TECO Energy, Inc. Q1 2010 Earnings Call Transcript

TECO Energy, Inc. Q1 2010 Earnings Call Transcript
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TECO Energy, Inc. (TE)

Q1 2010 Earnings Call

May 4, 2010 5:00 pm ET

Executives

Sandy Callahan - CFO

John Ramil - COO & President

Mark Kane - Director of IR

Analysts

Ali Agha - SunTrust Robinson Humphrey

Paul Ridzon - KeyBanc

Mark De Croisset - FBR

Emily Christie - RBC Capital Management

Danielle Seitz - Dudack Research

Presentation

Operator

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Good afternoon. My name is Rachael, and I will be your conference operator today. At this time, I would like to welcome everyone to the TECO Energy’s first quarter results and 2010 outlook conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator instructions) Thank you.

I would now like to turn the call over to Mr. Mark Kane, Director of Investor Relations. Sir, you may begin your conference.

Mark Kane

Thank you, Rachael. Good afternoon, everyone and thank you for joining us this afternoon on TECO Energy’s first quarter 2010 results call and update on our 2010 outlook. Our earnings release was issued about 4:20 this afternoon and filed with the SEC. It also included at accompany financial statements. Slide for this conference call are available on our website at www.tecoenergy.com and the call will be available for replay through the website for approximately 30 days and will be available about two hours after the call.

In the course of our remarks today, we will be using non-GAAP measures there are tables in the appendix reconciling between the non-GAAP and the nearest GAAP measure. Also in the course of our call today, we will be making forward-looking statements. We caution use that there are many cautious that could cause actual results to differ materially from those that we will discuss today.

For a more complete description of the items that could cause these results to differ, we refer you to the risk factors discussion in our Annual Report on Form 10-K for the period ended December 31, 2009 as filed with SEC filings. Today, our Chief Financial Officer, Sandy Callahan will discuss our first quarter results and the outlook for the remainder of the year. Also with us today to assist in answering your questions are John Ramil, TECO Energy’s Chief Operating Officer and President.

With that, I’ll turn it over to Sandy.

Sandy Callahan

Thank you, Mark. Good afternoon everyone and thank you for joining us so late in the day today. Today I’ll cover our first quarter results and business drivers and then I’ll update our expectations for 2010, what we’re seeing in the Florida and local economies and final update you on our communications plan.

In the first quarter our GAAP net income was $55.8 million, compared to $34.7 million in 2009. Earnings per share were $0.26 in the first quarter, compared to $0.16 in 2009. Net income included a $16.2 million charge for early debt retirement and the final $900,000 charge related to last years restructuring action.

The $5.1 million of net gains in 2009 included the gain on the sale of our interest in the Guatemalan company, Navaga and a negative valuation adjustment auction rate security. Excluding charges and gains non-GAAP results were $72.9 million or $0.34 on per share basis, this quarter compared to $29.6 million or $0.14 of share in 2009.

We covered the quarter’s drivers in our earnings release, so I’ll just recap the highlight. Tampa Electric reported first quarter results that were substantially above last year. One of the most significant drivers for the quarter was the abnormally cold weather experience throughout Florida. It was the coldest sustain winter weather in the Tampa area in over 40 years.

We estimate that weather driven sales added $15 million to $20 million to base revenues in the first quarter. New base rates effective last year and on January 1 of this year added $25 million to $30 million to base revenues in the quarter. Retail sales increased 7.4% in the quarter driven by the colder than weather and we also saw four tenths of a percent customer growth, which is stronger than we expected in the current economy.

Total degree days were 37% above normal and 33% above 2009 first quarter. Due to the cold weather in the quarter, heating degree days were actually a 150% above normal, but cooling degree days were 85% below normal. Non-fuel operations and maintenances expenses were 9% lower this quarter and actually slightly below 2008 first quarter level, reflecting the benefits of last years restructuring and the timing of generating unit maintenances outages.

Peoples Gas also reported significantly higher results for the quarter, driven by the cold weather and the new base rates effective in June last year. We estimate that the cold weather added about $10 million to base revenues and the base rate increased added about $1 million in the first quarter. The rates approved in 2009 have a higher fixed component, but a lower volume related charges. This shift drives a disproportional effect to weather in the higher volume winter months, but it makes Peoples Gas less weather sensitive for the rest of the year.

Peoples Gas had two tenths of a percent higher average number of customers this quarter compared to last year, but these appeared to be mostly seasonal resident in turning to Florida for the winter. Following the normal spring pattern, we expect many of these customers to go back inactive status in the second quarter. Higher therm sales to commercial and industrial customers are partially driven by the weather and we’re seeing some customers actually increase usage.

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