Recently, Fitch Ratings upgraded the investment ratings for TECO Energy Inc. (TE) and its subsidiary Tampa Electric Co. on account of better financial performance which came on the back of a significant reduction in the companies’ debt levels along with improved rates.
Fitch Ratings has now moved to an issuer default rating of BBB from BBB- for TECO, and upgraded Tampa Electric’s rating to BBB+ from BBB. Fitch also upgraded Tampa Electric’s senior unsecured and pollution control revenue bonds to A- from BBB+. The ratings are low investment grade ratings. The rating outlook is stable.
TECO Energy has been performing well over the past few years in terms of financial results. The company has over the years achieved substantial reduction in debt levels and demonstrated superior cash flows from the utilities due to higher base rates that became came into effect in 2009 and 2010.
In the past few years, TECO Energy has completed a series of divestments as part of its business strategy that have helped in strengthening its capital structure by accelerated debt repayments and further investments in Tampa Electric. TECO’s long-term debt was down to $3.14 billion at year-end 2010 from $3.2 billion in 2009.
As of December 31, 2010, consolidated liquidity at TECO was $737.9 million, consisting of $82.3 million in cash and short-term investments and available credit facilities of $655.6 million. In 2010, consolidated cash flow from operations improved to $664 million, primarily due to recovery of deferred costs, including fuel and purchased costs.
Total liquidity, as of year-end 2010, at Tampa Electric was also strong at $466 million with cash and short-term investments of $3.7 million and available credit facilities of $462.3 million.
In general, TECO Energy targets maintaining consolidated liquidity of at least $500 million. Going forward, the company also expects its cash from operations to improve versus 2010 levels.
Despite such positive financials, Fitch remains concerned about the slow paced economic recovery in Tampa Electric’s service territory. Nevertheless, Fitch pointed out that signs of stabilization in the real estate market and employment in the Tampa area have begun to emerge, which have influenced its stable outlook for Tampa.
TECO Energy currently retains a Zacks #3 Rank (short-term Hold rating). We provide a long-term Neutral rating on the stock. The company keeps in line with its peers NextEra Energy Inc. (NEE) and Southern Company (SO) based on the short-term Zacks Rank.
Based in Tampa, Florida, TECO Energy is involved in the generation, purchase, transmission, distribution and sale of electric energy in Florida.
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TECO ENERGY (TE): Free Stock Analysis Report
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