THE INFORMATION IN THIS PRELIMINARY PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND
MAY BE CHANGED. THIS PRELIMINARY PROSPECTUS SUPPLEMENT IS NOT AN OFFER TO SELL
THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
Filed Pursuant to Rule 424(b)(5)
File No.: 333-83958
SUBJECT TO COMPLETION, DATED MAY 7, 2002
PRELIMINARY PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MAY 6, 2002
$ ,000,000
TECO ENERGY, INC.
% Notes Due May , 2007
% Notes Due May , 2012
------------------
We will pay interest on the notes each May 1 and November 1. The first
interest payment will be made on November 1, 2002 for interest accruing from May
, 2002.
We may redeem some or all of the notes from time to time. The redemption
prices are described on page S-14. There is no sinking fund for the notes.
SEE "RISK FACTORS" BEGINNING ON PAGE S-7 TO READ ABOUT CERTAIN FACTORS YOU
SHOULD CONSIDER BEFORE BUYING THE NOTES.
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS TECO ENERGY(1)
-------------- -------------- --------------
Per 2007 Note........................................ % % %
2007 Note Total...................................... $ $ $
Per 2012 Note........................................ % % %
2012 Note Total...................................... $ $ $
-------------- -------------- --------------
Total............................................ $ $ $
(1) Plus accrued interest, if any, from May , 2002.
Delivery of the notes, in book-entry form only, will be made on or about
May , 2002.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the prospectus to which it relates is truthful or
complete. Any representation to the contrary is a criminal offense.
Joint Book-Running Managers
BANC OF AMERICA SECURITIES LLC
BNY CAPITAL MARKETS, INC.
CREDIT SUISSE FIRST BOSTON
SALOMON SMITH BARNEY
------------------
BNP PARIBAS
CIBC WORLD MARKETS
SCOTIA CAPITAL
TOKYO-MITSUBISHI INTERNATIONAL PLC
The date of this prospectus supplement is May , 2002.
------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
ABOUT THIS PROSPECTUS SUPPLEMENT...... S-1
PROSPECTUS SUMMARY.................... S-2
RISK FACTORS.......................... S-7
CAPITALIZATION........................ S-12
USE OF PROCEEDS....................... S-12
PAGE
----
DESCRIPTION OF THE NOTES.............. S-13
UNDERWRITING.......................... S-17
NOTICE TO CANADIAN RESIDENTS.......... S-19
LEGAL MATTERS......................... S-20
PROSPECTUS
PAGE
----
ABOUT THIS PROSPECTUS................. 1
RISK FACTORS.......................... 1
FORWARD-LOOKING STATEMENTS............ 1
TECO ENERGY........................... 2
RATIOS OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS....... 2
DESCRIPTION OF DEBT SECURITIES........ 3
DESCRIPTION OF PREFERRED STOCK........ 8
DESCRIPTION OF COMMON STOCK........... 9
ANTI-TAKEOVER EFFECTS OF OUR ARTICLES
OF INCORPORATION AND BYLAWS, FLORIDA
LAW AND OUR RIGHTS PLAN............. 10
PAGE
----
DESCRIPTION OF STOCK PURCHASE
CONTRACTS AND STOCK PURCHASE
UNITS............................... 11
DESCRIPTION OF WARRANTS AND OTHER
PURCHASE RIGHTS..................... 11
USE OF PROCEEDS....................... 13
PLAN OF DISTRIBUTION.................. 13
LEGAL MATTERS......................... 14
EXPERTS............................... 14
WHERE YOU CAN FIND MORE INFORMATION... 15
------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY BE USED ONLY WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY BE ACCURATE ONLY
ON THE DATE OF THIS DOCUMENT.
ABOUT THIS PROSPECTUS SUPPLEMENT
This document is in two parts. The first part is the prospectus supplement,
which describes the specific terms of the notes we are offering and certain
other matters relating to us and our financial condition. The second part, the
accompanying prospectus, gives more general information about securities we may
offer from time to time, some of which does not apply to the notes we are
offering. Generally, when we refer to the prospectus, we are referring to both
parts of this document combined. If the description of the offering varies
between this prospectus supplement and the accompanying prospectus, you should
rely on the information in this prospectus supplement.
This prospectus supplement contains forward-looking statements. For a
description of these statements and a discussion of the factors that may cause
our actual results to differ materially from these statements, see
"Forward-Looking Statements" in the accompanying prospectus and the Investment
Considerations included in our Annual Report on Form 10-K for the fiscal year
ended December 31, 2001.
In this prospectus supplement, "we", "our", "ours" and "us" refer to TECO
Energy, Inc., unless the context otherwise requires.
PROSPECTUS SUMMARY
This summary contains basic information that is important to you. The
"Description of the Notes" section of this prospectus supplement contains more
detailed information about the terms and conditions of the notes.
TECO ENERGY
Overview. We are an electric and gas utility holding company, exempt from
registration under the Public Utility Holding Company Act of 1935, with
important unregulated activities. We have a balance of regulated utility
companies in the growing Florida market and profitable unregulated companies.
Our unregulated businesses include independent power generation and
distribution, marine transportation, coal mining, coalbed methane gas
production, the marketing of natural gas, energy and engineering services and,
indirectly, the sale of propane gas. The following describes our principal
operations.
- TAMPA ELECTRIC COMPANY provides electric energy and related services to
over 575,000 residential, commercial and industrial customers in its West
Central Florida service area covering approximately 2,000 square miles,
including the City of Tampa and the surrounding areas. Tampa Electric has
a total net system generating capability of approximately 3,900 megawatts
in operation, and is constructing additional capacity to serve its
growing customer base. It is in the process of repowering an older
coal-fired station to become a combined-cycle natural gas-fired facility,
which will reduce emissions, add capacity and enhance fuel diversity.
- PEOPLES GAS SYSTEM is Florida's leading provider of natural gas. With a
presence in most of Florida's major metropolitan areas, it serves over
272,000 customers. In early 2000, Peoples Gas completed a major expansion
to Southwest Florida to market natural gas to a previously unserved high
growth area of the state. Peoples Gas is continuing its expansion into
other areas of Florida previously unserved by natural gas.
- TECO POWER SERVICES, through its subsidiaries, develops, builds, owns and
operates electric generation facilities and electric distribution and
transmission facilities primarily in the United States and Central
America. It has net ownership interests in more than 6,500 net megawatts
of generating capacity in operation or under construction as follows:
GROSS PLANT TPS TPS NET IN-SERVICE OR
SIZE ECONOMIC PLANT SIZE PARTICIPATION
PROJECT LOCATION (MEGAWATTS) INTEREST (MEGAWATTS) DATE
------- ----------- ----------- -------- ----------- -------------
OPERATING
Alborada Power Station*... Guatemala 78 96% 75 9/95
Hardee Power Station*..... Florida 370 100% 370 1/93, 5/00
Commonwealth
Chesapeake*............. Virginia 312 95% 296 9/00, 8/01
Hamakua Energy Project*... Hawaii 60 50% 30 8/00, 12/00
San Jose Power Station*... Guatemala 120 100% 120 1/00
Empresa Electrica
Guatemala S.A. (EEGSA)
(a distribution
utility)................ Guatemala N/A 24% N/A 9/98(1)
Frontera Power Station.... Texas 477 100% 477 5/00, 3/01(1)
Odessa/Guadalupe.......... Texas 2,000 (2) 750 12/00, 10/01
----- -----
Sub-total........ 3,417 2,118
UNDER CONSTRUCTION
Union*.................... Arkansas 2,200 (3) 1,650 11/02-5/03
Gila River*............... Arizona 2,145 (3) 1,609 4/03-8/03
Dell*..................... Arkansas 599 100% 599 5/03
McAdams*.................. Mississippi 599 100% 599 5/03
----- -----
Sub-total........ 5,543 4,457
----- -----
TOTAL............ 8,960 6,575
---------------
* These facilities are operated by TECO Power Services or its affiliates.
(1) Dates on which TECO Power Services acquired its economic interest in the
project.
(2) Odessa/Guadalupe investment, currently in the form of a loan, estimated at a
75% economic interest in the 50% interest held by Panda Energy International
(TPS' joint venture partner).
(3) Based on the effect of the assumed preferred return, effective economic
interest estimated at 75%.
S-2
- TECO TRANSPORT is a marine transportation business that, through its
subsidiaries, operates a U.S.-flag fleet of oceangoing vessels, a river
barge fleet and a dry bulk commodity transfer and storage deep water
terminal. Its business primarily includes the movement of commodities via
domestic inland rivers, the Gulf of Mexico and the Caribbean, and to
worldwide markets, including South America, Asia, Africa and Europe.
- TECO COAL, through its subsidiaries, owns and operates several low-sulfur
coal mines and handling facilities in Kentucky and Tennessee. It expects
to mine and ship approximately 10 million tons of coal in 2002 for sale
to domestic and European steel companies, as well as domestic utilities
and industrial customers. In addition, it owns and operates two synthetic
fuel production facilities that qualify under existing rules for Section
29 tax credits for non-conventional fuel production through 2007.
- TECO COALBED METHANE extracts naturally occurring methane gas from seams
in the coal beds of Alabama's Black Warrior Basin. It has approximately
682 producing wells, all of which qualify under existing rules for
Section 29 tax credits on non-conventional fuel production through 2002.
It had proven reserves estimated at 167 billion cubic feet as of December
31, 2001.
- TECO SOLUTIONS was formed to support TECO Energy's strategy of offering
customers a comprehensive and competitive package of energy services and
products with its Florida operations focus. Through various operating
subsidiaries, TECO Solutions delivers customized energy-efficient design
and new construction, operations and maintenance projects for commercial
and public sector clients. In addition, TECO Gas Services and Prior
Energy Corp., our gas marketing companies, provide gas management and
marketing services for large municipal, industrial, commercial and power
generation customers. TECO Solutions also holds an indirect investment in
Heritage Propane Partners L.P., a publicly traded propane gas business.
Strategy. Our business growth strategy is focused on the following three
areas:
- Capitalize on a growing Florida economy and the eventual shift to a more
competitive energy market in Florida with our electric and gas operations
and energy services business. Tampa Electric believes that it has the
competitive generating capacity to serve increased demand and expand its
market share in a more competitive environment in Florida.
- Grow TECO Power Services through its portfolio of quality projects in the
high growth areas of the United States.
- Use the returns of our family of other profitable unregulated businesses
to continue our growth.
RECENT DEVELOPMENTS
Rating Agency Action
On April 25, 2002, Standard & Poor's Rating Service lowered the ratings on
our debt securities to BBB+ from A- for our senior unsecured debt and to A-2
from A-1 for our commercial paper. At the same time, Standard & Poor's lowered
the ratings on Tampa Electric's debt securities to A- from A for its senior
secured debt and senior unsecured debt and to A-2 from A-1 for its commercial
paper. Standard & Poor's indicated that the rating outlook remains negative.
S-3
First Quarter Earnings
Our results for the quarters ended March 31, 2002 and 2001 are set forth
below.
THREE MONTHS ENDED TWELVE MONTHS ENDED
MARCH 31, MARCH 31,
--------------------------- ---------------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
($ IN MILLIONS, EXCEPT PER ($ IN MILLIONS, EXCEPT PER
SHARE AMOUNTS) SHARE AMOUNTS)
Revenues.................................... $740.3 $671.2 $2,717.5 $2,445.4
Net Income.................................. 75.4 69.7 309.4 267.1
Earnings per Share - Basic.................. 0.54 0.54 2.25 2.11
Earnings per Share - Diluted................ 0.54 0.53 2.23 2.09
Average Common Shares Outstanding - Basic... 139.7 128.6 137.6 126.5
Average Common Shares
Outstanding - Diluted..................... 140.3 129.8 138.4 127.2
Our net income summary by segment for the quarter ended March 31, 2002 is
set forth below.
THREE MONTHS ENDED TWELVE MONTHS ENDED
MARCH 31, MARCH 31,
------------------- --------------------
2002 2001 2002 2001
------ ------ ------ ------
($ IN MILLIONS) ($ IN MILLIONS)
Tampa Electric................................ $36.0 $30.5 $159.6 $146.4
People Gas System............................. 9.8 10.5 22.4 23.8
Total Regulated*......................... 45.8 41.0 182.0 170.2
===== ===== ====== ======
TECO Power Services........................... 4.9 2.5 29.3 18.0
TECO Transport................................ 6.9 8.4 26.1 29.7
TECO Coal..................................... 17.4 14.0 62.4 46.9
Other diversified companies................... 7.7 11.3 31.3 33.3
Other/financing/eliminations.................. (7.3) (7.5) (21.7) (31.0)
Total Unregulated*....................... 29.6 28.7 127.4 96.9
===== ===== ====== ======
Net Income.................................... $75.4 $69.7 $309.4 $267.1
---------------
* Segment net income is reported on a basis that includes internally allocated
financing costs at pretax rates of 7.0% for 2001 and 2002.
Tampa Electric had customer growth of 2.6% in the first quarter of 2002,
which was partially offset by mild winter weather patterns which resulted in
retail energy sales 4.8% lower than the same quarter in 2001. Results in the
first quarter of 2001 included higher than normal energy sales due to colder
than normal winter weather. Tampa Electric showed improved results from higher
other income related to a pole attachment revenue true-up. Allowance for funds
used during construction (AFUDC) (which represents interest and allowed equity
cost capitalized to the construction costs), primarily from the Gannon to
Bayside Units 1 and 2 repowering project, increased to $6.0 million for the
quarter, from $1.1 million for the same period last year.
Peoples Gas System's quarterly results reflected mild winter weather
patterns, which more than offset customer growth of almost 4%. Volumes for
low-margin, gas transportation for electric power generators, interruptible
customers and off-system sales increased 35% as lower gas prices made gas
utilization more attractive to these customers.
TECO Power Services' net income for the first quarter of 2002 increased
from the same period last year due to contributions from higher capacity
payments for both the San Jose and Alborada power stations in Guatemala and
increased earnings from loan agreements with Panda Energy. These results were
offset by increased operating costs, higher interest expense related to new
investments in the Frontera and Commonwealth Chesapeake stations, and the
effects of weak Texas energy market prices on the Frontera Power Station.
Results in the first quarter of 2001 included the effect of a one time
$6.1-million after-tax charge associated with TECO Power Services' sale of its
minority interests in Energia Global International
S-4
Ltd., which owns small projects in Central America. Results for the first
quarter of 2001 also included higher-than-normal utilization of the Commonwealth
Chesapeake Power Station due to system constraints.
At TECO Transport, lower northbound river volumes and lower outside tonnage
transferred at the river terminal more than offset the effects of lower fuel
prices and increased government grain and phosphate rock shipments.
TECO Coal's increase in net income for the first quarter of 2002 over the
same period last year was attributable to better coal pricing and increased
synthetic fuel production, which more than offset higher underground mining
costs.
Our other unregulated companies recorded lower net income for the first
quarter of 2002, compared to the same period last year, primarily because
results at TECO Coalbed Methane were adversely affected by its realizing net gas
prices of about $2.50 per thousand cubic feet in the first quarter of 2002,
compared with more than $4.00 per thousand cubic feet in the first quarter of
2001, coupled with the expected natural production declines.
Peoples Gas System Rate Increase
Peoples Gas System filed a Test Year Notification letter with the Florida
Public Service Commission on April 26, 2002, which notified the FPSC of Peoples
Gas System's intent to file a petition for rate relief on or before June 30,
2002 designating 2003 as the test year for determining rates. The petition, if
filed, would request a rate increase to reflect, among other things, the effects
of inflation and investment in system expansion since Peoples Gas System's last
rate case in 1992.
S-5
THE OFFERING
Notes Offered................. $ ,000,000 aggregate principal amount of
notes in two series.
2007 Notes.................. Aggregate principal amount: $ ,000,000.
Interest rate: % per year. Maturity date: May
, 2007.
2012 Notes.................. Aggregate principal amount: $ ,000,000.
Interest rate: % per year. Maturity date: May
, 2012.
Interest Payment Dates........ May 1 and November 1, commencing on November 1,
2002. Interest payments will be made to the
persons in whose names the notes are registered
on the 15th calendar day immediately preceding
the applicable interest payment date.
Denominations................. $1,000 with integral multiples of $1,000.
Optional Redemption........... Either series of notes is redeemable, at our
option, in whole or in part from time to time,
at the redemption prices described in
"Description of the Notes -- Optional
Redemption." The notes may not be redeemed at
any time at the option of the holders.
Ranking....................... The notes will be unsecured debt and will rank
on a parity with our other unsecured and
unsubordinated indebtedness.
Use of Proceeds............... We expect to use the net proceeds to repay
short-term indebtedness of TECO Finance, Inc.,
our finance subsidiary, to repay maturing debt
and for general corporate purposes. Pending
such uses, we will invest the net proceeds in
short-term money market instruments.
Additional Issuances.......... We may, without the consent of the holders of
the notes, issue additional notes of either
series having the same ranking and the same
interest rate, maturity and other terms as
those notes. Any additional notes of either
series having such similar terms, together with
those notes of the respective series, may
constitute a single series of those notes under
the indenture.
Form.......................... The notes will be represented by registered
global securities registered in the name of
Cede & Co., the partnership nominee of the
depositary, The Depository Trust Company.
Beneficial interests in the notes will be shown
on, and transfers will be effected through,
records maintained by The Depository Trust
Company and its participants.
S-6
RISK FACTORS
In deciding whether to purchase our notes, you should consider carefully
the following factors that could cause our operating results and financial
condition to be materially adversely affected.
GENERAL ECONOMIC CONDITIONS MAY ADVERSELY AFFECT OUR BUSINESSES.
Our businesses are affected by general economic conditions. In particular,
the projected growth in Tampa Electric's service area and in Florida is
important to the realization of Tampa Electric's and Peoples Gas System's
forecasts for annual energy sales growth. An unanticipated downturn in the local
area's or Florida's economy could adversely affect Tampa Electric's or Peoples
Gas System's expected performance.
Our unregulated businesses, particularly TECO Transport, TECO Coal and TECO
Power Services, are also affected by general economic conditions in the
industries and geographic areas they serve, both nationally and internationally.
TECO Power Services' investment in Empresa Electrica Guatemala S.A. depends on
growth in the relevant service areas and forecasts for annual energy sales
growth.
OUR BUSINESSES ARE SENSITIVE TO VARIATIONS IN WEATHER.
Most of our businesses are affected by variations in general weather
conditions and unusually severe weather. Tampa Electric's, Peoples Gas System's
and TECO Power Services' energy sales are particularly sensitive to variations
in weather conditions. Those companies forecast energy sales on the basis of
normal weather, which represents a long-term historical average. Significant
variations from normal weather could also have a material impact on energy
sales. Unusual weather, such as hurricanes, could adversely affect operating
costs and sales.
Peoples Gas System, with a single winter peak period, is more weather
sensitive than Tampa Electric, with both summer and winter peak periods. Mild
winter weather in Florida can be expected to negatively impact results at
Peoples Gas System.
Variations in weather conditions also affect the demand and prices for the
commodities sold by TECO Coalbed Methane and TECO Coal, as well as electric
power sales from TECO Power Services' merchant power plants. TECO Transport is
also impacted by weather because of its effects on the supply of and demand for
the products transported. Severe weather conditions could interrupt or slow
service and increase operating costs of those businesses.
POTENTIAL COMPETITIVE CHANGES MAY ADVERSELY AFFECT OUR GAS AND ELECTRICITY
BUSINESSES.
The U.S. electric power industry has been undergoing restructuring.
Competition in wholesale power sales has been introduced on a national level.
Some states have mandated or encouraged competition at the retail level and, in
some situations, required divestiture of generating assets. While there is
active wholesale competition in Florida, the retail electric business has
remained substantially free from direct competition. Changes in the competitive
environment occasioned by legislation, regulation, market conditions or
initiatives of other electric power providers, particularly with respect to
retail competition, could adversely affect Tampa Electric's business and its
performance.
The gas distribution industry has been subject to competitive forces for
several years. Gas services provided by Peoples Gas System are now unbundled for
all non-residential customers. Because Peoples Gas System earns margins on
distribution of gas, but not on the commodity itself, unbundling has not
negatively impacted Peoples Gas System results. However, we cannot predict
future structural changes that could adversely affect Peoples Gas System.
OUR GAS AND ELECTRICITY BUSINESSES ARE HIGHLY REGULATED AND ANY CHANGES IN
REGULATORY STRUCTURES COULD LOWER REVENUES OR INCREASE COSTS OR COMPETITION.
Tampa Electric and Peoples Gas System operate in highly regulated
industries. Their retail operations, including the prices charged, are regulated
by the Florida Public Service Commission, and Tampa Electric's
S-7
wholesale power sales and transmission services are subject to regulation by the
Federal Energy Regulatory Commission (FERC). Changes in regulatory requirements
or adverse regulatory actions could have an adverse effect on Tampa Electric's
or Peoples Gas System's performance by, for example, increasing competition or
costs, threatening investment recovery or impacting rate structure.
The merchant plants being developed by TECO Power Services will require
authorization from FERC for market-based rates. In granting such a request, FERC
typically requires a showing that the plant's owners and affiliates lack market
power in the relevant generation and transmission markets and in markets for
related commerce such as fuel. Obtaining FERC authority for market-based rates
would also require a showing by the seller that there is no opportunity for
abusive affiliate transactions involving any of TECO Power Services' regulated
affiliates. TECO Power Services does not anticipate any material difficulties in
obtaining these authorizations, but it cannot guarantee that they will be
granted.
TECO Coal's forecast includes the benefits associated with the generation
of Section 29 tax credits related to the production of non-conventional fuels.
Future changes in the laws, regulations or administration governing these tax
credits could impact TECO Coal's quantity of qualified synfuel production and,
accordingly, the amount of available tax credits.
COMMODITY PRICE CHANGES MAY AFFECT THE OPERATING COSTS AND COMPETITIVE POSITIONS
OF OUR BUSINESSES.
Most of our businesses are sensitive to changes in coal, gas, oil and other
commodity prices. Any changes could affect the prices these businesses charge,
their operating costs and the competitive position of their products and
services.
In the case of Tampa Electric, currently fuel costs used for generation are
mostly affected by the cost of coal. Future fuel costs will be impacted by the
cost of natural gas as well as coal. Tampa Electric is able to recover the cost
of fuel through retail customers' bills, but increases in fuel costs affect
electric prices and, therefore, the competitive position of electricity against
other energy sources.
Regarding wholesale sales of electricity, the ability to make sales and
margins on power sales are currently affected by the cost of coal to Tampa
Electric, particularly as it relates to the cost of gas and oil to other power
producers.
In the case of TECO Power Services, results are impacted by changes in the
market price for electricity. The profitability of merchant power plants is
heavily dependent on the price for power in the markets they serve. Wholesale
power prices are set by the market assuming a cost for the input energy and
conversion efficiency, but the fixed costs may not be reflected in the price for
spot, or excess, power.
In the case of Peoples Gas System, costs for purchased gas and pipeline
capacity are recovered through retail customers' bills, but increases in gas
costs affect total retail prices and therefore the competitive position of
Peoples Gas System relative to electricity, other forms of energy and other gas
suppliers.
Changes in gas, oil and coal prices directly affect the margins at our
unregulated businesses. For example, TECO Coalbed Methane is exposed to
commodity price risk through the sale of natural gas. A hypothetical 10% change
in any one year in the market price of natural gas would have an estimated
earnings impact of $4 million. TECO Coal is exposed to commodity price risk
through coal sales. A hypothetical 10% change in the market price of coal in any
one year would have an estimated earnings impact of between $15 million and $20
million. TECO Transport is exposed to commodity price risk through fuel
purchases. A hypothetical 10% change in the market price of fuel in any one year
would have an estimated earnings impact of $1 million.
Further, natural gas prices have been increasingly volatile and,
accordingly, the earnings from TECO Coalbed Methane are increasingly difficult
to predict.
At TECO Power Services, the price paid for natural gas is expected to pass
through to the customer. In those instances where these costs are not passed
directly to the customer, the price of gas is expected to be reflected in the
price charged to the customer for electricity.
S-8
TECO COALBED METHANE'S RESULTS WILL BE INCREASINGLY DEPENDENT UPON GAS PRICES
AND GAS PRODUCTION LEVELS.
The Section 29 tax credit for coalbed methane is set to expire on December
31, 2002. As a result, TECO Coalbed Methane's results will be increasingly
affected by gas prices, which are volatile, and affected by its level of
production, which is naturally declining. Our forecast assumes that production
will decline 8% per year. Actual production levels may be different than those
we assumed.
WE MAY BE UNABLE TO TAKE ADVANTAGE OF OUR EXISTING TAX CREDITS.
We derive a portion of our net income from non-conventional fuels tax
credits. Our use of these tax credits is dependent on our generating sufficient
taxable income against which to use the credits. These credits could be impacted
by or become unavailable due to actions of the Internal Revenue Service or the
U.S. Treasury or changes in law, regulation or administration.
WE MAY BE UNABLE TO IDENTIFY APPROPRIATE BUSINESS GROWTH OPPORTUNITIES OR TAKE
ADVANTAGE OF THEM IF WE CANNOT FIND APPROPRIATE FINANCING.
Part of our business strategy is to grow our unregulated businesses. Much
of our growth depends on our ability to find attractive acquisition and
development opportunities and independent power projects and to obtain the
necessary financing for them. Our outlook is based on our expectation that we
will be successful in finding and capitalizing on these acquisition and
development opportunities and independent power projects, but our efforts may
not be successful.
WE MAY BE UNABLE TO SUCCESSFULLY COMPLETE AND FINANCE CURRENT AND FUTURE
PROJECTS ON SCHEDULE AND WITHIN BUDGET.
Tampa Electric and TECO Power Services currently have new power generating
facilities under construction. The construction of these facilities, as well as
future construction projects, involves risks of shortages and inconsistent
qualities of equipment, material and labor, engineering problems, work
stoppages, unanticipated cost increases, and environmental or geological
problems. In addition, the development of independent power plants involves
considerable risks, including successful siting, permitting, financing and
construction, contracting for necessary services, fuel supplies and power sales
and performance by project partners. Any of these events could delay a project's
construction schedule or increase its costs.
THE ENRON BANKRUPTCY MAY RESULT IN ADDITIONAL COSTS AT FOUR POWER PLANT PROJECTS
IN WHICH TECO POWER SERVICES HAS AN INTEREST.
On December 2, 2001, Enron Corp., a large energy trading and services
company, filed for protection under the U.S. Bankruptcy Code. An Enron
subsidiary, NEPCO, is currently serving as the construction contractor for four
merchant power plants in which TECO Power Services has interests. If NEPCO had
to be replaced as contractor, it is likely that there would be delays in the
project schedules and additional project costs, which could, depending on the
circumstances of the replacement, be substantial. A new contractor would also
have to be reasonably satisfactory to the project lenders for the Union and Gila
River projects.
TECO POWER SERVICES' EXISTING AND PLANNED MERCHANT POWER PLANTS ARE IMPACTED BY
MARKET CONDITIONS AND TECO POWER SERVICES MAY NOT BE ABLE TO SELL POWER AT
PRICES THAT RECOVER ITS INVESTMENTS.
TECO Power Services is currently operating, developing, constructing and
investing in merchant power plants. A merchant power plant sells power based on
market conditions at the time of sale, so TECO Power Services cannot predict
with certainty:
- the amount or timing of revenue it may receive from power sales from
operating plants;
- the differential between the cost of operations (in particular, natural
gas prices) and merchant power sales revenue; or
- whether it will recover its initial investment in these plants.
S-9
Our forecast assumes that TECO Power Services will manage these risks by:
- building in well-established markets that enable TECO Power Services to
use established hedging mechanisms;
- hiring experienced power marketers;
- entering into negotiated contracts with offtakers resulting in higher
revenues than the spot market for capacity payments and ancillary
services for a significant portion of the plant's output;
- avoiding selling short; and
- entering into non-energy related sales to offset potential operational
risks.
PROBLEMS WITH OPERATIONS COULD CAUSE US TO INCUR SUBSTANTIAL COSTS.
Each of our subsidiaries is subject to various operational risks, including
accidents or equipment breakdown or failure and operations below expected levels
of performance or efficiency. As operators of power generation facilities, Tampa
Electric and TECO Power Services could incur problems such as the breakdown or
failure of power generation equipment, transmission lines, pipelines or other
equipment or processes which would result in performance below assumed levels of
output or efficiency. Our forecast assumes normal operations and normal
maintenance periods for our subsidiaries' facilities.
WE ARE VULNERABLE TO INTEREST RATE CHANGES AND MAY NOT HAVE ACCESS TO CAPITAL AT
FAVORABLE RATES, IF AT ALL.
Changes in interest rates can affect the cost of borrowing for us and our
subsidiaries on variable rate debt outstanding, on refinancing of debt
maturities and on incremental borrowing to fund new investments. Our forecasts
reflect the expectation that we will have access to the equity and capital
markets on satisfactory terms to fund commitments, including acquisition and
development opportunities and independent power projects.
We provide short-term liquidity for our non-regulated operating companies
primarily through our commercial paper program. Tampa Electric also issues
commercial paper. These programs are backed by our bank credit facilities. Our
ability to utilize our commercial paper program is dependent upon our
maintaining an investment grade rating and would be adversely affected by
changes in the commercial paper market or if our bank credit facilities were
unavailable. In order to utilize the bank credit facilities, our debt to capital
ratio as defined in the credit agreement may not exceed 65% at the end of the
applicable quarter.
WE HAVE SIGNIFICANT DEBT LEVELS THAT MAY RESTRICT OUR ABILITY TO FINANCE
ADDITIONAL PROJECTS OR PREVENT THE REPAYMENT OF CERTAIN DEBT.
To support our growth, we have significantly expanded our indebtedness,
increased our debt-to-equity ratio and lowered our interest coverage. This
increase in debt levels has increased the amount of fixed charges we are
obligated to pay. The level of our indebtedness and restrictive covenants
contained in existing or future financings could limit our ability to finance
the acquisition and development of additional projects.
We also incur obligations in connection with the operations of our
subsidiaries and affiliates, which do not appear on our balance sheet, including
in connection with the development of power projects by unconsolidated
affiliates. These obligations take the form of guarantees, letters of credit and
contractual commitments, as we describe in the sections titled "Off Balance
Sheet Financing" and "Liquidity, Capital Resources" of the "Management's
Discussion & Analysis of Financial Condition & Results of Operations" section of
our periodic reports filed with the SEC, including our Annual Report on Form
10-K for the fiscal year ended December 31, 2001. In addition, our
unconsolidated affiliates from time to time incur non-recourse debt to finance
their power projects. Although we are not obligated on that debt, our
investments in those unconsolidated affiliates and our commitments with respect
to their power projects are at risk if the projects are not successfully
developed.
S-10
In 2000 and 2001, Moody's Investor Services, Inc., Standard & Poor's
Ratings Service and Fitch Investor Services, Inc. lowered the ratings on our
debt securities and the debt securities of Tampa Electric. Standard & Poor's
further downgraded our debt securities and those of Tampa Electric in April
2002. The outlook assigned by each agency is negative. The ratings actions were
attributed to increased debt levels and the changing risk profile associated
with the expansion of our independent power development activities, as well as
the required capital outlays of Tampa Electric, the uncertainties related to
industry restructuring and the additional risks and obligations undertaken by us
with respect to various TECO Power Services projects. These downgrades and any
future downgrades may affect our ability to borrow and increase our financing
costs, which may decrease our earnings.
Some of our debt obligations contain financial covenants related to
debt-to-capital ratios and interest coverage that could prevent the repayment of
subordinated debt and the payment of dividends if those payments would cause a
violation of the covenants. Further, some of our subsidiaries have indebtedness
containing restrictive covenants which, if violated, could prevent them from
making cash distributions to us. As a holding company, we are dependent on cash
flow from our subsidiaries.
THE INTERNATIONAL PROJECTS AND OPERATIONS OF TECO POWER SERVICES AND TECO OCEAN
SHIPPING ARE SUBJECT TO RISKS THAT COULD RESULT IN LOSSES OR INCREASED COSTS.
TECO Power Services is involved in several international projects. These
projects involve numerous risks that are not present in domestic projects,
including expropriation, political instability, currency exchange rate
fluctuations, repatriation restrictions, and regulatory and legal uncertainties.
Our forecast assumes that TECO Power Services will manage these risks through a
variety of risk mitigation measures, including specific contractual provisions,
teaming with strong international and local partners, obtaining non-recourse
financing and obtaining political risk insurance where appropriate.
TECO Ocean Shipping is exposed to operational risks in international ports,
primarily in the form of its need to obtain suitable labor and equipment to
safely discharge its cargoes in a timely manner. Our forecast assumes that TECO
Ocean Shipping will manage these risks through a variety of risk mitigation
measures, including retaining agents with local knowledge and experience in
successfully discharging cargoes and vessels similar to those used.
CHANGES IN THE ENVIRONMENTAL LAWS AND REGULATIONS TO WHICH OUR REGULATED
BUSINESSES ARE SUBJECT COULD INCREASE OUR COSTS OR CURTAIL OUR ACTIVITIES.
Our businesses are subject to regulation by various governmental
authorities dealing with air, water and other environmental matters. Changes in
compliance requirements or the interpretation by governmental authorities of
existing requirements may impose additional costs on us or result in the
curtailment of some of our businesses' activities.
S-11
CAPITALIZATION
The following table summarizes the historical capitalization of TECO Energy
and its consolidated subsidiaries at March 31, 2002, and its capitalization as
adjusted to reflect the issuance and sale of $ ,000,000 aggregate principal
amount of notes contemplated by this prospectus supplement and our application
of the net proceeds in the manner described in "Use of Proceeds."
MARCH 31, 2002
----------------------
ACTUAL PROFORMA
AMOUNTS AS ADJUSTED
-------- -----------
($ IN MILLIONS)
Cash and cash equivalents................................... $ 82.8 $
======== ========
Short-term debt............................................. $ 545.3 $
Long-term debt due within one year.......................... 813.7
Long-term debt, less amount due within one year............. 1,808.3
Redeemable preferred securities............................. 200.0 200.0
Mandatorily convertible preferred securities................ 449.1 449.1
Common equity, including the effect of unearned
compensation.............................................. 1,966.2 1,966.2
-------- --------
Total capitalization.............................. $5,782.6 $5,782.6
======== ========
USE OF PROCEEDS
We estimate that the net proceeds (after deducting underwriting discounts
and commissions and estimated offering expenses) from the offering of the %
Notes due 2007 and the % Notes due 2012 will be approximately $
million. We expect to use the net proceeds to repay short-term indebtedness of
TECO Finance, Inc., our finance subsidiary, to repay maturing debt and for
general corporate purposes. Pending such uses, we will invest the net proceeds
in short-term money market instruments. At March 31, 2002, we had no short-term
indebtedness outstanding and TECO Finance had $386.4 million in short-term
indebtedness outstanding with various remaining terms until maturity of 24 days
or less and with fixed interest rates ranging from 2.00% to 2.05%.
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DESCRIPTION OF THE NOTES
The following description of the particular terms of the notes that we are
offering supplements the description of the general terms of the debt securities
under the caption "Description of Debt Securities" in the accompanying
prospectus. Capitalized terms not defined in this prospectus supplement are
defined in the indenture, dated as of August 17, 1998, as amended and
supplemented by the seventh supplemental indenture thereto, between us and The
Bank of New York, as trustee.
The indenture provides for the issuance from time to time of various series
of debt securities, including the notes. Each series may differ as to terms,
including maturity, interest rate, redemption and sinking fund provisions,
covenants, and events of default. For purposes of the following description,
unless otherwise indicated, a business day is any day that is not a day on which
banking institutions in New York, New York are authorized or obligated by law or
executive order to close.
GENERAL
The notes offered hereby will be our unsubordinated and unsecured
obligations and will rank equally in right of payment with all of our other
unsubordinated and unsecured indebtedness. The notes will not limit other
indebtedness or securities that we or any of our subsidiaries may incur or issue
or contain financial or similar restrictions on us or any of our subsidiaries.
The notes do not have a sinking fund. We may, without the consent of the holders
of the notes, issue additional notes of either series having the same ranking,
the same interest rate, maturity and other terms, and the same CUSIP number, as
those notes. Any additional notes of either series having such similar terms,
together with those notes of the respective series, may constitute a single
series of those notes under the indenture.
The notes will be issued in fully registered form, without coupons, in
minimum denominations of $1,000 or integral multiples of $1,000 in excess
thereof. The notes will be initially issued as global securities. See
"-- Book-Entry, Delivery and Form" below for additional information concerning
the notes and the book-entry system. The Depository Trust Company ("DTC") will
be the depositary with respect to the notes. Settlement of the sale of the notes
to the underwriter will be in immediately available funds. The notes will trade
in DTC's Same-Day Funds Settlement System until maturity or earlier redemption,
as the case may be, and secondary market trading activity in the notes will
therefore settle in immediately available funds. We will make all payments of
principal and interest in immediately available funds to DTC in The City of New
York.
PRINCIPAL AND MATURITY
The aggregate principal amount of the notes offered under this prospectus
is $ ,000,000. The aggregate principal amount of the % Notes due 2007 is
$ ,000,000 and the aggregate principal amount of the % Notes due 2012 is
$ ,000,000. The % Notes due 2007 will mature on May , 2007 and the %
Notes due 2012 will mature on May , 2012.
INTEREST
2007 Notes
The 2007 Notes will bear interest at % per year (computed based on a
360-day year consisting of twelve 30-day months) for the period from May ,
2002 to, but excluding, May , 2007. Interest on the notes will be payable
semi-annually on May 1 and November 1 of each year, commencing November 1, 2002.
Interest payments will be made to the persons in whose names the notes are
registered on the 15th calendar day (whether or not a business day) immediately
preceding the related interest payment date.
2012 Notes
The 2012 Notes will bear interest at % per year (computed based on a
360-day year consisting of twelve 30-day months) for the period from May ,
2002 to, but excluding, May , 2012. Interest on the notes will be payable
semi-annually on May 1 and November 1 of each year, commencing November 1,
S-13
2002. Interest payments will be made to the persons in whose names the notes are
registered on the 15th calendar day (whether or not a business day) immediately
preceding the related interest payment date.
OPTIONAL REDEMPTION
Either series of notes is redeemable, in whole or in part, at any time, and
at our option, at a redemption price equal to the greater of:
- 100% of the principal amount of notes of that series then outstanding to
be redeemed, or
- the sum of the present values of the remaining scheduled payments of
principal and interest on the notes of that series then outstanding to be
redeemed (not including any portion of such payments of interest accrued
as of the redemption date) discounted to the redemption date on a
semi-annual basis (computed based on a 360-day year consisting of twelve
30-day months) at the Adjusted Treasury Rate, plus basis points with
respect to the % Notes due 2007 or at the Adjusted Treasury Rate, plus
basis points with respect to the % Notes due 2012, as calculated
by an Independent Investment Banker,
plus, in both of the above cases, accrued and unpaid interest thereon to the
redemption date.
We will mail a notice of redemption at least 30 days but no more than 60
days before the redemption date to each holder of notes to be redeemed. If we
elect to partially redeem the notes of either series, the trustee will select in
a fair and appropriate manner the notes of such series to be redeemed.
Unless we default in payment of the redemption price, on and after the
redemption date, interest will cease to accrue on the notes or portions thereof
called for redemption.
"Adjusted Treasury Rate" means, with respect to any redemption date:
- the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published
statistical release designated "H.15(519)" or any successor publication
which is published weekly by the Board of Governors of the Federal
Reserve System and which establishes yields on actively traded United
States Treasury securities adjusted to constant maturity under the
caption "Treasury Constant Maturities," for the maturity corresponding to
the Comparable Treasury Issue (if no maturity is within three months
before or after the Remaining Life, as defined below, yields for the two
published maturities most closely corresponding to the Comparable
Treasury Issue will be determined and the Adjusted Treasury Rate will be
interpolated or extrapolated from such yields on a straight line basis,
rounding to the nearest month), or
- if such release (or any successor release) is not published during the
week preceding the calculation date or does not contain such yields, the
rate per year equal to the semi-annual equivalent yield to maturity of
the Comparable Treasury Issue, calculated using a price for the
Comparable Treasury Issue (expressed as a percentage of its principal
amount) equal to the Comparable Treasury Price for such redemption date.
The Adjusted Treasury Rate will be calculated on the third business day
preceding the redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the notes to be redeemed that would be used, at the time
of selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of such notes (the "Remaining Life").
"Comparable Treasury Price" means (1) the average of five Reference
Treasury Dealer Quotations for such redemption date, after excluding the highest
and lowest Reference Treasury Dealer Quotations, or (2) if an Independent
Investment Banker obtains fewer than five such Reference Treasury Dealer
Quotations, the average of all such quotations.
"Independent Investment Banker" means any of Banc of America Securities
LLC, BNY Capital Markets, Inc., Credit Suisse First Boston Corporation or
Salomon Smith Barney Inc. or any of their respective successors, as designated
by us, or if those firms are unwilling or unable to serve as such, an
independent investment and banking institution of national standing appointed by
us.
S-14
"Reference Treasury Dealer" means:
- Banc of America Securities LLC, BNY Capital Markets, Inc., Credit Suisse
First Boston Corporation, Salomon Smith Barney Inc. and each of their
respective successors; provided that, if any of them ceases to be a
primary U.S. Government securities dealer in New York City (Primary
Treasury Dealer), we will substitute another Primary Treasury Dealer, and
- one other Primary Treasury Dealer selected by us.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
an Independent Investment Banker, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to an Independent Investment Banker at 5:00 p.m., New York
City time, on the third business day preceding such redemption date.
BOOK-ENTRY, DELIVERY AND FORM
The notes will be issued in the form of one or more securities in global
form. Each global security will be deposited on the date of the closing of the
sale of the notes with, or on behalf of DTC, and registered in the name of Cede
& Co., as DTC's nominee.
DTC is a limited-purpose trust company created to hold securities for its
participants and to facilitate the clearance and settlement of transactions in
those securities between those participants through electronic book-entry
changes in accounts of the participants, thereby eliminating the need for
physical movement of securities certificates. DTC's participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and other organizations. Access to DTC's system is also available to other
entities such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly (referred to as the "indirect participants"). Persons who are not
participants may beneficially own securities held by or on behalf of DTC only
through the participants or the indirect participants. The ownership interest
and transfer of ownership interest of each actual purchaser of each security
held by or on behalf of DTC are recorded on the records of the participants and
indirect participants.
We expect that under procedures established by DTC, (1) upon deposit of the
global securities, DTC will credit the accounts of participants designated by
the underwriters with portions of the principal amount of the global securities
and (2) ownership of such interests in the global securities will be shown on,
and the transfer of ownership thereof will be effected only through, records
maintained by DTC (with respect to the participants) or by the participants and
the indirect participants (with respect to other owners of beneficial interests
in the global securities).
Investors in the global securities may hold their interests directly
through DTC if they are participants in that system, or indirectly through
organizations which are participants in that system. All interests in a global
security may be subject to the procedures and requirements of DTC. The laws of
some states require that some persons take physical delivery in certificated
form of securities that they own. Consequently, the ability to transfer
beneficial interests in a global security to those persons will be limited to
that extent. Because DTC can act only on behalf of participants, which in turn
act on behalf of indirect participants and some banks, the ability of a person
with beneficial interests in a global security to pledge that interest to
persons that do not participate in the DTC system, or to take other actions
regarding that interest, may be affected by the lack of a physical certificate
evidencing those interests.
Except as described below, owners of interests in the global securities
will not have notes registered in their name, will not receive physical delivery
of notes in certificated form and will not be considered the registered owners
or holders of notes for any purpose.
Payments on the global securities registered in the name of DTC or its
nominee will be payable by the trustee to DTC in its capacity as the registered
holder under the indenture. Under the terms of the indenture, the trustee will
treat the persons in whose names the notes, including the global securities, are
registered, as the owners for the purpose of receiving those payments and for
any and all other purposes.
S-15
Consequently, neither the trustee nor any agent of the trustee has or will
have any responsibility or liability for:
- any aspect of DTC's records or any participant's or indirect
participant's records relating to, or payments made on account of
beneficial ownership interests in the, global security or for
maintaining, supervising or reviewing any of DTC's records or any
participant's or indirect participant's records relating to the
beneficial ownership interests in the global security or
- any other matter relating to the actions and practices of DTC or any of
its participants or indirect participants.
DTC's current practice, upon receipt of any payment on securities such as
the notes, is to credit the accounts of the relevant participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in principal amounts of beneficial interests in the relevant security
as shown on the records of DTC unless DTC has reason to believe it will not
receive payment on the payment date. Payments by the participants and the
indirect participants to the beneficial owners of the notes will be governed by
standing instructions and customary practices and will be the responsibility of
the participants or the indirect participants and will not be the responsibility
of DTC, the trustee or us. Neither we nor the trustee will be liable for any
delay by DTC or any of its participants in identifying the beneficial owners of
the notes, and we and the trustee may conclusively rely on and will be protected
in relying on instructions from DTC or its nominee for all purposes.
DTC will take any action permitted to be taken by a holder of the notes
only at the direction of one or more participants to whose account with DTC
interests in the global securities are credited and only in respect of such
portion of the notes as to which the participant or participants has or have
given such direction. However, if there is an event of default with respect to
the notes, DTC reserves the right to exchange the global securities for notes in
certificated form and to distribute the notes to its participants.
A global security is exchangeable for notes in registered certificated form
if:
- DTC notifies us that it is unwilling or unable to continue as clearing
agency for the global securities or has ceased to be a clearing agency
registered under the Securities Exchange Act of 1934 and we fail to
appoint a successor clearing agency,
- we in our sole discretion elect to cause the issuance of definitive
certificated notes, or
- there has occurred and is continuing an event of default under the
indenture.
The information in this section concerning DTC and its book-entry system
has been obtained from sources that we believe to be reliable, but we have not
independently determined the accuracy thereof. We will not have any
responsibility for the performance by DTC or its participants of their
obligations under the rules and procedures governing their operations.
S-16
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement relating to the notes dated May , 2002, we have agreed to sell to
the underwriters named below the following respective principal amounts of the
notes:
PRINCIPAL AMOUNT
-------------------------------
UNDERWRITER 2007 NOTES 2012 NOTES
----------- ------------- -------------
Banc of America Securities LLC .................. $ $
BNY Capital Markets, Inc.........................
Credit Suisse First Boston Corporation...........
Salomon Smith Barney Inc.........................
BNP Paribas Securities Corp......................
CIBC World Markets Corp..........................
Scotia Capital (USA), Inc........................
Tokyo-Mitsubishi International plc...............
------------- -------------
Total....................................... $ $
============= =============
The underwriting agreement provides that the underwriters are obligated to
purchase all of the notes if any are purchased. The underwriting agreement also
provides that if an underwriter defaults the purchase commitments of
non-defaulting underwriters may be increased or the offering of notes may be
terminated.
The underwriters propose to offer the notes initially at the public
offering prices on the cover page of this prospectus supplement and to selling
group members at those prices less a selling concession of % of the
principal amount per note. The underwriters and selling group members may allow
a discount of % of the principal amount per note on sales to other
broker/dealers. After the initial public offering, the underwriters may change
the public offering price and concession and discount to broker/dealers.
We estimate that our out of pocket expenses for this offering will be
approximately $ .
The notes are new issues of securities with no established trading market.
One or more of the underwriters intends to make a secondary market for the
notes. However, they are not obligated to do so and may discontinue making a
secondary market for the notes at any time without notice. No assurance can be
given as to how liquid the trading market for the notes will be or that an
active public market for the notes will develop.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments which the underwriters may be required
to make in respect of any of these liabilities.
In the ordinary course of business, some of the underwriters and their
affiliates have provided, and continue to provide, financial, advisory,
investment banking and general finance and banking services for us and our
affiliates for customary fees. BNY Capital Markets, Inc. is an affiliate of The
Bank of New York, the trustee of the indenture under which the notes are being
issued.
In connection with the offering, the underwriters may engage in stabilizing
transactions, over-allotment transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934.
- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
- Over-allotment involves sales by the underwriters of notes in excess of
the principal amount of the notes the underwriters are obligated to
purchase, which creates a syndicate short position.
- Syndicate covering transactions involve purchases of the notes in the
open market after the distribution has been completed in order to cover
syndicate short positions. A short position is more likely to be created
if the underwriters are concerned that there may be downward pressure on
the price of the
S-17
notes in the open market after pricing that could adversely affect
investors who purchase in the offering.
- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the notes originally sold by the syndicate
member are purchased in a stabilizing transaction or a syndicate covering
transaction to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty bids
may have the effect of raising or maintaining the market price of the notes or
preventing or retarding a decline in the market price of the notes. As a result
the price of the notes may be higher than the price that might otherwise exist
in the open market. The underwriters are not required to engage in any of these
activities, and may end any of them at any time.
S-18
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the notes in Canada is being made only on a private
placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of notes are made. Any resale of the notes in Canada must be made under
applicable securities laws, which will vary depending on the relevant
jurisdiction, and which may require resales to be made under available statutory
exemptions or under a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the notes.
REPRESENTATIONS OF PURCHASERS
By purchasing notes in Canada and accepting a purchase confirmation a
purchaser is representing to us and the dealer from whom the purchase
confirmation is received that
- the purchaser is entitled under applicable provincial securities laws to
purchase the notes without the benefit of a prospectus qualified under
those securities laws,
- where required by law, that the purchaser is purchasing as principal and
not as agent, and
- the purchaser has reviewed the text above under Resale Restrictions.
RIGHTS OF ACTION -- ONTARIO PURCHASERS ONLY
Under Ontario securities legislation, a purchaser who purchases a security
offered by this prospectus during the period of distribution will have a
statutory right of action for damages, or while still the owner of the notes,
for rescission against us in the event that this prospectus contains a
misrepresentation. A purchaser will be deemed to have relied on the
misrepresentation. The right of action for damages is exercisable not later than
the earlier of 180 days from the date the purchaser first had knowledge of the
facts giving rise to the cause of action and three years from the date on which
payment is made for the notes. The right of action for rescission is exercisable
not later than 180 days from the date on which payment is made for the notes. If
a purchaser elects to exercise the right of action for rescission, the purchaser
will have no right of action for damages against us. In no case will the amount
recoverable in any action exceed the price at which the notes were offered to
the purchaser and if the purchaser is shown to have purchased the securities
with knowledge of the misrepresentation, we will have no liability. In the case
of an action for damages, we will not be liable for all or any portion of the
damages that are proven to not represent the depreciation in value of the notes
as a result of the misrepresentation relied upon. These rights are in addition
to, and without derogation from, any other rights or remedies available at law
to an Ontario purchaser. The foregoing is a summary of the rights available to
an Ontario purchaser. Ontario purchasers should refer to the complete text of
the relevant statutory provisions.
ENFORCEMENT OF LEGAL RIGHTS
All of our directors and officers as well as the experts named herein may
be located outside of Canada and, as a result, it may not be possible for
Canadian purchasers to effect service of process within Canada upon us or those
persons. All or a substantial portion of our assets and the assets of those
persons may be located outside of Canada and, as a result, it may not be
possible to satisfy a judgment against us or those persons in Canada or to
enforce a judgment obtained in Canadian courts against us or those persons
outside of Canada.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of notes should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the notes in
their particular circumstances and about the eligibility of the notes for
investment by the purchaser under relevant Canadian legislation.
S-19
LEGAL MATTERS
Palmer & Dodge LLP, Boston, Massachusetts will pass upon the validity of
the notes offered hereby. Ropes & Gray, Boston, Massachusetts will pass upon
certain matters for the underwriters.
S-20
TECO ENERGY, INC.
DEBT SECURITIES, PREFERRED STOCK, COMMON STOCK,
STOCK PURCHASE CONTRACTS, STOCK PURCHASE UNITS AND WARRANTS
------------------------
We plan to offer to the public from time to time:
- debt securities consisting of debentures, notes or other evidences of
indebtedness,
- preferred stock,
- common stock,
- stock purchase contracts,
- stock purchase units, and
- warrants or other rights to purchase common stock, preferred stock or
debt securities.
Our common stock trades on the New York Stock Exchange under the symbol
"TE".
This prospectus provides you with a general description of the securities
we may offer. We may offer the securities as separate series, in amounts, prices
and on terms determined at the time of the sale. When we offer securities, we
will provide a prospectus supplement or a term sheet describing the terms of the
specific issue, including the offering price of the securities. YOU SHOULD READ
BOTH THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT OR TERM SHEET, TOGETHER WITH
THE ADDITIONAL INFORMATION DESCRIBED UNDER THE HEADING "WHERE YOU CAN FIND MORE
INFORMATION" BEGINNING ON PAGE 15 OF THIS PROSPECTUS, BEFORE YOU MAKE YOUR
INVESTMENT DECISION.
We will sell the securities to underwriters or dealers, through agents, or
directly to investors.
------------------------
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS MAY NOT BE USED TO SELL SECURITIES UNLESS ACCOMPANIED BY A
PROSPECTUS SUPPLEMENT.
------------------------
The date of this prospectus is May 6, 2002
TECO Energy, Inc. - 702 North Franklin Street - Tampa, Florida
33602 - (813) 228-4111
TABLE OF CONTENTS
PAGE
----
About This Prospectus....................................... 1
Risk Factors................................................ 1
Forward-Looking Statements.................................. 1
TECO Energy................................................. 2
Ratios of Earnings To Fixed Charges and Preferred Stock
Dividends................................................. 2
Description of Debt Securities.............................. 3
Description of Preferred Stock.............................. 8
Description of Common Stock................................. 9
Anti-Takeover Effects of Our Articles of Incorporation and
Bylaws, Florida Law and Our Rights Plan................... 10
Description of Stock Purchase Contracts and Stock Purchase
Units..................................................... 11
Description of Warrants and Other Purchase Rights........... 11
Use of Proceeds............................................. 13
Plan of Distribution........................................ 13
Legal Matters............................................... 14
Experts..................................................... 14
Where You Can Find More Information......................... 15
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
SEC using a "shelf" registration process. The registration statement registered
both the securities described in this prospectus as well as other securities
issuable by us, TECO Capital Trust III and TECO Funding Company III, LLC. Under
the shelf process, we, TECO Capital Trust III, and TECO Funding Company III, LLC
may, from time to time, issue and sell to the public any combination of the
securities described in the registration statement in one or more offerings up
to a total dollar amount of $1,368,906,250.
RISK FACTORS
In deciding whether to purchase our securities, in addition to the other
information contained in this prospectus, you should consider carefully any risk
factors we may include, if appropriate, in the applicable prospectus supplement
or term sheet. You should also consider the "Investment Considerations" included
in our Annual Report on Form 10-K for the fiscal year ended December 31, 2001,
which is incorporated by reference in this prospectus, as the same may be
amended, supplemented or superseded from time to time by our future filings
under the Securities Exchange Act of 1934.
FORWARD-LOOKING STATEMENTS
This prospectus, any prospectus supplement or term sheet, and the documents
we have incorporated by reference may contain forward-looking statements. Such
statements relate to future events or our future financial performance. We use
words such as "anticipate," "believe," "expect," "intend," "may," "project,"
"will" or other similar words to identify forward-looking statements.
Without limiting the foregoing, any statements relating to our
- anticipated capital expenditures;
- future cash flows and borrowings;
- potential future merger opportunities; and
- sources of funding
are forward-looking statements. These forward-looking statements are based on
numerous assumptions that we believe are reasonable, but they are open to a wide
range of uncertainties and business risks and actual results may differ
materially from those discussed in these statements.
Among the factors that could cause actual results to differ materially are:
- general economic conditions, particularly those affecting energy sales in
our service area;
- variations in weather conditions affecting energy sales and operating
costs;
- potential competitive changes in the electric and gas industries,
particularly in the area of retail competition;
- federal and state regulatory initiatives that increase competition or
costs, threaten investment recovery, or impact rate structure;
- commodity price changes, including the price of energy affecting our
merchant plants;
- any adverse changes in nonconventional fuel tax credit laws, regulations
or administration, or in our ability to generate sufficient taxable
income to utilize those credits;
- a greater decline in gas production levels at TECO Coalbed Methane than
are currently projected;
- our ability to find and successfully implement attractive investments in
unregulated businesses;
- our ability to successfully develop, construct, finance and operate our
projects on schedule and within budget;
- any costs incurred if we must replace NEPCO, an Enron subsidiary, as the
construction contractor on our TECO Power Services merchant power
projects;
- the degree to which we are able to successfully develop and operate our
diversified businesses, particularly our merchant power plants which have
no guaranteed rate of return;
- interest rates and other factors that could impact our ability to obtain
access to sufficient capital on satisfactory terms;
- restrictive covenants in or changes to the credit ratings on our current
or future debt that could increase our financing costs or affect our
ability to borrow, make payments on subordinated debt or pay dividends;
- changes in environmental regulation that may impose additional costs or
curtail some of our activities; and
- adverse economic or political developments in the foreign countries in
which our shipping business or TECO Power Services have operations.
When considering forward-looking statements, you should keep in mind the
cautionary statements in this prospectus, any prospectus supplement or term
sheet and the documents incorporated by reference, including the Investment
Considerations included in our filings with the SEC.
TECO ENERGY
We are an electric and gas utility holding company, exempt from
registration under the Public Utility Holding Company Act of 1935, with
important unregulated activities. We have a balance of regulated utility
companies in the growing Florida market and profitable unregulated companies.
Our unregulated businesses include independent power generation and
distribution, marine transportation, coal mining, coalbed methane gas
production, the marketing of natural gas, energy and engineering services and,
indirectly, the sale of propane gas. You can find a more complete description of
our business and recent activities in the documents listed under "WHERE YOU CAN
FIND MORE INFORMATION." The address of our principal executive office is 702
North Franklin Street, Tampa, Florida 33602, and the telephone number is (813)
228-4111.
RATIOS OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth our consolidated ratios of earnings to fixed
charges and preferred stock dividends for the periods shown. If any series of
debt or preferred stock securities should be used to repay our outstanding debt
or retire other securities, we will present a pro forma ratio in the applicable
prospectus supplement or term sheet if the change in a ratio would be ten
percent or greater.
YEAR ENDED DECEMBER 31,
----------------------------------------------------
2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
Ratio of Earnings to Fixed Charges.......................... 2.60x 2.51x 3.22x(1) 3.64x(2) 3.74x(3)
Ratio of Earnings to Fixed Charges and Preferred Stock
Dividends................................................. 2.60x 2.51x 3.22x(1) 3.64x(2) 3.74x(3)
---------------
For the purposes of calculating these ratios, earnings consist of income from
continuing operations before income taxes, income or loss from equity investees
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 other non-recurring pretax items totaling $21.0
million recorded at Tampa Electric Company, TECO Investments, Inc. and TECO
Energy. The effect of these items was to
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reduce the ratio of earnings to fixed charges. Had these items been excluded
from the calculation, the ratio of earnings to fixed charges would have been
3.58x for the year ended December 31, 1999.
(2) Includes the effect of other non-operating pretax items totaling $30.5
million associated with write-offs at TECO Coal Corporation and Tampa
Electric, and $0.6 million pretax of merger-related costs. The effect of
these items was to reduce the ratio of earnings to fixed charges. Had these
items been excluded from the calculation, the ratio of earnings to fixed
charges would have been 3.93x for the year ended December 31, 1998.
(3) Includes a $2.6-million pretax charge for all transactions associated with
the mergers completed in June 1997. The effect of this charge was to reduce
the ratio of earnings to fixed charges. Had this charge been excluded from
the calculation, the ratio of earnings to fixed charges would have been
3.76x for the year ended December 31, 1997.
DESCRIPTION OF DEBT SECURITIES
The debt securities will be unsecured and, unless indicated otherwise in
the applicable prospectus supplement or term sheet, will rank on parity with all
our other unsecured and unsubordinated indebtedness. We will issue debt
securities in one or more series under an indenture dated as of August 17, 1998
between us and The Bank of New York, as trustee. We filed the indenture as an
exhibit to the registration statement on Form S-3 dated August 24, 1998. The
following description of the terms of the debt securities summarizes only the
material terms of the debt securities. The description is not complete, and we
refer you to the indenture, which we incorporate by reference.
GENERAL
The indenture does not limit the aggregate principal amount of the debt
securities or of any particular series of debt securities that we may issue
under it. We are not required to issue debt securities of any series at the same
time nor must the debt securities within any series bear interest at the same
rate or mature on the same date.
Each time that we issue a new series of debt securities, the prospectus
supplement or term sheet relating to that new series will describe the
particular amount, price and other terms of those debt securities. These terms
may include:
- the title of the debt securities;
- any limit on the total principal amount of the debt securities;
- the date or dates on which the principal of the debt securities will be
payable or the method by which such date or dates will be determined;
- the rate or rates at which the debt securities will bear interest, if
any, or the method by which such rate or rates will be determined, and
the date or dates from which any such interest will accrue;
- the date or dates on which any such interest will be payable and the
record dates, if any, for any such interest payments;
- if applicable, whether we may extend the interest payment periods and, if
so, the permitted duration of any such extensions;
- the place or places where the principal of and interest on the debt
securities will be payable;
- any obligation we may have to redeem or purchase the debt securities
pursuant to any sinking fund, purchase fund or analogous provision or at
the option of the holder and the terms and conditions on which the debt
securities may be redeemed or purchased pursuant to an obligation;
- the denominations in which we will issue the debt securities, if other
than denominations of $1,000;
- the terms and conditions, if any, on which we may redeem the debt
securities;
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- the currency, currencies or currency units in which we will pay the
principal of and any premium and interest on the debt securities, if
other than U.S. dollars, and the manner of determining the equivalent in
U.S. dollars;
- whether we will issue any debt securities in whole or in part in the form
of one or more global securities and, if so, the identity of the
depositary for the global security and any provisions regarding the
transfer, exchange or legending of any such global security if different
from those described below under the caption "Global Securities";
- any addition to, change in or deletion from the events of default or
covenants described in this prospectus with respect to the debt
securities and any change in the right of the trustee or the holders to
declare the principal amount of the debt securities due and payable;
- any index or formula used to determine the amount of principal of or any
premium or interest on the debt securities and the manner of determining
any such amounts;
- any terms relating to the conversion of the debt security into our common
stock, preferred stock or other security issuable by us;
- any subordination of the debt securities to any of our other
indebtedness; and
- other material terms of the debt securities.
Unless the prospectus supplement or term sheet relating to the issuance of
a series of debt securities indicates otherwise, the debt securities will have
the following characteristics:
We will issue debt securities only in fully registered form, without
coupons and, generally, in denominations of $1,000 or multiples of $1,000. We
will not charge a service fee for the registration, transfer or exchange of debt
securities, but we may require a payment sufficient to cover any tax or other
governmental charge payable in connection with registration, transfer or
exchange.
The principal of, and any premium and interest on, any debt securities will
be payable at the corporate trust office of The Bank of New York in New York,
New York. Debt securities will be exchangeable and transfers thereof will be
registrable at this corporate trust office. Payment of any interest due on any
debt security will be made to the person in whose name the debt security is
registered at the close of business on the regular record date for interest.
We will have the right to redeem the debt securities only upon written
notice mailed between 30 and 60 days prior to the redemption date.
If we plan to redeem the debt securities, before the redemption occurs, we
are not required to:
- issue, register the transfer of, or exchange any debt security of that
series during the period beginning 15 days before we mail the notice of
redemption and ending on the day we mail the notice; or
- after we mail the notice of redemption, register the transfer of or
exchange any debt security selected for redemption, except, if we are
only redeeming a part of a debt security, we are required to register the
transfer of or exchange the unredeemed portion of the debt security if
the holder so requests.
We may offer and sell debt securities at a substantial discount below their
principal amount. We will describe any applicable special federal income tax and
other considerations, if any, in the relevant prospectus supplement or term
sheet. We may also describe certain special federal income tax or other
considerations, if any, applicable to any debt securities that are denominated
in a currency or currency unit other than U.S. dollars in the relevant
prospectus supplement or term sheet.
The debt securities do not provide special protection in the event we are
involved in a highly leveraged transaction.
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The debt securities are obligations exclusively of TECO Energy, Inc.,
which, as a holding company, has no material assets other than its ownership of
the common stock of its subsidiaries, including Tampa Electric Company. We will
rely entirely upon distributions from our subsidiaries to meet the payment
obligations under the debt securities. Our subsidiaries are separate and
distinct legal entities and have no obligation, contingent or otherwise, to pay
amounts due under the debt securities or otherwise to make any funds available
to us including the payment of dividends or other distributions or the extension
of loans or advances. Furthermore, the ability of our subsidiaries to make any
payments to us would be dependent upon the terms of any credit facilities of the
subsidiaries and upon the subsidiaries' earnings, which are subject to various
business risks. In a bankruptcy or insolvency proceeding, claims of holders of
the debt securities would be satisfied solely from our equity interests in our
subsidiaries remaining after the satisfaction of claims of creditors of the
subsidiaries. Accordingly, the debt securities are effectively subordinated to
existing and future liabilities of our subsidiaries to their respective
creditors.
GLOBAL SECURITIES
If we decide to issue debt securities in the form of one or more global
securities, then we will register the global securities in the name of the
depositary for the global securities or the nominee of the depositary and the
global securities will be delivered by the trustee to the depositary for credit
to the accounts of the holders of beneficial interests in the debt securities.
The prospectus supplement or term sheet will describe the specific terms of
the depositary arrangement for debt securities of a series that are issued in
global form. None of our company, the trustee, any payment agent or the security
registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in a global debt security or for maintaining, supervising or reviewing
any records relating to these beneficial ownership interests.
CONSOLIDATION, MERGER, ETC.
We will not consolidate or merge with or into any other corporation or
other organization, or sell, convey or transfer all or substantially all of our
assets to any individual or organization, unless:
- the successor is an individual or organization organized under the laws
of the United States or any state thereof or the District of Columbia or,
upon the effectiveness of the currently proposed amendment to the
indenture, under the laws of a foreign jurisdiction and such successor
consents to the jurisdiction of the courts of the United States or any
state thereof;
- the successor or transferee expressly assumes our obligations under the
indenture; and
- the consolidation, merger, sale or transfer does not cause the occurrence
of a default under the indenture.
Upon the assumption by the successor of our obligations under the indenture
and the debt securities issued thereunder, and the satisfaction of any other
conditions required by the indenture, the successor will succeed to and be
substituted for us under the indenture.
MODIFICATION OF THE INDENTURE
The indenture provides that we or the trustee may modify or amend its terms
with the consent of (i) the holders of not less than a majority in aggregate
principal amount of the outstanding debt securities of each affected series and
(ii) 66 2/3% in aggregate principal amount of the outstanding debt securities of
all affected series. However, without the consent of each holder of all of the
outstanding debt securities affected by that modification, we may not:
- change the date stated on the debt security on which any payment of
principal or interest is stated to be due;
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- reduce the principal amount or any premium or interest on, any debt
security, including in the case of a discounted debt security, the amount
payable upon acceleration of the maturity thereof;
- change the place of payment or currency of payment of principal of, or
premium, if any, or interest on, any debt security;
- impair the right to institute suit for the enforcement of any payment on
or with respect to any debt security after the stated maturity (or, in
the case of redemption, on or after the redemption date); or
- reduce the percentage in principal amount of outstanding debt securities
of any series, the consent of the holders of which is required for
modification or amendment of the indenture, for waiver of compliance with
some provisions of the indenture or for waiver of some defaults.
Under limited circumstances and only upon the fulfillment of conditions, we
and the trustee may make modifications and amendments of the indenture without
the consent of any holders of the debt securities.
The holders of not less than a majority in aggregate principal amount of
the outstanding debt securities of any series may waive any past default under
the indenture with respect to that series except:
- a default in the payment of principal of, or any premium or interest on,
any debt security of that series;
- in respect of a covenant or provision under the indenture which cannot be
modified or amended without the consent of the holder of each outstanding
debt security of the affected series.
EVENTS OF DEFAULT
An event of default with respect to debt securities of any series issued
under the indenture is any one of the following events (unless inapplicable to
the particular series, specifically modified or deleted as a term of such series
or otherwise modified or deleted in an indenture supplemental to the indenture):
- we fail to pay any interest on any debt security of that series when due,
and such failure has continued for 30 days;
- we fail to pay principal of or premium, if any, on any debt security of
that series when due;
- we fail to deposit any sinking fund payment in respect of any debt
security of that series when due, and such failure has continued for 30
days;
- we fail to perform any other covenant in the indenture (other than a
covenant included in the indenture solely for the benefit of a series of
debt securities other than that series), and such failure has continued
for 90 days after we receive written notice as provided in the indenture;
- events of bankruptcy, insolvency or reorganization; and
- any other event defined as an event of default with respect to debt
securities of a particular series.
If an event of default with respect to any series of debt securities occurs
and is continuing, the trustee or the holders of not less than 25% in principal
amount of the outstanding debt securities of that series may declare the
principal amount (or, if any debt securities of that series are discounted debt
securities, a portion of the principal amount that the terms of the series may
specify) of all debt securities of that series to be immediately due and
payable. Under some circumstances, the holders of a majority in principal amount
of the outstanding debt securities of that series may rescind and annul that
declaration and its consequences. The prospectus supplement or term sheet
relating to any series of debt securities which are discounted debt securities
will specify the particular provisions relating to acceleration of a portion of
the principal amount of the discounted debt securities upon the occurrence of an
event of default and the continuation of the event of default.
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Subject to the provisions of the indenture relating to the duties of the
trustee in case an event of default occurs and is continuing, the trustee is not
obligated to exercise any of its rights or powers under the indenture at the
request or direction of any of the holders unless the holders have offered to
the trustee reasonable security or indemnity. Subject to such provisions for
security and indemnification of the trustee and other rights of the trustee, the
holders of a majority in principal amount of the outstanding debt securities of
any series have the right to direct the time, method and place of conducting any
proceedings for any remedy available to the trustee or exercising any trust or
power conferred on the trustee with respect to the debt securities of that
series.
The holder of any debt security will have an absolute and unconditional
right to receive payment of the principal of and any premium and, subject to
limitations specified in the indenture, interest on such debt security on its
stated maturity date (or, in the case of redemption, on the redemption date) and
to institute suit for the enforcement of any of these payments.
We must furnish to the trustee an annual statement that to the best of our
knowledge we are not in default in the performance and observance of any terms,
provisions or conditions of the indenture or, if there has been such a default,
specifying each default and its status.
SATISFACTION AND DISCHARGE OF THE INDENTURE
We will have satisfied and discharged the indenture and it will cease to be
in effect (except as to our obligations to compensate, reimburse and indemnify
the trustee pursuant to the indenture and some other obligations) when we
deposit or cause to be deposited with the trustee, in trust, an amount
sufficient to pay and discharge the entire indebtedness on the debt securities
not previously delivered to the trustee for cancellation, for the principal (and
premium, if any) and interest to the date of the deposit (or to the stated
maturity date or earlier redemption date for debt securities that have been
called for redemption).
DEFEASANCE OF DEBT SECURITIES
Unless otherwise provided in the prospectus supplement or term sheet for a
series of debt securities, we may cause ourself (subject to the terms of the
indenture) to be discharged from any and all obligations with respect to any
debt securities or series of debt securities (except for certain obligations to
register the transfer or exchange of such debt securities, to replace such debt
securities if stolen, lost or mutilated, to maintain paying agencies and to hold
money for payment in trust) on and after the date the conditions set forth in
the indenture are satisfied. Such conditions include the deposit with the
trustee, in trust for such purpose, of money and/or U.S. government obligations,
which through the scheduled payment of principal and interest in respect thereof
in accordance with their terms will provide money in an amount sufficient to pay
the principal of and any premium and interest on such debt securities on the
stated maturity date of such payments or upon redemption, as the case may be, in
accordance with the terms of the indenture and such debt securities.
Under current Federal income tax law, the defeasance of the debt securities
would be treated as a taxable exchange of the relevant debt securities in which
holders of debt securities would recognize gain or loss. In addition,
thereafter, the amount, timing and character of amounts that holders would be
required to include in income might be different from that which would be
includable in the absence of such defeasance. Prospective investors are urged to
consult their own tax advisors as to the specific consequences of a defeasance,
including the applicability and effect of tax laws other than the Federal income
tax law.
THE TRUSTEE
The trustee is The Bank of New York, which maintains banking relationships
with us in the ordinary course of business and serves as trustee under other
indentures with us and some of our affiliates.
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GOVERNING LAW
The indenture and the debt securities will be governed by and construed in
accordance with the laws of the State of New York.
DESCRIPTION OF PREFERRED STOCK
We currently have authorized 10,000,000 shares of undesignated preferred
stock, $1.00 par value per share, none of which were issued and outstanding as
of the date of this prospectus. Under Florida law and our charter, our board is
authorized to issue shares of preferred stock from time to time in one or more
series without shareholder approval.
Subject to limitations prescribed by Florida law and our charter and
by-laws, our board can determine the number of shares constituting each series
of preferred stock and the designation, preferences, voting powers,
qualifications, and special or relative rights or privileges of that series.
These may include provisions as may be desired concerning voting, redemption,
dividends, dissolution, or the distribution of assets, conversion or exchange,
and other subjects or matters as may be fixed by resolution of the board or an
authorized committee of the board.
Our board is authorized to determine the voting rights of any series of
preferred stock, subject to the following restrictions in our charter:
- holders of shares of our preferred stock are not entitled to more than
the lesser of (i) one vote per $100 of liquidation value and (ii) one
vote per share, when voting as a class with the holders of shares of our
common stock; and
- holders of shares of our preferred stock are not entitled to vote on any
matter separately as a class, other than (i) as required by Florida law,
or (ii) as specified in the terms of the preferred stock, if the matter
to be voted upon would affect the powers, preferences or special rights
of the series or with respect to the election of directors in the event
of our failure to pay dividends on the series.
If we offer a specific series of preferred stock under this prospectus, we
will describe the terms of the preferred stock in the prospectus supplement for
such offering and will file a copy of the charter amendment establishing the
terms of the preferred stock with the SEC. This description will include:
- the title and stated value;
- the number of shares offered, the liquidation preference per share and
the purchase price;
- the dividend rate(s), period(s) and/or payment date(s), or method(s) of
calculation for dividends;
- whether dividends will be cumulative, partially cumulative or
non-cumulative and, if cumulative or partially cumulative, the date from
which the dividends will accumulate;
- the procedures for any auction or remarketing, if any;
- the provisions for a sinking fund, if any;
- the provisions for redemption, if applicable;
- any listing of the preferred stock on any securities exchange or market;
- whether the preferred stock will be convertible into any series of our
common stock, and, if applicable, the conversion price (or how it will be
calculated) and exchange period;
- voting rights, if any, of the preferred stock;
- whether interests in the preferred stock will be represented by
depositary shares;
- a discussion of any material and/or special U.S. federal income tax
considerations applicable to the preferred stock;
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- the relative ranking and preferences of the preferred stock as to
dividend rights and rights upon liquidation, dissolution or winding up of
our affairs;
- any limitations on issuance of any class or series of preferred stock
ranking senior to or on parity with the series of preferred stock as to
dividend rights and rights upon our liquidation, dissolution or winding
up;
- any other specific terms, preferences, rights, limitations or
restrictions of the preferred stock.
The preferred stock offered by this prospectus will, when issued, be fully
paid and nonassessable and will not have, or be subject to, any preemptive or
similar rights.
Unless we specify otherwise in the applicable prospectus supplement, the
preferred stock will, with respect to dividend rights and rights upon our
liquidation, dissolution or winding up, rank as follows:
- senior to all classes or series of our common stock, and to all equity
securities issued by us, the terms of which specifically provide that
they rank junior to the preferred stock with respect to those rights;
- on a parity with all equity securities we issue that do not rank senior
or junior to the preferred stock with respect to those rights; and
- junior to all equity securities we issue, the terms of which do not
specifically provide that they rank on a parity with or junior to the
preferred stock with respect to these rights.
As used for these purposes, the term "equity securities" does not include
convertible debt securities.
DESCRIPTION OF COMMON STOCK
Our authorized common stock consists of 400,000,000 shares, $1.00 par value
per share. At April 1, 2002, there were 139,831,589 shares of common stock
issued and outstanding. The approximate number of shareholders of record of our
common stock as of April 1, 2002 was 23,053.
Each share of our common stock is entitled to one vote on all matters
requiring a vote of shareholders and, subject to the rights of the holders of
any outstanding shares of preferred stock, are entitled to receive any
dividends, in cash, securities or property, as our board may declare. We may not
pay cash dividends on our common stock at any time when we have deferred
interest payments on our 8.50% Junior Subordinated Notes Due 2041 issued in
connection with the issuance of the 8.50% Trust Preferred Securities of TECO
Capital Trust I or our 5.11% Junior Subordinated Notes Due January 15, 2007
issued in connection with the issuance of the 5.11% Trust Preferred Securities
of TECO Capital Trust II issued as part of our 9.50% Equity Security Units.
In the event of our liquidation, dissolution or winding up, either
voluntary or involuntary, subject to the rights of the holders of any
outstanding shares of preferred stock, holders of common stock are entitled to
share pro-rata in all of our remaining assets available for distribution.
The common stock issued by this prospectus will, when issued, be fully paid
and nonassessable and will not have, or be subject to, any preemptive or similar
rights.
EquiServe, L.P. is the transfer agent and registrar for our common stock.
Its phone number is 800-650-9222.
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ANTI-TAKEOVER EFFECTS OF OUR ARTICLES OF INCORPORATION AND
BYLAWS, FLORIDA LAW AND OUR RIGHTS PLAN
REQUIRED VOTE FOR AUTHORIZATION OF CERTAIN ACTIONS
Our Articles require the vote of the holders of at least 80% of the
combined voting power of the then outstanding shares of stock of all classes and
series entitled to vote generally in the election of directors for approval of
certain business combinations, including certain mergers, asset sales, security
issuances, recapitalizations and liquidations, involving us or our subsidiaries
and certain acquiring persons (namely a person, entity or specified group which
beneficially owns more than 10% of the voting power of the then outstanding
shares of our capital stock entitled to vote generally in an election of
directors), unless such business combination has been approved by a majority of
disinterested directors, or the fair market value and other procedural
requirements of our Articles are met.
ELECTION AND REMOVAL OF DIRECTORS
Our board of directors is divided into three classes. The directors in each
class serve for a three year term, one class being elected each year by our
stockholders. A vote of a majority of the board or 80% of the combined voting
power of the then outstanding shares of stock, voting together as a single
class, is required to remove a director, with or without cause. This system of
electing and removing directors may discourage a third party from making a
tender offer or otherwise attempting to obtain control of us because it
generally makes it more difficult for stockholders to replace a majority of the
directors. Under the terms of our bylaws and Articles, these provisions cannot
be changed without a supermajority vote of our stockholders.
UNDER FLORIDA LAW
Florida has enacted legislation that may deter or frustrate takeovers of
Florida corporations. The "Control Share Acquisitions" section of the Florida
Business Corporation Act, or FBCA, generally provides that shares acquired in
excess of certain specified thresholds, beginning at 20% of a corporation's
outstanding voting shares, will not possess any voting rights unless such voting
rights are approved by a majority vote of the corporation's disinterested
shareholders. We have provided in our bylaws that the Control Share Acquisition
Act shall not apply to us.
The "Affiliated Transactions" section of the FBCA generally requires
majority approval by disinterested directors or supermajority approval of
disinterested shareholders of certain specified transactions (such as a merger,
consolidation, sale of assets, issuance or transfer of shares or
reclassifications of securities) between a corporation and a holder of more than
10% of the outstanding shares of the corporation, or any affiliate of such
shareholder.
RIGHTS PLAN
We have a shareholder rights plan. Under the plan, each outstanding share
of our common stock carries with it a right, currently unexercisable, that if
triggered permits the holder to purchase large amounts of our or any successor
entity's securities at a discount and/or trade those purchase rights separately
from the common stock. The rights are triggered when a person acquires, or makes
a tender or exchange offer to acquire, 10% of our common stock. The plan,
however, prohibits the 10%-acquiror, or its affiliates, from exercising our
shares' purchase rights. As a result the acquiror's interest in TECO Energy is
substantially diluted. The rights expire in May 2009, subject to extension. We
may also redeem the rights at a nominal price per right until 10 business days
after a triggering event.
These and other provisions of our Articles, bylaws and rights plan could
discourage potential acquisition proposals and could delay or prevent a change
in control.
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DESCRIPTION OF STOCK PURCHASE CONTRACTS
AND STOCK PURCHASE UNITS
We may issue stock purchase contracts, including contracts obligating
holders to purchase from us, and us to sell to the holders, a specified number
of shares of common stock or preferred stock at a future date or dates (which we
refer to as stock purchase contracts). The price per share of common stock or
preferred stock and the number of shares of common stock or preferred stock may
be fixed at the time the stock purchase contracts are issued or may be
determined by reference to a specific formula set forth in the stock purchase
contracts. The stock purchase contracts may be issued separately or as part of
units consisting of a stock purchase contract and debt securities, preferred
stock, trust preferred securities or debt obligations of third parties,
including U.S. Treasury securities, securing the holders' obligations to
purchase the common stock or preferred stock under the stock purchase contracts
(which we refer to as stock purchase units). The stock purchase contracts may
require us to make periodic payments to the holders of the stock purchase units
or vice versa, and such payments may be unsecured or prefunded on some basis.
The stock purchase contracts may require holders to secure their obligations
thereunder in a specified manner and in certain circumstances we may deliver
newly issued prepaid stock purchase contracts, often known as prepaid
securities, upon release to a holder of any collateral securing such holder's
obligation under the original stock purchase contract.
The applicable prospectus supplement will describe the material terms of
the stock purchase contracts or stock purchase units and, if applicable, prepaid
securities. Material United States federal income tax considerations applicable
to the stock purchase units and the stock purchase contracts will also be
discussed in the applicable prospectus supplement.
DESCRIPTION OF WARRANTS AND OTHER PURCHASE RIGHTS
GENERAL
We may issue warrants and/or other rights to purchase debt securities
(which we refer to as debt warrants), preferred stock (which we refer to as
preferred stock warrants) or common stock (which we refer to as common stock
warrants). We may issue any of these warrants or purchase rights (which we refer
to generally as warrants) independently or together with other securities
offered by this prospectus and attached to or separate from the other
securities. If we issue warrants, we will issue them under warrant agreements
between us and a bank or trust company, as agent, all of which will be described
in the prospectus supplement relating to the warrants we are offering.
DEBT WARRANTS
We will describe the terms of debt warrants offered in the applicable
prospectus supplement, the warrant agreement relating to the debt warrants and
the debt warrant certificates representing the debt warrants, including the
following:
- the title;
- the aggregate number offered;
- their issue price or prices;
- the designation, aggregate principal amount and terms of the debt
securities purchasable upon exercise, and the procedures and conditions
relating to exercise;
- the designation and terms of any related debt securities and the number
of debt warrants issued with each security;
- if applicable, the date, if any, on and after which the debt warrants and
the related debt securities will be separately transferable;
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- the principal amount of debt securities purchasable upon exercise, and
the price at which that principal amount of debt securities may be
purchased upon exercise;
- the commencement and expiration dates of the right to exercise;
- the maximum or minimum number which may be exercised at any time;
- if applicable, a discussion of the material United States income tax
considerations applicable to exercise;
- and any other terms, including terms, procedures and limitations relating
to exercise.
Debt warrant certificates will be exchangeable for new debt warrant
certificates of different denominations, and debt warrants may be exercised at
the corporate trust office of the warrant agent or any other office indicated in
the applicable prospectus supplement. Before exercising their debt warrants,
holders will not have any of the rights of holders of the securities purchasable
upon exercise and will not be entitled to payments of principal of, premium, if
any, or interest, if any, on the securities purchasable upon exercise.
OTHER WARRANTS
The applicable prospectus supplement will describe the following terms of
preferred stock warrants or common stock warrants offered under this prospectus:
- the title;
- the securities issuable upon exercise;
- the issue price or prices;
- the number of warrants issued with each share of preferred stock or
common stock;
- any provisions for adjustment of (i) the number or amount of shares of
preferred stock or common stock issuable upon exercise of the warrants or
(ii) the exercise price;
- if applicable, the date on and after which the warrants and the related
preferred stock or common stock will be separately transferable;
- if applicable, a discussion of the material United States federal income
tax considerations applicable to the exercise of the warrants;
- the commencement and expiration dates of the right to exercise;
- the maximum and minimum number that may be exercised at any time; and
- any other terms, including terms, procedures, and limitations relating to
exchange or exercise.
EXERCISE OF WARRANTS
Each warrant will entitle the holder to purchase for cash the principal
amount of debt securities or shares of preferred stock or common stock at the
applicable exercise price set forth in, or determined as described in, the
applicable prospectus supplement. Warrants may be exercised at any time up to
the close of business on the expiration date set forth in the applicable
prospectus supplement. After the close of business on the expiration date,
unexercised warrants will become void.
Warrants may be exercised by delivering to the corporate trust office of
the warrant agent or any other officer indicated in the applicable prospectus
supplement (a) the warrant certificate properly completed and duly executed and
(b) payment of the amount due upon exercise. As soon as practicable following
exercise, we will forward the debt securities or shares of preferred stock or
common stock purchasable upon exercise. If less than all of the warrants
represented by a warrant certificate are exercised, a new warrant certificate
will be issued for the remaining warrants.
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USE OF PROCEEDS
We intend to add the net proceeds from the sale of the securities to our
general funds to be used for general corporate purposes, which may include
investment in subsidiaries, working capital, capital expenditures, repayment of
debt and other business opportunities.
PLAN OF DISTRIBUTION
We may sell the securities through one or more of the following ways:
- directly to purchasers;
- to or through one or more underwriters or dealers; or
- through agents.
A prospectus supplement or term sheet with respect to a particular series
of securities will set forth the terms of the offering of those securities,
including the following:
- name or names of any underwriters, dealers or agents;
- the purchase price of such securities and our proceeds from the sale;
- underwriting discounts and commissions; and
- any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers.
If we use underwriters in the sale, the underwriters will acquire the
securities for their own account and they may resell them from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. Underwriting
syndicates represented by one or more managing underwriters or one or more
independent firms acting as underwriters may offer the securities to the public.
In connection with the sale of securities, we may compensate the underwriters in
the form of underwriting discounts or commissions. The purchasers of the
securities for whom the underwriters may act as agent may also pay them
commissions. Underwriters may sell the securities to or through dealers, and
such dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agents. Unless otherwise set forth in the applicable
prospectus supplement or term sheet, the obligations of any underwriters to
purchase the securities will be subject to conditions precedent, and the
underwriters will be obligated to purchase all such securities if any are
purchased.
If we use dealers in the sale of the securities, we will sell the
securities to the dealers as principals. The dealers may then resell the
securities to the public at varying prices to be determined by the dealer at the
time of resale. The applicable prospectus supplement or term sheet will name any
dealer, who may be deemed to be an underwriter, as that term is defined in the
Securities Act of 1933, involved in the offer or sale of securities, and set
forth any commissions or discounts we grant to the dealer.
If we use agents in the sales of the securities, the agents may solicit
offers to purchase the securities from time to time. Any such agent, who may be
deemed to be an underwriter, as that term is defined in the Securities Act,
involved in the offer or sale of the securities will be named, and any
commissions payable by us to such agent set forth, in the applicable prospectus
supplement or term sheet. Any agent will be acting on a reasonable effort basis
for the period of its appointment or, if indicated in the applicable prospectus
supplement or term sheet, on a firm commitment basis.
We may also sell securities directly to institutional investors or others
who may be deemed to be underwriters within the meaning of the Securities Act
with respect to resales. The terms of those sales would be described in the
prospectus supplement or term sheet.
If the prospectus supplement or term sheet so indicates, we will authorize
agents, underwriters or dealers to solicit offers from institutions to purchase
securities from us at the public offering price set forth
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in the prospectus supplement or term sheet pursuant to stock purchase or delayed
delivery contracts providing for payment and delivery on a specified date in the
future. The contracts will be subject only to those conditions set forth in the
prospectus supplement or term sheet, and the prospectus supplement or term sheet
will set forth the commission payable for solicitation of the contracts.
We may engage in at the market offerings of our common stock. An "at the
market" offering is an offering of our common stock at other than a fixed price
on or through the facilities of the NYSE. Under Rule 415(a)(4) of the Securities
Act, the total value of at the market offerings made under this prospectus may
not exceed 10% of the aggregate market value of our common stock held by
non-affiliates on a date within 60 days prior to filing the registration
statement containing this prospectus. Accordingly, we may not sell under this
prospectus more than approximately $359,708,910 of our common stock in at the
market offerings. Any underwriter that we engage for an at the market offering
will be named in a post-effective amendment to the registration statement
containing this prospectus. Additional details of our arrangement with the
underwriter, including commissions or fees paid by us and whether the
underwriter is acting as principal or agent, will be described in the related
prospectus supplement.
Agents, dealers and underwriters may be entitled under agreements with us
to indemnification against some civil liabilities, including liabilities under
the Securities Act, or to contribution with respect to payments which the
agents, dealers or underwriters may be required to make. Agents, dealers and
underwriters may engage in transactions with, or perform services for, us or our
subsidiaries for customary compensation.
If indicated in the applicable prospectus supplement or term sheet, one or
more firms may offer and sell securities in connection with a remarketing upon
their purchase, in accordance with their terms, acting as principals for their
own accounts or as our agents. Any remarketing firm will be identified and the
terms of its agreement, if any, with us will be described in the applicable
prospectus supplement or term sheet. We may be obligated to indemnify the
remarketing firm against some liabilities, including liabilities under the
Securities Act, and the remarketing firm may engage in transactions with or
perform services for us or our subsidiaries for customary compensation.
Any underwriter may engage in over-allotment, stabilizing and syndicate
short covering transactions and penalty bids in accordance with Regulation M of
the Securities Exchange Act of 1934. Over-allotment involves sales in excess of
the offering size, which creates a short position. Stabilizing transactions
involve bids to purchase the underlying security so long as the stabilizing bids
do not exceed a specified maximum. Syndicate short covering transactions involve
purchases of securities in the open market after the distribution has been
completed in order to cover syndicate short positions. Penalty bids permit the
underwriters to reclaim selling concessions from dealers when the securities
originally sold by the dealers are purchased in covering transactions to cover
syndicate short positions. These transactions may cause the price of the
securities sold in an offering to be higher than it would otherwise be. These
transactions, if commenced, may be discontinued by the underwriters at any time.
Any securities, other than our common stock, will be a new issue of
securities with no established trading market. We cannot assure you that there
will be a market for the securities of any particular security, or that if a
market does develop, that it will continue to provide holders of those
securities with liquidity for their investment or will continue for the duration
the securities are outstanding.
The prospectus supplement or term sheet relating to each offering will set
forth the anticipated date of delivery of the securities.
LEGAL MATTERS
Palmer & Dodge LLP, Boston, Massachusetts will pass upon the validity of
the securities for us.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference to the Annual Report on Form 10-K of TECO Energy for the year ended
December 31, 2001 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent certified public accountants, given on
the authority of said firm as experts in auditing and accounting.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any of these documents at the
SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference room. Our SEC filings are also available to the public on the SEC's
website at http://www.sec.gov. Copies of certain information filed by us with
the SEC are also available on our website at http://www.tecoenergy.com. Our
website is not part of this prospectus.
We filed a registration statement on Form S-3 with the SEC covering the
securities. For further information on us and the securities, you should refer
to the registration statement and its exhibits. This prospectus discusses
material provisions of our indenture dated August 17, 1998 entered into with The
Bank of New York as trustee. Because the prospectus may not contain all the
information that you may find important, you should review the full text of the
indenture and other documents we have incorporated by reference into the
registration statement.
The SEC allows us to "incorporate by reference" information that we file
with the SEC, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 until all of the securities are sold:
- our Annual Report on Form 10-K for the fiscal year ended December 31,
2001;
- the description of our common stock contained in our Registration
Statement on Form 8-B, filed on July 13, 1981 (File No. 1-8180),
including any amendment or reports filed for the purpose of updating such
description; and
- our Current Reports on Form 8-K filed April 22, 2002, January 24, 2002,
January 15, 2002, January 11, 2002 and January 9, 2002.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Director of Investor Relations
TECO Energy, Inc.
702 North Franklin Street
Tampa, Florida 33602
(813) 228-4111
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement or term sheet. We have not
authorized anyone to provide you with different information. We are not making
an offer of these securities in any state where the offer is not permitted. You
should not assume that the information in this prospectus or any supplement or
term sheet is accurate as of any date other than the date on the front of these
documents.
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