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TECO To Shed Its Shipping Arm

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By RUSSELL RAY, The Tampa Tribune

Published: October 30, 2007

TAMPA - In a move to reduce debt and raise capital, TECO Energy said Monday that it will sell its shipping business, TECO Transport Corp., to a Miami-based investment group for $405 million by the end of the year.

News of the cash deal pushed shares of TECO up 18 cents Monday to $16.92 before closing the day at $16.75, up 1 cent, on the New York Stock Exchange.

TECO said in February that it might sell TECO Transport to accelerate its debt-reduction plan and generate capital to pay for the expansion of its core businesses, Tampa Electric Co. and Peoples Gas, which serve nearly 1 million customers in Florida.

'It will allow us to retire debt more quickly, and ... that puts us in a better position to raise capital as we grow the core utility business,' John Ramil, TECO Energy president and chief operating officer, said.

As demand for electricity grows, additional capital will be needed, because TECO must build new facilities to generate and transmit more power in the Tampa Bay area, Ramil said. Tampa Electric, TECO Energy's largest business, serves more than 666,000 customers in Hillsborough County and parts of Pasco, Polk and Pinellas counties.
TECO Energy has slashed its debt to $1.6 billion from $2.6 billion. The company wants to trim another $500 million in debt from its books, and the sale of TECO Transport will help the company realize that goal.
TECO Transport hauls coal, phosphate and other commodities on the Mississippi River and through the Gulf of Mexico and Caribbean. TECO Energy acquired full ownership of the shipping business in 1981.
TECO Transport accounted for about $26 million, or more than 9 percent, of TECO Energy's profit last year.

'Transportation businesses have been highly valued,' Ramil said. 'A $405 million purchase price is fifteen and a half times earnings. That's a pretty good multiple.'
TECO Energy agreed to sell TECO Transport to an investment group led by Greenstreet Equity Partners, a Miami-based private equity firm founded by Steven Green, a former U.S. Ambassador to Singapore.

'The management team of TECO Transport is pretty pleased,' Ramil said. 'We're selling to a quality organization that's going to provide the capital it needs to grow and expand.'

Net proceeds from the deal are expected to range from $370 million to $380 million, TECO said.

Sherrill Hudson, TECO chairman and chief executive officer, said the deal, in addition to strengthening the company's balance sheet, could lead to an upgrade in the company's credit rating.

'We are pleased with the outcome and believe that it is in the best interest of all concerned,' Hudson said in a statement.
TECO Energy is expected to release its third-quarter results Friday. During the first half of this year, the company has earned $146.5 million, or 70 cents a share, up 24 percent compared with the first half of 2006.

Reporter Russell Ray can be reached at rray@tampatrib.com or (813) 250-7870.

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