<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the fiscal year ended December 31, 1999
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from _________ 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)
TECO PLAZA
702 N. FRANKLIN STREET
TAMPA, FLORIDA 33602
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813)228-4111
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 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.
[X] YES [ ] NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of February 29, 2000 was zero.
As of February 29, 2000, there were 10 shares of the registrant's common stock
issued and outstanding, all of which were held, beneficially and of record, by
TECO Energy, Inc.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
The registrant meets the conditions set forth in General Instruction (I) (1) (a)
and (b) of Form 10-K and is therefore filing this form with the reduced
disclosure format.
<PAGE> 2
PART I
ITEM 1. BUSINESS.
Tampa Electric Company (the company) was incorporated in Florida in
1899 and was reincorporated in 1949. As a result of a restructuring in 1981, the
company became a wholly owned subsidiary of TECO Energy, Inc. (TECO Energy), a
diversified energy-related holding company.
In 1997, TECO Energy acquired Lykes Energy, Inc. As part of this
acquisition, Lykes' regulated gas distribution utility was merged into the
company and now operates as the Peoples Gas System division of Tampa Electric
Company (Peoples Gas System or PGS). Also in June 1997, TECO Energy completed
its acquisition of West Florida Natural Gas Company (West Florida Gas), a local
distribution company, serving the Ocala and Panama City, Florida areas. West
Florida Gas now operates as part of the Peoples Gas System division.
Tampa Electric Company is a public utility operating within the state
of Florida. Through its Tampa Electric division (Tampa Electric), it is engaged
in the generation, purchase, transmission, distribution and sale of electric
energy; through its Peoples Gas System division, it is engaged in the purchase,
distribution and sale of natural gas for residential, commercial, industrial and
electric power generation customers wholly in the State of Florida.
Tampa Electric's retail electric service territory comprises an area of
about 2,000 square miles in West Central Florida, including Hillsborough County
and parts of Polk, Pasco and Pinellas Counties, and has an estimated population
of over one million. Tampa Electric provides electric service to more than
552,000 customers. The principal communities served are Tampa, Winter Haven,
Plant City and Dade City. In addition, Tampa Electric engages in wholesale sales
to utilities and other resellers of electricity. It has three electric
generating stations in or near Tampa, one electric generating station in
southwestern Polk County, Florida and two electric generating stations (one of
which is on long-term standby) located near Sebring, a city located in Highlands
County in South Central Florida.
PGS, with approximately 253,000 customers, has operations in Florida's
major metropolitan areas. Annual natural gas throughput (the amount of gas
delivered to its customers including transportation only service) in 1999 was
1.1 billion therms.
Power Engineering & Construction, Inc. (PEC), a Florida corporation
formed in late 1996, is a wholly owned subsidiary of Tampa Electric Company and
is engaged in engineering and construction services with principal focus on
power facilities not owned or operated by Tampa Electric. Operations of PEC in
1999 were not significant.
TAMPA ELECTRIC--ELECTRIC OPERATIONS
Tampa Electric had 2,850 employees as of Dec. 31, 1999, of which 1,067
were represented by the International Brotherhood of Electrical Workers (IBEW)
and 345 by the Office and Professional Employees International Union.
In 1999, approximately 46 percent of Tampa Electric's total operating
revenue was derived from residential sales, 29 percent from commercial sales, 9
percent from industrial sales and 16 percent from other sales including bulk
power sales for resale.
The sources of electric operating revenue and megawatt-hour sales for
1999 were as follows:
<TABLE>
<CAPTION>
Operating revenue
(millions) 1999
---------
<S> <C>
Residential $ 557.4
Commercial 345.5
Industrial-Phosphate 54.2
Industrial-Other 56.2
Other retail sales of electricity 86.8
Sales for resale 86.1
Deferred revenues (11.9)
Other 25.5
---------
$ 1,199.8
=========
</TABLE>
<TABLE>
<CAPTION>
Megawatt-hour Sales
(thousands) 1999
---------
<S> <C>
Residential 6,967
Commercial 5,336
Industrial 2,224
Other retail sales of electricity 1,278
Sales for resale 2,160
------
17,965
======
</TABLE>
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No significant part of Tampa Electric's business is dependent upon a
single customer or a few customers, the loss of any one or more of whom would
have a significantly adverse effect on Tampa Electric, except for IMC-Agrico
(IMCA), a large phosphate producer representing less than 3 percent of Tampa
Electric's 1999 base revenues.
Tampa Electric's business is not highly seasonal, but winter peak loads
are experienced due to fewer daylight hours and colder temperatures, and summer
peak loads are experienced due to use of air conditioning and other cooling
equipment.
REGULATION
The retail operations of Tampa Electric are regulated by the Florida
Public Service Commission (FPSC), which has jurisdiction over retail rates,
quality of service, issuances of securities, planning, siting and construction
of facilities, accounting and depreciation practices and other matters.
In general, the FPSC's pricing objective is to set rates at a level
that allows the utility to collect total revenues (revenue requirements) equal
to its cost of providing service, including a reasonable return on invested
capital.
The costs of owning, operating and maintaining the utility system,
other than fuel, purchased power, conservation and certain environmental costs,
are recovered through base rates. These costs include operation and maintenance
expenses, depreciation and taxes, as well as a return on Tampa Electric's
investment in assets used and useful in providing electric service (rate base).
The rate of return on rate base, which is intended to approximate Tampa
Electric's weighted cost of capital, primarily includes its costs for debt,
deferred income taxes at a zero cost rate and an allowed return on common
equity. Base prices are determined in FPSC price setting hearings which occur at
irregular intervals at the initiative of Tampa Electric, the FPSC or other
parties. See the discussion of the FPSC-approved agreements covering 1995
through 1999 on pages 17 and 18.
Fuel, conservation, certain environmental and certain purchased power
costs are recovered through levelized monthly charges established pursuant to
the FPSC's cost recovery clauses. These charges, which are reset annually in an
FPSC proceeding, are based on estimated costs of fuel, environmental compliance,
conservation programs and purchased power and estimated customer usage for a
specific recovery period, with a true-up adjustment to reflect the variance of
actual costs from the projected charges.
The FPSC may disallow recovery of any costs that it considers
imprudently incurred.
Tampa Electric is also subject to regulation by the Federal Energy
Regulatory Commission (FERC) in various respects including wholesale power
sales, certain wholesale power purchases, transmission services and accounting
and depreciation practices.
Federal, state and local environmental laws and regulations cover air
quality, water quality, land use, power plant, substation and transmission line
siting, noise and aesthetics, solid waste and other environmental matters. See
ENVIRONMENTAL MATTERS on pages 5 and 6.
TECO Transport Corporation (TECO Transport), TECO Coal Corporation
(TECO Coal) and TECO Power Services Corporation (TECO Power Services),
subsidiaries of TECO Energy, sell transportation services, coal, and generating
capacity and energy, respectively, to Tampa Electric in addition to third
parties. The transactions between Tampa Electric and these affiliates and the
prices paid by Tampa Electric are subject to regulation by the FPSC and FERC,
and any charges deemed to be imprudently incurred may not be allowed to be
recovered from Tampa Electric's customers.
COMPETITION
Tampa Electric's retail electric business is substantially free from
direct competition with other electric utilities, municipalities and public
agencies. At the present time, the principal form of competition at the retail
level consists of natural gas and propane for residential and commercial
customers and the self-generation option is available to larger users of
electric energy. Such users may seek to expand their options through various
initiatives including legislative and/or regulatory changes that would permit
competition at the retail level. Tampa Electric intends to take all appropriate
actions to retain and expand its retail business, including managing costs and
providing high-quality service to retail customers.
In 1999, the FERC approved a market-based sales tariff for Tampa
Electric which allows Tampa Electric to sell excess power at market prices. The
FERC had already approved market-based prices for interstate sales for Tampa
Electric and the other state investor owned utilities (IOU's); however, Tampa
Electric is the only utility with intrastate market-based sales authority.
There is presently active competition in the wholesale power markets in
Florida, and this is increasing largely as a result of the Energy Policy Act of
1992 and related federal initiatives. This Act removed for independent power
producers certain regulatory barriers and required utilities to transmit power
from such producers, utilities and others to wholesale customers as more fully
described below.
In April 1996, the FERC issued its Final Rule on Open Access
Non-discriminatory Transmission, Stranded Costs, Open Access Same-time
Information System (OASIS) and Standards of Conduct. These rules work together
to open access for wholesale power flows on transmission systems. Utilities such
as Tampa Electric owning transmission facilities are required to provide
services to wholesale transmission customers comparable to those they provide to
themselves on comparable terms and conditions including price. Among other
things, the rules require transmission services to be unbundled from power sales
and owners of transmission systems must take transmission service under their
own transmission tariffs.
Transmission system owners are also required to implement an OASIS
system providing, via the Internet, access to transmission service information
(including price and availability), and to rely exclusively on their own OASIS
system for such
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information for purposes of their own wholesale power transactions. To
facilitate compliance, owners must implement Standards of Conduct to ensure that
personnel involved in marketing wholesale power are functionally separated from
personnel involved in transmission services and reliability functions. Tampa
Electric, together with other utilities, has implemented an OASIS system and
believes it is in compliance with the Standards of Conduct.
In addition to these transmission developments at the federal level,
there have been initiatives at the state level to facilitate the construction of
merchant power plants, i.e. plants built on speculation with a portion or all of
their capacity not subject to purchase agreements. Tampa Electric has opposed
these efforts. See WHOLESALE POWER MARKET on 19 for a further description of
proposed projects and the issues involved.
FUEL
About 97 percent of Tampa Electric's generation for 1999 was from its
coal-fired units which provided approximately 86 percent of the Company's total
system energy requirements. About the same level is anticipated for 2000.
Tampa Electric's average delivered fuel cost per million BTU and
average delivered cost per ton of coal burned for 1999 were as follows:
<TABLE>
<CAPTION>
AVERAGE COST
PER MILLION BTU: 1999
- ---------------- -------
<S> <C>
Coal $ 2.00
Oil $ 3.09
Composite $ 2.03
AVERAGE COST PER TON
OF COAL BURNED $ 44.63
</TABLE>
Tampa Electric's generating stations burn fuels as follows: Gannon
Station burns low-sulfur coal; Big Bend Station, which has sulfur dioixide
scrubber capabilities, burns a combination of low-sulfur coal and coal of a
somewhat higher sulfur content; Polk Power Station burns high-sulfur coal which
is gasified subject to sulfur removal prior to combustion; Hookers Point Station
burns low-sulfur oil; Phillips Station burns oil of a somewhat higher sulfur
content; and Dinner Lake Station, which was placed on long-term reserve standby
in March 1994, burned natural gas and oil.
COAL. Tampa Electric used approximately 7.3 million tons of coal during
1999 and estimates that its coal consumption will be about 7.9 million tons for
2000. During 1999, Tampa Electric purchased approximately 64 percent of its coal
under long-term contracts with six suppliers, including TECO Coal, and 36
percent of its coal in the spot market or under intermediate-term purchase
agreements. During December 1999, the average delivered cost of all coal
delivered (including transportation) was $44.35 per ton, or $1.88 per million
BTU. About 8 percent of Tampa Electric's 1999 coal requirements were supplied by
TECO Coal. Tampa Electric's long-term contract with TECO Coal expired at the end
of 1999 and will not be renewed. Tampa Electric expects to obtain approximately
53 percent of its coal requirements in 2000 under long-term contracts with five
suppliers and the remaining 47 percent in the spot market or under
intermediate-term purchase agreements. Tampa Electric's remaining long-term coal
contracts provide for revisions in the base price to reflect changes in a wide
range of cost factors and for suspension or reduction of deliveries if
environmental regulations should prevent Tampa Electric from burning the coal
supplied, provided that a good faith effort has been made to continue burning
such coal.
In 1999, about 67 percent of Tampa Electric's coal supply was
deep-mined, approximately 32 percent was surface-mined and the remainder was a
processed oil by-product known as petroleum coke. Federal surface-mining laws
and regulations have not had any material adverse impact on Tampa Electric's
coal supply or results of its operations. Tampa Electric, however, cannot
predict the effect on the market price of coal of any future mining laws and
regulations. Although there are reserves of surface-mineable coal dedicated by
suppliers to Tampa Electric's account, high-quality coal reserves in Kentucky
that can be economically surface-mined are being depleted and in the future more
coal will be deep-mined. This trend is not expected to result in any significant
additional costs to Tampa Electric.
OIL. Tampa Electric had supply agreements through Dec. 31, 1999 for No.
2 fuel oil and No. 6 fuel oil for its Polk and Hookers Point stations, and its
four combustion turbine units at prices based on Gulf Coast Cargo spot prices.
Contracts for the supply of No. 6 fuel oil through Dec. 31, 2000 are expected to
be finalized by March 31, 2000. The price for No. 2 fuel oil deliveries taken in
December 1999 was $30.14 per barrel, or $5.20 per million BTU. There were no No.
6 fuel oil deliveries taken in December 1999.
FRANCHISES
Tampa Electric holds franchises and other rights that, together with
its charter powers, give it the right to carry on its retail business in the
localities it serves. The franchises are irrevocable and are not subject to
amendment without the consent of Tampa Electric, although, in certain events,
they are subject to forfeiture.
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Florida municipalities are prohibited from granting any franchise for a
term exceeding 30 years. If a franchise is not renewed by a municipality, the
franchisee may choose to exercise its statutory right to require the
municipality to purchase any and all property used in connection with the
franchise at a valuation to be fixed by arbitration or, if arbitration is
unsuccessful, by eminent domain. In addition, all of the municipalities except
for the cities of Tampa and Winter Haven have reserved the right to purchase
Tampa Electric's property used in the exercise of its franchise, if the
franchise is not renewed.
Tampa Electric has franchise agreements with 13 incorporated
municipalities within its retail service area. These agreements have various
expiration dates ranging from December 2005 to September 2021.
Franchise fees payable by Tampa Electric, which totaled $20.8 million
in 1999, are calculated using a formula based primarily on electric revenues.
Utility operations in Hillsborough, Pasco, Pinellas and Polk Counties
outside of incorporated municipalities are conducted in each case under one or
more permits to use county rights-of-way granted by the county commissioners of
such counties. There is no law limiting the time for which such permits may be
granted by counties. There are no fixed expiration dates for the Hillsborough
County and Pinellas County agreements. The agreements covering electric
operations in Pasco and Polk counties expire in 2033 and 2005, respectively.
ENVIRONMENTAL MATTERS
Tampa Electric met the environmental compliance requirements for the
Phase I emission limitations imposed by the Clean Air Act Amendments (CAAA)
which became effective Jan. 1, 1995 by using blends of lower-sulfur coal,
integrating the Big Bend Unit Four FGD system with Unit Three, implementing
operational modifications and purchasing emission allowances. For Phase II,
which began Jan. 1, 2000, further reductions in sulfur dioxide (SO2) and
nitrogen oxide (NOx) emissions were required. To comply with the Phase II SO2
requirements, the company installed a new FGD system at Big Bend Units One and
Two and will rely less on fuel blending and SO2 allowance purchases. The $83
million scrubber was placed in service on Dec. 30, 1999 and will significantly
reduce the amount of SO2 emitted by Tampa Electric's Big Bend Units One and Two.
As a result of this project, all of the units at Big Bend Station, Tampa
Electric's largest generating station, are equipped with FGD, or scrubber
technology. The FPSC approved recovery of the costs associated with the Big Bend
Units One and Two FGD system in November 1999 and cost recovery began in January
2000. In order to comply with the Phase II NOx emission limits on a system wide
average, Tampa Electric has implemented combustion optimization projects at Big
Bend and Gannon Stations.
In 1997, the EPA began an investigation under the Clean Air Act (CAA)
of coal-fired electric power generators to determine compliance with New Source
Review (NSR) environmental permitting requirements associated with repairs,
maintenance, modifications and operational changes made to the facilities over
the years. The EPA asserted that certain electric utilities, including Tampa
Electric, should have applied for pre-construction permits for certain unit
maintenance projects, and that the permitting review of such projects would have
included NSR, resulting in requirements that the units meet more restrictive,
Best Available Control Technology (BACT) standards for NOx, SO2 and particulate
matter (PM). Tampa Electric disagreed with EPA's interpretation of its NSR rules
and its definitions of what constitutes maintenance. On Nov. 3, 1999, despite
Tampa Electric's extensive efforts to reach a mutually agreeable settlement with
the EPA, the Department of Justice sued Tampa Electric and six other electric
utilities and issued an administrative order against TVA on behalf of the EPA
for alleged violations of the CAA associated with this NSR issue. Coincident
with the lawsuits, EPA issued Notices of Violations (NOV) alleging similar NSR
violations under the relevant State Implementation Plans (SIP).
Following notice to the State of Florida of the EPA's NOV, the Florida
Department of Environmental Protection (DEP), the agency responsible for
enforcement of the Air Quality SIP, began negotiations to resolve the same
allegations under the SIP that Tampa Electric had not applied for appropriate
permits for certain unit maintenance projects at Gannon and Big Bend Stations
and, therefore, had operated the coal-fired units without BACT for NOx and SO2.
Effective Dec. 16, 1999, a Consent Final Judgment (CFJ) entered into between DEP
and Tampa Electric resolved the DEP claims. The requirements of the CFJ require
the implementation of several environmental initiatives which include repowering
certain Gannon Station units with natural gas and placing the remaining Gannon
units on reserve standby by the end of 2004. It also requires Tampa Electric to
implement other specific initiatives to further reduce NOx, SO2 and PM emissions
at Big Bend Station Unit Four by 2007 and Big Bend Units One, Two and Three by
2010.
On Feb. 29, 2000, Tampa Electric Company, the U.S. Environmental
Protection Agency and the U.S. Department of Justice announced they had resolved
the federal agencies' pending enforcement actions (including the NOV) filed last
year against the company. The resolution, which was in the form of a consent
decree, resulted in full and final settlement of the November 1999 federal
litigation and NOV alleging violations of NSR requirements of the Clear Air Act.
The consent decree was lodged with the U.S. District Court for the Middle
District of Florida in Tampa, Florida, and, is subject to a 30-day public
comment period before it may be entered by the Court at which time it will
become effective.
The agreement is substantially the same as Tampa Electric's earlier
agreement with the Florida Department of Environmental Protection with respect
to environmental controls and pollution reductions reached on Dec. 7, 1999;
however, it contains specific detail with respect to the availability of the
scrubbers and earlier incremental NOx reduction efforts on Big Bend Units One,
Two and Three. In order to eliminate the uncertainties of litigation and in
exchange for a release from past liability and a safe harbor during the 10-year
term of the consent decree, the Company agreed to pay a $3.5 million civil
penalty. Under the consent decree,
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<PAGE> 6
Tampa Electric will commit to a comprehensive cleanup program that will
dramatically decrease emissions from the company's power plants. The agreement
makes Tampa Electric the first utility in the nation to respond to EPA's
coal-fired utility initiative.
Engineering for the repowering project began in January 2000, and the
company anticipates that commercial operation for the first repowered unit will
occur by May 1, 2003. The repowering of additional units is scheduled to be
completed by May 1, 2004. When these units are repowered, the station will be
renamed the Bayside Power Station and will have an increased total station
capacity of about 1,475 megawatts of natural gas-fueled electric energy.
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, Tampa
Electric 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.
EXPENDITURES. During the five years ended Dec. 31, 1999, Tampa Electric
spent $212.2 million on capital additions to meet environmental requirements
including $92.8 million for the Polk Power Station project. Environmental
expenditures are estimated at $6.4 million for 2000 and $17.3 million in total
for 2001 through 2004. These totals exclude amounts required to comply with the
CAAA, as discussed in the following paragraphs.
Tampa Electric is complying with the Phase I emission limitations
imposed by the CAAA which became effective Jan. 1, 1995 by using blends of
lower-sulfur coal, controlling stack emissions and purchasing emission
allowances.
In December 1999, Tampa Electric put into operation a flue gas
desulfurization (FGD) system or "scrubber" at Big Bend Units One and Two. As a
result of the installation of this FGD system, all of the units at Big Bend
Station, Tampa Electric's largest generating station, will be equipped with
scrubber technology. This technology will reduce the sulfur dioxide emissions
from these units and will allow Tampa Electric to achieve compliance with the
requirements of the Clean Air Act Amendments. As of Dec. 31, 1999, Tampa
Electric had spent approximately $80 million on the FGD project, and it expects
the total expenditures for the scrubber to be about $83 million.
The FPSC approved the FGD system as the most cost effective alternative
for Tampa Electric to meet its CAAA compliance requirements and the recovery of
prudently incurred costs through the environmental cost recovery clause. Cost
recovery began in January 2000.
Tampa Electric may petition the FPSC for recovery of certain other
environmental compliance costs on a current basis pursuant to a statutory
environmental cost recovery procedure used in connection with the above
described FGD system, along with environmental costs required by the consent
decree described above.
In 1999, Tampa Electric recovered $8 million of environmental
compliance costs through the environmental cost recovery clause. These were
costs incurred by Tampa Electric after April 1993 to comply with environmental
regulations that were not included in the then current base rates. In addition,
Tampa Electric may recover environmental compliance costs through base rates.
PEOPLES GAS SYSTEM--GAS OPERATIONS
PGS is engaged in the purchase, distribution and marketing of natural
gas for residential, commercial, industrial and electric power generation
customers in the State of Florida.
PGS has no gas reserves, but relies on two interstate pipelines to
deliver gas to it for sale or other delivery to customers connected to its
distribution system. PGS does not engage in the exploration for or production of
natural gas. Currently, PGS operates a natural gas distribution system that
serves approximately 253,000 customers. The system includes approximately 8,100
miles of mains and over 4,800 miles of service lines.
In 1999, the total throughput for PGS was 1.1 billion therms. Of this
total throughput, 23 percent was gas purchased and resold to retail customers by
PGS, 72 percent was third party supplied gas delivered for retail customers, and
5 percent was gas sold off-system. Industrial and power generation customers
consumed approximately 69 percent of PGS' annual therm volume. Commercial
customers used approximately 26 percent with the balance consumed by residential
customers.
While the residential market represents only a small percentage of
total therm volume, residential operations generally comprise 23 percent of
total revenues. New residential construction and conversions of existing
residences to gas have steadily increased since the late 1980's.
Natural gas has historically been used in many traditional industrial
and commercial operations throughout Florida, including production of products
such as steel, glass, ceramic tile and food products. Gas climate control
technology is expanding throughout Florida, and commercial/industrial customers
including schools, hospitals, office complexes and churches are utilizing this
new technology.
Within the PGS operating territory, large cogeneration facilities
utilize gas technology in the production of electric power and steam. Over the
past three years, the company has transported, on average, about 238 million
therms annually to facilities involved in cogeneration.
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Revenues and therms for PGS for 1999, are as follows:
<TABLE>
<CAPTION>
Revenues Therms
(millions) 1999 1999
-------- --------
<S> <C> <C>
Residential $ 59.0 52.1
Commercial 125.5 273.5
Industrial 29.3 331.9
Power Generation 10.4 405.2
Other revenues 27.5 -
-------- -------
Total $ 251.7 1,062.7
======== =======
</TABLE>
PGS had 845 employees as of Dec. 31, 1999. A total of 82 employees in
six of the company's 13 operating divisions are represented by various union
organizations.
REGULATION
The operations of PGS are regulated by the FPSC separate from the
regulation of Tampa Electric's electric operations. The FPSC has jurisdiction
over rates, service, issuance of certain securities, safety, accounting and
depreciation practices and other matters.
In general, the FPSC sets rates at a level that allows a utility such
as PGS to collect total revenues (revenue requirements) equal to its cost of
providing service, including a reasonable return on invested capital.
The basic costs, other than the costs of purchased gas and interstate
pipeline capacity, of providing natural gas service are recovered through base
rates. Base rates are designed to recover the costs of owning, operating and
maintaining the utility system. The rate of return on rate base, which is
intended to approximate PGS' weighted cost of capital, primarily includes its
cost for debt, deferred income taxes at a zero cost rate, and an allowed return
on common equity. Base prices are determined in FPSC proceedings which occur at
irregular intervals at the initiative of PGS, the FPSC or other parties.
PGS recovers the costs it pays for gas supply and interstate
transportation for system supply through the Purchased Gas Adjustment (PGA)
clause. This charge is designed to recover the costs incurred by PGS for
purchased gas, and for holding and using interstate pipeline capacity for the
transportation of gas it sells to its customers. These charges are adjusted
monthly based on a cap approved annually in an FPSC hearing. The cap is based on
estimated costs of purchased gas and pipeline capacity, and estimated customer
usage for a specific recovery period, with a true-up adjustment to reflect the
variance of actual costs and usage from the projected charges for prior periods.
In 1999, PGS received Commission approval to begin recovering costs using
different billing factors for residential and commercial customers.
In addition to its base rates and purchased gas adjustment clause
charges for system supply customers, PGS customers (except interruptible
customers) also pay a per-therm charge for all gas consumed to recover the costs
incurred by the company in developing and implementing energy conservation
programs, which are mandated by Florida law and approved and supervised by the
FPSC. PGS is permitted to recover, on a dollar-for-dollar basis, expenditures
made in connection with these programs if it demonstrates that the programs are
cost effective for its ratepayers.
In June 1996, following informal workshops held in late 1995, the FPSC
initiated a proceeding for the purpose of investigating the unbundling of
natural gas services provided by PGS and other local distribution companies
subject to the FPSC's regulatory jurisdiction.
In February 2000, the FPSC proposed a rule that would require natural
gas utilities to offer transportation-only service to all non-residential
customers. PGS believes a generic rule is unnecessary and is opposed to this
broad proposal. The rulemaking process is expected to last anywhere from six
months to in excess of a year. It is unclear whether the FPSC staff action will
lead to FPSC adoption of a rule requiring further unbundling.
Under a separate docket, in June 1999, PGS extended for a two-year
period its existing, experimental unbundling program to 2,600 customers from the
previous 170 customers. This program, known as the Firm Transportation
Aggregation (FTA) program, advances the unbundling initiative being pursued by
the FPSC Staff, but contemplates a more reasonable pace toward total unbundled
service to non-residential customers. In July, PGS petitioned the FPSC for
approval of FTA-2 which contains terms and conditions similar to FTA, except it
allows customers new to PGS to transport immediately. Marketers are also allowed
to convert existing sales service customers to transportation under FTA-2 equal
to the amount of "new" load served by the marketers. The FTA-2 went into effect
in October 1999, but a hearing is scheduled for early 2000 to address issues
raised by the FPSC staff. Under the unbundling activities currently underway and
those that have FPSC approval pending, PGS would continue to receive its base
rate for distribution regardless of whether a customer decided to opt for
transportation only service or to continue bundled service. It is therefore, not
expected that unbundling will have a material adverse effect on PGS' earnings in
the future.
In addition to economic regulation, PGS is subject to the FPSC's safety
jurisdiction, pursuant to which the FPSC regulates the construction, operation
and maintenance of PGS' distribution system. In general, the FPSC has
implemented this by adopting the Minimum Federal Safety Standards and reporting
requirements for pipeline facilities and transportation of gas prescribed by the
U.S. Department of Transportation in Parts 191, 192 and 199, Title 49, Code of
Federal Regulations.
7
<PAGE> 8
PGS is also subject to Federal, state and local environmental laws and
regulations pertaining to air and water quality, land use, noise and aesthetics,
solid waste and other environmental matters.
COMPETITION
PGS is not in direct competition with any other regulated distributors
of natural gas for customers within its service areas. At the present time, the
principal form of competition for residential and small commercial customers is
from companies providing other sources of energy and energy services including
fuel oil, electricity and in some cases liquid propane gas. PGS has taken
actions to retain and expand its commodity and transportation business,
including managing costs and providing high quality service to customers. The
multiple PGA factors approved in 1999 and the FTA-2 program are both designed to
improve the competitiveness of natural gas for commercial load.
Competition is most prevalent in the large commercial and industrial
markets. In recent years, these classes of customers have been targeted by
competing companies seeking to sell gas directly either using PGS facilities or
transporting gas through other facilities, thereby bypassing PGS facilities.
Many of these competitors are larger natural gas marketers with a national
presence. The FPSC has allowed PGS to adjust rates to meet competition for the
largest interruptible customers.
GAS SUPPLIES
PGS purchases gas from various suppliers depending on the needs of its
customers. The gas is delivered to the PGS distribution system through two
interstate pipelines on which PGS has reserved firm transportation capacity for
further delivery by PGS to its customers.
Gas is delivered by Florida Gas Transmission Company (FGT) through more
than 40 interconnections (gate stations) serving PGS' operating divisions. In
addition, PGS' Jacksonville Division receives gas delivered by the South Georgia
Natural Gas Company (South Georgia) pipeline through a gate station located
northwest of Jacksonville.
Companies with firm pipeline capacity receive priority in scheduling
deliveries during times when the pipeline is operating at its maximum capacity.
PGS presently holds sufficient firm capacity to permit it to meet the gas
requirements of its system commodity customers except during localized
emergencies affecting the PGS distribution system, and on abnormally cold days.
Firm transportation rights on an interstate pipeline represent a right
to use the amount of the capacity reserved for transportation of gas, on any
given day. PGS pays reservation charges on the full amount of the reserved
capacity whether or not it actually uses such capacity on any given day. When
the capacity is actually used, PGS pays a volumetrically based usage charge for
the amount of the capacity actually used. The levels of the reservation and
usage charges are regulated by FERC. PGS actively markets any excess capacity
available on a day to day basis to partially offset costs recovered through the
Purchased Gas Adjustment Clause.
PGS procures natural gas supplies using base load and swing supply
contracts distributed among various vendors along with spot market purchases.
Pricing generally takes the form of either a variable price based on published
indices, or a fixed price for the contract term.
Neither PGS nor any of its interconnected interstate pipelines has
storage facilities in Florida. PGS occasionally faces situations when the
demands of all of its customers for the delivery of gas cannot be met. In these
instances, it is necessary that PGS interrupt or curtail deliveries to its
interruptible customers. In general, the largest of PGS' industrial customers
are in the categories that are first curtailed in such situations. PGS' tariff
and transportation agreements with these customers give PGS the right to divert
these customers' gas to other higher priority users during the period of
curtailment or interruption. PGS pays these customers for such gas at the price
they paid their suppliers (if purchased by the customer under a contract with a
term of five years or longer), or at a published index price (if purchased by
the customer pursuant to a contract with a term less than five years), and in
either case pays the customer for charges incurred for interstate pipeline
transportation to the PGS system.
FRANCHISES
PGS holds franchise and other rights with 89 municipalities within its
service area. These include the cities of Jacksonville, Daytona Beach, Eustis,
Orlando, Lakeland, Tampa, St. Petersburg, Bradenton, Sarasota, Avon Park,
Frostproof, Palm Beach Gardens, Pompano Beach, Fort Lauderdale, Hollywood, North
Miami, Miami Beach, Miami, Panama City and Ocala. These agreements give PGS a
right to operate within the franchise territory. The franchises are irrevocable
and are not subject to amendment without the consent of PGS, although in certain
events, they are subject to forfeiture.
Municipalities are prohibited from granting any franchise for a term
exceeding 30 years. If a franchise is not renewed by a municipality, the
franchisee may choose to exercise its statutory right to require the
municipalities to purchase any and all property used in connection with the
franchise at a valuation to be fixed by arbitration or, if arbitration is
unsuccessful, by eminent domain. In addition, several of the municipalities have
reserved the right to purchase PGS' property used in the exercise of its
franchise, if the franchise is not renewed.
PGS' franchise agreements with the incorporated municipalities within
its service area have various expiration dates ranging from March 2000 through
December 2029.
8
<PAGE> 9
In March 2000, the City of Lakeland notified PGS that it intended to
begin negotiations to exercise its right to purchase PGS' property consisting of
approximately 200 miles of gas line in the Lakeland franchise area when its
franchise agreement with PGS expired on March 13, 2000. PGS serves approximately
5,000 customers in Lakeland. The Company continues to negotiate the terms of an
extension to the franchise. PGS has continued its discussions with the City of
Lakeland urging the city to renew this agreement. While PGS believes it is best
suited to serve these customers, it cannot at this time predict the ultimate
outcome of these activities. If negotiations prove to be unsuccessful, then a
resolution will only be achieved through appropriate legal action.
Franchise fees payable by PGS, which totaled $7.4 million in 1999, are
calculated using various formulas which are based principally on natural gas
revenues. Franchise fees are collected from only those customers within each
franchise area.
Utility operations in areas outside of incorporated municipalities are
conducted in each case under one or more permits to use county rights-of-way
granted by the county commissioners of such counties. There is no law limiting
the time for which such permits may be granted by counties. There are no fixed
expiration dates and these rights are, therefore, considered perpetual.
ENVIRONMENTAL MATTERS
PGS's operations are subject to federal, state and local statutes,
rules and regulations relating to the discharge of materials into the
environment and the protection of the environment generally that require
monitoring, permitting and ongoing expenditures. These expenditures have not
been significant in the past, but the trend is toward stricter standards,
greater regulation and more extensive permitting requirements.
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, Tampa
Electric 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.
PGS believes that it is in substantial compliance with applicable
environmental laws, regulations, orders and rules. It is allowed to recover
certain prudently incurred environmental costs through rates charged to its
customers.
EXPENDITURES. During the five years ended Dec. 31, 1999, PGS has not
incurred any material capital additions to meet environmental requirements, nor
are any anticipated for 2000 through 2004.
ITEM 2. PROPERTIES.
The company believes that the physical properties are adequate to
carry on its business as currently conducted. The properties are generally
subject to liens securing long-term debt.
ELECTRIC PROPERTIES
At Dec. 31, 1999, Tampa Electric had five electric generating plants
and four combustion turbine units in service with a total net winter generating
capability of 3,569 megawatts, including Big Bend (1,742-MW capability from four
coal units), Gannon (1,160-MW capability from six coal units), Hookers Point
(189-MW capability from five oil units), Phillips (34-MW capability from two
diesel units), Polk (250-MW capability from one integrated gasification combined
cycle unit (IGCC)) and four combustion turbine units located at the Big Bend and
Gannon stations (194 MWs). The capability indicated represents the demonstrable
dependable load carrying abilities of the generating units during winter peak
periods as proven under actual operating conditions. Units at Hookers Point went
into service from 1948 to 1955, at Gannon from 1957 to 1967, and at Big Bend
from 1970 to 1985. The Polk IGCC unit began commercial operation in September
1996. In 1991, Tampa Electric purchased two power plants (Dinner Lake and
Phillips) from the Sebring Utilities Commission (Sebring). Dinner Lake (11-MW
capability from one natural gas unit) and Phillips were placed in service by
Sebring in 1966 and 1983, respectively. In March 1994, Dinner Lake Station was
placed on long-term reserve standby.
Engineering for repowering Gannon Station began in January 2000, and
the company anticipates that commercial operation for the first repowered unit
will occur by May 1, 2003. The repowering of the additional units is scheduled
to be completed by May 1, 2004. When these units are repowered, the station will
be renamed the Bayside Power Station. Total station capacity is expected to
increase to about 1,475 megawatts.
Tampa Electric owns 221 substations having an aggregate transformer
capacity of 16,654,239 KVA. The transmission system consists of approximately
1,196 pole miles of high voltage transmission lines, and the distribution system
consists of 6,939 pole miles of overhead lines and 2,838 trench miles of
underground lines. As of Dec. 31, 1999, there were 576,803 meters in service.
All of this property is located in Florida.
All plants and important fixed assets are held in fee except that title
to some of the properties is subject to easements, leases, contracts, covenants
and similar encumbrances and minor defects, of a nature common to properties of
the size and character of those of Tampa Electric.
9
<PAGE> 10
Tampa Electric has easements for rights-of-way adequate for the
maintenance and operation of its electrical transmission and distribution lines
that are not constructed upon public highways, roads and streets. It has the
power of eminent domain under Florida law for the acquisition of any such
rights-of-way for the operation of transmission and distribution lines.
Transmission and distribution lines located in public ways are maintained under
franchises or permits.
Tampa Electric has a long-term lease for its office building in
downtown Tampa which serves as headquarters for TECO Energy, Tampa Electric and
numerous other TECO Energy subsidiaries.
GAS PROPERTIES
PGS' distribution system extends throughout the areas it serves in
Florida, and consists of approximately 12,900 miles of pipe, including
approximately 8,100 miles of mains and over 4,800 miles of service lines.
PGS operating divisions are located in thirteen markets throughout
Florida. While most of the operations, storage and administrative facilities are
owned, a small number are leased.
ITEM 3. LEGAL PROCEEDINGS.
On Nov. 3, 1999, a civil action was filed by the U.S. Department of
Justice on behalf of the U.S. Environmental Protection Agency against Tampa
Electric Company in the United States District Court for the Middle District of
Florida, and EPA issued a Notice of Violation (NOV) for violations under the
Florida State Implementation Plan (SIP). Both enforcement actions alleged that
Tampa Electric made modifications to its Big Bend and Gannon generating plants
without obtaining permits and installing the best available pollution control
equipment as required by the Prevention of Significant Deterioration provisions
of the Clean Air Act and the requirements of the SIP.
On Feb. 29, 2000, Tampa Electric Company, the U.S. Environmental
Protection Agency and the U.S. Department of Justice announced they had resolved
the federal agencies' pending enforcement actions (including the NOV) filed last
year against Tampa Electric. The resolution, which was in the form of a consent
decree, resulted in full and final settlement of the November 1999 federal
litigation and NOV alleging violations of the New Source Review (NSR)
requirements of the Clear Air Act. The Consent Decree was lodged with the U.S.
District Court for the Middle District of Florida in Tampa, Florida, and is
subject to a 30-day public comment period, before it may be entered by the Court
at which time it will become effective. See the discussion under TAMPA
ELECTRIC--ELECTRIC OPERATIONS - ENVIRONMENTAL MATTERS.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
All of the company's common stock is owned by TECO Energy, Inc. and
therefore, there is no market for the stock.
The company pays dividends substantially equal to its net income
applicable to common stock to TECO Energy. Such dividends totaled $149.5 million
in 1999 and $147.5 million for 1998. See Note C on page 31 for a description of
restrictions on dividends on the company's common stock.
10
<PAGE> 11
ITEM 7. MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS.
THE MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS WHICH FOLLOWS
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: GENERAL ECONOMIC CONDITIONS,
PARTICULARLY THOSE IN TAMPA ELECTRIC COMPANY'S SERVICE AREAS 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; COMMODITY PRICE CHANGES AFFECTING THE
COMPETITIVE POSITIONS OF BOTH TAMPA ELECTRIC AND PEOPLES GAS SYSTEM; AND CHANGES
IN AND COMPLIANCE WITH ENVIRONMENTAL REGULATIONS THAT MAY IMPOSE ADDITIONAL
COSTS OR CURTAIL SOME ACTIVITIES. THESE FACTORS ARE DISCUSSED MORE FULLY UNDER
"INVESTMENT CONSIDERATIONS" IN TECO ENERGY INC.'S ANNUAL REPORT ON FORM 10-K FOR
THE YEAR ENDED DEC. 31, 1999, AND REFERENCE IS MADE THERETO.
EARNINGS SUMMARY:
The acquisitions of Peoples Gas System, Inc. and West Florida Natural
Gas Company in June 1997, were accounted for as poolings of interests and,
accordingly, the 1997 financial and operating data include the results of
Peoples Gas System, Inc. And West Florida Natural Gas Company, combined for the
full year. However, prior year financial statements have not been restated to
reflect the results of West Florida Natural Gas Company due to its size.
Net income for 1999 of $144.9 million declined 1 percent from the prior
year results of $146.4 million due primarily to the impact of previously
deferred revenues and certain charges described in the CHARGES TO EARNINGS
section below. Net income in 1998 also declined 1 percent from 1997's results
primarily as a result of the charges described in the CHARGES TO EARNINGS
section below. For a description of the origination and treatment of deferred
revenues, see UTILITY REGULATION - RATE STABILIZATION STRATEGY section.
Operating income, excluding charges described in the CHARGES TO
EARNINGS section, declined 1.6 percent in 1999 reflecting the impact of deferred
revenue changes. Operating income in 1999 reflected the reversal of $11.9
million of previously deferred electric revenues compared to the recognition of
$38.3 million of previously deferred electric revenues in 1998. Operating income
in 1997 reflected the recognition of $30.5 million of previously deferred
electric revenues and the inclusion of Polk Unit One in rate base for earnings
purposes. See UTILITY REGULATION - RATE STABILIZATION STRATEGY section.
Earnings in 1999 and 1998 were affected by certain events and
adjustments that were unusual in nature and resulted in charges which are not
expected to recur in future periods. These charges are described in the CHARGES
TO EARNINGS section on page 12 and from a regulatory ruling denying recovery of
coal expenses over an established benchmark for coal purchases from Gatliff
since 1992 (described in the TAMPA ELECTRIC - ELECTRIC OPERATING RESULTS
section).
Results in 1997 reflected one-time costs from the 1997 Peoples Gas
companies merger and an FPSC decision, described in the TAMPA ELECTRIC -
ELECTRIC OPERATING RESULTS section, to change the regulatory treatment of two
wholesale power sales contracts.
CONTRIBUTIONS BY OPERATING DIVISION
<TABLE>
<CAPTION>
(millions) 1999 CHANGE 1998 CHANGE 1997
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
OPERATING INCOME
Tampa Electric $195.0 (1) -4.1% $203.4 (2) 5.3% $193.1
Peoples Gas System 30.5 18.2% 25.8 5.3% 24.5
------ ------ ------
225.5 -1.6% 229.2 5.3% 217.6
Non-recurring charge 7.9 (3) -- (9.6)(4) -- --
------ ------ ------
Total $233.4 6.3% $219.6 .9% $217.6
====== ======
</TABLE>
(1) Excludes a pretax credit of $7.9 million. See CHARGES TO EARNINGS section on
page 12.
(2) Excludes a pretax charge of $9.6 million for treatment of a wholesale
contract. See CHARGES TO EARNINGS section on page 12.
(3) Deferred revenue benefit recognized under the rgulatory agreement related to
the charge for tax settlement described in the CHARGES TO EARNINGS section
on page 12.
(4) Pre-tax charge for treatment of a wholesale contract, described in the
CHARGES TO EARNINGS SECTION ON PAGE 12.
11
<PAGE> 12
CHARGES TO EARNINGS
In 1999 and 1998 the company recognized certain charges that were
unusual and nonrecurring in nature.
1999 CHARGES
The charges in 1999 totaled $18.3 million pretax ($13.7 million after
tax) and consisted of the following:
Tampa Electric recorded a charge of $10.5 million ($6.4 million after
tax) based on FPSC audits of its 1997 and 1998 earnings, which among other
things, limited its regulatory equity ratio to 58.7 percent, a decrease of 91
basis points and 224 basis points from 1997's and 1998's ratios, respectively.
Tampa Electric also recorded a charge of $3.5 million after tax,
representing management's estimate of additional expense to resolve the
litigation filed by the United States Environmental Protection Agency.
A net after-tax charge, after recovery under the then current
regulatory agreement totaling $3.8 million was also recognized reflecting
corporate income tax provisions and settlements related to prior years' tax
returns.
1998 CHARGES
In 1998, Tampa Electric recognized charges totaling $16.9 million,
pretax ($10.3 million, after tax). These charges consisted of the following:
The FPSC in September 1997 ruled that under the regulatory agreements
effective through 1999 the costs associated with two long-term wholesale power
sales contracts should be assigned to the wholesale jurisdiction and that for
retail rate making purposes the costs transferred from retail to wholesale
should reflect average costs rather than the lower incremental costs on which
the two contracts are based. As a result of this decision and the related
reduction of the retail rate base upon which Tampa Electric is allowed to earn a
return, these contracts became uneconomic. One contract was terminated in 1997.
As to the other contract, which expires in March 2001, Tampa Electric entered
into firm power purchase contracts with third parties to provide replacement
power through 1999 and is no longer separating the associated generation assets
from the retail jurisdiction. The cost of purchased power under these contracts
exceeded the revenues expected through 1999. To reflect this difference, Tampa
Electric recorded a $9.6 million charge ($5.9 million after tax) in 1998. In
November 1999, the FPSC approved a company-proposed treatment for the remaining
14 1/2 months of the contract that flows 100 percent of the revenues from the
contract back to retail customers.
Tampa Electric also recorded a charge of $7.3 million ($4.4 million
after tax) in other expense for an FPSC decision in 1998 denying recovery of
certain BTU coal quality price adjustments for coal purchases from TECO Coal
since 1993.
OPERATING RESULTS
TAMPA ELECTRIC - ELECTRIC OPERATIONS
TAMPA ELECTRIC OPERATING RESULTS
Tampa Electric's 1999 operating income, before charges described in the
CHARGES TO EARNINGS section, decreased 4 percent from 1998. Results in 1999
included the deferral of $11.9 million of revenues excluding an offsetting
nonrecurring pretax benefit of $7.9 million of deferred revenues recognized
under the then current regulatory agreement related to the charge for tax
settlements. 1998's results reflected the recognition of $38.3 million of
previously deferred revenues partially offset by a $20.8 million temporary base
rate reduction. Favorably impacting 1999, customer growth was 2.5 percent and
operations and maintenance expenses were $9.6 million lower, primarily the
result of efficiency improvements in 1999. Expenses were higher in 1998,
primarily to enhance system reliability.
<TABLE>
<CAPTION>
SUMMARY OF OPERATING RESULTS
(millions) 1999 CHANGE 1998 CHANGE 1997
-------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C>
Revenues $1,199.8(1) -2.8% $1,234.6(2) 3.8% $1,189.2(3)
Operating expenses 1,004.8 -2.6% 1,031.2(4) 3.5% 996.1
-------- -------- --------
Operating income $ 195.0 -4.1% $ 203.4 5.3% $ 193.1
======== ======== ========
</TABLE>
(1) Includes $11.9 million of deferred revenues. This amount is before the $7.9
million deferred revenue benefit recognized under the regulatory agreement
related to the charge for tax settlements, described in the CHARGES TO
EARNINGS section.
(2) Includes the recognition of previously deferred revenues totaling $38.3
million offset by temporary base rate reductions of $20.8 million, described
in the UTILITY REGULATION - RATE STABILIZATION STRATEGY section.
(3) Includes the recognition of previously deferred revenues totaling $30.5
million offset by temporary base rate reductions of $4.6 million, described
in the UTILITY REGULATION - RATE STABILIZATION STRATEGY section.
(4) Excludes a pretax charge of $9.6 million for treatment of a wholesale
contract, described in the CHARGES TO EARNINGS section.
12
<PAGE> 13
TAMPA ELECTRIC OPERATING REVENUES
The economy in Tampa Electric's service area continued to grow in 1999,
with increased employment from corporate relocations and expansions. The Tampa
metropolitan area's employment grew over 5 percent in 1999, placing it among the
top five in the U.S. for job growth.
Tampa Electric's 1999 operating revenues decreased 3 percent, primarily
because the company deferred revenues in 1999, while in 1998 it benefitted from
the recognition of revenues deferred in prior years. The company experienced
customer growth of 2.5 percent while retail energy sales were 1.4 percent lower.
Tampa Electric's 1998 revenues, including recognition of $38.3 million of
previously deferred revenues partially offset by a $20.8 million temporary base
rate reduction, increased almost 4 percent, with customer growth increasing 2.3
percent and retail energy sales up 6.2 percent.
Overall, the company experienced a higher-margin customer mix in 1999,
primarily the result of retail customer growth of 2.5 percent and strong
commercial sales. Total retail energy sales were lower primarily due to a
slowdown in the phosphate industry, the lowest margin sector.
Combined residential and commercial energy sales increased slightly in
1999, as the addition of almost 13,000 new customers more than offset the
effects of mild weather. These sales increased over 7 percent in 1998,
reflecting the addition of almost 12,000 customers and increased demand during
warmer-than-normal summer weather.
Non-phosphate industrial sales increased in 1999 and 1998, reflecting
the shift of some commercial customers to the industrial classification to take
advantage of favorable tax law changes on electricity used in manufacturing.
This shift does not affect Tampa Electric revenues.
Sales to the phosphate industry declined in 1999 and in 1998. The
phosphate industry has experienced a slowdown over the past two years. Several
mines were shut down in late 1998, and additional closures were announced in
1999. The phosphate industry is currently experiencing lower pricing and
oversupply. According to phosphate industry sources, the market is expected to
remain in this downturn for the next two years and to rebound in 2002. Revenues
from phosphate sales represented slightly less than 3 percent of base revenues
in 1999 and in 1998.
Based on expected growth reflecting population increases and business
expansion, Tampa Electric projects retail energy sales growth of approximately
2.5 percent annually over the next five years, with combined energy sales growth
in the residential and commercial sectors of almost 3 percent annually. Energy
sales to non-phosphate industrial customers are expected to grow almost 2
percent annually over the next five years.
These growth projections assume continued local area economic growth,
normal weather and certain other factors.
Non-fuel revenues from sales to other utilities were $37 million in
1999, $36 million in 1998 and $39 million in 1997. Megawatt hours sold to other
utilities decreased in 1999 primarily because of mild weather and lower Tampa
Electric generating unit availability. The slight increase in non-fuel revenues
in 1999 was the result of increased partial-requirement sales due to contractual
escalations in megawatt requirements.
<TABLE>
<CAPTION>
MEGAWATT-HOUR SALES
(thousands) 1999 CHANGE 1998 CHANGE 1997
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Residential 6,967 -1.2% 7,050 8.5% 6,500
Commercial 5,336 3.2% 5,173 5.5% 4,901
Industrial 2,224 -11.7% 2,520 2.2% 2,466
Other 1,278 -0.5% 1,284 5.0% 1,223
------ ------ ------
Total retail 15,805 -1.4% 16,027 6.2% 15,090
Sales for resale 2,160 -13.1% 2,486 -21.3% 3,160
------ ------ ------
Total energy sold 17,965 -3.0% 18,513 1.4% 18,250
====== ====== ======
Retail customers (average) 543.7 2.5% 530.3 2.3% 518.4
====== ====== ======
</TABLE>
TAMPA ELECTRIC OPERATING EXPENSES
Overall expenses were down 3 percent in 1999, reflecting lower fuel
consumption and lower operations and maintenance expense. Partially offsetting
these reductions were property tax settlements and environmental study costs
associated with the state environmental settlement described below and in the
ENVIRONMENTAL COMPLIANCE section.
Non-fuel operations and maintenance expenses decreased 4 percent in
1999, the result of effective cost management and improved efficiency throughout
the company. Required expenditures to enhance system reliability and timing of
generation station outages contributed to the higher maintenance costs in 1998.
Tampa Electric's 250-megawatt, state-of-the-art, clean-coal technology
Polk Unit One was placed into service in late 1996. Between 1996 and 1999, a
total of approximately $29 million was received from the U.S. Department of
Energy (DOE) to partially offset the unit's non-fuel operations and maintenance
expenses. 1999 was the last year in which Tampa Electric was eligible to receive
DOE funding for Polk Unit One.
Non-fuel operations and maintenance expenses in 2000 are expected to be
higher than in 1999, reflecting the discontinuance of DOE funding of $6 to 7
million and operating expenses estimated at $4 to 5 million associated with the
new Big Bend flue-gas
13
<PAGE> 14
desulfurization (FGD) system, described in the ENVIRONMENTAL COMPLIANCE section.
Following 2000, expenses are expected to increase at or below the rate of
inflation over the next several years.
<TABLE>
<CAPTION>
OPERATING EXPENSES
(millions) 1999 CHANGE 1998 CHANGE 1997
-------- ------ -------- ------ -------
<S> <C> <C> <C> <C> <C>
Other operating expenses $ 163.6 -1.3% $ 165.8 .4% $ 165.1
Maintenance 87.1 -7.9% 94.6 21.0% 78.2
Depreciation 147.6 1.0% 146.1 3.3% 141.4
Taxes-federal and state income 68.9 -9.7% 76.3 -2.8% 78.5
Taxes, other than income 98.8 1.6% 97.2 5.9% 91.8
-------- -------- -------
Operating expenses 566.0 -2.4% 580.0 4.5% 555.0
-------- -------- -------
Fuel 304.0 -17.1% 366.5 -1.8% 373.4
Purchased power 134.8 59.1% 84.7 25.1% 67.7
-------- -------- -------
Total fuel expense 438.8 -2.7% 451.2 2.3% 441.1
-------- -------- -------
Total operating expenses $1,004.8 -2.6% $1,031.2 3.5% $ 996.1
======== ======== =======
</TABLE>
Reflecting normal plant additions to serve the growing customer base,
depreciation expense increased 1 percent in 1999 and 3.3 percent in 1998.
Depreciation expense is projected to rise significantly for the next several
years due to the addition of a FGD system in 2000 and expected additional
depreciation of certain assets related to the Gannon repowering project. See the
ENVIRONMENTAL COMPLIANCE section.
Taxes other than income increased in 1999 as a result of higher
property taxes due to the settlement of prior year tax issues with Polk County.
This settlement clarified issues mainly related to Polk Unit One for 1997, 1998
and beyond in a manner satisfactory to the company. Taxes other than income
increased in 1998 as a result of higher gross receipts taxes and franchise fees
related to higher energy sales. The sales-related taxes are recovered through
customer bills.
Fuel expense decreased in 1999 from 1998 due to lower energy sales and
a higher reliance on purchased power attributable to lower unit availability.
Average coal costs, on a cents-per-million BTU basis, increased slightly in 1999
and 1 percent in 1998. In 1998, the FPSC disallowed, retroactively to the
beginning of 1993, certain quality adjustments for coal purchased from a Tampa
Electric affiliate, resulting in a pretax charge of $7.3 million.
Purchased power increased in 1999 due to lower unit availability, the
provision of replacement power for certain wholesale power sales contracts and
an explosion at the Gannon plant in April. In 1998, purchased power increased
primarily due to weather-related demand. In each year, substantially all fuel
and purchased power expenses were recovered through the fuel adjustment clause.
Nearly all of Tampa Electric's generation in the last three years has
been from coal, and the fuel mix is expected to continue to be substantially
comprised of coal until 2003 when the first of three repowered units is
scheduled to begin operating on natural gas. See the ENVIRONMENTAL COMPLIANCE
section.
External forecasts indicate relatively stable coal prices for the next
few years. On a total energy supply basis, company-generation accounted for 88
percent of the total system energy requirement in 1999, compared with 92 percent
in 1998.
On April 8, 1999, an explosion at Tampa Electric's Gannon Station Unit
Six, a 375-megawatt generator that was off line for scheduled spring
maintenance, resulted in damage to the unit, the temporary shut down of the
other five units at the Station and injuries to 45 employees and contractors,
including three fatalities. The units at Gannon Station that were affected by
the accident were returned to service in the second and third quarter. The cost
of replacement fuel and purchased power totaled $5 million; $1.8 million was
approved by the FPSC for recovery through Tampa Electric's fuel and purchased
power clause with little impact on customer rates, and the balance was recovered
from interruptible customers. The costs resulting from the accident were
substantially covered by insurance. The impact on current-year operation and
maintenance expenses was approximately $2 million. The U.S. Occupational Safety
and Health Administration (OSHA) concluded its safety investigation at the
Gannon Station. OSHA found no willful violations, and Tampa Electric agreed not
to contest OSHA's citations. Tampa Electric paid $30,075 in fines to OSHA
largely related to the explosion at the Gannon plant. This amount included a
reduction of 10 percent due to the company's excellent safety history.
PEOPLES GAS SYSTEM
PEOPLES GAS SYSTEM RESULTS
Peoples Gas System (PGS) achieved operating income growth of 18 percent
in 1999, with the increase due primarily to new customer additions from system
expansion and lower operating expenses resulting from management's decision to
discontinue the appliance sales and service business in mid-1998. The benefits
of customer growth for the year were partially offset by the less favorable
weather patterns during 1999.
Operating income grew 5 percent in 1998, from new customer additions
and higher average utilization per customer. The benefits of customer growth for
the year were partially offset by the effects of warmer-than-normal weather
during the winter months and by restructuring costs associated with management's
decision to exit the appliance sales and service business.
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<PAGE> 15
The actual cost of gas and upstream transportation purchased and resold
to end-use customers is recovered through a Purchased Gas Adjustment (PGA)
clause approved by the FPSC.
<TABLE>
<CAPTION>
SUMMARY OF OPERATING RESULTS
(millions) 1999 CHANGE 1998 CHANGE 1997
-------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Revenues $ 251.7 -.4% $ 252.8 1.3% $ 249.5
Cost of gas sold 107.7 -6.7% 115.4 -3.5% 119.6
Operating expenses 113.5 1.7% 111.6 5.9% 105.4
-------- ------- -------
Operating income $ 30.5 18.2% $ 25.8 5.3% $ 24.5
======== ======= =======
Therms sold (millions) -
by Customer Segment
Residential 52.1 -1.1% 52.7 7.8% 48.9
Commercial 273.5 2.8% 266.0 7.4% 247.6
Industrial 331.9 8.8% 305.0 5.7% 288.6
Power Generation 405.2 40.5% 288.3 -8.4% 314.7
-------- ------- -------
Total 1,062.7 16.5% 912.0 1.4% 899.8
======== ======= =======
Therms sold (millions) -
By Sales Type
System Supply 300.0 -6.5% 320.8 9.6% 292.6
Transportation 762.7 29.0% 591.2 -2.6% 607.2
-------- ------- -------
Total 1,062.7 16.5% 912.0 1.4% 899.8
======== ======= =======
Customers (thousands)
- average 248.4 3.7% 239.6 2.2% 234.4
======== ======= =======
</TABLE>
Residential therm sales decreased slightly in 1999, the result of less
favorable weather patterns in the first quarter offset in part by new customer
additions. Therm sales to commercial customers increased in 1999, reflecting a
growing number of higher-margin customers.
Operating revenues from residential customers increased 2 percent in
1999. Revenue from commercial customers decreased 9 percent, while revenues from
industrial and power generation customers were up approximately 33 percent.
The increase in operating revenues in the residential segment reflects
higher revenue from monthly customer charges, the result of strong residential
customer growth in 1999.
The decline in operating revenues from the commercial segment reflects
a shift from commodity sales to transportation sales for a growing number of
commercial customers. For commodity sales, the cost-of-gas pass-through is
included in operating revenues; for transportation customers, there is no
cost-of-gas pass-through. Therefore, the net financial impact to the company is
the same for both groups.
Operating expenses excluding federal and state income taxes decreased
in 1999, reflecting cost savings associated with management's decision in
mid-1998 to exit the appliance sales and service business.
PGS expects to invest an average of $50 to $60 million per year for the
next five years to grow the business. Infrastructure is being expanded both in
areas currently served and in areas not yet served by natural gas.
In 1998, PGS announced plans to expand into the Southwest Florida
market providing service to Fort Myers, Naples, Cape Coral and surrounding
areas. In 1999, the company began connecting customers and delivering gas to
North Fort Myers and expects to complete the long-haul portion of this extension
of its distribution system by the end of the first quarter of 2000. External
sources anticipate that more than 100,000 new homes and businesses will be added
in this market over the next decade, representing a significant opportunity for
growth in the high-end residential and the commercial customer sectors.
The company also has expanded service to the U.S. Naval Station at
Mayport near Jacksonville and anticipates that the Mayport facilities and
surrounding communities will use over 2.6 million therms of natural gas
annually. In addition, PGS will construct 19 miles of pipeline in 2000 to
connect Jacksonville Electric Authority's planned combustion turbine generating
units.
PGS expects increases in sales volumes and corresponding revenues in
2000, and continued customer additions and related revenues reflecting the
Southwest Florida expansion and other expansion efforts throughout the state.
These growth projections assume continued local area economic growth,
normal weather and other factors.
PGS is the largest investor-owned gas distribution utility in Florida,
with about 70 percent of the investor owned local distribution company market.
It serves approximately 250,000 customers in all of the major metropolitan areas
of Florida.
15
<PAGE> 16
YEAR 2000 COMPUTER SYSTEMS PREPARATION
Tampa Electric has encountered no significant problems related to the
Year 2000 issue and all computer systems are performing as expected to date.
The total cost of Year 2000 remediation for Tampa Electric Company was
approximately $9 million, which included contracted resources, purchases and
internal labor. A breakdown of project costs is as follows: Tampa Electric -
$6.5 million, and Peoples Gas System - $2.5 million. Approximately 40 percent of
these costs were attributable to testing expenses, and the remainder consisted
primarily of renovation or replacement costs. The company does not anticipate
any significant additional costs related to this issue.
NON-OPERATING ITEMS
OTHER INCOME (EXPENSE)
Other income (expense) in 1999 included charges of $3.5 million to
provide for Tampa Electric's expected costs of settling an EPA lawsuit and $10.0
million for a regulatory decision limiting the utility's regulatory equity ratio
to 58.7 percent for 1997 and 1998.
Other income (expense) in 1998 included a charge of $7.3 million at
Tampa Electric reflecting an FPSC decision denying recovery of certain coal
expenses from an affiliate. These 1999 and 1998 charges are described in the
CHARGES TO EARNINGS section.
Allowance for other funds used during construction (AFUDC) was $1.3
million in 1999 and $.1 million in 1997; no AFUDC was recorded in 1998. AFUDC is
expected to increase over the next several years reflecting Tampa Electric's
generation expansion activities.
INTEREST CHARGES
Interest charges were $77.4 million compared to $63.4 million in 1998.
A charge for income tax settlements and provisions, discussed in the CHARGES TO
EARNINGS section, included $12.7 million of interest expense and accounted for
much of the increase over 1998. Higher borrowing levels associated with new
investments in the operating businesses also increased interest expense.
Interest charges were down slightly in 1998, reflecting lower interest
on a declining deferred revenue balance at Tampa Electric and lower short-term
rates, partially offset by higher borrowing levels for new business initiatives.
ENVIRONMENTAL COMPLIANCE
Tampa Electric met the environmental compliance requirements for the
Phase I emission limitations imposed by the Clean Air Act Amendments (CAAA)
which became effective Jan. 1, 1995 by using blends of lower-sulfur coal,
integrating the Big Bend Unit Four FGD system with Unit Three, implementing
operational modifications and purchasing emission allowances. For Phase II,
which began Jan. 1, 2000, further reductions in sulfur dioxide (SO2) and
nitrogen oxide (NOx) emissions were required. To comply with the Phase II SO2
requirements, the company installed a new FGD system at Big Bend Units One and
Two and will rely less on fuel blending and SO2 allowance purchases. The $83
million scrubber was placed in service on Dec. 30, 1999 and will significantly
reduce the amount of SO2 emitted by Tampa Electric's Big Bend Units One and Two.
As a result of this project, all of the units at Big Bend Station, Tampa
Electric's largest generating station, are equipped with FGD, or scrubber
technology. The FPSC approved recovery of the costs associated with the Big Bend
Units One and Two FGD system in November 1999 and cost recovery began in January
2000. In order to comply with the Phase II NOx emission limits on a system wide
average, Tampa Electric has implemented combustion optimization projects at Big
Bend and Gannon Stations.
In 1997, the EPA began an investigation under the Clean Air Act (CAA)
of coal-fired electric power generators to determine compliance with New Source
Review (NSR) environmental permitting requirements associated with repairs,
maintenance, modifications and operational changes made to the facilities over
the years. The EPA asserted that certain electric utilities, including Tampa
Electric, should have applied for pre-construction permits for certain unit
maintenance projects, and that the permitting review of such projects would have
included NSR, resulting in requirements that the units meet more restrictive,
Best Available Control Technology (BACT) standards for NOx, SO2 and particulate
matter (PM). Tampa Electric disagreed with EPA's interpretation of its NSR rules
and its definitions of what constitutes maintenance. On Nov. 3, 1999, despite
Tampa Electric's extensive efforts to reach a mutually agreeable settlement with
the EPA, the Department of Justice sued Tampa Electric and six other electric
utilities and issued an administrative order against TVA on behalf of the EPA
for alleged violations of the CAA associated with this NSR issue. Coincident
with the lawsuits, EPA issued Notices of Violations (NOV) alleging similar NSR
violations under the relevant State Implementation Plans (SIP).
Following notice to the State of Florida of the EPA's NOV, the Florida
Department of Environmental Protection (DEP), the agency responsible for
enforcement of the Air Quality SIP, began negotiations to resolve the same
allegations under the SIP that Tampa Electric had not applied for appropriate
permits for certain unit maintenance projects at Gannon and Big Bend Stations
and, therefore, had operated the coal-fired units without BACT for NOx and SO2.
Effective Dec. 16, 1999, a Consent Final Judgment
16
<PAGE> 17
(CFJ) entered into between DEP and Tampa Electric resolved the DEP claims. The
requirements of the CFJ require the implementation of several environmental
initiatives which include repowering certain Gannon Station units with natural
gas and placing the remaining Gannon units on reserve standby by the end of
2004. It also requires Tampa Electric to implement other specific initiatives to
further reduce NOx, SO2 and PM emissions at Big Bend Station Unit Four by 2007
and Big Bend Units One, Two and Three by 2010.
On Feb. 29, 2000, Tampa Electric Company, the U.S. Environmental
Protection Agency and the U.S. Department of Justice announced they had resolved
the federal agencies' pending enforcement actions (including the NOV) filed last
year against the company. The resolution, which was in the form of a consent
decree, resulted in full and final settlement of the November 1999 federal
litigation and NOV alleging violations of NSR requirements of the Clear Air Act.
The consent decree was lodged with the U.S. District Court for the Middle
District of Florida in Tampa, Florida, and is subject to a 30-day public comment
period before it may be entered by the Court at which time it will become
effective.
The agreement is substantially the same as Tampa Electric's earlier
agreement with the Florida Department of Environmental Protection with respect
to environmental controls and pollution reductions reached on Dec. 7, 1999;
however, it contains specific detail with respect to the availability of the
scrubbers and earlier incremental NOx reduction efforts on Big Bend Units One,
Two and Three. In order to eliminate the uncertainties of litigation and in
exchange for a release from past liability and a safe harbor during the 10-year
term of the consent decree, the Company agreed to pay a $3.5 million civil
penalty. Under the consent decree, Tampa Electric will commit to a
comprehensive cleanup program that will dramatically decrease emissions from
the company's power plants. The agreement makes Tampa Electric the first
utility in the nation to respond to EPA's coal-fired utility initiative.
Engineering for the repowering project began in January 2000, and the
company anticipates that commercial operation for the first repowered unit occur
by May 1, 2003. The repowering of additional units is scheduled to be completed
by May 1, 2004. When these units are repowered, the station will be renamed the
Bayside Power Station and will have an increased total station capacity of about
1,475 megawatts of natural gas-fueled electric energy.
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, Tampa
Electric 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.
UTILITY REGULATION
RATE STABILIZATION STRATEGY
Tampa Electric's objectives of stabilizing prices through 1999 and
securing fair earnings opportunities during this period were accomplished
through agreements entered into in 1996 with the Florida Office of Public
Counsel (OPC) and the Florida Industrial Power Users Group (FIPUG) which were
approved by the FPSC.
Prior to these agreements, the FPSC approved a plan submitted by Tampa
Electric to defer certain 1995 revenues. Under this plan Tampa Electric's
allowed return on equity (ROE) was established at an 11.75 percent midpoint with
a range of 10.75 percent to 12.75 percent. For 1995 an initial $15 million of
revenues were deferred as well as 50 percent of actual revenues in excess of a
ROE of 11.75 percent up to a net earned ROE of 12.75 percent. Also as part of
this plan, Tampa Electric's oil backout tariff was eliminated as of January
1996, reducing annual revenues by approximately $12 million.
In 1995, Tampa Electric deferred $51 million of revenues under this
plan. The deferred revenues accrued interest at the 30-day commercial paper rate
as specified in the Florida Administrative Code.
In 1996, the FPSC approved agreements between Tampa Electric, the OPC
and the FIPUG which froze base rates for the electric utility through 1999,
returned $50 million to customers between October 1996 and December 1998 through
refunds and a temporary base rate reduction and allowed full recovery of the
capital costs incurred for the Polk Unit One project.
In addition, the agreements set forth multi-year plans for allocating
revenues based on Tampa Electric's ROE. For the years 1996 through 1998, Tampa
Electric retained all revenues contributing to an ROE up to 11.75 percent. Under
this plan, any additional revenues were allocated as follows:
In 1996, 40 percent of any actual revenues contributing to an ROE in
excess of 11.75 percent were included in 1996 revenues. The remaining 60 percent
were deferred for recognition in 1997 and 1998. The company deferred $34 million
in 1996. This amount and the deferred revenues and interest from 1995 (less $25
million of refunds) provided $68 million for recognition by the company in 1997
and 1998.
In 1997, 40 percent of any revenues that contributed to an ROE in
excess of 11.75 percent up to 12.75 percent were included in revenues. The
remaining 60 percent were deferred for use in 1998, as were all revenues in
excess of 12.75 percent. The company recognized $31 million in 1997 of the
revenues and interest deferred from 1995 and 1996.
In 1998, 40 percent of any actual revenues contributing to a ROE in
excess of 11.75 percent up to 12.75 percent were included in revenues. The
remaining 60 percent, as well as revenues in excess of 12.75 percent were
deferred for anticipated refund to customers pending resolution of the FIPUG
protest of the FPSC decision as discussed below. The company recognized $38
million in 1998 of the revenues and interest deferred from prior years.
17
<PAGE> 18
For 1999, 60 percent of the revenues contributing to an ROE in excess
of 12 percent were deferred for refund to customers in 2000 following final
review by the FPSC. Tampa Electric's 1999 results reflect an anticipated refund
to customers of $4.0 million earned above the 12 percent.
In 1999, the FPSC reviewed Tampa Electric's earnings for 1997 and 1998
and ordered that $11.2 million plus interest be refunded to customers in 2000.
In November 1999, FIPUG protested the FPSC decisions for both years and
requested a hearing to review a wide range of costs incurred by the company over
the two-year period. The FPSC ordered that the $11.2 million refund be withheld
with interest until the protest is heard and resolved. A hearing is scheduled
for August 2000.
The regulatory arrangements described above covered periods that ended
on Dec. 31, 1999. Tampa Electric's rates and its 11.75 percent allowed rate of
return on common equity midpoint will continue in effect until such time as
changes are occasioned by an agreement approved by the FPSC or other FPSC action
as a result of rate or other proceedings initiated by Tampa Electric, FPSC staff
or other interested parties. Tampa Electric believes that its currently allowed
ROE range is reasonable based on the current interest rate environment and
previous FPSC rulings.
COST RECOVERY CLAUSES
In October 1999, Tampa Electric filed with the FPSC for approval of
fuel, capacity, environmental and conservation cost recovery clause rates for
the period January 2000 through December 2000. On Nov. 22 and 23, 1999, the FPSC
held hearings and: 1) approved the company's proposed replacement fuel and
purchased power costs associated with the Gannon Unit Six explosion; 2) approved
the company's proposed regulatory treatment for the remaining terms of a
wholesale power sales agreement for Jan. 1, 2000 through March 15, 2001; 3)
approved cost recovery of purchased power agreements entered into for 1999 and
2000 for enhanced system reliability including a 12-year agreement entered into
with Hardee Power Partners; 4) approved the recovery of capital and operating
and maintenance costs for the Big Bend Units One and Two FGD system; and 5)
approved a fair accounting treatment for retired environmental assets that are
being replaced by new technology environmental assets. Including these changes,
the total residential bill for 1,000 kwh in 2000 will be $81.78, which
represents a $1.90, or 2 percent increase over 1999 rates.
LONG RANGE POWER SUPPLY PLANNING
Tampa Electric filed a 10-year site plan with the FPSC in April 1999.
Since that time, several events have occurred that have caused Tampa Electric to
make several modifications to its plan. First, as part of the FPSC's assessment
of Florida's electric reliability for future years, the FPSC ordered a generic
investigation into the aggregate reserve margins planned for peninsular Florida.
The investigation was to include an evaluation of the manner in which reserve
margins are calculated, the level of reserve margins considered adequate for
Florida's utilities, and the remedial action that would be taken to assure
adequate reserve margins. Prior to a formal, evidentiary hearing scheduled to be
held in November 1999, Tampa Electric along with Florida Power & Light and
Florida Power Corp. submitted a proposed stipulation to the FPSC to voluntarily
adopt a minimum 20 percent reserve margin planning criteria from then current 15
percent criteria for the resolution of the issues in the investigation. The
Florida investor-owned utilities (IOUs) proposed to implement the 20 percent
criterion over a transition period of four years. In December 1999 the FPSC
approved the proposed stipulation. In addition, the FPSC ordered its staff to
conduct workshops to address reliability issues related to non-firm electric
resources that were identified in the original reserve margin proceeding. These
workshops are scheduled for the first quarter of 2000.
Subsequent to the approval of the stipulation, Tampa Electric filed a
modification to its planning reserve margin criteria to include a minimum 7
percent summer supply-side component (firm resources) to the overall 20 percent
reserve margin planning criteria. A supply-side reserve margin standard
establishes a balance of resources by requiring a minimum level of supply-side
reserves while not limiting the contributions of non-firm load resources.
Another change to the 10-year site plan was that Tampa Electric
accelerated the in-service date of its next two 180 megawatt combustion turbines
from January 2001 to September 2000 and from January 2003 to May 2002. Finally
the company entered into a 12-year purchased power agreement with Hardee Power
Partners. Tampa Electric's original purchased power agreement with Hardee Power
Partners, entered into in 1989, provided the company the option of building out
the existing site by installing a 75 megawatt combustion turbine that is
expected to be in service by May 15, 2000. Through all of these actions, Tampa
Electric expects enhanced system reliability for the benefit of all its
customers.
UTILITY COMPETITION: ELECTRIC
Tampa Electric's retail electric business is substantially free from
direct competition with other electric utilities, municipalities and public
agencies. At the present time, the principal form of competition at the retail
level consists of self-generation available to larger users of electric energy.
Such users may seek to expand their options through various initiatives,
including legislative and/or regulatory changes that would permit competition at
the retail level. Tampa Electric intends to take all appropriate actions to
retain and expand its retail business, including managing costs and providing
high-quality service to retail customers.
In December, the Federal Energy Regulatory Commission (FERC) issued its
rule on regional transmission organizations (RTOs). This rule is driven by the
FERC's continuing effort to effect open access to transmission facilities in
large, regional markets. The rule provides guidelines to utilities for joining
RTOs by December 2001. These guidelines specify minimum characteristics and
functions.
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<PAGE> 19
In response to the FERC activity in this area, the FPSC has been
holding workshops since January 1999 to discuss transmission issues within
peninsular Florida. Although the IOUs, municipals, cooperatives and marketers
participating in the workshops do not yet agree on how to resolve specific
issues related to planning, operations, pricing and governance, they and the
FPSC agree that a national one-size-fits-all approach is not appropriate. With
the encouragement of the FPSC, Tampa Electric is working with utilities in the
state and others to develop a peninsular Florida solution. These activities have
been recently accelerated by Florida Power Corp. and Carolina Power and Light,
recognizing that some type of RTO proposal is an integral feature for FERC
approval of their proposed merger.
WHOLESALE POWER MARKET
There is presently active competition in the wholesale power markets in
Florida, increasing largely as a result of the Energy Policy Act of 1992 and
related federal initiatives. This act removed certain regulatory barriers for
independent power producers and required utilities to transmit power from such
producers, utilities and others to wholesale customers.
In 1999, the city of New Smyrna Beach and an affiliate of Duke Energy
Corporation applied for an FPSC determination of need for a proposed
514-megawatt merchant power plant in Volusia County, Florida, to supply 30
megawatts of capacity and associated energy to the Utilities Commission of the
City of New Smyrna Beach with the remaining capacity to be used on a speculative
basis. Tampa Electric and others intervened to oppose this proposal. Tampa
Electric believes that only Florida utilities or entities with contracts for
firm capacity and an obligation to serve the long-term needs of a Florida
utility can legally be applicants under the Florida Power Plant Siting Act
(PPSA). The PPSA sets the state electric energy/environmental policy and governs
the building of new generation involving steam capacity of 75 megawatts or more.
It requires the applicant to demonstrate that a plant is needed prior to
receiving construction and operating permits. On March 4, 1999, the FPSC
determined that the proponents of the merchant plant were proper applicants
under the PPSA and voted to approve the need for the proposed merchant plant.
This decision has been appealed by the Florida IOUs and the Florida Supreme
Court heard oral arguments on Feb, 19, 2000. A decision on the appeal is not
expected until April 2000 or later.
Following Duke/New Smyrna Beach, several companies have proposed
merchant plant projects in Florida. In September 1999, the Okeechobee Generating
Company, a subsidiary of Pacific Gas and Electric, filed for a determination of
need for two combined cycle units that would generate approximately 550
megawatts. In addition several other merchant plants have been proposed to be
constructed in Florida that do not fall under the requirements to file a
determination of need due to the fact that the proposed generation involves
steam capacity less than 75 megawatts.
If the FPSC's decision to allow the Duke plant to operate is upheld or
other regulatory or legislative actions are taken that would allow the
construction of wholesale merchant power plants, the wholesale operations of
Tampa Electric and other Florida utilities could be adversely affected.
UTILITY COMPETITION: GAS
Although Peoples Gas System is not in direct competition with any other
regulated distributors of natural gas for customers within its service areas,
there are other forms of competition. At the present time, the principal form of
competition for residential and small commercial customers is from companies
providing other sources of energy, including electricity.
Competition is most prevalent in the large commercial and industrial
markets. In recent years, these classes of customers have been targeted by
companies seeking to sell gas directly, either using Peoples Gas System
facilities or transporting gas through other facilities, thereby bypassing
Peoples Gas System facilities. In response to this competition, various programs
have been developed including the provision of transportation services at
discounted rates.
In general, Peoples Gas System faces competition from other energy
source suppliers offering fuel oil, electricity and in some cases propane.
Peoples Gas System has taken actions to retain and expand its commodity and
transportation business, including managing costs and providing high-quality
service to customers.
FINANCING ACTIVITY:
In the second quarter of 1998, Tampa Electric Company filed a
registration statement for the issuance of up to $200 million of medium-term
notes. In July 1998, Tampa Electric Company issued $50 million of Remarketed
Notes, due 2038. The Notes, which bear an initial coupon rate of 5.94%, are
subject to mandatory tender on July 15, 2001, at which time they will be
remarketed or redeemed. Net proceeds were $51 million, which included a premium
paid to Tampa Electric by the remarketing agent for the right to purchase the
Notes in 2001. If this right is exercised, for the following 10 years the Notes
will bear interest at 5.41% plus a premium based on Tampa Electric Company's
then-current credit spread above United States Treasury Notes with 10 years to
maturity.
Proceeds from the note issue were used to repay short-term debt and for
general corporate purposes.
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<PAGE> 20
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.
The company has determined that such activity has been minimal and relatively
short term in duration. From time to time, Tampa Electric has entered into
futures, swaps and options contracts 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.
Based on policies and procedures approved by the Board of Directors,
from time to time the company enters into futures, swaps and option contracts to
limit exposure to gas price increases at the regulated natural gas utility. 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.
At this point, the company does not anticipate that the adoption of FAS
133 will significantly impact its financial statements. Management will continue
to document all current and possible future uses of derivatives, evaluate their
effectiveness for hedging treatment and utilize procedures and methods for
measuring them.
ITEM 7A. 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.
From time to time, Tampa Electric Company enters into futures, swaps
and option contracts to moderate exposure to interest rate changes.
A hypothetical 10 percent increase in Tampa Electric Company's weighted
average interest rate on its variable rate debt would not have a significant
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 Dec. 31, 1999.
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, Tampa Electric Company enters into futures, swaps
and options contracts to limit exposure to gas price increases at the regulated
natural gas utility.
Tampa Electric Company does not use derivatives or other financial
products for speculative purposes.
20
<PAGE> 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
PAGE
NO.
<S> <C>
Report of Independent Certified Public Accountants 22
Consolidated Balance Sheets, Dec. 31, 1999 and 1998 23
Consolidated Statements of Income for the years ended
Dec. 31, 1999, 1998 and 1997 24
Consolidated Statements of Cash Flows for the years ended
Dec. 31, 1999, 1998 and 1997 25
Consolidated Statements of Retained Earnings for the years ended
Dec. 31, 1999, 1998 and 1997 26
Consolidated Statements of Capitalization, Dec. 31, 1999 and 1998 26-28
Notes to Consolidated Financial Statements 29-37
Financial Statement Schedule II - Valuation and Qualifying Accounts
for the years ended Dec. 31, 1999, 1998 and 1997 39
</TABLE>
All other financial statement schedules have been omitted since they
are not required, are inapplicable or the required information is presented in
the financial statements or notes thereto.
21
<PAGE> 22
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Tampa Electric Company
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Tampa Electric Company and its subsidiaries, (a wholly owned
subsidiary of TECO Energy, Inc.) at Dec. 31, 1999 and 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended Dec. 31, 1999, in conformity with accounting principles generally
accepted in the United States. In addition, in our opinion, the financial
statement schedule listed in the accompanying index presents fairly, in all
material respect, the information set forth therein when read in conjunction
with the related consolidated financial statements. These financial statements
and financial statement schedule are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Tampa, Florida
Jan. 14, 2000
22
<PAGE> 23
CONSOLIDATED BALANCE SHEETS
(MILLIONS)
<TABLE>
<CAPTION>
ASSETS
1999 1998
-------- --------
<S> <C> <C>
DEC. 31,
PROPERTY, PLANT AND EQUIPMENT, AT ORIGINAL COST
Utility plant in service
Electric $3,892.1 $3,742.6
Gas 590.0 518.5
Construction work in progress 81.6 71.5
-------- --------
4,563.7 4,332.6
Accumulated depreciation (1,818.7) (1,722.2)
-------- --------
2,745.0 2,610.4
Other property 7.9 8.1
-------- --------
2,752.9 2,618.5
-------- --------
CURRENT ASSETS
Cash and cash equivalents 26.1 .8
Receivables, less allowance for uncollectibles 147.1 142.8
Inventories, at average cost
Fuel 73.2 87.3
Materials and supplies 49.0 45.5
Prepayments 10.9 8.4
--------- --------
306.3 284.8
-------- --------
DEFERRED DEBITS
Unamortized debt expense 14.2 16.1
Deferred income taxes 121.6 116.1
Regulatory asset-tax related 42.9 39.0
Other 84.6 72.0
-------- --------
263.3 243.2
-------- --------
$3,322.5 $3,146.5
======== ========
LIABILITIES AND CAPITAL
CAPITAL
Common stock $1,043.1 $1,026.1
Retained earnings 283.9 288.5
-------- --------
1,327.0 1,314.6
LONG-TERM DEBT, LESS AMOUNT DUE WITHIN ONE YEAR 690.3 774.5
-------- --------
2,017.3 2,089.1
-------- --------
CURRENT LIABILITIES
Long-term debt due within one year 84.8 4.6
Notes payable 271.2 79.7
Accounts payable 163.8 189.1
Customer deposits 79.9 77.5
Interest accrued 12.9 8.8
Taxes accrued 30.9 8.8
-------- --------
643.5 368.5
-------- --------
DEFERRED CREDITS
Deferred income taxes 458.3 447.6
Investment tax credits 40.5 45.1
Regulatory liability-tax related 56.1 73.0
Other 106.8 123.2
-------- --------
661.7 688.9
-------- --------
$3,322.5 $3,146.5
======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
23
<PAGE> 24
CONSOLIDATED STATEMENTS OF INCOME
(MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DEC. 31, 1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
OPERATING REVENUES
Electric $1,207.1 $1,234.6 $1,189.2
Gas 251.7 252.8 249.5
-------- -------- --------
1,458.8 1,487.4 1,438.7
-------- -------- --------
OPERATING EXPENSES
Operation
Fuel 304.0 366.5 373.4
Purchased power 134.8 94.3 67.7
Natural gas sold 107.7 115.4 119.6
Other 217.2 221.2 215.7
Maintenance 90.4 98.8 83.4
Depreciation 170.7 167.2 161.2
Taxes-Federal and state income 81.7 86.3 87.5
Taxes-Other than income 118.9 118.1 112.6
-------- -------- --------
1,225.4 1,267.8 1,221.1
-------- -------- --------
OPERATING INCOME 233.4 219.6 217.6
-------- -------- --------
OTHER INCOME (EXPENSE)
Allowance for other funds used during construction 1.3 -- .1
Other expense, net (12.4) (9.8) (2.7)
-------- -------- --------
(11.1) (9.8) (2.6)
-------- -------- --------
Income before interest charges 222.3 209.8 215.0
-------- -------- --------
INTEREST CHARGES
Interest on long-term debt 51.5 50.4 50.7
Other interest 26.4 13.0 15.8
Allowance for borrowed funds used during construction (0.5) -- (.1)
-------- -------- --------
77.4 63.4 66.4
-------- -------- --------
NET INCOME 144.9 146.4 148.6
Preferred dividend requirements -- -- .5
-------- -------- --------
BALANCE APPLICABLE TO COMMON STOCK $ 144.9 $ 146.4 $ 148.1
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
24
<PAGE> 25
CONSOLIDATED STATEMENTS OF CASH FLOWS
(MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DEC. 31, 1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 144.9 $ 146.4 $ 148.6
Adjustments to reconcile net income to net cash
Depreciation 170.7 167.2 161.2
Deferred income taxes (15.7) 28.5 21.1
Investment tax credits, net (4.6) (4.6) (4.7)
Allowance for funds used during construction (1.8) -- (.2)
Deferred clause revenues (expenses) (38.2) 17.4 2.7
Deferred revenue 11.9 (38.3) (30.5)
Refund to customers -- -- (19.8)
Charges (discussed in Note I) 18.3 16.9 --
Receivables, less allowance for uncollectibles (4.3) 18.6 2.7
Inventories 10.6 (17.7) (15.2)
Taxes accrued 22.2 .3 (3.5)
Accounts payable (39.3) 70.7 (15.0)
Other -- 10.1 (23.3)
------- ------- -------
274.7 415.5 224.1
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (306.4) (232.1) (155.3)
Allowance for funds used during construction 1.8 -- .2
------- ------- -------
(304.6) (232.1) (155.1)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from contributed capital from parent 17.0 54.0 5.0
Proceeds from long-term debt -- 51.2 --
Repayment of long-term debt (3.8) (3.7) (16.7)
Net borrowings (payments) under credit lines -- -- (10.0)
Net increase (decrease) in short-term debt 191.5 (139.4) 118.9
Redemption of preferred stock -- -- (20.4)
Dividends (149.5) (147.5) (146.5)
------- ------- -------
55.2 (185.4) (69.7)
------- ------- -------
Net decrease in cash and cash equivalents 25.3 (2.0) (.7)
Cash and cash equivalents at beginning of year .8 2.8 3.5
------- ------- -------
Cash and cash equivalents at end of year $ 26.1 $ .8 $ 2.8
======== ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 62.5 $ 58.1 $ 57.1
Income taxes $ 79.9 $ 48.6 $ 85.3
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
25
<PAGE> 26
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DEC. 31, 1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
BALANCE, BEGINNING OF YEAR $288.5 $289.6 $285.7
Add-Net income 144.9 146.4 148.6
West Florida Gas Merger -- -- 2.3
------ ------ ------
433.4 436.0 436.6
------ ------ ------
Deduct-
Cash dividends on capital stock
Preferred -- -- .6
Common 149.5 147.5 145.9
Other - adjustment -- -- .5
------ ------ ------
149.5 147.5 147.0
------ ------ ------
BALANCE, END OF YEAR $283.9 $288.5 $289.6
====== ====== ======
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
CONSOLIDATED STATEMENTS OF CAPITALIZATION
<TABLE>
<CAPTION>
CAPITAL STOCK
OUTSTANDING CASH DIVIDENDS
DEC.31, 1999 PAID IN 1999(1)
CURRENT ------------------------ --------------------
REDEMPTION PER
PRICE SHARES AMOUNT(2) SHARE AMOUNT(2)
---------- ------ --------- ----- ---------
<S> <C> <C> <C> <C> <C>
COMMON STOCK-WITHOUT PAR VALUE
25 million shares authorized N/A 10 $1,043.1 N/A $149.5
======== ======
PREFERRED STOCK-$100 PAR VALUE
1.5 million shares authorized, none outstanding.
PREFERRED STOCK - NO PAR
2.5 million shares authorized, none outstanding.
PREFERENCE STOCK - NO PAR
2.5 million shares authorized, none outstanding.
</TABLE>
- -----------------
(1) Quarterly dividends paid on Feb. 15, May 15, Aug. 15 and Nov. 15.
(2) Millions.
26
<PAGE> 27
CONSOLIDATED STATEMENTS OF CAPITALIZATION (continued)
<TABLE>
<CAPTION>
LONG-TERM DEBT OUTSTANDING AT DEC. 31, DUE 1999 1998
---- ------- -------
<S> <C> <C> <C>
TAMPA ELECTRIC
First mortgage bonds (issuable in series):
7 3/4% 2022 75.0 75.0
5 3/4% 2000 80.0 80.0
6 1/8% 2003 75.0 75.0
Installment contracts payable(2):
5 3/4% 2007 23.2 23.5
7 7/8% Refunding bonds(3) 2021 25.0 25.0
8% Refunding bonds(3) 2022 100.0 100.0
6 1/4% Refunding bonds(4) 2034 86.0 86.0
5.85% 2030 75.0 75.0
Variable rate: 3.21% for 1999 and 3.06% for 1998(1) 2025 51.6 51.6
Variable rate: 3.46% for 1999 and 3.17% for 1998(1) 2018 54.2 54.2
Variable rate: 3.69% for 1999 and 3.39% for 1998(1) 2020 20.0 20.0
Medium-term notes payable: 5.11% (1)(5) 2001 38.0 38.0
------- -------
703.0 703.3
------- -------
PEOPLES GAS SYSTEM
Senior Notes (6)
10.35% 2007 6.2 6.8
10.33% 2008 8.0 8.6
10.3% 2009 8.8 9.2
9.93% 2010 9.0 9.4
8.0% 2012 30.5 32.0
Medium-term notes payable: 5.11% (1)(5) 2001 12.0 12.0
------- -------
74.5 78.0
------- -------
Unamortized debt premium (discount), net (2.4) (2.2)
------- -------
775.1 779.1
Less amount due within one year(7) 84.8 4.6
------- -------
Total long-term debt $ 690.3 $ 774.5
======= =======
</TABLE>
(1) Composite year-end interest rate.
(2) Tax-exempt securities.
(3) Proceeds of these bonds were used to refund bonds with interest rates of 11
5/8% - 12 5/8%. For accounting purposes, interest expense has been recorded
using blended rates of 8.28% - 8.66% on the original and refunding bonds,
consistent with regulatory treatment.
(4) Proceeds of these bonds were used to refund bonds with an interest rate of
9.9% in February 1995. For accounting purposes, interest expense has been
recorded using a blended rate of 6.52% on the original and refunding bonds,
consistent with regulatory treatment.
(5) These notes are subject to mandatory tender on July 15, 2001, at which time
they will be redeemed or remarketed.
(6) These long-term debt agreements contain various restrictive covenants,
including provisions related to interest coverage, maximum levels of debt to
total capitalization and limitations on dividends.
(7) Of the amount due in 2000, $0.8 million may be satisfied by the substitution
of property in lieu of cash payments.
27
<PAGE> 28
CONSOLIDATED STATEMENTS OF CAPITALIZATION (continued)
Substantially all of the property, plant and equipment of the company
is pledged as collateral. Maturities and annual sinking fund requirements of
long-term debt for the years 2001, 2002, 2003 and 2004 are $55.2 million, $6.0
million, $186.5 million, and $6.5 million, respectively. Of these amounts $.8
million per year for 2001 through 2004 may be satisfied by the substitution of
property in lieu of cash payments.
At Dec. 31, 1999, total long-term debt had a carrying amount of $690.3
million and an estimated fair market value of $721.6 million. The estimated fair
market value of long-term debt was based on quoted market prices for the same or
similar issues, on the current rates offered for debt of the same remaining
maturities, or for long-term debt issues with variable rates that approximate
market rates, at carrying amounts. The carrying amount of long-term debt due
within one year approximated fair market value because of the short maturity of
these instruments.
The accompanying notes are an integral part of the
consolidated financial statements.
28
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
Tampa Electric Company's regulated electric and gas operations maintain
their accounts in accordance with recognized policies prescribed or permitted by
the Florida Public Service Commission (FPSC). In addition, Tampa Electric
maintains its accounts in accordance with recognized policies prescribed or
permitted by the Federal Energy Regulatory Commission (FERC). These policies
conform with generally accepted accounting principles in all material respects.
The impact of Financial Accounting Standard (FAS) No. 71, Accounting
for the Effects of Certain Types of Regulation, has been minimal in the
experience of the regulated utilities, but when cost recovery is ordered over a
period longer than a fiscal year, costs are recognized in the period that the
regulatory agency recognizes them in accordance with FAS 71. Also as provided in
FAS 71, Tampa Electric has deferred revenues in accordance with the various
regulatory agreements approved by the FPSC in 1995, 1996 and 1999. Revenues are
recognized as allowed in 1997, 1998 and 1999 under the terms of the agreements.
The regulated utilities' retail business is regulated by the FPSC, and
Tampa Electric's wholesale business is regulated by FERC. Prices allowed, with
respect to Tampa Electric, by both agencies are generally based on the recovery
of prudent costs incurred plus a reasonable return on invested capital.
The use of estimates is inherent in the preparation of financial
statements in accordance with generally accepted accounting principles.
REVENUES AND FUEL COSTS
Revenues include amounts resulting from cost recovery clauses which
provide for monthly billing charges to reflect increases or decreases in fuel,
purchased capacity, conservation and environmental costs for Tampa Electric and
purchased gas, interstate pipeline capacity and conservation costs for Peoples
Gas System. These adjustment factors are based on costs projected for a specific
recovery period. Any over-recovery or under-recovery of costs plus an interest
factor are taken into account in the process of setting adjustment factors for
subsequent recovery periods. Over-recoveries of costs are recorded as deferred
credits, and under-recoveries of costs are recorded as deferred charges.
In August 1996, the FPSC approved Tampa Electric's petition for
recovery of certain environmental compliance costs through the Environmental
Cost Recovery Clause.
In December 1994, Tampa Electric bought out a long-term coal supply
contract which would have expired in 2004 for a lump sum payment of $25.5
million and entered into two new contracts with the supplier. The coal supplied
under the new contracts is competitive in price with coal of comparable quality.
As a result of this buyout, Tampa Electric customers will benefit from
anticipated net fuel savings of more than $40 million through the year 2004. In
February 1995, the FPSC authorized the recovery of the $25.5-million buy-out
amount plus carrying costs through the Fuel and Purchased Power Cost Recovery
Clause over the 10-year period beginning April 1, 1995. In each of the years
1999, 1998 and 1997, $2.7 million of buy-out costs were amortized to expense.
Certain other costs incurred by the regulated utilities are allowed to
be recovered from customers through prices approved in the regulatory process.
These costs are recognized as the associated revenues are billed.
The regulated utilities accrue base revenues for services rendered but
unbilled to provide a closer matching of revenues and expenses.
In May 1996, the FPSC issued an order approving an agreement among
Tampa Electric, the Office of Public Council (OPC) and the Florida Industrial
Power Users Group (FIPUG) regarding 1996 earnings. This agreement provided for a
$25-million revenue refund to customers to be made over the 12-month period
beginning Oct. 1, 1996. This refund consisted of $15 million of revenues
deferred from 1996 and $10 million of revenues deferred from 1995, plus accrued
interest.
In October 1996, the FPSC approved an agreement among Tampa Electric,
OPC and FIPUG that resolved all pending regulatory issues associated with the
Polk Power Station. The agreement allowed the full recovery of the capital costs
incurred in the construction of the Polk Power Station project, and called for
an extension of the base rate freeze established in the May agreement through
1999. The October agreement also established a $25-million temporary base rate
reduction reflected as a credit on customer bills over a 15-month period. The
reduction began Oct. 1, 1997 which immediately followed the $25-million refund
in the May agreement.
DEPRECIATION
The company provides for depreciation primarily by the straight-line
method at annual rates that amortize the original cost, less net salvage, of
depreciable property over its estimated service life. The provision for utility
plant in service, expressed as a percentage of the original cost of depreciable
property, was 4.0% for 1999, 4.1% for 1998 and 4.0% for 1997.
The original cost of utility plant retired or otherwise disposed of and
the cost of removal less salvage are charged to accumulated depreciation.
29
<PAGE> 30
ASSET IMPAIRMENT
The company periodically assesses whether there has been a permanent
impairment of its long-lived assets and certain intangibles held and used by the
company, in accordance with FAS 121, Accounting for the Impairment of Long-lived
Assets and Long-Lived Assets to be Disposed of. No write-down of assets due to
impairment was required in 1999 or 1998.
REPORTING COMPREHENSIVE INCOME
The company has adopted FAS 130, Reporting Comprehensive Income. This
standard requires that comprehensive income, which includes net income as well
as certain changes in assets and liabilities recorded in common equity, be
reported in the financial statements. There were no components of comprehensive
income other than net income for the years ended Dec. 31, 1999 and 1998.
REPORTING ON THE COSTS OF START-UP ACTIVITIES
In 1999, the company adopted AICPA Statement of Position (SOP) 98-5,
Reporting on the Costs of Start-up Activities. It requires costs of start-up
activities and organization costs to be expensed as incurred. Start-up
activities are broadly defined as those one-time activities related to events
such as opening a new facility, conducting business in a new territory and
organizing a new entity. Some costs, such as the costs of acquiring or
constructing long-lived assets and bringing them into service, are not subject
to SOP 98-5. The costs expensed in 1999 in accordance with SOP 98-5 were not
significant.
ACCOUNTING FOR CONTRACTS INVOLVED IN ENERGY TRADING AND RISK MANAGEMENT
ACTIVITIES
In 1998, the FASB's Emerging Issues Task Force (EITF) released Issue
98-10, Accounting for Contracts Involved in Energy Trading and Risk Management
Activities, effective for fiscal years beginning after Dec. 15, 1998. EITF 98-10
requires contracts for the purchase and sale of energy commodities that are
determined to be trading activities or contracts as defined in the Issue, be
valued at market on the balance sheet date, and the resulting gain or loss
reflected in earnings. At Dec. 31, 1999, the company does not have any contracts
for the purchase or sale of energy that would be classified as trading
activities as defined in EITF 98-10.
DEFERRED INCOME TAXES
The liability method is utilized in the measurement of deferred income
taxes. Under the liability method, the temporary differences between the
financial statement and tax bases of assets and liabilities are reported as
deferred taxes measured at current tax rates. Tampa Electric and Peoples Gas
System are regulated, and their books and records reflect approved regulatory
treatment, including certain adjustments to accumulated deferred income taxes
and the establishment of a corresponding regulatory tax liability reflecting the
amount payable to customers through future rates.
INVESTMENT TAX CREDITS
Investment tax credits have been recorded as deferred credits and are
being amortized to income tax expense over the service lives of the related
property.
OTHER DEFERRED CREDITS
Other deferred credits primarily include the accrued postretirement
benefit liability, the pension liability and minority interest.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION (AFUDC)
AFUDC is a non-cash credit to income with a corresponding charge to
utility plant which represents the cost of borrowed funds and a reasonable
return on other funds used for construction. The rate used to calculate AFUDC is
revised periodically to reflect significant changes in Tampa Electric's cost of
capital. The rate was 7.79% for 1999, 1998 and 1997. Total AFUDC for 1999 and
1997 was $1.8 million and $0.2 million, respectively. There were no qualifying
projects in 1998. The base on which AFUDC is calculated excludes construction
work in progress which has been included in rate base.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
In 1998, the Financial Accounting Standards Board (FASB) issued
Financial Accounting Standard (FAS) 133, Accounting for Derivative Instruments
and Hedging. This standard was initially to be effective for fiscal years
beginning after June 15, 1999. In July 1999, the FASB delayed the effective date
of this pronouncement until fiscal years beginning after June 15, 2000. The new
standard 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 initial review of business activities and
contracts, and has developed a preliminary inventory of derivative instruments
encompassed by FAS 133. The company has found that such activity has been
minimal and relatively short-term in duration. From time to time, the company
has entered into futures, swaps and options contracts to limit exposure to gas
price increases at both the regulated natural gas utility and unregulated
propane business. As of Dec. 31, 1999, the company had hedging transactions in
place to protect against purchase price variability of natural gas at Peoples
Gas. Tampa Electric Company has not used derivatives or other financial products
for speculative purposes.
30
<PAGE> 31
At this point, the company does not anticipate that the adoption of FAS 133 will
significantly impact its financial statements. Management will continue to
document all current and possible future uses of derivatives, evaluate their
effectiveness for hedging treatment, and develop procedures and methods for
measuring them.
MERGERS
In June 1997, TECO Energy, Inc. completed its merger with Lykes Energy,
Inc. Concurrent with this merger, the regulated gas distribution utility,
Peoples Gas System, Inc., was merged into Tampa Electric Company and now
operates as the Peoples Gas System division of Tampa Electric Company.
Also in June 1997, TECO Energy completed its merger with West Florida
Gas Inc. (West Florida). Concurrent with this merger, West Florida's regulated
gas distribution utility, West Florida Natural Gas Company, was merged into
Tampa Electric Company and now operates as part of the Peoples Gas System
division.
These mergers were accounted for as poolings of interests and,
accordingly, the company's Balance Sheet as of Dec. 31, 1997 and its Statements
of Income and Cash Flows for the period ended Dec. 31, 1997 include the results
of Peoples Gas System and West Florida.
Financial statements and all financial information presented for
periods prior to 1997 have been restated to include the results of the Peoples
Gas System. Prior period financial statements have not been restated to reflect
the operations and financial position of West Florida Natural Gas due to its
size.
RECLASSIFICATIONS
Certain prior year amounts were reclassified to conform with current
year presentation.
B. COMMON STOCK
The company is a wholly owned subsidiary of TECO Energy, Inc.
<TABLE>
<CAPTION>
COMMON STOCK
------------------ ISSUE
(thousands) SHARES AMOUNT EXPENSE TOTAL
------ -------- ------- --------
<S> <C> <C> <C> <C>
Balance Dec. 31, 1996 10 962.5 (0.8) 961.7
Contributed capital from parent - 5.0 -- 5.0
Costs associated with Preferred Stock
retirements (1) - - 0.1 0.1
West Florida Natural Gas merger - 5.3 -- 5.3
-- -------- ----- --------
Balance Dec. 31, 1997 10 972.8 (0.7) 972.1
Contributed capital from parent - 54.0 -- 54.0
-- -------- ----- --------
Balance Dec. 31, 1998 10 $1,026.8 $(0.7) $1,026.1
Contributed capital from parent - 17.0 -- 17.0
-- -------- ----- --------
Balance Dec. 31, 1999 10 $1,043.8 $(0.7) $1,043.1
== ======== ===== ========
</TABLE>
(1) In July 1997, Tampa Electric retired all of its outstanding shares ($20
million aggregate par value) of 4.32% Series A. 4.16% Series B and 4.58%
Series D preferred stock at redemption prices of $103.75, $102.875 and
$101.00 per share, respectively. In connection with this retirement, $.1
million of associated issuance costs were recognized.
C. RETAINED EARNINGS
Tampa Electric's first mortgage bonds and certain of Peoples Gas
System's long-term debt issues contain provisions that limit the dividend
payment on the company's common stock. At Dec. 31, 1999, substantially all of
the company's retained earnings were available for dividends on its common
stock.
D. RETIREMENT PLAN
Tampa Electric is a participant in the comprehensive retirement plan of
TECO Energy, including a non-contributory defined benefit retirement plan which
covers substantially all employees. Benefits are based on employees' years of
service and average final salary.
TECO Energy's policy is to fund the plan within the guidelines set by
ERISA for the minimum annual contribution and the maximum allowable as a tax
deduction by the IRS. About 73 percent of plan assets were invested in common
stocks and 27 percent in fixed income investments at Dec. 31, 1999.
The Peoples Gas System retirement plan was merged with the TECO Energy
retirement plan effective Jan. 1, 1998. As of Dec. 31, 1997, Peoples Gas System
had a non-contributory defined benefit retirement plan which covered
substantially all employees. Benefits were based on employees' years of service
and average compensation during specified years of employment.
31
<PAGE> 32
Peoples Gas System's retirement plan was funded annually by the company
within the guidelines set by ERISA for the minimum annual contribution and the
maximum allowable as a tax deduction by the IRS. Plan assets were invested
primarily in a collective investment trust consisting of equity securities,
fixed income securities and cash equivalents.
All information prior to 1998 has been restated to include the Peoples
Gas System Retirement Plan.
In 1997, the Financial Accounting Standards Board issued FAS 132,
Employers' Disclosures about Pensions and Other Post Retirement Benefits. FAS
132 standardizes the disclosure requirements for pension and other
postretirement benefits with additional information required on changes in the
benefit obligations and fair values of plan assets. TECO Energy adopted FAS 132
with the additional disclosures included here and in Footnote E, Postretirement
Benefit Plan.
Components of net pension expense, reconciliation of the funded status
and the accrued pension liability are presented below for TECO Energy
consolidated.
<TABLE>
<CAPTION>
COMPONENTS OF NET PENSION EXPENSE
(MILLIONS) 1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Service cost
(benefits earned during the period) $ 12.9 $ 11.7 $ 10.4
Interest cost on projected benefit obligations 27.2 26.5 24.8
Expected return on plan assets (34.6) (31.5) (28.4)
Amortization of:
Unrecognized transition asset (0.9) (0.9) (0.9)
Prior service cost 1.2 1.2 1.2
Actuarial (gain) loss 5.2 1.2 0.2
------ ------ ------
Net pension expense 11.0 8.2 7.3
Special termination benefit charge -- 0.7 --
Curtailment charge -- (0.8) --
------ ------ ------
Net pension expense recognized in the Consolidated
Statements of Income (1) $ 11.0 $ 8.1 $ 7.3
====== ====== ======
</TABLE>
(1) Tampa Electric Company's portion was $1.8 million, $2.1 million and $2.6
million for 1999, 1998 and 1997, respectively.
RECONCILIATION OF THE FUNDED STATUS OF THE RETIREMENT PLAN AND THE ACCRUED
PENSION PREPAYMENT/(LIABILITY) (MILLIONS)
<TABLE>
<CAPTION>
DEC. 31, DEC. 31,
1999 1998
-------- --------
<S> <C> <C>
Project benefit obligation, beginning of year $414.9 $374.9
Change in benefit obligation due to:
Service cost 12.9 11.7
Interest cost 27.2 26.5
Actuarial (gain) loss (68.1) 29.5
Curtailments -- (1.1)
Special termination benefits -- 0.7
Gross benefits paid (26.5) (27.3)
------ ------
Projected benefit obligation, end of year 360.4 414.9
------ ------
Fair value of plan assets, beginning of year 468.7 414.8
Change in plan assets due to:
Actual return on plan assets 65.3 72.2
Employer contributions 7.6 9.0
Gross benefits paid (including expenses) (29.5) (27.3)
------ ------
Fair value of plan assets, end of year 512.1 468.7
------ ------
Funded status, end of year 151.7 53.8
Unrecognized net actuarial gain (188.6) (87.6)
Unrecognized prior service cost 11.3 12.5
Unrecognized net transition asset (5.7) (6.7)
------ ------
Accrued pension liability $(31.3) $(28.0)
====== ======
</TABLE>
32
<PAGE> 33
ASSUMPTIONS USED IN DETERMINING ACTUARIAL VALUATIONS
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Discount rate to determine projected
benefit obligation 7.75% 6.75%
Rates of increase in compensation levels 3.3-5.3% 3.3-5.3%
Plan asset growth rate through time 9% 9%
</TABLE>
E. POSTRETIREMENT BENEFIT PLAN
Tampa Electric Company currently provides certain postretirement health
care benefits for substantially all employees retiring after age 55 meeting
certain service requirements. The company contribution toward health care
coverage for most employees retiring after Jan. 1, 1990 is limited to a defined
dollar benefit based on years of service. Postretirement benefit levels are
substantially unrelated to salary. Tampa Electric Company reserves the right to
terminate or modify the plan in whole or in part at any time. The prior period
amounts have been restated to include life insurance benefits.
<TABLE>
<CAPTION>
COMPONENTS OF POSTRETIREMENT BENEFIT COST
(MILLIONS)
1999 1998 1997
----- ---- ----
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 2.2 $1.6 $1.5
Interest cost on projected benefit obligations 5.2 4.8 4.9
Amortization of transition obligation
(straight line over 20 years) 2.1 2.1 2.1
Amortization of prior service cost 0.5 0.5 0.5
Amortization of actuarial loss/(gain) 0.2 (0.1) (0.1)
----- ---- ----
Net periodic Postretirement benefit expense $10.2 $8.9 $8.9
===== ==== ====
</TABLE>
RECONCILIATION OF THE FUNDED STATUS OF THE POSTRETIREMENT BENEFIT PLAN AND THE
ACCRUED LIABILITY
(MILLIONS)
<TABLE>
<CAPTION>
DEC. 31, DEC. 31,
1999 1998
-------- --------
<S> <C> <C>
Accumulated postretirement benefit obligation, beginning of year $ 72.8 $ 69.3
Change in benefit obligation due to:
Service cost 2.2 1.6
Interest cost 5.2 4.8
Plan participants' contributions 0.3 0.1
Actuarial (gain) loss (4.8) 1.0
Gross benefits paid (3.6) (4.0)
------ ------
Accumulated postretirement benefit obligation, end of year $ 71.1 $ 72.8
====== ======
Funded status, end of year $(71.1) $(72.8)
Unrecognized net loss from past experience (0.5) 4.4
Unrecognized prior service cost 5.1 5.6
Unrecognized transition obligation 27.4 29.5
------ ------
Liability for accrued postretirement benefit $(39.1) $(33.3)
====== ======
</TABLE>
ASSUMPTIONS USED IN DETERMINING ACTUARIAL VALUATIONS
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Discount rate to determine projected benefit obligation 7.75% 6.75%
</TABLE>
The assumed health care cost trend rate for medical costs prior to age
65 was 8.0% in 1999 and decreases to 5.75% in 2002 and thereafter. The assumed
health care cost trend rate for medical costs after age 65 was 6.5% in 1999 and
decreases to 5.75% in 2002 and thereafter.
A 1-percent increase in the medical trend rates would produce a
6-percent ($0.4 million) increase in the aggregate service and interest cost for
1999 and a 5-percent ($3.3 million) increase in the accumulated postretirement
benefit obligation as of Dec. 31, 1999.
A 1-percent decrease in the medical trend rates would produce a
5-percent ($0.4 million) decrease in the aggregate service and interest cost for
1999 and a 4-percent ($2.9 million) decrease in the accumulated postretirement
benefit obligation as of Dec. 31, 1999.
33
<PAGE> 34
F. INCOME TAX EXPENSE
The company is included in the filing of a consolidated Federal income tax
return with its parent and affiliates. The company's income tax expense is based
upon a separate return computation. Income tax expense consists of the following
components:
<TABLE>
<CAPTION>
(millions) FEDERAL STATE TOTAL
------- ------ ------
<S> <C> <C> <C>
1999
Currently payable $ 89.2 $ 12.4 $ 101.6
Deferred (16.2) .5 (15.7)
Amortization of investment
tax credits (4.6) - (4.6)
------ ------ -------
Total income tax expense $ 68.4 $ 12.9 81.3
====== ======
Included in other income, net (0.4)
-------
Included in operating expenses $ 81.7
=======
1998
Currently payable $ 52.8 $ 9.3 $ 62.1
Deferred 24.7 3.8 28.5
Amortization of investment tax credits (4.6) - (4.6)
------ ------ ------
Total income tax expense $ 72.9 $ 13.1 86.0
======= ======
Included in other income, net (0.3)
-------
Included in operating expenses $ 86.3
=======
1997
Currently payable $ 62.9 $ 7.1 $ 70.0
Deferred 15.0 6.1 21.1
Amortization of investment tax credits (4.7) -- (4.7)
------ ------- -------
Total income tax expense $ 73.2 $ 13.2 86.4
======= ======= =======
Included in other income, net (1.1)
-------
Included in operating expenses $ 87.5
=======
</TABLE>
Deferred taxes result from temporary differences in the recognition of
certain liabilities or assets for tax and financial reporting purposes. The
principal components of the company's deferred tax assets and liabilities
recognized in the balance sheet are as follows:
<TABLE>
<CAPTION>
DEC. 31, DEC. 31,
(millions) 1999 1998
-------- --------
<S> <C> <C>
Deferred tax assets(1)
Property related $ 94.3 $ 90.1
Leases 4.5 4.8
Insurance reserves 12.4 10.7
Early capacity payments 2.2 2.2
Other 8.2 8.3
------- -------
Total deferred income tax assets 121.6 116.1
------- -------
Deferred income tax liabilities(1)
Property related (484.7) (475.9)
Other 26.4 28.3
------- -------
Total deferred income tax liabilities (458.3) (447.6)
------- -------
Accumulated deferred income taxes $(336.7) $(331.5)
======= =======
</TABLE>
- -----------------
(1) Certain property related assets and liabilities have been netted.
34
<PAGE> 35
The total income tax provisions differ from amounts computed by
applying the federal statutory tax rate to income before income taxes for the
following reasons:
<TABLE>
<CAPTION>
(millions) 1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Net income $144.9 $146.4 $148.6
Total income tax provision 81.3 86.0 86.4
------ ------ ------
Income before income taxes $226.2 $232.4 $235.0
====== ====== ======
Income taxes on above at federal statutory rate of 35% $ 79.1 $ 81.3 $ 82.3
Increase (decrease) due to
State income tax, net of federal income tax 8.4 8.5 8.6
Amortization of investment tax credits (4.6) (4.6) (4.7)
Equity portion of AFUDC -- -- --
Other (1.6) 0.8 0.2
------ ------ ------
Total income tax provision $ 81.3 $ 86.0 $ 86.4
====== ====== ======
Provision for income taxes as a percent of income
before income taxes 35.9% 37.0% 36.7%
====== ====== ======
</TABLE>
G. SHORT-TERM DEBT
Notes payable consisted primarily of commercial paper with weighted
average interest rates of 5.95% and 5.18% at Dec. 31, 1999 and 1998,
respectively. The carrying amount of notes payable approximated fair market
value because of the short maturity of these instruments. Unused lines of credit
at Dec. 31, 1999 were $230 million. Certain lines of credit require commitment
fees of .05% on the unused balances.
H. RELATED PARTY TRANSACTIONS (millions)
Net transactions with affiliates are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------ -------
<S> <C> <C> <C>
Fuel and interchange related, net $ 130.0 $ 149.6 $ 154.6
Administrative and general, net $ 15.5 $ 13.5 $ 9.5
</TABLE>
Amounts due from or to affiliates of the company at year-end are as follows:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Accounts receivable $ 3.8 $ 3.6
Accounts payable $ 27.0 $ 19.2
</TABLE>
Accounts receivable and accounts payable were incurred in the ordinary course of
business and do not bear interest.
I. CHARGES TO EARNINGS
In 1999 and 1998 the company recognized certain charges that were
unusual and nonrecurring in nature.
1999 CHARGES
The charges in 1999 totaled $18.3 million pretax ($13.7 million after
tax) and consisted of the following:
Tampa Electric recorded a charge of $10.5 million ($6.4 million after
tax) based on FPSC audits of its 1997 and 1998 earnings, which among other
things, limited its regulatory equity ratio to 58.7 percent, a decrease of 91
basis points and 224 basis points from 1997's and 1998's ratios, respectively.
Tampa Electric also recorded a charge of $3.5 million after tax,
representing management's estimate of additional expense to resolve the
litigation filed by the United States Environmental Protection Agency.
A net after-tax charge, after recovery under the then current
regulatory agreement totaling $3.8 million was also recognized reflecting
corporate income tax provisions and settlements related to prior years' tax
returns.
35
<PAGE> 36
1998 CHARGES
In 1998, TECO Energy recognized charges totaling $16.9 million, pretax
($10.3 million, after tax). These charges consisted of the following:
The FPSC in September 1997 ruled that under the regulatory agreements
effective through 1999 the costs associated with two long-term wholesale power
sales contracts should be assigned to the wholesale jurisdiction and that for
retail rate making purposes the costs transferred from retail to wholesale
should reflect average costs rather than the lower incremental costs on which
the two contracts are based. As a result of this decision and the related
reduction of the retail rate base upon which Tampa Electric is allowed to earn a
return, these contracts became uneconomic. One contract was terminated in 1997.
As to the other contract, which expires in 2001, Tampa Electric entered into
firm power purchase contracts with third parties to provide replacement power
through 1999 and is no longer separating the associated generation assets from
the retail jurisdiction. The cost of purchased power under these contracts
exceeded the revenues expected through 1999. To reflect this difference, Tampa
Electric recorded a $9.6 million charge ($5.9 million after tax) in 1998. In
November 1999, the FPSC approved a company-proposed treatment for the remaining
14 1/2 months of the contract that flows 100 percent of the revenues from the
contract back to retail customers.
Tampa Electric also recorded a charge of $7.3 million ($4.4 million
after tax) in other expense for an FPSC decision in 1998 denying recovery of
certain BTU coal quality price adjustments for coal purchases from TECO Coal
since 1993.
J. COMMITMENTS AND CONTINGENCIES
Tampa Electric's capital investments are estimated to be $141 million
in 2000 and $540 million for 2001 through 2004 for equipment and facilities to
meet customer growth and generation reliability programs. Additionally, Tampa
Electric is also expecting to spend $51 million in 2000 and $554 million during
2001-2004 to repower the Gannon Power Station and is forecasting $42 million in
2000 and $114 million during 2001-2004 to construct additional generation
expansion. At the end of 1999, Tampa Electric had outstanding commitments of
about $66 million to repower the Gannon Power Station.
Peoples Gas System's capital investments are estimated to be $66
million for 2000 and $211 million for 2001 through 2004 for infrastructure
expansion to grow the customer base and normal asset replacement.
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, Tampa
Electric 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.
36
<PAGE> 37
K. SEGMENT INFORMATION
Tampa Electric Company is a public utility operating within the state
of Florida. Through its Tampa Electric division, it is engaged in the
generation, purchase, transmission, distribution and sale of electric energy to
more than 552,000 customers in West Central Florida. Its Peoples Gas System
division is engaged in the purchase, distribution and marketing of natural gas
for almost 253,000 residential, commercial, industrial and electric power
generation customers in the State of Florida. FAS 131 was adopted in 1998 and
all prior years presented here have been restated to conform to the requirements
of FAS 131.
<TABLE>
<CAPTION>
INCOME CAPITAL
FROM NET ASSETS EXPENDITURES
(millions) REVENUES OPERATIONS(1) INCOME DEPRECIATION AT DEC. 31, FOR THE YEAR
-------- ------------- ------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
1999
Tampa Electric $1,199.8 (2)(3)(4) $195.0 (4) $138.8 (6) $147.6 $2,889.4 $228.7
Peoples Gas System 251.7 30.5 19.8 23.1 433.1 84.5
Other and eliminations (0.6) -- -- -- -- --
Charges (see Note I) 7.9 7.9 (13.7) -- -- --
-------- ------ ------ ------ -------- ------
Tampa Electric Company $1,458.8 $233.4 $144.9 $170.7 $3,322.5 $313.2
======== ====== ====== ====== ======== ======
1998
Tampa Electric $1,234.6 (2)(3) $203.4 (5) $141.2 (6) $146.1 $2,770.9 $176.2
Peoples Gas System 252.8 25.8 15.5 21.1 375.6 55.9
Charges (see Note I) -- (9.6) (10.3) -- -- --
-------- ------ ------ ------ -------- ------
Tampa Electric Company $1,487.4 $219.6 $146.4 $167.2 $3,146.5 $232.1
======== ====== ====== ====== ======== ======
1997
Tampa Electric $1,189.2 (2)(3) $193.1 $135.2 $141.4 $2,750.0 $125.1
Peoples Gas System 249.5 24.5 14.3 19.8 348.9 30.2
-------- ------ ------ ------ -------- ------
Tampa Electric Company $1,438.7 $217.6 $149.5 $161.2 $3,098.9 $155.3
======== ====== ====== ====== ======== ======
</TABLE>
(1) Operating income is net of income tax expense. Total income tax expense was
$81.7 million, $86.3 million and $87.5 million in 1999, 1998 and 1997,
respectively.
(2) Revenues from sales to affiliates were $24.1 million, $23.2 million and
$22.2 million in 1999, 1998 and 1997, respectively.
(3) Revenues shown in 1999 include the reversal of previously deferred revenue
of $11.9 million. Revenues shown in 1998 and 1997 include the recognition of
previously deferred revenue of $38.3 million and $30.5 million,
respectively.
(4) Revenues and Operating income as shown for 1999 exclude a $7.9 million
credit resulting from a non-recurring charge. See Note I.
(5) Operating income excludes a non-recurring pretax charge of $9.6 million in
1998. See Note I.
(6) Net income excludes non-recurring after tax charges totaling $13.7 million
and $10.3 million in 1999 and 1998, respectively. See Note I.
37
<PAGE> 38
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
During the period Jan. 1, 1998 to the date of this report, the company
has not had and has not filed with the Commission a report as to any changes in
or disagreements with accountants on accounting principles or practices,
financial statement disclosure, or auditing scope or procedure.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements - See index on page 21.
2. Financial Statement Schedules - See index on page 21.
38
<PAGE> 39
TAMPA ELECTRIC COMPANY
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DEC. 31, 1999, 1998 AND 1997
(millions)
<TABLE>
<CAPTION>
Additions
Balance at ---------------------- Balance at
Beginning Charged to Other End of
of Period Income Charges Deductions(1) Period
---------- ---------- ------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for Uncollectible Accounts:
1999 $ 0.6 $ 5.7 $-- $ 5.2 $ 1.1
1998 0.9 4.5 -- 4.8 0.6
1997 1.2 3.7 -- 4.0 0.9
</TABLE>
- -------------
(1) Write-off of individual bad debt accounts
39
<PAGE> 40
3. Exhibits
<TABLE>
<S> <C>
*3.1 Articles of Incorporation (Exhibit 3.1 to Registration Statement No.
2-70653).
*3.2 Bylaws, as amended, effective April 16, 1997 (Exhibit 3, Form 10-Q for
the quarter ended June 30, 1997 of Tampa Electric Company).
*4.1 Indenture of Mortgage among Tampa Electric Company, State Street Trust
Company and First Savings & Trust Company of Tampa, dated as of Aug. 1,
1946 (Exhibit 7-A to Registration Statement No. 2-6693).
*4.2 Thirteenth Supplemental Indenture, dated as of Jan. 1, 1974, to Exhibit
4.1 (Exhibit 2-g-l, Registration Statement No. 2-51204).
*4.3 Sixteenth Supplemental Indenture, dated as of Oct. 30, 1992, to Exhibit
4.1 (Exhibit 4.1, Form 10-Q for the quarter ended Sept. 30, 1992 of
Tampa Electric Company).
*4.4 Eighteenth Supplemental Indenture, dated as of May 1, 1993, to Exhibit
4.1 (Exhibit 4.1, Form 10-Q for the quarter ended June 30, 1993).
*4.5 Installment Purchase and Security Contract between the Hillsborough
County Industrial Development Authority and Tampa Electric Company,
dated as of March 1, 1972 (Exhibit 4.9, Form 10-K for 1986 of Tampa
Electric Company).
*4.6 First Supplemental Installment Purchase and Security Contract, dated as
of Dec. 1, 1974 (Exhibit 4.10, Form 10-K for 1986 of Tampa Electric
Company).
*4.7 Third Supplemental Installment Purchase Contract, dated as of May 1,
1976 (Exhibit 4.12, Form 10-K for 1986 of Tampa Electric Company).
*4.8 Installment Purchase Contract between the Hillsborough County
Industrial Development Authority and Tampa Electric Company, dated as
of Aug. 1, 1981 (Exhibit 4.13, Form 10-K for 1986 of Tampa Electric
Company).
*4.9 Amendment to Exhibit A of Installment Purchase Contract, dated as of
April 7, 1983 (Exhibit 4.14, Form 10-K for 1989 of Tampa Electric
Company).
*4.10 Second Supplemental Installment Purchase Contract, dated as of June 1,
1983 (Exhibit 4.11, Form 10- K for 1994 of Tampa Electric Company).
*4.11 Third Supplemental Installment Purchase Contract, dated as of Aug. 1,
1989 (Exhibit 4.16, Form 10-K for 1989 of Tampa Electric Company).
*4.12 Installment Purchase Contract between the Hillsborough County
Industrial Development Authority and Tampa Electric Company, dated as
of Jan. 31, 1984 (Exhibit 4.13, Form 10-K for 1993 of Tampa Electric
Company).
*4.13 First Supplemental Installment Purchase Contract, dated as of Aug. 2,
1984 (Exhibit 4.14, Form 10-K for 1994 of Tampa Electric Company).
*4.14 Second Supplemental Installment Purchase Contract, dated as of July 1,
1993 (Exhibit 4.3, Form 10-Q for the quarter ended June 30, 1993).
*4.15 Loan and Trust Agreement among the Hillsborough County Industrial
Development Authority, Tampa Electric Company and NCNB National Bank of
Florida, dated as of Sept. 24, 1990 (Exhibit 4.1, Form 10-Q for the
quarter ended Sept. 30, 1990 of Tampa Electric Company).
*4.16 Loan and Trust Agreement, dated as of Oct. 26, 1992 among the
Hillsborough County Industrial Development Authority, Tampa Electric
Company and NationsBank of Florida, N.A., as trustee (Exhibit 4.2, Form
10-Q for the quarter ended Sept. 30, 1992 of Tampa Electric Company).
*4.17 Loan and Trust Agreement, dated as of June 23, 1993, among the
Hillsborough County Industrial Development Authority, Tampa Electric
Company and NationsBank of Florida, N.A., as trustee (Exhibit 4.2, Form
10-Q for the quarter ended June 30, 1993 of Tampa Electric Company).
*4.18 Loan and Trust Agreement, dated as of Dec. 1, 1996, among the Polk
County Industrial Development Authority, Tampa Electric Company and the
Bank of New York, as trustee (Exhibit 4.18, Form 10-K for 1996 of Tampa
Electric Company).
*4.19 First Supplemental Indenture dated as of July 15, 1998 between Tampa
Electric Company and The Bank of New York, as trustee (Exhibit 4.1,
Form 8-K dated July 28, 1998 of Tampa Electric Company).
*10.1 TECO Energy Group Supplemental Executive Retirement Plan, as amended
and restated as of Oct. 16, 1996 (Exhibit 10.3, Form 10-K for 1996 of
Tampa Electric Company).
*10.2 TECO Energy Group Supplemental Retirement Benefits Trust Agreement, as
amended and restated as of Jan. 15, 1997 (Exhibit 10.4, Form 10-K for
1996 of Tampa Electric Company).
*10.3 Annual Incentive Compensation Plan for TECO Energy and subsidiaries, as
revised Jan. 20, 1999. (Exhibit 10.4, Form 10-K for 1998 of Tampa
Electric Company).
*10.4 TECO Energy, Inc. Group Supplemental Disability Income Plan, dated as
of March 20, 1989 (Exhibit 10.19, Form 10-K for 1988 of Tampa Electric
Company).
</TABLE>
40
<PAGE> 41
<TABLE>
<S> <C>
10.5 Forms of Severance Agreements between TECO Energy, Inc. and certain
senior executives, as amended and restated as of Oct. 22, 1999.
*10.6 TECO Energy, Inc. 1991 Director Stock Option Plan as amended on Jan.
21, 1992 (Exhibit 10.20, Form 10-K for 1991 of Tampa Electric Company).
*10.7 Supplemental Executive Retirement Plan for R.H. Kessel, as amended and
restated as of Jan. 15, 1997 (Exhibit 10.10, Form 10-K for 1996 of
Tampa Electric Company).
*10.8 Supplemental Executive Retirement Plan for H.L. Culbreath, as amended
on April 27, 1989 (Exhibit 10.14, Form 10-K for 1989 of TECO Energy,
Inc.).
*10.9 Supplemental Executive Retirement Plan for G.F. Anderson, as amended
and restated effective as of Oct. 16, 1996 (Exhibit 10.15, Form 10-K
for 1996 of Tampa Electric Company).
*10.10 TECO Energy Directors' Deferred Compensation Plan, as amended and
restated effective April 1, 1994 (Exhibit 10.1, Form 10-Q for the
quarter ended March 31, 1994 of Tampa Electric Company).
*10.11 TECO Energy Group Retirement Savings Excess Benefit Plan, as amended
and restated effective as of July 15, 1998. (Exhibit 10.13, Form 10-K
for 1998 of Tampa Electric Company).
*10.12 Severance Agreement between TECO Energy, Inc. and H. L. Culbreath,
dated as of April 28, 1989 (Exhibit 10.24, Form 10-K for 1989 of TECO
Energy, Inc.).
*10.13 Supplemental Executive Retirement Plan for R.A. Dunn, as amended and
restated effective as of Jan. 15, 1997 (Exhibit 10.20, Form 10-K for
the 1996 of Tampa Electric Company).
*10.14 Form of Nonstatutory Stock Option under the TECO Energy, Inc. 1996
Equity Incentive Plan (Exhibit 10.1, Form 10-Q for the quarter ended
June 30, 1996 of Tampa Electric Company).
*10.15 Form of Amendment to Nonstatutory Stock Option, dated as of July 15,
1998, under the TECO Energy, Inc. 1996 Equity Incentive Plan (Exhibit
10.3, Form 10-Q for the quarter ended Sept. 30, 1998 of Tampa Electric
Company).
*10.16 Form of Nonstatutory Stock Option under the TECO Energy, Inc. 1996
Equity Incentive Plan (Exhibit 10.5, Form 10-Q for the quarter ended
June 30, 1999 of Tampa Electric Company).
*10.17 Form of Restricted Stock Agreement between TECO Energy, Inc. And
certain executives under the TECO Energy, Inc. 1996 Equity Incentive
Plan (Exhibit 10.1, Form 10-Q for the quarter ended June 30, 1998 of
Tampa Electric Company).
*10.18 Form of Amendment to Restricted Stock Agreements, dated as of July 15,
1998, between TECO Energy, Inc. and certain senior executives under the
TECO Energy, Inc. 1996 Equity Incentive Plan (Exhibit 10.2, Form 10-Q
for the quarter ended Sept. 30, 1998 of Tampa Electric Company).
*10.19 Form of Restricted Stock Agreement between TECO Energy, Inc. and G. F.
Anderson under the TECO Energy, Inc. 1996 Equity Incentive Plan
(Exhibit 10.2, Form 10-Q for the quarter ended June 30, 1998 of Tampa
Electric Company).
*10.20 TECO Energy, Inc. 1997 Director Equity Plan (Exhibit 10.1, Form 8-K
dated April 16, 1997 of Tampa Electric Company).
*10.21 Form of Nonstatutory Stock Option under the TECO Energy, Inc. 1997
Director Equity Plan (Exhibit 10, Form 10-Q for the quarter ended June
30, 1997 of Tampa Electric Company).
*10.22 Supplemental Executive Retirement Plan for R. D. Fagan as of May 24,
1999 (Exhibit 10.1, Form 10- Q for the quarter ended June 30, 1999 of
Tampa Electric Company).
*10.23 Terms of R. D. Fagan's employment, dated as of May 24, 1999 (Exhibit
10.2, Form 10-Q for the quarter ended June 30, 1999 of Tampa Electric
Company).
*10.24 Nonstatutory Stock Option granted to R. D. Fagan, dated as of May 24,
1999 (Exhibit 10.3, Form 10-Q for the quarter ended June 30, 1999 of
Tampa Electric Company).
*10.25 Restricted Stock Agreement between TECO Energy, Inc. and R. D. Fagan,
dated as of May 24, 1999 (Exhibit 10.4, Form 10-Q for the quarter ended
June 30, 1999 of Tampa Electric Company).
*10.26 Form of Performance Shares Agreement between TECO Energy, Inc. and
certain senior executives under the TECO Energy, Inc. 1996 Equity
Incentive Plan. (Exhibit 10.6, Form 10-Q for the quarter ended June 30,
1999 of Tampa Electric Company).
12. Ratio of earnings to fixed charges.
23. Consent of Independent Certified Public Accountants.
24.1 Power of Attorney.
24.2 Certified copy of resolution authorizing Power of Attorney.
27. Financial Data Schedule (EDGAR filing only).
</TABLE>
- -------------
* Indicates exhibit previously filed with the Securities and Exchange Commission
and incorporated herein by reference. Exhibits filed with periodic reports of
Tampa Electric Company and TECO Energy, Inc. were filed under Commission File
Nos. 1-5007 and 1-8180, respectively.
41
<PAGE> 42
Certain instruments defining the rights of holders of long-term debt of
Tampa Electric Company authorizing in each case a total amount of securities not
exceeding 10 percent of total assets on a consolidated basis are not filed
herewith. Tampa Electric Company will furnish copies of such instruments to the
Securities and Exchange Commission upon request.
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
Exhibits 10.1 through 10.26 above are management contracts or
compensatory plans or arrangements in which executive officers or directors of
TECO Energy, Inc. and its subsidiaries participate.
(b) REPORTS ON FORM 8-K
Tampa Electric Company filed the following reports on Form 8-K during
the last quarter of 1999.
The registrant filed a Current Report on Form 8-K dated Dec. 7, 1999
reporting under "Item 5. Other Events" announcing Tampa Electric
Company's 10-year environmental program.
Subsequent to Dec. 31, 1999, Tampa Electric Company filed the following
reports on Form 8-K.
The registrant filed a Current Report on Form 8-K dated Feb. 29,
2000, reporting under "Item 5. Other Events" announcing Tampa Electric
Company's agreement with the U.S. Environmental Protection Agency and
the U.S. Department of Justice to resolve the federal agencies'
pending enforcement actions against the Company.
42
<PAGE> 43
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on the 29th day of
March, 2000.
TAMPA ELECTRIC COMPANY
By R. D. FAGAN*
------------------------------------
R. D. FAGAN, Chairman of the Board,
Director and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
and in the capacities indicated on March 29, 2000:
<TABLE>
<CAPTION>
Signature Title
- --------- -----
<S> <C>
R. D. FAGAN* Chairman of the Board,
- -------------------- Director and Chief Executive Officer
R. D. FAGAN (Principal Executive Officer)
/s/ G. L. GILLETTE Vice President-Finance
- -------------------- and Chief Financial Officer
G. L. GILLETTE (Principal Financial Officer)
P. L. BARRINGER* Vice President-Controller
- -------------------- (Principal Accounting Officer)
P. L. BARRINGER
</TABLE>
<TABLE>
<CAPTION>
Signature Title Signature Title
- --------- ----- --------- -----
<S> <C> <C> <C>
C. D. AUSLEY* Director T. L. RANKIN* Director
- -------------------- ----------------------
C. D. AUSLEY T. L. RANKIN
S. L. BALDWIN* Director W. P. SOVEY* Director
- -------------------- ----------------------
S. L. BALDWIN W. P. SOVEY
H. L. CULBREATH* Director J. T. TOUCHTON* Director
- -------------------- ----------------------
H. L. CULBREATH J. T. TOUCHTON
J. L. FERMAN, JR.* Director J. A. URQUHART* Director
- -------------------- ----------------------
J. L. FERMAN, JR. J. A. URQUHART
E. L. FLOM* Director J. O. WELCH, JR.* Director
- -------------------- ----------------------
E. L. FLOM J. O. WELCH, JR.
L. GUINOT, JR.* Director
- --------------------
L. GUINOT, JR.
*By: /s/ G. L. GILLETTE
---------------------------------
G. L. GILLETTE, Attorney-in-fact
</TABLE>
43
<PAGE> 44
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT
No annual report or proxy material has been sent to Tampa Electric
Company's security holders, since all of its equity securities are held by TECO
Energy, Inc.
44
<PAGE> 45
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------- ----------- ----
<S> <C> <C>
3.1 Articles of Incorporation (Exhibit 3.1 to Registration Statement No.
2-70653). *
3.2 Bylaws, as amended, effective April 16, 1997 (Exhibit 3, Form 10-Q for
the quarter ended June 30, 1997 of Tampa Electric Company). *
4.1 Indenture of Mortgage among Tampa Electric Company, State Street Trust
Company and First Savings & Trust Company of Tampa, dated as of Aug.
1, 1946 (Exhibit 7-A to Registration Statement No. 2-6693). *
4.2 Thirteenth Supplemental Indenture, dated as of Jan. 1, 1974, to
Exhibit 4.1 (Exhibit 2-g-l, Registration Statement No. 2-51204). *
4.3 Sixteenth Supplemental Indenture, dated as of Oct. 30, 1992, to
Exhibit 4.1 (Exhibit 4.1, Form 10-Q for the quarter ended Sept. 30,
1992 of Tampa Electric Company). *
4.4 Eighteenth Supplemental Indenture, dated as of May 1, 1993, to Exhibit
4.1 (Exhibit 4.1, Form 10-Q for the quarter ended June 30, 1993). *
4.5 Installment Purchase and Security Contract between and the
Hillsborough County Industrial Development Authority and Tampa
Electric Company, dated as of March 1, 1972 (Exhibit 4.9, Form 10-K
for 1986 of Tampa Electric Company). *
4.6 First Supplemental Installment Purchase and Security Contract, dated
as of Dec. 1, 1974 (Exhibit 4.10, Form 10-K for 1986 of Tampa Electric
Company). *
4.7 Third Supplemental Installment Purchase Contract, dated as of May 1,
1976 (Exhibit 4.12, Form 10-K for 1986 of Tampa Electric Company). *
4.8 Installment Purchase Contract between the Hillsborough County
Industrial Development Authority and Tampa Electric Company, dated as
of Aug. 1, 1981 (Exhibit 4.13, Form 10-K for 1986 of Tampa Electric
Company). *
4.9 Amendment to Exhibit A of Installment Purchase Contract, dated as of
April 7, 1983 (Exhibit 4.14, Form 10-K for 1989 of Tampa Electric
Company). *
4.10 Second Supplemental Installment Purchase Contract, dated as of June 1,
1983 (Exhibit 4.11, Form 10-K for 1994 of Tampa Electric Company). *
4.11 Third Supplemental Installment Purchase Contract, dated as of Aug. 1,
1989 (Exhibit 4.16, Form 10-K for 1989 of Tampa Electric Company). *
4.12 Installment Purchase Contract between the Hillsborough County
Industrial Development Authority and Tampa Electric Company, dated as
of Jan. 31, 1984 (Exhibit 4.13, Form 10-K for 1993 of Tampa Electric
Company). *
4.13 First Supplemental Installment Purchase Contract, dated as of Aug. 2,
1984 (Exhibit 4.14, Form 10-K for 1994 of Tampa Electric Company). *
4.14 Second Supplemental Installment Purchase Contract, dated as of July 1,
1993 (Exhibit 4.3, Form 10-Q for the quarter ended June 30, 1993). *
4.15 Loan and Trust Agreement among the Hillsborough County Industrial
Development Authority, Tampa Electric Company and NCNB National Bank
of Florida, dated as of Sept. 24, 1990 (Exhibit 4.1, Form 10-Q for the
quarter ended Sept. 30, 1990 of Tampa Electric Company). *
4.16 Loan and Trust Agreement, dated as of Oct. 26, 1992 among the
Hillsborough County Industrial Development Authority, Tampa Electric
Company and NationsBank of Florida, N.A., as trustee (Exhibit 4.2,
Form 10-Q for the quarter ended Sept. 30, 1992 of Tampa Electric
Company). *
4.17 Loan and Trust Agreement, dated as of June 23, 1993, among the
Hillsborough County Industrial Development Authority, Tampa Electric
Company and NationsBank of Florida, N.A., as trustee (Exhibit 4.2,
Form 10-Q for the quarter ended June 30, 1993 of Tampa Electric
Company). *
4.18 Loan and Trust Agreement, dated as of Dec. 1, 1996, among the Polk
County Industrial Development Authority, Tampa Electric Company and
the Bank of New York, as trustee (Exhibit 4.18, Form 10-K for 1996 of
Tampa Electric Company). *
4.19 First Supplemental Indenture dated as of July 15, 1998 between Tampa
Electric Company and The Bank of New York, as trustee (Exhibit 4.1,
Form 8-K dated July 28, 1998 of Tampa Electric Company). *
</TABLE>
45
<PAGE> 46
<TABLE>
<S> <C> <C>
10.1 TECO Energy Group Supplemental Executive Retirement Plan, as amended
and restated as of Oct. 16, 1996 (Exhibit 10.3, Form 10-K for 1996 of
Tampa Electric Company). *
10.2 TECO Energy Group Supplemental Retirement Benefits Trust Agreement as
amended and restated as of Jan. 15, 1997 (Exhibit 10.4, Form 10-K for
1996 of Tampa Electric Company). *
10.3 Annual Incentive Compensation Plan for TECO Energy and subsidiaries,
revised Jan. 20, 1999 (Exhibit 10.4, Form 10-K for 1998 of Tampa
Electric Company). *
10.4 TECO Energy, Inc. Group Supplemental Disability Income Plan, dated as
of March 20, 1989 (Exhibit 10.19, Form 10-K for 1988 of Tampa Electric
Company). *
10.5 Forms of Severance Agreements between TECO Energy, Inc. and certain
senior 48 executives, as amended and restated as of Oct. 22, 1999. 48
10.6 TECO Energy, Inc. 1991 Director Stock Option Plan as amended on Jan.
31, 1992 (Exhibit 10.20, Form 10-K for 1991 of Tampa Electric
Company). *
10.7 Supplemental Executive Retirement Plan for R.H. Kessel, as amended and
restated as of Jan. 15, 1997 (Exhibit 10.10, Form 10-K for 1996 of
Tampa Electric Company). *
10.8 Supplemental Executive Retirement Plan for H.L. Culbreath, as amended
on April 27, 1989 (Exhibit 10.14, Form 10-K for 1989 of TECO Energy,
Inc.). *
10.9 Supplemental Executive Retirement Plan for G.F. Anderson, as amended
and restated effective as of Oct. 16, 1996 (Exhibit 10.15, Form 10-K
for 1996 of Tampa Electric Company). *
10.10 TECO Energy Directors' Deferred Compensation Plan, as amended and
restated effective April 1, 1994 (Exhibit 10.1, Form 10-Q for the
quarter ended March 31, 1994 of Tampa Electric Company). *
10.11 TECO Energy Group Retirement Savings Excess Benefit Plan, as amended
and restated effective as of July 15, 1998. (Exhibit 10.13, Form 10-K
for 1998 of Tampa Electric Company). *
10.12 Severance Agreement between TECO Energy, Inc. and H.L. Culbreath,
dated as of April 28, 1989 (Exhibit 10.24, Form 10-K for 1989 of TECO
Energy, Inc.). *
10.13 Supplemental Executive Retirement Plan for R.A. Dunn, as amended and
restated as of Jan. 15, 1997 (Exhibit 10.20, Form 10-K for 1996 of
Tampa Electric Company). *
10.14 Form of Nonstatutory Stock Option under the TECO Energy, Inc. 1996
Equity Incentive Plan (Exhibit 10.1, Form 10-Q for the quarter ended
June 30, 1996 of Tampa Electric Company). *
10.15 Form of Amendment to Nonstatutory Stock Option, dated as of July 15,
1998, under the TECO Energy, Inc. 1996 Equity Incentive Plan (Exhibit
10.3, Form 10-Q for the quarter ended Sept. 30, 1998 of Tampa Electric
Company). *
10.16 Form of Nonstatutory Stock Option under the TECO Energy,Inc. 1996
Equity Incentive Plan (Exhibit 10.5, Form 10-Q for the quarter ended
June 30, 1999 of Tampa Electric Company). *
10.17 Form of Restricted Stock Agreement between TECO Energy, Inc. and
certain executives under the TECO Energy, Inc. 1996 Equity Incentive
Plan (Exhibit 10.1, Form 10-Q for the quarter ended June 30, 1998 of
Tampa Electric Company). *
10.18 Form of Amendment to Restricted Stock Agreements, dated as of July 15,
1998, between TECO Energy, Inc. and certain senior executives under
the TECO Energy, Inc. 1996 Equity Incentive Plan (Exhibit 10.2, Form
10-Q for the quarter ended Sept. 30, 1998 of Tampa Electric Company). *
10.19 Form of Restricted Stock Agreement between TECO Energy, Inc. and G.F.
Anderson under the TECO Energy, Inc. 1996 Equity Incentive Plan
(Exhibit 10.2, Form 10-Q for the quarter ended June 30, 1998 of Tampa
Electric Company). *
10.20 TECO Energy, Inc. 1997 Director Equity Plan (Exhibit 10, Form 10-Q for
the quarter ended June 30, 1997 of Tampa Electric Company). *
10.21 Form of Nonstatutory Stock Option under the TECO Energy, Inc. 1997
Director Equity Plan (Exhibit 10, Form 10-Q for the quarter ended June
30, 1997 of Tampa Electric Company). *
10.22 Supplemental Executive Retirement Plan for R. D. Fagan as of May 14,
1999 (Exhibit 10.1, Form 10-Q for the quarter ended June 30, 1999 of
Tampa Electric Company). *
10.23 Terms of R. D. Fagan's employment, dated as of May 24, 1999 (Exhibit
10.2, Form 10-Q for the quarter ended June 30, 1999 of Tampa Electric
Company). *
10.24 Nonstatutory Stock Option granted to R. D. Fagan, dated as of May 24,
1999 (Exhibit 10.3, Form 10-Q for the quarter ended June 30, 1999 of
Tampa Electric Company). *
10.25 Restricted Stock Agreement between TECO Energy, Inc. And R.D. Fagan,
dated as of May 24, 1999. (Exhibit 10.4, Form 10-Q for the quarter
ended June 30, 1999 of Tampa Electric Company). *
10.26 Form of Performance Shares Agreement between TECO Energy, Inc. and
certain senior executives under the TECO Energy, Inc. 1996 Equity
Incentive Plan (Exhibit 10.6, Form 10-Q for the quarter ended June 30,
1999 of Tampa Electric Company). *
</TABLE>
46
<PAGE> 47
<TABLE>
<S> <C> <C>
12. Ratio of earnings to fixed charges. 86
23. Consent of Independent Certified Public Accountants. 87
24.1 Power of Attorney. 88
24.2 Certified copy of resolution authorizing Power of Attorney. 90
27.1 Financial Data Schedule (EDGAR filing only).
</TABLE>
- -------------
* Indicates exhibit previously filed with the Securities and Exchange Commission
and incorporated herein by reference. Exhibits filed with periodic reports of
Tampa Electric Company and TECO Energy, Inc. were filed under Commission File
Nos. 1-5007 and 1-8180, respectively.
47
<PAGE> 1
Exhibit 10.5
TAMPA ELECTRIC COMPANY
FORMS OF SEVERANCE AGREEMENTS BETWEEN TECO ENERGY, INC. AND
CERTAIN SENIOR EXECUTIVES
AMENDED AND RESTATED AS OF OCT. 22, 1999
<PAGE> 2
PRIVILEGED AND CONFIDENTIAL
Date
Name
Address
Address 2
Dear First Name:
TECO Energy, Inc. (the "Company") considers it essential to the best
interests of its stockholders to foster the continuous employment of key
management personnel. In this connection, the Board of Directors of the Company
(the "Board") recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of key management
personnel to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Company.
In order to induce you to remain in the employ of the Company and in
consideration of your agreement set forth in Subsection 2(iii) hereof, the
Company agrees that you shall receive the severance benefits set forth in this
letter agreement (the "Agreement") in the event your employment with the Company
is terminated subsequent to a "change in control of the Company" (as defined in
Section 2(i) hereof) (or is deemed to be terminated subsequent to a change in
control of the Company in accordance with the second sentence of Section 3
hereof) under the circumstances described below. Amd Date
1. Term of Agreement. Subject to the provisions of Section 13 hereof,
this Agreement shall commence on the date hereof and shall continue in effect
through June 30, 2001; provided, however, that commencing on July 1, 2000 and
each July 1 thereafter, the term of this Agreement shall automatically be
extended for one additional year unless, not later than March 31 of such year,
the Company shall have given notice that it does not wish to extend this
Agreement (provided that no such notice may be given during the pendency of or
within two years following a potential change in control of the Company, as
defined in Section 2(ii) hereof);
<PAGE> 3
provided, further, if a change in control of the Company shall have occurred
during the original or extended term of this Agreement, this Agreement shall
continue in effect for a period of thirty-six (36) months beyond the month in
which such change in control occurred.
2. Change in Control; Potential Change in Control. (i) Except as
provided in the second sentence of Section 3 hereof, no benefits shall be
payable hereunder unless there shall have been a change in control of the
Company, as set forth below. For purposes of this Agreement, a "change in
control of the Company" shall mean a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not the Company is in fact required to comply
therewith; provided, that, without limitation, such a change in control shall be
deemed to have occurred if:
(A) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than the Company, any trustee or
other fiduciary holding securities under an employee benefit plan of
the Company or a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 30% or more of
the combined voting power of the Company's then outstanding securities;
(B) during any period of twenty-four (24) consecutive months
(not including any period prior to the date of this Agreement),
individuals who at the beginning of such period constitute the Board
and any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction
described in paragraphs (A), (C) or (D) of this Section 2(i)) whose
election by the Board or nomination for election by the stockholders of
the Company was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election
was previously so approved, cease for any reason to constitute a
majority thereof; or
(C) there is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company with any
other corporation, other than (i) a merger or consolidation resulting
in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at
least 65% of the combined voting securities of the Company or such
surviving entity or any parent thereof outstanding immediately after
such merger or consolidation or (ii) a merger or consolidation effected
to implement a recapitalization of the Company (or similar transaction)
in which no "person" (as hereinabove defined) acquires 30% or more of
the combined voting power of the Company's then outstanding securities;
or
<PAGE> 4
(D) the stockholders of the Company approve a plan of complete
liquidation of the Company or there is consummated the sale or
disposition by the Company of all or substantially all of the Company's
assets.
(ii) For purposes of this Agreement, a "potential
change in control of the Company" shall be deemed to have
occurred if:
(A) the Company enters into an agreement, the consummation of
which would result in the occurrence of a change in control of the
Company;
(B) any person (as hereinabove defined), including the
Company, publicly announces an intention to take or consider taking
actions which if consummated would constitute a change in control of
the Company;
(C) any person (as hereinabove defined), other than the
Company, any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a corporation owned, directly
or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company (a) is or
becomes the beneficial owner, (b) discloses directly or indirectly to
the Company or publicly a plan or intention to become the beneficial
owner, or (c) makes a filing under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, with respect to securities to
become the beneficial owner, directly or indirectly, of securities
representing 9.9% or more of the combined voting power of the
outstanding voting securities of the Company; or
(D) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a potential change in control of the
Company has occurred.
(iii) You agree that, subject to the terms and
conditions of this Agreement, in the event of a potential
change in control of the Company, you will remain in the
employ of the Company until the earliest of (a) a date which
is one (1) year from the occurrence of such potential change
in control of the Company, (b) the termination by you of your
employment after you attain "normal retirement age" under the
provisions of the TECO Energy Group Retirement Plan or any
successor thereto (the "Retirement Plan") or by reason of
Disability as defined in Section 3(i), or (c) the date of the
occurrence of a change in control of the Company.
3. Termination Following Change in Control. If (i) your employment is
terminated following a change in control of the Company and during the term of
this Agreement (as determined under Section 1 hereof), other than (A) by the
Company for Cause, (B) by reason of death or Disability, or (C) by you without
Good Reason, or (ii) you voluntarily terminate your employment for any reason
during the one-month period commencing on the first anniversary of the change in
control of the Company, then, in either such case, the Company shall pay you the
amounts, and provide you the benefits, described in Section 4(iii) hereof. For
purposes of this Agreement, your
<PAGE> 5
employment shall be deemed to have been terminated following a change in control
of the Company by the Company without Cause or by you with Good Reason, if (i)
your employment is terminated by the Company without Cause prior to a change in
control of the Company (whether or not such a change in control ever occurs) and
such termination was at the request or direction of a "person" (as hereinabove
defined) who has entered into an agreement with the Company the consummation of
which would constitute a change in control of the Company, (ii) you terminate
your employment for Good Reason prior to a change in control of the Company
(whether or not such a change in control ever occurs) and the circumstance or
event which constitutes Good Reason occurs at the request or direction of such
person, or (iii) your employment is terminated by the Company without Cause or
by you for Good Reason and such termination or the circumstance or event which
constitutes Good Reason is otherwise in connection with or in anticipation of a
change in control of the Company (whether or not such a change in control ever
occurs).
(i) Disability. If, as a result of your incapacity
due to physical or mental illness, you shall have been absent
from the full-time performance of your duties with the Company
for six (6) consecutive months, and within thirty (30) days
after written notice of termination is given you shall not
have returned to the full-time performance of your duties,
your employment may be terminated for "Disability".
(ii) Cause. Termination by the Company of your
employment for "Cause" shall mean termination upon (A) the
willful and continued failure by you to substantially perform
your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental
illness or any such actual or anticipated failure after the
issuance of a Notice of Termination by you for Good Reason, as
defined in Subsections 3(iv) and 3(iii), respectively) after a
written demand for substantial performance is delivered to you
by the Board, which demand specifically identifies the manner
in which the Board believes that you have not substantially
performed your duties, or (B) the willful engaging by you in
conduct which is demonstrably and materially injurious to the
Company, monetarily or otherwise. For purposes of this
Subsection, no act, or failure to act, on your part shall be
deemed "willful" unless done, or omitted to be done, by you
not in good faith and without reasonable belief that your
action or omission was in the best interest of the Company.
Notwithstanding the foregoing, you shall not be deemed to have
been terminated for Cause unless and until there shall have
been delivered to you a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters (3/4) of
the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice to
you and an opportunity for you, together with your counsel, to
be heard before the Board), finding that in the good faith
opinion of the Board you were guilty of conduct set forth
above in this Subsection and specifying the particulars
thereof in detail.
(iii) Good Reason. "Good Reason" for termination by
you of your employment shall mean the occurrence (without your
express written consent) after any change in control of the
Company, or prior to a change in control of the Company under
the circumstances described in the second sentence of Section
3 hereof (treating all references in paragraphs (A) through
(H) below to a "change in control of the Company" as
references to a "potential change in control of the
<PAGE> 6
Company"), of any one of the following acts by the Company, or failures by the
Company to act:
(A) the assignment to you of any duties inconsistent (except
in the nature of a promotion) with the position in the Company that you
held immediately prior to the change in control of the Company or a
substantial adverse alteration in the nature or status of your position
or responsibilities or the conditions of your employment from those in
effect immediately prior to the change in control of the Company;
(B) a reduction by the Company in your annual base salary as
in effect on the date hereof or as the same may be increased from time
to time;
(C) the Company's requiring you to be based more than
twenty-five (25) miles from the Company's offices at which you were
principally employed immediately prior to the date of the change in
control of the Company except for required travel on the Company's
business to an extent substantially consistent with your present
business travel obligations;
(D) the failure by the Company to pay to you any portion of
your current compensation or compensation under any deferred
compensation program of the Company, within seven (7) days of the date
such compensation is due;
(E) the failure by the Company to continue in effect any
material compensation or benefit plan in which you participate
immediately prior to the change in control of the Company unless an
equitable arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the failure by the
Company to continue your participation therein (or in such substitute
or alternative plan) on a basis not materially less favorable, both in
terms of the amount of benefits provided and the level of your
participation relative to other participants, than existed at the time
of the change in control;
(F) the failure by the Company to continue to provide you with
benefits substantially similar to those enjoyed by you under any of the
Company's pension, life insurance, medical, health and accident, or
disability plans in which you were participating at the time of the
change in control of the Company, the taking of any action by the
Company which would directly or indirectly materially reduce any of
such benefits or deprive you of any material fringe benefit enjoyed by
you at the time of the change in control of the Company, or the failure
by the Company to provide you with the number of paid vacation days to
which you are entitled on the basis of your years of service with the
Company in accordance with the Company's normal vacation policy in
effect at the time of the change in control of the Company;
(G) the failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Section 6
<PAGE> 7
hereof; or
(H) any purported termination of your employment which is not
effected pursuant to a Notice of Termination satisfying the
requirements of Subsection (iv) below (and, if applicable, the
requirements of Subsection (ii) above), which purported termination
shall not be effective for purposes of this Agreement.
Your right to terminate your employment pursuant to this Subsection shall not be
affected by your incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder.
(iv) Notice of Termination. Any purported termination
of your employment by the Company or by you shall be
communicated by written Notice of Termination to the other
party hereto in accordance with Section 7 hereof. For purposes
of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision
in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the
provision so indicated.
(v) Date of Termination, Etc. "Date of Termination"
shall mean (A) if your employment is terminated for
Disability, thirty (30) days after Notice of Termination is
given (provided that you shall not have returned to the
full-time performance of your duties during such thirty (30)
day period), and (B) if your employment is terminated pursuant
to Subsection (ii) or (iii) above or for any other reason
(other than Disability), the date specified in the Notice of
Termination (which, in the case of a termination pursuant to
Subsection (ii) above shall not be less than thirty (30) days,
and in the case of a termination pursuant to Subsection (iii)
above shall not be less than fifteen (15) nor more than sixty
(60) days, respectively, from the date such Notice of
Termination is given); provided that if within fifteen (15)
days after any Notice of Termination is given, or, if later,
prior to the Date of Termination (as determined without regard
to this proviso), the party receiving such Notice of
Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be
the date on which the dispute is finally determined, either by
mutual written agreement of the parties or by a binding
arbitration award; and provided further that the Date of
Termination shall be extended by a notice of dispute only if
such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable
diligence. Notwithstanding the pendency of any such dispute,
the Company will continue to pay you your full compensation in
effect when the notice giving rise to the dispute was given
(including, but not limited to, base salary) and continue you
as a participant in all compensation, benefit and insurance
plans in which you were participating when the notice giving
rise to the dispute was given, until the dispute is finally
resolved in accordance with this Subsection. Amounts paid
under this Subsection are in addition to all other amounts due
under this Agreement and shall not be offset against or reduce
any other amounts due under this Agreement.
<PAGE> 8
4. Compensation Upon Termination or During Disability. Following a
change in control of the Company, as defined by Subsection 2(i), or prior to a
change in control of the Company under the circumstances described in the second
sentence of Section 3 hereof, upon termination of your employment or during a
period of disability you shall be entitled to the following benefits:
(i) During any period that you fail to perform your
full-time duties with the Company as a result of incapacity
due to physical or mental illness, you shall continue to
receive your base salary at the rate in effect at the
commencement of any such period, together with all
compensation payable to you under the Company's disability
plan or program or other similar plan during such period,
until this Agreement is terminated pursuant to Section 3(i)
hereof. Thereafter, or in the event your employment shall be
terminated by reason of your death, your benefits shall be
determined under the Company's retirement, insurance and other
compensation programs then in effect in accordance with the
terms of such programs.
(ii) If your employment shall be terminated by the
Company for Cause or by you other than for Good Reason, the
Company shall pay you your full base salary through the Date
of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are
entitled under any compensation plan of the Company at the
time such payments are due, and the Company shall have no
further obligations to you under this Agreement.
(iii) If your employment by the Company terminates in
a manner entitling you to benefits under this Section pursuant
to Section 3 hereof, then you shall be entitled to the
benefits provided below:
(A) the Company shall pay you your full base salary through
the Date of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are entitled
under any compensation plan of the Company, at the time such payments
are due, except as otherwise provided below;
(B) in lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as
severance pay to you a lump sum severance payment (together with the
payments provided in paragraphs (D), (E) and (F) below, the "Severance
Payments") equal to three (3) times the sum of (1) the greater of (a)
your annual rate of base salary in effect on the Date of Termination or
(b) your annual rate of base salary in effect immediately prior to the
change in control of the Company and (2) the greatest of (a) the
average of the last two annual bonuses (annualized in the case of any
bonus paid with respect to a partial year) paid to you preceding the
Date of Termination, (b) the average of the last two annual bonuses
(annualized in the case of any bonus paid with respect to a partial
year) paid to you preceding such change in control, (c) the most recent
annual bonus (annualized in the case of any bonus paid with respect to
a partial year) paid to you preceding the Date of Termination, or (d)
the most recent annual
<PAGE> 9
bonus (annualized in the case of any bonus paid with respect to a
partial year) paid to you preceding such change in control, or (e) in
the event that on the date of the change in control of the the Company
you have been employed by the Company for less than two years and have
not yet been considered for receipt of an annual bonus, your annual
incentive target award in effect immediately prior to such change in
control;
(C) the Company shall also pay to you, within five (5) days
after any such fees or expenses are incurred, all legal fees and
expenses incurred by you as a result of or in connection with such
termination, including all such fees and expenses, if any, incurred in
contesting or disputing any such termination or in seeking to obtain or
enforce any right or benefit provided by this Agreement (other than any
such fees or expenses incurred in connection with any such claim which
is determined by arbitration, in accordance with Section 11 of this
Agreement, to be frivolous) or in connection with any tax audit or
proceeding to the extent attributable to the application of section
4999 of the Code to any payment or benefit provided hereunder;
(D) for a thirty-six (36) month period after such termination,
the Company shall arrange to provide you with life, disability,
accident and health insurance benefits substantially similar to those
which you are receiving immediately prior to the Notice of Termination.
Benefits otherwise receivable by you pursuant to this Subsection
4(iii)(D) shall be reduced to the extent comparable benefits are
actually received by you from a subsequent employer during the
thirty-six (36) month period following your termination, and any such
benefits actually received by you shall be reported to the Company;
(E) in addition to the retirement benefits to which you are
entitled under the Retirement Plan, any supplemental retirement or
excess benefit plan maintained by TECO or any of its subsidiaries or
any successor plans thereto (hereinafter collectively referred to as
the "Pension Plans"), the Company shall pay you in cash a lump sum
equal to the excess of (a) the actuarial equivalent (computed at your
date of termination) of the retirement pension (taking into account any
early retirement subsidies and post-retirement surviving spouse
benefits associated therewith and determined as an annuity payable in
the normal form under the Pension Plans commencing at your normal
retirement age under the Retirement Plan or any earlier date, but in no
event earlier than the third anniversary of the Date of Termination,
whichever annuity the actuarial equivalent of which is greatest) which
you would have accrued under the terms of the Pension Plans (without
regard to the limitations imposed by Section 401(a)(17) of the Internal
Revenue Code of 1986, as amended (the "Code"), or any amendment to the
Pension Plans made subsequent to a change in control of the Company and
on or prior to the Date of Termination, which amendment adversely
affects in any manner the computation of retirement benefits
thereunder), determined as if you were fully vested thereunder and had
continued to be a participant in each of the Pension Plans for
thirty-six (36) additional months and as if you had accumulated
thirty-six (36) additional months of compensation (for purposes of
determining your pension benefits thereunder), each in an amount equal
to the sum of the
<PAGE> 10
amounts determined under clauses (1) and (2) of Section 4(iii)(B)
hereof over (b) the actuarial equivalent (computed at your date of
termination) of the vested retirement pension (taking into account any
early retirement subsidies and post-retirement surviving spouse
benefits associated therewith and determined as an annuity payable in
the normal form under the Pension Plans commencing at your normal
retirement age under the Retirement Plan or any earlier date, but in no
event earlier than the Date of Termination, whichever annuity the
actuarial equivalent of which is greatest) which you had then accrued
pursuant to the provisions of the Pension Plans. For purposes of this
Subsection, "actuarial equivalent" shall be determined using the same
actuarial assumptions utilized in determining the amount of alternate
forms of benefits under the Retirement Plan immediately prior to the
change in control of the Company; and
(F) should you move your residence in order to pursue other
business opportunities within one (1) year of the Date of Termination,
the Company will pay you, within five (5) days after any such expenses
are incurred, an amount equal to the expenses incurred by you in
connection with such relocation (including expenses incurred in selling
your home to the extent such expenses were customarily reimbursed by
the Company to transferred executives prior to the change in control of
the Company) and which are not reimbursed by another employer.
(iv) Except as otherwise specifically provided in
paragraph (C) and (F) thereof, the payments provided for in
Subsection (iii) shall be made not later than the fifth day
following the Date of Termination; provided, however, that if
the amounts of such payments cannot be finally determined on
or before such day, the Company shall pay to you on such day
an estimate, as determined in good faith by the Company, of
the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the rate
provided in section 1274(b)(2)(B) of the Code) as soon as the
amount thereof can be determined but in no event later than
the thirtieth day after the Date of Termination. In the event
that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall
constitute a loan by the Company to you payable on the fifth
day after demand therefor by the Company (together with
interest at the rate provided in section 1274(b)(2)(B) of the
Code).
(v) You shall not be required to mitigate the amount
of any payment provided for in this Section 4 or Section 5
hereof by seeking other employment or otherwise, nor, except
as specifically provided in Sections 4(iii)(D) and (F) above,
shall the amount of any payment or benefit provided for in
this Section 4 or Section 5 hereof be reduced by any
compensation earned by you as the result of employment by
another employer, by retirement benefits, by offset against
any amount claimed to be owed by you to the Company, or
otherwise.
5. Certain Additional Payments by the Company.
(i) Whether or not you become entitled to payments
under this Agreement, if any of
<PAGE> 11
the payments or benefits received or to be received by you in
connection with a change in control of the Company or the
termination of your employment (whether pursuant to the terms
of this Agreement or any other plan, arrangement or agreement
with the Company, any person whose actions result in a change
in control of the Company or any person affiliated with the
Company or such person) (such payments or benefits, including
the Severance Payments but excluding the Gross-Up Payment,
being hereinafter referred to as the "Total Payments") will be
subject to the excise tax imposed by section 4999 of the Code
or any interest or penalties are incurred by you with respect
to such excise tax (such excise tax, together with any such
interest and penalties, being hereinafter referred to as the
"Excise Tax"), the Company shall pay to you an additional
amount (the "Gross-Up Payment") such that the net amount
retained by you, after paying any Excise Tax on the Total
Payments and any federal, state and local income and
employment taxes and Excise Tax on the Gross-Up Payment, shall
be equal to the Total Payments.
(ii) For purposes of determining whether any of the
Total Payments will be subject to the Excise Tax and the
amount of such Excise Tax, (A) all of the Total Payments shall
be treated as "parachute payments" (within the meaning of
section 280G(b)(2) of the Code) unless, in the opinion of tax
counsel ("Tax Counsel") acceptable to you and selected by the
accounting firm which was, immediately prior to the change in
control of the Company, the Company's independent auditor (the
"Auditor"), such payments or benefits (in whole or in part) do
not constitute parachute payments, including by reason of
section 280G(b)(4)(A) of the Code, (B) all "excess parachute
payments" (within the meaning of section 280G(b)(1) of the
Code) shall be treated as subject to the Excise Tax unless, in
the opinion of Tax Counsel, such excess parachute payments (in
whole or in part) represent reasonable compensation for
services actually rendered (within the meaning of section
280G(b)(4)(B) of the Code) in excess of the "base amount"
(within the meaning of section 280G(b)(3) of the Code)
allocable to such reasonable compensation, or are otherwise
not subject to the Excise Tax, and (C) the value of any
noncash benefits or any deferred payment or benefit shall be
determined by the Auditor in accordance with the principles of
sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, you shall be
deemed to pay federal income tax at the highest marginal rate
of federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income
taxes at the highest marginal rate of taxation in the state
and locality of your residence on the Date of Termination, net
of the maximum reduction in federal income taxes which could
be obtained from deduction of such state and local taxes.
(iii) In the event that the Excise Tax is
subsequently determined to be less than the amount taken into
account hereunder at the time of the termination of your
employment, you shall repay to the Company, at the time that
the amount of such reduction in Excise Tax is finally
determined, the portion of the Gross-Up Payment attributable
to such reduction (plus that portion of the Gross-Up Payment
attributable to the Excise Tax and federal, state and local
income and employment taxes imposed on the Gross-Up Payment
being repaid by you to the extent that such repayment results
in a reduction in Excise Tax and/or a federal, state or local
income or employment tax deduction) plus interest on the
amount of such repayment at 120% of the rate provided in
section 1274(b)(2)(B) of the Code. In the event that the
Excise Tax is determined to
<PAGE> 12
exceed the amount taken into account hereunder at the time of
the termination of your employment (including by reason of any
payment the existence or amount of which cannot be determined
at the time of the Gross-Up Payment), the Company shall make
an additional Gross-Up Payment in respect of such excess (plus
any interest, penalties or additions payable by you with
respect to such excess) at the time that the amount of such
excess is finally determined. You and the Company shall each
reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the
existence or amount of liability for Excise Tax with respect
to the Total Payments.
6. Successors; Binding Agreement. (iv) The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle you to compensation from the
Company in the same amount and on the same terms as you would be entitled to
hereunder if you terminate your employment for Good Reason following a change in
control of the Company, except that for purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be deemed the Date
of Termination. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
(ii) This Agreement shall inure to the benefit of and
be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued
to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement
to your devisee, legatee or other designee or, if there is no
such designee, to your estate.
7. Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the Board
with a copy to the Secretary of the Company, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notices of change of address shall be effective only upon receipt.
8. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by you and such officer as may be specifically designated
by the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or
<PAGE> 13
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Florida, without giving effect to the conflicts of
law principles thereof. All references to sections of the Exchange Act or the
Code shall be deemed also to refer to any successor provisions to such sections.
Any payments provided for hereunder shall be paid net of any applicable
withholding required under federal, state or local law. The obligations of the
Company under Sections 4 and 5 shall survive the expiration of the term of this
Agreement.
9. Validity. The invalidity or unenforceability or any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
10. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
11. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration
conducted before a panel of three arbitrators in the State of Florida in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that you shall be entitled to seek specific
performance of your right to be paid until the Date of Termination during the
pendency of any dispute or controversy arising under or in connection with this
Agreement.
12. Entire Agreement. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and during
the term of the Agreement supersedes the provisions of all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or representative
of any party hereto with respect to the subject matter hereof.
13. Effective Date; Pooling. This Agreement shall become effective as
of the date set forth above. In the event that the Company is party to an
agreement with respect to a transaction that is intended to qualify for "pooling
of interests" accounting treatment, then (A) this Agreement shall, to the extent
practicable, be interpreted so as to permit such accounting treatment, and (B)
to the extent that the application of clause (A) of this Section 13 does not
preserve the availability of such accounting treatment, then the Company shall
have the unilateral right to amend this Agreement to the extent necessary to
enable the Company's accountants to issue a "pooling" opinion with respect to
such transaction, and any such amendment shall be effective as of the date
hereof.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject.
<PAGE> 14
Sincerely,
TECO Energy, Inc.
By /s/
-------------------------------------
Name: Roger A. Dunn
Title: Vice President-Human Resources
Agreed to this _______ day
of __________________, 2000.
_____________________________
Signature
<PAGE> 15
PRIVILEGED AND CONFIDENTIAL
Date
Name
Address 1
Address 2
Dear First Name:
TECO Energy, Inc. (the "Company") considers it essential to the best
interests of its stockholders to foster the continuous employment of key
management personnel. In this connection, the Board of Directors of the Company
(the "Board") recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of key management
personnel to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Company.
In order to induce you to remain in the employ of the Company and in
consideration of your agreement set forth in Subsection 2(iii) hereof, the
Company agrees that you shall receive the severance benefits set forth in this
letter agreement (the "Agreement") in the event your employment with the Company
is terminated subsequent to a "change in control of the Company" (as defined in
Section 2(i) hereof) (or is deemed to be terminated subsequent to a change in
control of the Company in accordance with the second sentence of Section 3
hereof) under the circumstances described below. Amd Date
1. Term of Agreement. Subject to the provisions of Section 13 hereof,
this Agreement shall commence on the date hereof and shall continue in effect
through June 30, 2001; provided, however, that commencing on July 1, 2000 and
each July 1 thereafter, the term of this Agreement shall automatically be
extended for one additional year unless, not later than March 31 of such year,
the Company shall have given notice that it does not wish to extend this
Agreement (provided that no such notice may be given during the pendency of or
within two years following a potential change in control of the Company, as
defined in Section 2(ii) hereof); provided, further, if a change in control of
the Company shall have occurred during the original or extended
<PAGE> 16
term of this Agreement, this Agreement shall continue in effect for a period of
twenty-four (24) months beyond the month in which such change in control
occurred.
2. Change in Control; Potential Change in Control. (i) Except as
provided in the second sentence of Section 3 hereof, no benefits shall be
payable hereunder unless there shall have been a change in control of the
Company, as set forth below. For purposes of this Agreement, a "change in
control of the Company" shall mean a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not the Company is in fact required to comply
therewith; provided, that, without limitation, such a change in control shall be
deemed to have occurred if:
(A) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than the Company, any trustee or
other fiduciary holding securities under an employee benefit plan of
the Company or a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 30% or more of
the combined voting power of the Company's then outstanding securities;
(B) during any period of twenty-four (24) consecutive months
(not including any period prior to the date of this Agreement),
individuals who at the beginning of such period constitute the Board
and any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction
described in paragraphs (A), (C) or (D) of this Section 2(i)) whose
election by the Board or nomination for election by the stockholders of
the Company was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election
was previously so approved, cease for any reason to constitute a
majority thereof; or
(C) there is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company with any
other corporation, other than (i) a merger or consolidation resulting
in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at
least 65% of the combined voting securities of the Company or such
surviving entity or any parent thereof outstanding immediately after
such merger or consolidation or (ii) a merger or consolidation effected
to implement a recapitalization of the Company (or similar transaction)
in which no "person" (as hereinabove defined) acquires 30% or more of
the combined voting power of the Company's then outstanding securities;
or
(D) the stockholders of the Company approve a plan of complete
liquidation of
<PAGE> 17
the Company or there is consummated the sale or disposition by the
Company of all or substantially all of the Company's assets.
(ii) For purposes of this Agreement, a "potential
change in control of the Company" shall be deemed to have
occurred if:
(A) the Company enters into an agreement, the consummation of
which would result in the occurrence of a change in control of the
Company;
(B) any person (as hereinabove defined), including the
Company, publicly announces an intention to take or consider taking
actions which if consummated would constitute a change in control of
the Company;
(C) any person (as hereinabove defined), other than the
Company, any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a corporation owned, directly
or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company (a) is or
becomes the beneficial owner, (b) discloses directly or indirectly to
the Company or publicly a plan or intention to become the beneficial
owner, or (c) makes a filing under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, with respect to securities to
become the beneficial owner, directly or indirectly, of securities
representing 9.9% or more of the combined voting power of the
outstanding voting securities of the Company; or
(D) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a potential change in control of the
Company has occurred.
(iii) You agree that, subject to the terms and
conditions of this Agreement, in the event of a potential
change in control of the Company, you will remain in the
employ of the Company until the earliest of (a) a date which
is one (1) year from the occurrence of such potential change
in control of the Company, (b) the termination by you of your
employment after you attain "normal retirement age" under the
provisions of the TECO Energy Group Retirement Plan or any
successor thereto (the "Retirement Plan") or by reason of
Disability as defined in Section 3(i), or (c) the date of the
occurrence of a change in control of the Company.
3. Termination Following Change in Control. If your employment is
terminated following a change in control of the Company and during the term of
this Agreement (as determined under Section 1 hereof), other than (A) by the
Company for Cause, (B) by reason of death or Disability, or (C) by you without
Good Reason, then the Company shall pay you the amounts, and provide you the
benefits, described in Section 4(iii) hereof. For purposes of this Agreement,
your employment shall be deemed to have been terminated following a change in
control of the Company by the Company without Cause or by you with Good Reason,
if (i) your employment is terminated by the Company without Cause prior to a
change in control of the Company (whether or not such a
<PAGE> 18
change in control ever occurs) and such termination was at the request or
direction of a "person" (as hereinabove defined) who has entered into an
agreement with the Company the consummation of which would constitute a change
in control of the Company, (ii) you terminate your employment for Good Reason
prior to a change in control of the Company (whether or not such a change in
control ever occurs) and the circumstance or event which constitutes Good Reason
occurs at the request or direction of such person, or (iii) your employment is
terminated by the Company without Cause or by you for Good Reason and such
termination or the circumstance or event which constitutes Good Reason is
otherwise in connection with or in anticipation of a change in control of the
Company (whether or not such a change in control ever occurs).
(i) Disability. If, as a result of your incapacity
due to physical or mental illness, you shall have been absent
from the full-time performance of your duties with the Company
for six (6) consecutive months, and within thirty (30) days
after written notice of termination is given you shall not
have returned to the full-time performance of your duties,
your employment may be terminated for "Disability".
(ii) Cause. Termination by the Company of your
employment for "Cause" shall mean termination upon (A) the
willful and continued failure by you to substantially perform
your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental
illness or any such actual or anticipated failure after the
issuance of a Notice of Termination by you for Good Reason, as
defined in Subsections 3(iv) and 3(iii), respectively) after a
written demand for substantial performance is delivered to you
by the Board, which demand specifically identifies the manner
in which the Board believes that you have not substantially
performed your duties, or (B) the willful engaging by you in
conduct which is demonstrably and materially injurious to the
Company, monetarily or otherwise. For purposes of this
Subsection, no act, or failure to act, on your part shall be
deemed "willful" unless done, or omitted to be done, by you
not in good faith and without reasonable belief that your
action or omission was in the best interest of the Company.
Notwithstanding the foregoing, you shall not be deemed to have
been terminated for Cause unless and until there shall have
been delivered to you a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters (3/4) of
the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice to
you and an opportunity for you, together with your counsel, to
be heard before the Board), finding that in the good faith
opinion of the Board you were guilty of conduct set forth
above in this Subsection and specifying the particulars
thereof in detail.
(iii) Good Reason. "Good Reason" for termination by
you of your employment shall mean the occurrence (without your
express written consent) after any change in control of the
Company, or prior to a change in control of the Company under
the circumstances described in the second sentence of Section
3 hereof (treating all references in paragraphs (A) through
(H) below to a "change in control of the Company" as
references to a "potential change in control of the Company"),
of any one of the following acts by the Company, or failures
by the Company to act:
(A) the assignment to you of any duties inconsistent (except
in the nature of a
<PAGE> 19
promotion) with the position in the Company that you held immediately
prior to the change in control of the Company or a substantial adverse
alteration in the nature or status of your position or responsibilities
or the conditions of your employment from those in effect immediately
prior to the change in control of the Company;
(B) a reduction by the Company in your annual base salary as
in effect on the date hereof or as the same may be increased from time
to time;
(C) the Company's requiring you to be based more than
twenty-five (25) miles from the Company's offices at which you were
principally employed immediately prior to the date of the change in
control of the Company except for required travel on the Company's
business to an extent substantially consistent with your present
business travel obligations;
(D) the failure by the Company to pay to you any portion of
your current compensation or compensation under any deferred
compensation program of the Company, within seven (7) days of the date
such compensation is due;
(E) the failure by the Company to continue in effect any
material compensation or benefit plan in which you participate
immediately prior to the change in control of the Company unless an
equitable arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the failure by the
Company to continue your participation therein (or in such substitute
or alternative plan) on a basis not materially less favorable, both in
terms of the amount of benefits provided and the level of your
participation relative to other participants, than existed at the time
of the change in control;
(F) the failure by the Company to continue to provide you with
benefits substantially similar to those enjoyed by you under any of the
Company's pension, life insurance, medical, health and accident, or
disability plans in which you were participating at the time of the
change in control of the Company, the taking of any action by the
Company which would directly or indirectly materially reduce any of
such benefits or deprive you of any material fringe benefit enjoyed by
you at the time of the change in control of the Company, or the failure
by the Company to provide you with the number of paid vacation days to
which you are entitled on the basis of your years of service with the
Company in accordance with the Company's normal vacation policy in
effect at the time of the change in control of the Company;
(G) the failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Section 6 hereof; or
(H) any purported termination of your employment which is not
effected
<PAGE> 20
pursuant to a Notice of Termination satisfying the requirements of
Subsection (iv) below (and, if applicable, the requirements of
Subsection (ii) above), which purported termination shall not be
effective for purposes of this Agreement.
Your right to terminate your employment pursuant to this Subsection shall not be
affected by your incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder.
(iv) Notice of Termination. Any purported termination
of your employment by the Company or by you shall be
communicated by written Notice of Termination to the other
party hereto in accordance with Section 7 hereof. For purposes
of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision
in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the
provision so indicated.
(v) Date of Termination, Etc. "Date of Termination"
shall mean (A) if your employment is terminated for
Disability, thirty (30) days after Notice of Termination is
given (provided that you shall not have returned to the
full-time performance of your duties during such thirty (30)
day period), and (B) if your employment is terminated pursuant
to Subsection (ii) or (iii) above or for any other reason
(other than Disability), the date specified in the Notice of
Termination (which, in the case of a termination pursuant to
Subsection (ii) above shall not be less than thirty (30) days,
and in the case of a termination pursuant to Subsection (iii)
above shall not be less than fifteen (15) nor more than sixty
(60) days, respectively, from the date such Notice of
Termination is given); provided that if within fifteen (15)
days after any Notice of Termination is given, or, if later,
prior to the Date of Termination (as determined without regard
to this proviso), the party receiving such Notice of
Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be
the date on which the dispute is finally determined, either by
mutual written agreement of the parties or by a binding
arbitration award; and provided further that the Date of
Termination shall be extended by a notice of dispute only if
such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable
diligence. Notwithstanding the pendency of any such dispute,
the Company will continue to pay you your full compensation in
effect when the notice giving rise to the dispute was given
(including, but not limited to, base salary) and continue you
as a participant in all compensation, benefit and insurance
plans in which you were participating when the notice giving
rise to the dispute was given, until the dispute is finally
resolved in accordance with this Subsection. Amounts paid
under this Subsection are in addition to all other amounts due
under this Agreement and shall not be offset against or reduce
any other amounts due under this Agreement.
4. Compensation Upon Termination or During Disability. Following a
change in control of the Company, as defined by Subsection 2(i), or prior to a
change in control of the Company under the circumstances described in the second
sentence of Section 3 hereof, upon
<PAGE> 21
termination of your employment or during a period of disability you shall be
entitled to the following benefits:
(i) During any period that you fail to perform your
full-time duties with the Company as a result of incapacity
due to physical or mental illness, you shall continue to
receive your base salary at the rate in effect at the
commencement of any such period, together with all
compensation payable to you under the Company's disability
plan or program or other similar plan during such period,
until this Agreement is terminated pursuant to Section 3(i)
hereof. Thereafter, or in the event your employment shall be
terminated by reason of your death, your benefits shall be
determined under the Company's retirement, insurance and other
compensation programs then in effect in accordance with the
terms of such programs.
(ii) If your employment shall be terminated by the
Company for Cause or by you other than for Good Reason, the
Company shall pay you your full base salary through the Date
of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are
entitled under any compensation plan of the Company at the
time such payments are due, and the Company shall have no
further obligations to you under this Agreement.
(iii) If your employment by the Company terminates in
a manner entitling you to benefits under this Section pursuant
to Section 3 hereof, then you shall be entitled to the
benefits provided below:
(A) the Company shall pay you your full base salary through
the Date of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are entitled
under any compensation plan of the Company, at the time such payments
are due, except as otherwise provided below;
(B) in lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as
severance pay to you a lump sum severance payment (together with the
payments provided in paragraphs (D), (E) and (F) below, the "Severance
Payments") equal to two (2) times the sum of (1) the greater of (a)
your annual rate of base salary in effect on the Date of Termination or
(b) your annual rate of base salary in effect immediately prior to the
change in control of the Company and (2) the greatest of (a) the
average of the last two annual bonuses (annualized in the case of any
bonus paid with respect to a partial year) paid to you preceding the
Date of Termination, (b) the average of the last two annual bonuses
(annualized in the case of any bonus paid with respect to a partial
year) paid to you preceding such change in control, (c) the most recent
annual bonus (annualized in the case of any bonus paid with respect to
a partial year) paid to you preceding the Date of Termination, or (d)
the most recent annual bonus (annualized in the case of any bonus paid
with respect to a partial year) paid to you preceding such change in
control, or (e) in the event that on the date of the change in control
of the the Company you have been employed by the Company for less than
two
<PAGE> 22
years and have not yet been considered for receipt of an annual bonus,
your annual incentive target award in effect immediately prior to such
change in control;
(C) the Company shall also pay to you, within five (5) days
after any such fees or expenses are incurred, all legal fees and
expenses incurred by you as a result of or in connection with such
termination, including all such fees and expenses, if any, incurred in
contesting or disputing any such termination or in seeking to obtain or
enforce any right or benefit provided by this Agreement (other than any
such fees or expenses incurred in connection with any such claim which
is determined by arbitration, in accordance with Section 11 of this
Agreement, to be frivolous) or in connection with any tax audit or
proceeding to the extent attributable to the application of section
4999 of the Code to any payment or benefit provided hereunder;
(D) for a twenty-four (24) month period after such
termination, the Company shall arrange to provide you with life,
disability, accident and health insurance benefits substantially
similar to those which you are receiving immediately prior to the
Notice of Termination. Benefits otherwise receivable by you pursuant to
this Subsection 4(iii)(D) shall be reduced to the extent comparable
benefits are actually received by you from a subsequent employer during
the twenty-four (24) month period following your termination, and any
such benefits actually received by you shall be reported to the
Company;
(E) in addition to the retirement benefits to which you are
entitled under the Retirement Plan, any supplemental retirement or
excess benefit plan maintained by TECO or any of its subsidiaries or
any successor plans thereto (hereinafter collectively referred to as
the "Pension Plans"), the Company shall pay you in cash a lump sum
equal to the excess of (a) the actuarial equivalent (computed at your
date of termination) of the retirement pension (taking into account any
early retirement subsidies and post-retirement surviving spouse
benefits associated therewith and determined as an annuity payable in
the normal form under the Pension Plans commencing at your normal
retirement age under the Retirement Plan or any earlier date, but in no
event earlier than the second anniversary of the Date of Termination,
whichever annuity the actuarial equivalent of which is greatest) which
you would have accrued under the terms of the Pension Plans (without
regard to the limitations imposed by Section 401(a)(17) of the Internal
Revenue Code of 1986, as amended (the "Code"), or any amendment to the
Pension Plans made subsequent to a change in control of the Company and
on or prior to the Date of Termination, which amendment adversely
affects in any manner the computation of retirement benefits
thereunder), determined as if you were fully vested thereunder and had
continued to be a participant in each of the Pension Plans for
twenty-four (24) additional months and as if you had accumulated
twenty-four (24) additional months of compensation (for purposes of
determining your pension benefits thereunder), each in an amount equal
to the sum of the amounts determined under clauses (1) and (2) of
Section 4(iii)(B) hereof over (b) the actuarial equivalent (computed at
your date of termination) of the vested retirement pension (taking into
account any early retirement subsidies and post-retirement surviving
<PAGE> 23
spouse benefits associated therewith and determined as an annuity
payable in the normal form under the Pension Plans commencing at your
normal retirement age under the Retirement Plan or any earlier date,
but in no event earlier than the Date of Termination, whichever annuity
the actuarial equivalent of which is greatest) which you had then
accrued pursuant to the provisions of the Pension Plans. For purposes
of this Subsection, "actuarial equivalent" shall be determined using
the same actuarial assumptions utilized in determining the amount of
alternate forms of benefits under the Retirement Plan immediately prior
to the change in control of the Company; and
(F) should you move your residence in order to pursue other
business opportunities within one (1) year of the Date of Termination,
the Company will pay you, within five (5) days after any such expenses
are incurred, an amount equal to the expenses incurred by you in
connection with such relocation (including expenses incurred in selling
your home to the extent such expenses were customarily reimbursed by
the Company to transferred executives prior to the change in control of
the Company) and which are not reimbursed by another employer.
(iv) Except as otherwise specifically provided in
paragraph (C) and (F) thereof, the payments provided for in
Subsection (iii) shall be made not later than the fifth day
following the Date of Termination; provided, however, that if
the amounts of such payments cannot be finally determined on
or before such day, the Company shall pay to you on such day
an estimate, as determined in good faith by the Company, of
the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the rate
provided in section 1274(b)(2)(B) of the Code) as soon as the
amount thereof can be determined but in no event later than
the thirtieth day after the Date of Termination. In the event
that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall
constitute a loan by the Company to you payable on the fifth
day after demand therefor by the Company (together with
interest at the rate provided in section 1274(b)(2)(B) of the
Code).
(v) You shall not be required to mitigate the amount
of any payment provided for in this Section 4 by seeking other
employment or otherwise, nor, except as specifically provided
in Sections 4 (iii)(D) and (F) above, shall the amount of any
payment or benefit provided for in this Section 4 be reduced
by any compensation earned by you as the result of employment
by another employer, by retirement benefits, by offset against
any amount claimed to be owed by you to the Company, or
otherwise.
5. Limit on Severance Payments. In the event that (i) any payment or
benefit received or to be received by you in connection with a change in control
of the Company or the termination of your employment (whether pursuant to the
terms of this Agreement or any other plan, arrangement or agreement with the
Company, any person whose actions result in a change in control or any person
affiliated with the Company or such person) (collectively with the Severance
Payments, "Total Payments") would not be deductible (in whole or part) as a
result of section 280G of the Code by the Company, an affiliate or other person
making such payment or providing
<PAGE> 24
such benefit and (ii) the net amount retained by you, after paying the excise
tax imposed by section 4999 of the Code and any federal, state and local income
and employment taxes on the Total Payments, would not exceed the net amount that
would have been retained by you after the reduction of the Severance Payments as
set forth below and the payment of any federal, state and local income and
employment taxes on the Total Payments as so reduced, the Severance Payments
shall be reduced until no portion of the Total Payments is not deductible, or
the Severance Payments are reduced to zero. For purposes of this limitation (a)
no portion of the Total Payments the receipt or enjoyment of which you shall
have effectively waived in writing prior to the date of payment of the Severance
Payments shall be taken into account, (b) no portion of the Total Payments shall
be taken into account which in the opinion of tax counsel selected by the
Company's independent auditors and acceptable to you does not constitute a
"parachute payment" within the meaning of section 280G(b)(2) of the Code, (c)
the Severance Payments shall be reduced only to the extent necessary so that the
Total Payments (other than those referred to in clauses (a) or (b)) in their
entirety constitute reasonable compensation for services actually rendered
within the meaning of section 280G(b)(4) of the Code or are otherwise not
subject to disallowance as deductions, in the opinion of the tax counsel
referred to in clause (b); and (d) the value of any non-cash benefit or any
deferred payment or benefit included in the Total Payments shall be determined
by the Company's independent auditors in accordance with the principles of
sections 280G(d)(3) and (4) of the Code. For purposes of determining the income
taxes on the Total Payments, you shall be deemed to pay federal income tax at
the highest marginal rate of federal income taxation in the calendar year in
which the Total Payments are to be made and local income taxes at the highest
marginal rate of taxation in the state and locality of your residence on the
Date of Termination, net of the maximum reduction in federal income taxes which
could be obtained from deduction of such state and local taxes.
6. Successors; Binding Agreement. (i) The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle you to compensation from the
Company in the same amount and on the same terms as you would be entitled to
hereunder if you terminate your employment for Good Reason following a change in
control of the Company, except that for purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be deemed the Date
of Termination. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
(ii) This Agreement shall inure to the benefit of and
be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued
to live, all such amounts, unless otherwise provided herein,
shall be paid in
<PAGE> 25
accordance with the terms of this Agreement to your devisee,
legatee or other designee or, if there is no such designee, to
your estate.
7. Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the Board
with a copy to the Secretary of the Company, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notices of change of address shall be effective only upon receipt.
8. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by you and such officer as may be specifically designated
by the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Florida, without giving effect to the conflicts of
law principles thereof. All references to sections of the Exchange Act or the
Code shall be deemed also to refer to any successor provisions to such sections.
Any payments provided for hereunder shall be paid net of any applicable
withholding required under federal, state or local law. The obligations of the
Company under Section 4 shall survive the expiration of the term of this
Agreement.
9. Validity. The invalidity or unenforceability or any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
10. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
11. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration
conducted before a panel of three arbitrators in the State of Florida in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that you shall be entitled to seek specific
performance of your right to be paid until the Date of Termination during the
pendency of any dispute or controversy arising under or in connection with this
Agreement.
<PAGE> 26
12. Entire Agreement. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and during
the term of the Agreement supersedes the provisions of all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or representative
of any party hereto with respect to the subject matter hereof.
13. Effective Date; Pooling. This Agreement shall become effective as
of the date set forth above. In the event that the Company is party to an
agreement with respect to a transaction that is intended to qualify for "pooling
of interests" accounting treatment, then (A) this Agreement shall, to the extent
practicable, be interpreted so as to permit such accounting treatment, and (B)
to the extent that the application of clause (A) of this Section 13 does not
preserve the availability of such accounting treatment, then the Company shall
have the unilateral right to amend this Agreement to the extent necessary to
enable the Company's accountants to issue a "pooling" opinion with respect to
such transaction, and any such amendment shall be effective as of the date
hereof.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
TECO Energy, Inc.
By /s/
-------------------------------------
Name: Roger A. Dunn
Title: Vice President-Human Resources
Agreed to this _______ day
of __________________, 2000.
____________________________
Signature
<PAGE> 27
PRIVILEGED AND CONFIDENTIAL
Date
Name
Address 1
Address 2
Dear First Name:
TECO Energy, Inc. (the "Company") considers it essential to the best
interests of its stockholders to foster the continuous employment of key
management personnel. In this connection, the Board of Directors of the Company
(the "Board") recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of key management
personnel to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Company.
In order to induce you to remain in the employ of the Company and in
consideration of your agreement set forth in Subsection 2(iii) hereof, the
Company agrees that you shall receive the severance benefits set forth in this
letter agreement (the "Agreement") in the event your employment with the Company
is terminated subsequent to a "change in control of the Company" (as defined in
Section 2(i) hereof) (or is deemed to be terminated subsequent to a change in
control of the Company in accordance with the second sentence of Section 3
hereof) under the circumstances described below. Amd Date
1. Term of Agreement. Subject to the provisions of Section 13 hereof,
this Agreement shall commence on the date hereof and shall continue in effect
through June 30, 2001; provided, however, that commencing on July 1, 2000 and
each July 1 thereafter, the term of this Agreement shall automatically be
extended for one additional year unless, not later than March 31 of such year,
the Company shall have given notice that it does not wish to extend this
Agreement (provided that no such notice may be given during the pendency of or
within two years following a potential change in control of the Company, as
defined in Section 2(ii) hereof); provided, further, if a change in control of
the Company shall have occurred during the original or extended term of this
Agreement, this Agreement shall continue in effect for a period of twenty-four
(24) months beyond the month in which such change in control occurred.
<PAGE> 28
2. Change in Control; Potential Change in Control. (i) Except as
provided in the second sentence of Section 3 hereof, no benefits shall be
payable hereunder unless there shall have been a change in control of the
Company, as set forth below. For purposes of this Agreement, a "change in
control of the Company" shall mean a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not the Company is in fact required to comply
therewith; provided, that, without limitation, such a change in control shall be
deemed to have occurred if:
(A) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than the Company, any trustee or
other fiduciary holding securities under an employee benefit plan of
the Company or a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 30% or more of
the combined voting power of the Company's then outstanding securities;
(B) during any period of twenty-four (24) consecutive months
(not including any period prior to the date of this Agreement),
individuals who at the beginning of such period constitute the Board
and any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction
described in paragraphs (A), (C) or (D) of this Section 2(i)) whose
election by the Board or nomination for election by the stockholders of
the Company was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election
was previously so approved, cease for any reason to constitute a
majority thereof; or
(C) there is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company with any
other corporation, other than (i) a merger or consolidation resulting
in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at
least 65% of the combined voting securities of the Company or such
surviving entity or any parent thereof outstanding immediately after
such merger or consolidation or (ii) a merger or consolidation effected
to implement a recapitalization of the Company (or similar transaction)
in which no "person" (as hereinabove defined) acquires 30% or more of
the combined voting power of the Company's then outstanding securities;
or
(D) the stockholders of the Company approve a plan of complete
liquidation of the Company or there is consummated the sale or
disposition by the Company of all or substantially all of the Company's
assets.
<PAGE> 29
(ii) For purposes of this Agreement, a "potential
change in control of the Company" shall be deemed to have
occurred if:
(A) the Company enters into an agreement, the consummation of
which would result in the occurrence of a change in control of the
Company;
(B) any person (as hereinabove defined), including the
Company, publicly announces an intention to take or consider taking
actions which if consummated would constitute a change in control of
the Company;
(C) any person (as hereinabove defined), other than the
Company, any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a corporation owned, directly
or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company (a) is or
becomes the beneficial owner, (b) discloses directly or indirectly to
the Company or publicly a plan or intention to become the beneficial
owner, or (c) makes a filing under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, with respect to securities to
become the beneficial owner, directly or indirectly, of securities
representing 9.9% or more of the combined voting power of the
outstanding voting securities of the Company; or
(D) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a potential change in control of the
Company has occurred.
(iii) You agree that, subject to the terms and
conditions of this Agreement, in the event of a potential
change in control of the Company, you will remain in the
employ of the Company until the earliest of (a) a date which
is one (1) year from the occurrence of such potential change
in control of the Company, (b) the termination by you of your
employment after you attain "normal retirement age" under the
provisions of the TECO Energy Group Retirement Plan or any
successor thereto (the " Retirement Plan") or by reason of
Disability as defined in Section 3(i), or (c) the date of the
occurrence of a change in control of the Company.
3. Termination Following Change in Control. If your employment is
terminated following a change in control of the Company and during the term of
this Agreement (as determined under Section 1 hereof), other than (A) by the
Company for Cause, (B) by reason of death or Disability, or (C) by you without
Good Reason, then the Company shall pay you the amounts, and provide you the
benefits, described in Section 4(iii) hereof. For purposes of this Agreement,
your employment shall be deemed to have been terminated following a change in
control of the Company by the Company without Cause or by you with Good Reason,
if (i) your employment is terminated by the Company without Cause prior to a
change in control of the Company (whether or not such a change in control ever
occurs) and such termination was at the request or direction of a "person" (as
hereinabove defined) who has entered into an agreement with the Company the
consummation of which would constitute a change in control of the Company, (ii)
you terminate your employment for
<PAGE> 30
Good Reason prior to a change in control of the Company (whether or not such a
change in control ever occurs) and the circumstance or event which constitutes
Good Reason occurs at the request or direction of such person, or (iii) your
employment is terminated by the Company without Cause or by you for Good Reason
and such termination or the circumstance or event which constitutes Good Reason
is otherwise in connection with or in anticipation of a change in control of the
Company (whether or not such a change in control ever occurs).
(i) Disability. If, as a result of your incapacity
due to physical or mental illness, you shall have been absent
from the full-time performance of your duties with the Company
for six (6) consecutive months, and within thirty (30) days
after written notice of termination is given you shall not
have returned to the full-time performance of your duties,
your employment may be terminated for "Disability".
(ii) Cause. Termination by the Company of your
employment for "Cause" shall mean termination upon (A) the
willful and continued failure by you to substantially perform
your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental
illness or any such actual or anticipated failure after the
issuance of a Notice of Termination by you for Good Reason, as
defined in Subsections 3(iv) and 3(iii), respectively) after a
written demand for substantial performance is delivered to you
by the Board, which demand specifically identifies the manner
in which the Board believes that you have not substantially
performed your duties, or (B) the willful engaging by you in
conduct which is demonstrably and materially injurious to the
Company, monetarily or otherwise. For purposes of this
Subsection, no act, or failure to act, on your part shall be
deemed "willful" unless done, or omitted to be done, by you
not in good faith and without reasonable belief that your
action or omission was in the best interest of the Company.
Notwithstanding the foregoing, you shall not be deemed to have
been terminated for Cause unless and until there shall have
been delivered to you a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters (3/4) of
the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice to
you and an opportunity for you, together with your counsel, to
be heard before the Board), finding that in the good faith
opinion of the Board you were guilty of conduct set forth
above in this Subsection and specifying the particulars
thereof in detail.
(iii) Good Reason. "Good Reason" for termination by
you of your employment shall mean the occurrence (without your
express written consent) after any change in control of the
Company, or prior to a change in control of the Company under
the circumstances described in the second sentence of Section
3 hereof (treating all references in paragraphs (A) through
(H) below to a "change in control of the Company" as
references to a "potential change in control of the Company"),
of any one of the following acts by the Company, or failures
by the Company to act:
(A) the assignment to you of any duties inconsistent (except
in the nature of a promotion) with the position in the Company that you
held immediately prior to the change in control of the Company or a
substantial adverse alteration in the nature or status of your position
or responsibilities or the conditions of your employment from those in
effect
<PAGE> 31
immediately prior to the change in control of the Company;
(B) a reduction by the Company in your annual base salary as
in effect on the date hereof or as the same may be increased from time
to time;
(C) the Company's requiring you to be based more than
twenty-five (25) miles from the Company's offices at which you were
principally employed immediately prior to the date of the change in
control of the Company except for required travel on the Company's
business to an extent substantially consistent with your present
business travel obligations;
(D) the failure by the Company to pay to you any portion of
your current compensation or compensation under any deferred
compensation program of the Company, within seven (7) days of the date
such compensation is due;
(E) the failure by the Company to continue in effect any
material compensation or benefit plan in which you participate
immediately prior to the change in control of the Company unless an
equitable arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the failure by the
Company to continue your participation therein (or in such substitute
or alternative plan) on a basis not materially less favorable, both in
terms of the amount of benefits provided and the level of your
participation relative to other participants, than existed at the time
of the change in control;
(F) the failure by the Company to continue to provide you with
benefits substantially similar to those enjoyed by you under any of the
Company's pension, life insurance, medical, health and accident, or
disability plans in which you were participating at the time of the
change in control of the Company, the taking of any action by the
Company which would directly or indirectly materially reduce any of
such benefits or deprive you of any material fringe benefit enjoyed by
you at the time of the change in control of the Company, or the failure
by the Company to provide you with the number of paid vacation days to
which you are entitled on the basis of your years of service with the
Company in accordance with the Company's normal vacation policy in
effect at the time of the change in control of the Company;
(G) the failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Section 6 hereof; or
(H) any purported termination of your employment which is not
effected pursuant to a Notice of Termination satisfying the
requirements of Subsection (iv) below (and, if applicable, the
requirements of Subsection (ii) above), which purported termination
shall not be effective for purposes of this Agreement.
<PAGE> 32
Your right to terminate your employment pursuant to this Subsection
shall not be affected by your incapacity due to physical or mental
illness. Your continued employment shall not constitute consent to, or
a waiver of rights with respect to, any circumstance constituting Good
Reason hereunder.
(iv) Notice of Termination. Any purported termination
of your employment by the Company or by you shall be
communicated by written Notice of Termination to the other
party hereto in accordance with Section 7 hereof. For purposes
of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision
in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the
provision so indicated.
(v) Date of Termination, Etc. "Date of Termination"
shall mean (A) if your employment is terminated for
Disability, thirty (30) days after Notice of Termination is
given (provided that you shall not have returned to the
full-time performance of your duties during such thirty (30)
day period), and (B) if your employment is terminated pursuant
to Subsection (ii) or (iii) above or for any other reason
(other than Disability), the date specified in the Notice of
Termination (which, in the case of a termination pursuant to
Subsection (ii) above shall not be less than thirty (30) days,
and in the case of a termination pursuant to Subsection (iii)
above shall not be less than fifteen (15) nor more than sixty
(60) days, respectively, from the date such Notice of
Termination is given); provided that if within fifteen (15)
days after any Notice of Termination is given, or, if later,
prior to the Date of Termination (as determined without regard
to this proviso), the party receiving such Notice of
Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be
the date on which the dispute is finally determined, either by
mutual written agreement of the parties or by a binding
arbitration award; and provided further that the Date of
Termination shall be extended by a notice of dispute only if
such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable
diligence. Notwithstanding the pendency of any such dispute,
the Company will continue to pay you your full compensation in
effect when the notice giving rise to the dispute was given
(including, but not limited to, base salary) and continue you
as a participant in all compensation, benefit and insurance
plans in which you were participating when the notice giving
rise to the dispute was given, until the dispute is finally
resolved in accordance with this Subsection. Amounts paid
under this Subsection are in addition to all other amounts due
under this Agreement and shall not be offset against or reduce
any other amounts due under this Agreement.
4. Compensation Upon Termination or During Disability. Following a
change in control of the Company, as defined by Subsection 2(i), or prior to a
change in control of the Company under the circumstances described in the second
sentence of Section 3 hereof, upon termination of your employment or during a
period of disability you shall be entitled to the following benefits:
(i) During any period that you fail to perform your
full-time duties with the
<PAGE> 33
Company as a result of incapacity due to physical or mental
illness, you shall continue to receive your base salary at the
rate in effect at the commencement of any such period,
together with all compensation payable to you under the
Company's disability plan or program or other similar plan
during such period, until this Agreement is terminated
pursuant to Section 3(i) hereof. Thereafter, or in the event
your employment shall be terminated by reason of your death,
your benefits shall be determined under the Company's
retirement, insurance and other compensation programs then in
effect in accordance with the terms of such programs.
(ii) If your employment shall be terminated by the
Company for Cause or by you other than for Good Reason, the
Company shall pay you your full base salary through the Date
of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are
entitled under any compensation plan of the Company at the
time such payments are due, and the Company shall have no
further obligations to you under this Agreement.
(iii) If your employment by the Company terminates in
a manner entitling you to benefits under this Section pursuant
to Section 3 hereof, then you shall be entitled to the
benefits provided below:
(A) the Company shall pay you your full base salary through
the Date of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are entitled
under any compensation plan of the Company, at the time such payments
are due, except as otherwise provided below;
(B) in lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as
severance pay to you a lump sum severance payment (together with the
payments provided in paragraphs (D), (E) and (F) below, the "Severance
Payments") equal to two (2) times the sum of (1) the greater of (a)
your annual rate of base salary in effect on the Date of Termination or
(b) your annual rate of base salary in effect immediately prior to the
change in control of the Company and (2) the greatest of (a) the
average of the last two annual bonuses (annualized in the case of any
bonus paid with respect to a partial year) paid to you preceding the
Date of Termination, (b) the average of the last two annual bonuses
(annualized in the case of any bonus paid with respect to a partial
year) paid to you preceding such change in control, (c) the most recent
annual bonus (annualized in the case of any bonus paid with respect to
a partial year) paid to you preceding the Date of Termination, or (d)
the most recent annual bonus (annualized in the case of any bonus paid
with respect to a partial year) paid to you preceding such change in
control, or (e) in the event that on the date of the change in control
of the the Company you have been employed by the Company for less than
two years and have not yet been considered for receipt of an annual
bonus, your annual incentive target award in effect immediately prior
to such change in control;
(C) the Company shall also pay to you, within five (5) days
after any such fees
<PAGE> 34
or expenses are incurred, all legal fees and expenses incurred by you
as a result of or in connection with such termination, including all
such fees and expenses, if any, incurred in contesting or disputing any
such termination or in seeking to obtain or enforce any right or
benefit provided by this Agreement (other than any such fees or
expenses incurred in connection with any such claim which is determined
by arbitration, in accordance with Section 11 of this Agreement, to be
frivolous) or in connection with any tax audit or proceeding to the
extent attributable to the application of section 4999 of the Code to
any payment or benefit provided hereunder;
(D) for a twenty-four (24) month period after such
termination, the Company shall arrange to provide you with life,
disability, accident and health insurance benefits substantially
similar to those which you are receiving immediately prior to the
Notice of Termination. Benefits otherwise receivable by you pursuant to
this Subsection 4(iii)(D) shall be reduced to the extent comparable
benefits are actually received by you from a subsequent employer during
the twenty-four (24) month period following your termination, and any
such benefits actually received by you shall be reported to the
Company;
(E) in addition to the retirement benefits to which you are
entitled under the Retirement Plan, any supplemental retirement or
excess benefit plan maintained by TECO or any of its subsidiaries or
any successor plans thereto (hereinafter collectively referred to as
the "Pension Plans"), the Company shall pay you in cash a lump sum
equal to the excess of (a) the actuarial equivalent (computed at your
date of termination) of the retirement pension (taking into account any
early retirement subsidies and post-retirement surviving spouse
benefits associated therewith and determined as an annuity payable in
the normal form under the Pension Plans commencing at your normal
retirement age under the Retirement Plan or any earlier date, but in no
event earlier than the second anniversary of the Date of Termination,
whichever annuity the actuarial equivalent of which is greatest) which
you would have accrued under the terms of the Pension Plans (without
regard to the limitations imposed by Section 401(a)(17) of the Internal
Revenue Code of 1986, as amended (the "Code"), or any amendment to the
Pension Plans made subsequent to a change in control of the Company and
on or prior to the Date of Termination, which amendment adversely
affects in any manner the computation of retirement benefits
thereunder), determined as if you were fully vested thereunder and had
continued to be a participant in each of the Pension Plans for
twenty-four (24) additional months and as if you had accumulated
twenty-four (24) additional months of compensation (for purposes of
determining your pension benefits thereunder), each in an amount equal
to the sum of the amounts determined under clauses (1) and (2) of
Section 4(iii)(B) hereof over (b) the actuarial equivalent (computed at
your date of termination) of the vested retirement pension (taking into
account any early retirement subsidies and post-retirement surviving
spouse benefits associated therewith and determined as an annuity
payable in the normal form under the Pension Plans commencing at your
normal retirement age under the Retirement Plan or any earlier date,
but in no event earlier than the Date of Termination, whichever annuity
the actuarial equivalent of which is greatest) which you had then
<PAGE> 35
accrued pursuant to the provisions of the Pension Plans. For purposes
of this Subsection, "actuarial equivalent" shall be determined using
the same actuarial assumptions utilized in determining the amount of
alternate forms of benefits under the Retirement Plan immediately prior
to the change in control of the Company; and
(F) should you move your residence in order to pursue other
business opportunities within one (1) year of the Date of Termination,
the Company will pay you, within five (5) days after any such expenses
are incurred, an amount equal to the expenses incurred by you in
connection with such relocation (including expenses incurred in selling
your home to the extent such expenses were customarily reimbursed by
the Company to transferred executives prior to the change in control of
the Company) and which are not reimbursed by another employer.
(iv) Except as otherwise specifically provided in
paragraph (C) and (F) thereof, the payments provided for in
Subsection (iii) shall be made not later than the fifth day
following the Date of Termination; provided, however, that if
the amounts of such payments cannot be finally determined on
or before such day, the Company shall pay to you on such day
an estimate, as determined in good faith by the Company, of
the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the rate
provided in section 1274(b)(2)(B) of the Code) as soon as the
amount thereof can be determined but in no event later than
the thirtieth day after the Date of Termination. In the event
that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall
constitute a loan by the Company to you payable on the fifth
day after demand therefor by the Company (together with
interest at the rate provided in section 1274(b)(2)(B) of the
Code).
(v) You shall not be required to mitigate the amount
of any payment provided for in this Section 4 by seeking other
employment or otherwise, nor, except as specifically provided
in Sections 4 (iii)(D) and (F) above, shall the amount of any
payment or benefit provided for in this Section 4 be reduced
by any compensation earned by you as the result of employment
by another employer, by retirement benefits, by offset against
any amount claimed to be owed by you to the Company, or
otherwise.
5. Limit on Severance Payments. In the event that any payment or
benefit received or to be received by you in connection with a change in control
of the Company or the termination of your employment (whether pursuant to the
terms of this Agreement or any other plan, arrangement or agreement with the
Company, any person whose actions result in a change in control or any person
affiliated with the Company or such person) (collectively with the Severance
Payments, "Total Payments") would not be deductible (in whole or part) as a
result of section 280G of the Code by the Company, an affiliate or other person
making such payment or providing such benefit the Severance Payments shall be
reduced until no portion of the Total Payments is not deductible, or the
Severance Payments are reduced to zero. For purposes of this limitation (a) no
portion of the Total Payments the receipt or enjoyment of which you shall have
effectively waived in writing prior to the date of payment of the Severance
Payments shall be taken into
<PAGE> 36
account, (b) no portion of the Total Payments shall be taken into account which
in the opinion of tax counsel selected by the Company's independent auditors and
acceptable to you does not constitute a "parachute payment" within the meaning
of section 280G(b)(2) of the Code, (c) the Severance Payments shall be reduced
only to the extent necessary so that the Total Payments (other than those
referred to in clauses (a) or (b)) in their entirety constitute reasonable
compensation for services actually rendered within the meaning of section
280G(b)(4) of the Code or are otherwise not subject to disallowance as
deductions, in the opinion of the tax counsel referred to in clause (b); and (d)
the value of any non-cash benefit or any deferred payment or benefit included in
the Total Payments shall be determined by the Company's independent auditors in
accordance with the principles of sections 280G(d)(3) and (4) of the Code.
6. Successors; Binding Agreement. (i) The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle you to compensation from the
Company in the same amount and on the same terms as you would be entitled to
hereunder if you terminate your employment for Good Reason following a change in
control of the Company, except that for purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be deemed the Date
of Termination. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
(ii) This Agreement shall inure to the benefit of and
be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued
to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement
to your devisee, legatee or other designee or, if there is no
such designee, to your estate.
7. Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the Board
with a copy to the Secretary of the Company, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notices of change of address shall be effective only upon receipt.
8. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by you
<PAGE> 37
and such officer as may be specifically designated by the Board. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Florida, without giving effect to the conflicts of law principles thereof. All
references to sections of the Exchange Act or the Code shall be deemed also to
refer to any successor provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding required under
federal, state or local law. The obligations of the Company under Section 4
shall survive the expiration of the term of this Agreement.
9. Validity. The invalidity or unenforceability or any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
10. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
11. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration
conducted before a panel of three arbitrators in the State of Florida in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that you shall be entitled to seek specific
performance of your right to be paid until the Date of Termination during the
pendency of any dispute or controversy arising under or in connection with this
Agreement.
12. Entire Agreement. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and during
the term of the Agreement supersedes the provisions of all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or representative
of any party hereto with respect to the subject matter hereof.
13. Effective Date; Pooling. This Agreement shall become effective as
of the date set forth above. In the event that the Company is party to an
agreement with respect to a transaction that is intended to qualify for "pooling
of interests" accounting treatment, then (A) this Agreement shall, to the extent
practicable, be interpreted so as to permit such accounting treatment, and (B)
to the extent that the application of clause (A) of this Section 13 does not
preserve the availability of such accounting treatment, then the Company shall
have the unilateral right to amend this Agreement to the extent necessary to
enable the Company's accountants to issue a "pooling" opinion with respect to
such transaction, and any such amendment shall be effective as of the date
hereof.
<PAGE> 38
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
TECO Energy, Inc.
By /s/
--------------------------------------
Name: Roger A. Dunn
Title: Vice President-Human Resources
Agreed to this _______ day
of __________________, 2000.
____________________________
Signature
<PAGE> 1
EXHIBIT 12
TAMPA ELECTRIC COMPANY
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the company's ratio of earnings to fixed
charges for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1999 1998 1997 1996(3) 1995(3)
-------- -------- ----- ------- -------
<S> <C> <C> <C> <C>
3.82x(1) 4.51x(2) 4.38x 4.40x 4.28x
</TABLE>
For the purposes of calculating these ratios, earnings consist of
income before income taxes and fixed charges. Fixed charges consist of interest
on indebtedness, amortization of debt premium, the interest component of rentals
and preferred stock dividend requirements.
(1) Includes the effect of one-time, pretax charges totaling $18.3 million. The
effect of these charges was to reduce the ratio of earnings to fixed
charges. Had these charges been excluded from the calculation, the ratio of
earnings to fixed charges would have been 4.61x for the year ended Dec. 31,
1999.
(2) Includes the effect of one-time, pretax charges totaling $16.9 million. The
effect of these charges was to reduce the ratio of earnings to fixed
charges. Had these charges been excluded from the calculation, the ratio of
earnings to fixed charges would have been 4.66x for the year ended Dec. 31,
1998.
(3) Amounts have been restated to reflect the merger of Peoples Gas System,
Inc., with and into Tampa Electric Company.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3 (File Nos. 33-61636 and 333-55873) of Tampa Electric
Company of our report dated Jan. 14, 2000, relating to the financial statements
and financial statement schedule, which appears in this Form 10-K.
PricewaterhouseCoopers LLP
Tampa, Florida
March 29, 2000
<PAGE> 1
Exhibit 24.1
TAMPA ELECTRIC COMPANY
POWER OF ATTORNEY
WHEREAS, the Board of Directors of Tampa Electric Company, a Florida
corporation, at a meeting held on January 19, 2000, authorized the officers and
Directors of the Corporation to execute an Annual Report on Form 10-K and
authorized the officers of the Company to file said Annual Report with the
Securities and Exchange Commission under the Securities Exchange Act of 1934 as
amended.
NOW, THEREFORE, each of the undersigned in his capacity as a Director
or officer or both, as the case may be, of said Company, does hereby appoint R.
D. Fagan, G. L. Gillette, and D. E. Schwartz, and each of them, severally, his
true and lawful attorneys or attorney to execute in his name, place and stead,
in his capacity as Director or officer or both, as the case may be, of said
Company, said Annual Report and any and all amendments thereto and all
instruments necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission. Each of said attorneys has the
power to act hereunder with or without the other of said attorneys and shall
have full power of substitution and resubstitution. Each of said attorneys shall
have full power and authority to do and perform in the name and on behalf of
each of the undersigned, in any and all capacities, every act whatsoever
requisite or necessary to be done in the premises, as fully and to all intents
and purposes as each of the undersigned might or could do in person, and each of
the undersigned hereby ratifies and approves the acts of said attorneys and each
of them.
IN TESTIMONY WHEREOF, the undersigned have executed this instrument on
the dates set forth below.
<TABLE>
<S> <C>
/s/ R. D. Fagan January 19, 2000
- -----------------------------------------------
R. D. FAGAN, CHAIRMAN OF THE BOARD,
DIRECTOR AND CHIEF EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
/s/ G. L. Gillette January 19, 2000
- -----------------------------------------------
G. L. GILLETTE, VICE PRESIDENT-FINANCE
AND CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)
/s/ P. L. Barringer January 21, 2000
- -----------------------------------------------
P. L. BARRINGER, VICE PRESIDENT-CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
/s/ C. D. Ausley January 19, 2000
- -----------------------------------------------
C. D. AUSLEY, DIRECTOR
/s/ S. L. Baldwin January 19, 2000
- -----------------------------------------------
S. L. BALDWIN, DIRECTOR
/s/ H. L. Culbreath January 19, 2000
- -----------------------------------------------
H. L. CULBREATH, DIRECTOR
/s/ J. L. Ferman, Jr. January 19, 2000
- -----------------------------------------------
J. L. FERMAN, JR., DIRECTOR
/s/ E. L. Flom January 19, 2000
- -----------------------------------------------
E. L. FLOM, DIRECTOR
/s/ L. Guinot, Jr. January 19, 2000
- -----------------------------------------------
L. GUINOT, JR., DIRECTOR
/s/ T. L. Rankin January 19, 2000
- -----------------------------------------------
T. L. RANKIN, DIRECTOR
/s/ W. P. Sovey January 19, 2000
- -----------------------------------------------
W. P. SOVEY, DIRECTOR
</TABLE>
<PAGE> 2
<TABLE>
Exhibit 24.1
<S> <C>
/s/ J. T. Touchton January 19, 2000
- -----------------------------------------------
J. T. TOUCHTON, DIRECTOR
/s/ J. A. Urquhart January 19, 2000
- -----------------------------------------------
J. A. URQUHART, DIRECTOR
/s/ J. O. Welch, Jr. January 19, 2000
- -----------------------------------------------
J. O. WELCH, JR., DIRECTOR
</TABLE>
<PAGE> 1
Exhibit 24.2
TAMPA ELECTRIC COMPANY
TRANSCRIPT FROM RECORDS OF BOARD OF DIRECTORS
JANUARY 19, 2000
********************************************************************************
RESOLVED, that the preparation and filing with the Securities
and Exchange Commission of an Annual Report on Form 10-K pursuant to
the Securities Exchange Act of 1934, as amended, including any required
exhibits and amendments thereto and containing the information required
by such form and any additional information as the officers of the
Company, with the advice of counsel, deem necessary, advisable or
appropriate (the "10-K"), are hereby authorized and approved; that the
Chief Executive Officer, the President and any Vice President of the
Company be, and each of them acting singly hereby is, authorized for
and in the name and on behalf of the Company to execute the 10-K and
cause it to be filed with the Securities and Exchange Commission; and
that the officers referred to above be, and each of them hereby is,
authorized to execute the 10-K through or by R. D. Fagan, G. L.
Gillette or D. E. Schwartz, or any of them, as duly authorized
attorneys pursuant to a Power of Attorney in such form as shall be
approved by the Company's general counsel.
********************************************************************************
I, D. E. Schwartz, hereby certify that I am Secretary of Tampa Electric
Company, a Florida corporation (the "Company"), and set forth above is a true
and correct copy of a certain resolution from the minutes of the meeting of the
Board of Directors of the Company convened and held on January 19, 2000, at
which meeting a quorum for the transaction of business was present and acting
throughout.
I further certify that the resolution set forth above has not been
altered, amended or rescinded and that the same is now in full force and effect.
EXECUTED this 24th day of March, 2000.
/s/ D. E. Schwartz
-----------------------
D. E. Schwartz
SECRETARY
TAMPA ELECTRIC COMPANY
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE TAMPA
ELECTRIC COMPANY BALANCE SHEETS, STATEMENTS OF INCOME AND STATEMENTS OF CASH
FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000096271
<NAME> TAMPA ELECTRIC COMPANY
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,745
<OTHER-PROPERTY-AND-INVEST> 8
<TOTAL-CURRENT-ASSETS> 306
<TOTAL-DEFERRED-CHARGES> 264
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 3,323
<COMMON> 119
<CAPITAL-SURPLUS-PAID-IN> 924
<RETAINED-EARNINGS> 284
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,327
0
0
<LONG-TERM-DEBT-NET> 690
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 271
<LONG-TERM-DEBT-CURRENT-PORT> 85
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 950
<TOT-CAPITALIZATION-AND-LIAB> 3,323
<GROSS-OPERATING-REVENUE> 1,459<F1>
<INCOME-TAX-EXPENSE> 82
<OTHER-OPERATING-EXPENSES> 1,144
<TOTAL-OPERATING-EXPENSES> 1,144
<OPERATING-INCOME-LOSS> 233<F2>
<OTHER-INCOME-NET> (11)<F3>
<INCOME-BEFORE-INTEREST-EXPEN> 222
<TOTAL-INTEREST-EXPENSE> 77<F4>
<NET-INCOME> 145
0
<EARNINGS-AVAILABLE-FOR-COMM> 145
<COMMON-STOCK-DIVIDENDS> 150
<TOTAL-INTEREST-ON-BONDS> 43
<CASH-FLOW-OPERATIONS> 275
<EPS-BASIC> .00
<EPS-DILUTED> .00
<FN>
<F1>Revenues are after $11.9 million of deferred revenues at Tampa Electric, and
includes a $7.9 million pretax benefit of deferred revenues recognized related
to the charge for tax settlements under the then current regulatory agreement.
<F2>Includes a $7.9 million pretax benefit of deferred revenues recognized
related to the charge for tax settlements under the then current regulatory
agreement.
<F3>Other income, net includes $13.5 million to recognize certain charges that
were unusual and nonrecurring in nature at Tampa Electric.
<F4>Interest expense includes $12.7 million of interest expense related to
certain income tax settlements that were unusual and non recurring in nature.
</FN>
</TABLE>
