TECO Energy Inc.
) subsidiary Tampa Electric Company announced its plan to increase
power generation capacity of Polk Power Station by approximately
460 megawatts. In line with this expansion, the company plans to
file for requisite approvals from the Florida Public Service
Commission and a Site Certification Application with the Florida
Department of Environmental Protection.
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TECO Energy intends to do this generation capacity expansion to
meet higher-than-expected power demand for 2017. The demand will
increase due to a rise in the number of customers and expiration of
purchased-power agreements with power providers.
For quite a long time, TECO Energy has been looking for prospective
alternatives to meet forthcoming electricity demand. Accordingly,
the company reviewed several bids from other electricity
generators. But later, TECO Energy changed its plan and intended to
generate electricity with the help of its own generation
facilities. The company expects this plan will be lesser capital
intensive than taking third-party assistance.
After completion of this project, TECO Energy will not depend on
third party electricity vendors for handling its customer-demand
pressure. In addition, this expansion will switch the four existing
simple-cycle natural gas divisions to an extra proficient
combined-cycle part within January 2017.
At the same time, this expansion project will detain waste heat of
the existing combustion turbines and boost the output of the
gas-fired units by 70% without acquiring additional land.
This project will also have social, economic and environmental
benefits. As far as socio-economic development is concerned, TECO
Energy's Polk Power Station expansion project is expected to
produce roughly 500 local jobs. As a whole, this will help to
improve the economic condition of Florida. On the other hand, this
new system will reduce emissions of nitrogen oxide and carbon
dioxide and supply clean energy to its users.
We believe this initiative will enable TECO Energy to control its
expenses and resources, while positively impacting its financial as
well as operating performance in terms of smooth supply of safe and
reliable power to approximately 100,000 homes.
In second-quarter 2012, Tampa Electric reported net income of $52
million versus $58.4 million in the prior-year quarter. The decline
in net income was due to mild weather, higher operating expenses
and increase in depreciation costs.
As of June 30, 2012, TECO Energy had cash and cash equivalents of
$117.4 million compared with $44 million as of December 31, 2011.
On top of its financial strength, the company comfortably continues
with its plant upgrade and infrastructure development activities.
During second-quarter 2012 earnings call, TECO Energy lowered its
full-year 2012 earnings guidance to $1.20 - $1.30 per share from
the prior estimate of $1.30 - $1.40 per share due to the negative
effect of mild weather.
As per the Zacks Consensus Estimates, TECO Energy's earnings for
the third-quarter and full-year 2012 are currently pegged at 41
cents per share and $1.25 per share, respectively.
We believe that strong customer growth along with improvement in
Florida economy will act as a positive catalyst for TECO Energy's
forthcoming financial performance. However, we are concerned about
natural disasters and extreme weather conditions, which might
hamper smooth functioning of TECO Energy's operations.
TECO Energy Inc. currently holds a Zacks #4 Rank, which translates
into a short-term Sell rating.
Tampa, Florida-based TECO Energy Inc. is involved in regulated
utility operations. Through its subsidiaries, the company
generates, transmits, distributes, purchases and sells electric
energy in Florida and Guatemala. The company mainly competes with
Wisconsin Energy Inc.