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TAMPA -- After months of delay, Teco Energy Inc. pulled out of a deal to sell its coal division to a Kentucky mining company, and has potentially found a new all-cash buyer instead.
Cambrian Coal Corp. was expected to close on its purchase of Teco Coal LLC last Friday, but the company was not able to “satisfy the conditions” set in the purchase agreement, Teco says in a filing with the U.S. Securities and Exchange Commission. While the Tampa-based energy utility didn't go into details, the Booth Energy affiliate was required to pay $80 million in cash, and depending on future coal prices, up to an additional $60 million over the next five years.
The $140 million price was a significant reduction over the $170 million the two sides agreed upon last year, which would have included a $120 million base and $50 million over the next five years. That price was reduced in February, and the sale was expected to close in March, before it was delayed to June.
Teco, which trades on the New York Stock Exchange under the symbol TE, did not reveal who the new buyer was, or what the purchase price will be. President and CEO John Ramil says in a release that this new buyer will provide Teco the “best opportunity to exit the coal business” at what he calls an “appropriate value.”
“The new buyer has indicated a strong interest in purchasing TECO Coal, and has the financial capability to do so,” Ramil says.
The new deal is expected to close by July 3.
Teco reported a first quarter profit of $58 million, or 25 cents per share, on revenue of $693 million for the period ended March 31. That beat a $50.1 million, or 23 cents per share, profit the year before on revenue of $578 million.
Teco's coal operation reported a loss of $1.6 million in the quarter. Teco also says after the sale is complete it will incur a $7.7 million loss in the operation for unfunded “black lung” liability of the coal division's employees.
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