS already has net ownership in 1,000 MW of capacity either operating or under construction, including 400 MW of capacity brought online in 2000.
TECO Energy's Florida operations are benefiting from the strong Florida economy. For flagship companies Tampa Electric and Peoples Gas, this has meant customer growth of 3% and 3.5% in 2000 so far, and sales volume growth of 7% and 15%, respectively. Both Tampa Electric and Peoples Gas are expected to produce earnings growth above customer growth from higher per customer volumes and have increased investments to serve customers. The companies' longer-term customer growth outlook is 2.5% for Tampa Electric and 4 to 6% for Peoples.
The company's other businesses also are expected to contribute to TECO's growth. It's shipping transportation business, TECO Transport, continues to provide solid earnings growth and is now expected to deliver 10% growth this year and 7 to 10% growth in 2001. In addition, TECO Coal is expected to deliver an additional 10 to 15 cents per share in 2000 as a result of increased synthetic fuel production.
Gillette also indicated that TECO Energy expects to make significant capital investments over the next five years to support the growth strategy and to use internally generated funds as well as the capital markets to fund these investments. The company expects to use non-recourse project debt financing at TECO Power Services. TECO's stock rose $0.69 yesterday on the news to $26.69 and is near the top end of a 52-week range.
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