TECO Coal’s net income fell in 2013 in weak market

TECO Energy (NYSE:TE) reported Jan. 30 that its TECO Coal subsidiary had fourth-quarter net income of $6.7m on sales of 1.5 million tons, compared with net income of $10.8m on sales of 1.4 million tons in the same period in 2012.

TECO Energy President and CEO John Ramil indicated during the Jan. 30 earnings call that TECO Coal is not a “core” business like its Tampa Electric utility subsidiary. He said in the last couple of years there have been offers of interest in the coal assets, but said there is nothing close in terms of a sale transaction. He said divesting TECO Coal would have the advantage of simplifying TECO Energy’s message to investors.

In 2013, fourth-quarter results reflect an average net selling price, excluding transportation allowances, of almost $82 per ton, compared to almost $95 per ton in 2012. In the fourth quarter of 2013, the all-in total per-ton cost of sales was $79 per ton, compared with $85 per ton in the 2012 period.

TECO Coal turned in full-year 2013 net income of $9m on sales of 5.8 million tons, compared with $50.2m on sales of 6.3 million tons in the 2012 period. The 2013 full-year average net selling price was almost $85 per ton, compared with $95 per ton in 2012. The all-in total cost of sales was $84 per ton, compared with $85 per ton in the 2012 period. The cost of sales in the first quarter of 2013 included some higher-cost tons from December 2012 inventory that included costs associated with personnel reductions and with idling certain mining operations.

TECO Coal has 80% of its expected sales contracted for 2014 and another 15% committed but unpriced, and 5% unsold. Total sales in 2014 are expected to be between 5.5 million and 6.0 million tons, and are expected to be almost 70% specialty coal. The committed but unpriced tons are subject to price adjustments based on the quarterly benchmark prices.

TECO Coal expects average selling prices for 2014 to be about $80 per ton based on current market conditions and the all-in cost of sales to be in a range between $79 and $83 per ton. The cash cost of sales, which excludes depreciation and allocated interest, is expected to be about $7 per ton below the all-in cost.

TECO Coal has mining operations, mostly in eastern Kentucky, under operating company names like Clintwood Elkhorn Mining and Perry County Coal. Its mines ship coal via the Norfolk Southern and/or CSX Transportation railroads to electric utilities, steel mills and industrial customers in the United States as well as to the piers of Norfolk and Newport News in Virginia for export to Europe and the Pacific Rim.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.