<PAGE> 1
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended Sept. 30, 2000
-------------------------------------------------
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period _____ to _____
Commission File Number 1-5007
TAMPA ELECTRIC COMPANY
----------------------
(Exact name of registrant as specified in its charter)
FLORIDA 59-0475140
------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
702 N. FRANKLIN STREET, TAMPA, FLORIDA 33602
-------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813) 228-4111
----------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [_]
Number of shares outstanding of each of the issuer's classes of common stock,
as of the latest practicable date (Oct. 31, 2000):
Common Stock, Without Par Value 10
The registrant meets the conditions set forth in General Instruction (H)(1)(a)
and (b) of Form 10-Q and is therefore filing this form with the reduced
disclosure format.
Index to Exhibits Appears on Page 17
Page 1 of 18
<PAGE> 2
FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
In the opinion of management, the unaudited condensed consolidated
financial statements include all adjustments which are of a recurring nature
and necessary to present fairly the financial position of Tampa Electric
Company as of Sept. 30, 2000 and 1999, and the results of operations and cash
flows for the three- and nine-month periods ended Sept. 30, 2000 and 1999. The
results of operations for the three- and nine-month periods ended Sept. 30,
2000 are not necessarily indicative of the entire fiscal year ending Dec. 31,
2000. Reference should be made to the explanatory notes affecting the income
and balance sheet accounts contained in Tampa Electric Company's Annual Report
on Form 10-K for the year ended Dec. 31, 1999 and to the notes on pages 7 and 8
of this report.
2
<PAGE> 3
CONSOLIDATED BALANCE SHEETS
UNAUDITED
(in millions)
SEPT. 30, DEC. 31,
2000 1999
-------- --------
ASSETS
PROPERTY, PLANT AND EQUIPMENT, AT ORIGINAL COST
Utility plant in service
Electric $4,011.4 $3,892.1
Gas 641.5 590.0
Construction work in progress 101.7 81.6
-------- --------
4,754.6 4,563.7
Accumulated depreciation (1,898.9) (1,818.7)
-------- --------
2,855.7 2,745.0
Other property 8.5 7.9
-------- --------
2,864.2 2,752.9
-------- --------
CURRENT ASSETS
Cash and cash equivalents 1.1 26.1
Receivables, less allowance for uncollectibles 192.2 147.1
Inventories, at average cost
Fuel 63.0 73.2
Materials and supplies 50.9 49.0
Prepayments 15.9 10.9
-------- --------
323.1 306.3
-------- --------
DEFERRED DEBITS
Unamortized debt expense 13.3 14.2
Deferred income taxes 125.9 121.6
Regulatory asset - tax related 41.4 42.9
Other 98.9 84.6
-------- --------
279.5 263.3
-------- --------
$3,466.8 $3,322.5
======== ========
LIABILITIES AND CAPITAL
CAPITAL
Common stock $1,148.1 $1,043.1
Retained earnings 323.6 283.9
-------- --------
1,471.7 1,327.0
LONG-TERM DEBT, LESS AMOUNT DUE WITHIN ONE YEAR 790.0 690.3
-------- --------
2,261.7 2,017.3
-------- --------
CURRENT LIABILITIES
Long-term debt due within one year 55.2 84.8
Notes payable 104.7 271.2
Accounts payable 174.1 163.8
Customer deposits 81.5 79.9
Interest accrued 36.6 12.9
Taxes accrued 139.6 30.9
-------- --------
591.7 643.5
-------- --------
DEFERRED CREDITS
Deferred income taxes 412.7 458.3
Investment tax credits 37.1 40.5
Regulatory liability-tax related 50.8 56.1
Other 112.8 106.8
-------- --------
613.4 661.7
-------- --------
$3,466.8 $3,322.5
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 4
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
(in millions)
FOR THE THREE MONTHS ENDED SEPT. 30, 2000 1999
------ ------
REVENUES
Electric $391.6 $366.2
Gas 72.0 57.2
------ ------
463.6 423.4
------ ------
OPERATING EXPENSES
Operation
Fuel 80.4 89.7
Purchased power 75.6 48.2
Natural gas sold 38.5 26.3
Other 56.6 54.2
Maintenance 20.6 21.3
Depreciation 46.8 42.7
Taxes-Federal and state income 33.8 28.1
Taxes-Other than income 29.6 30.0
------ ------
381.9 340.5
------ ------
OPERATING INCOME 81.7 82.9
OTHER INCOME (EXPENSE) 1.3 (9.3)
------ ------
INCOME BEFORE INTEREST CHARGES 83.0 73.6
------ ------
INTEREST CHARGES
Interest on long-term debt 12.9 12.9
Other interest 12.1 15.4
------ ------
25.0 28.3
------ ------
NET INCOME $ 58.0 $ 45.3
====== ======
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE> 5
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
(in millions)
FOR THE NINE MONTHS ENDED SEPT. 30, 2000 1999
-------- --------
REVENUES
Electric $1,024.2 $ 931.2
Gas 230.1 185.1
-------- --------
1,254.3 1,116.3
-------- --------
OPERATING EXPENSES
Operation
Fuel 244.6 227.2
Purchased power 143.2 109.8
Natural gas sold 115.2 79.0
Other 174.8 159.7
Maintenance 80.1 65.3
Depreciation 135.6 127.2
Taxes-Federal and state income 77.7 70.9
Taxes-Other than income 91.0 90.5
-------- --------
1,062.2 929.6
-------- --------
OPERATING INCOME 192.1 186.7
OTHER INCOME (EXPENSE) 2.4 (8.8)
-------- --------
INCOME BEFORE INTEREST CHARGES 194.5 177.9
-------- --------
INTEREST CHARGES
Interest on long-term debt 38.2 38.5
Other interest 21.5 21.2
-------- --------
59.7 59.7
-------- --------
NET INCOME $ 134.8 $ 118.2
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE> 6
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(in millions)
FOR THE NINE MONTHS ENDED SEPT. 30, 2000 1999
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $134.8 $118.2
Adjustments to reconcile net income to net cash
Depreciation 135.6 127.2
Deferred income taxes (53.6) (8.4)
Investment tax credits, net (3.4) (3.4)
Allowance for funds used during construction (1.9) (0.8)
Deferred revenue -- 9.0
Deferred recovery clause (31.9) (29.7)
Refund to customers (3.8) --
Charges, pretax -- 14.8
Receivables, less allowance for uncollectibles (45.1) (31.2)
Inventories 8.3 13.9
Taxes accrued 108.7 67.1
Interest accrued 23.7 1.3
Accounts payable 10.3 (37.7)
Other 25.6 14.1
------ ------
307.3 254.4
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (248.1) (214.8)
Allowance for funds used during construction 1.9 0.8
------ ------
(246.2) (214.0)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from contributed capital from parent 105.0 12.0
Proceeds from long-term debt 154.5 --
Repayment of long-term debt (84.0) (3.8)
Net increase (decrease) in short-term debt (166.5) 43.4
Payment of dividends (95.1) (94.1)
------ ------
(86.1) (42.5)
------ ------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (25.0) (2.1)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 26.1 0.8
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1.1 $ (1.3)
====== ======
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Tampa Electric Company (the company) is a wholly owned
subsidiary of TECO Energy, Inc.
B. The company has made certain commitments in connection with
its continuing construction program. Total construction expenditures
during 2000 are estimated to be $268 million for its electric division
(referred to as Tampa Electric) and $78 million for its natural gas
division (referred to as Peoples Gas System). Tampa Electric Company
is a potentially responsible party for certain superfund sites and,
through its Peoples Gas System division, for certain former
manufactured gas plant sites. While the joint and several liability
associated with these sites presents the potential for significant
response costs, the company estimates its ultimate financial liability
at approximately $20 million over the next 10 years. The environmental
remediation costs associated with these sites are not expected to have
a significant impact on customer prices.
C. Revenues reflected the reversal of $2.8 million of revenues
previously deferred for future refund to customers for the three-month
period ended Sept. 30, 1999, and the deferral for refund to customers
of $1.1 million in the nine-month period ended Sept. 30, 1999,
associated with 1999 earnings at Tampa Electric. These deferred
revenues resulted from Tampa Electric's regulatory agreement that
ended on Dec. 31, 1999. On Aug. 1, 2000, the FPSC approved a
stipulation entered into by the Office of Public Counsel (OPC),
Florida Industrial Power Users Group (FIPUG), and Tampa Electric
settling the deferred revenue refund amount for 1997 and 1998. Tampa
Electric began a $13 million refund to its customers on Sept. 1, 2000
which will continue until Dec. 31, 2000. The amount of this refund is
essentially the same as the amount originally approved by the FPSC for
the years 1997 and 1998. On Oct. 12, 2000, the FPSC staff issued its
recommendation for the 1999 refund amount of $6.1 million. OPC
disagreed with the staff's recommendation stating, that the refund
should be $8.3 million higher as a result of corporate income tax
provisions and settlements related to prior years' tax returns. Tampa
Electric estimates the refund to be $4.3 million. The final decision
may not be made until 2001.
D. In the third quarter of 1999, the company recognized certain
charges totaling $10.2 million after tax at the electric division. A
one-time charge of $10.5 million ($6.4 million after-tax), was
recorded based on Florida Public Service Commission (FPSC) audits of
Tampa Electric's 1997 and 1998 earnings, which among other things,
limited its equity ratio to 58.7 percent, a decrease of 91 basis
points and 224 basis points from 1997's and 1998's ratios,
respectively. The company also recorded a one-time after-tax charge of
$3.8 million in the third quarter of 1999 reflecting corporate income
tax provisions and settlements related to prior years' tax returns.
E. On Aug. 21, 2000, Tampa Electric Company issued $150 million
of Reset Put Securities (the Tampa Electric Notes) due 2015. The Tampa
Electric Notes are subject to mandatory tender on Sept. 1, 2002, at
which time they will be remarketed or redeemed. The coupon rate for
the initial term is 7.375%. If the remarketing agent appointed by
Tampa Electric Company in connection with the issue of the Tampa
Electric Notes exercises its right to purchase the Tampa Electric
Notes on Sept. 1, 2002, for the following ten years the Tampa Electric
Notes will bear interest at an annual rate of 5.75% plus a premium
based on Tampa Electric Company's then current credit spread above
United States Treasury Notes with ten years to maturity. Otherwise,
the Tampa Electric Notes may be remarketed for periods selected by
Tampa Electric Company at fixed or floating market rates of interest.
Net proceeds to Tampa Electric Company were 102.8 percent of the
principal amount and included a premium paid to Tampa Electric Company
by the remarketing agent for the right to purchase the Tampa Electric
Notes in 2002 which is being amortized over two years. Proceeds from
the Tampa Electric Note issuance were used to repay short-term debt
and for general corporate purposes.
7
<PAGE> 8
F. CONTRIBUTION BY OPERATING DIVISION
(in millions)
<TABLE>
<CAPTION>
OPERATING NET
REVENUES INCOME INCOME
-------- -------- --------
<S> <C> <C> <C>
THREE MONTHS ENDED SEPT. 30, 2000
Electric division (1) $ 391.8 $ 75.8 $ 54.7
Peoples Gas System (3) 72.0 5.9 3.3
-------- -------- --------
463.8 81.7 58.0
Other and eliminations (0.2) -- --
-------- -------- --------
Tampa Electric Company $ 463.6 $ 81.7 $ 58.0
======== ======== ========
THREE MONTHS ENDED SEPT. 30, 1999
Electric division (1) (2) (4) $ 358.6 $ 65.5 $ 53.0
Peoples Gas System (3) 57.2 4.9 2.5
-------- -------- --------
415.8 70.4 55.5
Other and eliminations (5) 7.6 12.5 (10.2)
-------- -------- --------
Tampa Electric Company $ 423.4 $ 82.9 $ 45.3
======== ======== ========
NINE MONTHS ENDED SEPT. 30, 2000
Electric division (1) $1,024.8 $ 167.6 $ 118.9
Peoples Gas System (3) 230.1 24.5 15.9
-------- -------- --------
1,254.9 192.1 134.8
Other and eliminations (0.6) -- --
-------- -------- --------
Tampa Electric Company $1,254.3 $ 192.1 $ 134.8
======== ======== ========
NINE MONTHS ENDED SEPT. 30, 1999
Electric division (1) (2) (4) $ 923.8 $ 153.1 $ 115.1
Peoples Gas System (3) 185.1 21.1 13.3
-------- -------- --------
1,108.9 174.2 128.4
Other and eliminations (5) 7.4 12.5 (10.2)
-------- -------- --------
Tampa Electric Company $1,116.3 $ 186.7 $ 118.2
======== ======== ========
</TABLE>
(1) Operating income is net of income tax expense of $32.2 million
and $68.2 million, respectively, for the three and nine months
ended Sept. 30, 2000, and $26.7 million and $62.3 million,
respectively, for the three and nine months ended Sept. 30, 1999.
(2) The electric division revenues reflect the reversal of $2.8
million of previous deferrals for refund to customer for the
three-month period ended Sept. 30, 1999, and deferral of $1.1
million for the nine months ended Sept. 30, 1999. (See Note C on
page 7.)
(3) Operating income is net of income tax expense of $1.6 million and
$9.5 million, respectively, for the three and nine months ended
Sept. 30, 2000, and $1.5 million and $8.6 million, respectively,
for the three and nine months ended Sept. 30, 1999.
(4) Revenues and operating income exclude a $7.9 million benefit
related to the charges discussed in Note D on page 7. Net income
excludes the after-tax impact of the charges totaling $10.2
million, as discussed in Note D on page 7.
(5) After-tax charges for the three- and nine-month periods ended
Sept. 30, 1999 totaled $10.2 million as discussed in Note D on
page 7. The $3.8 million of corporate income tax settlements and
provisions included a $7.9 million benefit to revenues.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains forward-looking statements
which are subject to the inherent uncertainties in predicting future results
and conditions. Certain factors that could cause actual results to differ
materially from those projected in these forward-looking statements include the
following: interest rates and other factors that could impact Tampa Electric
Company's ability to obtain access to sufficient capital on satisfactory terms;
general economic conditions, particularly those in Tampa Electric's service
area affecting energy sales; weather variations affecting energy sales and
operating costs; potential competitive changes in the electric and gas
industries, particularly in the area of retail competition; regulatory actions
affecting Tampa Electric and Peoples Gas System; commodity price changes
affecting the competitive positions of Tampa Electric and Peoples Gas System;
and changes in and compliance with environmental regulations that may impose
additional costs or curtail some activities. Some of these factors are
discussed more fully under "Investment Considerations" in TECO Energy's Annual
Report on Form 10-K for the year ended Dec. 31, 1999, and reference is made
thereto.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPT. 30, 2000:
Tampa Electric Company's net income for the quarter ended Sept. 30,
2000 was $58.0 million, up from $55.5 million recorded before charges for the
three-month period ended Sept. 30, 1999. The third quarter 1999 net income
including charges of $10.2 million was $45.3 million. These charges are
discussed in Note D on page 7. The 4 percent increase over last year's net
income reflects the continued strong customer growth at Tampa Electric and
Peoples Gas System.
TAMPA ELECTRIC COMPANY - ELECTRIC DIVISION (TAMPA ELECTRIC)
Tampa Electric's net income for the third quarter was $54.7 million,
compared with $53.0 million excluding charges, for the same period last year.
Net income for 1999 including the charges discussed in note D on page 7 was
$42.8 million. The company showed improved results from strong customer growth
of more than 3 percent and energy sales growth of 3 percent. Expenses for the
three months ended Sept. 30, 2000 reflected higher depreciation due to the
scrubber addition at Big Bend. Purchased power costs were higher than last year
primarily due to unit availability decreases as a result of the outage at
Gannon 6. Also included in Tampa Electric's third quarter 2000 results was a
$4.5 million after-tax provision for interest associated with income tax
disputes. A summary of the operating statistics for the three months ended
Sept. 30, 2000 and 1999 is below:
<TABLE>
<CAPTION>
OPERATING REVENUES KILOWATT-HOUR SALES
(in millions, except average customers) ------------------------------ --------------------------------
THREE MONTHS ENDED SEPT. 30, 2000 1999 CHANGE 2000 1999 CHANGE
---------------------------- -------- ------- ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Residential $ 186.8 $ 174.2 7.3% 2,251.0 2,224.8 1.2%
Commercial 104.9 96.3 8.9% 1,531.2 1,507.5 1.6%
Industrial - Phosphate 17.0 17.7 -4.2% 295.4 301.3 -1.9%
Industrial - Other 16.7 15.4 9.1% 275.1 263.4 4.4%
Other sales of electricity 25.0 23.3 7.2% 353.8 350.8 0.8%
Deferred and other revenues 1.4 6.0 -77.1% -- -- --
-------- -------- ------- -------
351.8 332.9 5.7% 4,706.5 4,647.8 1.3%
Sales for resale 32.0 26.3 21.7% 764.2 664.7 15.0%
Other operating revenue 8.0 7.3 8.8% -- -- --
-------- -------- ------- -------
$ 391.8 $ 366.5 6.9% 5,470.7 5,312.5 3.0%
======== ======== ======= =======
Average customers 560.5 543.3 3.2%
======== ========
System Net Input 5,071.8 4,975.4 1.9%
======= =======
</TABLE>
9
<PAGE> 10
TAMPA ELECTRIC - NATURAL GAS DIVISION (PEOPLES GAS SYSTEM)
Peoples Gas System (PGS) reported net income of $3.3 million for the
quarter, compared with $2.5 million last year. The increase was primarily
driven by customer growth of almost 5 percent, along with commercial gas sales
to new customers in Southwest Florida and increased volumes for electric power
generators. A summary of the operating statistics for the three months ended
Sept. 30, 2000 and 1999 is below:
<TABLE>
<CAPTION>
OPERATING REVENUES THERMS
(in millions, except average customers) ---------------------------- ---------------------------
THREE MONTHS ENDED SEPT. 30, 2000 1999 CHANGE 2000 1999 CHANGE
---------------------------- ------ ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
BY CUSTOMER SEGMENT:
Residential $ 12.5 $ 11.4 9.7% 8.0 8.2 -1.6%
Commercial 32.4 27.4 18.4% 61.9 63.1 -1.9%
Industrial 2.6 2.9 -9.0% 59.2 61.0 -2.9%
Off system sales 14.5 7.1 -- 30.0 23.6 26.7%
Power generation 2.6 2.6 -3.5% 126.4 121.4 4.1%
Other revenues 7.4 5.8 28.5% -- -- --
------ ------ ----- ----
$ 72.0 $ 57.2 25.8% 285.5 277.3 3.0%
====== ====== ===== =====
BY SALES TYPE:
System supply $ 53.6 $ 40.1 33.8% 72.0 66.0 9.1%
Transportation 11.0 11.3 -3.6% 213.5 211.3 1.1%
Other revenues 7.4 5.8 28.5% -- -- --
------ ------ ----- ----
$ 72.0 $ 57.2 25.8% 285.5 277.3 3.0%
====== ====== ===== =====
Average customers 257.4 246.2 4.6%
===== ======
</TABLE>
OTHER
In the third quarter of 1999, Tampa Electric recorded a $10.0 million
pretax charge to Other Income (Expense) related to FPSC audits of years 1997
and 1998. (See Note D on page 7.)
Allowance for other funds used during construction (AFUDC) was $0.6
million for the three months ended Sept. 30, 2000 and 1999. AFUDC is expected
to increase over the next several years reflecting Tampa Electric's generation
expansion activities.
Interest charges were $25.0 million for the three months ended Sept.
30, 2000 compared to $28.3 million for the same period in 1999. Financing costs
for the third quarter of 2000 reflected higher borrowing levels and higher
interest rates. Third quarter 2000 interest charges include a pretax charge of
$7.4 million recorded at Tampa Electric for interest associated with income tax
disputes. Prior year results included pretax charges to interest expense
totaling $12.7 million primarily associated with tax adjustments and
settlements as discussed in Note D on page 7.
NINE MONTHS ENDED SEPT. 30, 2000:
Tampa Electric Company's year-to-date net income was $134.8 million,
up from $128.4 million recorded before charges for the nine-month period ended
Sept. 30, 1999. Net income for the nine months ended Sept. 30, 1999 including
charges of $10.2 million was $118.2 million. These charges are discussed in
Note D on page 7. The 5-percent increase over last year's net income, as noted
in the third quarter results discussion above, reflected the continued strong
customer growth at Tampa Electric and Peoples Gas System.
10
<PAGE> 11
TAMPA ELECTRIC COMPANY - ELECTRIC DIVISION (TAMPA ELECTRIC)
Tampa Electric's year-to-date net income was $118.9 million compared
to $115.1 million for the same period last year. The Company showed improved
results from strong customer growth year-to-date of 3 percent and energy sales
growth of almost 7 percent. Year-to-date retail energy sales were 5 percent
above 1999 levels driven by customer growth and increased usage by residential
and commercial customers. Higher expenses year-to-date reflected the increased
scrubber depreciation and higher maintenance expenses associated with improving
summer unit availability. Purchased power costs were higher than last year
primarily due to unit availability decreases as a result of the outage at
Gannon 6. In addition, last year's results reflected U.S. Department of Energy
credits associated with Polk Power Station which expired at the end of 1999.
Also included in Tampa Electric's current year-to-date results was a $4.5
million after-tax provision for interest associated with income tax disputes. A
summary of the operating statistics for the nine months ended Sept. 30, 2000
and 1999 is below:
<TABLE>
<CAPTION>
OPERATING REVENUES KILOWATT-HOUR SALES
(in millions, except average customers) -------------------------------- --------------------------------
NINE MONTHS ENDED SEPT. 30, 2000 1999 CHANGE 2000 1999 CHANGE
------- ------- ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Residential $ 468.3 $430.0 8.9% 5,661.3 5,389.7 5.0%
Commercial 282.1 260.7 8.2% 4,169.1 4,029.5 3.5%
Industrial - Phosphate 47.0 42.6 10.4% 970.6 911.0 6.5%
Industrial - Other 47.2 42.5 10.9% 814.7 766.5 6.3%
Other sales of electricity 70.6 64.9 8.7% 999.8 957.0 4.5%
Deferred and other revenues 5.2 7.1 -26.6% -- -- --
-------- ------ -------- --------
920.4 847.8 8.6% 12,615.5 12,053.7 4.7%
Sales for resale 81.0 63.0 28.5% 1,910.2 1,536.9 24.3%
Other operating revenue 23.4 20.9 12.1% -- -- --
-------- ------ -------- --------
$1,024.8 $931.7 10.0% 14,525.7 13,590.6 6.9%
======== ====== ======== ========
Average customers 558.1 541.7 3.0%
======== ======
System Net Input 13,492.2 12,873.5 4.8%
======== ========
</TABLE>
A generator failure caused an unplanned outage at Tampa Electric's
385-megawatt Gannon Station Unit 6 on July 18, 2000. The unit is currently
being repaired and is expected to be back in service by the end of 2000. Tampa
Electric has been purchasing and expects to continue to purchase replacement
power to meet peak loads until the unit returns to service. The estimated
replacement power costs of approximately $20 million is expected to be fully
recovered through the fuel cost recovery clause. It is expected that most of
the repair costs will be covered by insurance and the remaining amount will be
capitalized. As a result, the outage is not expected to have a significant
impact on Tampa Electric's operating income.
TAMPA ELECTRIC - NATURAL GAS DIVISION (PEOPLES GAS SYSTEM)
Net income at Peoples Gas System (PGS) improved almost 20 percent over
last year, with net income increasing to $15.9 million from $13.3 million for
the same period last year. Year-to-date customer growth of almost 5 percent and
normal winter weather contributed to higher retail gas sales. Commercial
volumes and residential volumes were up 6 percent and 9 percent, respectively,
for the year. Depreciation was higher reflecting the company's continuing
expansion efforts, and operation and maintenance expenses were slightly higher.
A summary of the operating statistics for the nine months ended Sept. 30, 2000
and 1999 is below:
11
<PAGE> 12
<TABLE>
<CAPTION>
OPERATING REVENUES THERMS
(in millions, except average customers) ------------------------------ --------------------------------
NINE MONTHS ENDED SEPT. 30, 2000 1999 CHANGE 2000 1999 CHANGE
--------------------------- ------- ------ ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
BY CUSTOMER SEGMENT:
Residential $ 51.5 $ 42.5 21.0% 41.7 38.4 8.6%
Commercial 103.6 93.9 10.4% 213.7 201.9 5.8%
Industrial 9.7 9.9 -1.5% 211.6 204.6 3.4%
Off system sales 34.8 11.0 -- 89.5 39.6 --
Power generation 8.1 7.4 8.1% 338.1 298.4 13.3%
Other revenues 22.4 20.4 9.9% -- -- --
------- ------ ----- -----
$230.1 $185.1 24.3% 894.6 782.9 14.3%
======= ====== ===== =====
BY SALES TYPE:
System supply $172.3 $137.5 25.3% 255.3 225.5 13.2%
Transportation 35.4 27.2 30.1% 639.3 557.4 14.7%
Other revenues 22.4 20.4 9.9% -- -- --
------ ------ ----- -----
$230.1 $185.1 24.3% 894.6 782.9 14.3%
====== ====== ===== =====
Average customers 258.2 247.1 4.5%
===== ======
</TABLE>
On Aug. 11, 2000, the City of Lakeland filed a Complaint for
Declaratory and Injunctive Relief against Tampa Electric Company d/b/a Peoples
Gas System seeking an interpretation of the City's rights to acquire Peoples'
facilities under the franchise and seeking restrictions on the Company's rights
to expand its facilities to serve customers. Peoples responded with a Motion to
Dismiss Complaint filed on Aug. 31, 2000. Legal arguments on Peoples' Motion to
dismiss was heard on Oct. 23, 2000. The Court has required that the City file
an amended complaint, and the City has withdrawn both the receivership and
temporary injunction counts from its Complaint. Although the franchise expired
on March 11, 2000, Peoples continues to serve its customers located within the
City's corporate limits.
OTHER
In the third quarter of 1999, Tampa Electric recorded a $10.0 million
pretax charge to Other Income (Expense) related to FPSC audits of years 1997
and 1998. (See Note D on page 7.)
Year-to-date allowance for other funds used during construction
(AFUDC) was $1.9 million compared to $0.8 million for the same period in 1999.
AFUDC is expected to increase over the next several years reflecting Tampa
Electric's generation expansion activities.
Interest charges were $59.7 million for the year-to-date periods ended
Sept. 30, 2000 and 1999. Financing costs were higher for 2000 reflecting higher
borrowing levels and higher interest rates. Current year results included a
pretax charge of $7.4 million recorded at Tampa Electric for interest primarily
associated with income tax disputes. Prior year results included pretax charges
to interest expense totaling $12.7 million primarily associated with tax
adjustments and settlements as discussed in Note D on page 7.
RECENT DEVELOPMENTS
Fitch and Standard & Poor's in July 2000 and October 2000,
respectively, lowered the ratings of Tampa Electric Company. The resulting
ratings are as follows:
FITCH STANDARD & POOR'S
----- -----------------
Senior Secured AA A
Senior Unsecured AA- A
On Oct. 16, 2000, Tampa Electric Company, along with Florida Power &
Light Company and Florida Power Corporation, filed with the Federal Energy
Regulatory Commission (FERC) to create a regional transmission organization
(RTO) to serve peninsular Florida. The RTO will be known as GridFlorida LLC. As
proposed,
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GridFlorida LLC would independently control the transmission assets of the
three filing utilities, as well as other utilities in the region that choose to
join. The filing is in response to FERC's Order No. 2000, issued in December
1999, which requires all investor-owned electric utilities subject to FERC
regulation to file a proposal to create or join an RTO, or describe any
barriers to joining or forming such a group. Proposed RTO's are required to
begin operations by Dec. 15, 2001. Following this filing, the three utilities
and other stakeholders will continue the collaborative process, with another
filing scheduled for Dec. 15, 2000, which will contain additional details of
the proposed RTO.
On May 3, 2000, the governor of Florida, by executive order, created a
commission charged with proposing a comprehensive energy plan and strategy for
the state. The 17-member Energy 2020 Study Commission will address issues
including the current and future reliability of electric and natural gas
supply, emerging energy supply and delivery options, electrical industry
competition, environmental impacts of energy supply, energy conservation, and
fiscal impacts of energy supply options on taxpayers and energy providers. The
Commission held its first meeting in September 2000, and established as its
first priority to look at the creation of a wholesale competitive electricity
market in Florida. The Commission intends to make preliminary determinations by
year's end, which would permit the Study Commission to make policy
recommendations for consideration during the 2001 Legislative Session. The
Governor's Executive Order requires the Study Commission to issue its final
report dealing with wholesale and retail restructuring issues and associated
matters by December 2001.
ACCOUNTING STANDARDS
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
In 1998, the FASB issued FAS 133, Accounting for Derivative
Instruments and Hedging. This standard is effective for fiscal years beginning
after June 15, 2000. The new standard, as amended, requires an entity to
recognize derivatives as either assets or liabilities in the financial
statements, to measure those instruments at fair value and to reflect the
changes in fair value of those instruments as either components of
comprehensive income or in net income, depending on the types of those
instruments.
In preparation for adoption of this Statement effective Jan. 1, 2001,
the company has completed an analysis of the information required by FAS 133,
and is continuing to evaluate and document all derivatives and hedging
relationships. From time to time, Tampa Electric has entered into futures,
swaps and options contracts to limit exposure to gas price increases at both
the regulated natural gas utility, and to moderate its exposure to interest
rate changes. The benefits of these arrangements are at risk only in the event
of non-performance by the other party to the agreement, which the company does
not anticipate. The company does not anticipate that the adoption of FAS 133
will significantly impact its financial statements since activity in
derivatives has been relatively minimal and short-term in duration. Management
will continue to evaluate all current and possible future uses of derivatives,
including their effectiveness for hedging, and to apply appropriate procedures
and methods for valuing them.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
Tampa Electric Company is exposed to changes in interest rates
primarily as a result of its borrowing activities. A hypothetical 10-percent
increase in Tampa Electric Company's weighted average interest rate on its
variable rate debt would have an estimated $2 million impact on Tampa Electric
Company's pretax earnings over the next fiscal year.
A hypothetical 10-percent decrease in interest rates would not have a
significant impact on the estimated fair value of Tampa Electric Company's
long-term debt at Sept. 30, 2000.
Based on policies and procedures approved by the Board of Directors,
from time to time Tampa Electric Company may enter into futures, swaps and
option contracts to moderate exposure to interest rate changes.
Commodity Price Risk
Currently, at Tampa Electric and Peoples Gas System, commodity price
increases due to changes in market conditions for fuel, purchased power and
natural gas are recovered through cost recovery clauses, with no effect on
earnings.
From time to time, Peoples Gas System may enter into futures, swaps
and options contracts to limit the effect of natural gas price increases on the
prices it charges customers.
Tampa Electric Company does not use derivatives or other financial
products for speculative purposes.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
12 Ratio of earnings to fixed charges
27 Financial data schedule - nine months ended Sept. 30, 2000.
(EDGAR filing only)
(b) REPORTS ON FORM 8-K
The registrant filed a Current Report on form 8-K dated Aug. 16, 2000,
reporting under "Item 5. Other Events" that Tampa Electric Company had
entered into a Purchase Agreement with Morgan Stanley & Co.
Incorporated and Chase Securities Inc. (Collectively, the
"Underwriters") for the sale to the Underwriters of $150 million
principal amount of 7 3/8% Reset Put Securities due 2015.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TAMPA ELECTRIC COMPANY
(Registrant)
Date: Nov. 14, 2000 *By: /s/ G. L. GILLETTE
--------------------------------
G. L. GILLETTE
Vice President - Finance
and Chief Financial Officer
(Principal Financial Officer)
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INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBITS PAGE NO.
12 Ratio of earnings to fixed charges 18
27 Financial data schedule - nine months ended
Sept. 30, 2000. (EDGAR filing only) --
17
