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Teco Energy (TE) to Sell Coal Mining Subsidiary in $170M Deal

October 20, 2014 8:34 AM EDT

Teco Energy (NYSE: TE) announced that it has signed an agreement to sell its coal mining subsidiary, TECO Coal and its subsidiaries, to Cambrian Coal Corporation, a member of the Booth Energy Group. The total sales price of $170 million includes future contingent consideration of $50 million if certain coal benchmark prices reach certain levels over the next five years. The $120 million cash base purchase price is subject to post-closing adjustments.

The sale is expected to close by year end, subject to the purchasers obtaining financing, and other normal closing conditions. TECO Energy expects to use sale proceeds to repay debt and for general corporate purposes.

As a result of the agreement, in the third quarter of 2014, TECO Coal will be classified as an asset held for sale and its operating results will be reported as discontinued operations. TECO Energy will record a non-cash valuation adjustment of approximately $65 million, after tax, to the carrying value of TECO Coal to reflect the sales price.

TECO Energy Chief Executive Officer John Ramil said, “This transaction will result in a complete exit from the coal mining business. TECO Coal has been an important component of TECO Energy’s business mix since the mid-1970s, contributing strong earnings and cash flow for many years. We appreciate the dedicated team members at TECO Coal and the contributions they have made to TECO Energy’s success.”

Ramil went on to say, “When this transaction closes, it will complete a long journey returning TECO Energy to its core utility businesses. I would like to thank all those who have successfully contributed over the years to positioning our company to completely focus on growing our strong utility operations.”

In connection with the signing of this agreement, TECO Coal is issuing a Worker Adjustment and Retraining Notice (WARN) to all of its team members to allow the new owners maximum flexibility in the operations of the company.

J.P. Morgan Securities LLC acted as TECO Energy’s financial advisor, and Skadden, Arps, Slate, Meagher & Flom, LLP acted as its legal advisors. Deutsche Bank Securities, Inc. acted as exclusive financial advisor, and Frost Brown Todd acted as legal advisors to Cambrian Coal Corporation.



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