Sept 28 - The sale of TECO Guatemala, TECO Energy Inc.'s (TECO)
international power subsidiary, is expected to have no impact on the credit
ratings of TECO, according to Fitch Ratings.
TECO Guatemala has entered into separate agreements to sell all of the equity
interests in the Alborada and San Jose power stations and related solid fuel
handling, and port facilities in Guatemala for a total purchase price of $227.5
million in cash. The transaction is expected to result in an after-tax book loss
of approximately $33 million and be dilutive to earnings in 2013 and 2014.
Upon closing, TECO will use net cash proceeds of $223 million to repay $25
million of San Jose Power Station project debt and apply the remaining proceeds
towards share buyback and reduction of parent-level debt.
Fitch considers the transaction to be credit neutral to positive, given that it
streamlines TECO's business mix and further improves parent leverage while
offsetting the credit impact of share repurchases.
Under Fitch's base case scenario excluding TECO Guatemala, TECO's credit metrics
remain solidly positioned within the 'BBB' rating category with interest
coverage above 5 times (x) and leverage below 3.4x. The projected loss of
earnings power from the Guatemalan business is largely mitigated by its
relatively small cash flow contribution to meet TECO's dividend and parent-level
TECO's credit ratings are supported by its solid credit metrics and the
consistent financial performance of its regulated utility subsidiary Tampa
Electric which provides over 80% of consolidated EBITDA. The ratings also take
into account the manageable exposure to TECO Coal, TECO's remaining unregulated
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research
--'Corporate Rating Methodology' (Aug. 8, 2012);
--'Rating North American Utilities, Power, Gas, and Water Companies' (May 16,
--'Parent and Subsidiary Rating Linkage' (Aug. 12, 2011).
Applicable Criteria and Related Research:
Corporate Rating Methodology
Rating North American Utilities, Power, Gas, and Water Companies
Parent and Subsidiary Rating Linkage