AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER
19, 2002.
REGISTRATION NO. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
TECO ENERGY, INC.
(Exact Name of Registrant as Specified in Its Charter)
FLORIDA 4911 59-2052286
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code) Identification No.)
702 NORTH FRANKLIN STREET
TAMPA, FLORIDA 33602
(813) 228-4111
(Address, Including ZIP Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
DAVID E. SCHWARTZ, ESQ.
SECRETARY
TECO ENERGY, INC.
702 NORTH FRANKLIN STREET
TAMPA, FLORIDA 33602
(813) 228-4111
(Name, Address, Including ZIP Code and Telephone Number, Including Area
Code, of Agent for Service)
with copies to:
Stanley Keller, Esq.
Palmer & Dodge LLP
111 Huntington Avenue
Boston, Massachusetts 02199-7613
(617) 239-0100
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this registration statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462 (b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462
(d) under the Securities Act, check the following box and list the Securities
Act registration number of the earlier effective registration statement for the
same offering. [ ]
CALCULATION OF REGISTRATION FEE
Title of Each Class of Amount to be Proposed Maximum Offering Proposed Maximum Amount of
Securities to be Registered Price Per Unit(1) Aggregate Offering Registration Fee(1)
Registered Price(1)
10.50% Notes Due 2007 $380,000,000 100% $380,000,000 $34,960
(1) This registration fee has been calculated pursuant to Rule 457(f)(2) under
the Securities Act of 1933, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED DECEMBER 19, 2002
PROSPECTUS
TECO ENERGY, INC.
OFFER TO EXCHANGE
$380,000,000 10.50% NOTES DUE 2007
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OUTSTANDING
10.50% NOTES DUE 2007
WHICH HAVE NOT BEEN SO REGISTERED
- The exchange offer expires at 5:00 p.m., New York City time, on
____________, 2003, unless we extend the offer. If we extend the
exchange offer, we will not extend it beyond _________, 2003.
- The terms of the exchange notes to be issued in the exchange offer are
substantially identical to the terms of the original notes, except that
the exchange notes are registered under the Securities Act of 1933 and
the transfer restrictions and the registration rights applicable to the
original notes generally do not apply to the exchange notes.
- All original notes that are validly tendered and not validly withdrawn
will be exchanged.
- Tenders of original notes may be withdrawn at any time prior to the
expiration of the exchange offer.
- We do not intend to apply for listing of the exchange notes on any
securities exchange or to arrange for them to be quoted on any
quotation system.
- The exchange offer is subject to customary conditions, including the
condition that the exchange offer not violate applicable law or any
applicable interpretation of the staff of the Securities and Exchange
Commission.
- We will not receive any proceeds from the exchange offer.
- This prospectus and the letter of transmittal are first being mailed to
all holders of the original notes on _____________, 2003.
INVESTING IN THE EXCHANGE NOTES INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 7.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The exchange offer is not being made, nor will we accept surrender or
exchange from holders of original notes, in any jurisdiction in which the
exchange offer or the acceptance thereof would not be in compliance with the
securities or "blue sky" laws of such jurisdiction.
Each broker-dealer that receives exchange notes for its own account
pursuant to this exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. The letter of
transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act of 1933,
as amended. This prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales of exchange
notes received in exchange for original notes where such original notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities. We have agreed that, for a period of 180 days after the date
this exchange offer expires, we will make this prospectus available to any
broker-dealer for use in connection with any such resale. See "PLAN OF
DISTRIBUTION."
The date of this prospectus is _______________, 200_.
TECO Energy, Inc. 702 North Franklin Street Tampa, Florida 33602 (813) 228-4111
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY.......................................................... 3
RISK FACTORS................................................................ 7
NOTE REGARDING FORWARD-LOOKING STATEMENTS.................................. 17
USE OF PROCEEDS............................................................ 19
CAPITALIZATION............................................................. 20
SELECTED CONSOLIDATED HISTORICAL FINANCIAL INFORMATION..................... 21
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES............................ 23
THE EXCHANGE OFFER......................................................... 24
DESCRIPTION OF THE EXCHANGE NOTES.......................................... 32
BOOK ENTRY; DELIVERY AND FORM.............................................. 55
MATERIAL FEDERAL INCOME TAX CONSEQUENCES................................... 58
ORIGINAL NOTES REGISTRATION RIGHTS......................................... 65
PLAN OF DISTRIBUTION....................................................... 68
LEGAL OPINIONS............................................................. 69
EXPERTS.................................................................... 69
WHERE YOU CAN FIND MORE INFORMATION........................................ 70
In this prospectus, "we," "our," "ours" and "us" refer to TECO Energy, Inc.
unless the context otherwise requires. The terms "note" or "notes" refer to both
the original notes and the exchange notes to be issued in the exchange offer.
The term "holders", when used in connection with the notes, refers to those
persons who are the registered holders of the notes on the books of the
registrar appointed under the indenture.
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You
should not rely on any unauthorized information or representations. This
prospectus is an offer to exchange only the notes offered by this prospectus,
and only under the circumstances and in those jurisdictions where it is lawful
to do so. The information contained in this prospectus is current only as of its
date.
This prospectus incorporates important business and financial information
about us that is not included in or delivered with this document. You may
request a copy of these filings, at no cost, by writing or telephoning us at the
following address:
1
Director of Investor Relations
TECO Energy, Inc.
702 North Franklin Street
Tampa, Florida 33602
(813) 228-4111
IN ORDER TO OBTAIN TIMELY DELIVERY, YOU MUST REQUEST INFORMATION NO LATER
THAN ____________, 2003.
2
PROSPECTUS SUMMARY
This summary contains basic information that is important to you in
deciding whether to participate in the exchange offer. This summary is not
complete and does not contain all of the information that you should consider.
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.
SUMMARY OF THE EXCHANGE OFFER
On November 20, 2002, we completed a private offering of $380,000,000
aggregate principal amount of 10.50% Notes Due 2007. Prior to the offering of
those original notes, we entered into a registration rights agreement with the
initial purchaser of those original notes in which we agreed to deliver this
prospectus to you and to complete an exchange offer for those original notes.
Below is a summary of the exchange offer.
EXCHANGE OFFER We are offering to exchange an
aggregate of $380,000,000 principal
amount of exchange notes for an
aggregate of $380,000,000 principal
amount of original notes. The original
notes may be exchanged only in multiples
of $1,000.
EXPIRATION DATE This exchange offer will expire at
5:00 p.m., New York City time, on
_________, 2003, unless we extend the
offer. We will not extend the exchange
offer beyond _____________, 2003.
PROCEDURES FOR TENDERING ORIGINAL The procedures for exchanging original
NOTES notes involve notifying the exchange
agent before the expiration date
of the exchange offer of your intention
to do so. The procedures for properly
providing notice are described in this
prospectus under the heading "THE
EXCHANGE OFFER - Exchange Offer
Procedures - How to Tender."
ACCEPTANCE OF ORIGINAL NOTES AND We will accept any original notes that
DELIVERY OF EXCHANGE NOTES are properly tendered for exchange
before 5:00 p.m., New York City time, on
the day this exchange offer expires.
The exchange notes will be delivered
promptly after expiration of this
exchange offer.
EXCHANGE DATE We will notify the exchange agent of the
date of acceptance of the original notes
for exchange.
3
WITHDRAWAL RIGHTS If you tender your original notes for exchange in this exchange offer and later
wish to withdraw them, you may do so at any time before 5:00 p.m., New York City
time, on the day this exchange offer expires.
EFFECT ON HOLDERS OF ORIGINAL NOTES Any original notes that remain outstanding after this exchange offer will
continue to be subject to restrictions on their transfer. After this
exchange offer, holders of original notes will not (with limited exceptions)
have any further rights under the registration rights agreement. Any market
for original notes that are not exchanged could be adversely affected by the
completion of this exchange offer. See "RISK FACTORS-The original notes
are, and will continue to be, subject to restrictions on transfer, and the
trading market, if any, for the original notes may be adversely affected by
completion of this exchange offer."
RESALE OF THE EXCHANGE NOTES Based on the position of the staff of the Division of Corporation Finance of
the SEC as stated in certain interpretive letters issued to third parties in
other transactions, we believe that the exchange notes acquired in this
exchange offer may be freely traded without compliance with the provisions
of the Securities Act of 1933, as amended, that call for registration and
delivery of a prospectus, except as described in the following paragraphs.
See "PLAN OF DISTRIBUTION."
In order to participate in the exchange offer, you will be required to make
specified representations in a letter of transmittal, including that:
- you are not an "affiliate" of ours, as defined in Rule 405 of the
Securities Act of 1933;
- you are not a broker-dealer who owns original notes acquired
directly from us;
- you will acquire the exchange notes in the ordinary course of
business; and
- you have not agreed with anyone to distribute the exchange notes.
If you are a broker-dealer that purchased original notes for your own account as
part of market-making or other trading activities, you may represent to us that
you have not agreed with us or our affiliates to distribute the exchange notes.
If you make this representation, you must agree to deliver a prospectus in
connection with any resale of the exchange notes and you need not make the last
representation provided for above.
ACCRUED INTEREST ON THE Any interest that has accrued on an original note before its exchange in this
ORIGINAL NOTES exchange offer will be payable on the exchange note on the first
4
ORIGINAL NOTES interest payment date after the completion of this exchange offer.
TAX CONSEQUENCES The exchange of the original notes for the exchange notes should not be a
taxable exchange for United States federal income tax purposes. See "MATERIAL
FEDERAL INCOME TAX CONSEQUENCES."
EXCHANGE AGENT The Bank of New York is serving as the exchange agent. Its address and telephone
number are provided in this prospectus under the heading "THE EXCHANGE OFFER -
Exchange Agent."
USE OF PROCEEDS We will not receive any cash proceeds from this exchange offer.
SUMMARY OF THE TERMS OF THE EXCHANGE NOTES
The terms of the exchange notes will be essentially the same as the
original notes, except that the exchange notes will not contain language
restricting their transfer, and holders of the exchange notes generally will not
be entitled to further registration rights under the registration rights
agreement. The exchange notes will evidence the same debt as the outstanding
original notes for which they were exchanged, and the exchange notes will
replace such outstanding original notes. Both the original notes and the
exchange notes are governed by the same indenture. See the "DESCRIPTION OF
EXCHANGE NOTES" section of this prospectus for more detailed information about
the terms and conditions of the exchange notes.
NOTES OFFERED $380,000,000 principal amount of 10.50% Notes Due 2007.
MATURITY DATE December 1, 2007.
INTEREST RATE The exchange notes will bear interest at the rate of 10.50% per year from
the exchange date to, but excluding, December 1, 2007.
INTEREST PAYMENT DATES June 1 and December 1 of each year, commencing June 1, 2003. Interest payments
will be made to the persons in whose names the exchange notes are registered on
the 15th calendar day immediately preceding the applicable interest payment
date.
DENOMINATIONS $1,000 and integral multiples of $1,000.
OPTIONAL REDEMPTION The exchange notes will be redeemable at our option, in whole or in part at
any time and from time to time, at the redemption price described in
"DESCRIPTION OF EXCHANGE NOTES-Optional Redemption." Except as described
in "DESCRIPTION OF EXCHANGE NOTES-Purchase of Notes upon Change in
Control," the exchange notes may not be redeemed at any time at the option
of the holders.
5
CHANGE IN CONTROL In the event of a Change in Control and
if the exchange notes are rated below
a specified level at that time, each
holder of the exchange notes may
require us to repurchase such exchange
notes, in whole or in part, at a
purchase price of 101% of the principal
amount thereof plus accrued and unpaid
interest, if any. See "DESCRIPTION OF
EXCHANGE NOTES - Purchase of Notes upon
Change in Control."
CERTAIN COVENANTS The indenture contains covenants that,
among other things, in the event of
certain ratings downgrades, limit our
ability to pay dividends or
distributions or make investments,
incur additional liens or issue
additional indebtedness. See
"DESCRIPTION OF EXCHANGE NOTES -
Certain Restrictive Covenants."
RANKING The exchange notes will be our
unsecured debt and will rank on a
parity with our other unsecured and
unsubordinated indebtedness from time
to time outstanding, and would be
effectively subordinated to any secured
indebtedness we may incur. Because we
are a holding company that conducts our
operations through our subsidiaries,
the exchange notes will be structurally
subordinated to any indebtedness of our
subsidiaries.
ADDITIONAL ISSUANCES We may, at any time, without the
consent of the holders of the exchange
notes, issue additional notes having
the same ranking and same interest
rate, maturity and other terms as the
exchange notes. Any additional notes,
together with these exchange notes, may
constitute single series of notes under
the indenture.
FORM The exchange notes will be represented
by registered global securities
registered in the name of Cede & Co.,
the partnership nominee of The
Depository Trust Company. Beneficial
interests in the exchange notes will be
shown on, and transfers will be
effected through, records maintained by
The Depository Trust Company and its
participants.
TRUSTEE The Bank of New York.
6
RISK FACTORS
The following are certain factors that could affect our future operating
results and financial condition. These factors could cause our actual operating
results and financial condition to differ materially from our projections.
FINANCING RISKS
WE HAVE SUBSTANTIAL INDEBTEDNESS, WHICH COULD ADVERSELY AFFECT OUR FINANCIAL
CONDITION AND FINANCIAL FLEXIBILITY.
To support our growth to date, we have significantly expanded our
indebtedness. 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 our debt obligations could limit our ability to obtain
additional financing or refinance existing debt.
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. Specifically, TECO Energy's credit facilities and
the financing arrangements of TECO Power Services' Gila River and Union Power
projects require that at each quarter-end TECO Energy's debt-to-capital ratio,
as defined in the applicable agreements, not exceed 65%. Similarly, Tampa
Electric's credit facility requires that at each quarter-end Tampa Electric's
debt-to-capital ratio not exceed 60%, and certain long-term debt at Peoples Gas
System contains a prohibition on the incurrence of funded debt if Tampa Electric
Company's debt-to-capital ratio, as defined in the applicable agreement, exceeds
65%. The Peoples Gas debt also carries a Tampa Electric Company interest
coverage requirement, as defined in the applicable agreement, of 2.0 times or
greater for four consecutive quarters, Tampa Electric's credit facility contains
an interest coverage covenant, as defined in the applicable agreement, of 2.5
times or greater for each twelve-month period ended each quarter, and certain
TECO Power Services financing arrangements require a TECO consolidated interest
coverage, as defined in the applicable agreement, equal to or exceeding 3.0
times for the twelve-month period ended each quarter. At September 30, 2002,
Tampa Electric Company's and our debt-to-capital ratios, as applicable, were
44.3% and 56.5%, respectively, and interest coverage, as applicable, was 7.8
times and 3.9 times, respectively. Our failure to comply with any of these
covenants, as well as our ratings maintenance covenants discussed below, or to
meet our payment obligations, could result in an event of default which, if not
cured or waived, could result in the acceleration of other outstanding debt
obligations. We may not have sufficient working capital or liquidity to satisfy
our debt obligations in the event of an acceleration of all or a significant
portion of our outstanding obligations. Additionally, such an acceleration would
also affect our ability to pay dividends. Furthermore, if we had to defer
interest payment on our subordinated notes that support the distributions on our
outstanding trust preferred securities, we would be prohibited from paying cash
dividends on our common stock until all unpaid distributions on the subordinated
notes were made.
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 are described 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,
7
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.
OUR FINANCIAL CONDITION AND ABILITY TO ACCESS CAPITAL AND PAY DIVIDENDS MAY BE
MATERIALLY ADVERSELY AFFECTED BY FURTHER RATINGS DOWNGRADES.
On September 23, 2002, Fitch Ratings lowered the ratings on our senior
unsecured debt to BBB from A-. On September 24, 2002 Moody's Investor
Services, Inc. and Standard & Poor's Ratings Services, Inc. lowered their
ratings on our senior unsecured debt to Baa2 from A3 and to BBB- from BBB+,
respectively. The agencies also lowered the ratings on other of our securities,
as well as those of TECO Finance and Tampa Electric. In September 2002, the
rating outlook from Fitch was revised to stable from negative, while the outlook
from Standard & Poor's remained negative. On November 13, 2002, Moody's revised
its rating outlook to negative from stable.
These downgrades and any future downgrades may affect our ability to
borrow and may increase our financing costs, which may decrease our earnings. We
are also likely to experience greater interest expense than we may have
otherwise if, in future periods, we replace maturing debt with new debt bearing
higher interest rate spreads due to our lower credit ratings. In addition, such
downgrades could adversely affect our relationships with customers and
counterparties.
In addition to affecting our cost of borrowing, our lower credit ratings
may affect the amount of indebtedness, types of financing structures and debt
markets that are available to us. For example, TECO Energy and Tampa Electric
have historically accessed the commercial paper markets to satisfy the
short-term borrowing requirements of our unregulated and regulated operations,
respectively. The recent ratings actions by Standard & Poor's have limited TECO
Energy's access to the commercial paper markets. Tampa Electric continues to
maintain access to the commercial paper market. We are currently using our TECO
Energy credit facility for our short-term borrowing needs. Half of TECO Energy's
$700 million credit facility had a renewal date of November 13, 2002, which was
converted to a one year term loan while we work towards renewing that credit
facility with the banks. The second half has a renewal date of November 13,
2004. Tampa Electric's $300 million 364-day facility was renewed with higher
interest rates and a maturity date of November 12, 2003. In order to utilize the
credit facilities, we must meet the required debt-to-capital ratio, and in the
case of Tampa Electric the interest coverage test, referred to above. We have
implemented a plan of cash flow preservation and generation, which, in addition
to normal operating cash generation, includes sales of certain assets, capital
expenditure reductions and other financial transactions. This plan is designed
to cover our cash needs, but we cannot be sure that it will be sufficient to
cover any liquidity shortfall.
We guaranteed $500 million in fully-drawn equity bridge facilities and a
balance of approximately $100 million (net of estimated available reserves for
contingencies) in equity commitments as of September 30, 2002 for the
construction of the Gila River and Union Power projects. On October 31, 2002, we
paid $125 million of the $500 million on the equity bridge facilities, thereby
reducing the outstanding guaranteed amount under those facilities to $375
million. In addition, as a result of Enron's bankruptcy, we agreed to be the
guarantor of the contractor's payment and performance obligations under the
construction contracts for these two projects. Our guarantees of the equity
bridge facilities, the equity contribution agreements and the construction
contract guarantees for those projects require that we maintain senior unsecured
credit ratings from Standard & Poor's and Moody's of not less than ratings of
BBB and Baa3 or ratings of BBB- and Baa2. Our current ratings referred to above
are at the minimum required level. A further downgrade from either Standard &
Poor's or Moody's would trigger a failure to meet that requirement, thereby
requiring the delivery of letters of credit, which we estimate currently could
approximate $575 million.
8
In the event of a downgrade, under the terms of the construction contract
guarantees, we are required to deliver letters of credit in an amount equal to
the full construction contract price and any change orders and cost overruns or
such lesser amount satisfactory to the majority of the lenders for the Gila
River and Union Power projects. We believe that the amounts required would be
based on the estimated amounts reasonably necessary to cover the remaining
payment and performance obligations under the construction contracts. As of
January 2002, when documenting the construction contract guarantees with the
lenders for the Gila River and Union Power projects, the amount necessary to
cover the payment and performance obligations of the contractor was estimated to
be approximately $310 million, net of approximately $150 million in letters of
credit previously issued to the lenders as security for the projects. Based on
the construction status as of October 31, 2002, we estimate the amount necessary
to cover the payment and performance obligations of the contractor to be
approximately $100 million, net of the approximately $150 million in letters of
credit previously issued as security. This $100 million is included in the $575
million amount referenced above.
The amount of the letters of credit that would be required to be delivered
as set forth above declines as equity is contributed to the projects and the
levels of construction completion increase. If we are required to post letters
of credit in the amounts set forth above, we would engage in discussions with
the lenders to negotiate arrangements to meet that commitment. If we were
unsuccessful, we would need to find alternate means of meeting that obligation,
and we cannot be sure that we would be able to do so. The failure to deliver
such letters of credit within the time allotted would constitute an event of
default under the terms of the credit facilities and the construction guarantees
relating to the Gila River and Union Power projects.
IF WE ARE UNABLE TO REDUCE CAPITAL EXPENDITURES OR SUCCESSFULLY COMPLETE PLANNED
MONETIZATION AND OTHER TRANSACTIONS TO THE EXTENT ANTICIPATED, OUR FINANCIAL
CONDITION AND RESULTS COULD BE ADVERSELY AFFECTED.
Part of our business plan for 2003 includes reducing previously
anticipated capital expenditures by approximately $250 million in order to
maximize cash flows and reduce the need for external financings. We cannot be
sure that we will be successful in achieving reductions in that amount. Our
business plan also includes plans to monetize material amounts of the Section 29
tax credits related to TECO Coal's synthetic fuel production capability and
Tampa Electric's Polk Power Station's coal gasification unit, to sell the TECO
Coalbed Methane business, to realize cash from repatriation and non-recourse
refinancings on generating facilities in Guatemala. We cannot be certain,
however, that we will find purchasers or realize the expected value of these
transactions with the anticipated impact on the our cash flow position.
Depending on the success of these planned expenditure reductions and
monetization transactions, we may need to seek external financings, which, in
the case of debt financings, could adversely affect our balance sheet strength
and apply downward pressure on our credit ratings, and in the case of equity
financings, could have a dilutive effect to our equity holders and our
earnings-per-share results.
BECAUSE WE ARE A HOLDING COMPANY, WE ARE DEPENDENT ON CASH FLOW FROM OUR
SUBSIDIARIES, WHICH MAY NOT BE AVAILABLE IN THE AMOUNTS AND AT THE TIMES WE NEED
IT.
We are a holding company and dependent on cash flow from our subsidiaries
to meet our cash requirements that are not satisfied from external funding
sources. Some of our subsidiaries have indebtedness containing restrictive
covenants which, if violated, would prevent them from making cash distributions
to us. In particular, Tampa Electric Company's first mortgage bonds contain
restrictions on distributions on its common stock, and certain long-term debt at
Tampa Electric Company's Peoples Gas System division prohibits payment of
dividends to TECO Energy if Tampa Electric Company's consolidated shareholders'
equity is not at least $500,000,000. At September 30, 2002, Tampa Electric
Company's unrestricted retained earnings available for dividends on its common
stock were
9
approximately $161.9 million and its consolidated shareholders' equity was
approximately $1.8 billion. Also, our wholly-owned subsidiary, TECO Diversified,
the holding company for TECO Transport, TECO Coal and TECO Solutions, has a
guaranty related to a coal supply agreement that could limit the payment of
dividends to us.
WE ARE VULNERABLE TO INTEREST RATE CHANGES AND MAY NOT HAVE ACCESS TO CAPITAL AT
FAVORABLE RATES, IF AT ALL.
Changes in interest rates and capital markets generally affect our cost of
borrowing and access to these markets. We cannot be sure that we will be able to
accurately predict the effect those changes will have on our cost of borrowing
or access to capital markets.
INDEPENDENT POWER PROJECT RISKS
TECO POWER SERVICES' EXISTING AND PLANNED POWER PLANTS ARE AFFECTED BY MARKET
CONDITIONS, AND TECO POWER SERVICES MAY NOT BE ABLE TO SELL POWER AT PRICES THAT
ENABLE IT TO RECOVER ITS INVESTMENTS IN THE PLANTS.
TECO Power Services is currently operating, constructing and investing in
power plants that do not currently have long-term contracts for the sale of
power. These power plants may sell at least a portion of their 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 power sales revenue;
- the effect of competition from other suppliers of power;
- regulatory actions that may affect market behavior, such as price
limitations or bidding rules imposed by the Federal Energy
Regulatory Commission (FERC) or reimposition of regulation in power
markets;
- the demand for power in a market served by our plants relative to
available supply;
- the availability of transmission to accommodate the sale of power;
or
- whether TECO Power Services will recover its initial investment in
these plants.
At present, several of the wholesale markets supplied by so-called
"merchant" power plants are experiencing significant pricing declines due to
excess supply and weak economies. Consequently, only a portion of the projected
output of TECO Power Services' plants has been hedged for 2003 and 2004. TECO
Power Services' results could be adversely affected if it is unable to
sufficiently sell the output of its plants at a premium to forward curve prices
or if we need to write off any capital already invested in projects.
Our forecast assumes that TECO Power Services will manage these risks by:
- entering into negotiated contracts with power purchasers resulting
in higher revenues than the spot market for capacity payments and
providing ancillary services for a significant portion of the
plants' output;
10
- avoiding short positions; and
- retaining flexibility to defer, if and where possible and advisable,
construction of output capacity in a market that has become
oversupplied.
However, we cannot be sure how successfully we will be able to implement
these risk management measures. For instance, in oversupplied markets, entering
into forward contracts could be difficult.
TECO Power Services' position in the Odessa and Guadalupe power stations
in Texas is currently in the form of a $137 million loan to a Panda Energy
International subsidiary, which is a partner in Texas Independent Energy (TIE).
At the end of 2002, either the borrower will repay the loan or the loan will
convert to an indirect equity interest in these projects. TECO Power Services is
evaluating various options regarding its loan, including renegotiating the terms
of the loan, converting into equity and renegotiating the ownership structure,
selling TECO Power Services' interest in the projects, or writing-off of the
loan amount. Any write-off or charge from a renegotiation or sale would
adversely affect our results and has not been included in our estimates for 2002
or 2003.
WE MAY BE UNABLE TO SUCCESSFULLY COMPLETE AND FINANCE CURRENT AND FUTURE
PROJECTS ON SCHEDULE AND WITHIN BUDGET.
TECO Power Services currently has new power generating facilities under
construction. The construction of these facilities, as well as any future
construction projects, involves risks of shortages and inconsistent qualities of
equipment and material, labor shortages and disputes, 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, which may impact our ability to
generate sufficient cash flow and service our related project debt.
OUR MARKETING AND RISK MANAGEMENT POLICIES MAY NOT WORK AS PLANNED, AND WE MAY
SUFFER ECONOMIC LOSSES DESPITE SUCH POLICIES.
We actively manage the market risk inherent in our energy and fuel
positions. Nonetheless, adverse changes in energy and fuel prices may result in
losses in our earnings or cash flows and adversely affect our balance sheet. Our
marketing and risk management procedures may not always be followed or may not
work as planned. As a result, we cannot predict with precision the impact that
our marketing, trading and risk management decisions may have on our business,
operating results or financial position. In addition, to the extent we do not
cover the entire exposure of our assets or our positions to market price
volatility, or our hedging procedures do not work as planned, fluctuating
commodity prices could cause our sales and net income to be volatile.
Our marketing and risk management activities also are exposed to the
credit risk that counterparties to our transactions will not perform their
obligations. Should counterparties to these arrangements fail to perform, we may
be forced to enter into alternative hedging arrangements, honor underlying
commitments at then-current market prices or otherwise satisfy our obligations
on unfavorable terms. In that event, our financial results would likely be
adversely affected.
GENERAL BUSINESS AND OPERATIONAL RISKS
GENERAL ECONOMIC CONDITIONS MAY ADVERSELY AFFECT OUR BUSINESSES.
11
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 de Guatemala, S.A. depends
on growth in the relevant service areas and in annual energy sales.
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, future structural
changes that we cannot predict 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 (FPSC), and Tampa Electric's wholesale
power sales and transmission services are subject to regulation by the 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.
OUR BUSINESSES ARE SENSITIVE TO VARIATIONS IN WEATHER AND HAVE SEASONAL
VARIATIONS.
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 have a material impact on energy sales.
Unusual weather, such as hurricanes, could adversely affect operating costs and
sales.
Peoples Gas System, which has a single winter peak period, is more weather
sensitive than Tampa Electric, which has both summer and winter peak periods.
Mild winter weather in Florida can be expected to negatively impact results at
Peoples Gas System.
12
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.
Electric power marketing may be seasonal. For example, in some parts of
the country, demand for, and market prices of, electricity peak during the hot
summer months, while in other parts of the country such peaks occur in the cold
winter months. As a result, our power marketing results may fluctuate on a
seasonal basis. The pattern of this fluctuation may change depending on the
nature and location of the facilities we operate and the terms under which we
sell electricity.
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 is currently affected by the cost of coal to Tampa
Electric, particularly as it compares 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 can be volatile and, accordingly, when the
coalbed methane tax credits expire on December 31, 2002, the earnings from TECO
Coalbed Methane will become increasingly difficult to predict. In addition,
TECO Coalbed Methane's results are affected by its level of gas production,
which is naturally declining. It is expected that production will decline 6%
to 9% per year, although actual production levels may be different than those
we have assumed. Although we currently have plans to sell TECO Coalbed Methane,
until and unless such sale occurs, the performance of that business will affect
our consolidated results.
13
WE RELY ON SOME TRANSMISSION AND DISTRIBUTION ASSETS THAT WE DO NOT OWN OR
CONTROL TO DELIVER WHOLESALE ELECTRICITY, AS WELL AS NATURAL GAS. IF
TRANSMISSION IS DISRUPTED, OR IF CAPACITY IS INADEQUATE, OUR ABILITY TO SELL AND
DELIVER POWER AND NATURAL GAS MAY BE HINDERED.
We depend on transmission and distribution facilities owned and operated
by utilities and other energy companies to deliver the electricity and natural
gas we sell to the wholesale market, as well as the natural gas we sell and
purchase for use in our electric generation facilities. If transmission is
disrupted, or if capacity is inadequate, our ability to sell and deliver
products and satisfy our contractual and service obligations may be hindered.
The FERC has issued regulations that require wholesale electric
transmission services to be offered on an open-access, non-discriminatory basis.
Although these regulations are designed to encourage competition in wholesale
market transactions for electricity, there is the potential that fair and equal
access to transmission systems will not be available or that sufficient
transmission capacity will not be available to transmit electric power as we
desire. We cannot predict the timing of industry changes as a result of these
initiatives or the adequacy of transmission facilities in specific markets.
In addition, the independent system operators that oversee the
transmission systems in certain wholesale power markets have from time to time
been authorized to impose price limitations and other mechanisms to address
volatility in the power markets. These types of price limitations and other
mechanisms may adversely impact the profitability of our wholesale power
marketing business.
THE UNCERTAIN OUTCOME REGARDING THE CREATION OF REGIONAL TRANSMISSION
ORGANIZATIONS, OR RTOS, MAY IMPACT OUR OPERATIONS, CASH FLOWS OR FINANCIAL
CONDITION.
Tampa Electric is continuing to make progress towards the development of
its RTO, which would independently control the transmission assets of
participating utilities in peninsular Florida. Given the regulatory uncertainty
of the ultimate timing, structure and operations of GridFlorida or an alternate
combined transmission structure, we cannot predict what effect its creation will
have on our future consolidated results of operations, cash flow or financial
condition.
WE MAY BE UNABLE TO TAKE ADVANTAGE OF OUR EXISTING TAX CREDITS.
We derive a portion of our net income from Section 29 tax credits related
to the production of non-conventional fuels. Although, we currently plan to
monetize a significant amount of those credits, until and unless we successfully
do so, our use of these tax credits is dependent on our generating sufficient
taxable income against which to use the credits. Our forecast for 2002 assumes
that we will generate sufficient taxable income to use these credits. These
credits, and their monetization value, 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.
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.
14
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 require us to curtail
some of our businesses' activities.
15
RISKS RELATED TO THE EXCHANGE NOTES
THE EXCHANGE NOTES ARE EFFECTIVELY SUBORDINATED TO ALL EXISTING AND FUTURE
INDEBTEDNESS OF OUR SUBSIDIARIES, AND YOU MAY NOT RECEIVE FULL PAYMENT ON THE
EXCHANGE NOTES IN THE EVENT OF ANY LIQUIDATION, BANKRUPTCY, REORGANIZATION OR
SIMILAR PROCEEDING INVOLVING TECO ENERGY.
In any liquidation, bankruptcy, reorganization or similar proceeding, there
may not be sufficient assets to pay in full amounts due on the exchange notes.
The exchange notes are obligations exclusively of TECO Energy, 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 exchange notes. 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. Further, 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 liquidation, bankruptcy, reorganization or similar
proceeding involving TECO Energy, claims of holders of the exchange notes would
be satisfied solely from our equity interests in our subsidiaries remaining
after the satisfaction of claims of creditors of the subsidiaries. Accordingly,
the exchange notes are effectively subordinated to existing and future
liabilities of our subsidiaries to their respective creditors.
THERE IS CURRENTLY NO PUBLIC MARKET FOR THE EXCHANGE NOTES.
The exchange notes are a new issue of securities for which there is
currently no public market. Although Credit Suisse First Boston Corporation has
informed us that it currently intends to make a market in the exchange notes,
CSFB is not obligated to do so and any such market making may be discontinued at
any time without notice. Accordingly, there can be no assurance as to the
liquidity of any market that may develop for the exchange notes. We do not
currently intend to apply for listing of the exchange notes on any securities
exchange.
The liquidity of, and trading market for, the exchange notes or the original
notes, as the case may be, also may be adversely affected by general declines in
the market or by declines in the market for similar securities. Such declines
may adversely affect such liquidity and trading markets independent of our
financial performance and prospects.
16
THE ORIGINAL NOTES ARE, AND WILL CONTINUE TO BE, SUBJECT TO RESTRICTIONS ON
TRANSFER, AND THE TRADING MARKET, IF ANY, FOR ORIGINAL NOTES MAY BE ADVERSELY
AFFECTED BY COMPLETION OF THIS EXCHANGE OFFER.
The original notes have not been registered under the Securities Act of
1933 or any state securities laws and therefore may not be offered, sold or
otherwise transferred except in compliance with the registration requirements of
the Securities Act of 1933 and any other applicable securities laws, or pursuant
to an exemption from those laws or in a transaction not subject to those laws.
We do not intend to register under the Securities Act of 1933 the original notes
that remain outstanding after completion of this exchange offer (subject to
applicable limited exceptions). Original notes that remain outstanding after the
completion of this exchange offer will continue to bear a legend reflecting
those restrictions on transfer, and holders of those original notes will not be
entitled to any rights to have those original notes registered under the
Securities Act of 1933 or to any similar rights under the registration rights
agreement (subject to applicable limited exceptions). To the extent that
original notes are tendered and accepted in the exchange offer, the trading
market, if any, for remaining original notes may be adversely affected.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus 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
- earnings estimates and outlooks;
- anticipated capital expenditures;
- future cash flows and borrowings;
- potential future merger opportunities and/or asset sales or
monetizations; 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:
- the effect of our substantial indebtedness on our financial
condition and financial flexibility;
- ratings downgrades that could affect our ability to access
capital and to make payments on subordinated debt or pay
dividends, our ability to maintain compliance with covenants
in our
17
borrowing arrangements and increase our financing costs;
- our ability to reduce capital expenditures and complete
monetizations and other transactions to raise cash as planned;
- limitations on our ability to obtain cash flow on which we
depend from our subsidiaries;
- interest rates and other factors that could impact our ability
to obtain access to sufficient capital on satisfactory terms;
- the effect of market conditions on TECO Power Services' power
plants, which have no guaranteed rate of return;
- potential capital arrangements or write-offs associated with
our projects;
- our ability to successfully complete and finance our projects
on schedule and within budget;
- our ability to manage our market and credit risk;
- general economic conditions, particularly those affecting
energy sales in our service area;
- 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;
- variations in weather conditions and seasonal variations
affecting energy sales and operating costs;
- commodity price changes, including the price of energy
affecting our businesses;
- availability of transmission for sale of our power;
- 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;
- problems with our subsidiaries' operations such as accidents
or equipment failures that, if they occurred, would cause us
to incur substantial costs;
- adverse economic or political developments in the foreign
countries in which our shipping business or TECO Power
Services have operation; and
- changes in environmental regulation that may impose additional
costs or curtail some of our activities.
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,
18
including the section entitled "Risk Factors" of this prospectus and the
Investment Considerations included in our filings with the SEC.
USE OF PROCEEDS
This exchange offer is intended to satisfy some of our obligations under
the registration rights agreement. We will not receive any cash proceeds from
the issuance of the exchange notes in this exchange offer. In exchange for
issuing the exchange notes as described in this prospectus, we will receive an
equal principal amount of original notes, which will be canceled.
The net proceeds from the issuance and sale of the original notes were used
to retire $200,000,000 aggregate principal amount of our 7.00% Remarketable or
Redeemable Securities Due 2015 (ROARS Notes), to pay down short-term debt
previously drawn against our credit facility and for general corporate purposes.
Pending such uses, we have invested the remaining proceeds in short-term money
market instruments.
19
CAPITALIZATION
The following table summarizes:
- the historical capitalization of TECO Energy and its
consolidated subsidiaries at September 30, 2002 (as shown in
the first column below);
- the capitalization on a pro forma basis reflecting the
issuance and sale of 19,384,800 shares of our common stock and
receipt of aggregate proceeds (after deducting underwriting
discounts and commissions and estimated offering expenses) of
approximately $206.4 million in October 2002 and application
of the net proceeds to repay short-term debt (as shown in the
second column below); and
- the capitalization on a pro forma as adjusted basis reflecting
the issuance of common stock described in the preceding bullet
and as adjusted to reflect the issuance and sale of the
original notes and our application of the net proceeds in the
manner described in "USE OF PROCEEDS" (as shown in the third
column below).
SEPTEMBER 30, 2002 (UNAUDITED)
------------------------------
ACTUAL PRO FORMA
AMOUNTS PRO FORMA AS ADJUSTED
---------- ---------- ----------
($ IN MILLIONS)
Cash and cash equivalents ..................... $ 187.4 $ 187.4 $ 287.6
Restricted cash ............................... 1.6 1.6 1.6
---------- ---------- ----------
Total cash related .................. $ 189.0 $ 189.0 $ 289.2
========== ========== ==========
Short-term debt ............................... $ 230.8 $ 24.4 $ --
Long-term debt due within one year ............ 338.4(1) 338.4(1) 138.4
Long-term debt, less amount due within one year 2,955.8 2,955.8 3,335.8
Redeemable preferred securities ............... 200.0 200.0 200.0
Mandatorily convertible preferred securities .. 449.1 449.1 449.1
Common equity, including the effect of unearned
compensation ................................ 2,421.2 2,627.6 2,606.6(2)
---------- ---------- ----------
Total capitalization(3) ............. $ 6,595.3 $ 6,595.3 $ 6,729.9
========== ========== ==========
(1) Includes $200 million in aggregate principal amount of our ROARS Notes
which were exchanged for original notes valued at $234.1 million in
connection with the original note offering. See also "USE OF PROCEEDS."
(2) Includes an after-tax charge of $21.0 million, reflecting the $34.1 million
repurchase premium related to the ROARS Notes.
(3) Does not include guarantees and contingent obligations. See "RISK FACTORS
-- We have substantial indebtedness, which could adversely affect our
financial condition and financial flexibility," and "-- Our financial
condition and ability to access capital and pay dividends may be materially
adversely affected by further ratings downgrades."
20
SELECTED CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
The tables below present selected historical consolidated income statement
data, cash flow information and balance sheet data of TECO Energy and its
subsidiaries. The information in the table was derived from our audited
financial statements for the years ended December 31, 1997 through December 31,
2001 (including our financial information for the years ended December 31, 1999
through December 31, 2001 included in our Current Report on Form 8-K filed
December 19, 2002). The information in these tables is only a summary. You
should read it in connection with our historical financial statements and
related notes and the sections titled "Management's Discussion & Analysis of
Financial Condition & Results of Operations" in our Annual Report on Form 10-K
for the year ended December 31, 2001 (including our Current Report on Form 8-K
filed on December 19, 2002) and our Quarterly Reports on Form 10-Q for the
periods ended March 31, 2002, June 30, 2002 and September 30, 2002. See "WHERE
YOU CAN FIND MORE INFORMATION."
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------ ------------------------------------------------------------------
2002(3) 2001 2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- ---------- ---------- ----------
TABLE 1 ($ IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
INCOME STATEMENT DATA(1)(2)
Operating revenues $ 2,015.3 $ 1,914.1 $ 2,488.1 $ 2,223.2 $ 1,932.6 $ 1,905.1 $ 1,809.5
Operating income 329.4 330.1 398.2 400.5 411.5 386.5 397.0
Net income from continuing
operations 263.6 214.7 273.8 227.5 179.2(4) 179.2(5) 183.7(6)
Earnings per share (basic)
from continuing operations 1.80 1.61 $ 2.04 $ 1.81 $ 1.37(4) $ 1.36(5) $ 1.40(6)
Dividends paid per share 1.055 1.025 $ 1.370 $ 1.330 $ 1.285 $ 1.225 $ 1.165
CASH FLOW INFORMATION
EBITDA(7) $ 688.6 $ 627.8 $ 817.9 $ 732.2 $ 624.4 $ 603.5 $ 618.0
Cash interest 133.7 129.0 178.1 166.7 116.9 99.3 115.5
Cash flow from investing:
Capital expenditures (791.7) (711.2) (965.9) (688.4) (426.1) (296.1) (212.6)
Other capital investments (518.1) (43.6) (140.1) (361.4) (78.8) (94.8) 2.2
---------- ---------- ---------- ---------- --------- --------- ----------
Total (1,309.8) (754.8) (1,106.0) (1,049.8) (504.9) (390.9) (210.4)
Cash flow from financing 889.5 333.8 613.5 665.6 204.2 (98.2) (145.7)
Cash flow from operations 449.3 398.9 513.1 386.3 381.3 495.4 350.8
----------
(1) All prior periods presented reflect the results of TECO Coalbed Methane as
discontinued operations. In September 2002, we announced our intention and
initiated a plan to sell the TECO Coalbed Methane gas assets. Also
effective for the quarter ended September 30, 2002, based on the
deliberations of Emerging Issues Task Force No. (EITF) 02-03, Issues
Related to Accounting for Contracts Involved in Energy Trading and Risk
Management Activities, and EITF No. 99-19, Reporting Revenue Gross as a
Principal versus Net as an Agent, we will present revenues for energy
marketing operations on a net basis. All periods presented reflect these
reclassifications to conform to the current presentation.
(2) As described in Note J to our Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002, we adopted the Financial Accounting Standards
Board's FAS 142, Goodwill and Other Intangible Assets, as of January 1,
2002. Our adoption of FAS 142 resulted in the elimination of the
amortization of goodwill for periods beginning January 1, 2002. Goodwill
amortization of $3.7 million, $2.4 million, $0.4 million, $0.3 million and
$0.3 million were recorded for the years ended 2001, 2000, 1999, 1998 and
1997, respectively.
(3) Results include $6 million in after-tax income from a settlement agreement
with the Electric Reliability Council of Texas (ERCOT) relating to amounts
due for ancillary services provided by TECO Power Services' Frontera Power
Station in the second quarter and a $3.0 million after-tax charge for an
aircraft leased to US Airways by our TECO Investments subsidiary.
(4) Includes the effect of the following charges, which reduced net income by
$19.6 million and earnings per share by $0.15 in 1999:
Tampa Electric recorded a charge of $10.5 million ($6.4 million after tax)
based on Florida Public Service Commission audits of its 1997 and 1998
earnings which, among other things, limited its equity ratio to 58.7
percent, a decrease of 91 basis points and 224 basis points from 1997's and
1998's ratios, respectively. Tampa Electric also recorded a charge of $3.5
million after tax, representing management's estimate of additional expense
to resolve the litigation filed by the United States Environmental
Protection Agency, which was then pending. After-tax charges totaling $6.1
million were also recognized reflecting corporate income tax provisions and
settlements related to prior years' tax returns. These charges were
recorded at Tampa Electric (a $3.8-million net after-tax charge, after
recovery under the then current regulatory agreement), at TECO Investments
(a $4.3-million after-tax charge) and at the TECO Energy corporate level (a
$2.0-million after-tax benefit). A charge of $6.0 million ($3.6 million
after tax) was recorded to adjust the carrying value of certain investments
in leveraged aircraft leases to reflect lower anticipated residual values.
(5) Includes the effect of charges, which reduced net income by $19.6 million
and earnings per share by $0.15 in 1998.
21 footnotes continued on following page
(6) Includes the effect of merger-related transaction expenses, which reduced
net income by $5.3 million and earnings per share by $0.04 in 1997.
(7) EBITDA is defined as income from continuing operations before interest,
taxes (before application of the Section 29 synthetic fuel related
benefits), equity component of allowance for funds used during
construction, depreciation and amortization. EBITDA is not a measure of
performance under GAAP. While EBITDA should not be considered as a
substitute for net income, cash flows from operating activities and other
income or cash flow statement data prepared in accordance with GAAP, or as
a measure of profitability or liquidity, management understands that
EBITDA is customarily used as a measure in evaluating companies.
AS OF
SEPT. 30, AS OF DECEMBER 31,
---------- ----------------------------------------------------------
2002 2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- ---------- ----------
TABLE 2 ($ IN MILLIONS)
BALANCE SHEET DATA
Total assets $ 8,059.9 $ 6,722.1 $ 5,734.3 $ 4,690.1 $ 4,179.3 $ 3,960.4
Capitalization:
Short-term debt 230.8 638.9 1,208.9 813.7 319.0 447.5
Long-term debt due within one year 338.4(1) 788.8 237.3 155.8 36.0 12.7
Long-term debt, less amount due within one year 2,955.8 1,842.5 1,374.6 1,207.8 1,279.6 1,080.2
Redeemable preferred securities 200.0 200.0 200.0 -- -- --
Mandatorily convertible preferred securities 449.1 -- -- -- -- --
Common shareholders' equity excluding the effects of
unearned compensation 2,457.8 2,015.9 1,559.5 1,472.5 1,569.2 1,512.2
Total capitalization(2) 6,631.9 5,486.1 4,580.3 3,649.8 3,203.8 3,052.6
--------
(1) Includes $200 million in aggregate principal amount of our ROARS Notes
which were exchanged for original notes valued at $234.1 million in
connection with the original note offering. See also "USE OF PROCEEDS."
(2) Does not include guarantees and contingent obligations. See "RISK FACTORS
-- We have substantial indebtedness, which could adversely affect our
financial condition and financial flexibility," and "-- Our financial
condition and ability to access capital and pay dividends may be
materially adversely affected by further ratings downgrades."
22
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our consolidated ratios of earnings to
fixed charges for each of the periods shown.
NINE MONTHS TWELVE MONTHS YEAR ENDED DECEMBER 31,
ENDED ENDED -----------------------------------------------------
SEPTEMBER 30, 2002 SEPTEMBER 30, 2002 2001 2000 1999 1998 1997
------------------ ------------------ -------- -------- ----------- ----------- -----------
Ratio of Earnings to Fixed Charges 2.81x 2.55x 2.41x(1) 2.42x(1) 3.14x(1)(2) 3.55x(1)(3) 3.65x(1)(4)
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,
excluding allowance for funds used during construction, amortization of debt
premium, the interest component of rentals and preferred stock dividend
requirements.
----------
(1) All prior periods presented reflect the reclassification of TECO Coalbed
Methane's results from continuing operations to discontinued operations. In
September 2002, we announced our intention and initiated a plan to sell the TECO
Coalbed Methane gas assets.
(2) Includes the effect of 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 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 3.48x for the year ended December 31, 1999.
(3) Includes the effect of non-recurring 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 3.83x for
the year ended December 31, 1998.
(4) 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 3.68x for
the year ended December 31, 1997.
23
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The original notes were initially issued and sold on November 20, 2002.
Those sales were not registered under the Securities Act of 1933, as amended, in
reliance upon the exemption provided by Section 4(2) of the Securities Act and
Rule 144A under the Securities Act. We and the initial purchaser entered into a
registration rights agreement prior to the issuance of the original notes. Under
the registration rights agreement, we agreed to file and cause to become
effective with the SEC the registration statement of which this prospectus is a
part to effect the exchange of original notes for exchange notes.
The sole purpose of this exchange offer is to fulfill our obligations
under the registration rights agreement.
CONDITIONS TO EXCHANGE OFFER
Completion of the exchange offer is subject to the conditions that the
exchange offer not violate any applicable law or interpretation of the staff of
the Division of Corporation Finance of the SEC and that no injunction, order or
decree has been issued which would prohibit, prevent or materially impair our
ability to proceed with the exchange offer. The exchange offer is also subject
to various procedural requirements discussed below with which holders must
comply. We reserve the right, in our absolute discretion, to waive compliance
with these requirements subject to applicable law.
In addition, we will not accept for exchange any original notes tendered,
and no exchange notes will be issued in exchange for any such original notes, if
at such time any stop order shall be threatened or in effect with respect to the
registration statement of which this prospectus is a part or qualification of
the Indenture under the Trust Indenture Act of 1939, as amended.
TERMS OF THE EXCHANGE OFFER
We are offering to exchange, upon the terms and subject to the conditions
described in this prospectus and the accompanying letter of transmittal, $1,000
principal amount of exchange notes for each $1,000 principal amount of original
notes. Based on the position of the staff of the Division of Corporation Finance
of the SEC as stated in certain interpretive letters issued to third parties in
other transactions, we believe that the exchange notes will generally be freely
transferable by holders thereof . See "PLAN OF DISTRIBUTION." Holders of the
exchange notes will not be entitled to registration rights under the
registration rights agreement except under certain limited circumstances. See
"ORIGINAL NOTES REGISTRATION RIGHTS." Otherwise, the terms of the exchange notes
are identical in all respects to the terms of the original notes for which they
may be exchanged pursuant to this exchange offer. The exchange notes will
evidence the same debt as the original notes and will be entitled to the
benefits of the indenture. See "DESCRIPTION OF THE EXCHANGE NOTES."
Each broker-dealer that receives exchange notes for its own account in
exchange for original notes, where those original notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of those exchange notes. See "PLAN OF DISTRIBUTION."
24
If you are an affiliate of ours or if you intend to participate in the
exchange offer for the purpose of distributing the exchange notes, or if you are
a broker-dealer that purchased original notes from us to resell pursuant to Rule
144A or any other available exemption under the Securities Act, you will not be
permitted or entitled to tender those original notes in the exchange offer and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or transfer of those original notes
unless that sale is made pursuant to an exemption from such requirements. See
"PLAN OF DISTRIBUTION."
The exchange offer is not conditioned upon any minimum aggregate principal
amount of original notes being tendered or accepted for exchange.
Holders of original notes do not have any appraisal or dissenters' rights
in connection with this exchange offer.
Neither we nor our board of directors makes any recommendation to you as
to whether to tender or refrain from tendering all or any portion of your
original notes in this exchange offer. In addition, no one has been authorized
to make any recommendation as to whether you should tender notes in this
exchange offer. You must make your own decision whether to tender original notes
in the exchange offer and, if so, the aggregate amount of original notes to
tender based on your own financial positions and requirements.
If any tendered original notes are not accepted for exchange because of an
invalid tender, global securities for any such unaccepted original notes will be
returned, without expense, to the tendering holder promptly after completion of
this exchange offer.
Holders who tender original notes in connection with this exchange offer
will not be required to pay brokerage commissions or fees or, subject to the
instructions in the letter of transmittal, transfer taxes with respect to the
exchange of original notes in connection with this exchange offer. We will pay
all charges and expenses in connection with this exchange offer. See " - Fees
and Expenses."
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The exchange offer will expire at 5:00 p.m., New York City time, on
_______________, 2003 unless we, in our sole discretion, extend the period
during which the exchange offer is open by giving written notice to the exchange
agent and by timely public announcement communicated no later than 9:00 a.m. on
the next business day following the date for expiration, unless otherwise
required by applicable law or regulation, by making a press release. We will not
extend the exchange offer beyond ______________, 2003. During any extension of
the exchange offer, all original notes previously tendered pursuant to the
exchange offer will remain subject to the exchange offer.
We expressly reserve the right to:
- terminate the exchange offer and not accept for exchange any
original notes if we determine, in our sole discretion, that the
conditions to the exchange offer have not been satisfied, and
- amend the terms of the exchange offer in any manner permitted by
applicable law, whether before or after any tender of original
notes.
If any such termination or amendment occurs, we will notify the exchange
agent in writing and will either issue a press release or give written notice to
the holders of original notes as promptly as
25
practicable. Unless we terminate the exchange offer prior to 5:00 p.m., New York
City time, on the date of expiration, we will exchange the exchange notes for
original notes on the first business day following the expiration date.
If we waive any material condition to the exchange offer, or amend the
exchange offer in any other material respect, we will promptly disclose such
waiver or amendment by means of a prospectus supplement that will be distributed
to the holders of the original notes, and if at the time that such prospectus
supplement is first sent or given to holders of original notes, the exchange
offer is scheduled to expire at any time earlier than the expiration of a period
ending on the fifth business day from, and including, the date that such
prospectus supplement is first so sent or given, then the exchange offer will be
extended until the expiration of such period of five business days.
We will mail this prospectus and the related letter of transmittal and
other relevant materials to record holders of original notes and to brokers,
banks and similar persons whose names, or the names of whose nominees, appear on
the lists of holders for subsequent transmittal to beneficial owners of original
notes.
EXCHANGE OFFER PROCEDURES
HOW TO TENDER
Your tender to us of original notes pursuant to one of the procedures set
forth below will constitute an agreement between you and us in accordance with
the terms and subject to the conditions stated below and in the letter of
transmittal.
GENERAL PROCEDURES.
You may tender your original note by:
- properly completing and signing the letter of transmittal and
delivering it, together with the certificate or certificates
representing the original notes being tendered and any required
signature guarantees (or a timely confirmation of a book-entry
transfer pursuant to the procedure described below), to the exchange
agent at its address set forth below on or prior to the date the
exchange offer expires, or
- complying with the guaranteed delivery procedures described below.
Each broker-dealer that receives exchange notes for its own account in
exchange for original notes, where those original notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of those exchange notes. See "PLAN OF DISTRIBUTION."
If tendered original notes are registered in the name of the signer of the
letter of transmittal and the exchange notes to be issued in exchange for those
original notes are to be issued (and any untendered original notes are to be
reissued) in the name of the registered holder, the signature of such signer
need not be guaranteed. In any other case, the tendered original notes must be
endorsed or accompanied by written instruments of transfer in form satisfactory
to us and duly executed by the registered holder and the signature on the
endorsement or instrument of transfer must be guaranteed by a bank, broker,
dealer, credit union, savings association, clearing agency or other institution
that is a member of a recognized signature guarantee medallion program within
the meaning of Rule 17Ad-15 under the Securities
26
Exchange Act of 1934, as amended. If the exchange notes and/or original notes
not exchanged are to be delivered to an address other than that of the
registered holder appearing on the note register for the original notes, the
signature on the letter of transmittal must be guaranteed by one of the
institutions just described.
If your original notes are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and you wish to tender those
original notes, you should contact that holder promptly and instruct that holder
to tender those original notes on your behalf. If you wish to tender those
original notes yourself, you must, prior to completing and executing the letter
of transmittal and delivering those original notes, make appropriate
arrangements to register ownership of those original notes in your name and
follow the procedures described in the immediately preceding paragraph. The
transfer of record ownership may take considerable time.
BOOK-ENTRY TRANSFER.
The exchange agent will make a request to establish an account with
respect to the original notes at The Depository Trust Company (DTC) for purposes
of the exchange offer within two business days after receipt of this prospectus,
and any financial institution that is a participant in DTC's system may make
book-entry delivery of original notes by causing DTC to transfer such original
notes into the exchange agent's account at DTC in accordance with DTC's
procedures for transfer. Although delivery of original notes may be effected
through book-entry transfer at DTC, you must send the letter of transmittal,
with any required signature guarantees and any other required documents, to the
exchange agent at the address specified below and it must be received by the
exchange agent on or prior to the date the exchange offer expires or you must
comply with the guaranteed delivery procedures described below.
The exchange agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may use the Automated Tender Offer Program
procedures to tender original notes.
Any participant in DTC's system may make book-entry delivery of original
notes by causing DTC to transfer such original notes into the exchange agent's
account in accordance with the Automated Tender Offer Program procedures for
transfer. However, the exchange for original notes so tendered will be made only
after a book-entry confirmation of such book-entry transfer of original notes
into the exchange agent's account, and timely receipt by the exchange agent of
an agent's message and any other documents required by the letter of
transmittal. An agent's message is a message, transmitted by DTC and received by
the exchange agent and forming part of a book-entry confirmation, that states
that DTC has received an express acknowledgment from a participant tendering
original notes that are the subject of such book-entry confirmation that such
participant has received and agrees to be bound by the terms of the letter of
transmittal, and that we may enforce that agreement against that participant.
THE METHOD OF DELIVERY OF ORIGINAL NOTES AND ALL OTHER DOCUMENTS,
INCLUDING DELIVERY THROUGH DTC AND ANY ACCEPTANCE OF AN AGENT'S MESSAGE THROUGH
THE AUTOMATED TENDER OFFER PROGRAM, IS AT YOUR ELECTION AND RISK. IF YOU SEND
THESE DOCUMENTS BY MAIL, WE RECOMMEND THAT YOU USE REGISTERED MAIL, RETURN
RECEIPT REQUESTED, THAT YOU OBTAIN PROPER INSURANCE, AND THAT YOU MAIL THOSE
DOCUMENTS SUFFICIENTLY IN ADVANCE OF THE DATE ON WHICH THE EXCHANGE OFFER
EXPIRES TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE SUCH DATE.
27
GUARANTEED DELIVERY PROCEDURES.
If you wish to accept the exchange offer and time will not permit a letter
of transmittal or original notes to reach the exchange agent before the date on
which the exchange offer expires, you must deliver to the exchange agent a
letter, telegram or facsimile transmission from a bank, broker, dealer, credit
union, savings association, clearing agency or other institution that is a
member of a recognized guarantee medallion program within the meaning of Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended, stating:
- the name and address of the tendering holder,
- the principal amount of the original notes being tendered,
- the names in which the original notes are registered,
- if possible, the certificate numbers of the original notes to be
tendered, and
- that the tender is being made thereby and guaranteeing that within
three New York Stock Exchange trading days after the date of
execution of such letter, telegram or facsimile transmission by the
appropriate submitting institution, the original notes, in proper
form for transfer, will be delivered by such appropriate submitting
institution together with a properly completed and duly executed
letter of transmittal (and any other required documents).
Such a tender will be effective only if such notice is received by the
exchange agent before the exchange offer expires.
Unless original notes being tendered by the above-described method (or a
timely book-entry confirmation) are deposited with the exchange agent within the
time period set forth above (accompanied or preceded by a properly completed
letter of transmittal and any other required documents), we may, at our option,
reject the tender. Copies of a notice of guaranteed delivery which may be used
by appropriate submitting institutions for the purposes described in the
paragraphs above are available from the exchange agent.
A tender will be deemed to have been received as of the date when your
properly completed and duly signed letter of transmittal or agent's message
accompanied by the original notes (or a timely book-entry confirmation) is
received by the exchange agent. Issuances of exchange notes in exchange for
original notes tendered pursuant to a notice of guaranteed delivery or letter,
telegram or facsimile transmission to similar effect (as provided above) by an
appropriate submitting institution will be made only against deposit of the
letter of transmittal (and any other required documents) and the tendered
original notes (or a timely book-entry confirmation).
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of original notes will be
determined by us, which determination will be final and binding. We reserve the
absolute right to reject any and all tenders not in proper form or the
acceptances for exchange of which may, in the opinion of our counsel, be
unlawful. We also reserve the absolute right to waive any of the conditions of
the exchange offer or any defect or irregularities in tenders of any particular
holder whether or not similar defects or irregularities are waived in the case
of other holders. Neither we, the exchange agent nor any other person will be
under any duty to give notification of any defects or irregularities in tenders
or shall incur any liability for failure to give any such notification. Our
28
interpretation of the terms and conditions of the exchange offer (including the
letter of transmittal and the instructions thereto) will be final and binding.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The letter of transmittal contains, among other things, the following
terms and conditions, which are part of the exchange offer.
By tendering your original notes for exchange, you thereby exchange,
assign and transfer the original notes to us and irrevocably constitute and
appoint the exchange agent as your agent and attorney-in-fact to cause the
original notes to be assigned, transferred and exchanged. You will be required
to represent and warrant that you have full power and authority to tender,
exchange, assign and transfer the original notes and to acquire exchange notes
issuable upon the exchange of those tendered original notes, and that, when the
same are accepted for exchange, we will acquire good and unencumbered title to
the tendered original notes, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claim or proxy. You will also
warrant that you will, upon request, execute and deliver any additional
documents deemed by us to be necessary or desirable to complete the exchange,
assignment and transfer of tendered original notes by us, and the issuance of
exchange notes in exchange for those notes shall constitute performance in full
by us of our obligations under the registration rights agreement and that we
will have no further obligations or liabilities under that agreement (except in
certain limited circumstances). All authority conferred by you will survive your
death or incapacity, and all of your obligations will be binding upon your
heirs, legal representatives, successors, assigns, executors and administrators.
By tendering original notes and executing the letter of transmittal, or
transmitting an agent's message, as the case may be, you represent that:
- you are not an affiliate of ours as defined in Rule 405 of the
Securities Act of 1933;
- you are not a broker-dealer that owns original notes acquired
directly from us or from an affiliate of ours;
- you are acquiring the exchange notes offered hereby in the ordinary
course of business; and
- you have not agreed with anyone to distribute the exchange notes.
If you are a broker-dealer that purchased original notes for your own
account as part of market-making or other trading activities, you represent that
you have not agreed with us or our affiliates to distribute the exchange notes
and agree to deliver a prospectus in connection with any resale of the exchange
notes; and you may exclude the representation in the last bullet point above.
WITHDRAWAL RIGHTS
You may withdraw any original notes you have tendered pursuant to the
exchange offer at any time prior to the date on which the exchange offer
expires.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the exchange agent at its
address set forth below in the "Exchange Agent" section prior to the date on
which the exchange offer expires. Any such notice of withdrawal must state:
29
- the person named in the letter of transmittal as having tendered
original notes to be withdrawn;
- if possible, the certificate numbers of original notes to be
withdrawn;
- the principal amount of original notes to be withdrawn;
- a statement that such holder is withdrawing its election to have
those original notes exchanged, and
- the name of the registered holder of those original notes.
The withdrawal notice must be signed by the holder in the same manner as
the original signature on the letter of transmittal (including any required
signature guarantees) or be accompanied by evidence satisfactory to us that the
person withdrawing the tender has succeeded to the beneficial ownership of the
original notes being withdrawn.
The exchange agent will return the properly withdrawn original notes
promptly following receipt of the notice of withdrawal. We will determine all
questions as to the validity of notices of withdrawal, including time of
receipt, and such determinations will be final and binding on all persons.
ACCEPTANCE OF ORIGINAL NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the exchange offer, we
will choose and notify the exchange agent of the date on which the acceptance
for exchange of original notes validly tendered and not withdrawn and the
issuance of the exchange notes will be made. For the purposes of the exchange
offer, we will be deemed to have accepted for exchange validly tendered original
notes when we have given written notice thereof to the exchange agent.
The exchange agent will act as agent for the tendering holders of original
notes for the purposes of receiving exchange notes from us and causing the
original notes to be assigned, transferred and exchanged. Upon the terms and
subject to the conditions of the exchange offer, delivery of the exchange notes
to be issued in exchange for accepted original notes will be made by the
exchange agent promptly after acceptance of the tendered original notes.
Original notes not accepted for exchange by us will be returned without expense
to the tendering holders (or in the case of original notes tendered by
book-entry transfer into the exchange agent's account at DTC pursuant to the
procedures described above, such non-exchanged original notes will be credited
to an account maintained with DTC) promptly following the date on which the
exchange offer expires, or, if we terminate the exchange offer prior to such
date, promptly after the exchange offer is so terminated.
ACCRUED INTEREST ON EXCHANGE NOTES
You will not receive accrued but unpaid interest on original notes at the
time you tender them. Rather, that interest will be payable on the exchange
notes delivered in exchange for the original notes on the first interest payment
date after the exchange date.
30
ACCOUNTING TREATMENT
The exchange notes will be recorded at the same carrying value as the
original notes for which they are exchanged, which is the aggregate principal
amount of the original notes, as reflected in our accounting records on the date
of exchange. Accordingly, no gain or loss for accounting purposes will be
recognized in connection with the exchange offer. The cost of the exchange offer
will be amortized over the term of the exchange notes.
EXCHANGE AGENT
The Bank of New York has been appointed as the exchange agent for the
exchange offer. You should direct questions and requests for assistance and
requests for additional copies of this prospectus or of the letter of
transmittal to the exchange agent as follows:
By Mail, Hand or Overnight Delivery: The Bank of New York
Corporate Trust Operations
Reorganization Unit
101 Barclay Street
7th Floor East
New York, New York 10286
Attn: Bernard Arsenec
Telephone: (212) 815-5098
By Fax (for eligible institutions only): (212) 298-1915
Delivery to an address other than as stated above, or transmissions of
instructions to a facsimile number other than the one stated above, will not
constitute a valid delivery.
FEES AND EXPENSES
We have not retained any dealer-manager or similar agent in connection
with the exchange offer and will not make any payments to brokers, dealers or
others for soliciting acceptances of the exchange offer. We will, however, pay
the exchange agent reasonable and customary fees for its services and will
reimburse it for reasonable out-of-pocket expenses in connection with its
services. We will also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding
tenders for their customers. We will pay the expenses to be incurred in
connection with the exchange offer, including the fees and expenses of the
exchange agent, printing, accounting and legal fees.
Holders who tender their original notes for exchange notes will not be
obligated to pay any transfer taxes in connection with the exchange. If,
however, exchange notes are to be delivered to, or are to be issued in the name
of, any person other than the registered holder of the original notes tendered,
or if a transfer tax is imposed for any reason other than the exchange of the
original notes in connection with the exchange offer, then the amount of any
such transfer taxes (whether imposed on the registered holder or any other
person) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption from such taxes is not submitted with the
letter of transmittal, the amount of such taxes will be billed directly to such
tendering holder.
31
No person has been authorized to give any information or to make any
representations in connection with the exchange offer other than those contained
in this prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by us. Neither the delivery of this
prospectus nor any exchange made hereunder shall, under any circumstances,
create any implication that there has been no change in our business since the
respective dates as of which information is given herein. We are not making the
exchange offer to (nor will tenders be accepted from or on behalf of) holders of
original notes in any jurisdiction in which the making of the exchange offer or
the acceptance thereof would not be in compliance with the laws of such
jurisdiction. However, we may, at our discretion, take such action as we may
deem necessary to make the exchange offer in any such jurisdiction and extend
the exchange offer to holders of original notes in such jurisdiction. In any
jurisdiction the securities laws or blue sky laws of which require the exchange
offer to be made by a licensed broker or dealer, the exchange offer may be made
on our behalf by one or more registered brokers or dealers which are licensed
under the laws of such jurisdiction.
DESCRIPTION OF THE EXCHANGE NOTES
The exchange notes will be issued under an indenture, dated as of August
17, 1998, as amended and supplemented by an eighth supplemental indenture
thereto, between us and The Bank of New York, as trustee. The indenture was
filed as an exhibit to our Registration Statement on Form S-3 dated August 24,
1998. The eighth supplemental indenture was filed as an exhibit to our current
report on Form 8-K filed on November 20, 2002. The following description
summarizes only the material terms of the exchange notes. The description is not
complete, and we refer you to the indenture, which is incorporated by reference.
For purposes of the following description, unless otherwise indicated, a
business day is any day other than a Saturday or Sunday that is neither a legal
holiday nor a day on which banking institutions are authorized or obligated by
law or executive order to close in New York, New York.
GENERAL
The initial aggregate principal amount of the exchange notes offered under
this prospectus is $380,000,000. The exchange notes will mature on December 1,
2007.
The exchange notes do not have a sinking fund. The original notes and the
exchange notes will constitute a single series of notes under the indenture. We
may, at any time, issue additional notes having the same ranking, the same
interest rate, maturity and other terms, and the same CUSIP number, as the
original notes and the exchange notes, without the consent of the holders
thereof. Any additional notes having such similar terms, together with the
original notes and the exchange notes, may constitute a single series of notes
under the indenture.
Except as described in "-- Purchase of Notes Upon Change in Control," the
exchange notes do not provide special protection in the event we are involved in
a highly leveraged transaction.
INTEREST ON THE EXCHANGE NOTES
The exchange notes will bear interest at the rate of 10.50% per year
(computed based on a 360-day year consisting of twelve 30-day months) for the
period from November 20, 2002 to, but excluding, December 1, 2007. Interest on
the exchange notes will be payable semi-annually on June 1 and December 1 of
each year, commencing June 1, 2003. Interest payments will be made to the
persons in whose names the exchange notes are registered on the 15th calendar
day (whether or not a business day) immediately preceding the related interest
payment date.
32
Interest on each exchange note issued pursuant to the exchange offer will
accrue from the last interest payment date to which interest was paid on the
original notes surrendered in exchange therefor or, if no interest has been paid
on the original notes, from the date of the initial issuance of the original
notes.
If we fail to pay any interest on the exchange notes when due or we fail
to pay principal of or premium, if any, on the exchange notes when due, interest
will accrue on such unpaid interest or principal or premium at the same interest
rate applicable to the exchange notes, until such unpaid interest or principal
or premium is paid in full.
RANKING
The exchange notes will be our unsubordinated and unsecured obligations
and will rank equally in right of payment with all of our other unsubordinated
and unsecured indebtedness from time to time outstanding and would be
effectively subordinated to any secured indebtedness that we may incur. Except
as described in "-- Certain Restrictive Covenants," the exchange 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. In addition, because we are a holding company that conducts our
operations through our subsidiaries, holders of the exchange notes will have a
junior position to the claims of creditors of our subsidiaries.
FORM
The exchange notes will be issued in fully registered form, without
coupons, in minimum denominations of $1,000 or integral multiples of $1,000 in
excess of $1,000. The exchange notes will be issued as global securities and
deposited with, or on behalf of DTC. See "BOOK-ENTRY; DELIVERY AND FORM" below
for additional information concerning the exchange notes and the book-entry
system. The exchange 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 exchange 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.
OPTIONAL REDEMPTION
The notes are redeemable at our option, in whole or in part, at any time
and from time to time, at a redemption price equal to the greater of:
- 100% of the principal amount of notes then outstanding to be
redeemed, or
- the sum of the present values of the remaining scheduled payments of
principal and interest on the notes 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 50 basis
points (0.50%), as calculated by an independent investment banker,
plus, in both of the above cases, accrued and unpaid interest thereon to the
redemption date.
"Adjusted Treasury Rate" means, with respect to any redemption date:
33
- 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 the 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 Credit Suisse First Boston
Corporation (CSFB) or its successors, as designated by us, or if that firm is
unwilling or unable to serve as such, an independent investment and banking
institution of national standing appointed by us.
"Reference Treasury Dealer" means:
- CSFB and its successors; provided that, if CSFB 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
- up to four other Primary Treasury Dealers 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
34
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.
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, the trustee will select in a fair and
appropriate manner the notes to be redeemed.
If we plan to redeem the notes, before the redemption occurs, we are not
required to:
- issue, register the transfer of, or exchange any note during the
period beginning 15 days before the notice of redemption is mailed
and ending on the day the notice is mailed; or
- after the notice of redemption is mailed, register the transfer of
or exchange any note selected for redemption, except, if we are
redeeming only a part of a note, we are required to register the
transfer of or exchange the unredeemed portion of the note if the
holder so requests.
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.
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 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 notes, and the satisfaction of any other conditions required
by the indenture, the successor will succeed to and be substituted for us under
the indenture.
PURCHASE OF NOTES UPON CHANGE IN CONTROL
In the event of any Change in Control (as defined below) and if the notes
are rated below BBB- (or an equivalent rating) by Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc. or below Baa3 (or an
equivalent rating) by Moody's Investor's Service, Inc. at such time, each holder
of a note will have the right, at such holder's option, subject to the terms and
conditions of the indenture, to require us to repurchase all or any part of such
holder's notes on a date selected by us that is no earlier than 60 days nor
later than 90 days (the "Change in Control Purchase Date") after the mailing of
written notice by us of the occurrence of such Change in Control, at a
repurchase price payable in cash equal to
35
101% of the principal amount of such notes plus accrued and unpaid interest, if
any, thereon to the Change in Control Purchase Date (the "Change in Control
Purchase Price").
Within 30 days after the Change in Control, we will mail to each holder of
a note a notice regarding the Change in Control, which notice shall state, among
other things:
- that a Change in Control has occurred and that each such holder has
the right to require us to repurchase all or any part of such
holder's notes at the Change in Control Purchase Price;
- the Change in Control Purchase Price;
- the Change in Control Purchase Date;
- the name and address of the paying agent; and
- the procedures that holders must follow to cause the notes to be
repurchased.
To exercise this right, a holder must deliver a written notice (the
"Change in Control Purchase Notice") to the paying agent at its corporate trust
office in New York, New York, or any other office of the paying agent maintained
for such purposes, not later than 30 days prior to the Change in Control
Purchase Date. The Change in Control Purchase Notice shall state:
- the portion of the principal amount of any notes to be repurchased,
which must be $1,000 or an integral multiple thereof;
- that such notes are to be repurchased by us pursuant to the
applicable change-in-control provisions of the indenture; and
- unless the notes are represented by one or more global notes, the
certificate numbers of the notes to be repurchased.
Any Change in Control Purchase Notice may be withdrawn by the holder by a
written notice of withdrawal delivered to the paying agent not later than three
business days prior to the Change in Control Purchase Date. The notice of
withdrawal shall state the principal amount and, if applicable, the certificate
numbers of the notes as to which the withdrawal notice relates and the principal
amount, if any, which remains subject to a Change in Control Purchase Notice.
If a note is represented by a global note, DTC or its nominee will be the
holder of such note and therefore will be the only entity that can require us to
repurchase notes upon a Change in Control. To obtain repayment with respect to
such note upon a Change in Control, the beneficial owner of such note must
provide to the broker or other entity through which it holds the beneficial
interest in such note (1) the Change in Control Purchase Notice signed by such
beneficial owner, and such signature must be guaranteed by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc. or a commercial bank or trust company having an office
or correspondent in the United States and (2) instructions to such broker or
other entity to notify DTC of such beneficial owner's desire to cause us to
repurchase such notes. Such broker or other entity will provide to the paying
agent (1) a Change in Control Purchase Notice received from such beneficial
owner and (2) a certificate satisfactory to the paying agent from such broker or
other entity that it represents such
36
beneficial owner. Such broker or other entity will be responsible for disbursing
any payments it receives upon the repurchase of such notes by us.
Payment of the Change in Control Purchase Price for a note in registered,
certificated form for which a Change in Control Purchase Notice has been
delivered and not withdrawn is conditioned upon delivery of such certificated
note (together with necessary endorsements) to the paying agent at its office in
New York, New York, or any other office of the paying agent maintained for such
purpose, at any time (whether prior to, on or after the Change in Control
Purchase Date) after the delivery of such Change in Control Purchase Notice.
Payment of the Change in Control Purchase Price for such certificated note will
be made promptly following the later of the Change in Control Purchase Date and
the time of delivery of such certificated note.
If the paying agent holds, in accordance with the terms of the indenture,
money sufficient to pay the Change in Control Purchase Price of a note on the
business day following the Change in Control Purchase Date for such note, then,
on and after such date, interest on such note will cease to accrue, whether or
not such note is delivered to the paying agent, and all other rights of the
holder shall terminate (other than the right to receive the Change in Control
Purchase Price upon delivery of the note).
Under the indenture, a "Change in Control" means the occurrence of any of
the following:
- we cease to beneficially own, directly or indirectly, at least 80%
of the total voting power of all classes of Capital Stock then
outstanding of Tampa Electric (whether arising from issuance of
securities of us or Tampa Electric, any direct or indirect transfer
of securities by us or Tampa Electric, any merger, consolidation,
liquidation or dissolution of us or Tampa Electric or otherwise);
- any "entity", "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934)
becomes the "beneficial owner" (as such term is used in Rules 13d-3
and 13d-5 under the Securities Exchange Act of 1934, except that a
person or group shall be deemed to have "beneficial ownership" of
all shares that such person or group has the right to acquire,
whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than a majority of
our voting stock;
- we consolidate or merge with another person pursuant to a
transaction in which our outstanding voting stock or the voting
stock of such other person is changed into or exchanged for cash,
securities, or other property, other than any such transaction where
(A) our outstanding voting stock is changed into or exchanged for,
in whole or in part, voting stock of the surviving or transferee
person and (B) the holders of our voting stock immediately prior to
such transaction retain or receive, directly or indirectly,
substantially proportionate ownership of at least a majority of the
voting stock of the surviving or transferee person immediately after
such transaction;
- the direct or indirect sale, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one
or a series of related transactions, of all or substantially all of
our properties or assets and those of our Restricted Subsidiaries
taken as a whole to any "person" (as that term is used in Section
13(d)(3) of the Securities Exchange Act of 1934), other than to an
entity at least a majority of whose voting stock is owned, directly
or indirectly, substantially proportionately by the holders of our
voting stock;
37
- during any period of up to 24 consecutive months, commencing after
the date of issuance of the original notes, individuals who at the
beginning of such 24-month period were members of our board of
directors shall cease for any reason to constitute a majority of our
board of directors, provided that any person becoming a director
subsequent to the date of issuance of the original notes, whose
election, or nomination for election by our shareholders, was
approved by a vote of at least a majority of the directors who were
either directors at the beginning of such period or whose election
or nomination for election was previously so approved (other than
the election or nomination of an individual whose initial assumption
of office is in connection with an actual or threatened election
contest relating to the election of our directors) shall be, for
purposes of this provision, considered as though such person were a
member of the board as of the beginning of such period; or
- the adoption of a plan relating to our liquidation or dissolution.
The indenture requires us to comply with the provisions of Regulation 14E
and any other tender offer rules under the Securities Exchange Act of 1934 which
may then be applicable in connection with any offer by us to purchase notes at
the option of holders upon a Change in Control. The Change in Control purchase
feature of the notes may in certain circumstances make more difficult or
discourage a takeover of us and, thus, the removal of incumbent management. The
Change in Control purchase feature, however, is not the result of management's
knowledge of any specific effort to accumulate shares of our common stock or to
obtain control of us by means of a merger, tender offer, solicitation or
otherwise, or part of a plan by management to adopt a series of anti-takeover
provisions. Instead, the Change in Control purchase feature is a term contained
in many similar debt offerings and the terms of such feature result from
negotiations between us and the initial purchaser of the original notes.
Management has no present intention to propose any anti-takeover measures
although it is possible that we may decide to do so in the future.
No note may be repurchased by us as a result of a Change in Control if
there has occurred and is continuing an event of default described under "Events
of Default" below (other than a default in the payment of the Change in Control
Purchase Price with respect to the notes). In addition, our ability to purchase
the notes may be limited by our financial resources and our inability to raise
the required funds because of restrictions on issuance of securities contained
in other contractual arrangements. The agreements governing our other
Indebtedness may contain prohibitions of certain events or provide that such
events are events of default, including events that would constitute a Change in
Control. In addition, the exercise by holders of notes of their right to require
us to repurchase the notes upon a Change in Control could cause a default under
these other agreements, even if the Change in Control itself does not, due to
the financial effect of such repurchases on us.
The definition of Change in Control includes a phrase relating to the
direct or indirect sale, transfer, conveyance or other disposition of "all or
substantially all" of our properties or assets and those of our Restricted
Subsidiaries taken as a whole. Although there is a limited body of case law
interpreting the phrase "substantially all," there is no precise, established
definition of the phrase under applicable law. Accordingly, the ability of a
holder of notes to require us to repurchase notes as a result of the sale,
transfer, conveyance or other disposition of less than all of our assets and
those of our Restricted Subsidiaries taken as a whole to another person or group
may be uncertain.
38
CERTAIN RESTRICTIVE COVENANTS
The indenture contains the covenants described below, which will apply
only if either (a) the notes are rated below BBB- (or an equivalent rating) by
Standard & Poor's or below Baa3 (or an equivalent rating) by Moody's, or (b) the
notes are rated below the Special Ratings Trigger; provided, however, the
condition of clause (b) shall not apply when the TECO Construction Undertakings
have been discharged and we are no longer obligated with respect to Indebtedness
(including guarantees) that requires us to deliver, when our long-term unsecured
Indebtedness is rated below the Special Ratings Trigger, letters of credit in
the aggregate face amount of $50,000,000 or more. Certain capitalized terms used
below are defined under the heading "Certain Definitions" below.
LIMITATION ON RESTRICTED PAYMENTS
We will not, and will not permit any of our Restricted Subsidiaries,
directly or indirectly, to:
- declare or pay any dividend or make any distribution on our
Capital Stock to the direct or indirect holders of our Capital
Stock (except dividends or distributions payable solely in our
Non-Convertible Capital Stock or in options, warrants or other
rights to purchase such Non-Convertible Capital Stock and
except dividends or distributions payable to us or a
Restricted Subsidiary);
- purchase, redeem or otherwise acquire or retire for value any
of our Capital Stock; or
- purchase, repurchase, redeem, defease or otherwise acquire or
retire for value, prior to scheduled maturity or scheduled
repayment thereof, any Subordinated Indebtedness,
- make any Restricted Investment (any such dividend,
distribution, purchase, redemption, repurchase, defeasing,
other acquisition or retirement, payments and other actions
set forth in this and the preceding bullets above being
collectively referred to as "Restricted Payments"),
if at the time we or such Restricted Subsidiary makes such Restricted Payment:
(1) an event of default, or an event that with the lapse of time or the giving
of notice or both would constitute an event of default, shall have occurred and
be continuing (or would result therefrom); or (2) the aggregate amount of such
Restricted Payment and all other Restricted Payments made since the issuance
date of the original notes would exceed the sum (without duplication) of: (a)
the difference of (i) Operating Cash Flow minus (ii) an amount equal to the
product of (x) Consolidated Interest Expense multiplied by (y) 1.70, in each
case for the period from the beginning of the first fiscal quarter commencing
after the issuance date of the original notes to the end of the most recent
fiscal quarter ending at least 45 days prior to the date of such Restricted
Payment (or, in case such difference shall be a deficit, minus 100% of the
deficit), (b) the aggregate Net Cash Proceeds received by us from the issue or
sale of or contribution with respect to our Capital Stock after the issuance
date of the original notes (other than Capital Stock sold to one of our
subsidiaries), (c) to the extent that any Restricted Investment that was made
after the issuance date of the original notes is sold for cash or otherwise
liquidated, redeemed or repaid for cash, the lesser of (i) the cash return of
capital with respect to such Restricted Investment (less the cost of
disposition, if any) and (ii) the initial amount of such Restricted Investment
and (d) 100% of any dividends received by us or a Restricted Subsidiary after
the issuance date of the original notes from an Unrestricted Subsidiary, to the
extent that such dividends were not otherwise included in our Consolidated Net
Income for such period.
39
The foregoing provisions will not prohibit:
- dividends or other distributions paid in respect of any class
of Capital Stock issued by us in connection with the
acquisition of any business or assets by us or a Restricted
Subsidiary where the dividends or other distributions with
respect to such Capital Stock are payable solely from the net
earnings of such business or assets;
- any purchase or redemption of our Capital Stock made by
exchange for, or out of the proceeds of the substantially
concurrent sale of, our Capital Stock (other than Redeemable
Stock or Exchangeable Stock);
- dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividends would
have complied with this covenant;
- payments made by us or a Restricted Subsidiary to an
Unrestricted Subsidiary in satisfaction of obligations
existing on the issuance date of the original notes.
LIMITATION ON CERTAIN LIENS
We will not, and will not permit any of our Restricted Subsidiaries to,
create, incur, assume or suffer to exist any lien upon or with respect to any of
its property of any character, including without limitation any shares of
Capital Stock of Tampa Electric, without making effective provision whereby the
notes will be (so long as any such other creditor shall be so secured) equally
and ratably secured. The foregoing restrictions shall not apply to (a) liens
securing Indebtedness of us or our Restricted Subsidiaries; provided, that on
the date such liens are created, and after giving effect to such Indebtedness,
the aggregate principal amount at maturity of all our secured Indebtedness at
such date shall not exceed 5% of Consolidated Net Tangible Assets, (b) liens for
taxes, pledges to secure workman's compensation, other statutory obligations and
materialman's, mechanic's and similar liens and purchase money liens and (c)
liens incurred by Tampa Electric that are not prohibited by applicable legal and
regulatory requirements, including without limitation the rules and regulations
of the Florida Public Service Commission.
LIMITATION ON INDEBTEDNESS
We will not, and will not permit any of our Restricted Subsidiaries to,
issue, create, assume, guarantee, incur or otherwise become liable for
(collectively, "issue"), directly or indirectly, any Indebtedness, provided,
however, that we may issue Indebtedness if the Consolidated Coverage Ratio of us
and our Restricted Subsidiaries for the four consecutive fiscal quarters
immediately preceding the issuance of such Indebtedness (as shown by a pro forma
consolidated income statement of us and our Restricted Subsidiaries for the four
most recent fiscal quarters ending at least 30 days prior to the issuance of
such Indebtedness after giving effect to (1) the issuance of such Indebtedness
and (if applicable) the application of the net proceeds thereof to refinance
other Indebtedness as if such Indebtedness was issued at the beginning of the
period, (2) the issuance and retirement of any other Indebtedness since the
first day of the period as if such Indebtedness was issued or retired at the
beginning of the period and (3) the acquisition or disposition of any company or
business by us or any Restricted Subsidiary since the first day of the period
(including giving effect to the pro forma historical earnings and interest
expense of such company or business), including any acquisition or disposition
which will be consummated
40
contemporaneously with the issuance of such Indebtedness, as if in each case
such acquisition or disposition occurred at the beginning of the period) exceeds
a ratio of 2.0 to 1.0.
The foregoing limitation is subject to exceptions for:
- our Indebtedness under Credit Facilities not to exceed
$1,000,000,000 in aggregate outstanding principal amount at
any time;
- Indebtedness (other than Indebtedness described in the first
bullet above) outstanding on the issuance date of the original
notes, and Indebtedness issued in exchange for, or the
proceeds of which are used to refund or refinance, any
Indebtedness permitted by this bullet; provided, however, that
(i) the principal amount (or accreted value in the case of
Indebtedness issued at a discount) of the Indebtedness so
issued shall not exceed the principal amount (or accreted
value in the case of Indebtedness issued at a discount) of,
premium, if any, and accrued but unpaid interest on, the
Indebtedness so exchanged, refunded or refinanced and (ii) the
Indebtedness so issued (A) shall not mature prior to the
stated maturity of the Indebtedness so exchanged, refunded or
refinanced, (B) shall have an Average Life equal to or greater
than the remaining Average Life of the Indebtedness so
exchanged, refunded or refinanced and (C) if the Indebtedness
to be exchanged, refunded or refinanced is subordinated to the
notes, the Indebtedness is subordinated to the notes in right
of payment;
- Indebtedness represented by the notes;
- our Indebtedness owed to and held by a Restricted Subsidiary
and Indebtedness of a Restricted Subsidiary owed to and held
by us or a Restricted Subsidiary; provided, however, that in
the case of Indebtedness of us or of a Restricted Subsidiary
owed to and held by a Restricted Subsidiary, (i) any
subsequent issuance or transfer of any Capital Stock that
results in any such Restricted Subsidiary ceasing to be a
subsidiary or (ii) any transfer of such Indebtedness (except
to us or a Restricted Subsidiary) shall be deemed for these
purposes to constitute the issuance of such Indebtedness by us
or a Restricted Subsidiary, as the case may be;
- Indebtedness of us or a Restricted Subsidiary issued in
exchange for, or the proceeds of which are used to refund or
refinance, Indebtedness of us or of a Restricted Subsidiary
issued in accordance with the first paragraph of this section
above; provided, however, that (i) the principal amount (or
accreted value in the case of Indebtedness issued at a
discount) of the Indebtedness so issued shall not exceed the
principal amount (or accreted value in the case of
Indebtedness issued at a discount) of, premium, if any, and
accrued but unpaid interest on, the Indebtedness so exchanged,
refunded or refinanced and (ii) the Indebtedness so issued (A)
shall not mature prior to the stated maturity of the
Indebtedness so exchanged, refunded or refinanced, (B) shall
have an Average Life equal to or greater than the remaining
Average Life of the Indebtedness so exchanged, refunded or
refinanced and (C) if the Indebtedness to be exchanged,
refunded or refinanced is subordinated to the notes, the
Indebtedness is subordinated to the notes in right of payment;
- Indebtedness of a person existing at the time at which such
person became a subsidiary and not incurred in connection
with, or in contemplation of, such person becoming a
subsidiary;
41
- Indebtedness of us or a Restricted Subsidiary represented by
Capital Lease Obligations or purchase money obligations;
- Indebtedness of Tampa Electric that is not prohibited by
applicable legal and regulatory requirements, including
without limitation the rules and regulations of the Florida
Public Service Commission;
- Indebtedness for working capital of a Restricted Subsidiary
(other than Tampa Electric) under Credit Facilities not to
exceed $100,000,000 in aggregate outstanding principal amount
at any time; and
- Indebtedness issued by us or any of our Restricted
Subsidiaries not to exceed $100,000,000 in aggregate
outstanding principal amount at any time.
DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES
Our board of directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause an event of default
or an event that with notice or the passage of time or both would constitute an
event of default; provided, that in no event will any Restricted Subsidiary
existing on the issuance date of the original notes or any substantial portion
of any of such Restricted Subsidiary's businesses be transferred to or held by
an Unrestricted Subsidiary. If a Restricted Subsidiary is designated as an
Unrestricted Subsidiary, the aggregate fair market value of all outstanding
Investments owned by us and our Restricted Subsidiaries in the subsidiary
properly designated will be deemed to be an Investment made as of the time of
the designation and will reduce the amount available for Restricted Payments
under the first paragraph of the covenant described above under the caption " --
Limitation on Restricted Payments" or Permitted Investments, as determined by
us. That designation will only be permitted if the Investment would be permitted
at that time and if the Restricted Subsidiary otherwise meets the definition of
an Unrestricted Subsidiary. Our board of directors may redesignate any
Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation would
not cause an event of default or an event that with notice or the passage of
time or both would constitute an event of default.
CERTAIN DEFINITIONS
Set forth below is a summary of certain defined terms used in the
indenture. Reference is made to the indenture for a full definition of all terms
as well as any other capitalized terms used herein and not otherwise defined.
"Amortization Expense" means, for any period, amounts recognized during
such period as amortization of capital leases, depletion, fuel, goodwill and
assets classified as intangible assets in accordance with U.S. generally
accepted accounting principals (GAAP).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness, the quotient obtained by dividing (i) the sum of the products of
(x) the number of years from the date of determination to the dates of each
successive scheduled principal payment of such Indebtedness and (y) the amount
of such principal payment by (ii) the sum of all such principal payments.
"Capital Lease Obligation" of a person means any obligation that is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such person prepared in accordance with
42
GAAP; the amount of such obligation shall be the capitalized amount thereof,
determined in accordance with GAAP; the stated maturity thereof shall be the
date of the last payment of rent or any other amount due under such lease prior
to the first date upon which such lease may be terminated by the lessee without
payment of a penalty; and such obligation shall be deemed secured by a lien on
any property or assets to which such lease relates.
"Capital Stock" means any and all shares, interests, rights to purchase,
warrants, options, participations or other equivalents of or interests in
(however designated) corporate stock, including any Preferred Stock or letter
stock; provided, that Hybrid Preferred Securities are not considered Capital
Stock for purposes of this definition.
"Cash Equivalents" means:
- United States dollars;
- securities issued or directly and fully guaranteed or insured
by the United States government or any agency or
instrumentality of the United States government (provided that
the full faith and credit of the United States is pledged in
support of those securities) having maturities of not more
than 270 days from the date of acquisition;
- certificates of deposit and eurodollar time deposits with
maturities of 270 days or less from the date of acquisition,
bankers' acceptances with maturities not exceeding 270 days
and overnight bank deposits, in each case, with any domestic
commercial bank having capital and surplus in excess of $500
million and a Thomson Bank Watch Rating of "B" or better;
- repurchase obligations with a term of not more than seven days
for underlying securities of the types described in the second
and third bullets above entered into with any financial
institution meeting the qualifications specified in the third
bullet above;
- commercial paper having the highest rating obtainable from
Moody's or Standard & Poor's and in each case maturing within
six months after the date of acquisition; and
- money market funds, substantially all of which constitute Cash
Equivalents of the kinds described in bullets one through five
of this definition.
"Consolidated Coverage Ratio" with respect to any period means the ratio
of (1) the aggregate amount of Operating Cash Flow for such period to (2) the
aggregate amount of Consolidated Interest Expense for such period.
"Consolidated Current Liabilities" means, for any period, the aggregate
amount of our liabilities and of our Restricted Subsidiaries which may properly
be classified as current liabilities (including taxes accrued as estimated),
after (1) eliminating all inter-company items between us and any Restricted
Subsidiary and (2) deducting all current maturities of long-term Indebtedness,
all as determined in accordance with GAAP.
"Consolidated Indebtedness" means, at any date of determination, the
aggregate our Indebtedness and of our Restricted Subsidiaries determined on a
consolidated basis in accordance with GAAP.
43
"Consolidated Interest Expense" means, for any period, the total interest
expense in respect of our Consolidated Indebtedness and of our Restricted
Subsidiaries, including, without duplication:
- interest expense attributable to capital leases,
- amortization of debt discount,
- capitalized interest,
- cash and noncash interest payments,
- commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance
financing,
- net costs under Hedging Obligations (including amortization of
discount), and
- interest expense in respect of obligations of other persons
deemed to be our Indebtedness or Indebtedness of any
Restricted Subsidiaries under the fifth or sixth bullets of
the definition of Indebtedness,
provided, however, that Consolidated Interest Expense shall exclude any costs
otherwise included in interest expense recognized on early retirement of debt.
"Consolidated Net Income" means, for any period, our net income and the
net income of our Restricted Subsidiaries determined on a consolidated basis in
accordance with GAAP; provided, however, that there shall not be included in
such Consolidated Net Income:
- any net income of any person if such person is not us or a
Restricted Subsidiary, except that our equity in the net
income of any such person for such period shall be included in
such Consolidated Net Income up to the aggregate amount of
cash actually distributed by such person during such period to
us or a Restricted Subsidiary as a dividend or other
distribution;
- the net income of any Restricted Subsidiary will be excluded
to the extent that the declaration or payment of dividends or
similar distributions by that Restricted Subsidiary of that
net income is not at the date of determination permitted
without any prior governmental approval (that has not been
obtained) or, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation
applicable to that subsidiary or its stockholders;
- any net income of any person acquired by us or a Restricted
Subsidiary in a pooling of interests transaction for any
period prior to the date of such acquisition;
- the cumulative effect of a change in accounting principles
will be excluded; and
- any gain or loss realized upon the sale or other disposition
of any of our property, plant or equipment or of a Restricted
Subsidiaries which is not sold or otherwise disposed of in the
ordinary course of business and any gain or loss realized upon
the sale or other disposition of any Capital Stock of any
person.
44
"Consolidated Net Tangible Assets" means, for any period, the total amount
of assets (less accumulated depreciation or amortization, allowances for
doubtful receivables, other applicable reserves and other properly deductible
items) as set forth on our and our Restricted Subsidiaries' most recently
available quarterly or annual consolidated balance sheet, determined on a
consolidated basis in accordance with GAAP, and after giving effect to purchase
accounting and after deducting therefrom, to the extent otherwise included, the
amounts of:
- Consolidated Current Liabilities;
- minority interests in Consolidated Subsidiaries held by
persons other than us or a Restricted Subsidiary;
- excess of cost over fair value of assets of businesses
acquired, as determined in good faith by the board of
directors as evidenced by board resolutions;
- any revaluation or other write-up in value of assets
subsequent to December 31, 2001, as a result of a change in
the method of valuation in accordance with GAAP;
- unamortized debt discount and expenses and other unamortized
deferred charges, goodwill, patents, trademarks, service
marks, trade names, copyrights, licenses, organization or
developmental expenses and other intangible items;
- treasury stock; and
- any cash set apart and held in a sinking or other analogous
fund established for the purpose of redemption or other
retirement of Capital Stock to the extent such obligation is
not reflected in Consolidated Current Liabilities.
"Consolidated Net Worth" of any person means the total of the amounts
shown on the consolidated balance sheet of such person and its consolidated
subsidiaries, determined on a consolidated basis in accordance with GAAP, as of
any date selected by such person not more than 90 days prior to the taking of
any action for the purpose of which the determination is being made (and
adjusted for any material events since such date), as (1) the par or stated
value of all outstanding Capital Stock plus (2) paid-in capital or capital
surplus relating to such Capital Stock plus (3) any retained earnings or earned
surplus less (A) any accumulated deficit, (B) any amounts attributable to
Redeemable Stock and (C) any amounts attributable to Exchangeable Stock.
"Consolidated Subsidiary" means, any subsidiary whose accounts are or are
required to be consolidated with our accounts in accordance with GAAP.
"Credit Facilities" means, one or more debt facilities or commercial paper
facilities, in each case with banks or other institutional lenders providing for
revolving credit loans, term loans, receivables financing (including through the
sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, supplemented, renewed, refunded,
restructured, replaced or refinanced in whole or in part from time to time.
45
"Exchangeable Stock" means any Capital Stock of a corporation that is
exchangeable or convertible into another security (other than Capital Stock of
such corporation that is neither Exchangeable Stock nor Redeemable Stock).
"Hedging Obligations" means, with respect to any specified person, the
obligations of such person under:
- interest rate swap agreements, interest rate cap agreements
and interest rate collar agreements; and
- other agreements or arrangements designed to protect such
person against fluctuations in interest rates and foreign
currency exchange rates,
in each case, to the extent incurred in the ordinary course of business and not
for speculative purposes.
"Hybrid Preferred Securities" means any preferred securities issued by a
Hybrid Preferred Securities Subsidiary, where such preferred securities have the
following characteristics:
- such Hybrid Preferred Securities Subsidiary lends
substantially all of the proceeds from the issuance of such
preferred securities to us in exchange for subordinated debt
issued by us or lends substantially all of the proceeds from
the issuance of such preferred securities to a second Hybrid
Preferred Securities Subsidiary, which in turn lends
substantially all of the proceeds from the issuance of its
preferred securities to us in exchange for subordinated debt
issued by us;
- such preferred securities contain terms providing for the
deferral of distributions corresponding to provisions
providing for the deferral of interest payments on such
subordinated debt; and
- we make periodic interest payments on such subordinated debt,
which interest payments are in turn used by the Hybrid
Preferred Securities Subsidiary or Hybrid Preferred Securities
Subsidiaries to make corresponding payments to the holders of
the Hybrid Preferred Securities.
"Hybrid Preferred Securities Subsidiary" means:
any business trust:
- all of the common equity interest of which is owned (either
directly or indirectly through one or more of our wholly-owned
subsidiaries) at all times by us or whose sole depositor is
another Hybrid Preferred Securities Subsidiary;
- that has been formed for the purpose of issuing Hybrid
Preferred Securities; and
- substantially all of the assets of which consist at all times
solely of subordinated debt issued by us or the preferred
securities of a second Hybrid Preferred Securities Subsidiary
and payments made from time to time on such subordinated debt
or preferred securities, as the case may be; or
46
any limited liability company (or similar entity):
- all of the common equity interest of which is owned (either
directly or indirectly through one or more of our wholly-owned
subsidiaries) at all times by us;
- that has been formed for the purpose of issuing Hybrid
Preferred Securities; and
- substantially all of the assets of which consist at all times
solely of subordinated debt issued by us and payments made
from time to time on such subordinated debt.
"Indebtedness" of any person means, without duplication:
- the principal of and premium (if any) in respect of (1)
indebtedness of such person for money borrowed and (2)
indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such person is
responsible or liable;
- all Capital Lease Obligations of such person;
- all obligations of such person issued or assumed as the
deferred purchase price of property, all conditional sale
obligations and all obligations under any title retention
agreement (but excluding trade accounts payable arising in the
ordinary course of business);
- all obligations of such person for the reimbursement of any
obligor on any letter of credit, bankers' acceptance or
similar credit transaction (other than obligations with
respect to letters of credit securing obligations (other than
obligations described in the bullets above) entered into in
the ordinary course of business of such person to the extent
such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than
the third business day following receipt by such person of a
demand for reimbursement following payment on the letter of
credit);
- all obligations of the type referred to in the bullets above
of other persons and all dividends of other persons for the
payment of which, in either case, such person is responsible
or liable as obligor, guarantor or otherwise; and
- all obligations of the type referred to in the bullets above
of other persons secured by any lien on any property or asset
of such person (whether or not such obligation is assumed by
such person), the amount of such obligation being deemed to be
the lesser of the value of such property or assets and the
amount of the obligation so secured.
"Investments" means, with respect to any person, all direct or indirect
investments by such person in other persons in the forms of loans (including
Support Obligations or other obligations), advances or capital contributions
(excluding commission, travel and similar advances to officers and employees
made in the ordinary course of business), purchases or other acquisitions for
consideration of Indebtedness, Capital Stock or other securities, together with
all items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP. If we or any of our subsidiaries sells or
otherwise disposes of any Capital Stock of any of our direct or indirect
subsidiaries, such that, after giving effect to any such sale or disposition,
such person is no longer our subsidiary, we will be deemed to have made an
47
Investment on the date of any such sale or disposition equal to the fair market
value of our Investments in such subsidiary that were not sold or disposed of.
The acquisition by us or any of our subsidiaries of a person that holds an
Investment in a third person will be deemed to be an Investment by us or such
subsidiary in such third person in an amount equal to the fair market value of
the Investments held by the acquired person in such third person.
"Net Cash Proceeds" means, with respect to any issuance or sale or
contribution in respect of Capital Stock, the aggregate proceeds of such
issuance, sale or contribution, including the fair market value (as determined
by the board of directors and net of any associated debt and of any
consideration other than Capital Stock received in return) of property other
than cash, received by the Company or any Restricted Subsidiary, net of
attorneys' fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof, provided, however, that if such fair market value as determined
by the board of directors of property other than cash is greater than $25
million, the value thereof shall be based upon an opinion from an independent
nationally recognized firm experienced in the appraisal or similar review of
similar types of transactions.
"Non-Convertible Capital Stock" means, with respect to any corporation,
any non-convertible Capital Stock of such corporation and any Capital Stock of
such corporation convertible solely into non-convertible Capital Stock other
than Preferred Stock of such corporation; provided, however, that
Non-Convertible Capital Stock shall not include any Redeemable Stock or
Exchangeable Stock.
"Non-Recourse Debt" means Indebtedness:
- as to which neither we nor any of our Restricted Subsidiaries
(a) provides credit support of any kind (including any
undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable as a
guarantor or otherwise, or (c) constitutes the lender;
- no default with respect to which (including any rights that
the holders of the Indebtedness may have to take enforcement
action against an Unrestricted Subsidiary) would permit upon
notice, lapse of time or both any holder of any other
Indebtedness (other than the exchange notes or any Credit
Facility) of us or any of our Restricted Subsidiaries to
declare a default on such other Indebtedness or cause the
payment of the Indebtedness to be accelerated or payable prior
to its stated maturity; and
- as to which the lenders have been notified in writing that
they will not have any recourse to our or any of our
Restricted Subsidiaries' stock or assets.
"Operating Cash Flow" means, for any period, with respect to us and our
Restricted Subsidiaries, the aggregate amount of Consolidated Net Income after
adding thereto Consolidated Interest Expense (adjusted to include costs
recognized on early retirement of debt), income taxes (before giving effect to
non-conventional fuel tax credits), depreciation expense, Amortization Expense
and any noncash amortization of debt issuance costs, any nonrecurring, non-cash
charges to earnings and any negative accretion recognition.
48
"Permitted Investments" means:
- any Investment in us or in a Restricted Subsidiary;
- any Investment in Cash Equivalents;
- any Investment by us or any Restricted Subsidiary in a person,
if as a result of such Investment:
- such person becomes our Restricted Subsidiary; or
- such person is merged, consolidated or amalgamated with
or into, or transfers or conveys substantially all of
its assets to, or is liquidated into, us or our
Restricted Subsidiary;
- any Investment made as a result of the receipt of non-cash
consideration from an asset sale;
- any acquisition of assets solely in exchange for the issuance
of our Capital Stock (other than Redeemable Stock or
Exchangeable Stock);
- any Investments received in compromise of obligations of such
persons incurred in the ordinary course of trade creditors or
customers that were incurred in the ordinary course of
business, including pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of any
trade creditor or customer;
- Hedging Obligations;
- receivables owing to us or any one of our subsidiaries, if
created or acquired in the ordinary course of business;
- payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated
as expenses for accounting purposes and that are made in the
ordinary course of business;
- loans or advances to employees made in the ordinary course of
our or any of our subsidiaries' business, as the case may be,
not to exceed $100,000 per employee and $5 million in the
aggregate at any one time outstanding;
- Support Obligations otherwise permitted by the terms of the
indenture;
- payments made by us or a Restricted Subsidiary to an
Unrestricted Subsidiary in satisfaction of obligations
existing on the issuance date of the exchange notes; and
- other Investments in any person having an aggregate fair
market value (measured on the date each such Investment was
made and without giving effect to subsequent changes in
value), when taken together with all other Investments made
pursuant to this bullet that are at the time outstanding not
to exceed $50 million, without giving effect to any writedown
or writeoff of such Investment or reduction to the extent
credit has already been given under
49
clause 2(c) of the covenant described above under the caption
"Limitation on Restricted Payments".
"Preferred Stock" as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) that is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation; provided, that Hybrid Preferred Securities are not considered
Preferred Stock for purposes of this definition.
"Redeemable Stock" means any Capital Stock that by its terms or otherwise
is required to be redeemed prior to the first anniversary of the stated maturity
of the outstanding notes or is redeemable at the option of the holder thereof at
any time prior to the first anniversary of the stated maturity of the
outstanding notes.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a person means any subsidiary of the referent
person that is not an Unrestricted Subsidiary.
"Special Ratings Trigger" with respect to long-term unsecured indebtedness
means that such indebtedness is not rated at least (x) BBB- by Standard & Poor's
and Baa2 by Moody's Investor's Service, Inc. or (y) BBB by Standard & Poor's and
Baa3 by Moody's.
"Subordinated Indebtedness" means any of our Indebtedness or of any of our
Restricted Subsidiaries (whether outstanding on the issuance date of the
original notes or thereafter incurred) which is contractually subordinated or
junior in right of payment to the notes.
"Support Obligations" means, for any person, without duplication, any
financial obligation, contingent or otherwise, of such person guaranteeing or
otherwise supporting any debt or other obligation of any other person in any
manner, whether directly or indirectly, and including, without limitation, any
obligation of such person, direct or indirect:
- to purchase or pay (or advance or supply funds for the
purchase or payment of) such debt or to purchase (or to
advance or supply funds for the purchase of) any security for
the payment of such debt;
- to purchase property, securities or services for the purpose
of assuring the owner of such debt of the payment of such
debt;
- to maintain working capital, equity capital, available cash or
other financial statement condition of the primary obligor so
as to enable the primary obligor to pay such debt;
- to provide equity capital under or in respect of equity
subscription arrangements (to the extent that such obligation
to provide equity capital does not otherwise constitute debt);
or
- to perform, or arrange for the performance of, any
non-monetary obligations or nonfunded debt payment obligations
of the primary obligor.
50
"TECO Construction Undertakings" means, collectively, the Amended and
Restated Construction Contract Undertaking dated as of May 14, 2002, as the same
may be amended from time to time, by us in favor of Panda Gila River, L.P., a
Delaware limited partnership ("Panda Gila River"), and Citibank, N.A., as
Administrative Agent (the "Panda Gila River Agent") under the Gila River Project
Credit Agreement dated as of May 31, 2001 among Panda Gila River, the banks a
party thereto, and the Panda Gila River Agent; and the Amended and Restated
Construction Contract Undertaking dated as of May 14, 2002, as the same may be
amended from time to time, by us in favor of Union Power Partners, L.P., a
Delaware limited partnership ("Union Power"), and Citibank, N.A., as
Administrative Agent (the "Union Power Agent") under the Union Power Project
Credit Agreement dated as of May 31, 2001 among Union Power, the banks a party
thereto, and the Union Power Agent.
"Unrestricted Subsidiary" means each of TECO Power Services Corporation
and its subsidiaries and any other subsidiary of us (other than any subsidiary
existing on the issuance date of the original notes or any successor to any of
them) that is designated by our board of directors as an Unrestricted Subsidiary
pursuant to a board resolution, but only to the extent that such subsidiary
being designated as an Unrestricted Subsidiary:
- has no Indebtedness other than Non-Recourse Debt;
- is not party to any agreement, contract, arrangement or
understanding with us or any of our Restricted Subsidiaries
unless the terms of any such agreement, contract, arrangement
or understanding are no less favorable to us or such
Restricted Subsidiary than those that might be obtained at the
time from persons who are not our affiliates;
- is a person with respect to which neither we nor any of our
Restricted Subsidiaries has any direct or indirect obligation
(a) to subscribe for additional Capital Stock or (b) to
maintain or preserve such person's financial condition or to
cause such person to achieve any specified levels of operating
results;
- has not guaranteed or otherwise directly or indirectly
provided credit support for any of our Indebtedness or of any
of our Restricted Subsidiaries; and
- has at least one director on its board of directors that is
not our director or executive officer or a director or
executive officer of any of our Restricted Subsidiaries and
has at least one executive officer that is not our director or
executive officer or a director or executive officer of any of
our Restricted Subsidiaries.
Any designation of one of our subsidiaries as an Unrestricted Subsidiary
will be evidenced to the trustee by filing with the trustee a certified copy of
the board resolution giving effect to such designation and an officers'
certificate certifying that such designation complied with the preceding
conditions and was permitted by the covenant described above under the caption "
-- Limitation on Restricted Payments." If, at any time, any Unrestricted
Subsidiary would fail to meet the preceding requirements as an Unrestricted
Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for
purposes of the indenture and any Indebtedness of such subsidiary will be deemed
to be incurred by our Restricted Subsidiary as of such date and, if such
Indebtedness is not permitted to be incurred as of such date under the covenant
described under the caption "Limitation on Indebtedness," we will be in default
of such covenant. Our board of directors may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, that such
designation will be deemed to be an incurrence of Indebtedness
51
by our Restricted Subsidiary of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation will only be permitted if (1) such
Indebtedness is permitted under the covenant described under the caption
"Limitation on Indebtedness," calculated on a pro forma basis as if such
designation had occurred at the beginning of the four-quarter reference period;
and (2) no default or event of default would be in existence following such
designation.
MODIFICATION OF THE INDENTURE
The indenture provides that we or the trustee may modify or amend its
terms with the consent of (1) the holders of not less than a majority in
aggregate principal amount of the outstanding debt securities of each affected
series and (2) 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 a modification, we may
not:
- change the date stated on the debt securities on which any
payment of principal or interest is stated to be due;
- reduce the principal amount or any premium or interest on, any
debt securities, including 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
securities;
- impair the right to institute suit for the enforcement of any
payment on or with respect to any debt securities 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 notes may waive any past default under the indenture with
respect to the notes except:
- a default in the payment of principal of, or any premium or
interest on, any notes;
- 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 note.
52
EVENTS OF DEFAULT
An event of default with respect to any of the notes is any one of the
following events:
- we fail to pay any interest (including additional interest on
the original notes) on any of the notes when due, and such
failure has continued for 30 days;
- we fail to pay principal of or premium, if any, on any of the
notes when due;
- we fail to comply with provisions described in the caption "
-- Purchase of Notes Upon Change in Control;"
- we or any of our subsidiaries fail to comply with the
provisions described under the captions " -- Certain
Restrictive Covenants -- Limitation on Restricted Payments" or
" -- Certain Restrictive Covenants -- Limitation on
Indebtedness," and such failure has continued for 30 days
after we receive written notice as provided in the indenture;
- we or any of our subsidiaries 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 the notes), and such failure has
continued for 90 days after we receive written notice as
provided in the indenture;
- a default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by us or any of
our Restricted Subsidiaries (or the payment of which is
guaranteed by us or any of our Restricted Subsidiaries)
whether such Indebtedness or guarantee now exists, or is
created after the date of the indenture, if that default:
- is caused by a failure to pay principal of, or interest
or premium, if any, on such Indebtedness at final
maturity and the aggregate amount of such Indebtedness
exceeds $50,000,000; or
- results in the acceleration of Indebtedness aggregating
$10,000,000 prior to its express maturity;
- we or any of our Restricted Subsidiaries fail to pay final
judgments aggregating in excess of $50,000,000, which
judgments are not paid, discharged or stayed for a period of
60 days;
- certain events of bankruptcy or insolvency described in the
indenture with respect to us or any of our Restricted
Subsidiaries which are Significant Subsidiaries or any group
of Restricted Subsidiaries that, taken together, would
constitute a Significant Subsidiary.
In the case of an event of default arising from certain events of
bankruptcy or insolvency, with respect to us, any Restricted Subsidiary that is
a Significant Subsidiary or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary, all outstanding notes will
become due and payable immediately without further action or notice. If any
other event of default occurs and is continuing, the trustee or the holders of
at least 25% in principal amount of the then outstanding notes may declare the
principal amount of all the notes to be immediately due and payable. Under some
53
circumstances, the holders of a majority in principal amount of the outstanding
notes may rescind and annul that declaration and its consequences.
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 notes 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 notes.
The holder of a note 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 note 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
issued under the indenture 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 THE NOTES
We may cause ourselves (subject to the terms of the indenture) to be
discharged from any and all obligations with respect to the notes (except for
certain obligations to register the transfer or exchange of the notes, to
replace the notes 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 the notes 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 the notes.
Under current Federal income tax law, the defeasance of the notes would be
treated as a taxable exchange of the notes in which holders of the notes 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. You are urged to consult your own tax advisor as to the specific
consequences of a defeasance, including the applicability and effect of tax laws
other than the federal income tax law.
54
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.
GOVERNING LAW
The indenture and the notes will be governed by and construed in
accordance with the laws of the State of New York.
BOOK ENTRY; DELIVERY AND FORM
The exchange 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 exchange of the exchange 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 us 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.
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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.
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.
Neither we nor the trustee will be liable for any delay by DTC or any
participant or indirect participant in DTC's system in identifying the
beneficial owners of the related notes and each such person may conclusively
rely on, and shall be protected in relying on, instructions from DTC for all
purposes (including with respect to the registration and delivery, and the
respective principal amounts, of the exchange notes to be issued).
56
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.
57
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material United States federal income
tax consequences of the exchange of original notes for exchange notes and of the
ownership and disposition of the exchange notes. This summary is based on the
Internal Revenue Code of 1986, as amended (the "Code"), administrative
pronouncements, judicial decisions and final, temporary and proposed
regulations, all of which are subject to change. Any such change could be
applied retroactively in a way that could cause the tax consequences to differ
from the consequences described below, possibly with adverse effect.
This summary applies only to persons who hold the original notes and the
exchange notes as capital assets within the meaning of Section 1221 of the Code
(that is, for investment purposes). This summary does not discuss all aspects of
United States federal income taxation that may be relevant to holders in light
of their special circumstances or that may be relevant to holders subject to
special tax rules (such as banks, thrifts, and other financial institutions,
insurance companies, tax-exempt organizations, regulated investment companies,
real estate investment trusts or real estate mortgage investment conduits,
financial asset securitization investment trusts, dealers in securities or
currencies, persons who hold the notes through a partnership or other
pass-through entity, persons subject to alternative minimum tax, persons holding
the notes as a part of a hedge, straddle, conversion, constructive sale or other
integrated transaction, persons whose functional currency is not the U.S.
dollar, or persons who have ceased to be U.S. citizens or to be taxed as
resident aliens). This summary also does not discuss any tax consequences
arising under the United States federal estate and gift tax laws or the law of
any state, local, foreign or other taxing jurisdiction.
YOU SHOULD CONSULT YOUR OWN TAX ADVISOR CONCERNING THE UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES TO YOU, IN LIGHT OF YOUR PARTICULAR SITUATION, OF THE
EXCHANGE OF THE ORIGINAL NOTES FOR THE EXCHANGE NOTES AND THE OWNERSHIP AND
DISPOSITION OF THE EXCHANGE NOTES, AS WELL AS ANY CONSEQUENCES ARISING UNDER
UNITED STATES FEDERAL ESTATE AND GIFT TAX LAWS AND THE LAWS OF ANY STATE, LOCAL,
FOREIGN OR OTHER TAXING JURISDICTION.
As used this summary, the term "U.S. holder" means a beneficial owner of a
note that is for United States federal income tax purposes:
- a citizen or resident of the United States;
- a corporation (including an entity treated as a corporation
for U.S. federal income tax purposes) created or organized in
or under the laws of the United States or of any political
subdivision thereof;
- an estate, the income of which is subject to United States
federal income tax regardless of its source; or
- a trust, if a court within the United States is able to
exercise primary supervision over the administration of the
trust and one or more United States persons have the authority
to control all substantial decisions of the trust or if a
valid election is in place to treat the trust as a United
States person.
As used in this summary, the term "non-U.S. holder" means a beneficial
owner of a note that is not a U.S. holder.
58
TAX CONSEQUENCES TO U.S. HOLDERS
EXCHANGE OFFER
The exchange of the original notes for the exchange notes in connection
with the exchange offer will not be a taxable sale or exchange for U.S. federal
income tax purposes. Accordingly,
- holders will not recognize taxable gain or loss as a result of
the exchange;
- the adjusted tax basis of an exchange note immediately after
the exchange will be the same as the adjusted tax basis of the
original note exchanged therefor immediately before the
exchange; and
- the holding period of the exchange note will include the
holding period of the original note.
Further, any original issue discount, market discount or bond premium (as
discussed below) applicable to the original notes will carry over to the
exchange notes.
STATED INTEREST PAYMENTS ON THE EXCHANGE NOTES
Stated interest payments on the exchange notes will generally be taxable
as ordinary interest income at the time the interest accrues or is received in
accordance with a holder's regular method of accounting for federal income tax
purposes.
ORIGINAL ISSUE DISCOUNT
The original notes were issued with original issue discount in an amount
equal to the excess of the par value of the original notes over their issue
price. As a result, each exchange note also will be treated as having been
issued with original issue discount in an amount equal to the excess of the par
value of the exchange note over its issue price. The issue price of an exchange
note will equal the first offering price to the public at which a substantial
amount of the original notes were sold. A holder of an exchange note generally
must include the original issue discount on the exchange note in income as
ordinary interest as it accrues under a constant yield method in advance of the
receipt of the cash payments attributable to such income, regardless of the
holder's regular method of accounting.
In general, the amount of original issue discount included in income by a
holder of an exchange note will be the sum of the daily portions of original
issue discount with respect to the exchange note for each day during the taxable
year (or portion of the taxable year) on which the holder held the exchange note
and the original note exchanged therefor. The daily portion of original issue
discount on any exchange note is determined by allocating to each day in any
accrual period a ratable portion of the original issue discount allocable to
that accrual period.
An accrual period may be of any length and the accrual periods may vary in
length over the term of the exchange notes, provided that each accrual period is
no longer than one year and each scheduled payment of principal or interest
occurs either on the final day of an accrual period or on the first day of an
accrual period.
The amount of original issue discount allocable to each accrual period is
generally equal to the difference between:
59
- the product of (x) the exchange notes' adjusted issue price at the
beginning of such accrual period and (y) the yield of the exchange
notes (appropriately adjusted to take into account the length of the
particular accrual period), and
- the amount of any qualified stated interest payments allocable to
such accrual period.
The adjusted issue price of an exchange note at the beginning of any accrual
period is the sum of the issue price of the note plus the amount of original
issue discount allocable to all prior accrual periods minus the amount of any
prior payments on the note that were not qualified stated interest payments.
Under these rules, holders generally will have to include in income
increasingly greater amounts of original issue discount in successive accrual
periods.
If a holder acquires an exchange note (or purchased an original note which
such holder exchanges for an exchange note) after original issuance for an
amount that is less than or equal to the note's par value but greater than its
adjusted issue price, the holder will be considered to have acquired such note
at an "acquisition premium" equal in amount to the excess of the note's cost
over its adjusted issue price. Under the acquisition premium rules, the amount
of original issue discount which such holder must include in income in each
period with respect to the note will be reduced (but not below zero) by the
portion of the acquisition premium allocated to the period.
MARKET DISCOUNT
If a holder acquires an exchange note (or purchased an original note which
such holder exchanges for an exchange note) for an amount that is less than its
adjusted issue price, the difference will be treated as "market discount"
(unless such difference is less than a statutorily defined de minimis amount),
and the exchange note will be subject to the market discount rules. The holder
of an exchange note that is subject to the market discount rules will be
required to treat any full or partial principal payment or any gain recognized
on the maturity, sale or other disposition of the note as ordinary income, to
the extent that such gain does not exceed the accrued market discount on the
note. The amount of market discount treated as having accrued will be determined
either:
- on a straight-line basis by multiplying the market discount
times a fraction, the numerator of which is the number of days
the note was held by the holder and the denominator of which
is the total number of days after the date such holder
acquired the note up to (and including) the note's maturity
date, or
- if the holder so elects, on a constant interest rate method.
The holder of an exchange note subject to the market discount rules may
elect to include market discount in income currently, through the use of either
the straight-line inclusion method or the elective constant interest method, in
lieu of recharacterizing gain upon disposition as ordinary income to the extent
of accrued market discount at the time of disposition. Once made, this election
will apply to all debt instruments with market discount acquired by the electing
holder on or after the first day of the first taxable year to which the election
applies and may not be revoked without the consent of the Internal Revenue
Service (IRS). If an election is made to include market discount on a debt
instrument in income
60
currently, the basis of the debt instrument in the hands of the holder will be
increased by the market discount thereon as it is included in income.
A holder who does not elect to include the market discount on an exchange
note in income currently may be required to defer interest expense deductions
for a portion of the interest paid on indebtedness incurred or continued to
purchase or carry such note, until the maturity of the note, its earlier
disposition in a taxable transaction or, if the holder so elects, a subsequent
taxable year in which sufficient income exists with respect to the exchange
note.
AMORTIZABLE BOND PREMIUM.
If a holder purchases an exchange note (or purchased an original note
which such holder exchanges for an exchange note) for an amount in excess of its
par value, such holder will not be required to include in income any original
issue discount with respect to the note. In addition, such holder may elect to
treat the excess as "amortizable bond premium," in which case the amount
required to be included in the holder's income each year with respect to stated
interest on such note will be reduced by the amount of amortizable bond premium
allocable (based on the yield to maturity of the note) to such year. Any
election to amortize bond premium will apply to all debt instruments (other than
debt instruments the interest on which is excludable from gross income) held or
subsequently acquired by the holder on or after the first day of the first
taxable year to which the election applies and may not be revoked without the
consent of the IRS.
SALE, EXCHANGE OR RETIREMENT OF EXCHANGE NOTES
A holder of an exchange note will recognize gain or loss upon the sale,
redemption, retirement or other disposition of the note equal to the difference
between:
- the amount of cash and the fair market value of any property
received (except to the extent attributable to accrued
interest) and
- the holder's adjusted tax basis in the note.
A holder's adjusted tax basis in an exchange note generally will equal such
holder's initial investment in the original note or the exchange note, increased
by the amount of original issue discount and any accrued market discount
previously included in income and decreased by the amount of any payments, other
than qualified stated interest payments, received with respect to such note and
any amortized bond premium. If a holder disposes of an exchange note between
interest payment dates, a portion of the amount received represents interest
accrued to the date of disposition and must be reported as ordinary interest
income, and not as proceeds from the disposition, in accordance with the
holder's regular method of accounting for federal income tax purposes. Subject
to the market discount rules discussed above, any gain or loss recognized by a
holder on the disposition of an exchange note generally will be capital gain or
loss and will be long-term capital gain or loss if the holder's holding period
is more than one year. Under current law, holders who are individuals generally
are taxed on long-term capital gains at a maximum marginal rate of 20%;
corporate holders are taxed on long-term capital gains at a maximum marginal
rate of 35%. The deductibility of capital losses is subject to limitations.
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UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS
The following discussion applies only to non-U.S. holders. This discussion
does not address all aspects of United States federal income taxation that may
be relevant to such non-U.S. holders in light of their special circumstances.
For example, special rules may apply to a non-U.S. holder that is a "controlled
foreign corporation," "passive foreign investment company" or "foreign personal
holding company," and such holders should consult their own tax advisors to
determine the United States federal, state, local and other tax consequences
that may be relevant to them.
EXCHANGE OFFER
The exchange of the original notes for the exchange notes in the exchange
offer will not be a taxable sale or exchange for U.S. federal income tax
purposes.
INTEREST PAYMENTS ON THE EXCHANGE NOTES
Subject to the discussion below concerning effectively connected income
and backup withholding, the 30% United States federal withholding tax should not
apply to any payment of interest (including original issue discount) on the
exchange notes provided that:
- the holder does not own actually or constructively 10% or more
of the total combined voting power of TECO Energy;
- the holder is not a controlled foreign corporation related to
TECO Energy through actual or constructive stock ownership;
- the holder is not a bank whose receipt of interest on the
exchange notes is described in Section 881(c)(3)(A) of the
Internal Revenue Code; and
- either
- the holder provides the holder's name and address on an
IRS Form W-8BEN (or other applicable form), and
certifies, under penalty of perjury that the holder is
not a United States person, or
- a financial institution holding the notes on the
holder's behalf certifies, under penalty of perjury,
that it has received an IRS Form W-8BEN (or other
applicable form) from the beneficial owner and provides
a copy or, in the case of certain foreign
intermediaries, satisfies other certification
requirements under the applicable U.S. Treasury
regulations.
Special certification requirements apply to certain non-U.S. holders that are
entities rather than individuals.
If a holder cannot satisfy the requirements described above, payments of
interest (including original issue discount) made to the holder will be subject
to the 30% United States federal withholding tax, unless the holder qualifies
for a reduced rate of withholding under a tax treaty or the payments are exempt
from withholding because they are effectively connected with the holder's
conduct of a trade or business in the United States (or, where a tax treaty
applies, are attributable to a United States permanent
62
establishment maintained by the holder) and the holder satisfies the applicable
certification and disclosure requirements. In order to claim a reduction in or
exemption from the 30% withholding tax under an applicable tax treaty, a holder
must provide a properly executed IRS Form W-8BEN (or a suitable substitute
form). A holder must provide an IRS Form W-8ECI (or a suitable substitute form)
in order to claim that the interest payments are exempt from the withholding tax
because they are effectively connected with the holder's conduct of a trade or
business in the United States.
A non-U.S. holder eligible for a reduced rate of United States withholding
tax pursuant to an income tax treaty may obtain a refund of any excess amounts
withheld by filing an appropriate claim for refund with the IRS.
SALE, EXCHANGE OR RETIREMENT OF THE EXCHANGE NOTES
Subject to the discussion below concerning effectively connected income
and backup withholding, a holder will not be subject to U.S. federal income tax
on any gain (including gain attributable to market discount) realized on the
sale, exchange or retirement of an exchange note unless the holder is an
individual who is present in the U.S. for at least 183 days during the year of
disposition of the exchange note and other conditions are satisfied.
EFFECTIVELY CONNECTED INCOME
If a holder is engaged in a trade or business in the United States and the
holder's investment in an exchange note is effectively connected with such trade
or business, the holder will be exempt from the 30% withholding tax on interest
(provided a certification requirement, generally on IRS Form W-8ECI, is met) and
will instead generally be subject to regular U.S. federal income tax on a net
income basis on any interest and gain with respect to the exchange notes in the
same manner as if the holder were a U.S. Holder. In addition, if the holder is a
foreign corporation, the holder may be subject to a branch profits tax of 30%
(or the lower rate provided by an applicable income tax treaty) of the holder's
earnings and profits for the taxable year that are effectively connected with
the holder's conduct of a trade or business in the United States. If the holder
is eligible for the benefits of a tax treaty, any effectively connected income
or gain will generally be subject to U.S. federal income tax only if it is also
attributable to a permanent establishment maintained by the holder in the United
States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Interest on, and proceeds received from the sale of, an exchange note
generally will be reported to U.S. holders, other than certain exempt
recipients, such as corporations, on Internal Revenue Service Form 1099. In
addition, a backup withholding tax may apply to those amounts if the U.S. holder
fails to furnish the payor with a correct taxpayer identification number or
other required certification or fails to report interest or dividends required
to be shown on the holder's federal income tax returns.
In general, a non-U.S. holder will not be subject to backup withholding
with respect to interest payments on the exchange notes if such holder has
provided the statement described above under "-- United States Federal Income
Tax Consequences to Non-U.S. Holders -- Interest Payments on the Exchange Notes"
and the payor does not have actual knowledge or reason to know that such holder
is a U.S. person. In addition, a non-U.S. holder will not be subject to backup
withholding with respect to the proceeds of the sale of an exchange note made
within the United States or conducted through certain United States financial
intermediaries if the payor receives the statement described above and does not
have actual knowledge or reason to know that such holder is a United States
person or such holder
63
otherwise establishes an exemption. Non-U.S. holders should consult their tax
advisors regarding the application of information reporting and backup
withholding in their particular situations, the availability of exemptions and
the procedure for obtaining such exemptions, if available.
Backup withholding is not an additional tax, and amounts withheld as
backup withholding will be allowed as a refund or credit against a holder's
federal income tax liability, provided that the required information is
furnished to the IRS.
64
ORIGINAL NOTES REGISTRATION RIGHTS
We and Credit Suisse First Boston Corporation, the initial purchaser,
entered into a registration rights agreement prior to the issuance of the
original notes. The following description of the registration rights agreement
is a summary only, does not purport to be complete and is qualified in its
entirety by reference to all provisions of the registration rights agreement, a
copy of which has been filed as an exhibit to our current report on Form 8-K
filed with the SEC on November 20, 2002. See "WHERE YOU CAN FIND MORE
INFORMATION."
EXCHANGE OFFER REGISTRATION STATEMENT
Pursuant to the registration rights agreement, we agreed to file and cause
to become effective the registration statement of which this prospectus is a
part to effect an exchange of the original notes for the exchange notes.
We also agreed to make available for a period of up to 180 days after the
completion of this exchange offer a prospectus to any broker-dealer for use in
connection with any resale of any such exchange notes. The 180-day period may be
suspended (to be offset by a commensurate extension) in the event of a possible
acquisition, business combination or other transaction involving us or if it
becomes necessary for us to amend or supplement such prospectus. If we suspend
use of the prospectus, we may require broker-dealers to discontinue the sale or
other disposition of the exchange notes for a period of not more than 20 days in
any 12-month period. We have also agreed to pay all expenses incident to the
exchange offer (including the expenses of one counsel to the holders of the
original notes) and to indemnify certain holders of the exchange notes
(including any broker-dealer) against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. A broker-dealer that delivers such
a prospectus to purchasers in connection with such resales may be subject to
certain of the civil liability provisions under the Securities Act of 1933 and
will be bound by the provisions of the registration rights agreement (including
certain indemnification rights and obligations).
RESALE SHELF REGISTRATION STATEMENT
We also agreed to file with the SEC a shelf registration statement to
cover resales of Transfer Restricted Securities if:
- because of any change in law or applicable interpretations of
such law by the staff of the SEC, we are not permitted to
effect this exchange offer;
- this exchange offer is not completed by April 29, 2003;
- the initial purchaser requests that we file such a
registration statement covering original notes not eligible to
be exchanged for exchange notes in this exchange offer;
- any holder of original notes that is not eligible to
participate in the exchange offer requests that we file such a
registration statement; or
- any holder of original notes (other than a broker-dealer
exchanging original notes acquired for its own account as a
result of market-making activities or other trading
activities) that participates in the exchange offer does not
receive freely transferable exchange notes in exchange for
tendered original notes requests that we file such a
registration statement.
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Each of the five bullets above is referred to in this prospectus as a
"Trigger Date."
"Transfer Restricted Security" means each original note until:
- the date on which such original note has been exchanged by a
person other than a broker-dealer for a freely transferable
exchange note in this exchange offer;
- following the exchange by a broker-dealer in the exchange
offer of an original note for an exchange note, the date on
which such exchange note is sold to a purchaser who receives
from such broker-dealer on or prior to the date of such sale a
copy of the prospectus contained in this exchange offer
registration statement;
- the date on which such original note has been effectively
registered under the Securities Act of 1933 and disposed of in
accordance with the shelf registration statement; or
- the date on which such original note is distributed to the
public pursuant to Rule 144 under the Securities Act of 1933
or is saleable pursuant to Rule 144(k) under the Securities
Act.
If we file a shelf registration statement, we will use our reasonable best
efforts to keep the shelf registration statement effective until the earlier of:
- two years (or for such longer period if extended as provided
below) from the date of its effectiveness;
- the date on which all the notes covered by that registration
statement have been sold under that registration statement; or
- the date on which all the notes covered by the registration
statement are no longer restricted securities as defined in
rule 144A under the Securities Act of 1933.
Holders of original notes will be required to deliver information to be
used in connection with the shelf registration statement in order to have their
notes included in the shelf registration statement. A holder who sells notes
pursuant to the shelf registration statement generally will be required to be
named as a selling security holder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act of 1933 in connection with such sales and
will be bound by the provisions of the registration rights agreement which are
applicable to such a holder (including certain indemnification obligations).
NOTICE OF CERTAIN EVENTS
We have agreed to notify the initial purchaser, the holders of the
original notes and any known participating broker-dealer of:
- any request from the SEC for amendments or supplements to the
registration statement or the related prospectus or for
additional information;
- the SEC's issuance of any stop order suspending the
effectiveness of the registration statement or the initiation
of any proceeding for that purpose;
66
- any notice of suspension of the qualification of the notes for
sale in any jurisdiction or the initiation or threatening of
any proceeding for that purpose; and
- any event that requires us to make changes to the registration
statement or the prospectus in order that the registration
statement or the prospectus do not contain an untrue statement
of a material fact nor omit to state a material fact required
to be stated therein or necessary to make the statements
therein (in the case of the prospectus, in the light of the
circumstances under which they were made) not misleading.
Upon such notification, the initial purchaser, the holders of the original
notes and any known participating broker-dealer agree to suspend use of such
prospectus and discontinue disposition of such notes until receipt of copies of
the supplemental or amended prospectus or until advised in writing by us that
use of the applicable prospectus may be resumed, and the period of effectiveness
of the registration statement above shall be extended by the number of days
from, and including, the date of giving such notice to, and including, the date
when the initial purchaser, the holders of the original notes and any known
participating broker-dealer have received such amended or supplemented
prospectus or our authorization to resume use of the applicable prospectus. The
period of effectiveness including any such extension shall not exceed the
holding period applicable under Rule 144(k) of the Securities Act.
ADDITIONAL INTEREST
We will pay additional interest over and above the stated interest rate of
the notes from and including the date on which any "registration default" occurs
to, but excluding, the date on which all registration defaults have been cured,
to each holder of Transfer Restricted Securities at a rate of 0.50% per year for
the first 90-day period immediately following the occurrence of the registration
default. The additional interest rate will increase by an additional 0.50% per
year for each subsequent 90-day period until all registration defaults have been
cured, up to a maximum additional interest rate of 2.0% per year. Any amounts of
additional interest will be paid to holders of Transfer Restricted Securities in
the same manner as interest payments on the notes on semi-annual payment dates
which correspond to interest payment dates for the notes.
For the purposes of this section, a "registration default" will be deemed
to occur if:
- this exchange offer is not consummated on or prior to April
29, 2003;
- we are required to file a shelf registration statement and we
have not filed that registration statement with the SEC on or
prior to 60 days after the applicable Trigger Date;
- the shelf registration statement we filed is not declared
effective on or prior to 120 days after the applicable Trigger
Date;
- the exchange registration statement or shelf registration
statement, as the case may be, we filed was declared effective
but has since ceased to be effective; or
- the exchange registration statement or shelf registration
statement, as the case may be, or any related prospectus
ceases to be usable in connection with resales of Transfer
Restricted Securities because either (1) an event has occurred
as a result of which the related prospectus would include an
untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein in
light of the circumstances under which they were made not
misleading or (2) it is necessary to amend such registration
statement or supplement the related prospectus to comply with
the Securities Act of 1933.
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A registration default described in the fourth and fifth bullets above
will be deemed not to have occurred and be continuing in relation to a shelf
registration statement or the related prospectus if such registration default
has occurred solely because:
- we have filed a post-effective amendment to that shelf
registration statement to incorporate annual audited financial
information with respect to us where such post-effective
amendment is not yet effective and needs to be declared
effective to permit holders to use the related prospectus, or
- other material events with respect to us have occurred that
need to be described in that shelf registration statement or
the related prospectus and, either, we are proceeding promptly
and in good faith to amend or supplement that shelf
registration statement and the related prospectus to describe
such events or we have delayed filing and distributing any
such amendment or supplement if there is a possible
acquisition or business combination or other transaction
involving us that would require disclosure in the shelf
registration statement or the related prospectus, and we
determine in the exercise of our reasonable judgment that such
disclosure is not in our best interests or the best interests
of our stockholders at such time.
We will not be entitled to delay filing or distributing any such
supplement or amendment for more than 20 days (whether or not consecutive) in
any period of 12 consecutive months. If any registration default occurs for a
continuous period in excess of 30 days, we will pay additional interest from the
day such registration default occurs until such registration default is cured.
PLAN OF DISTRIBUTION
Based on interpretations by the staff of the Division of Corporation
Finance of the SEC set forth in no-action letters issued to third parties, we
believe that the exchange notes issued pursuant to this exchange offer in
exchange for original notes generally may be offered for resale, resold or
otherwise transferred by holders without compliance with the registration and
prospectus delivery provisions of the Securities Act of 1933 if the exchange
notes are acquired in the ordinary course of such holders' business and such
holders have no arrangement with any person to participate in a distribution of
such exchange notes. We did not, and do not intend to, request an interpretation
from the SEC with respect to resales of the exchange notes, and we cannot be
sure that the staff of the Division of Corporation Finance of the SEC would make
a similar determination with respect to the resale of the exchange notes as it
did in those interpretative letters to third-parties. Broker-dealers receiving
exchange notes in the exchange offer will be subject to a prospectus delivery
requirement with respect to resales of such exchange notes.
Any holder that is an "affiliate" of ours or a broker-dealer that acquired
original notes directly from us or that otherwise cannot rely upon such
interpretations must comply with the registration and prospectus delivery
requirements of the Securities Act in order to resell the original notes and
will not be permitted or entitled to exchange original notes in the exchange
offer.
Based on the position taken by the staff of the Division of Corporation
Finance of the SEC in the no-action letters referred to above, we believe that
broker-dealers who acquired original notes for their own accounts, as a result
of market-making activities or other trading activities, may fulfill their
prospectus delivery requirements with respect to the exchange notes received
upon exchange of such original notes (other than original notes which represent
an unsold allotment from the original sale of the original notes) with a
prospectus meeting the requirements of the Securities Act of 1933, which may be
the prospectus prepared for an exchange offer so long as it contains a
description of the plan of distribution with respect to the resale of such
exchange notes. Accordingly, this prospectus, as it may be amended or
68
supplemented from time to time, may be used by a broker-dealer in connection
with resales of exchange notes received in exchange for original notes where
those original notes were acquired as a result of market-making activities or
other trading activities. However, a broker-dealer who intends to use this
prospectus in connection with the resale of exchange notes received in exchange
for original notes pursuant to this exchange offer, must notify us or cause us
to be notified, on or prior to the expiration of this exchange offer, that it is
a broker-dealer. Such notice may be given in the space provided for in the
letter of transmittal or may be delivered to the exchange agent. Further, each
broker-dealer that receives exchange notes for its own account pursuant to the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of such exchange notes. We have agreed that, for a period of 180
days after the exchange offer has been completed, we will make this prospectus,
as amended or supplemented, available to any broker-dealer for use in connection
with any such resale. The 180-day period may be suspended (to be offset by a
commensurate extension) in the event of a possible acquisition, business
combination or other transaction involving us or if it becomes necessary for us
to amend or supplement such prospectus. If we suspend use of the prospectus, we
may require broker-dealers to discontinue the sale or other disposition of the
exchange notes for a period of not more than 20 days in any 12-month period.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the exchange notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any broker-dealer or
the purchasers of any such exchange notes. Any broker-dealer that resells
exchange notes that were received by it for its own account pursuant to the
exchange offer and any broker or dealer that participates in a distribution of
such exchange notes may be deemed to be an "underwriter" within the meaning of
the Securities Act, and any profit on any such resale of exchange notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The letter of transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The initial purchaser and its respective affiliates perform various
commercial banking and investment banking services for us on a regular basis.
LEGAL OPINIONS
The validity of the exchange notes offered hereby will be passed upon for
us by Palmer & Dodge LLP, Boston, Massachusetts. In rendering its opinion,
Palmer & Dodge LLP will rely on the opinion of Ropes & Gray with respect to
matters of New York law.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference to our Current Report on Form 8-K filed December 19, 2002 and the
financial statement schedule incorporated by reference to our Annual Report on
Form 10-K 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 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 have filed a registration statement on Form S-4 with the SEC relating
to the exchange notes to be issued in the exchange offer. For further
information on us, the notes and the exchange offer, 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:
- our Annual Report on Form 10-K for the fiscal year ended
December 31, 2001;
- our Quarterly Reports on Form 10-Q for the quarterly periods
ended March 31, 2002, June 30, 2002 and September 30, 2002;
and
- our Current Reports on Form 8-K filed December 19, 2002,
December 18, 2002, November 21, 2002, November 20, 2002,
November 15, 2002, November 12, 2002, November 5, 2002,
October 11, 2002, October 8, 2002, September 25, 2002, August
14, 2002, June 10, 2002, June 5, 2002, May 31, 2002, May 20,
2002 May 10, 2002, 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
IN ORDER TO OBTAIN TIMELY DELIVERY, YOU MUST REQUEST INFORMATION NO LATER
THAN ___________, 2003.
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone to
provide you with different information. We are not
70
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 is accurate as of any date other than the date on the front of these
documents.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
TECO Energy, Inc.
Our bylaws provide that we will indemnify to the full extent permitted by
the law any person who is or was a party to any threatened, pending or completed
proceeding, because such person is or was a director or officer for us or is or
was serving at our request as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise. The indemnification
provided for in our bylaws is expressly not exclusive of all other rights to
which the person may be entitled as a matter of law.
Section 607.0850 of the Florida Business Corporation Act provides that a
corporation may indemnify each person who was or is a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving,
at the request of the corporation, as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against liability, expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with any such action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the registrant, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful; provided, however, no
indemnification shall be made in connection with any proceeding brought by or in
the right of the registrant where the person involved is adjudged to be liable
to the corporation, except to the extent approved by a court.
We maintain an insurance policy on behalf of our directors and officers,
covering certain liabilities that may be incurred by the directors and officers
when acting in their capacities as such.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) See Exhibit Index immediately following the signature page.
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of
72
the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would
not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b)(4) if, in the aggregate, the changes in volume
and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Tampa, state of Florida,
on December 19, 2002.
TECO ENERGY, INC.
By: /s/ Gordon L. Gillette
Gordon L. Gillette
Senior Vice President - Finance and Chief Financial
Officer (Principal Financial Officer)
POWER OF ATTORNEY
We, the undersigned directors and officers of TECO Energy, Inc., hereby
severally constitute and appoint David E. Schwartz and Gordon L. Gillette, our
true and lawful attorneys-in-fact, with full power to them in any and all
capacities, to sign any amendments to this Registration Statement on Form S-4
(including pre- and post-effective amendments) and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons in
the capacities and as of December 19, 2002.
SIGNATURE TITLE
--------- -----
/s/ R. D. Fagan Chairman of the Board,
-------------------------------- President and Chief
R. D. Fagan Executive Officer
(Principal Executive Officer)
/s/ G. L. Gillette Senior Vice President-
-------------------------------- Finance and Chief
G. L. Gillette Financial Officer
(Principal Financial Officer)
/s/ S. A. Myers Vice President - Corporate
-------------------------------- Accounting and Tax
S. A. Myers (Principal Accounting Officer)
/s/ C. D. Ausley Director
--------------------------------
C. D. Ausley
/s/ S. L. Baldwin Director
--------------------------------
S. L. Baldwin
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/s/ J. L. Ferman, Jr. Director
--------------------------------
J. L. Ferman, Jr.
/s/ L. Guinot, Jr. Director
--------------------------------
L. Guinot, Jr.
/s/ I. D. Hall Director
--------------------------------
I. D. Hall
/s/ T. L. Rankin Director
--------------------------------
T. L. Rankin
/s/ W. D. Rockford Director
--------------------------------
W. D. Rockford
/s/ W. P. Sovey Director
--------------------------------
W. P. Sovey
/s/ J. T. Touchton Director
--------------------------------
J. T. Touchton
/s/ J. A. Urquhart Director
--------------------------------
J. A. Urquhart
/s/ J. O. Welch, Jr. Director
--------------------------------
J. O. Welch, Jr.
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
3.1* TECO Energy, Inc. Articles of Incorporation, as amended on April 20,
1993. Filed as Exhibit 3 to TECO Energy, Inc.'s, Quarterly Report on
Form 10-Q for the quarter ended March 31, 1993 and incorporated
herein by reference.
3.2* Bylaws of TECO Energy, Inc., as amended effective January 18, 2001.
Filed as Exhibit 3.2 to the TECO Energy, Inc.'s Annual Report on
Form 10-K for the year ended December 31, 2000 and incorporated
herein by reference.
4.1* Indenture dated as of August 17, 1998 between TECO Energy, Inc. and
The Bank of New York, as trustee. Filed as Exhibit 4 to TECO Energy,
Inc.'s Amendment No. 1 to Registration Statement on Form S-3 (No.
333-60819) filed with the Commission on August 24, 1998 and
incorporated herein by reference.
4.2* Eighth Supplemental Indenture dated as of November 20, 2002 between
TECO Energy, Inc. and The Bank of New York, as trustee,
supplementing the Indenture dated as of August 17, 1998. Filed as
Exhibit 4.1 to TECO Energy, Inc.'s Current Report on Form 8-K filed
with the Commission on November 20, 2002 and incorporated herein by
reference.
4.3* 10.50% Notes Due 2007. Filed as Exhibit 4.2 to TECO Energy, Inc.'s
Current Report on Form 8-K filed with the Commission on November 20,
2002 and incorporated herein by reference.
4.4* Registration Rights Agreement dated as of November 15, 2002 between
TECO Energy, Inc. and Credit Suisse First Boston Corporation. Filed
as Exhibit 10.1 to TECO Energy's Current Report on Form 8-K filed
with the Commission on November 20, 2002 and incorporated herein by
reference.
4.5 Form of Exchange Note. Filed herewith.
5.1 Opinion of Palmer & Dodge LLP. Filed herewith.
5.2 Opinion of Ropes & Gray. Filed herewith.
12.1* Computation of Ratio of Earnings to Fixed Charges. Filed as Exhibit
12 to TECO Energy, Inc.'s Quarterly Report on Form 10-Q for the
period ended September 30, 2002 and incorporated herein by
reference.
23.1 Consent of PricewaterhouseCoopers LLP. Filed herewith.
23.2 Consent of Palmer & Dodge LLP (included in Exhibit 5.1).
23.3 Consent of Ropes & Gray (included in Exhibit 5.2).
24.1 Power of Attorney (included on signature page of the initial filing
of this Registration Statement).
25.1 Statement of Eligibility of Trustee on Form T-1. Filed herewith.
99.1 Form of Letter of Transmittal. Filed herewith.
99.2 Form of Notice of Guaranteed Delivery. Filed herewith.
99.3 Form of Exchange Agent Agreement. Filed herewith.
99.4 Amended and Restated Construction Contract Undertaking dated as of
May 14, 2002 by TECO Energy, Inc. in favor of Panda Gila River, L.P.
and Citibank, N.A. Filed herewith.
99.5 Amended and Restated Construction Contract Undertaking dated as of
May 14, 2002 by TECO Energy, Inc. in favor of Union Power Partners,
L.P. and Citibank, N.A. Filed herewith.
99.6 Form of Instruction to Registered Holder and/or The Depository
Trust Company Participant from Beneficial Owner. Filed herewith.
----------
* Indicates exhibit previously filed with the Securities and Exchange
Commission and incorporated herein by reference. Exhibits filed with
periodic reports of TECO Energy, Inc. were filed under Commission File No.
1-8180.
Certain instruments defining the rights of holders of long-term debt of TECO
Energy, Inc. and its consolidated subsidiaries authorizing in each case a total
amount of securities not exceeding 10 percent of total assets on a consolidated
basis are not filed herewith. TECO Energy, Inc. will furnish copies of such
instruments to the Securities and Exchange Commission upon request.
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