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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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|[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------------



For the quarterly period ended
March 31,
2004



or



|[    ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|------ | ----------------------------------------------------------------------------------------



For the transition period from
 to



|                    |  |                                                                                                                                           |  |                                      
|------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------
|Commission File No. |  | Exact name of each Registrant as specified inits charter, state of incorporation, address ofprincipal executive offices, telephone number |  | I.R.S. Employer Identification Number
|                   
|1-8180              |  | TECO ENERGY, INC.                                                                                                                         |  | 59-2052286                           
|                    |  | (a Florida corporation)                                                                                                                   |  |                                      
|                    |  | TECO Plaza                                                                                                                                |  |                                      
|                    |  | 702 N. Franklin Street                                                                                                                    |  |                                      
|                    |  | Tampa, Florida 33602                                                                                                                      |  |                                      
|                    |  | (813) 228-4111                                                                                                                            |  |                                      
|                    |  |                                                                                                                                          
|1-5007              |  | TAMPA ELECTRIC COMPANY                                                                                                                    |  | 59-0475140                           
|                    |  | (a Florida corporation)                                                                                                                   |  |                                      
|                    |  | TECO Plaza                                                                                                                                |  |                                      
|                    |  | 702 N. Franklin Street                                                                                                                    |  |                                      
|                    |  | Tampa, Florida 33602                                                                                                                      |  |                                      
|                    |  | (813) 228-4111                                                                                                                            |  |                                      



Securities registered
pursuant to Section 12(b) of the Act:



|                              |  |                                          
|----------------------------- |  | -----------------------------------------
|Title of each class           |  | Name of each exchange on which registered
|TECO Energy, Inc.             |  |                                          
|Common Stock, $1.00 par value |  | New York Stock Exchange                  
|Common Stock Purchase Rights  |  | New York Stock Exchange                  
|Equity Security Units         |  | New York Stock Exchange                  



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Securities registered pursuant to Section 12(g) of the Act: NONE



Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) have been subject to such filing
requirements for the past 90 days.

YES [X]    NO [    ]



Indicate by check mark whether TECO Energy, Inc. is an accelerated filer (as
defined in Exchange Act Rule 12b-2).

YES [X]    NO [    ]



Indicate by check mark whether Tampa Electric Company is an accelerated filer
(as defined in Exchange Act Rule 12b-2).

YES [    ]    NO [X]



Number of shares of TECO Energy, Inc.s common stock outstanding as of
April 30, 2004 was 188,371,599.



As of April 30, 2004, there
were 10 shares of Tampa Electric Companys common stock issued and outstanding, all of which were held, beneficially and of record, by TECO Energy, Inc.



Tampa Electric Company meets the conditions set forth in General Instruction (H) (1) (a) and (b) of Form 10-Q and is therefore filing this form with the
reduced disclosure format.



This combined Form 10-Q represents
separate filings by TECO Energy, Inc. and Tampa Electric Company. Information contained herein relating to an individual registrant is filed by that registrant on its own behalf. Each registrant makes representations only as to information relating
to itself and its subsidiaries.



Page 1 of 57

Index to Exhibits appears on Page 57



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PART I. FINANCIAL INFORMATION



|Item 1. | CONSOLIDATED FINANCIAL STATEMENTS
|------- | ---------------------------------



TECO ENERGY, INC.



In the opinion of management, the unaudited consolidated financial statements include all adjustments that are of a recurring nature and necessary to
present fairly the financial position of TECO Energy, Inc. and subsidiaries as of Mar. 31, 2004 and Dec. 31, 2003, and the results of their operations and cash flows for the periods ended Mar. 31, 2004 and 2003. The results of operations for the
three-month period ended Mar. 31, 2004 are not necessarily indicative of the results that can be expected for the entire fiscal year ending Dec. 31, 2004. References should be made to the explanatory notes affecting the consolidated financial
statements contained in TECO Energy, Inc.s Annual Report on Form 10-K for the year ended Dec. 31, 2003 and to the notes on pages 8 through 28 of this report.



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                         |  |        
|-------------------------------------------------------------------------------------------------------- |  | -------
|                                                                                                         |  | PageNo.
|Consolidated Balance Sheets, Mar. 31, 2004 and Dec. 31, 2003                                             |  | 3-4    
|Consolidated Statements of Income for the three-month periods ended Mar. 31, 2004 and 2003               |  | 5      
|Consolidated Statements of Comprehensive Income for the three-month periods ended Mar. 31, 2004 and 2003 |  | 6      
|Consolidated Statements of Cash Flows for the three-month periods ended Mar. 31, 2004 and 2003           |  | 7      
|Notes to the Consolidated Financial Statements                                                           |  | 8-28   



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TECO ENERGY, INC.

Consolidated Balance Sheets



|                                                                                                                                 |  |                        |          |   |              |   |          |  
|-------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | -------- | - | ------------ | - | -------- | -
|Assets (millions,
except share amounts)                                                                                          |  | Mar. 31,2004 Unaudited |          |   | Dec. 31,2003 |  
|Current assets                                                                                                                   |  |                        |          |   |              |   |          |  
|Cash and cash equivalents                                                                                                        |  | $                      | 107.6    |   |              | $ | 108.2    |  
|Restricted cash                                                                                                                  |  |                        | 36.8     |   |              |   | 51.4     |  
|Receivables, less allowance for uncollectibles of $5.2 million and $4.5 million at Mar. 31, 2004 and Dec. 31, 2003,
respectively |  |                        | 271.9    |   |              |   | 280.4    |  
|Current derivative assets                                                                                                        |  |                        | 19.4     |   |              |   | 21.1     |  
|Inventories, at average cost                                                                                                     |  |                        |          |   |              |   |          |  
|Fuel                                                                                                                             |  |                        | 78.1     |   |              |   | 88.2     |  
|Materials and supplies                                                                                                           |  |                        | 79.0     |   |              |   | 82.5     |  
|Prepayments and other current assets                                                                                             |  |                        | 82.6     |   |              |   | 68.6     |  
|Assets held for sale                                                                                                             |  |                        | 107.0    |   |              |   | 169.4    |  
|                                                                                                                                 |  |                        |          |   |              |   |          |  
|Total current assets                                                                                                             |  |                        | 782.4    |   |              |   | 869.8    |  
|                                                                                                                                 |  |                        |          |   |              |   |          |  
|Property, plant and equipment                                                                                                    |  |                        |          |   |              |   |          |  
|Utility plant in service                                                                                                         |  |                        |          |   |              |   |          |  
|Electric                                                                                                                         |  |                        | 5,066.7  |   |              |   | 5,245.6  |  
|Gas                                                                                                                              |  |                        | 784.7    |   |              |   | 778.1    |  
|Construction work in progress                                                                                                    |  |                        | 841.8    |   |              |   | 1,193.3  |  
|Other property                                                                                                                   |  |                        | 835.3    |   |              |   | 823.2    |  
|                                                                                                                                 |  |                        |          |   |              |   |          |  
|Property, plant and equipment, at original cost                                                                                  |  |                        | 7,528.5  |   |              |   | 8,040.2  |  
|Accumulated depreciation                                                                                                         |  |                        | (1,996.1 | ) |              |   | (2,361.2 | )
|                                                                                                                                 |  |                        |          |   |              |   |          |  
|Total property, plant and equipment (net)                                                                                        |  |                        | 5,532.4  |   |              |   | 5,679.0  |  
|                                                                                                                                 |  |                        |          |   |              |   |          |  
|Other assets                                                                                                                     |  |                        |          |   |              |   |          |  
|Deferred income taxes                                                                                                            |  |                        | 1,015.7  |   |              |   | 1,051.5  |  
|Other investments                                                                                                                |  |                        | 12.0     |   |              |   | 16.5     |  
|Regulatory assets                                                                                                                |  |                        | 157.2    |   |              |   | 188.3    |  
|Investment in unconsolidated affiliates                                                                                          |  |                        | 450.1    |   |              |   | 343.5    |  
|Goodwill                                                                                                                         |  |                        | 71.2     |   |              |   | 71.2     |  
|Deferred charges and other assets                                                                                                |  |                        | 139.2    |   |              |   | 165.1    |  
|Assets held for sale                                                                                                             |  |                        | 2,065.4  |   |              |   | 2,077.4  |  
|                                                                                                                                 |  |                        |          |   |              |   |          |  
|Total other assets                                                                                                               |  |                        | 3,910.8  |   |              |   | 3,913.5  |  
|                                                                                                                                 |  |                        |          |   |              |   |          |  
|Total assets                                                                                                                     |  | $                      | 10,225.6 |   |              | $ | 10,462.3 |  
|                                                                                                                                 |  |                        |          |   |              |   |          |  



The accompanying notes
are an integral part of the consolidated financial statements.



3



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TECO ENERGY, INC.

Consolidated Balance Sheetscontinued



|                                                                                                                                                                        |  |                       |          |   |              |   |          |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------- | -------- | - | ------------ | - | -------- | -
|Liabilities and capital (millions, except share amounts)                                                                                                                |  | Mar. 31,2004Unaudited |          |   | Dec. 31,2003 |  
|Current liabilities                                                                                                                                                     |  |                       |          |   |              |   |          |  
|Long-term debt due within one year                                                                                                                                      |  |                       |          |   |              |   |          |  
|Recourse                                                                                                                                                                |  | $                     | 5.3      |   |              | $ | 6.1      |  
|Non-recourse                                                                                                                                                            |  |                       | 10.8     |   |              |   | 25.5     |  
|Notes payable                                                                                                                                                           |  |                       | 50.0     |   |              |   | 37.5     |  
|Accounts payable                                                                                                                                                        |  |                       | 290.8    |   |              |   | 313.8    |  
|Customer deposits                                                                                                                                                       |  |                       | 103.4    |   |              |   | 101.4    |  
|Current derivative liabilities                                                                                                                                          |  |                       | 9.9      |   |              |   | 12.0     |  
|Interest accrued                                                                                                                                                        |  |                       | 97.0     |   |              |   | 56.6     |  
|Taxes accrued                                                                                                                                                           |  |                       | 94.0     |   |              |   | 149.9    |  
|Liabilities associated with assets held for sale                                                                                                                        |  |                       | 1,554.8  |   |              |   | 1,544.4  |  
|                                                                                                                                                                        |  |                       |          |   |              |   |          |  
|Total current liabilities                                                                                                                                               |  |                       | 2,216.0  |   |              |   | 2,247.2  |  
|                                                                                                                                                                        |  |                       |          |   |              |   |          |  
|Other liabilities                                                                                                                                                       |  |                       |          |   |              |   |          |  
|Deferred income taxes                                                                                                                                                   |  |                       | 476.7    |   |              |   | 498.0    |  
|Investment tax credits                                                                                                                                                  |  |                       | 22.1     |   |              |   | 22.8     |  
|Regulatory liabilities                                                                                                                                                  |  |                       | 564.1    |   |              |   | 560.2    |  
|Deferred credits and other liabilities                                                                                                                                  |  |                       | 360.5    |   |              |   | 364.1    |  
|Liabilities associated with assets held for sale                                                                                                                        |  |                       | 663.4    |   |              |   | 697.8    |  
|Long-term debt, less amount due within one year                                                                                                                         |  |                       |          |   |              |   |          |  
|Recourse                                                                                                                                                                |  |                       | 3,589.8  |   |              |   | 3,660.3  |  
|Non-recourse                                                                                                                                                            |  |                       | 14.9     |   |              |   | 83.2     |  
|Junior subordinated                                                                                                                                                     |  |                       | 669.3    |   |              |   | 649.1    |  
|Minority interest                                                                                                                                                       |  |                       | 3.6      |   |              |   | 1.9      |  
|                                                                                                                                                                        |  |                       |          |   |              |   |          |  
|Total other liabilities                                                                                                                                                 |  |                       | 6,364.4  |   |              |   | 6,537.4  |  
|                                                                                                                                                                        |  |                       |          |   |              |   |          |  
|Commitments and contingencies (see Note 16)                                                                                                                             |  |                       |          |   |              |   |          |  
|                                                                                                                                                                        |  |                      
|Capital                                                                                                                                                                 |  |                       |          |   |              |   |          |  
|Common equity (400 million shares authorized; par value $1; 188.1 million shares and 187.8 million shares outstanding at Mar. 31, 2004 and
Dec. 31, 2003, respectively) |  |                       | 188.1    |   |              |   | 187.8    |  
|Additional paid in capital                                                                                                                                              |  |                       | 1,221.2  |   |              |   | 1,220.8  |  
|Retained earnings                                                                                                                                                       |  |                       | 306.4    |   |              |   | 339.5    |  
|Accumulated other comprehensive income                                                                                                                                  |  |                       | (59.3    | ) |              |   | (55.8    | )
|                                                                                                                                                                        |  |                       |          |   |              |   |          |  
|Common equity                                                                                                                                                           |  |                       | 1,656.4  |   |              |   | 1,692.3  |  
|Unearned compensation                                                                                                                                                   |  |                       | (11.2    | ) |              |   | (14.6    | )
|                                                                                                                                                                        |  |                       |          |   |              |   |          |  
|Total capital                                                                                                                                                           |  |                       | 1,645.2  |   |              |   | 1,677.7  |  
|                                                                                                                                                                        |  |                       |          |   |              |   |          |  
|Total liabilities and capital                                                                                                                                           |  | $                     | 10,225.6 |   |              | $ | 10,462.3 |  
|                                                                                                                                                                        |  |                       |          |   |              |   |          |  



The accompanying notes
are an integral part of the consolidated financial statements.



4



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##### Table of Contents

TECO ENERGY, INC.

Consolidated Statements of Income

Unaudited



|                                                                                                                                 |  |                            |       |   |      |   |       |  
|-------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ----- | - | ---- | - | ----- | -
|                                                                                                                                 |  | Three monthsended Mar. 31, |      
|(millions, except per share amounts)                                                                                             |  | 2004                       |       |   | 2003 |  
|Revenues                                                                                                                         |  |                            |       |   |      |   |       |  
|Regulated electric and gas (includes franchise fees and gross receipts taxes of $20.8 million in 2004 and $18.8 million in
2003) |  | $                          | 487.9 |   |      | $ | 468.0 |  
|Unregulated                                                                                                                      |  |                            | 154.4 |   |      |   | 183.8 |  
|                                                                                                                                 |  |                            |       |   |      |   |       |  
|Total revenues                                                                                                                   |  |                            | 642.3 |   |      |   | 651.8 |  
|                                                                                                                                 |  |                            |       |   |      |   |       |  
|Expenses                                                                                                                         |  |                            |       |   |      |   |       |  
|Regulated operations                                                                                                             |  |                            |       |   |      |   |       |  
|Fuel                                                                                                                             |  |                            | 120.8 |   |      |   | 51.1  |  
|Purchased power                                                                                                                  |  |                            | 29.1  |   |      |   | 39.4  |  
|Cost of natural gas sold                                                                                                         |  |                            | 58.9  |   |      |   | 70.8  |  
|Other                                                                                                                            |  |                            | 65.2  |   |      |   | 61.1  |  
|Other operations                                                                                                                 |  |                            | 157.2 |   |      |   | 180.7 |  
|Maintenance                                                                                                                      |  |                            | 31.4  |   |      |   | 34.6  |  
|Depreciation                                                                                                                     |  |                            | 72.1  |   |      |   | 75.0  |  
|Asset impairment                                                                                                                 |  |                            | 6.7   |   |      |   | 104.5 |  
|Taxes, other than income                                                                                                         |  |                            | 48.4  |   |      |   | 43.4  |  
|                                                                                                                                 |  |                            |       |   |      |   |       |  
|Total expenses                                                                                                                   |  |                            | 589.8 |   |      |   | 660.6 |  
|                                                                                                                                 |  |                            |       |   |      |   |       |  
|Income (loss) from operations                                                                                                    |  |                            | 52.5  |   |      |   | (8.8  | )
|                                                                                                                                 |  |                            |       |   |      |   |       |  
|Other income                                                                                                                     |  |                            |       |   |      |   |       |  
|Allowance for other funds used during construction                                                                               |  |                            | 0.7   |   |      |   | 7.6   |  
|Other income                                                                                                                     |  |                            | 42.7  |   |      |   | 3.3   |  
|Income from equity investments                                                                                                   |  |                            | 6.9   |   |      |   | 2.6   |  
|                                                                                                                                 |  |                            |       |   |      |   |       |  
|Total other income                                                                                                               |  |                            | 50.3  |   |      |   | 13.5  |  
|                                                                                                                                 |  |                            |       |   |      |   |       |  
|Interest charges                                                                                                                 |  |                            |       |   |      |   |       |  
|Interest expense                                                                                                                 |  |                            | 88.9  |   |      |   | 57.3  |  
|Distribution on preferred securities                                                                                             |  |                            |      |   |      |   | 10.0  |  
|Allowance for borrowed funds used during construction                                                                            |  |                            | (0.3  | ) |      |   | (2.9  | )
|                                                                                                                                 |  |                            |       |   |      |   |       |  
|Total interest charges                                                                                                           |  |                            | 88.6  |   |      |   | 64.4  |  
|                                                                                                                                 |  |                            |       |   |      |   |       |  
|Income (loss) before provision for income taxes                                                                                  |  |                            | 14.2  |   |      |   | (59.7 | )
|Provision (benefit) for income taxes                                                                                             |  |                            | 8.7   |   |      |   | (39.4 | )
|                                                                                                                                 |  |                            |       |   |      |   |       |  
|Net income (loss) from continuing operations before minority interests                                                           |  |                            | 5.5   |   |      |   | (20.3 | )
|Minority interest                                                                                                                |  |                            | 23.2  |   |      |   |      |  
|                                                                                                                                 |  |                            |       |   |      |   |       |  
|Net income (loss) from continuing operations                                                                                     |  |                            | 28.7  |   |      |   | (20.3 | )
|                                                                                                                                 |  |                            |       |   |      |   |       |  
|Discontinued operations                                                                                                          |  |                            |       |   |      |   |       |  
|(Loss) Income from discontinued operations                                                                                       |  |                            | (40.3 | ) |      |   | 39.6  |  
|Income tax (benefit) provision                                                                                                   |  |                            | (14.1 | ) |      |   | 15.5  |  
|                                                                                                                                 |  |                            |       |   |      |   |       |  
|Total discontinued operations                                                                                                    |  |                            | (26.2 | ) |      |   | 24.1  |  
|                                                                                                                                 |  |                            |       |   |      |   |       |  
|Cumulative effect of change in accounting principle, net of tax                                                                  |  |                            |      |   |      |   | (1.1  | )
|                                                                                                                                 |  |                            |       |   |      |   |       |  
|Net income                                                                                                                       |  | $                          | 2.5   |   |      | $ | 2.7   |  
|                                                                                                                                 |  |                            |       |   |      |   |       |  
|Average common shares outstanding                                                                                                |  |                            |       |   |      |   |       |  
|Basic                                                                                                                            |  |                            | 188.0 |   |      |   | 175.9 |  
|Diluted                                                                                                                          |  |                            | 188.6 |   |      |   | 175.9 |  
|                                                                                                                                 |  |                            |       |   |      |   |       |  
|Earnings per share from continuing operations                                                                                    |  |                            |       |   |      |   |       |  
|Basic                                                                                                                            |  | $                          | 0.15  |   |      | $ | (0.12 | )
|Diluted                                                                                                                          |  | $                          | 0.15  |   |      | $ | (0.12 | )
|                                                                                                                                 |  |                            |       |   |      |   |       |  
|Earnings per share                                                                                                               |  |                            |       |   |      |   |       |  
|Basic                                                                                                                            |  | $                          | 0.01  |   |      | $ | 0.02  |  
|Diluted                                                                                                                          |  | $                          | 0.01  |   |      | $ | 0.02  |  
|                                                                                                                                 |  |                            |       |   |      |   |       |  
|Dividends paid per common share outstanding                                                                                      |  | $                          | 0.190 |   |      | $ | 0.355 |  
|                                                                                                                                 |  |                            |       |   |      |   |       |  



The accompanying notes
are an integral part of the consolidated financial statements.





5



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TECO ENERGY, INC.

Consolidated Statements of Comprehensive Income

Unaudited



|                                              |  |                            |      |   |      |   |      |  
|--------------------------------------------- |  | -------------------------- | ---- | - | ---- | - | ---- | -
|                                              |  | Three monthsended Mar. 31, |     
|(millions)                                    |  | 2004                       |      |   | 2003 |  
|Net income                                    |  | $                          | 2.5  |   |      | $ | 2.7  |  
|                                              |  |                            |      |   |      |   |      |  
|Other comprehensive income (loss), net of tax |  |                            |      |   |      |   |      |  
|Foreign currency translation adjustments      |  |                            |     |   |      |   | 0.8  |  
|Net unrealized (losses) on cash flow hedges   |  |                            | (3.5 | ) |      |   | (9.7 | )
|                                              |  |                            |      |   |      |   |      |  
|Other comprehensive income (loss), net of tax |  |                            | (3.5 | ) |      |   | (8.9 | )
|                                              |  |                            |      |   |      |   |      |  
|Comprehensive income (loss)                   |  | $                          | (1.0 | ) |      | $ | (6.2 | )
|                                              |  |                            |      |   |      |   |      |  



The accompanying notes
are an integral part of the consolidated financial statements.



6



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##### Table of Contents

TECO ENERGY, INC.

Consolidated Statements of Cash Flows

Unaudited



|                                                                           |  |   |       |                            |  |   |        |   |  | 
|-------------------------------------------------------------------------- |  | - | ----- | -------------------------- |  | - | ------ | - |  | 
|                                                                           |  |   |       | Three monthsended Mar. 31, | 
|(millions)                                                                 |  |   |       | 2004                       |  |   | 2003   |  
|Cash flows from operating activities                                       |  |   |       |                            |  |   |        |  
|Net income                                                                 |  | $ | 2.5   |                            |  | $ | 2.7    |  
|Adjustments to reconcile net income to net cash from operating activities: |  |   |       |                            |  |   |        |  
|Depreciation                                                               |  |   | 72.1  |                            |  |   | 79.8   |  
|Deferred income taxes                                                      |  |   | 12.7  |                            |  |   | 15.2   |  
|Investment tax credits, net                                                |  |   | (0.7  | )                          |  |   | (1.1   | )
|Allowance for funds used during construction                               |  |   | (1.0  | )                          |  |   | (10.5  | )
|Amortization of unearned compensation                                      |  |   | 3.7   |                            |  |   | 4.4    |  
|Cumulative effect of change in accounting principle, pre-tax               |  |   |      |                            |  |   | 1.8    |  
|Gain on sales of business/assets, pre-tax                                  |  |   | (36.8 | )                          |  |   | (38.7  | )
|Equity in earnings of unconsolidated affiliates                            |  |   | (4.3  | )                          |  |   | 6.7    |  
|Minority loss                                                              |  |   | (23.2 | )                          |  |   |       |  
|Asset impairment, pre-tax                                                  |  |   | 6.7   |                            |  |   | 104.5  |  
|Deferred recovery clause                                                   |  |   | 30.9  |                            |  |   | (3.0   | )
|Receivables, less allowance for uncollectibles                             |  |   | 39.7  |                            |  |   | (56.9  | )
|Inventories                                                                |  |   | 12.3  |                            |  |   | 6.3    |  
|Prepayments and other deposits                                             |  |   | 5.3   |                            |  |   | (4.6   | )
|Taxes accrued                                                              |  |   | (68.7 | )                          |  |   | (105.8 | )
|Interest accrued                                                           |  |   | 65.7  |                            |  |   | 31.7   |  
|Accounts payable                                                           |  |   | (80.5 | )                          |  |   | 30.0   |  
|Other                                                                      |  |   | 16.3  |                            |  |   | 9.5    |  
|                                                                           |  |   |       |                            |  |   |        |   |  | 
|Cash flows from operating activities                                       |  |   | 52.7  |                            |  |   | 72.0   |  
|                                                                           |  |   |       |                            |  |   |        |   |  | 
|Cash flows from investing activities                                       |  |   |       |                            |  |   |        |  
|Capital expenditures                                                       |  |   | (59.5 | )                          |  |   | (102.2 | )
|Allowance for funds used during construction                               |  |   | 1.0   |                            |  |   | 10.5   |  
|Net proceeds from sales of business/assets                                 |  |   | 109.7 |                            |  |   | 124.9  |  
|Net cash reduction from deconsolidation                                    |  |   | (22.8 | )                          |  |   |       |  
|Restricted cash                                                            |  |   | (4.9  | )                          |  |   |       |  
|Investment in unconsolidated affiliates                                    |  |   | (3.1  | )                          |  |   | (1.0   | )
|Other non-current investments                                              |  |   | 8.4   |                            |  |   | (44.1  | )
|                                                                           |  |   |       |                            |  |   |        |   |  | 
|Cash flows from investing activities                                       |  |   | 28.8  |                            |  |   | (11.9  | )
|                                                                           |  |   |       |                            |  |   |        |   |  | 
|Cash flows from financing activities                                       |  |   |       |                            |  |   |        |  
|Dividends                                                                  |  |   | (35.7 | )                          |  |   | (62.4  | )
|Common stock                                                               |  |   | 4.8   |                            |  |   | 2.6    |  
|Proceeds from long-term debt                                               |  |   |      |                            |  |   | 4.9    |  
|Minority interest                                                          |  |   | 21.8  |                            |  |   |       |  
|Repayment of long-term debt                                                |  |   | (80.4 | )                          |  |   | (20.3  | )
|Net increase in short-term debt                                            |  |   | 12.5  |                            |  |   | 6.7    |  
|Equity contract adjustment payments                                        |  |   | (5.1  | )                          |  |   | (5.1   | )
|                                                                           |  |   |       |                            |  |   |        |   |  | 
|Cash flows from financing activities                                       |  |   | (82.1 | )                          |  |   | (73.6  | )
|                                                                           |  |   |       |                            |  |   |        |   |  | 
|Net (decrease) in cash and cash equivalents                                |  |   | (0.6  | )                          |  |   | (13.5  | )
|Cash and cash equivalents at beginning of period                           |  |   | 108.2 |                            |  |   | 411.1  |  
|                                                                           |  |   |       |                            |  |   |        |   |  | 
|Cash and cash equivalents at end of period                                 |  | $ | 107.6 |                            |  | $ | 397.6  |  
|                                                                           |  |   |       |                            |  |   |        |   |  | 



The accompanying notes
are an integral part of the consolidated financial statements.



7



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##### Table of Contents

TECO ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.
Summary of Significant Accounting Policies



The
significant accounting policies for both utility and diversified operations include:



Principles of Consolidation



The consolidated
financial statements include the accounts of TECO Energy, Inc. and its majority-owned subsidiaries (TECO Energy or the company). All significant intercompany balances and intercompany transactions have been eliminated in consolidation. Generally,
the equity method of accounting is used to account for investments in partnerships or other arrangements in which TECO Energy or its subsidiary companies do not have majority ownership or exercise control.



As more fully described in Note 18, the company, as required this
quarter, adopted FASB Interpretation No. 46R, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51, (FIN 46R) which impacted the consolidation principles applied to certain entities. For entities that are determined to
meet the definition of a variable interest entity (VIE), the company obtains information, where possible, to determine if it is the primary beneficiary of the VIE. If the company is determined to be the primary beneficiary, then the VIE is
consolidated and a minority interest is recognized for any other third-party interests. If the company is not the primary beneficiary, then the VIE is accounted for using the equity method of accounting. In unusual circumstances this can result in
the company consolidating entities in which it has less than a 50-percent equity investment and deconsolidating entities in which it has a majority equity interest. FIN 46R impacted the consolidation policy for the San José and Alborada power
stations in Guatemala, the funding companies involved in the issuance of the trust preferred securities, and other entities as described in Note 18. For all other entities, the general consolidation principles described above apply.



The use of estimates is inherent in the preparation of
financial statements in accordance with generally accepted accounting principles (GAAP). Actual results could differ from these estimates.



Revised Segment Reporting



As more fully described in Note 11, the Union and Gila River projects results have been reflected in discontinued operations. This
reclassification, as well as other changes described below, significantly revised operating segments used for decision-making purposes.



In 2003, the company, as part of its renewed focus on core utility operations, revised internal reporting information used for decision making purposes.
With this change, management began to view the results and performance of TECO Wholesale Generation, Inc. (formerly TECO Power Services Corporation), or TWG, as a separate segment comprised of all continuing merchant energy-related operations (TWG
Merchant), from which the Union and Gila River projects operations have been reclassified to discontinued operations. The TWG Merchant segment includes the results of operations for the Frontera, Commonwealth Chesapeake, Dell and McAdams power
plants, as well as the results of the equity investment in the Odessa and Guadalupe power plants, held through PLC Development Holdings, LLC (PLC), and TECO EnergySource, Inc. (TES), the energy marketing affiliate for the merchant operations.



The non-merchant operations formerly included in the TECO
Power Services operating segment are comprised of the results from Hardee Power Partners, Ltd. (HPP) up to the date of the sale in 2003, the Hamakua power plant in Hawaii, the Guatemalan operations which include the San José and Alborada
power plants and the results of the equity investment in the Guatemalan distribution company, EEGSA, and other non-merchant activities. These non-merchant operations are reported in the Other Unregulated segment (see Note 15).



Assets Held for Sale



The company classifies assets and liabilities, including long-lived assets, as Assets held for sale and
Liabilities associated with assets held for sale when the recognition criteria, established in FAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets, are met. At Mar. 31, 2004 and Dec. 31, 2003, included in the
current portion of liabilities associated with assets held for sale is $1,395.0 million of non-recourse long-term debt. See Note 11 for additional details of the amounts and nature of the items classified as held for sale.



Restricted Cash



Restricted cash at Mar. 31, 2004 is comprised primarily of $29.2 million of cash accumulated in escrow under the sale
agreement of TECO Coals synthetic fuel production facilities (to provide credit support due to the companys current credit rating), and $6.9 million held in escrow from the sale of HPP. Over time, up to $50 million of cash from the
synthetic fuel facility sale will accumulate in escrow to support the companys obligation under the sale agreement (due to the companys current credit rating).



8



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##### Table of Contents

Cost Capitalization



Capitalized interest expenseInterest costs for the construction of non-utility facilities are capitalized and depreciated over the service
lives of the related property. TECO Energy capitalized $10.0 million of interest costs in the three months ended Mar. 31, 2003. No interest costs were capitalized in the three months ended Mar. 31, 2004.



Allowance for Funds Used During Construction (AFUDC)



AFUDC is a non-cash credit to income with a corresponding charge to utility
plant which represents the cost of borrowed funds and a reasonable return on other funds used for construction. The rate used to calculate AFUDC is revised periodically to reflect significant changes in Tampa Electrics cost of capital. The
rate was 7.79% for 2004 and 2003. Total AFUDC for the three months ended Mar. 31, 2004 and 2003 was $1.0 million, and $10.5 million, respectively. The base on which AFUDC is calculated excludes construction work-in-progress which has been included
in rate base.



Other Investments



Other investments, which include longer-term passive investments, at Mar.
31, 2004 and Dec. 31, 2003 were as follows:



Other Investments



|                                           |  |      |      |  |          |  |               |      |               |   |     
|------------------------------------------ |  | ---- | ---- |  | -------- |  | ------------- | ---- | ------------- | - | ----
|(millions)                                 |  | Rate |      |  | Due Date |  | Mar. 31, 2004 |      | Dec. 31, 2003
|Notes receivable from EEGSA                |  | 6.17 | %(1) |  | 9/11/07  |  | $             | 3.6  |               | $ | 8.1 
|Continuing investments in leveraged leases |  |     |      |  |         |  |               | 8.4  |               |   | 8.4 
|                                           |  |      |      |  |          |  |               |      |               |   |     
|Other investments                          |  |      |      |  |          |  | $             | 12.0 |               | $ | 16.5
|                                           |  |      |      |  |          |  |               |      |               |   |     

---

|(1) | Current rate at Mar. 31, 2004.
|--- | ------------------------------



These financial investments have no quoted market prices and, accordingly, a reasonable estimate of fair market value could not be made without incurring
excessive costs. However, the company believes the fair value of these assets would not differ significantly from the carrying value.



Investments in Unconsolidated Affiliates



Investments in unconsolidated affiliates are accounted for using the equity method of accounting. The percentage ownership interest for each investment at
Mar. 31, 2004 and Dec. 31, 2003 is presented in the following table:



TECO
Energy and Subsidiaries Percent Ownership in Unconsolidated Affiliates



|                                                                    |  |               |   |  |               |  
|------------------------------------------------------------------- |  | ------------- | - |  | ------------- | -
|                                                                    |  | Mar. 31, 2004 |   |  | Dec. 31, 2003 |  
|TECO Wholesale Generation (TWG)                                     |  |               |   |  |               |  
|Texas Independent Energy, L.P. (TIE)(1)                             |  | 50            | % |  | 50            | %
|                                                                    |  |               |   |  |               |  
|Other unregulated                                                   |  |               |   |  |               |  
|Central Generadora Eléctrica San José, Ltda. (San José or CGE)(2)   |  | 100           | % |  |              | %
|Tampa Centro Americana de Electricidad, Ltda. (Alborada or TCAE)(2) |  | 96            |   |  |              |  
|Empresa Eléctrica de Guatemala, S.A. (EEGSA)                        |  | 24            |   |  | 24            |  
|Hamakua Energy Partners, L.P.                                       |  | 50            |   |  | 50            |  
|Hamakua Land Partnership, LLP                                       |  | 50            |   |  | 50            |  
|US Propane, LLC(3)                                                  |  | 38            |   |  | 38            |  
|TECO AGC, Ltd.(4)                                                   |  |              |   |  | 50            |  
|Litestream Technologies, LLC                                        |  | 36            |   |  | 36            |  
|Hernando Oaks, LLC(4)                                               |  |              |   |  | 50            |  
|Brandon Properties Partners, Ltd.                                   |  | 50            |   |  | 50            |  
|Walden Woods Business Center, Ltd.                                  |  | 50            |   |  | 50            |  

---

|(1) | PLC Development Holdings, LLC (PLC) has a 50-percent ownership interest in TIE (the holding company for the Odessa and Guadalupe project entities).
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | As of Jan. 1, 2004, in accordance with the most recent interpretation and application of the new consolidation guidance established in FIN 46R to long-term power purchase
agreements, TECO Energy can no longer consolidate CGE or TCAE, the project companies for the San José and Alborada power plants, respectively, in Guatemala. See Note 18 for additional details.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | In January 2004, US Propane, LLC sold a majority of its assets, consisting of direct and indirect equity investments in Heritage Propane Partners, L.P., resulting in an after-tax
gain of $10.6 million ($17.2 million pre-tax).
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





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##### Table of Contents

|(4) | As of Jan. 1, 2004, in accordance with FIN 46R, the company had determined that it is the primary beneficiary of this entity. As a result, this entity is included in the
consolidated financial statements of the company as a fully consolidated entity with a significant minority interest. See Note 18 for additional details.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Revenues and Fuel Costs



As of Mar. 31, 2004 and Dec. 31, 2003, unbilled revenues of $43.3 million and $45.7 million, respectively, are included in the Receivables
line item on the balance sheet.



Purchased Power



Tampa Electric purchases power on a regular basis primarily to meet the
needs of its retail customers. As a result of the sale of HPP in 2003, power purchases from HPP, subsequent to the sale, are reflected as non-affiliate purchases by Tampa Electric. Tampa Electrics long-term power purchase agreement from HPP
was not affected by the sale of HPP. Under the existing agreement, which has been approved by the FPSC, Tampa Electric has the right to purchase, on average, approximately 52% of the total output of the Hardee power station. Tampa Electric purchased
power from non-TECO Energy affiliates, including purchases from HPP, at a cost of $29.1 million, and $53.6 million, respectively, for the three months ended Mar. 31, 2004 and 2003. The associated revenue at HPP from power sold to Tampa Electric of
$14.2 million for the three months ended Mar. 31, 2003, is offset against Regulated operations Purchased power in the income statement. The purchased power costs at Tampa Electric are recoverable through an FPSC-approved cost
recovery clause.



In order to meet firm commitments or maintain
acceptable operating conditions, unregulated affiliates may also purchase power in the ordinary course of business. Total unregulated purchases of power for continuing operations, for the three months ended Mar. 31, 2004, and 2003, were $0.2
million, and $6.8 million, respectively. Unregulated power purchases are reported in Other operations in the income statement.



Depreciation



TECO Energy provides for depreciation primarily by the straight-line method at annual rates that amortize the original cost, less salvage value, of
depreciable property over its estimated service life. Unregulated electric generating, pipeline and transmission facilities are depreciated over the expected useful lives of the related equipment, a period of up to 40 years. The provision for total
regulated and unregulated plant in service, expressed as a percentage of the original cost of depreciable property, was 3.9% for the three months ended Mar. 31, 2004 and 4.2% for the same period in 2003. Construction work-in-progress is not
depreciated until the asset is completed or placed in service.



The implementation of FAS 143, Accounting for Asset Retirement Obligations,in 2003 resulted in an increase in the carrying amount of long-lived assets and the reclassification of the accumulated reserve for cost of removal from
accumulated depreciation to Regulatory liabilities for all periods presented. The adjusted capitalized amount is depreciated over the remaining useful life of the asset. See Notes 4and 5.



Accounting for Excise Taxes, Franchise Fees and Gross Receipts



The regulated utilities are allowed to recover certain costs incurred from
customers through prices approved by the FPSC. The amounts included in customers bills for franchise fees and gross receipt taxes are included as revenues on the Consolidated Statements of Income. These amounts totaled $20.8 million, and $18.8
million for the three months ended Mar. 31, 2004 and 2003, respectively. Franchise fees and gross receipt taxes payable by the regulated utilities are included as an expense on the Consolidated Statements of Income in Taxes, other than
income. For the three months ended Mar. 31, 2004, and 2003, these totaled $20.7 million and $18.7 million, respectively.



Stock-Based Compensation



Effective Jan. 1, 2003, the company adopted FAS 148, Accounting for Stock-Based CompensationTransition and Disclosure, an amendment of FASB
Statement No. 123. This standard amends FAS 123 to provide alternative methods of transition for companies that voluntarily change to the fair value-based method of accounting for stock-based employee compensation. It also requires prominent
disclosure about the effects on reported net income of the companys accounting policy decisions with respect to stock-based employee compensation in both annual and interim financial statements. The adoption of the disclosure provisions of
this standard did not have a material impact on the companys financial position.



Restrictions on Dividend Payments and Transfer of Assets



Dividends on TECO Energys common stock are declared and paid at the discretion of its Board of Directors. The primary sources of funds to pay dividends on TECO Energys common stock are dividends and other
distributions from its operating companies. TECO Energys $380 million note indenture contains a covenant that requires the company to achieve certain interest coverage levels in order to pay dividends. TECO Energys Merrill Lynch credit
facility contains a covenant that could limit the payment of dividends exceeding $40 million in any quarter under certain circumstances if the facility is drawn. Tampa Electrics first mortgage bond indenture and certain long-term debt
issuances at PGS contain provisions that limit the payment of dividends and distributions on the common stock of Tampa Electric Company. In March 2004, $75 million of Tampa Electrics first mortgage bonds were repaid and the



10



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##### Table of Contents

related restriction on distributions and dividends became no longer operative since there are no bonds outstanding under
the mortgage indenture (see Note 16 for a discussion of the PGS covenant). Tampa Electrics credit facilities include a covenant limiting cumulative distributions and outstanding affiliate loans.



In addition, TECO Diversified, Inc., a wholly-owned subsidiary of TECO Energy
and the holding company for TECO Transport, TECO Coal and TECO Solutions, has a guarantee related to a coal supply agreement that limits the payment of dividends to its common shareholder, TECO Energy, but does not limit loans or advances.



See Note 16for a more detailed description of
significant financial covenants.





Reclassifications



Results for all prior periods have been reclassified from continuing operations to discontinued operations as appropriate for each of the entities as discussed in Note 11.





2. Derivatives and Hedging



At Mar. 31, 2004 and Dec. 31, 2003, respectively, TECO Energy and its
affiliates had derivative assets totaling $19.4 million and $21.1 million, and liabilities totaling $9.9 million and $12.0 million. At Mar. 31, 2004 and Dec. 31, 2003, accumulated other comprehensive income (OCI) included $7.8 million and $4.3
million, respectively, of unrealized after-tax losses, representing the fair value of cash flow hedges whose transactions will occur in the future. Included in OCI at Mar. 31, 2004 and Dec. 31, 2003 is an unrealized after-tax loss of $16.2 million
and $14.6 million, respectively, on interest rate swaps designated as cash flow hedges, reflecting the remaining amount included in OCI related to cash flow hedges for the period preceding the expected disposition of the net assets associated with
the Union and Gila River projects. Amounts recorded in OCI reflect the estimated fair value of derivative instruments designated as hedges, based on market prices as of the balance sheet date.



For the three months ended Mar. 31, 2004, and 2003, TECO Energy and its
affiliates reclassified amounts from OCI and recognized net pre-tax (losses) gains of ($2.0) million and $9.7 million, respectively. Based on the fair value of cash flow hedges at Mar. 31, 2004, pre-tax losses of $9.5 million are expected to be
reversed from OCI to the Consolidated Statements of Income within the next twelve months. However, these losses and other future reclassifications from OCI will fluctuate with movements in the underlying market price of the derivative instruments.
The company does not currently have any cash flow hedges for transactions forecasted to take place in periods subsequent to 2006.



For the three months ended Mar. 31, 2004 and 2003, respectively, the company also recognized pre-tax gains (losses) of $2.4 million and ($5.0) million,
relating to derivatives that were not designated as either a cash flow or fair value hedge.





3. Other Intangible Assets



The amount of intangible assets recorded in Other assets at Mar. 31, 2004 and Dec. 31, 2003 was $4.9 million at the end of each period. For
the three months ended Mar. 31, 2003, the company recognized amortization expense of $4.7 million. No amortization expense was recognized for the three months ended Mar. 31, 2004.





4. Regulatory



Cost RecoveryTampa Electric



2003 Proceedings



In September 2003, Tampa Electric filed with the FPSC for approval of fuel
and purchased power, capacity, environmental and conservation cost recovery clause rates for the period January through December 2004. In November 2003, the FPSC approved Tampa Electrics requested changes. The resulting rates included the
impact of increased use of natural gas at the Bayside Power Station, the collection of approximately $91 million for under-recovery of fuel expense for 2002 and 2003, and estimated waterborne transportation rates for coal transportation services.
The FPSC did not allow recovery of $8.4 million it characterized as savings from shutting down the Gannon Station earlier than originally planned, which the FPSC asserted generated operations and maintenance savings. The previous rates included
recovery of the costs associated with coal transportation services. A separate docket was opened to review the contract for these services (see the Other Itemssection below for additional details). The rates include projected costs
associated with environmental projects required under the Environmental Protection Agency (EPA) Consent Decree and the Florida Department of Environmental Protection (FDEP) Consent Final Judgment (see Note 16 for additional details regarding
these environmental matters). The costs associated with this disallowance were recognized in 2003.



11



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##### Table of Contents

Tampa Electric filed its objection to the disallowance of the recovery of the $8.4 million and a motion
asking the FPSC to reconsider its decision. The motion was filed on Jan. 6, 2004 and on Mar. 30, 2004, the FPSC voted unanimously to deny the companys motion to reconsider its decision.



As part of the regulatory process, it is reasonably likely that third parties
may intervene in various matters in the future. The company is unable to predict the timing, nature or impact of such future actions.



Other Items



Coal Transportation Contract



Tampa Electrics contract for coal transportation and storage services with TECO Transport expired on Dec. 31, 2003. In June 2003, Tampa Electric
issued a Request For Proposal (RFP) to potential providers requesting services for the next five years. The result of the RFP process was the execution of a new contract between Tampa Electric and TECO Transport with market rates supported by the
results of the RFP and an independent consultant in maritime transportation matters. The prudence of the RFP process and final contract is expected to be reviewed by the FPSC in May 2004, with a decision expected in July 2004.



Regulatory Assets and Liabilities



Tampa Electric and PGS maintain their accounts in accordance with recognized
policies of the FPSC. In addition, Tampa Electric maintains its accounts in accordance with recognized policies prescribed or permitted by the FERC. These policies conform with generally accepted accounting principles in all material respects.



Tampa Electric and PGS apply the accounting treatment
permitted by FAS 71, Accounting for the Effects of Certain Types of Regulation. Areas of applicability include deferral of revenues under approved regulatory agreements; revenue recognition resulting from cost recovery clauses that provide
for monthly billing charges to reflect increases or decreases in fuel; purchased power, conservation and environmental costs; and deferral of costs as regulatory assets, when cost recovery is ordered over a period longer than a fiscal year, to the
period that the regulatory agency recognizes them. Details of the regulatory assets and liabilities as of Mar. 31, 2004 and Dec. 31, 2003 are presented in the following table:



Regulatory Assets and Liabilities



|                                            |  |              |       |              |   |      
|------------------------------------------- |  | ------------ | ----- | ------------ | - | -----
|(millions)                                  |  | Mar. 31,2004 |       | Dec. 31,2003
|Regulatory assets:                          |  |              |       |              |   |      
|Regulatory tax asset(1)                     |  | $            | 62.3  |              | $ | 63.3 
|Other:                                      |  |              |       |              |   |      
|Cost recovery clauses                       |  |              | 29.5  |              |   | 59.7 
|Coal contract buy-out(2)                    |  |              | 2.0   |              |   | 2.7  
|Deferred bond refinancing costs(3)          |  |              | 35.3  |              |   | 32.2 
|Environmental remediation                   |  |              | 18.5  |              |   | 20.7 
|Competitive rate adjustment                 |  |              | 5.2   |              |   | 5.3  
|Other                                       |  |              | 4.4   |              |   | 4.4  
|                                            |  |              |       |              |   |      
|                                            |  |              | 94.9  |              |   | 125.0
|                                            |  |              |       |              |   |      
|Total regulatory assets                     |  | $            | 157.2 |              | $ | 188.3
|                                            |  |              |       |              |   |      
|Regulatory liabilities:                     |  |              |       |              |   |      
|Regulatory tax liability(1)                 |  | $            | 28.5  |              | $ | 29.9 
|Other:                                      |  |              |       |              |   |      
|Deferred allowance auction credits          |  |              | 1.9   |              |   | 1.9  
|Recovery clause related                     |  |              | 0.7   |              |   |     
|Environmental remediation                   |  |              | 18.5  |              |   | 20.7 
|Transmission and distribution storm reserve |  |              | 41.0  |              |   | 40.0 
|Deferred gain on property sales(4)          |  |              | 1.8   |              |   | 1.9  
|Accumulated reserve  cost of removal       |  |              | 469.1 |              |   | 462.2
|Other                                       |  |              | 2.6   |              |   | 3.6  
|                                            |  |              |       |              |   |      
|                                            |  |              | 535.6 |              |   | 530.3
|                                            |  |              |       |              |   |      
|Total regulatory liabilities                |  | $            | 564.1 |              | $ | 560.2
|                                            |  |              |       |              |   |      

---

|(1) | Related primarily to plant life. Includes $16.1 million and $17.0 million of excess deferred taxes as of Mar. 31, 2004 and Dec. 31, 2003, respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Amortized over a 10-year period ending December 2004.
|--- | -----------------------------------------------------



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|(3) | Unamortized refinancing costs:
|--- | ------------------------------



|                                                    |  |                 
|--------------------------------------------------- |  | ----------------
|Related to debt transactions as follows (millions): |  | Amortized until:
|$  51.6                                             |  | 2005            
|$  22.1                                             |  | 2007            
|$  25.0                                             |  | 2011            
|$  50.0                                             |  | 2011            
|$150.0                                              |  | 2012            
|$150.0                                              |  | 2012            
|$  85.9                                             |  | 2014            
|$  25.0                                             |  | 2021            
|$100.0                                              |  | 2022            
|$  75.0                                             |  | 2022            



|(4) | Amortized over a 5-year period with various ending dates.
|--- | ---------------------------------------------------------



5. Asset Retirement Obligations



On Jan. 1, 2003, TECO Energy adopted FAS 143, Accounting for Asset Retirement Obligations. TECO Energy has recognized asset retirement obligations
for reclamation and site restoration obligations principally associated with coal mining, storage and transfer facilities. The majority of obligations arise from environmental remediation and restoration activities for coal-related operations. Prior
to the adoption of FAS 143, TECO Coal accrued reclamation costs for such activities. For TECO Coal, the adoption of FAS 143 modifies the valuation and accrual methods used to estimate the fair value of asset retirement obligations.



As a result of the adoption of FAS 143 in 2003, TECO Energy recorded an
increase to net property, plant and equipment of $7.8 million (net of accumulated depreciation of $6.6 million) and an increase to asset retirement obligations of $22.1 million, partially offset by previously recognized accrued reclamation
obligations associated with coal mining activities of $12.3 million. A pre-tax charge of $1.8 million, net of a $0.2 million offset due to a regulatory asset at Tampa Electric, ($1.1 million after tax) was recognized in the first quarter of 2003 as
a change in accounting principle.



For the three months ended
Mar. 31, 2004 and 2003, TECO Energy recognized $0.5 million and $0.3 million, respectively, of accretion expense associated with asset retirement obligations. During this period, no new retirement obligations were incurred and no significant
revisions to estimated cash flows used in determining the recognized asset retirement obligations were necessary.



As regulated utilities, Tampa Electric and PGS must file depreciation and dismantlement studies periodically and receive approval from the FPSC before
implementing new depreciation rates. Included in approved depreciation rates is either an implicit net salvage factor or a cost of removal factor, expressed as a percentage. The net salvage factor is principally comprised of two componentsa
salvage factor and a cost of removal or dismantlement factor. The company uses current cost of removal or dismantlement factors as part of the estimation method to approximate the amount of cost of removal in accumulated depreciation.



As a result of the adoption of FAS 143 at Jan. 1, 2003, the estimated
accumulated cost of removal and dismantlement included in net accumulated depreciation as of Mar. 31, 2004 and Dec. 31, 2003 of $469.1 million and $462.2 million, respectively, is classified as a regulatory liability (see also Note 4). For
Tampa Electric and PGS, the original cost of utility plant retired or otherwise disposed of and the cost of removal, or dismantlement, less salvage value is charged to accumulated depreciation and the accumulated cost of removal reserve reported as
a regulatory liability, respectively.



13



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##### Table of Contents

6. Short-Term Debt



At Mar. 31, 2004 and Dec. 31, 2003, the following credit facilities and related borrowings existed:



Credit Facilities

|                  |  |                  |       |                           |   |                             |  |                  |      |                           |   |                             |  |   |      |  |   |      
|----------------- |  | ---------------- | ----- | ------------------------- | - | --------------------------- |  | ---------------- | ---- | ------------------------- | - | --------------------------- |  | - | ---- |  | - | -----
|                  |  | Mar. 31, 2004    |       | Dec. 31, 2003            
|(millions)        |  | CreditFacilities |       | BorrowingsOutstanding (1) |   | Letters ofCreditOutstanding |  | CreditFacilities |      | BorrowingsOutstanding (1) |   | Letters ofCreditOutstanding
|Recourse:         |  |                  |       |                           |   |                             |  |                  |      |                           |   |                             |  |   |      |  |   |      
|Tampa Electric:   |  |                  |       |                           |   |                             |  |                  |      |                           |   |                             |  |   |      |  |   |      
|1-year facility   |  | $                | 125.0 |                           | $ |                            |  | $                |     |                           | $ | 125.0                       |  | $ |     |  | $ |     
|3-year facility   |  |                  | 125.0 |                           |   | 50.0                        |  |                  |     |                           |   | 125.0                       |  |   |     |  |   |     
|TECO Energy:      |  |                  |       |                           |   |                             |  |                  |      |                           |   |                             |  |   |      |  |   |      
|18-month facility |  |                  | 20.6  |                           |   |                            |  |                  |     |                           |   | 100.0                       |  |   |     |  |   |     
|1-year facility   |  |                  |      |                           |   |                            |  |                  |     |                           |   | 37.5                        |  |   | 37.5 |  |   |     
|3-year facility   |  |                  | 350.0 |                           |   |                            |  |                  | 43.9 |                           |   | 350.0                       |  |   |     |  |   | 109.9
|                  |  |                  |       |                           |   |                             |  |                  |      |                           |   |                             |  |   |      |  |   |      
|Total             |  | $                | 620.6 |                           | $ | 50.0                        |  | $                | 43.9 |                           | $ | 737.5                       |  | $ | 37.5 |  | $ | 109.9
|                  |  |                  |       |                           |   |                             |  |                  |      |                           |   |                             |  |   |      |  |   |      

---

|(1) | Borrowings outstanding are reported as notes payable.
|--- | -----------------------------------------------------



These credit facilities require commitment fees ranging from 20 to 50 basis points. The weighted-average interest rate on outstanding notes payable at
Mar. 31, 2004 and Dec. 31, 2003 was 2.25% and 6.63%, respectively.





7. Long-Term Debt



In March 2004, Tampa Electric repaid $75 million of 7.75% first mortgage bonds. The mortgage indenture included a limitation on dividends covenant which
became no longer operative since there are no bonds outstanding under the indenture.



Junior Subordinated (formerly Preferred Securities)



As a result of the adoption of FIN 46R, on Jan. 1, 2004, the preferred securities issued by the company were no longer recognized as a result of the deconsolidation of the funding companies established to issue the securities purchased by
the trusts described below. As described below, the company issued junior subordinated debt obligations to the funding companies in connection with the issuance of the trust preferred securities. As of Mar. 31, 2004, the company has reflected the
junior subordinated debt and the equity investment in the funding companies on the balance sheet. The impact of the adoption of FIN 46R for these two entities was an increase in liabilities of $20.2 million and a corresponding increase in assets. As
of Dec. 31, 2003, this amount reflected the obligation associated with the preferred securities.



Under FIN 46R, the funding companies are considered to be variable interest entities in which the company is not the primary beneficiary. Rather, the
capital trusts are considered to be the primary beneficiaries and thus, the trusts and not TECO Energy must consolidate the funding company. The company does not have any significant exposure to losses as a result of its involvement with the
deconsolidated funding companies.



Capital Trust I



In December 2000, TECO Capital Trust I, a trust
established for the sole purpose of issuing Trust Preferred Securities (TRuPS) and purchasing company preferred securities, issued 8 million shares of $25 par, 8.5% TRuPS, due 2041, with an aggregate liquidation value of $200 million. Each TRuPS
represents an undivided beneficial interest in the assets of the Trust. The TRuPS represent an indirect interest in a corresponding amount of TECO Energy 8.5% junior subordinated notes due 2041. Distributions are payable quarterly in arrears on Jan.
31, Apr. 30, Jul. 31, and Oct. 31 of each year. Distributions were $4.2 million for each of the three-month periods ended Mar. 31, 2004 and 2003. For the three months ended Mar. 31, 2004, the distributions were reflected in interest expense as
interest payments under the junior subordinated notes.



The
junior subordinated notes may be redeemed at the option of TECO Energy at any time on or after Dec. 20, 2005 at 100% of their principal amount plus accrued interest through the redemption date. Upon any liquidation of the company preferred
securities, holders of the TRuPS would be entitled to the liquidation preference of $25 per share plus all accrued and unpaid dividends through the date of redemption.



Capital Trust II



In January 2002, TECO Energy sold 17.965 million mandatorily convertible equity security units in the form of 9.5% equity units at $25 per unit resulting
in $436 million of net proceeds. Each equity unit consisted of $25 in principal amount of a trust preferred security of TECO Capital Trust II, a Delaware business trust formed for the purpose of issuing these securities, with a stated liquidation
amount of $25 and a contract to purchase shares of common stock of TECO Energy in January 2005 at a price per share of between $26.29 and $30.10 based on the market price at that time. If the equity units had been converted as of Mar.31, 2004, the
company would have been required to issue 17.1 million shares of common stock to satisfy the mandatory conversion obligation. This is also the



14



---

##### Table of Contents

maximum number of shares issuable under the conversion feature. The equity units represent an indirect interest in a corresponding amount of TECO Energy
5.11% subordinated debt. The holders of these contracts are entitled to quarterly contract adjustment payments at the annualized rate of 4.39% of the stated amount of $25 per year through and including Jan. 15, 2005. Distributions were $5.7 million
for each of the three-month periods ended Mar. 31, 2004 and 2003. For the three months ended Mar. 31, 2004, the distributions were reflected in interest expense as interest payments under the junior subordinated notes.



8. Common Stock



Stock-Based Compensation



TECO Energy has adopted the disclosure-only provisions of FAS 123, Accounting for Stock-Based Compensation, as amended by FAS 148, but applies
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for its plans. Therefore, since stock options are granted with an option price greater than or equal to the fair
value on the grant date, no compensation expense has been recognized for stock options granted under the 1996 Plan and the 1997 Plan. If the company had elected to recognize compensation expense for stock options based on the fair value at grant
date, consistent with the method prescribed by FAS 123, net income and earnings per share would have been reduced to the pro forma amounts as follows. These pro forma amounts were determined using the Black-Scholes valuation model with weighted
average assumptions as set forth below:



Pro Forma Stock-Based Compensation
Expense



|                                                          |  |                            |       |   |      |   |       |  
|--------------------------------------------------------- |  | -------------------------- | ----- | - | ---- | - | ----- | -
|                                                          |  | Three monthsended Mar. 31, |      
|(millions, except per share amounts)                      |  | 2004                       |       |   | 2003 |  
|Net income (loss) from continuing operations              |  |                            |       |   |      |   |       |  
|As reported                                               |  | $                          | 28.7  |   |      | $ | (20.3 | )
|Add: Unearned compensation expense(1)                     |  |                            | 0.6   |   |      |   | (0.9  | )
|Less: Pro forma expense(2)                                |  |                            | 1.6   |   |      |   | 0.1   |  
|                                                          |  |                            |       |   |      |   |       |  
|Pro forma                                                 |  | $                          | 27.7  |   |      | $ | (21.3 | )
|                                                          |  |                            |       |   |      |   |       |  
|Net income                                                |  |                            |       |   |      |   |       |  
|As reported                                               |  | $                          | 2.5   |   |      | $ | 2.7   |  
|Add: Unearned compensation expense(1)                     |  |                            | 0.6   |   |      |   | (0.9  | )
|Less: Pro forma expense(2)                                |  |                            | 1.6   |   |      |   | 0.1   |  
|                                                          |  |                            |       |   |      |   |       |  
|Pro forma                                                 |  | $                          | 1.5   |   |      | $ | 1.7   |  
|                                                          |  |                            |       |   |      |   |       |  
|Net income (loss) from continuing operationsEPS, basic   |  |                            |       |   |      |   |       |  
|As reported                                               |  | $                          | 0.15  |   |      | $ | (0.12 | )
|Pro forma                                                 |  | $                          | 0.15  |   |      | $ | (0.12 | )
|Net income (loss) from continuing operationsEPS, diluted |  |                            |       |   |      |   |       |  
|As reported                                               |  | $                          | 0.15  |   |      | $ | (0.12 | )
|Pro forma                                                 |  | $                          | 0.15  |   |      | $ | (0.12 | )
|Net incomeEPS, basic                                     |  |                            |       |   |      |   |       |  
|As reported                                               |  | $                          | 0.01  |   |      | $ | 0.02  |  
|Pro forma                                                 |  | $                          | 0.01  |   |      | $ | 0.01  |  
|Net incomeEPS, diluted                                   |  |                            |       |   |      |   |       |  
|As reported                                               |  | $                          | 0.01  |   |      | $ | 0.02  |  
|Pro forma                                                 |  | $                          | 0.01  |   |      | $ | 0.01  |  
|                                                          |  |                            |       |   |      |   |       |  
|Assumptions                                               |  |                            |       |   |      |   |       |  
|Risk-free interest rate                                   |  |                            | 3.52  | % |      |   | 4.02  | %
|Expected lives (in years)                                 |  |                            | 7     |   |      |   | 7     |  
|Expected stock volatility                                 |  |                            | 32.68 | % |      |   | 45.00 | %
|Dividend yield                                            |  |                            | 6.87  | % |      |   | 10.40 | %
|                                                          |  |                            |       |   |      |   |       |  

---

|(1) | Unearned compensation expense reflects the compensation expense of restricted stock awards, after tax.
|--- | ------------------------------------------------------------------------------------------------------

|(2) | Compensation expense for stock options determined under the fair-value based method, after tax, and compensation expense associated with restricted stock awards.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



15



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##### Table of Contents

9. Asset Impairments



In the first quarter of 2004, Litestream Technologies, LLC, an entity in which TECO Fiber, a subsidiary of TECO Solutions, holds an equity investment, was
placed into bankruptcy by creditors. As a result of the bankruptcy, the company recognized a pre-tax loss of $5.5 million ($3.4 million after tax) in the three months ended Mar. 31, 2004. The loss on the equity investment in Litestream was
determined using the estimated fair value of the companys claims to net assets. In addition, a subsidiary of TECO Transport recognized a pre-tax loss of $1.2 million ($0.8 million after tax) on two barges. The loss at TECO Transport was
determined based on the fair value of the contributions to the joint venture by the third party and recent sales of similar equipment. No significant events or changes in circumstances occurred during the three months ended Mar. 31, 2004 to indicate
an impairment of any other long-lived assets.



At Mar.
31, 2003, TECO Energy recorded a $64.2 million after-tax charge ($104.1 million pre-tax) to reflect the impact of the cancellation of turbine purchase commitments. This represented after-tax charges of $15.3 million ($24.5 million pre-tax) at the
other unregulated segment and $48.9 million ($79.6 million pre-tax) at Tampa Electric relating to installment payments made and capitalized in prior periods. As reported previously, certain turbine rights had been transferred from the other
unregulated segment to Tampa Electric in 2002 for use in Tampa Electrics generation expansion activities. These cancellations, made in April 2003, fully terminated all turbine purchase obligations for TWG and Tampa Electric.



10. Income Tax Expense



The total income tax provisions differ from amounts computed by applying the
federal statutory tax rate to income before income taxes, primarily due to the recognition of non-conventional fuels tax credits, permanent reinvestment of foreign income under Accounting Principles Board Opinion No. 23, Accounting for
TaxesSpecial Areas, (APB 23) and other miscellaneous items as noted in the table that follows.



Effective Income Tax Rate



|                                                                                                                                                                                |  |                             |      |   |      |   |       |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ---- | - | ---- | - | ----- | -
|                                                                                                                                                                                |  | Three months ended Mar. 31, |     
|(millions)                                                                                                                                                                      |  | 2004                        |      |   | 2003 |  
|Income (loss) from continuing operations before minority interest                                                                                                               |  | $                           | 5.5  |   |      | $ | (20.3 | )
|Add: Minority interest                                                                                                                                                          |  |                             | 23.2 |   |      |   |      |  
|Less (1):Asset impairment charge                                                                                                                                                |  |                             | (3.4 | ) |      |   | (64.4 | )
|Gain on sale                                                                                                                                                                    |  |                             | 10.6 |   |      |   |      |  
|Income from equity investments                                                                                                                                                  |  |                             | 9.6  |   |      |   |      |  
|Add (2):Income tax provision                                                                                                                                                    |  |                             | 4.2  |   |      |   | 0.7   |  
|                                                                                                                                                                                |  |                             |      |   |      |   |       |  
|Income from continuing operation before income taxes, including minority interest, excluding asset impairment charge, gain on sale and equity
earnings for tax purposes only(1) |  |                             | 16.1 |   |      |   | 44.8  |  
|                                                                                                                                                                                |  |                             |      |   |      |   |       |  
|Income taxes on above at federal statutory rate of 35%                                                                                                                          |  |                             | 5.6  |   |      |   | 15.7  |  
|Increase (decrease) due to                                                                                                                                                      |  |                             |      |   |      |   |       |  
|State income tax, net of federal income tax                                                                                                                                     |  |                             | 0.7  |   |      |   | 1.0   |  
|Amortization of investment tax credits                                                                                                                                          |  |                             | (0.7 | ) |      |   | (1.1  | )
|Permanent reinvestment-foreign income                                                                                                                                           |  |                             | (1.9 | ) |      |   | (3.9  | )
|Non-conventional fuels tax credit                                                                                                                                               |  |                             |     |   |      |   | (9.3  | )
|AFUDC equity                                                                                                                                                                    |  |                             | (0.3 | ) |      |   | (2.7  | )
|Other                                                                                                                                                                           |  |                             | 0.8  |   |      |   | 1.0   |  
|                                                                                                                                                                                |  |                             |      |   |      |   |       |  
|Total income tax provision from continuing operations(3)                                                                                                                        |  | $                           | 4.2  |   |      | $ | 0.7   |  
|                                                                                                                                                                                |  |                             |      |   |      |   |       |  
|Provision for income taxes as a percent of income from continuing operations, before income taxes                                                                               |  |                             | 25.9 | % |      |   | 1.6   | %
|                                                                                                                                                                                |  |                             |      |   |      |   |       |  

---

|(1) | Excludes amounts recorded in the three months ended Mar. 31, 2004 for: a $10.6 million after-tax gain ($17.2 million pre-tax) on US Propanes sale of its interest in Heritage
Propane Partners; a $3.4 million after-tax asset impairment charge ($5.5 million pre-tax) at TECO Fiber (see Note 9); and net equity earnings of $9.6 million ($12.1 million pre-tax) associated with the Alborada (TCAE) and San José
(CGE) project entities, as a result of the current interpretation of FIN 46R as it applies to long-term power purchase agreements (see Note 18). For the three months ended Mar. 31, 2003, an impairment charge of $64.2 million after tax ($104.1
million pre-tax) associated with the cancellation of turbine purchase commitments in the first quarter of 2003 is excluded.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Does not include the tax provision (benefit) associated with excluded items described above.
|--- | --------------------------------------------------------------------------------------------



16



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##### Table of Contents

|(3) | Total income tax provision from continuing operations of $4.2 million, plus the income tax expense on asset impairment and gain on sale of $4.5 million, agrees to the total
provision for income taxes of $8.7 million as reported on the income statement for the three months ended Mar. 31, 2004. For 2003, the total income tax provision from continuing operations of $0.7 million plus the income tax benefit on the asset
impairment of $40.1 million agrees to the total benefit from income taxes of $39.3 million on the income statement for the three months ended Mar. 31, 2003.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



11. Discontinued Operations and Assets Held for Sale



Union and Gila River Projects



As of Dec. 31, 2003, management was committed to a plan to sell TECO Energys indirect ownership of the equity in or net assets of the project
companies. The company expects to complete the transfer of these projects in 2004. The Union and Gila River project companies comprised part of the TWG Merchant segment until designated as assets held for sale in December 2003.



As an asset held for sale, the assets and liabilities that are expected to be
transferred as part of the sale, as of Dec. 31, 2003, have been reclassified, respectively, in the balance sheet. Furthermore, the company has determined that the asset group meets the criteria of a discontinued operation. Results from operations
for the Union and Gila River project companies have been reclassified to Discontinued operations for all periods presented. For the three months ended Mar. 31, 2003, the project entities were development stage companies. The following
table provides selected components of discontinued operations for the asset group.



Components of income from discontinued operations  Union and Gila River Project Companies



|                                                |  |                           |       |   |      |   |    
|----------------------------------------------- |  | ------------------------- | ----- | - | ---- | - | ---
|                                                |  | Three monthsendedMar. 31,
|(millions)                                      |  | 2004                      |       |   | 2003
|Revenues                                        |  | $                         | 59.3  |   |      | $ |   
|(Loss) income from operations                   |  |                           | (19.6 | ) |      |   |   
|(Loss) income before provision for income taxes |  |                           | (39.0 | ) |      |   | 1.1
|(Benefit) provision for income taxes            |  |                           | (13.6 | ) |      |   | 0.3
|Net (loss) income from discontinued operations  |  | $                         | (25.4 | ) |      | $ | 0.8
|                                                |  |                           |       |   |      |   |    



Due to the fact that
the Union and Gila River projects are classified as discontinued operations, depreciation expense is no longer recognized and reported, in accordance with FAS 144. The amount of depreciation that would have been recognized for the three months ended
Mar. 31, 2004, if not classified as discontinued operations, is $12.7 million.



The following table provides a summary of the carrying amounts of the significant assets and liabilities reported in the combined current and non-current Assets held for sale and Liabilities
associated with assets held for sale line items:



Assets held for
saleUnion and Gila River Project Companies



|                                  |  |              |         |              |   |        
|--------------------------------- |  | ------------ | ------- | ------------ | - | -------
|(millions)                        |  | Mar. 31,2004 |         | Dec. 31,2003
|Current assets                    |  | $            | 106.8   |              | $ | 72.9   
|Net property, plant and equipment |  |              | 1,363.4 |              |   | 1,367.9
|Other investments                 |  |              | 676.1   |              |   | 676.1  
|Other non-current assets          |  |              | 22.6    |              |   | 23.7   
|                                  |  |              |         |              |   |        
|Total assets held for sale        |  | $            | 2,168.9 |              | $ | 2,140.6
|                                  |  |              |         |              |   |        



Liabilities associated with assets
held for saleUnion and Gila River Project Companies



|                                                       |  |              |         |   |              |   |        
|------------------------------------------------------ |  | ------------ | ------- | - | ------------ | - | -------
|(millions)                                             |  | Mar. 31,2004 |         |   | Dec. 31,2003
|Current liabilities                                    |  | $            | 159.5   |   |              | $ | 94.0   
|Long-term debt, non-recourse:                          |  |              |         |   |              |   |        
|Secured facility note(1)(2)                            |  |              | 1,395.0 |   |              |   | 1,395.0
|Financing facility note                                |  |              | 676.1   |   |              |   | 676.1  
|Other non-current liabilities                          |  |              | (12.9   | ) |              |   | 21.7   
|                                                       |  |              |         |   |              |   |        
|Total liabilities associated with assets held for sale |  | $            | 2,217.7 |   |              | $ | 2,186.8
|                                                       |  |              |         |   |              |   |        

---

|(1) | As defined in the legal documents.
|--- | ----------------------------------

|(2) | This debt is classified as a current liability.
|--- | -----------------------------------------------



17



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##### Table of Contents

Other transactions



As of Mar. 31, 2004, the company completed several divestitures including: the sale of Prior Energy in February 2004; the sale of TECO BGA, Inc. (formerly
a component of TECO Energy Services) in January 2004; and the sale of Hardee Power Partners, Ltd. (HPP) and substantially all of the net assets of TECO Gas Services in the third quarter of 2003. In December 2002, the company sold TECO Coalbed
Methane, which gave rise to a pre-tax gain in the first quarter of 2003 of $38.7 million ($23.5 million after-tax). For all periods presented, the results of operations for TECO Coalbed Methane, Prior Energy and TECO Gas Services have been
reclassified to Discontinued operations.



Below is
a table which provides selected components of discontinued operations for transactions other than the Union and Gila River projects (TPGC) transaction:



Components of income from discontinued operationsOther



|                                                   |  |                          |      |   |      |   |     
|-------------------------------------------------- |  | ------------------------ | ---- | - | ---- | - | ----
|                                                   |  | ThreemonthsendedMar. 31,
|(millions)                                         |  | 2004                     |      |   | 2003
|Revenues                                           |  | $                        |     |   |      | $ | 6.8 
|(Loss) income from operations                      |  |                          | (1.2 | ) |      |   | 0.3 
|Gain on sale                                       |  |                          | 0.3  |   |      |   | 38.7
|(Loss) income before provision for income taxes(1) |  |                          | (1.3 | ) |      |   | 38.5
|(Benefit) provision for income taxes               |  |                          | (0.5 | ) |      |   | 15.2
|Net (loss) income from discontinued operations(1)  |  | $                        | (0.8 | ) |      | $ | 23.3
|                                                   |  |                          |      |   |      |   |     

---

|(1) | Includes internal financing costs, allocated prior to discontinued operations designation. Internally allocated costs for the three months ended Mar. 31, 2004 and 2003, were at
pre-tax rates of 8%, based on the average investment in each subsidiary.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The following table provides a summary of the carrying amounts of the significant assets and liabilities reported in the combined current and non-current Assets held for sale and Liabilities
associated with assets held for sale line items for all other transactions, excluding the Union and Gila River projects, as described above:



Assets held for saleOther



|                                  |  |              |     |              |   |      
|--------------------------------- |  | ------------ | --- | ------------ | - | -----
|(millions)                        |  | Mar. 31,2004 |     | Dec. 31,2003
|Current assets                    |  | $            | 0.2 |              | $ | 96.5 
|Net property, plant and equipment |  |              | 3.3 |              |   | 1.5  
|Other non-current assets          |  |              |    |              |   | 8.2  
|                                  |  |              |     |              |   |      
|Total assets held for sale        |  | $            | 3.5 |              | $ | 106.2
|                                  |  |              |     |              |   |      



Liabilities associated with assets
held for saleOther



|                                                       |  |              |     |              |   |     
|------------------------------------------------------ |  | ------------ | --- | ------------ | - | ----
|(millions)                                             |  | Mar. 31,2004 |     | Dec. 31,2003
|Current liabilities                                    |  | $            | 0.4 |              | $ | 55.4
|Other non-current liabilities                          |  |              | 0.1 |              |   |    
|                                                       |  |              |     |              |   |     
|Total liabilities associated with assets held for sale |  | $            | 0.5 |              | $ | 55.4
|                                                       |  |              |     |              |   |     



18



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12. Comprehensive Income



TECO Energy reported the following comprehensive income (loss) for the three months ended Mar. 31, 2004 and 2003, related to changes in the fair value
of cash flow hedges, foreign currency adjustments and adjustments to the minimum pension liability associated with the companys supplemental executive retirement plan:



Comprehensive Income (Loss)



|                                         |  |       |       |   |     |   |      |     |  |   |       |  
|---------------------------------------- |  | ----- | ----- | - | --- | - | ---- | --- |  | - | ----- | -
|(millions) Three months ended Mar.
31,   |  | Gross |       |   | Tax |   |      | Net | 
|2004                                     |  |       |       |   |     |   |      |     |  |   |       |  
|Unrealized (loss) on cash flow hedges(1) |  | $     | (5.6  | ) |     | $ | (1.1 | )   |  | $ | (4.5  | )
|Less: Loss reclassified to net income    |  |       | 2.0   |   |     |   | 1.0  |     |  |   | 1.0   |  
|                                         |  |       |       |   |     |   |      |     |  |   |       |  
|(Loss) on cash flow hedges               |  |       | (3.6  | ) |     |   | (0.1 | )   |  |   | (3.5  | )
|                                         |  |       |       |   |     |   |      |     |  |   |       |  
|Foreign currency adjustments             |  |       |      |   |     |   |     |     |  |   |      |  
|                                         |  |       |       |   |     |   |      |     |  |   |       |  
|Total other comprehensive income         |  | $     | (3.6  | ) |     | $ | (0.1 | )   |  | $ | (3.5  | )
|                                         |  |       |       |   |     |   |      |     |  |   |       |  
|2003                                     |  |       |       |   |     |   |      |     |  |   |       |  
|Unrealized gain on cash flow hedges(1)   |  | $     | 3.4   |   |     | $ | 1.6  |     |  | $ | 1.8   |  
|Less: (Gain) reclassified to net income  |  |       | (18.7 | ) |     |   | (7.2 | )   |  |   | (11.5 | )
|                                         |  |       |       |   |     |   |      |     |  |   |       |  
|(Loss) on cash flow hedges               |  |       | (15.3 | ) |     |   | (5.6 | )   |  |   | (9.7  | )
|                                         |  |       |       |   |     |   |      |     |  |   |       |  
|Foreign currency adjustments             |  |       | 0.8   |   |     |   |     |     |  |   | 0.8   |  
|                                         |  |       |       |   |     |   |      |     |  |   |       |  
|Total other comprehensive income (loss)  |  | $     | (14.5 | ) |     | $ | (5.6 | )   |  | $ | (8.9  | )
|                                         |  |       |       |   |     |   |      |     |  |   |       |  

---

|(1) | Amounts include interest rate swaps at the project companies designated as cash flow hedges at TPGC, which was consolidated effective April 1, 2003 as a result of the termination of
the partnership. Prior to April 1, 2003, only the companys proportionate share of its equity investees comprehensive loss was included.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



13. Employee Postretirement Benefits



Effective Jan. 1, 2004, TECO Energy adopted FAS 132R (revised 2003), Employers Disclosures about Pensions and Other Postretirement Benefits, an
amendment of FASB Statements No. 87, 88 and 106, with no material effect. Included in the table below is the periodic pension (benefit) expense for pension benefits and other postretirement benefits offered by the company. No significant changes
have been made to these benefit plans since Dec. 31, 2003.



Pension Expense
(Benefit)



|                                                 |      |                 |      |      |                             |   |       |   |      |   |     |  |   |    
|------------------------------------------------ | ---- | --------------- | ---- | ---- | --------------------------- | - | ----- | - | ---- | - | --- |  | - | ---
|(millions) Three months ended
Mar. 31,           |      | PensionBenefits |      |      | OtherPostretirementBenefits
|                                                 | 2004 |                 |      | 2003 |                             |   | 2004  |   | 2003
|Components of net periodic benefit expense       |      |                 |      |      |                             |   |       |   |      |   |     |  |   |    
|Service cost (benefits earned during the period) |      | $               | 4.3  |      |                             | $ | 3.6   |   |      | $ | 1.2 |  | $ | 1.0
|Interest cost on projected benefit obligations   |      |                 | 8.2  |      |                             |   | 7.7   |   |      |   | 3.0 |  |   | 3.1
|Expected return on assets                        |      |                 | (9.8 | )    |                             |   | (10.5 | ) |      |   |    |  |   |   
|Amortization of:                                 |      |                 |      |      |                             |   |       |   |      |   |     |  |   |    
|Transition obligation (asset)                    |      |                 | (0.3 | )    |                             |   | (0.3  | ) |      |   | 0.7 |  |   | 0.7
|Prior service cost (benefit)                     |      |                 | (0.1 | )    |                             |   | (0.1  | ) |      |   | 0.5 |  |   | 0.5
|Actuarial (gain) loss                            |      |                 | 0.7  |      |                             |   | 0.3   |   |      |   | 0.4 |  |   | 0.4
|                                                 |      |                 |      |      |                             |   |       |   |      |   |     |  |   |    
|Pension expense                                  |      |                 | 3.0  |      |                             |   | 0.7   |   |      |   | 5.8 |  |   | 5.7
|Special termination benefit charge               |      |                 | 3.2  |      |                             |   |      |   |      |   |    |  |   |   
|Additional amounts recognized                    |      |                 | 0.3  |      |                             |   |      |   |      |   |    |  |   | 0.1
|                                                 |      |                 |      |      |                             |   |       |   |      |   |     |  |   |    
|Net pension expense recognized in the            |      |                 |      |      |                             |   |       |   |      |   |     |  |   |    
|TECO Energy Consolidated Statements of Income    |      | $               | 6.5  |      |                             | $ | 0.7   |   |      | $ | 5.8 |  | $ | 5.8
|                                                 |      |                 |      |      |                             |   |       |   |      |   |     |  |   |    



For the fiscal 2004
plan year, TECO Energy assumed an expected long-term return on plan assets of 8.75%. During 2004, the company expects to contribute approximately $14 million to the pension plans. This contribution is due by Sep. 15, 2004.



19



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##### Table of Contents

14. Earnings Per Share



For the three months ended Mar. 31, 2004 and 2003, unexercised stock options for 6.3 million shares and 6.6 million shares, respectively, were excluded
from the computation of diluted earnings per share due to their antidilutive effect. Additionally, 14.9 million common shares issuable under the purchase contract associated with the mandatorily convertible equity units issued in January 2002 were
also excluded from the computation of diluted earnings per share for each of the three months ended Mar. 31, 2004 and 2003, due to their antidilutive effect.



Earnings Per Share



|                                                                 |      |                            |       |      |  |   |       |  
|---------------------------------------------------------------- | ---- | -------------------------- | ----- | ---- |  | - | ----- | -
|(millions, except per share amounts)                             |      | Three monthsended Mar. 31, |      
|                                                                 | 2004 |                            |       | 2003 | 
|Numerator                                                        |      |                            |       |      |  |   |       |  
|Net income (loss) from continuing operations, basic and diluted  |      | $                          | 28.7  |      |  | $ | (20.3 | )
|Discontinued operations, net of tax                              |      |                            | (26.2 | )    |  |   | 24.1  |  
|Cumulative effect of a change in accounting principle, net       |      |                            |      |      |  |   | (1.1  | )
|                                                                 |      |                            |       |      |  |   |       |  
|Net income, basic                                                |      |                            | 2.5   |      |  |   | 2.7   |  
|Effect of contingent performance shares                          |      |                            | (0.4  | )    |  |   |      |  
|                                                                 |      |                            |       |      |  |   |       |  
|Net income, diluted                                              |      | $                          | 2.1   |      |  | $ | 2.7   |  
|                                                                 |      |                            |       |      |  |   |       |  
|Denominator                                                      |      |                            |       |      |  |   |       |  
|Average number of shares outstandingbasic                       |      |                            | 188.0 |      |  |   | 175.9 |  
|Plus: Incremental shares for assumed conversions:                |      |                            |       |      |  |   |       |  
|Stock options at end of period and contingent performance shares |      |                            | 2.5   |      |  |   |      |  
|Less: Treasury shares which could be purchased                   |      |                            | (1.9  | )    |  |   |      |  
|                                                                 |      |                            |       |      |  |   |       |  
|Average number of shares outstandingdiluted                     |      |                            | 188.6 |      |  |   | 175.9 |  
|                                                                 |      |                            |       |      |  |   |       |  
|Earnings per share from continuing operations                    |      |                            |       |      |  |   |       |  
|Basic                                                            |      | $                          | 0.15  |      |  | $ | (0.12 | )
|Diluted                                                          |      | $                          | 0.15  |      |  | $ | (0.12 | )
|Earnings per share from discontinued operations, net             |      |                            |       |      |  |   |       |  
|Basic                                                            |      | $                          | (0.14 | )    |  | $ | 0.14  |  
|Diluted                                                          |      | $                          | (0.14 | )    |  | $ | 0.14  |  
|Earnings per share                                               |      |                            |       |      |  |   |       |  
|Basic                                                            |      | $                          | 0.01  |      |  | $ | 0.02  |  
|Diluted                                                          |      | $                          | 0.01  |      |  | $ | 0.02  |  
|                                                                 |      |                            |       |      |  |   |       |  



15. Segment Information



TECO Energy is an electric and gas utility holding
company with significant diversified activities. Segments are determined based on how management evaluates, measures and makes decisions with respect to the operations of the entity. The management of TECO Energy reports segments based on each
subsidiarys contribution of revenues, net income and total assets, as required by FAS 131, Disclosures about Segments of an Enterprise and Related Information. All significant intercompany transactions are eliminated in the consolidated
financial statements of TECO Energy, but are included in determining reportable segments.



As more fully described in Note 1, in 2003, the company revised internal reporting information for the purpose of evaluating, measuring and making decisions with respect to the components which previously
comprised the TECO Power Services operating segment. The revised operating segment, TWG Merchant, is comprised of all merchant operations. The non-merchant components are now included in Other Unregulated operations.



The information presented in the following table excludes all discontinued
operations. See Note 11 for additional details of the components of discontinued operations.



20



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##### Table of Contents

Segment Information (1)

|                                            |  |               |         |      |            |   |             |  |   |               |   |  |          |       |     |                  |   |       |                    |  |   |            |      |  |   |       |   |  |   |          |  
|------------------------------------------- |  | ------------- | ------- | ---- | ---------- | - | ----------- |  | - | ------------- | - |  | -------- | ----- | --- | ---------------- | - | ----- | ------------------ |  | - | ---------- | ---- |  | - | ----- | - |  | - | -------- | -
|(millions) Three months ended Mar.
31,      |  | TampaElectric |         |      | PeoplesGas |   | TWGMerchant |  |   | TECOTransport |   |  | TECOCoal |       |     | OtherUnregulated |   |       | Elimination& Other |  |   | TECOEnergy |     
|2004                                        |  |               |         |      |            |   |             |  |   |               |   |  |          |       |     |                  |   |       |                    |  |   |            |      |  |   |       |   |  |   |          |  
|Revenuesoutsiders                          |  | $             | 370.1   |      |            | $ | 117.8       |  | $ | 15.0          |   |  | $        | 40.8  |     |                  | $ | 78.7  |                    |  | $ | 19.4       |      |  | $ | 0.5   |   |  | $ | 642.3    |  
|Sales to affiliates                         |  |               | 0.8     |      |            |   |            |  |   |              |   |  |          | 16.8  |     |                  |   |      |                    |  |   | 2.0        |      |  |   | (19.6 | ) |  |   |         |  
|                                            |  |               |         |      |            |   |             |  |   |               |   |  |          |       |     |                  |   |       |                    |  |   |            |      |  |   |       |   |  |   |          |  
|Total revenues                              |  |               | 370.9   |      |            |   | 117.8       |  |   | 15.0          |   |  |          | 57.6  |     |                  |   | 78.7  |                    |  |   | 21.4       |      |  |   | (19.1 | ) |  |   | 642.3    |  
|Depreciation                                |  |               | 45.1    |      |            |   | 8.4         |  |   | 3.4           |   |  |          | 5.4   |     |                  |   | 9.0   |                    |  |   | 0.8        |      |  |   |      |   |  |   | 72.1     |  
|Interest charges(2)                         |  |               | 24.8    |      |            |   | 3.8         |  |   | 14.4          |   |  |          | 1.1   |     |                  |   | 2.3   |                    |  |   | 4.6        |      |  |   | 37.6  |   |  |   | 88.6     |  
|Provision (benefit)for taxes(3)             |  |               | 13.7    |      |            |   | 8.0         |  |   | (10.7         | ) |  |          | 0.4   |     |                  |   | 8.2   |                    |  |   | 4.6        |      |  |   | (15.5 | ) |  |   | 8.7      |  
|Net income (loss) fromcontinuing operations |  | $             | 23.9    |      |            | $ | 12.8        |  | $ | (18.7         | ) |  | $        | 1.1   | (4) |                  | $ | 15.4  |                    |  | $ | 18.7       | (4)  |  | $ | (24.5 | ) |  | $ | 28.7     |  
|                                            |  |               |         |      |            |   |             |  |   |               |   |  |          |       |     |                  |   |       |                    |  |   |            |      |  |   |       |   |  |   |          |  
|2003                                        |  |               |         |      |            |   |             |  |   |               |   |  |          |       |     |                  |   |       |                    |  |   |            |      |  |   |       |   |  |   |          |  
|Revenuesoutsiders                          |  | $             | 341.1   |      |            | $ | 126.9       |  | $ | 19.2          |   |  | $        | 36.8  |     |                  | $ | 75.5  |                    |  | $ | 52.2       |      |  | $ | 0.1   |   |  | $ | 651.8    |  
|Sales to affiliates                         |  |               | 1.0     |      |            |   |            |  |   |              |   |  |          | 28.2  |     |                  |   |      |                    |  |   | 19.1       |      |  |   | (48.3 | ) |  |   |         |  
|                                            |  |               |         |      |            |   |             |  |   |               |   |  |          |       |     |                  |   |       |                    |  |   |            |      |  |   |       |   |  |   |          |  
|Total revenues                              |  |               | 342.1   |      |            |   | 126.9       |  |   | 19.2          |   |  |          | 65.0  |     |                  |   | 75.5  |                    |  |   | 71.3       |      |  |   | (48.2 | ) |  |   | 651.8    |  
|Depreciation                                |  |               | 46.0    |      |            |   | 8.4         |  |   | 2.8           |   |  |          | 5.3   |     |                  |   | 8.3   |                    |  |   | 4.2        |      |  |   |      |   |  |   | 75.0     |  
|Interest charges(2)                         |  |               | 19.2    |      |            |   | 3.9         |  |   | 9.5           |   |  |          | 1.1   |     |                  |   | 1.1   |                    |  |   | 10.7       |      |  |   | 18.9  |   |  |   | 64.4     |  
|(Benefit) provisionfor taxes(3)             |  |               | (11.8   | )    |            |   | 7.5         |  |   | (6.9          | ) |  |          | 2.5   |     |                  |   | (41.3 | )                  |  |   | (6.3       | )    |  |   | 16.9  |   |  |   | (39.4    | )
|Net (loss) income fromcontinuing operations |  | $             | (9.0    | )(5) |            | $ | 11.9        |  | $ | (11.8         | ) |  | $        | 4.6   |     |                  | $ | 25.7  |                    |  | $ | (2.2       | )(5) |  | $ | (39.5 | ) |  | $ | (20.3    | )
|                                            |  |               |         |      |            |   |             |  |   |               |   |  |          |       |     |                  |   |       |                    |  |   |            |      |  |   |       |   |  |   |          |  
|At Mar. 31, 2004                            |  |               |         |      |            |   |             |  |   |               |   |  |          |       |     |                  |   |       |                    |  |   |            |      |  |   |       |   |  |   |          |  
|Goodwill, net                               |  | $             |        |      |            | $ |            |  | $ |              |   |  | $        |      |     |                  | $ |      |                    |  | $ | 71.2       |      |  | $ |      |   |  | $ | 71.2     |  
|Investment inunconsolidated affiliates      |  |               |        |      |            |   |            |  |   | 159.9         |   |  |          | 3.0   |     |                  |   |      |                    |  |   | 267.0      | (6)  |  |   | 20.2  |   |  |   | 450.1    |  
|Other non-currentinvestments                |  |               |        |      |            |   |            |  |   |              |   |  |          |      |     |                  |   |      |                    |  |   | 12.0       |      |  |   |      |   |  |   | 12.0     |  
|Total assets                                |  | $             | 4,122.2 |      |            | $ | 645.5       |  | $ | 3,552.1       |   |  | $        | 306.1 |     |                  | $ | 355.7 |                    |  | $ | 589.9      | (6)  |  | $ | 654.1 |   |  | $ | 10,225.6 |  
|                                            |  |               |         |      |            |   |             |  |   |               |   |  |          |       |     |                  |   |       |                    |  |   |            |      |  |   |       |   |  |   |          |  
|At Dec. 31, 2003                            |  |               |         |      |            |   |             |  |   |               |   |  |          |       |     |                  |   |       |                    |  |   |            |      |  |   |       |   |  |   |          |  
|Goodwill, net                               |  | $             |        |      |            | $ |            |  | $ |              |   |  | $        |      |     |                  | $ |      |                    |  | $ | 71.2       |      |  | $ |      |   |  | $ | 71.2     |  
|Investment inunconsolidated affiliates      |  |               |        |      |            |   |            |  |   | 158.9         |   |  |          |      |     |                  |   |      |                    |  |   | 184.6      |      |  |   |      |   |  |   | 343.5    |  
|Other non-currentinvestments                |  |               |        |      |            |   |            |  |   |              |   |  |          |      |     |                  |   |      |                    |  |   | 16.5       |      |  |   |      |   |  |   | 16.5     |  
|Total assets                                |  | $             | 4,178.6 |      |            | $ | 651.5       |  | $ | 3,504.4       |   |  | $        | 315.8 |     |                  | $ | 340.8 |                    |  | $ | 851.2      |      |  | $ | 620.0 |   |  | $ | 10,462.3 |  
|                                            |  |               |         |      |            |   |             |  |   |               |   |  |          |       |     |                  |   |       |                    |  |   |            |      |  |   |       |   |  |   |          |  

---

|(1) | From continuing operations. All periods have been adjusted to reflect the reclassification of results from operations to discontinued operations for: the Union and Gila River
projects (formerly part of TWG Merchant); and Prior Energy and substantially all of TECO Gas Services (formerly part of Other Unregulated). The prior period reflects reclassifications, as necessary, to present amounts on a comparable basis to the
current period.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Segment net income is reported on a basis that includes internally allocated financing costs. Internally allocated costs for 2004 and 2003 were at pre-tax rates of 8%, based on the
average investment in each subsidiary.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Taxes have been allocated, for segment reporting purposes, to TWG Merchant based on the weighted-average tax rates of the TWG Merchant components.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | 2004 net income includes an $0.8 million after-tax asset impairment recorded at TECO Transport, and the Other Unregulated segments net income includes a $10.6 million
after-tax gain on the sale of TECO Energys interest in its propane business partially offset by a $3.4 million after-tax asset impairment at TECO Solutions.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | 2003 net income includes after-tax charges for turbine purchase cancellations of $48.9 million and $15.3 million, respectively, at Tampa Electric and Other Unregulated companies.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | As of Jan. 1, 2004, in accordance with FIN 46R, the San José and Alborada project entities were deconsolidated, and are accounted for using the equity method of accounting
with net assets included in the balance sheet as an Investment in unconsolidated affiliates (see Note 18).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

16. Commitments and Contingencies



Capital Expenditures



TECO Energy has made certain commitments in connection with its continuing capital expenditure program. At Mar. 31, 2004, the estimated capital
expenditures for the full year 2004 are approximately $274 million, and are summarized below. These estimated expenditures will be offset by proceeds from asset and business sales of approximately $183 million, including the sale of interests in
TECO Coal synfuel assets of $101 million, of which $35 million is expected to be restricted cash; the sale of Prior Energys assets of $30 million; and the sale of TPVs interest in Heritage Propane Partners of $49 million.



Forecasted Full-Year Capital Investments



|                                              |  |               |      |  
|--------------------------------------------- |  | ------------- | ---- | -
|(millions)                                    |  | Estimated2004 |     
|Tampa Electric                                |  | $             | 183  |  
|Peoples Gas                                   |  |               | 40   |  
|TECO Wholesale Generation                     |  |               | 4    |  
|TECO Transport                                |  |               | 20   |  
|TECO Coal                                     |  |               | 21   |  
|Other                                         |  |               | 6    |  
|                                              |  |               |      |  
|Total capital expenditures                    |  |               | 274  |  
|Less: proceeds from asset sales               |  |               | (183 | )
|Plus: net cash reduction from deconsolidation |  |               | 23   |  
|Other investment and restricted cash related  |  |               | (8   | )
|                                              |  |               |      |  
|Net capital investments                       |  | $             | 106  |  
|                                              |  |               |      |  



Legal Contingencies



TM Delmarva Power Arbitration and Related Proceeding



A dispute resulting in an arbitration proceeding was brought against a
TWG subsidiary, TM Delmarva Power, L.L.C. (TMDP), by the non-equity member, NCP of Virginia, L.L.C. (NCP), in the Commonwealth Chesapeake Project (CCC). The arbitration panel, in a 2-to-1 decision, found in favor of NCP and issued an interim award
on Dec. 17, 2002 and, after several briefing cycles and a reopened hearing, issued its final award in September 2003.



Under the award, TMDP is obligated to acquire NCPs voting and other rights, pay NCP interest on the deemed acquisition price from a pre-determined
date, and pay NCPs legal fees as prescribed under the final award. The forced acquisition created a pre-tax loss, recorded in the third quarter of 2003, of $32.0 million, representing the excess of the purchase price over the fair value of the
interests acquired. TMDP is seeking to vacate the arbitration award in the U.S. District Court for the District of Columbia and has not yet paid the amount of the award. As of Mar. 31, 2004, the company has reserved, but not yet paid, for the full
$47.9 million, representing the maximum payment obligation for the award plus accrued interest. The vacatur proceeding is still pending, and is expected to be completed in the second half of 2004.



Following a letter from the non-equity member raising issues that are related
to the subject of the arbitration proceeding, the Securities and Exchange Commission has requested information in connection with an informal inquiry. The company is in the process of responding to that request and intends to cooperate fully.



Other Actions



In March 2001, TWG (under its former name of TECO Power Services) was served
with a lawsuit filed in the Circuit Court for Hillsborough County by a Tampa-based firm called Grupo Interamerica, LLC. (Grupo) in connection with a potential investment in a power project in Colombia in 1996. Grupo alleges, among other
things, that TWG breached an oral contract with Grupo that would have allowed Grupo to acquire up to a 20-percent interest in the Colombian wholesale generation project when TWG declined to invest in such project. Grupo is seeking damages equal to
the net present value of the value of 20 percent of the project over its life. TWG disputes the allegations and denies liability since any understanding made regarding the investment in the project was subject to TECO Energy Board approval which was
not obtained. A trial date has been set in September 2004.



Three lawsuits have been filed in the Circuit Court in Hillsborough County against Tampa Electric, in connection with the location of transmission structures in certain residential areas, by residents in the areas surrounding the
structures. The high-voltage power lines are needed by Tampa Electric to move electricity to the northwest part of its service territory where population growth has been experienced. The residents are seeking to remove the poles or to receive
monetary damages. Tampa Electric has sought input from the community to determine the feasibility of alternate routes or structures or some combination.



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##### Table of Contents

From time to time TECO Energy and its subsidiaries are involved in various other legal, tax, and
regulatory proceedings before various courts, regulatory commissions, and governmental agencies in the ordinary course of its business. Where appropriate, accruals are made in accordance with FAS 5, Accounting for Contingencies, to provide
for matters that are probable of resulting in an estimable, material loss. While the outcome of such proceedings is uncertain, management does not believe that the ultimate resolution of pending matters will have a material adverse effect on the
companys results of operations or financial condition.



Superfund and
Former Manufactured Gas Plant Sites



Tampa Electric
Company, through its Tampa Electric and Peoples Gas divisions, is a potentially responsible party for certain superfund sites and, through its Peoples Gas division, for certain former manufactured gas plant sites. While the joint and several
liability associated with these sites presents the potential for significant response costs, as of Mar. 31, 2004, Tampa Electric Company has estimated its ultimate financial liability to be approximately $19 million, and this amount has been accrued
in the companys financial statements. The environmental remediation costs associated with these sites, which are expected to be paid over many years, are not expected to have a significant impact on customer prices.



The estimated amounts represent only the estimated portion of the cleanup
costs attributable to Tampa Electric Company. The estimates to perform the work are based on actual estimates obtained from contractors, or Tampa Electric Companys experience with similar work adjusted for site specific conditions and
agreements with the respective governmental agencies. The estimates are made in current dollars, are not discounted and do not assume any insurance recoveries.



Allocation of the responsibility for remediation costs among Tampa Electric Company and other potentially responsible parties (PRPs) is based on each
partys relative ownership interest in or usage of a site. Accordingly, Tampa Electric Companys share of remediation costs varies with each site. In virtually all instances where other PRPs are involved, those PRPs are considered
creditworthy.



Factors that could impact these estimates
include the ability of other PRPs to pay their pro rata portion of the cleanup costs, additional testing and investigation which could expand the scope of the cleanup activities, additional liability that might arise from the cleanup activities
themselves or changes in laws or regulations that could require additional remediation. These costs are recoverable through customer rates established in subsequent base rate proceedings.



Long Term Commitments



Affiliates of TECO Transport have two operating leases with an aggregate value of about $100 million as a result of sale-leaseback transactions entered
into in 2001 and 2002 that provided for a cross-default in the event TECO Energy or any of its affiliates defaulted in the payment of certain obligations. The failure of Union and Gila River project companies to make interest payments on the
non-recourse project debt could have resulted in a cross-default entitling the lessors to terminate the leases and recover certain amounts. In March 2004, the affiliates of TECO Transport and the lessors executed amendments to the leases that
eliminated this possible cross-default.



Guarantees and Letters of Credit



On Jan. 1, 2003, TECO Energy adopted the prospective
initial measurement provisions for certain types of guarantees, in accordance with FASB Interpretation No. (FIN) 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others
(an interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34). Upon issuance or modification of a guarantee after Jan. 1, 2003, the company must determine if the obligation is subject to either or both of
the following:



| |  | Initial recognition and initial measurement of a liability; and/or
| | - | ------------------------------------------------------------------



| |  | Disclosure of specific details of the guarantee.
| | - | ------------------------------------------------



Generally, guarantees of the performance of a third party or guarantees that are based on an underlying variable (where such a guarantee is not a
derivative subject to FAS 133) are likely to be subject to the recognition and measurement, as well as the disclosure provisions, of FIN 45. Such guarantees must initially be recorded at fair value, as determined in accordance with the
interpretation.



Alternatively, guarantees between and on
behalf of entities under common control or that are similar to product warranties are subject only to the disclosure provisions of the interpretation. The company must disclose information as to the term of the guarantee and the maximum potential
amount of future gross payments (undiscounted) under the guarantee, even if the likelihood of a claim is remote.



A summary of the face amount or maximum theoretical obligation under TECO Energys letters of credit and guarantees as of Mar. 31, 2004 are as
follows:



23



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##### Table of Contents

Letters of Credit and Guarantees



|                                                               |  |      |      |      |   |           |  |           |     |       |   |                                      |  |   |       |  |   |     
|-------------------------------------------------------------- |  | ---- | ---- | ---- | - | --------- |  | --------- | --- | ----- | - | ------------------------------------ |  | - | ----- |  | - | ----
|Letters of Credit and Guarantees for the
Benefit of (millions) |  | 2004 |      | 2005 |   | 2006-2008 |  | After2008 |     | Total |   | LiabilitiesRecognizedat Mar. 31,2004
|Tampa Electric                                                 |  |      |      |      |   |           |  |           |     |       |   |                                      |  |   |       |  |   |     
|Letters of credit                                              |  | $    |     |      | $ |          |  | $         |    |       | $ | 0.9                                  |  | $ | 0.9   |  | $ |    
|Guarantees:                                                    |  |      |      |      |   |           |  |           |     |       |   |                                      |  |   |       |  |   |     
|Fuel purchase/energy management(1)                             |  |      |     |      |   |          |  |           |    |       |   | 20.0                                 |  |   | 20.0  |  |   | 5.5 
|                                                               |  |      |      |      |   |           |  |           |     |       |   |                                      |  |   |       |  |   |     
|                                                               |  |      |     |      |   |          |  |           |    |       |   | 20.9                                 |  |   | 20.9  |  |   | 5.5 
|                                                               |  |      |      |      |   |           |  |           |     |       |   |                                      |  |   |       |  |   |     
|TECO Wholesale Generation                                      |  |      |      |      |   |           |  |           |     |       |   |                                      |  |   |       |  |   |     
|Letters of credit                                              |  |      | 1.2  |      |   |          |  |           |    |       |   |                                     |  |   | 1.2   |  |   |    
|Guarantees:                                                    |  |      |      |      |   |           |  |           |     |       |   |                                      |  |   |       |  |   |     
|Tax related                                                    |  |      |     |      |   |          |  |           |    |       |   | 1.3                                  |  |   | 1.3   |  |   |    
|Fuel purchase/energy management(1)                             |  |      | 10.0 |      |   |          |  |           |    |       |   | 159.5                                |  |   | 169.5 |  |   | 8.5 
|Construction/investment related                                |  |      | 5.0  |      |   |          |  |           |    |       |   |                                     |  |   | 5.0   |  |   |    
|                                                               |  |      |      |      |   |           |  |           |     |       |   |                                      |  |   |       |  |   |     
|                                                               |  |      | 16.2 |      |   |          |  |           |    |       |   | 160.8                                |  |   | 177.0 |  |   | 8.5 
|                                                               |  |      |      |      |   |           |  |           |     |       |   |                                      |  |   |       |  |   |     
|TECO Transport                                                 |  |      |      |      |   |           |  |           |     |       |   |                                      |  |   |       |  |   |     
|Letters of credit                                              |  |      |     |      |   |          |  |           |    |       |   | 1.5                                  |  |   | 1.5   |  |   |    
|                                                               |  |      |      |      |   |           |  |           |     |       |   |                                      |  |   |       |  |   |     
|TECO Coal                                                      |  |      |      |      |   |           |  |           |     |       |   |                                      |  |   |       |  |   |     
|Letters of credit                                              |  |      |     |      |   |          |  |           |    |       |   | 20.0                                 |  |   | 20.0  |  |   |    
|Guarantees: Fuel purchase related(1)                           |  |      |     |      |   |          |  |           |    |       |   | 1.5                                  |  |   | 1.5   |  |   | 1.1 
|                                                               |  |      |      |      |   |           |  |           |     |       |   |                                      |  |   |       |  |   |     
|                                                               |  |      |     |      |   |          |  |           |    |       |   | 21.5                                 |  |   | 21.5  |  |   | 1.1 
|                                                               |  |      |      |      |   |           |  |           |     |       |   |                                      |  |   |       |  |   |     
|Other unregulated subsidiaries                                 |  |      |      |      |   |           |  |           |     |       |   |                                      |  |   |       |  |   |     
|Letters of credit                                              |  |      | 11.5 |      |   |          |  |           | 4.7 |       |   | 4.3                                  |  |   | 20.5  |  |   |    
|Guarantees:                                                    |  |      |      |      |   |           |  |           |     |       |   |                                      |  |   |       |  |   |     
|Debt related                                                   |  |      |     |      |   |          |  |           |    |       |   | 24.8                                 |  |   | 24.8  |  |   | 8.5 
|Tax related                                                    |  |      |     |      |   |          |  |           |    |       |   | 2.5                                  |  |   | 2.5   |  |   |    
|Fuel purchase/energy management(1)                             |  |      | 3.8  |      |   |          |  |           |    |       |   | 14.7                                 |  |   | 18.5  |  |   |    
|                                                               |  |      |      |      |   |           |  |           |     |       |   |                                      |  |   |       |  |   |     
|                                                               |  |      | 15.3 |      |   |          |  |           | 4.7 |       |   | 46.3                                 |  |   | 66.3  |  |   | 8.5 
|                                                               |  |      |      |      |   |           |  |           |     |       |   |                                      |  |   |       |  |   |     
|Total                                                          |  | $    | 31.5 |      | $ |          |  | $         | 4.7 |       | $ | 251.0                                |  | $ | 287.2 |  | $ | 23.6
|                                                               |  |      |      |      |   |           |  |           |     |       |   |                                      |  |   |       |  |   |     

---

|(1) | These guarantees renew annually and are shown on the basis that they will continue to renew beyond 2008. The amounts shown are the maximum theoretical amount guaranteed under
current agreements. Liabilities recognized represent the associated obligation of TECO Energy under these agreements at Mar. 31, 2004. The obligations under these letters of credit and guarantees include net accounts payable and net derivative
liabilities.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



TECO Energy and its subsidiaries
also enter into commercial agreements in the normal course of business that typically contain standard indemnification clauses. TECO Energy may sometimes agree to make payments to compensate or indemnify the counter-party for legal fees,
environmental remediation costs and other similar costs arising from possible future events or changes in laws or regulations. These agreements cover a variety of goods and services, and have varying triggering events dependent on actions by third
parties.



TECO Energy is unable to estimate the maximum
potential future exposure under these clauses because the events that would obligate TECO Energy have not occurred or, if such event has occurred, TECO Energy has not been notified of any occurrence. As claims are made or changes in laws or
regulations indicate, an amount related to the indemnification is reflected in the financial statements.



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##### Table of Contents

Financial Covenants



A summary of TECO Energys significant financial covenants as of Mar. 31, 2004 is as follows:



TECO Energy Significant Financial Covenants



|                                               |  |                                                                         |  |                                                                                                          |  |                                  
|---------------------------------------------- |  | ----------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------- |  | ---------------------------------
|(millions) Instrument                          |  | Financial Covenant (1)                                                  |  | Requirement/Restriction                                                                                  |  | Calculation at Mar. 31, 2004     
|Tampa Electric                                 |  |                                                                         |  |                                                                                                          |  |                                  
|PGS senior notes                               |  | EBIT/interest(2) Restricted payments Funded
debt/capital Sale of assets |  | Minimum of 2.0 times Shareholder equity at least $500 Cannot exceed 65% Less than 20% of total assets    |  | 3.2 times $1,656 49.4% %        
|Credit facility                                |  | Debt/capital EBITDA/interest(2) Restriction on distributions(3)         |  | Cannot exceed 60% Minimum of 2.5 times Limit on cumulative distributions and outstanding affiliate loans |  | 48.8% 5.5 times $487 unrestricted
|6.25% senior notes                             |  | Debt/capital                                                            |  | Cannot exceed 60%                                                                                        |  | 48.8%                            
|                                               |  | Limit on liens                                                          |  | Cannot exceed $787                                                                                       |  | $287                             
|TECO Energy                                    |  |                                                                         |  |                                                                                                          |  |                                  
|$350 million credit facility                   |  | Debt/capital                                                            |  | Cannot exceed 65%                                                                                        |  | 61.9%                            
|$20.6 million Merrill credit facility(4)       |  | Debt/capital                                                            |  | Cannot exceed 65%                                                                                        |  | 54.0%(5)                         
|$380 million note indenture                    |  | Limit on restricted payments(6)                                         |  | Cumulative operating cash flow in excess of 1.7 times interest                                           |  | $311 unrestricted                
|                                               |  | Limit on liens assets                                                   |  | Cannot exceed 5% of tangible assets                                                                      |  | $227 unrestricted                
|                                               |  | Limit on indebtedness                                                   |  | Interest coverage at least 2.0 times                                                                     |  | 2.4 times                        
|$300 million note indenture                    |  | Limit on liens                                                          |  | Cannot exceed 5% of tangible assets                                                                      |  | $227 unrestricted                
|Union and Gila River project guarantees(7)     |  | Debt/capital EBITDA/interest(2)                                         |  | Cannot exceed 65% Minimum of 3.0 times                                                                   |  | 61.9% 2.1(8)                     
|TECO Diversified                               |  |                                                                         |  |                                                                                                          |  |                                  
|Energy management services agreement guarantee |  | Consolidated tangible net worth                                         |  | Minimum of $200                                                                                          |  | $540                             
|                                               |  | Consolidated funded debt                                                |  | Cannot exceed 60%                                                                                        |  | 19.6%                            
|Coal supply agreement guarantee                |  | Dividend restriction                                                    |  | Net worth not less than $200 or $386 (40% of tangible net assets)                                        |  | $540                             

---

|(1) | As defined in each applicable instrument.
|--- | -----------------------------------------

|(2) | EBIT generally represents earnings before interest and taxes. EBITDA generally represents EBIT before depreciation and amortization. However, in each circumstance, the term is
subject to the definition prescribed under the relevant legal agreements.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Limits cumulative distributions after Oct. 31, 2003 and outstanding affiliate loans to an amount representing an accumulation of net income after May 31, 2003 and capital
contributions from the parent after Oct. 31, 2003, plus $450 million.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | This credit facility, if drawn upon, can limit payment of dividends each quarter to $40 million, unless the company provides the lender with satisfactory liquidity projections
demonstrating the companys ability to pay both the dividends contemplated and each of the three quarterly dividends next scheduled to be paid. In April 2004, the company elected to not renew this credit facility.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | As a result of an amendment in December 2003, this covenant is not impacted by any write-down or write-off of the value of assets owned by TWG or the equity interests in TWG. In
April 2004, the company elected to not renew this credit facility.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | The limitation on restricted payments restricts the company from paying dividends or making distributions or certain investments unless there is sufficient cumulative operating cash
flow, as defined, in excess of 1.7 times interest to make such distribution or investment. The operating cash flow and restricted payments are calculated on a cumulative basis since the issuance of the 10.5% Notes in the fourth quarter of 2002. This
calculation, at Mar. 31, 2004, reflects the amount accumulated since the issuance of the notes and available for future restricted payments.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Includes the Construction Undertaking Guarantees related to the Union and Gila River projects.
|--- | ----------------------------------------------------------------------------------------------



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##### Table of Contents

|(8) | The Construction Undertaking Guarantees permit TECO Energy to terminate its obligations thereunder, including the requirement to comply with the covenants, by providing a Substitute
Guarantor reasonably satisfactory to the lending group. On Sept. 22, 2003, TECO Energy tendered a Substitute Guarantor, which it believes satisfied the requirements of the Construction Undertaking Guarantees. The lending group declined to accept
this tender as being satisfactory. TECO Energy has the right to assert that the Construction Undertaking Guarantees are terminated in the event that the lending group seeks to exercise its remedies based on a violation of the EBITDA-to-interest
coverage ratio covenant.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



17. Mergers, Acquisitions and
Dispositions



Synthetic Fuel Facilities



Effective Apr. 1, 2003, TECO Coal sold a 49.5-percent effective interest in
its synthetic fuel production facilities located at its operations in eastern Kentucky. No significant gain or loss was recognized at the time of the sale. The company, through its various affiliates, will provide feedstock supply, and operating,
sales and management services to the buyer through 2007, the current expiry date for the related Section 29 credit for which the production qualifies. Because the transaction was structured on a pay-as-you-go basis typical of similar
transactions in the industry, TECO Coal received no significant cash at the time of sale. On Oct. 31, 2003, TECO Coal received a PLR from the Internal Revenue Service (IRS) that resolved any uncertainty related to the previous sale of the
49.5-percent effective interest in its synthetic fuel facilities; and confirmed that synthetic fuel produced by TECO Coal is eligible for Section 29 credits and that its testing procedures are in compliance with the requirements of the IRS.



Prior Energy



Effective Feb. 1, 2004, a subsidiary of TECO Energy completed the sale of
Prior Energy, a natural gas management company serving customers in the southeast and south-central area of the United States, for net proceeds of approximately $30 million. This sale did not give rise to a material gain or loss to the company. The
results of operations for Prior Energy are included in discontinued operations for all periods presented (see Note 11).



18. Variable Interest Entities



The equity method of accounting is generally used to account for significant investments in partnership arrangements in which TECO Energy or its
subsidiary companies do not have a majority ownership interest or exercise control. On Jan. 17, 2003, the FASB issued FIN 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51, which imposes a new approach in
determining if a reporting entity should consolidate certain legal entities, including partnerships, limited liability companies, or trusts, among others, collectively defined as variable interest entities or VIEs. On Dec. 24, 2003, the FASB
published a revision to FIN 46 (FIN 46R), to clarify some of the provisions of FIN 46 and exempt certain legal entities from its requirements.



Under FIN 46R, a legal entity is considered a VIE, with some exemptions if specific criteria are met, if it does not have sufficient equity at risk to
finance its own activities without relying on financial support from other parties. Additional criteria must be applied to determine if this condition is met or if the equity holders, as a group, lack any one of three stipulated characteristics of a
controlling financial interest. If the legal entity is a VIE, then the reporting entity determined to be the primary beneficiary of the VIE must consolidate it. Even if a reporting entity is not obligated to consolidate a VIE, then certain
disclosures must be made about the VIE if the reporting entity has a significant variable interest. TECO Energy adopted the provisions of FIN 46R to all VIEs that previously were subject to certain previously issued special purpose entity, or SPE,
accounting pronouncements as of Oct. 1, 2003 with no material impact. For all other VIEs, TECO Energy adopted the provisions of FIN 46R as of Jan. 1, 2004. The impact of the adoption of FIN 46R as of Jan. 1, 2004 is described below for each specific
instance in which an entity was determined to be a VIE.



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##### Table of Contents

Funding Companies / Capital Trusts



In November 2000 and January 2002, respectively, TECO Energy established TECO Funding I, LLC and TECO Funding II, LLC. These
limited liability companies are wholly-owned subsidiaries of TECO Energy. These companies sold preferred securities to Capital Trust I and Capital Trust II, respectively (see Note 7for additional details of the activities of the trusts). The
Funding companies used the proceeds to purchase subordinated notes from TECO Energy. The subordinated notes are not secured by specific assets of the company. The terms of these notes are similar to the terms of the preferred securities. The funding
companies are considered VIEs in accordance with FIN 46R. Management does not believe the company has any material exposure to losses as a result of its involvement with TECO Funding I and II. In accordance with the guidance under FIN 46R,
management has concluded that the company is not the primary beneficiary of the funding companies. Accordingly, the company deconsolidated each entity as of Jan. 1, 2004. Funding I and Funding II are presented in the balance sheet using the equity
method of accounting. The junior subordinated obligation recognized on the balance sheet is associated with the trust preferred securities. The impact of the adoption of FIN 46R for Funding I and Funding II was an increase in liabilities of $20.2
million and a corresponding increase in assets.



Pike Letcher Synfuel



Pike Letcher Synfuel, LLC was established as part of the
Apr. 1, 2003 sale of TECO Coals synthetic fuel production facilities. See Note 17 for additional details regarding the terms of the sale and purpose of the entity. Management has concluded that Pike Letcher Synfuel is a VIE. TECO
Energys maximum loss exposure in this entity is its equity investment of approximately $10.9 million and potential losses related to the production costs for the future production of synthetic fuel, in the event that such production creates
Section 29 non-conventional fuel tax credits in excess of TECO Energys or the other buyers capacity to generate sufficient taxable income to use such credits. In accordance with the guidance under FIN 46R, management has concluded that
the company is the primary beneficiary, as of Mar. 31, 2004, of the synthetic fuel production facility. Accordingly, the company continued to consolidate the entity upon the adoption of FIN 46R.



TECO Transport



TECO Transport entered into two separate sale-leaseback transactions for certain vessels which were recognized as sales in
December 2001 and December 2002, and are currently recognized as operating leases for the assets. The sale-leaseback transactions were entered into with separate third parties via two trusts that the company believes meet the definition of a VIE.
TECO Transport currently leases two ocean-going tugboats, four ocean-going barges, five river towboats and 49 river barges through these two trusts. The estimated maximum loss exposure faced by TECO Transport is the incremental cost of obtaining
suitable equipment to meet the companys contractual shipping obligations. In accordance with the guidance under FIN 46R, management has concluded that the company is not the primary beneficiary of the lessor trusts. Accordingly, the company
continued to record only the impacts of the operating leases and any other required cash contributions.



TECO Properties



TECO
Properties formed a limited liability company with a project developer which meets the definition of a VIE. Hernando Oaks, LLC was formed by TECO Properties and the Pensacola Group to buy and develop 627 acres of land in Hernando County, Florida
into a residential golf community comprised of an 18-hole golf course and 975 single-family lots for sale to homebuilders. The company provided subordinated financial support in the form of a guarantee on behalf of the limited liability company and
determined that it is the primary beneficiary of Hernando Oaks. The company consolidated Hernando Oaks, LLC as of Jan. 1, 2004, resulting in an increase in assets of $18.5 million and a corresponding increase in liabilities.



TECO AGC



A subsidiary of TECO Solutions formed a partnership to construct, own and operate a water cooling plant to produce and
distribute chilled water to customers via a local distribution loop primarily for use in air conditioning systems. The partnership, TECO AGC, Ltd., meets the definition of a VIE. The company is the primary beneficiary, in accordance with FIN 46R,
due to the subordinated financing and other funding of $3.3 million provided to the partnership as of Dec. 31, 2003, in addition to the companys equity investment. This note receivable from the partnership is collateralized by the assets in
the partnership. The company consolidated TECO AGC, Ltd. as of Jan. 1, 2004 with no material increase in assets or liabilities.



San José and Alborada



In 1995, a subsidiary of the company undertook the construction of the Alborada power station in Guatemala and obtained a power purchase agreement (PPA)
with EEGSA, a utility in Guatemala. Under the terms of the contract, EEGSA purchases the full capacity of the plant for 15 years and has granted TCAE, the owner of the Alborada power plant, the right to extend the contract for five additional years.
As a result of the terms of the PPA and the current interpretations of FIN 46R, management has concluded that TCAE, the entity that owns the power plant, is a VIE. The terms of the PPA are such that management believes that EEGSA is the primary
beneficiary. Accordingly, the company has deconsolidated the project company (TCAE). At Mar. 31, 2004, TCAE is accounted for using the equity method of accounting. The deconsolidation resulted in the removal of $25.0 million of debt and $15.1
million of net assets from the balance sheet, and $5.1 million of revenues and $4.1 million of income from operations in the income statement. The full results of TCAE are included within the Income from equity investments line item in
the income statement. The net assets of TCAE are included in the balance sheet as an Investment in unconsolidated affiliates.



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##### Table of Contents

In 1998, a subsidiary of the company undertook the construction of the San José power station in
Guatemala and obtained a power purchase agreement (PPA) with EEGSA, a utility in Guatemala. Under the terms of the contract, EEGSA purchases the full capacity of the plant for 15 years and has granted CGE, the owner of the San José power
plant, the right to extend the contract for five additional years. As a result of the terms of the PPA and the current interpretations of FIN 46R, management has concluded that CGE, the entity that owns the power plant, is a VIE. The terms of the
PPA are such that management believes that EEGSA is the primary beneficiary. Accordingly, the company has deconsolidated the project company (CGE). At Mar. 31, 2004, CGE is accounted for using the equity method of accounting. The deconsolidation
resulted in the removal of $65.5 million of debt and $106.6 million of net assets from the balance sheet, and $18.7 million of revenues and $10.1 million of income from operations in the income statement. The full results of CGE are included within
the Income from equity investments line item in the income statement. The net assets of CGE are included in the balance sheet as an Investment in unconsolidated affiliates.



Hardee Power Partners, Ltd. (HPP)



In 1992, a subsidiary of the company (HPP) undertook the construction of the
Hardee power plant in central Florida. The plant was designed to provide peaking capacity to two utility customers, including Tampa Electric. The two utility customers each have a 20 year PPA with HPP. Under the terms of the PPA, the customers pay
for capacity and, if required, the delivery of electricity. Effective Sep. 30, 2003, the company sold its interest in HPP to an affiliate of Invenergy LLC and GTCR Golder Rauner LLC. Under FIN 46R, the company is required to make an exhaustive
effort to obtain sufficient information to determine if (1) HPP is a VIE and (2) which holder of variable interests is the primary beneficiary. The new owners of HPP have indicated that they will not provide the necessary information, have no
obligation to provide such information to the company and the required information is not available publicly. As a result, the company is unable to determine if (1) HPP is a VIE and (2) if so, which variable interest holder, if any, is the primary
beneficiary. The maximum exposure for the company is the ability to purchase electricity under the terms of the PPA with HPP at rates unfavorable to the wholesale market. For a description and measure of the purchases of electricity under the HPP
PPA, see Note 1Purchased Power.



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##### Table of Contents

TAMPA ELECTRIC COMPANY



In the opinion of management, the unaudited consolidated financial statements include all adjustments that are of a
recurring nature and necessary to present fairly the financial position of Tampa Electric Company as of Mar. 31, 2004 and Dec. 31, 2003, and the results of operations and cash flows for the three-month periods ended Mar. 31, 2004 and 2003. The
results of operations for the three-month periods ended Mar. 31, 2004 are not necessarily indicative of the results that can be expected for the entire fiscal year ending Dec. 31, 2004. References should be made to the explanatory notes affecting
the consolidated financial statements contained in Tampa Electric Companys Annual Report on Form 10-K for the year ended Dec. 31, 2003 and to the notes on pages 35 to 43 of this report.





INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                         |  |         
|-------------------------------------------------------------------------------------------------------- |  | --------
|                                                                                                         |  | Page No.
|Consolidated Balance Sheets, Mar. 31, 2004 and Dec. 31, 2003                                             |  | 30-31   
|Consolidated Statements of Income for the three-month periods ended Mar. 31, 2004 and 2003               |  | 32      
|Consolidated Statements of Comprehensive Income for the three-month periods ended Mar. 31, 2004 and 2003 |  | 33      
|Consolidated Statements of Cash Flows for the three-month periods ended Mar. 31, 2004 and 2003           |  | 34      
|Notes to the Consolidated Financial Statements                                                           |  | 35-43   



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TAMPA ELECTRIC COMPANY

Consolidated Balance Sheets



|                                                                                                                                 |  |                       |          |   |              |   |          |  
|-------------------------------------------------------------------------------------------------------------------------------- |  | --------------------- | -------- | - | ------------ | - | -------- | -
|Assets (millions)                                                                                                                |  | Mar. 31,2004Unaudited |          |   | Dec. 31,2003 |  
|Property, plant and equipment                                                                                                    |  |                       |          |   |              |   |          |  
|Utility plant in service                                                                                                         |  |                       |          |   |              |   |          |  
|Electric                                                                                                                         |  | $                     | 4,708.0  |   |              | $ | 4,693.5  |  
|Gas                                                                                                                              |  |                       | 784.7    |   |              |   | 778.2    |  
|Construction work in progress                                                                                                    |  |                       | 119.6    |   |              |   | 470.0    |  
|                                                                                                                                 |  |                       |          |   |              |   |          |  
|Property, plant and equipment, at original costs                                                                                 |  |                       | 5,612.3  |   |              |   | 5,941.7  |  
|Accumulated depreciation                                                                                                         |  |                       | (1,481.3 | ) |              |   | (1,808.2 | )
|                                                                                                                                 |  |                       |          |   |              |   |          |  
|                                                                                                                                 |  |                       | 4,131.0  |   |              |   | 4,133.5  |  
|Other property                                                                                                                   |  |                       | 3.5      |   |              |   | 3.7      |  
|                                                                                                                                 |  |                       |          |   |              |   |          |  
|Total property, plant and equipment                                                                                              |  |                       | 4,134.5  |   |              |   | 4,137.2  |  
|                                                                                                                                 |  |                       |          |   |              |   |          |  
|Current assets                                                                                                                   |  |                       |          |   |              |   |          |  
|Cash and cash equivalents                                                                                                        |  |                       | 19.3     |   |              |   | 33.6     |  
|Receivables, less allowance for uncollectibles of $1.2 million and $1.1 million at Mar. 31, 2004 and Dec. 31, 2003,
respectively |  |                       | 183.6    |   |              |   | 186.0    |  
|Inventories                                                                                                                      |  |                       |          |   |              |   |          |  
|Fuel, at average cost                                                                                                            |  |                       | 63.0     |   |              |   | 71.2     |  
|Materials and supplies                                                                                                           |  |                       | 43.9     |   |              |   | 43.8     |  
|Prepayments and other                                                                                                            |  |                       | 22.8     |   |              |   | 22.8     |  
|                                                                                                                                 |  |                       |          |   |              |   |          |  
|Total current assets                                                                                                             |  |                       | 332.6    |   |              |   | 357.4    |  
|                                                                                                                                 |  |                       |          |   |              |   |          |  
|Deferred debits                                                                                                                  |  |                       |          |   |              |   |          |  
|Deferred income taxes                                                                                                            |  |                       | 134.4    |   |              |   | 133.5    |  
|Unamortized debt expense                                                                                                         |  |                       | 21.8     |   |              |   | 23.2     |  
|Regulatory assets                                                                                                                |  |                       | 157.2    |   |              |   | 188.3    |  
|Other                                                                                                                            |  |                       | 1.7      |   |              |   | 0.1      |  
|                                                                                                                                 |  |                       |          |   |              |   |          |  
|Total deferred debits                                                                                                            |  |                       | 315.1    |   |              |   | 345.1    |  
|                                                                                                                                 |  |                       |          |   |              |   |          |  
|Total assets                                                                                                                     |  | $                     | 4,782.2  |   |              | $ | 4,839.7  |  
|                                                                                                                                 |  |                       |          |   |              |   |          |  



The accompanying notes
are an integral part of the consolidated financial statements.





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TAMPA ELECTRIC COMPANY

Consolidated Balance Sheetscontinued



|                                                |  |                       |         |              |   |        
|----------------------------------------------- |  | --------------------- | ------- | ------------ | - | -------
|Liabilities and Capital (millions)              |  | Mar. 31,2004Unaudited |         | Dec. 31,2003
|Capital                                         |  |                       |         |              |   |        
|Common stock                                    |  | $                     | 1,376.8 |              | $ | 1,376.8
|Retained earnings                               |  |                       | 278.8   |              |   | 274.9  
|                                                |  |                       |         |              |   |        
|Total capital                                   |  |                       | 1,655.6 |              |   | 1,651.7
|Long-term debt, less amount due within one year |  |                       | 1,519.1 |              |   | 1,590.9
|                                                |  |                       |         |              |   |        
|Total capitalization                            |  |                       | 3,174.7 |              |   | 3,242.6
|                                                |  |                       |         |              |   |        
|Current liabilities                             |  |                       |         |              |   |        
|Long-term debt due within one year              |  |                       | 5.3     |              |   | 6.1    
|Notes payable                                   |  |                       | 50.0    |              |   |       
|Accounts payable                                |  |                       | 148.3   |              |   | 167.9  
|Customer deposits                               |  |                       | 103.5   |              |   | 101.4  
|Interest accrued                                |  |                       | 29.0    |              |   | 26.7   
|Taxes accrued                                   |  |                       | 48.7    |              |   | 82.9   
|                                                |  |                       |         |              |   |        
|Total current liabilities                       |  |                       | 384.8   |              |   | 385.0  
|                                                |  |                       |         |              |   |        
|Deferred credits                                |  |                       |         |              |   |        
|Deferred income taxes                           |  |                       | 483.5   |              |   | 474.5  
|Investment tax credits                          |  |                       | 21.8    |              |   | 22.6   
|Regulatory liabilities                          |  |                       | 564.1   |              |   | 560.2  
|Other                                           |  |                       | 153.3   |              |   | 154.8  
|                                                |  |                       |         |              |   |        
|Total deferred credits                          |  |                       | 1,222.7 |              |   | 1,212.1
|                                                |  |                       |         |              |   |        
|Total liabilities and capital                   |  | $                     | 4,782.2 |              | $ | 4,839.7
|                                                |  |                       |         |              |   |        



The accompanying notes
are an integral part of the consolidated financial statements.





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TAMPA ELECTRIC COMPANY

Consolidated Statements of Income

Unaudited



|                                                                                                               |  |                            |       |   |      |   |       |  
|-------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ----- | - | ---- | - | ----- | -
|                                                                                                               |  | Three monthsended Mar. 31, |      
|(millions)                                                                                                     |  | 2004                       |       |   | 2003 |  
|Revenues                                                                                                       |  |                            |       |   |      |   |       |  
|Electric (includes franchise fees and gross receipts taxes of $15.7 million in 2004 and $13.9 million in 2003) |  | $                          | 370.8 |   |      | $ | 341.9 |  
|Gas (includes franchise fees and gross receipts taxes of $5.1 million in 2004 and $4.9 million in 2003)        |  |                            | 117.8 |   |      |   | 126.9 |  
|                                                                                                               |  |                            |       |   |      |   |       |  
|Total revenues                                                                                                 |  |                            | 488.6 |   |      |   | 468.8 |  
|                                                                                                               |  |                            |       |   |      |   |       |  
|Expenses                                                                                                       |  |                            |       |   |      |   |       |  
|Operations                                                                                                     |  |                            |       |   |      |   |       |  
|Fuel                                                                                                           |  |                            | 137.6 |   |      |   | 79.4  |  
|Purchased power                                                                                                |  |                            | 29.1  |   |      |   | 53.6  |  
|Cost of natural gas sold                                                                                       |  |                            | 58.9  |   |      |   | 70.8  |  
|Other                                                                                                          |  |                            | 65.0  |   |      |   | 60.9  |  
|Maintenance                                                                                                    |  |                            | 21.1  |   |      |   | 21.5  |  
|Depreciation                                                                                                   |  |                            | 53.5  |   |      |   | 54.4  |  
|Taxes, federal and state income                                                                                |  |                            | 21.2  |   |      |   | 26.7  |  
|Taxes, other than income                                                                                       |  |                            | 38.4  |   |      |   | 33.9  |  
|                                                                                                               |  |                            |       |   |      |   |       |  
|Total expenses                                                                                                 |  |                            | 424.8 |   |      |   | 401.2 |  
|                                                                                                               |  |                            |       |   |      |   |       |  
|Income from operations                                                                                         |  |                            | 63.8  |   |      |   | 67.6  |  
|                                                                                                               |  |                            |       |   |      |   |       |  
|Other income (expense)                                                                                         |  |                            |       |   |      |   |       |  
|Allowance for other funds used during construction                                                             |  |                            | 0.7   |   |      |   | 7.6   |  
|Taxes, non-utility federal and state income                                                                    |  |                            | (0.5  | ) |      |   | 0.1   |  
|Other income (expense), net                                                                                    |  |                            | 1.3   |   |      |   | (0.2  | )
|Asset impairment (net of income tax benefit of $30.7)                                                          |  |                            |      |   |      |   | (49.1 | )
|                                                                                                               |  |                            |       |   |      |   |       |  
|Total other income (expense)                                                                                   |  |                            | 1.5   |   |      |   | (41.6 | )
|                                                                                                               |  |                            |       |   |      |   |       |  
|Interest charges                                                                                               |  |                            |       |   |      |   |       |  
|Interest on long-term debt                                                                                     |  |                            | 26.6  |   |      |   | 23.6  |  
|Other interest                                                                                                 |  |                            | 2.3   |   |      |   | 2.4   |  
|Allowance for borrowed funds used during construction                                                          |  |                            | (0.3  | ) |      |   | (2.9  | )
|                                                                                                               |  |                            |       |   |      |   |       |  
|Total interest charges                                                                                         |  |                            | 28.6  |   |      |   | 23.1  |  
|                                                                                                               |  |                            |       |   |      |   |       |  
|Net income                                                                                                     |  | $                          | 36.7  |   |      | $ | 2.9   |  
|                                                                                                               |  |                            |       |   |      |   |       |  



The accompanying notes
are an integral part of the consolidated financial statements.





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TAMPA ELECTRIC COMPANY

Consolidated Statements of Comprehensive Income

Unaudited



|                                        |  |                            |      |      |   |    
|--------------------------------------- |  | -------------------------- | ---- | ---- | - | ---
|                                        |  | Three monthsended Mar. 31,
|(millions)                              |  | 2004                       |      | 2003
|Net income                              |  | $                          | 36.7 |      | $ | 2.9
|                                        |  |                            |      |      |   |    
|Other comprehensive income, net of tax  |  |                            |      |      |   |    
|Net unrealized gain on cash flow hedges |  |                            |     |      |   |   
|                                        |  |                            |      |      |   |    
|Other comprehensive income, net of tax  |  |                            |     |      |   |   
|                                        |  |                            |      |      |   |    
|Comprehensive income                    |  | $                          | 36.7 |      | $ | 2.9
|                                        |  |                            |      |      |   |    



The accompanying notes
are an integral part of the consolidated financial statements.





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TAMPA ELECTRIC COMPANY

Consolidated Statements of Cash Flows

Unaudited



|                                                                           |  |                            |       |   |      |   |       |  
|-------------------------------------------------------------------------- |  | -------------------------- | ----- | - | ---- | - | ----- | -
|                                                                           |  | Three monthsended Mar. 31, |      
|(millions)                                                                 |  | 2004                       |       |   | 2003 |  
|Cash flows from operating activities                                       |  |                            |       |   |      |   |       |  
|Net income                                                                 |  | $                          | 36.7  |   |      | $ | 2.9   |  
|Adjustments to reconcile net income to net cash from operating activities: |  |                            |       |   |      |   |       |  
|Depreciation                                                               |  |                            | 53.5  |   |      |   | 54.4  |  
|Deferred income taxes                                                      |  |                            | 8.8   |   |      |   | 15.2  |  
|Asset impairment, pre-tax                                                  |  |                            |      |   |      |   | 80.0  |  
|Investment tax credits, net                                                |  |                            | (0.7  | ) |      |   | (1.1  | )
|Allowance for funds used during construction                               |  |                            | (1.0  | ) |      |   | (10.5 | )
|Deferred recovery clause                                                   |  |                            | 30.9  |   |      |   | (3.0  | )
|Receivables, less allowance for uncollectibles                             |  |                            | 2.4   |   |      |   | (3.7  | )
|Inventories                                                                |  |                            | 8.1   |   |      |   | 3.3   |  
|Prepayments                                                                |  |                            | (1.3  | ) |      |   | (1.1  | )
|Taxes accrued                                                              |  |                            | (34.2 | ) |      |   | (59.5 | )
|Interest accrued                                                           |  |                            | 2.3   |   |      |   | 2.6   |  
|Accounts payable                                                           |  |                            | (19.6 | ) |      |   | (0.5  | )
|Other                                                                      |  |                            | 0.9   |   |      |   | 19.3  |  
|                                                                           |  |                            |       |   |      |   |       |  
|Cash flows from operating activities                                       |  |                            | 86.8  |   |      |   | 98.3  |  
|                                                                           |  |                            |       |   |      |   |       |  
|Cash flows from investing activities                                       |  |                            |       |   |      |   |       |  
|Capital expenditures                                                       |  |                            | (44.5 | ) |      |   | (77.1 | )
|Allowance for funds used during construction                               |  |                            | 1.0   |   |      |   | 10.5  |  
|                                                                           |  |                            |       |   |      |   |       |  
|Cash flows from investing activities                                       |  |                            | (43.5 | ) |      |   | (66.6 | )
|                                                                           |  |                            |       |   |      |   |       |  
|Cash flows from financing activities                                       |  |                            |       |   |      |   |       |  
|Repayment of long-term debt                                                |  |                            | (75.0 | ) |      |   |      |  
|Net increase in short-term debt                                            |  |                            | 50.0  |   |      |   | 6.7   |  
|Payment of dividends                                                       |  |                            | (32.6 | ) |      |   | (43.5 | )
|                                                                           |  |                            |       |   |      |   |       |  
|Cash flows from financing activities                                       |  |                            | (57.6 | ) |      |   | (36.8 | )
|                                                                           |  |                            |       |   |      |   |       |  
|Net (decrease) in cash and cash equivalents                                |  |                            | (14.3 | ) |      |   | (5.1  | )
|Cash and cash equivalents at beginning of period                           |  |                            | 33.6  |   |      |   | 6.9   |  
|                                                                           |  |                            |       |   |      |   |       |  
|Cash and cash equivalents at end of period                                 |  | $                          | 19.3  |   |      | $ | 1.8   |  
|                                                                           |  |                            |       |   |      |   |       |  



The accompanying notes
are an integral part of the consolidated financial statements.





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##### Table of Contents

TAMPA ELECTRIC COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1. Significant
Accounting Policies



The significant accounting policies
are as follows:



Principles of Consolidation



Tampa Electric Company (the company) is a wholly-owned subsidiary of TECO
Energy, Inc, and is comprised of the Electric division, generally referred to as Tampa Electric, and the Natural Gas division, generally referred to as Peoples Gas System (PGS).



All significant intercompany balances and intercompany transactions have been eliminated in consolidation.



The use of estimates is inherent in the preparation of financial statements
in accordance with generally accepted accounting principles (GAAP).



Revenue
Recognition



The regulated utilities (Tampa Electric
and Peoples Gas System) retail businesses and the prices charged to customers are regulated by the Florida Public Service Commission (FPSC). Tampa Electrics wholesale business is regulated by the Federal Energy Regulatory Commission (FERC). As
a result, the regulated utilities qualify for the application of Financial Accounting Standard No. (FAS) 71, Accounting for the Effects of Certain Types of Regulation. See Note 3 for a discussion of the applicability of FAS 71 to the
company.



Purchased Power



Tampa Electric purchases power on a regular basis primarily to meet the
needs of its retail customers. As a result of the sale of HPP in 2003, subsequent power purchases from HPP are reflected as non-affiliate purchases by Tampa Electric. Tampa Electrics long-term power purchase agreement from HPP was not affected
by the sale of HPP. Under the existing agreement, which has been approved by the FERC and FPSC, Tampa Electric has the right to purchase, on average, approximately 52% of the total output of the Hardee power station. Tampa Electric purchased power
from non-TECO Energy affiliates, including purchases from HPP, at a cost of $29.1 million, and $53.6 million, respectively, for the three months ended Mar. 31, 2004 and 2003. The purchased power costs at Tampa Electric are recoverable through an
FPSC-approved cost recovery clause.



Depreciation



Tampa Electric provides for depreciation primarily by the straight-line
method at annual rates that amortize the original cost, less salvage value, of depreciable property over its estimated service life. The provision for utility plant in service, expressed as a percentage of the original cost of depreciable property,
was 3.9% for the three months ended Mar. 31, 2004 and 4.2% for the same period in 2003. Construction work-in-progress is not depreciated until the asset is completed or placed in service.



The implementation of FAS 143, Accounting for Asset Retirement Obligations, in 2003 resulted in an increase in the
carrying amount of long-lived assets and the reclassification of the accumulated reserve for cost of removal from accumulated depreciation to Regulatory liabilities for all periods presented. The adjusted capitalized amount is
depreciated over the remaining useful life of the asset. See Notes 3 and 4.



Restrictions on Dividend Payments and Transfer of Assets



Tampa Electrics first mortgage bond indenture and certain long-term debt issuances at PGS contain provisions that limit the payment of dividends and
distributions on the common stock of Tampa Electric Company. In March 2004, the $75 million of Tampa Electrics first mortgage bonds were repaid and the related restriction on distributions and dividends became no longer operative since there
are no bonds outstanding under the mortgage indenture (see Note 13 for a discussion of the PGS covenant). Tampa Electrics credit facilities include a covenant limiting cumulative distributions and outstanding affiliate loans.



2. Derivatives and Hedging



At Mar. 31, 2004 and Dec. 31, 2003, respectively, the company had net
derivative assets of $3.5 million and $4.8 million. The amounts recorded in accumulated other comprehensive income (OCI), for the three months ended Mar. 31, 2004 and 2003 are fully offset by regulatory assets or liabilities to reflect the impact of
the fuel recovery clause on the results of hedging activities.



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As of Mar. 31, 2004, the company had transactions in place to hedge commodity price risk that qualify for
cash flow hedge accounting treatment under FAS 133. During the three months ended Mar. 31, 2004 and 2003, the company reclassified net pre-tax gains of $0.8 million and $7.4 million, respectively, to earnings for cash flow hedges. Amounts
reclassified from OCI were primarily related to cash flow hedges of physical purchases of natural gas. For these types of hedge relationships, the gain or loss on the derivative, reclassified from OCI to earnings, is offset by a regulatory asset or
liability, reflecting the fact that all fuel hedging activity is subject to the fuel recovery clause (see Note 3).



Based on the fair values of derivatives at Mar. 31, 2004, pre-tax gains of $3.5 million are expected to be reversed from OCI to the Consolidated
Statements of Income within the next twelve months. However, these gains and other future reclassifications from OCI will fluctuate with movements in the underlying market price of the derivative instruments. The company does not currently have any
cash flow hedges for transactions forecasted to take place in periods subsequent to 2004.



3. Regulatory



Cost
RecoveryTampa Electric



2003 Proceedings



In September 2003, Tampa Electric filed with the FPSC for
approval of fuel and purchased power, capacity, environmental and conservation cost recovery clause rates for the period January through December 2004. In November 2003, the FPSC approved Tampa Electrics requested changes. The resulting rates
included the impact of increased use of natural gas at the Bayside Power Station, the collection of approximately $91 million for under-recovery of fuel expense for 2002 and 2003, and estimated waterborne transportation rates for coal transportation
services. The FPSC did not allow recovery of $8.4 million it characterized as savings from shutting down the Gannon Station earlier than originally planned, which the FPSC asserted generated operations and maintenance savings. The rates include
projected costs associated with environmental projects required under the Environmental Protection Agency (EPA) Consent Decree and the Florida Department of Environmental Protection (FDEP) Consent Final Judgment (see Note 13 for additional
details regarding these environmental matters). The costs associated with this disallowance were recognized in 2003. Upon reconsideration, the FPSC upheld its decisions.



Tampa Electric filed its objection to the disallowance of the recovery of the $8.4 million and a motion asking the FPSC to
reconsider its decision. The motion was filed on Jan. 6, 2004 and on Mar. 30, 2004, the FPSC voted unanimously to deny the companys motion to reconsider its decision.



As part of the regulatory process, it is reasonably likely that third parties may intervene in various matters in the
future. The company is unable to predict the timing, nature or impact of such future actions.



Other Items



Coal
Transportation Contract



Tampa Electrics contract
for coal transportation and storage services with TECO Transport expired on Dec. 31, 2003. In June 2003, Tampa Electric issued a Request For Proposal (RFP) to potential providers requesting services for the next five years. The result of the RFP
process was the execution of a new contract between Tampa Electric and TECO Transport with market rates supported by the results of the RFP and an independent consultant in maritime transportation matters. The prudence of the RFP process and final
contract is expected to be reviewed by the FPSC in May 2004, with a decision expected in July 2004.



Regulatory Assets and Liabilities



Tampa Electric and PGS maintain their accounts in accordance with recognized policies of the FPSC. In addition, Tampa Electric maintains its accounts in accordance with recognized policies prescribed or permitted by
the FERC. These policies conform with generally accepted accounting principles in all material respects.



Tampa Electric and PGS apply the accounting treatment permitted by FAS 71, Accounting for the Effects of Certain Types of Regulation. Areas of
applicability include deferral of revenues under approved regulatory agreements; revenue recognition resulting from cost recovery clauses that provide for monthly billing charges to reflect increases or decreases in fuel; purchased power,
conservation and environmental costs; and deferral of costs as regulatory assets, when cost recovery is ordered over a period longer than a fiscal year, to the period that the regulatory agency recognizes them. Details of the regulatory assets and
liabilities as of Mar. 31, 2004 and Dec. 31, 2003 are presented in the following table:



36



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##### Table of Contents

Regulatory Assets and Liabilities



|                                            |  |              |       |              |   |      
|------------------------------------------- |  | ------------ | ----- | ------------ | - | -----
|(millions)                                  |  | Mar. 31,2004 |       | Dec. 31,2003
|Regulatory assets:                          |  |              |       |              |   |      
|Regulatory tax asset(1)                     |  | $            | 62.3  |              | $ | 63.3 
|Other:                                      |  |              |       |              |   |      
|Cost recovery clauses                       |  |              | 29.5  |              |   | 59.7 
|Coal contract buy-out(2)                    |  |              | 2.0   |              |   | 2.7  
|Deferred bond refinancing costs(3)          |  |              | 35.3  |              |   | 32.2 
|Environmental remediation                   |  |              | 18.5  |              |   | 20.7 
|Competitive rate adjustment                 |  |              | 5.2   |              |   | 5.3  
|Other                                       |  |              | 4.4   |              |   | 4.4  
|                                            |  |              |       |              |   |      
|                                            |  |              | 94.9  |              |   | 125.0
|                                            |  |              |       |              |   |      
|Total regulatory assets                     |  | $            | 157.2 |              | $ | 188.3
|                                            |  |              |       |              |   |      
|Regulatory liabilities:                     |  |              |       |              |   |      
|Regulatory tax liability(1)                 |  | $            | 28.5  |              | $ | 29.9 
|Other:                                      |  |              |       |              |   |      
|Deferred allowance auction credits          |  |              | 1.9   |              |   | 1.9  
|Recovery clause related                     |  |              | 0.7   |              |   |     
|Environmental remediation                   |  |              | 18.5  |              |   | 20.7 
|Transmission and distribution storm reserve |  |              | 41.0  |              |   | 40.0 
|Deferred gain on property sales(4)          |  |              | 1.8   |              |   | 1.9  
|Accumulated reservecost of removal         |  |              | 469.1 |              |   | 462.2
|Other                                       |  |              | 2.6   |              |   | 3.6  
|                                            |  |              |       |              |   |      
|                                            |  |              | 535.6 |              |   | 530.3
|                                            |  |              |       |              |   |      
|Total regulatory liabilities                |  | $            | 564.1 |              | $ | 560.2
|                                            |  |              |       |              |   |      

---

|(1) | Related primarily to plant life. Includes $16.1 million and $17.0 million of excess deferred taxes as of Mar. 31, 2004 and Dec. 31, 2003, respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Amortized over a 10-year period ending December 2004.
|--- | -----------------------------------------------------

|(3) | Unamortized refinancing costs:
|--- | ------------------------------



|                                                    |  |                 
|--------------------------------------------------- |  | ----------------
|Related to debt transactions as follows (millions): |  | Amortized until:
|$  51.6                                             |  | 2004            
|$  22.1                                             |  | 2007            
|$  25.0                                             |  | 2011            
|$  50.0                                             |  | 2011            
|$150.0                                              |  | 2012            
|$150.0                                              |  | 2012            
|$  85.9                                             |  | 2014            
|$  25.0                                             |  | 2021            
|$100.0                                              |  | 2022            
|$  75.0                                             |  | 2022            



|(4) | Amortized over a 5-year period with various ending dates.
|--- | ---------------------------------------------------------



4. Asset Retirement Obligations



On Jan. 1, 2003, Tampa Electric Company adopted FAS 143, Accounting for Asset Retirement Obligations. The company recognized liabilities for
retirement obligations associated with certain long-lived assets, in accordance with the relevant accounting guidance. An asset retirement obligation for a long-lived asset is recognized at fair value at inception of the obligation if there is a
legal obligation under an existing or enacted law or statute, a written or oral contract, or by legal construction under the doctrine of promissory estoppel. Retirement obligations are recognized only if the legal obligation exists in connection
with or as a result of the permanent retirement, abandonment or sale of a long-lived asset.



When the liability is initially recorded, the carrying amount of the related long-lived asset is correspondingly increased. Over time, the liability is accreted to its future value. The corresponding amount
capitalized at inception is depreciated over the remaining useful life of the asset. The liability must be revalued each period based on current market prices.



As a result of the adoption of FAS 143, Tampa Electric Company recorded an increase to net property, plant and equipment of $0.1 million (net of
accumulated depreciation), an increase in regulatory assets of $0.2 million, and an increase to asset retirement obligations of $0.3 million.



For the three months ended Mar. 31, 2004 and 2003, accretion expense associated with asset retirement obligations for Tampa Electric Company was not
material. During this period, no new retirement obligations were incurred and no revisions were



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made to estimated cash flows used in determining the recognize asset retirement obligations. Significant revisions to estimated cash flows used in
determining the recognized asset retirement obligations were necessary.



As regulated utilities, Tampa Electric and PGS must file depreciation and dismantlement studies periodically and receive approval from the FPSC before implementing new depreciation rates. Included in approved depreciation rates is either an
implicit net salvage factor or a cost of removal factor, expressed as a percentage. The net salvage factor is principally comprised of two componentsa salvage factor and a cost of removal or dismantlement factor. The company uses current cost
of removal or dismantlement factors as part of the estimation method to approximate the amount of cost of removal in accumulated depreciation.



As a result of the adoption of FAS 143 at Jan. 1, 2003, the estimated accumulated cost of removal and dismantlement included in net accumulated
depreciation as of Mar. 31, 2004 and Dec. 31, 2003 of $469.1 million and $462.2 million, respectively, is classified as a regulatory liability for all periods presented (see also Note 3). For Tampa Electric and PGS, the original cost of
utility plant retired or otherwise disposed of and the cost of removal, or dismantlement, less salvage value is charged to accumulated depreciation and the accumulated cost of removal reserve reported as a regulatory liability, respectively.



5. Short-term Debt



At Mar. 31, 2004 and Dec. 31, 2003, the following credit facilities and
related borrowings existed:



Credit Facilities

|                |  |                  |       |                           |   |                             |  |                  |   |                           |   |                             |  |   |   |  |   |  
|--------------- |  | ---------------- | ----- | ------------------------- | - | --------------------------- |  | ---------------- | - | ------------------------- | - | --------------------------- |  | - | - |  | - | -
|                |  | Mar. 31, 2004    |       | Dec. 31, 2003            
|(millions)      |  | CreditFacilities |       | BorrowingsOutstanding (1) |   | Letters ofCreditOutstanding |  | CreditFacilities |   | BorrowingsOutstanding (1) |   | Letters ofCreditOutstanding
|Recourse:       |  |                  |       |                           |   |                             |  |                  |   |                           |   |                             |  |   |   |  |   |  
|Tampa Electric: |  |                  |       |                           |   |                             |  |                  |   |                           |   |                             |  |   |   |  |   |  
|1-year facility |  | $                | 125.0 |                           | $ |                            |  | $                |  |                           | $ | 125.0                       |  | $ |  |  | $ | 
|3-year facility |  |                  | 125.0 |                           |   | 50.0                        |  |                  |  |                           |   | 125.0                       |  |   |  |  |   | 
|                |  |                  |       |                           |   |                             |  |                  |   |                           |   |                             |  |   |   |  |   |  
|Total           |  | $                | 250.0 |                           | $ | 50.0                        |  | $                |  |                           | $ | 250.0                       |  | $ |  |  | $ | 
|                |  |                  |       |                           |   |                             |  |                  |   |                           |   |                             |  |   |   |  |   |  

---

|(1) | Borrowings outstanding are reported as notes payable.
|--- | -----------------------------------------------------



These credit facilities require commitment fees ranging from 20 to 50 basis points. The weighted average interest rate on outstanding notes payable at
Mar. 31, 2004 was 2.25%.



6. Long-term Debt



In March 2004, Tampa Electric repaid $75 million of 7.75% first mortgage
bonds. The mortgage indenture included a limitation on dividends covenant which became no longer operative since there are no bonds outstanding under the indenture.



7. Asset Impairments



For the three months ended Mar. 31, 2003, Tampa Electric Company recorded a $48.9 million after-tax charge ($79.6 million pre-tax) to reflect the impact
of the cancellation of turbine purchase commitments. As reported previously and in Note 11, certain turbine rights had been transferred from TWG to Tampa Electric in 2002 for use in Tampa Electrics generation expansion activities. These
cancellations, made in April 2003, fully terminated all turbine purchase obligations.



38



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8. Income Tax Expense



Tampa Electric Company is included in the filing of a consolidated federal income tax return with TECO Energy and its affiliates. Tampa Electric
Companys income tax expense is based upon a separate return computation.



As discussed in Note 7, Tampa Electric Company recorded a $48.9 million after-tax charge for the cancellation of turbine purchase commitments in the first quarter of 2003. The provision for income taxes as a
percent of income from unusual and infrequently occurring items for the three months ended Mar. 31, 2003 was 38.58%.



The total income tax provisions differ from amounts computed by applying the federal statutory tax rate to income before income taxes for the following
reasons:



Effective Income Tax Rate





|                                                                                                  |  |                            |      |   |      |   |       |  
|------------------------------------------------------------------------------------------------- |  | -------------------------- | ---- | - | ---- | - | ----- | -
|                                                                                                  |  | Three monthsended Mar. 31, |     
|(millions)                                                                                        |  | 2004                       |      |   | 2003 |  
|Income (loss) from continuing operations                                                          |  | $                          | 36.7 |   |      | $ | 2.9   |  
|Less (1):Asset impairment charge                                                                  |  |                            |     |   |      |   | (49.1 | )
|Plus (2):Income tax provision                                                                     |  |                            | 21.7 |   |      |   | 26.7  |  
|                                                                                                  |  |                            |      |   |      |   |       |  
|Income from continuing operations before income taxes, excluding asset impairment charge(1)       |  |                            | 58.4 |   |      |   | 78.7  |  
|                                                                                                  |  |                            |      |   |      |   |       |  
|Income taxes on above at federal statutory rate of 35%                                            |  |                            | 20.4 |   |      |   | 27.5  |  
|Increase (decrease) due to                                                                        |  |                            |      |   |      |   |       |  
|State income tax, net of federal income tax                                                       |  |                            | 2.1  |   |      |   | 2.7   |  
|Amortization of investment tax credits                                                            |  |                            | (0.7 | ) |      |   | (1.1  | )
|AFUDC Equity                                                                                      |  |                            | (0.3 | ) |      |   | (2.7  | )
|Other                                                                                             |  |                            | 0.2  |   |      |   | 0.3   |  
|                                                                                                  |  |                            |      |   |      |   |       |  
|Total income tax provision from continuing operations                                             |  | $                          | 21.7 |   |      | $ | 26.7  |  
|                                                                                                  |  |                            |      |   |      |   |       |  
|Provision for income taxes as a percent of income from continuing operations, before income taxes |  |                            | 37.2 | % |      |   | 33.9  | %
|                                                                                                  |  |                            |      |   |      |   |       |  

---

|(1) | For the three months ended Mar. 31, 2003, excludes an impairment charge of $48.9 million after tax ($79.6 million pre-tax) associated with the cancellation of turbine purchase
commitments recognized in the first quarter of 2003.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Does not include the tax provision (benefit) associated with excluded items described above.
|--- | --------------------------------------------------------------------------------------------



9. Comprehensive Income



As discussed in Note 2, Tampa Electric Company records gains and losses on derivative instruments classified as cash flow hedges in OCI until the
hedged transaction is recognized in earnings. When the hedged transaction is recognized in earnings, the company reclassifies the gain or loss from OCI to earnings. However, an equal and offsetting regulatory asset or liability is recognized in OCI
and then earnings to reflect the companys obligation to reflect such gains or losses in regulatory cost recovery clauses. As a result, the reclassification from OCI gains or losses on derivatives and the recognition of the offsetting
regulatory impact, detailed below, had no net impact on the results of operations.



Tampa Electric Company reported the following comprehensive income (loss) for the three months ended Mar. 31, 2004 and 2003 related to changes in the fair value of cash flow hedges.



Comprehensive Income (Loss)



|                                        |  |       |      |   |     |   |      |     |  |   |      |  
|--------------------------------------- |  | ----- | ---- | - | --- | - | ---- | --- |  | - | ---- | -
|(millions) Three months ended Mar.
31,  |  | Gross |      |   | Tax |   |      | Net | 
|2004                                    |  |       |      |   |     |   |      |     |  |   |      |  
|Unrealized gain on cash flow hedges     |  | $     | 0.8  |   |     | $ | 0.3  |     |  | $ | 0.5  |  
|Less: (Gain) reclassified to net income |  |       | (0.8 | ) |     |   | (0.3 | )   |  |   | (0.5 | )
|                                        |  |       |      |   |     |   |      |     |  |   |      |  
|Total other comprehensive income (loss) |  | $     |     |   |     | $ |     |     |  | $ |     |  
|                                        |  |       |      |   |     |   |      |     |  |   |      |  
|2003                                    |  |       |      |   |     |   |      |     |  |   |      |  
|Unrealized gain on cash flow hedges     |  | $     | 7.4  |   |     | $ | 2.9  |     |  | $ | 4.5  |  
|Less: (Gain) reclassified to net income |  |       | (7.4 | ) |     |   | (2.9 | )   |  |   | (4.5 | )
|                                        |  |       |      |   |     |   |      |     |  |   |      |  
|Total other comprehensive income (loss) |  | $     |     |   |     | $ |     |     |  | $ |     |  
|                                        |  |       |      |   |     |   |      |     |  |   |      |  



39



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10. Employee Postretirement Benefits



Tampa Electric Company is a participant in the comprehensive retirement plans of TECO Energy (multi-employer plans),
including a non-contributory defined benefit retirement plan which covers substantially all employees. Where appropriate and reasonably determinable, the portion of expenses, income, gains or losses allocable to Tampa Electric Company are presented.
Otherwise, such amounts presented reflect the amount allocable to all participants of the TECO Energy retirement plans. Benefits are based on employees age, years of service and final average earnings.



Effective Jan. 1, 2004, Tampa Electric Company adopted FAS 132 (revised
2003), Employers Disclosures about Pensions and Other Postretirement Benefits, an amendment of FASB Statements No. 87, 88 and 106, with no material effect. Included in the table below is the periodic pension (benefit) expense for
pension benefits and other postretirement benefits offered by the company. No significant changes have been made to these benefit plans since Dec. 31, 2003.



Pension Expense (Benefit)



|                                                 |  |                  |      |   |                             |   |       |      |  |      |     |  |   |    
|------------------------------------------------ |  | ---------------- | ---- | - | --------------------------- | - | ----- | ---- |  | ---- | --- |  | - | ---
|(millions)                                       |  | Pension Benefits |      |   | OtherPostretirementBenefits
|Three months ended Mar. 31,                      |  | 2004             |      |   | 2003                        |   |       | 2004 |  | 2003
|Components of net periodic benefit expense       |  |                  |      |   |                             |   |       |      |  |      |     |  |   |    
|Service cost (benefits earned during the period) |  | $                | 4.3  |   |                             | $ | 3.6   |      |  | $    | 1.2 |  | $ | 1.0
|Interest cost on projected benefit obligations   |  |                  | 8.2  |   |                             |   | 7.7   |      |  |      | 3.0 |  |   | 3.1
|Expected return on assets                        |  |                  | (9.8 | ) |                             |   | (10.5 | )    |  |      |    |  |   |   
|Amortization of:                                 |  |                  |      |   |                             |   |       |      |  |      |     |  |   |    
|Transition obligation (asset)                    |  |                  | (0.3 | ) |                             |   | (0.3  | )    |  |      | 0.7 |  |   | 0.7
|Prior service cost (benefit)                     |  |                  | (0.1 | ) |                             |   | (0.1  | )    |  |      | 0.5 |  |   | 0.5
|Actuarial (gain) loss                            |  |                  | 0.7  |   |                             |   | 0.3   |      |  |      | 0.4 |  |   | 0.4
|                                                 |  |                  |      |   |                             |   |       |      |  |      |     |  |   |    
|Pension expense (benefit)                        |  | $                | 3.0  |   |                             | $ | 0.7   |      |  | $    | 5.8 |  | $ | 5.7
|Special termination benefit charge               |  |                  | 3.2  |   |                             |   |      |      |  |      |    |  |   |   
|Additional amounts recognized                    |  |                  | 0.3  |   |                             |   |      |      |  |      |    |  |   | 0.1
|                                                 |  |                  |      |   |                             |   |       |      |  |      |     |  |   |    
|Net pension expense (benefit) recognized in the  |  |                  |      |   |                             |   |       |      |  |      |     |  |   |    
|TECO Energy Consolidated Statements of Income(1) |  | $                | 6.5  |   |                             | $ | 0.7   |      |  | $    | 5.8 |  | $ | 5.8
|                                                 |  |                  |      |   |                             |   |       |      |  |      |     |  |   |    

---

|(1) | Tampa Electrics portion of the net pension expense for the three months ended Mar. 31, 2004 and 2003, respectively was $1.3 million and ($0.5) million for pension benefits,
and $4.2 million and $4.1 million for other postretirement benefits.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



For the fiscal 2004 plan year, TECO Energy assumed an expected long-term return on plan assets of 8.75%. During 2004, Tampa Electrics portion of expected contributions to the pension plans is approximately $9
million. This contribution is due by Sep. 15, 2004.



11. Related Parties



In February 2002, Tampa Electric and TECO-Panda
Generating Company II (TPGC II), an affiliate of TWG, entered into an assignment and assumption agreement under which Tampa Electric obtained TPGC IIs rights and interests to four combustion turbines being purchased from General Electric
Company, and assumed the corresponding liabilities and obligations for such equipment. Tampa Electric planned to use this equipment for future generation expansion. In accordance with the terms of the assignment and assumption agreement, Tampa
Electric paid $62.5 million to TPGC II as reimbursement for amounts already paid to General Electric by TPGC II for such equipment. No gain or loss was incurred on the transfer. During the first quarter of 2003, Tampa Electric recorded a $48.9
million after-tax charge related to the cancellation of these turbine purchase commitments.



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##### Table of Contents

12. Segment Information



|                                       |  |               |         |   |            |   |                     |  |   |                       |   |  |   |         |  
|-------------------------------------- |  | ------------- | ------- | - | ---------- | - | ------------------- |  | - | --------------------- | - |  | - | ------- | -
|(millions) Three months ended Mar.
31, |  | TampaElectric |         |   | PeoplesGas |   | Other &Eliminations |  |   | Tampa ElectricCompany |  
|2004                                   |  |               |         |   |            |   |                     |  |   |                       |   |  |   |         |  
|Revenuesoutsiders                     |  | $             | 370.1   |   |            | $ | 117.8               |  | $ |                      |   |  | $ | 487.9   |  
|Sales to affiliates                    |  |               | 0.8     |   |            |   |                    |  |   | (0.1                  | ) |  |   | 0.7     |  
|                                       |  |               |         |   |            |   |                     |  |   |                       |   |  |   |         |  
|Total revenues                         |  | $             | 370.9   |   |            | $ | 117.8               |  | $ | (0.1                  | ) |  | $ | 488.6   |  
|Depreciation                           |  |               | 45.1    |   |            |   | 8.4                 |  |   |                      |   |  |   | 53.5    |  
|Interest charges                       |  |               | 24.8    |   |            |   | 3.8                 |  |   |                      |   |  |   | 28.6    |  
|Provision (benefit) for taxes          |  |               | 13.7    |   |            |   | 8.0                 |  |   |                      |   |  |   | 21.7    |  
|Net income                             |  | $             | 23.9    |   |            | $ | 12.8                |  | $ |                      |   |  | $ | 36.7    |  
|                                       |  |               |         |   |            |   |                     |  |   |                       |   |  |   |         |  
|Total assets at Mar. 31                |  | $             | 4,122.2 |   |            | $ | 645.5               |  | $ | 14.5                  |   |  | $ | 4,782.2 |  
|                                       |  |               |         |   |            |   |                     |  |   |                       |   |  |   |         |  
|2003                                   |  |               |         |   |            |   |                     |  |   |                       |   |  |   |         |  
|Revenuesoutsiders                     |  | $             | 341.1   |   |            | $ | 126.9               |  | $ |                      |   |  | $ | 468.0   |  
|Sales to affiliates                    |  |               | 1.0     |   |            |   |                    |  |   | (0.2                  | ) |  |   | 0.8     |  
|                                       |  |               |         |   |            |   |                     |  |   |                       |   |  |   |         |  
|Total revenues                         |  | $             | 342.1   |   |            | $ | 126.9               |  | $ | (0.2                  | ) |  | $ | 468.8   |  
|Depreciation                           |  |               | 46.0    |   |            |   | 8.4                 |  |   |                      |   |  |   | 54.4    |  
|Interest charges                       |  |               | 19.2    |   |            |   | 3.9                 |  |   |                      |   |  |   | 23.1    |  
|(Benefit) provision for taxes(1)       |  |               | (11.8   | ) |            |   | 7.5                 |  |   |                      |   |  |   | (4.3    | )
|Net (loss) income(1)                   |  | $             | (9.0    | ) |            | $ | 11.9                |  | $ |                      |   |  | $ | 2.9     |  
|                                       |  |               |         |   |            |   |                     |  |   |                       |   |  |   |         |  
|Total assets at Dec. 31                |  | $             | 4,178.6 |   |            | $ | 651.5               |  | $ | 9.6                   |   |  | $ | 4,839.7 |  
|                                       |  |               |         |   |            |   |                     |  |   |                       |   |  |   |         |  

---

|(1) | Net income includes a $48.9 million after-tax ($79.6 million pre-tax) asset impairment related to turbine purchase cancellations (see Note 7).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------



13. Commitments and Contingencies



Legal Contingencies



Three lawsuits have been filed in the Circuit Court in Hillsborough County against Tampa Electric, in connection with the
location of transmission structures in certain residential areas, by residents in the areas surrounding the structures. The high-voltage power lines are needed by Tampa Electric to move electricity to the northwest part of its service territory
where population growth has been experienced. The residents are seeking to remove the poles or to receive monetary damages. Tampa Electric has sought input from the community to determine the feasibility of alternate routes or structures or some
combination.



From time to time Tampa Electric Company is
involved in various other legal, tax and regulatory proceedings before various courts, regulatory commissions, and governmental agencies in the ordinary course of its business. Where appropriate, accruals are made in accordance with FAS 5,
Accounting for Contingencies, to provide for matters that are probable of resulting in an estimable, material loss. While the outcome of such proceedings is uncertain, management does not believe that the ultimate resolution of pending
matters will have a material adverse effect on the companys results of operations or financial condition.



Superfund and Former Manufactured Gas Plant Sites



Tampa Electric Company, through its Tampa Electric and Peoples Gas divisions, is a potentially responsible party for certain superfund sites and, through
its Peoples Gas division, for certain former manufactured gas plant sites. While the joint and several liability associated with these sites presents the potential for significant response costs, as of Mar. 31, 2004, Tampa Electric Company has
estimated its ultimate financial liability to be approximately $19 million, and this amount has been accrued in the companys financial statements. The environmental remediation costs associated with these sites, which are expected to be paid
over many years, are not expected to have a significant impact on customer prices.



The estimated amounts represent only the estimated portion of the cleanup costs attributable to Tampa Electric Company. The estimates to perform the work are based on actual estimates obtained from contractors, or
Tampa Electric Companys experience with similar work adjusted for site specific conditions and agreements with the respective governmental agencies. The estimates are made in current dollars, are not discounted and do not assume any insurance
recoveries.



Allocation of the
responsibility for remediation costs among Tampa Electric Company and other potentially responsible parties (PRPs) is based on each partys relative ownership interest in or usage of a site. Accordingly, Tampa Electric Companys share of
remediation costs varies with each site. In virtually all instances where other PRPs are involved, those PRPs are considered creditworthy.



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##### Table of Contents

Factors that could impact these estimates include the ability of other PRPs to pay their pro rata portion
of the cleanup costs, additional testing and investigation which could expand the scope of the cleanup activities, additional liability that might arise from the cleanup activities themselves or changes in laws or regulations that could require
additional remediation. These costs are recoverable through customer rates established in subsequent base rate proceedings.



Guarantees and Letters of Credit



Tampa Electric Company enters into commercial agreements in the normal course of business that typically contain standard indemnification clauses. Tampa
Electric Company may sometimes agree to make payments to compensate or indemnify the counterparty for legal fees, environmental remediation costs and other similar costs arising from possible future events or changes in laws or regulations. These
agreements cover a variety of goods and services, and have varying triggering events dependent on actions by third parties.



Tampa Electric Company is unable to estimate the maximum potential future exposure under these clauses because the events that would obligate Tampa
Electric Company have not occurred, or if such event has occurred, Tampa Electric Company has not been notified of its occurrence. As claims are made or changes in laws or regulations indicate, an amount related to the indemnification is reflected
in the financial statements.



Financial Covenants



A summary of Tampa Electric Companys significant financial covenants
as of Mar. 31, 2004 is as follows:



Tampa Electric Companys
Significant Financial Covenants



|                      |  |                                |  |                                                                   |  |                             
|--------------------- |  | ------------------------------ |  | ----------------------------------------------------------------- |  | ----------------------------
|(millions) Instrument |  | Financial Covenant (1)         |  | Requirement/Restriction                                           |  | Calculation at Mar. 31, 2004
|Tampa Electric        |  |                                |  |                                                                   |  |                             
|PGS senior notes      |  | EBIT/interest                  |  | Minimum of 2.0 times                                              |  | 3.2 times                   
|                      |  | Restricted payments            |  | Shareholder equity at least $500                                  |  | $1,656                      
|                      |  | Funded debt/capital            |  | Cannot exceed 65%                                                 |  | 49.4%                       
|                      |  | Sale of assets                 |  | Less than 20% of total assets                                     |  | %                          
|Credit facility       |  | Debt/capital                   |  | Cannot exceed 60%                                                 |  | 48.8%                       
|                      |  | EBITDA/interest(2)             |  | Minimum of 2.5 times                                              |  | 5.5 times                   
|                      |  | Restriction ondistributions(3) |  | Limit on cumulative distributions and outstanding affiliate loans |  | $487 unrestricted           
|6.25% senior notes    |  | Debt/capital                   |  | Cannot exceed 60%                                                 |  | 48.8%                       
|                      |  | Limit on liens                 |  | Cannot exceed $787                                                |  | $287                        

---

|(1) | As defined in each applicable instrument.
|--- | -----------------------------------------

|(2) | EBIT generally represents earnings before interest and taxes. EBITDA generally represents EBIT before depreciation and amortization. However, in each circumstance, the term is
subject to the definition prescribed under the relevant legal agreements.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Limits cumulative distributions after Oct. 31, 2003 and outstanding affiliate loans to an amount representing an accumulation of net income after May 31, 2003 and capital
contributions from the parent after Oct. 31, 2003, plus $450 million.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



14. Variable Interest Entities



The equity
method of accounting is generally used to account for significant investments in partnership arrangements in which Tampa Electric Company or its subsidiary companies do not have a majority ownership interest or exercise control. On Jan. 17, 2003,
the FASB issued FIN 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51, which imposes a new approach in determining if a reporting entity should consolidate certain legal entities, including partnerships, limited
liability companies, or trusts, among others, collectively defined as variable interest entities or VIEs. On Dec. 24, 2003, the FASB published a revision to FIN 46 (FIN 46R), to clarify some of the provisions of FIN 46 and exempt certain legal
entities from its requirements.



Under FIN 46R, a legal entity
is considered a VIE, with some exemptions if specific criteria are met, if it does not have sufficient equity at risk to finance its own activities without relying on financial support from other parties. Additional criteria must be applied to
determine if this condition is met or if the equity holders, as a group, lack any one of three stipulated characteristics of a controlling financial interest. If the legal entity is a VIE, then the reporting entity determined to be the primary
beneficiary of the VIE must consolidate it. Even if a reporting entity is not obligated to consolidate a VIE, then certain disclosures must be made about the VIE if the reporting entity has a significant variable interest. Tampa Electric Company
adopted the provisions of FIN 46R to all VIEs that previously were subject to certain previously issued special purpose entity, or SPE, accounting pronouncements as of Oct. 1, 2003 with no material impact. For all other VIEs, Tampa Electric Company
adopted the provisions of FIN 46R as of Jan. 1, 2004. The adoption of FIN 46R as of Jan. 1, 2004 had no impact on Tampa Electric Company. Described below is a specific instance in which the company was unable to determine if an entity was a VIE.



42



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##### Table of Contents

Hardee Power Partners, Ltd. (HPP)



The Hardee power plant was designed and built to provide peaking capacity to two utility customers, including Tampa
Electric. The two utility customers each have a 20 year PPA with HPP. Under the terms of the PPA, the customers pay for capacity and, if required, the delivery of electricity. Effective Sep. 30, 2003, the company sold its interest in HPP to an
affiliate of Invenergy LLC and GTCR Golder Rauner LLC. Under FIN 46R, the company is required to make an exhaustive effort to obtain sufficient information to determine if (1) HPP is a VIE and (2) which holder of variable interests is the primary
beneficiary. The new owners of HPP have indicated that they will not provide the necessary information, have no obligation to provide such information to the company and the required information is not available publicly. As a result, the company is
unable to determine if (1) HPP is a VIE and (2) if so, which variable interest holder, if any, is the primary beneficiary. The maximum exposure for the company is the ability to purchase electricity under the terms of the PPA with HPP at rates
unfavorable to the wholesale market. For a description and measure of the purchases of electricity under the HPP PPA, see Note 1Purchased Power.



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##### Table of Contents

|Item 2. | MANAGEMENTS DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS
|------- | ---------------------------------------------------------------------------------



This Managements Discussion and Analysis contains forward-looking
statements, which are subject to the inherent uncertainties in predicting future results and conditions. These forward-looking statements include references to TECO Energys anticipated capital investments, financing requirements, project
completion dates, future transactions and other plans. These statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors that could cause actual results to differ materially from those projected
in these forward-looking statements include general economic conditions in Tampa Electrics service area affecting energy sales; economic conditions both national and international, that affect the demand for TECO Transports water borne
transportation services; weather variations affecting energy sales and operating costs at Tampa Electric and TECO Wholesale Generation (TWG); commodity price changes affecting the margins at TWG and TECO Coal; the ability of TECO Energys
subsidiaries to operate equipment without undue accidents, breakdowns or failures; and energy prices in the markets served by TWG facilities. Some of these factors and others are discussed more fully under Investment
Considerations in TECO Energys Annual Report on Form 10-K for the year ended Dec. 31, 2003, and reference is made thereto.



Earnings SummaryUnaudited



|                                             |  |                            |       |   |      |   |       |  
|-------------------------------------------- |  | -------------------------- | ----- | - | ---- | - | ----- | -
|                                             |  | Three monthsended Mar. 31, |      
|(millions, except per share amounts)         |  | 2004                       |       |   | 2003 |  
|Consolidated revenues                        |  | $                          | 642.3 |   |      | $ | 651.8 |  
|                                             |  |                            |       |   |      |   |       |  
|Net income (loss) from continuing operations |  | $                          | 28.7  |   |      | $ | (20.3 | )
|Discontinued operations                      |  |                            | (26.2 | ) |      |   | 24.1  |  
|Cumulative effect of change in accounting    |  |                            |      |   |      |   | (1.1  | )
|                                             |  |                            |       |   |      |   |       |  
|Net (loss) income                            |  | $                          | 2.5   |   |      | $ | 2.7   |  
|                                             |  |                            |       |   |      |   |       |  
|Average common shares outstanding            |  |                            |       |   |      |   |       |  
|Basic                                        |  |                            | 188.0 |   |      |   | 175.9 |  
|Diluted                                      |  |                            | 188.6 |   |      |   | 175.9 |  
|                                             |  |                            |       |   |      |   |       |  
|Earnings per sharebasic                     |  |                            |       |   |      |   |       |  
|Continuing operations                        |  | $                          | 0.15  |   |      | $ | (0.12 | )
|Discontinued operations                      |  |                            | (0.14 | ) |      |   | 0.14  |  
|Cumulative effect of change in accounting    |  |                            |      |   |      |   |      |  
|                                             |  |                            |       |   |      |   |       |  
|Earnings per sharebasic                     |  | $                          | 0.01  |   |      | $ | 0.02  |  
|                                             |  |                            |       |   |      |   |       |  
|Earnings per sharediluted                   |  |                            |       |   |      |   |       |  
|Continuing operations                        |  | $                          | 0.15  |   |      | $ | (0.12 | )
|Discontinued operations                      |  |                            | (0.14 | ) |      |   | 0.14  |  
|Cumulative effect of change in accounting    |  |                            |      |   |      |   |      |  
|                                             |  |                            |       |   |      |   |       |  
|Earnings per sharediluted                   |  | $                          | 0.01  |   |      | $ | 0.02  |  
|                                             |  |                            |       |   |      |   |       |  



Operating Results



Three Months Ended Mar. 31, 2004:



TECO Energy, Inc. (the company) reported first quarter net income of $2.5
million, compared with net income of $2.7 million in the first quarter of 2003. Earnings per share for the quarter were $0.01, compared with earnings per share of $0.02 in the first quarter of 2003. The first quarter net income from continuing
operations was $28.7 million, compared with a loss from continuing operations of $20.3 million for the same period in 2003. Earnings per share from continuing operations were $0.15 for the quarter, compared with a per-share loss of $0.12 in the 2003
period. Discontinued operations in the first quarter of 2004 and 2003 reflect the operating losses from the Union and Gila River power stations. The number of common shares outstanding was seven percent higher at the end of the quarter than it was
at the end of the first quarter of 2003.



First quarter results
from continuing operations in 2004 include a $10.6 million after-tax gain on the sale of TECO Energys interest in its propane business, partially offset by a $3.4 million after-tax charge due to a valuation adjustment at TECO Solutions and an
$0.8 million after-tax valuation adjustment at TECO Transport. First quarter results excluding discontinued operations in 2003 included a $48.9 million after-tax charge for turbine purchase cancellations at Tampa Electric, a $15.3 million after-tax
charge for non-merchant turbine purchase cancellations, (which was reflected in the Other Unregulated Companies segment), and a $1.1 million charge for the cumulative effect of a change in accounting principle associated with the adoption of FAS
143, Accounting for Asset Retirement Obligations. First quarter highlights include:



| |  | Completed Bayside repowering projectfinal phase in service January 15, 2004;
| | - | -----------------------------------------------------------------------------



| |  | Signed a non-binding letter of intent to transfer the Union and Gila River project to the lending bank group;
| | - | -------------------------------------------------------------------------------------------------------------



| |  | Signed a non-binding memorandum of understanding to sell an additional 40-percent ownership interest in our synfuel production facilities; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  | Completed the sale of several smaller non-core energy services businesses.
| | - | --------------------------------------------------------------------------



Effective with the year-end 2003 reporting, the TECO Power Services segment has been replaced by the TECO Wholesale Generation (TWG)Merchant
segment, which includes the results of operations for the merchant affiliates including Frontera,



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Commonwealth Chesapeake, Dell and McAdams, as well as the equity investment in the Odessa and Guadelupe (TIE) affiliates, and TECO EnergySource, Inc. (TES),
an energy marketing affiliate. The non-merchant power operations are comprised of the interests in the Hamakua Power Station in Hawaii, the San José and Alborada power stations in Guatemala and the minority interest in the Guatemalan
distribution utility EEGSA. The non-merchant results are now reported in the Other Unregulated Companies segment.



Results for unregulated business segments include internally allocated interest expenses. Interest is not, however, allocated to discontinued operations
but remains at the TECO Energy parent level.



Tampa Electric
CompanyElectric division (Tampa Electric)



Tampa
Electrics net income for the first quarter was $23.9 million, compared with a loss of $9.0 million for the same period in 2003, which included a $48.9 million after-tax turbine purchase cancellation charge. The 2004 results reflect lower
earnings from the equity component of AFUDC (which represents allowed equity cost capitalized to construction costs); lower base revenues from milder weather than 2003; higher interest expense; and increased employee related expenses (primarily
pension expense). The lower AFUDC equity earnings were driven primarily by the Gannon/Bayside repowering project, for which AFUDC equity earnings decreased to $0.7 million for the quarter, down from $7.6 million for the same period in 2003,
reflecting the completion of Bayside Station Unit 1 in April 2003 and Unit 2 in January 2004.



Retail energy sales increased 1 percent, as average customer growth of 2.6 percent was partially offset by mild weather. Total heating and cooling degree-days for the Tampa area in the quarter were almost 6 percent
below normal and more than 15 percent below 2003 levels. Although retail energy sales increased, total base revenues decreased as the milder weather reduced sales to residential customers.



A summary of Tampa Electrics operating statistics for the three months
ended Mar. 31, 2004 and 2003 follows:



|                                        |  |                    |       |   |                     |   |       |          |  |       |      |  |         |  |          |  |       |  
|--------------------------------------- |  | ------------------ | ----- | - | ------------------- | - | ----- | -------- |  | ----- | ---- |  | ------- |  | -------- |  | ----- | -
|                                        |  | Operating Revenues |       |   | Kilowatt-hour sales |  
|(in millions, except average customers) |  | 2004               |       |   | 2003                |   |       | % Change |  |       | 2004 |  | 2003    |  | % Change | 
|Three months ended Mar. 31,             |  |                    |       |   |                     |   |       |          |  |       |      |  |         |  |          |  |       |  
|Residential                             |  | $                  | 181.4 |   |                     | $ | 169.1 |          |  | 7.3   |      |  | 1,815.6 |  | 1,878.8  |  | (3.4  | )
|Commercial                              |  |                    | 112.3 |   |                     |   | 96.8  |          |  | 16.0  |      |  | 1,314.7 |  | 1,266.6  |  | 3.8   |  
|IndustrialPhosphate                    |  |                    | 18.5  |   |                     |   | 15.8  |          |  | 16.8  |      |  | 333.9   |  | 334.9    |  | (0.3  | )
|IndustrialOther                        |  |                    | 23.5  |   |                     |   | 19.3  |          |  | 22.2  |      |  | 319.1   |  | 299.3    |  | 6.6   |  
|Other sales of electricity              |  |                    | 32.8  |   |                     |   | 26.5  |          |  | 23.6  |      |  | 373.8   |  | 331.3    |  | 12.8  |  
|Deferred and other revenues             |  |                    | (15.5 | ) |                     |   | (5.2  | )        |  | 195.6 |      |  |        |  |         |  |      |  
|                                        |  |                    |       |   |                     |   |       |          |  |       |      |  |         |  |          |  |       |  
|                                        |  |                    | 353.0 |   |                     |   | 322.3 |          |  | 9.5   |      |  | 4,157.1 |  | 4,110.9  |  | 1.1   |  
|Sales for resale                        |  |                    | 9.3   |   |                     |   | 11.2  |          |  | (17.0 | )    |  | 148.8   |  | 201.9    |  | (26.3 | )
|Other operating revenue                 |  |                    | 8.6   |   |                     |   | 8.6   |          |  | 0.1   |      |  |        |  |         |  |      |  
|                                        |  |                    |       |   |                     |   |       |          |  |       |      |  |         |  |          |  |       |  
|                                        |  | $                  | 370.9 |   |                     | $ | 342.1 |          |  | 8.4   |      |  | 4,305.9 |  | 4,312.8  |  | (0.2  | )
|                                        |  |                    |       |   |                     |   |       |          |  |       |      |  |         |  |          |  |       |  
|Average customers (thousands)           |  |                    | 616.5 |   |                     |   | 601.0 |          |  | 2.6   |      |  |         |  |          |  |       |  
|Retail output to line (kilowatt hours)  |  |                    |       |   |                     |   |       |          |  |       |      |  | 4,240.8 |  | 4,285.1  |  | (1.0  | )
|                                        |  |                    |       |   |                     |   |       |          |  |       |      |  |         |  |          |  |       |  



Tampa Electric CompanyNatural
gas division (Peoples Gas System)



Peoples Gas System
reported net income of $12.8 million for the quarter, compared with $11.9 million in the same period in 2003. Quarterly results reflected customer growth of 5.0 percent and higher therm sales to residential and commercial customers. Peoples Gas is
only sensitive to heating degree days during the winter months, and statewide heating degree days for the period were above normal but below 2003 levels. Sales of low-margin transportation service for interruptible customers and electric power
generators declined due to the persistent high gas prices. These customers are sensitive to the commodity price of gas, and many have the ability to switch to alternative fuels or to simply alter consumption patterns.



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A summary of PGS operating statistics for the three months ended Mar. 31, 2004 and 2003 follows:



|                                        |  |                    |        |      |        |          |  |       |      |  |       |  |          |  |       |  
|--------------------------------------- |  | ------------------ | ------ | ---- | ------ | -------- |  | ----- | ---- |  | ----- |  | -------- |  | ----- | -
|                                        |  | Operating revenues |        |      | Therms |         
|(in millions, except average customers) |  | 2004               |        | 2003 |        | % Change |  |       | 2004 |  | 2003  |  | % Change | 
|Three months ended Mar. 31,             |  |                    |        |      |        |          |  |       |      |  |       |  |          |  |       |  
|By Customer Segment:                    |  |                    |        |      |        |          |  |       |      |  |       |  |          |  |       |  
|Residential                             |  | $                  | 45.7   |      | $      | 41.6     |  | 9.7   |      |  | 29.9  |  | 29.7     |  | 0.8   |  
|Commercial                              |  |                    | 49.1   |      |        | 47.7     |  | 3.1   |      |  | 109.9 |  | 106.1    |  | 3.6   |  
|Industrial                              |  |                    | 3.0    |      |        | 3.1      |  | (1.2  | )    |  | 62.2  |  | 59.5     |  | 4.6   |  
|Off system sales                        |  |                    | 7.6    |      |        | 21.8     |  | (65.2 | )    |  | 26.2  |  | 34.1     |  | (23.3 | )
|Power generation                        |  |                    | 2.7    |      |        | 2.4      |  | 11.6  |      |  | 60.9  |  | 86.6     |  | (29.6 | )
|Other revenues                          |  |                    | 9.7    |      |        | 10.3     |  | (5.7  | )    |  |      |  |         |  |      |  
|                                        |  |                    |        |      |        |          |  |       |      |  |       |  |          |  |       |  
|                                        |  |                    | $117.8 |      | $      | 126.9    |  | (7.2  | )    |  | 289.1 |  | 316.0    |  | (8.5  | )
|By Sales Type:                          |  |                    |        |      |        |          |  |       |      |  |       |  |          |  |       |  
|System supply                           |  | $                  | 85.4   |      | $      | 95.5     |  | (10.6 | )    |  | 84.0  |  | 94.4     |  | (11.0 | )
|Transportation                          |  |                    | 22.7   |      |        | 21.1     |  | 7.9   |      |  | 205.1 |  | 221.6    |  | (7.4  | )
|Other revenue                           |  |                    | 9.7    |      |        | 10.3     |  | (5.7  | )    |  |      |  |         |  |      |  
|                                        |  |                    |        |      |        |          |  |       |      |  |       |  |          |  |       |  
|                                        |  |                    | $117.8 |      | $      | 126.9    |  | (7.2  | )    |  | 289.1 |  | 316.0    |  | (8.5  | )
|                                        |  |                    |        |      |        |          |  |       |      |  |       |  |          |  |       |  
|Average customers (thousands)           |  |                    | 304.1  |      |        | 289.6    |  | 5.0   |      |  |       |  |          |  |       |  
|                                        |  |                    |        |      |        |          |  |       |      |  |       |  |          |  |       |  



Unregulated
CompaniesOperating Results



TECO Coal



TECO Coal achieved first-quarter net income from continuing operations of
$15.4 million, compared to $25.7 million reported in the same period in 2003 which excluded a $0.3-million after-tax charge due to the adoption of FAS 143, Accounting for Asset Retirement Obligations. TECO Coals 2004 results reflect no
Section 29 tax credits due to TECO Energys expected tax losses in 2004. Results in 2004 also reflect an increased third-party ownership interest in TECO Coals synfuel production facilities in the quarter and higher prices for
conventional coals, offset by higher mining costs due, in part, to the use of marginal coals for the production of synfuel. Results in 2003 included Section 29 tax credits at the operating segment level related to the production of synthetic fuel,
$25.9 million of which were deferred at the TECO Energy parent level in the first quarter of 2003. In the first quarter of 2003, TECO Coal owned 100 percent of the synfuel production facilities; ownership by third parties approximated 90 percent in
the same period in 2004.



TECO Transport



TECO Transport recorded net income of $1.1 million in the first quarter,
including $0.8 million of impairment charges on ocean-going equipment, compared with $4.6 million for the same period last year. These results reflect significantly lower Tampa Electric volumes as a result of the Bayside repowering, where a
disproportionate share, approximately two-thirds, of the reduction in Tampa Electric tonnage occurred in the first quarter. In addition, quarterly results were affected by a five-day shut down of the lower Mississippi River due to shipping traffic,
which impacted all of TECO transports businesses, and by a heavy shipyard schedule which idled ocean-going equipment and resulted in higher repair costs. Results in the first quarter of 2003 excluded a $0.8-million after-tax charge due to the
adoption of FAS 143.



Affiliates of TECO Transport have two
operating leases with an aggregate value of about $100 million as a result of sale-leaseback transactions entered into in 2001 and 2002 that provided for a cross-default in the event TECO Energy or any of its affiliates defaulted in the payment of
certain obligations. The failure of Union and Gila River project companies to make interest payments on the non-recourse project debt could have resulted in a cross-default entitling the lessors to terminate the leases and recover certain amounts.
In March 2004, affiliates of TECO Transport and the lessors executed amendments to the leases that eliminated this possible cross-default.



TWG Merchant



TWG Merchant operations recorded a first-quarter loss of $18.7 million, compared with a loss of $11.8 million for the same period in 2003. The lower
results reflect primarily lower energy prices in the Texas market which negatively affected first quarter comparative results for the TIE plants. Additionally, the Frontera Station was off-line for maintenance during most of the quarter in 2004.



Other Unregulated Companies



TECO Energys other unregulated companies, which now include the
Guatemalan and Hamakua non-merchant power investments, recorded net income of $18.7 million for the first quarter of 2004, compared to a loss of $2.2 million for the same period in 2003. The net income for the non-merchant portfolio power operations
was $11.2 million for the period, compared toa net loss of $2.9 million, which included a $15.3 million after-tax charge for turbine purchase cancellations, for the 2003 period. The non-merchant results included continued strong results from the
Guatemalan operation including the electric distribution utility operations, which benefited from higher rates. The Other Unregulated results also include the $10.6 million after-tax gain from the



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sale of the propane business partially offset by the $3.4 million valuation adjustment at TECO Solutions for its minority interest in a fiber optics business
(Litestream) that is in bankruptcy.



Non-operating items affecting net
income



Results for the quarter, as described above,
include a $10.6 million after-tax gain on the sale of TECO Energys interest in its propane business, partially offset by a $3.4 million after-tax charge due to a valuation adjustment at TECO Solutions and an $0.8 million after-tax valuation
adjustment at TECO Transport. First quarter results from continuing operations in 2003 included a $48.9 million after-tax charge for turbine purchase cancellations at Tampa Electric, a $15.3 million after-tax charge for non-merchant turbine purchase
cancellations and a $1.1 million charge for the cumulative effect of a change in accounting principle associated with the adoption of FAS 143.



See Notes 1 and 9 to the TECO Energy Consolidated Financial Statements for additional details related to these charges.



Other Income



Other income for the three months ended Mar. 31, 2004 and 2003 was $50.3 million and $13.5 million, respectively. AFUDC at
Tampa Electric, which is included in Other income, was $0.7 million and $7.6 million, respectively, for the three months ended Mar. 31, 2004 and 2003. AFUDC has decreased, reflecting the commercial operation of Bayside Unit 1 in April 2003 and Unit
2 in January 2004. In addition, included in Other income for the three months ended Mar. 31, 2004 and 2003, are the results of operations for equity investments of $6.9 million and $2.6 million. The increase from the 2003 period to the 2004 period
is due primarily to the results of operations from the San José and Alborada power plants, which are accounted for as equity investments in accordance with the current interpretation of FIN 46R.



Interest Charges



Total interest charges for the three months ended Mar. 31, 2004 was $88.6 million, compared with $64.4 million for the same
period last year. Interest expense increased due to decreased interest expense credit for AFUDC-borrowed funds at Tampa Electric and higher overall levels of debt in support of TECO Energys and Tampa Electrics capital investment
programs. Interest expense in the first quarter of 2003 reflected capitalized interest of $10.0 million associated with the Union and Gila River projects; no interest was capitalized in 2004 for these projects which are now held for sale.



Income Taxes



The total income tax provisions differ from amounts computed by applying the
federal statutory tax rate to income before taxes, primarily due to the recognition of non-conventional fuels tax credits, the permanent reinvestment of foreign income under Accounting Principles Board Opinion No. 23, Accounting for
TaxesSpecial Areas, (APB 23) and other miscellaneous items.



The provision for income taxes as a percent of income from continuing operations, before income taxes, for the three months ended Mar. 31, 2004 and 2003 were 25.9% and 1.6%, respectively. For the three months ended Mar. 31, 2004 and 2003,
net (loss) income from discontinued operations was ($26.2) million and $24.1 million, respectively, and the provision for income taxes as a percent of income from discontinued operations was 35.1% and 39.1%, respectively.



Discontinued Operations



Net loss from discontinued operations in the first quarter of 2004 of $26.2 million includes the operating losses for the
Union and Gila River project companies. Discontinued operations for the same period in 2003 produced a net income of $24.1 million and included the results from the Union and Gila River project companies which were more than offset by the gain on
the final installment of the sale of the coalbed methane gas production assets.



Liquidity, Capital Resources



At Mar.
31, 2004 and Dec. 31, 2003, included in the current portion of Liabilities associated with assets held for sale is the $1,395.0 million of non-recourse long-term debt associated with the Union and Gila River project companies.



Available Cash and Liquidity



TECO Energys consolidated cash and cash equivalents, excluding all
restricted cash, totaled $107.6 million at Mar. 31, 2004. The cash balance at Mar. 31, 2004 excludes the San José and Alborada project cash balances of $28.3 million, as these companies were deconsolidated due to the adoption of FIN 46R,
Consolidation of Variable Interest Entities, effective Jan. 1, 2004. Restricted cash of $36.8 million includes $29.2 million from the sale of an interest in the synthetic coal production facilities, held in escrow due to TECO Energys
current credit rating.



In addition, at Mar. 31, 2004,
availability under bank credit facilities totaled $526.5 million, net of letters of credit of $44.1 million outstanding under the TECO Energy facility and $50.0 million of loans under the Tampa Electric facilities. Thus, at the end of the first
quarter, total liquidity was $634.1 million, including $216.5 million at Tampa Electric.



Future liquidity needs is expected to be lower in 2004 than in 2003 because the major construction programs at TWG and Tampa Electric are now complete, the company has no significant upcoming debt maturities, and the
companys business risk has been reduced because of the planned exit from the large Union and Gila River power projects. Accordingly, TECO Energy expects to replace its existing $350 million credit facility with a smaller facility of
approximately $200 million. Tampa Electric expects to maintain credit facilities totaling $250 million.



Estimated cash needs for the remainder of 2004 reflect capital spending of approximately $274 million to support



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customer growth at the utilities and for normal renewal and replacement capital. TECO Energy expects to rely on cash on
hand, internally generated cash from operations and proceeds from asset sales to fund these cash needs and the payment of dividends to shareholders and build cash for the repayment of debt. Based on its cash flow forecasts, TECO Energy expects to
have more than $550 million of cash and capacity under bank credit facilities at the end of 2004.



Other



TECO Energy has
not made a contribution to its defined benefit pension plan since the 1995 plan year because investment returns had been sufficient to cover liability growth. Negative stock market returns over the past three years reduced the over-funding of the
defined benefit plan. The companys policy is to fund the plan within the guidelines set by ERISA for the minimum annual contribution and the maximum allowable as a tax deduction by the IRS. The company expects to make a contribution of about
$14.2 million in 2004 and $6.9 million in 2005.



In January
2002, TECO Energy sold 17.965 million 9.5% mandatorily convertible equity security units at $25 per unit resulting in $436 million of net proceeds. Each equity unit consisted of $25 in principal amount of a trust preferred security of TECO Capital
Trust II, a Delaware business trust formed for the purposes of issuing these securities, and a contract to purchase shares of common stock of TECO Energy in January 2005 at a price per share of between $26.29 and $30.10 based on the market price at
that time. At the current market price, the price per share would be $26.29 resulting in the issuance of 17.1 million shares of TECO Energys common stock upon the settlement of the equity purchase contracts. Under the terms of the units,
unless the holder elects not to participate, the trust preferred securities are to be sold in a remarketing on Oct. 15, 2004. The annual distribution rate on the trust preferred securities to be remarketed is to be reset to a rate designed to
produce proceeds from the remarketing at least sufficient to fund the holders equity share purchase obligations. The trust preferred securities are reflected as debt on TECO Energys consolidated financial statements.



TECO Energy is currently evaluating financing alternatives with respect to
the equity security units generally and, in particular, with respect to the remarketing of the trust preferred securities. Consistent with the companys current strategy of reducing fixed obligations and strengthening the balance sheet, these
alternatives may include reducing the amount of trust preferred securities to be remarketed through exchange offers or other arrangements with holders of equity security units involving the issuance of shares of TECO Energy common stock and/or cash
payments in privately negotiated transactions or otherwise. Possible alternatives would likely reduce both the outstanding trust preferred securities and the cash we would receive upon settlement of the equity contracts. However, such arrangements
would not be expected to increase the number of shares of common stock we would issue or to materially change the price at which they are issued. Prevailing market conditions and other factors will determine what alternatives, if any, we will
pursue.



Bank Credit Facilities



At Mar. 31, 2004, Tampa Electric had bank credit facilities totaling $250
million with maturity dates in November 2004 and November 2006. At Mar. 31, 2004, $50.0 million was drawn on the Tampa Electric facilities.



The TECO Energy bank credit facility maturing November 2004 includes a $250 million sub-limit for letters of credit; $43.9 million was outstanding at Mar.
31, 2004. In February 2004, the parties reached an agreement, whereby $35 million of the $66 million in letters of credit related to the Construction Undertakings were drawn by the lending banks, and the remaining $31 million were cancelled and
returned to TECO Energy. In addition, at Mar. 31, 2004, TECO Energy and its subsidiaries had $0.2 million of letters of credit outside of the bank credit line facility outstanding, and the Union and Gila River project companies had $144.2 million
outstanding under the letter of credit facilities included in their non-recourse bank financing.



As a result of cash proceeds from asset sales in early 2004, the amended Merrill Lynch facility at TECO Energy was reduced to $20.6 million. On Apr. 8,
2004, TECO Energy elected not to extend the remaining commitment of $20.6 million for six months.



In June 2003, TECO Energy entered into a one-year $37.5 million credit facility with four banks, collateralized by 50 percent of the interests in Union
and Gila River projects. The proceeds from the credit facility were used in the termination of the joint venture agreement with Panda Energy. The facility was paid in full in February 2004.



The above facilities are discussed more fully under Bank Credit
Facilities in TECO Energys Annual Report on Form 10-K for the year ended Dec. 31, 2003, and reference is made thereto.



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Covenants in Financing Agreements



In order to utilize their respective bank credit facilities, TECO Energy and Tampa Electric must meet certain financial
tests as defined in the applicable agreements. In addition, TECO Energy, Tampa Electric and other operating companies have certain restrictive covenants in specific agreements and debt issuances. The table that follows lists the covenants and the
performance relative to them at Mar. 31, 2004.



TECO Energy Significant
Financial Covenants



|                                               |                    |                                 |                      |                                                                   |        |                            
|---------------------------------------------- | ------------------ | ------------------------------- | -------------------- | ----------------------------------------------------------------- | ------ | ---------------------------
|(millions)Instrument                           |                    | Financial Covenant (1)          |                      | Requirement/Restriction                                           |        | Calculation atMar. 31, 2004
|Tampa Electric                                 |                    |                                 |                      |                                                                   |        |                            
|PGS senior notes                               |                    | EBIT/ interest(2)               |                      | Minimum of 2.0 times                                              |        | 3.2 times                  
|                                               |                    | Restricted payments             |                      | Shareholder equity at least $500                                  |        | $1,656                     
|                                               |                    | Funded debt/capital             |                      | Cannot exceed 65%                                                 |        | 49.4%                      
|                                               |                    | Sale of assets                  |                      | Less than 20% of total assets                                     |        | %                         
|Credit facility                                |                    | Debt/capital                    |                      | Cannot exceed 60%                                                 |        | 48.8%                      
|                                               |                    | EBITDA/interest(2)              |                      | Minimum of 2.5 times                                              |        | 5.5 times                  
|                                               |                    | Restriction on distributions(3) |                      | Limit on cumulative distributions and outstanding affiliate loans |        | $487 unrestricted          
|6.25% senior notes                             |                    | Debt/capital                    |                      | Cannot exceed 60%                                                 |        | 48.8%                      
|                                               |                    | Limit on liens                  |                      | Cannot exceed $787                                                |        | $287                       
|TECO Energy                                    |                    |                                 |                      |                                                                   |        |                            
|$350 million credit facility                   |                    | Debt/capital                    |                      | Cannot exceed 65%                                                 |        | 61.9%                      
|$20.6 million Merrill credit facility(4)       |                    | Debt/capital                    |                      | Cannot exceed 65%                                                 |        | 54.0%(5)                   
|$380 million note indenture                    |                    | Limit on restricted payments(6) |                      | Cumulative operating cash flow in excess of 1.7 times interest    |        | $311 unrestricted          
|                                               |                    | Limit on liens                  |                      | Cannot exceed 5% of tangible assets                               |        | $227 unrestricted          
|                                               |                    | Limit on indebtedness           |                      | Interest coverage at least2.0 times                               |        | 2.4 times                  
|$300 million note indenture                    |                    | Limit on liens                  |                      | Cannot exceed 5% of tangible assets                               |        | $227 unrestricted          
|Union and Gila River project guarantees(7)     |                    | Debt/capital                    |                      | Cannot exceed 65%                                                 |        | 61.9%                      
|                                               | EBITDA/interest(2) |                                 | Minimum of 3.0 times |                                                                   | 2.1(8)
|TECO Diversified                               |                    |                                 |                      |                                                                   |        |                            
|Energy management services agreement guarantee |                    | Consolidated tangible net worth |                      | Minimum of $200                                                   |        | $540                       
|                                               |                    | Consolidated funded debt        |                      | Cannot exceed 60%                                                 |        | 19.6%                      
|Coal supply agreement guarantee                |                    | Dividend restriction            |                      | Net worth not less than $200 or $386 (40% of tangible net assets) |        | $540                       

---

|(1) | As defined in each applicable instrument.
|--- | -----------------------------------------

|(2) | EBIT generally represents earnings before interest and taxes. EBITDA generally represents EBIT before depreciation and amortization. However, in each circumstance, the term is
subject to the definition prescribed under the relevant legal agreements.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Limits cumulative distributions after Oct. 31, 2003 and outstanding affiliate loans to an amount representing an accumulation of net income after May 31, 2003 and capital
contributions from the parent after Oct. 31, 2003, plus $450 million.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | This credit facility, if drawn upon, can limit payment of dividends each quarter to $40 million, unless the company provides the lender with satisfactory liquidity projections
demonstrating the companys ability to pay both the dividends contemplated and each of the three quarterly dividends next scheduled to be paid. In April 2004, the company elected to not renew this credit facility.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | As a result of an amendment in December 2003, this covenant is not impacted by any write-down or write-off of the value of assets owned by TWG or the equity interests in TWG. In
April 2004, the company elected to not renew this credit facility.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | The limitation on restricted payments restricts the company from paying dividends or making distributions or certain investments unless there is sufficient cumulative operating cash
flow, as defined, in excess of 1.7 times interest to make such distribution or investment. The operating cash flow and restricted payments are calculated on a cumulative basis since the issuance of the 10.5% Notes in the fourth quarter of 2002. This
calculation, at Mar. 31, 2004, reflects the amount accumulated since the issuance of the notes and available for future restricted payments.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Includes the Construction Undertakings related to the Union and Gila River projects.
|--- | ------------------------------------------------------------------------------------

|(8) | The Construction Undertakings permit TECO Energy to terminate its obligations thereunder, including the requirement to comply with the covenants, by providing a
Substitute Guarantor reasonably satisfactory to the lending group. On Sept. 22,
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | 2003, TECO Energy tendered a Substitute Guarantor, which it believes satisfied the requirements of the Construction Undertakings. The lending group declined
to accept this tender as being satisfactory. TECO Energy has the right to assert that the Construction Undertakings are terminated in the event that the lending group seeks to exercise its remedies based on a violation of the EBITDA-to-interest
coverage ratio covenant.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Off-Balance Sheet Financing



The equity method of accounting is used to account for
investments in partnership and corporate entities in which TECO Energy or its subsidiary companies do not have either a majority ownership or exercise control. On Jan. 17, 2003, the Financial Accounting Standards Board issued FASB Interpretation
(FIN) No. 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51, which requires a new approach in determining if a reporting entity should consolidate certain legal entities, including partnerships, limited
liability companies, or trusts, among others, collectively defined as variable interest entities or VIEs. On Dec. 24, 2003, the FASB published a revision to FIN 46 (FIN 46R), to clarify some of the provisions of FIN 46 and exempt certain entities
from its requirements. (See Note 18 to the TECO Energy Consolidated Financial Statements.)



In addition to the unconsolidated affiliates reported at Dec. 31, 2003, as a result of the adoption of FIN 46R, TECO Energy was obligated to no longer
consolidate Central Generadora Eléctrica San José, Ltda. (San José) and Tampa Centro Americana de Electricidad, Ltda. (Alborada). TECO Energy has no debt payment obligations with respect to these financings due to their
non-recourse nature.



|          |  |                          |      |                          |   |                           |  |     |  
|--------- |  | ------------------------ | ---- | ------------------------ | - | ------------------------- |  | --- | -
|Affiliate |  | Long-termDebt (millions) |      | IndirectMaximumGuarantee |   | IndirectOwnershipInterest | 
|San Jose  |  | $                        | 65.5 |                          | $ |                          |  | 100 | %
|Alborada  |  | $                        | 25.0 |                          | $ |                          |  | 100 | %



Critical Accounting Policies and
Estimates



There have been no significant
changes to the critical accounting policies and estimates since Dec. 31, 2003. TECO Energys Annual Report on Form 10-K for the year ended Dec. 31, 2003, includes a detailed discussion under Critical Accounting Policies and
Estimates about the estimates and assumptions used in the preparation of consolidated financial statements, and reference is made thereto.



Disclosures About Market Risk



Interest Rate Risk



TECO Energy is exposed to changes in interest rates primarily as a result of its borrowing activities. TECO Energy or its affiliates may enter into
futures, swaps and option contracts, in accordance with the approved risk management policies and procedures, to moderate this exposure to interest rate changes and achieve a desired level of fixed and variable rate debt. As of Mar. 31, 2004, there
was no significant change in the companys exposure to interest rate risk since Dec. 31, 2003.



50



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##### Table of Contents

Credit Risk



Financial instability and significant uncertainties relating to liquidity in the entire merchant energy sector have increased the perceived credit risk.
Below is a summary of TECO Energys consolidated credit risk exposure to counterparties on energy contracts related to merchant generation activities at Mar. 31, 2004.



|                     |  |                                    |      |                     |   |             |  |                                |      |                                   |   |  |   |     
|-------------------- |  | ---------------------------------- | ---- | ------------------- | - | ----------- |  | ------------------------------ | ---- | --------------------------------- | - |  | - | ----
|(millions) Rating(1) |  | ExposureBefore CreditCollateral(2) |      | CreditCollateral(3) |   | NetExposure |  | Number ofCounterparties>10%(4) |      | Net ExposureCounterparties>10%(4)
|Investment grade     |  | $                                  | 28.6 |                     | $ |            |  | $                              | 28.6 |                                   | 2 |  | $ | 10.4
|Split rating         |  |                                    | 3.6  |                     |   |            |  |                                | 3.6  |                                   | 1 |  |   | 3.6 
|Non-investment grade |  |                                    |     |                     |   |            |  |                                |     |                                   |  |  |   |    
|No external ratings  |  |                                    |      |                     |   |             |  |                                |      |                                   |   |  |   |     
|(internally rated)   |  |                                    |      |                     |   |             |  |                                |      |                                   |   |  |   |     
|Investment grade     |  |                                    | 0.1  |                     |   |            |  |                                | 0.1  |                                   |  |  |   |    
|Non-investment grade |  |                                    |     |                     |   |            |  |                                |     |                                   |  |  |   |    
|                     |  |                                    |      |                     |   |             |  |                                |      |                                   |   |  |   |     
|Total                |  | $                                  | 32.3 |                     | $ |            |  | $                              | 32.3 |                                   | 3 |  | $ | 14.0
|                     |  |                                    |      |                     |   |             |  |                                |      |                                   |   |  |   |     

---

|(1) | Ratings are principally determined based on publicly available credit ratings, as determined by independent ratings agencies. If the counterparty has provided a guarantee by a
higher rated entity, the assigned rating is that of the guarantor. Included in Investment grade are those counterparties with a minimum S&P or Fitchs rating of BBB- or higher and a Moodys rating of Baa3 or higher.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Exposure before credit collateral includes the fair value of net energy contract assets for open positions and the net accounts receivable for realized energy contracts. Exposures
are offset by a legal counterparty where legally enforceable netting and set-off arrangements are in place.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Credit collateral is required from time-to-time based on contractual provisions and may generally include cash deposits and letters of credit.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------

|(4) | The number of counterparties that individually, after considering legally enforceable netting arrangements, represent a significant concentration of credit risk (i.e., more than 10%
of the total credit exposure). Also, the combined exposure, less credit collateral, if any, of each significant concentration.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Commodity Risk



TECO Energy and its affiliates face varying degrees of exposure to commodity risksincluding coal, natural gas, fuel oil and other energy commodity
prices. Any changes in prices could affect the prices these businesses charge, their operating costs and the competitive position of their products and services. The company assesses and monitors risk using a variety of state-of-the-art measurement
tools. Management uses different risk measurement and monitoring tools based on the degree of exposure of each operating company to commodity risk. As of Mar. 31, 2004, the commodity risk exposure at the Regulated Utilities was not significantly
different from that as of Dec. 31, 2003.



Unregulated Companies



Most of the unregulated segments at TECO Energy are
subject to significant commodity risk. The unregulated companies do not speculate using derivative instruments. However, not all derivative instruments receive hedge accounting treatment due to the strict requirements and narrow applicability of the
accounting literature to dynamic transactions. For TECO Coal, TECO Transport, and Other Unregulated Companies, as of Mar. 31, 2004 there was no significant change from Dec. 31, 2003 for commodity risks.



For TWG Merchant, results of operations are impacted primarily by changes in
the market prices for electricity and natural gas. These merchant operations use derivative instruments to reduce the commodity price risk exposure of the merchant plants. The commodity price risk of each plant is managed on both a portfolio and
asset-specific basis. As of Mar. 31, 2004, the commodity risk exposure for these merchant operations was not significantly different from that as of Dec. 31, 2003.



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##### Table of Contents

The following tables summarize the changes in and the fair value balances of energy derivative assets
(liabilities) for the quarter ended Mar. 31, 2004:



Changes in Fair Value of
Energy Derivatives (millions)



|                                                         |  |   |      |  
|-------------------------------------------------------- |  | - | ---- | -
|Net fair value of derivatives as of Dec. 31, 2003        |  | $ | 9.1  |  
|Net change in unrealized fair value of derivatives       |  |   | 1.6  |  
|Changes in valuation techniques and assumptions          |  |   |     |  
|Realized net settlement of derivatives                   |  |   | (1.2 | )
|                                                         |  |   |      |  
|Net fair value of energy derivatives as of Mar. 31, 2004 |  | $ | 9.5  |  
|                                                         |  |   |      |  



Roll-Forward of Energy Derivative
Net Assets (Liabilities) (millions)



|                                                                     |  |   |      |  
|-------------------------------------------------------------------- |  | - | ---- | -
|Total energy derivative net assets (liabilities) as of Dec. 31, 2003 |  | $ | 9.1  |  
|Change in fair value of net derivative assets (liabilities):         |  |   |      |  
|Recorded in OCI                                                      |  |   | (1.2 | )
|Recorded in earnings                                                 |  |   | 4.1  |  
|Net option premium payments                                          |  |   | (1.4 | )
|Net purchase (sale) of existing contracts                            |  |   | (1.1 | )
|                                                                     |  |   |      |  
|Net fair value of energy derivatives as of Mar. 31, 2004             |  | $ | 9.5  |  
|                                                                     |  |   |      |  



Below is a summary
table of sources of fair value, by maturity period, for energy derivative contracts at Mar. 31, 2004.



Maturity and Source of Energy Derivative Contracts Net Assets (Liabilities) at Mar. 31, 2004



|                                |  |         |      |   |             |   |      |                  |  |   |      |  
|------------------------------- |  | ------- | ---- | - | ----------- | - | ---- | ---------------- |  | - | ---- | -
|Contracts Maturing in           |  | Current |      |   | Non-current |   |      | Total Fair Value | 
|Source of fair value (millions) |  |         |      |   |             |   |      |                  |  |   |      |  
|Actively quoted prices          |  | $       | (0.8 | ) |             | $ |     |                  |  | $ | (0.8 | )
|Other external sources(1)       |  |         | 9.7  |   |             |   |     |                  |  |   | 9.7  |  
|Model prices(2)                 |  |         | 0.7  |   |             |   | (0.1 | )                |  |   | 0.6  |  
|                                |  |         |      |   |             |   |      |                  |  |   |      |  
|Total                           |  | $       | 9.6  |   |             | $ | (0.1 | )                |  | $ | 9.5  |  
|                                |  |         |      |   |             |   |      |                  |  |   |      |  

---

|(1) | Information from external sources includes information obtained from OTC brokers, industry price services or surveys and multiple-party on-line platforms.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Model prices are used for determining the fair value of energy derivatives where price quotes are infrequent or the market is illiquid. Significant inputs to the models are derived
from market observable data and actual historical experience.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



For all unrealized energy derivative contracts, the valuation is an estimate based on the best available information. Actual cash flows could be materially different from the estimated value upon maturity.



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##### Table of Contents

|Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------



See the discussion entitled Disclosures about Market Risk in Item 2. Managements Discussion and Analysis.



|Item 4. | CONTROLS AND PROCEDURES
|------- | -----------------------



TECO Energy, Inc.



|(a) | Evaluation of Disclosure Controls and Procedures. TECO Energys Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of TECO
Energys disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this quarterly
report (the Evaluation Date). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, TECO Energys disclosure controls and procedures are effective and designed to ensure that the information
relating to TECO Energy (including its consolidated subsidiaries) required to be included in TECO Energys reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the requisite time periods.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Changes in Internal Controls. There have not been any changes in TECO Energys internal controls over financial reporting that have materially affected, or are
reasonably likely to materially affect, such controls.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Tampa
Electric Company



|(a) | Evaluation of Disclosure Controls and Procedures. Tampa Electric Companys Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of Tampa
Electrics disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of a date within 90 days prior to the filing date
of this quarterly report (the Evaluation Date). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, Tampa Electrics disclosure controls and procedures are effective and designed to ensure that
the information relating to Tampa Electric (including its consolidated subsidiaries) required to be included in Tampa Electrics reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the
requisite time periods.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Changes in Internal Controls. There have not been any significant changes in Tampa Electrics internal controls over financial reporting that have materially affected,
or are reasonably likely to materially affect, such controls.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

PART II. OTHER INFORMATION



|Item  1. | LEGAL PROCEEDINGS
|-------- | -----------------



TM Delmarva Power Arbitration and Related Proceeding



A dispute resulting in an arbitration proceeding was brought against a TWG subsidiary, TM Delmarva Power, L.L.C. (TMDP), by the non-equity member, NCP of
Virginia, L.L.C. (NCP), in the Commonwealth Chesapeake Project (CCC). The arbitration panel, in a 2-to-1 decision, found in favor of NCP and issued an interim award on Dec. 17, 2002 and, after several briefing cycles and a reopened hearing, issued
its final award in September 2003.



Under the award, TMDP is
obligated to acquire NCPs voting and other rights, pay NCP interest on the deemed acquisition price from a pre-determined date, and pay NCPs legal fees as prescribed under the final award. The forced acquisition created a pre-tax loss,
recorded in the third quarter of 2003, of $32.0 million, representing the excess of the purchase price over the fair value of the interests acquired. TMDP is seeking to vacate the arbitration award in the U.S. District Court for the District of
Columbia and has not yet paid the amount of the award. As of Mar. 31, 2004, the company has reserved, but not yet paid, for the full $47.9 million, representing the maximum payment obligation for the award plus accrued interest. The vacatur
proceeding is still pending, and is expected to be completed in the second half of 2004.



Following a letter from the non-equity member raising issues that are related to the subject of the arbitration proceeding, the Securities and Exchange Commission has requested information in connection with an
informal inquiry. The company is in the process of responding to that request and intends to cooperate fully.



Other Actions



There
have been no significant developments since Dec. 31, 2003.



|Item  6. | EXHIBITS AND REPORTS ON FORM 8-K
|-------- | --------------------------------



|(a) | ExhibitsSee index on page 57.
|--- | ------------------------------



|(b) | Reports on Form 8-K
|--- | -------------------



TECO Energy, Inc. filed or furnished the following reports on Form 8-K during the first quarter of 2004.



| | 1. | Current Report on Form 8-K of Feb. 2, 2004, filing under Item 5. Other Events, to announce that TECO Energy, the Union and Gila River project companies and the
lending banks had entered into a standstill agreement through Feb. 5, 2004 relating to matters covered by the Suspension Agreement.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | Current Report on Form 8-K of Feb. 5, 2004, filing under Item 5. Other Events, to announce TECO Energys decision to exit from its ownership of the Union and
Gila River projects and to cease further funding of these plants.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | Current Report on Form 8-K of Feb. 9, 2004, furnishing under Item 12. Results of Operations and Financial Condition, financial results for the three-month and
twelve-month periods ended Dec. 31, 2003.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | Current Report on Form 8-K of Mar. 3, 2004, furnishing under Item 12. Results of Operations and Financial Condition, revised 2003 financial results for TECO
Energy, Inc.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



TECO Energy, Inc. furnished the
following report on Form 8-K subsequent to Mar. 31, 2004.



| | 1. | Current Report on Form 8-K of Apr. 28, 2004, furnishing under Item 12. Results of Operations and Financial Condition, financial results for the three-month period
ended Mar. 31, 2004.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Tampa Electric Company did
not file any reports on Form 8-K during or subsequent to the first quarter of 2004.





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##### Table of Contents

SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on the 7thday of May, 2004.



|                  |  |  |  |                                |  |                       |  |                                                                                                       
|----------------- |  |  |  | ------------------------------ |  | --------------------- |  | ------------------------------------------------------------------------------------------------------
|                  |  |  |  | TECO ENERGY, INC. (Registrant)
|                  |  |  | 
|Date: May 7, 2004 |  |  |  | By:                            |  | /s/    G. L. GILLETTE
|                  |  |  |  |                                |  |                      
|                  |  |  |  |                                |  |                       |  | G. L. GILLETTE Senior Vice
PresidentFinance and Chief Financial Officer (Principal
Financial Officer)



55



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##### Table of Contents

SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized on the 7thday of May, 2004.



|                  |  |  |  |                                     |  |                       |  |                                                                                                       
|----------------- |  |  |  | ----------------------------------- |  | --------------------- |  | ------------------------------------------------------------------------------------------------------
|                  |  |  |  | TAMPA ELECTRIC COMPANY (Registrant)
|                  |  |  | 
|Date: May 7, 2004 |  |  |  | By:                                 |  | /s/    G. L. GILLETTE
|                  |  |  |  |                                     |  |                       | 
|                  |  |  |  |                                     |  |                       |  | G. L. GILLETTE Senior Vice
PresidentFinance and Chief Financial Officer (Principal
Financial Officer)



56



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##### Table of Contents

INDEX TO EXHIBITS



|           |  |                                                                                                                                                                                                                |  |         |  
|---------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------- | -
|ExhibitNo. |  | Description                                                                                                                                                                                                    |  | PageNo. |  
|           |  |                                                                                                                                                                                                               
|3.1        |  | Articles of Incorporation of TECO Energy, Inc., as amended on April 30, 1993 (Exhibit 3, Form 10-Q for the quarter ended Mar. 31, 1993 of TECO Energy, Inc., File No. 1-8180).                                 |  | *       |  
|           |  |                                                                                                                                                                                                               
|3.2        |  | Bylaws of TECO Energy, Inc., as amended effective Jan. 18, 2001 (Exhibit 3.2, Form 10-K for the year ended Dec. 31, 2000 of TECO Energy, Inc., File No. 1-8180).                                               |  | *       |  
|           |  |                                                                                                                                                                                                               
|3.3        |  | Articles of Incorporation of Tampa Electric Company (Exhibit 3, Registration Statement No. 2-70653 of Tampa Electric Company, File No. 1-5007).                                                                |  | *       |  
|           |  |                                                                                                                                                                                                               
|3.4        |  | Bylaws of Tampa Electric Company, as amended effective April 16, 1997 (Exhibit 3, Form 10-Q for the quarter ended June 30, 1997 of Tampa Electric Company, File No. 1-5007).                                   |  | *       |  
|           |  |                                                                                                                                                                                                               
|10.1       |  | Amended and Restated Guarantee, dated as of Mar. 12, 2004, by TECO Energy, Inc. and TECO Transport Corporation, jointly and severally in favor of the Guaranteed Parties as defined
therein.                   |  | [       | ]
|           |  |                                                                                                                                                                                                               
|10.2       |  | TECO Energy, Inc. 2004 Equity Incentive Plan. **                                                                                                                                                               |  | [       | ]
|           |  |                                                                                                                                                                                                               
|12.1       |  | Ratio of Earnings to Fixed ChargesTECO Energy, Inc.                                                                                                                                                           |  | [       | ]
|           |  |                                                                                                                                                                                                               
|12.2       |  | Ratio of Earnings to Fixed ChargesTampa Electric Company.                                                                                                                                                     |  | [       | ]
|           |  |                                                                                                                                                                                                               
|31.1       |  | Certification of the Chief Executive Officer of TECO Energy, Inc. pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.            |  | [       | ]
|           |  |                                                                                                                                                                                                               
|31.2       |  | Certification of the Chief Financial Officer of TECO Energy, Inc. pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.            |  | [       | ]
|           |  |                                                                                                                                                                                                               
|31.3       |  | Certification of the Chief Executive Officer of Tampa Electric Company pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.       |  | [       | ]
|           |  |                                                                                                                                                                                                               
|31.4       |  | Certification of the Chief Financial Officer of Tampa Electric Company to Securities Exchange Act Rules 13a-14 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.                |  | [       | ]
|           |  |                                                                                                                                                                                                               
|32.1       |  | Certification of the Chief Executive Officer and Chief Financial Officer of TECO Energy, Inc. pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.(1)      |  | [       | ]
|           |  |                                                                                                                                                                                                               
|32.2       |  | Certification of the Chief Executive Officer and Chief Financial Officer of Tampa Electric Company pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.(1) |  | [       | ]

---

|(1) | This certification accompanies the Quarterly Report on Form 10-Q and is not filed as part of it.
|--- | ------------------------------------------------------------------------------------------------

|* | Indicates exhibit previously filed with the Securities and Exchange Commission and incorporated herein by reference. Exhibits filed with periodic reports of TECO Energy, Inc. and
Tampa Electric Company were filed under Commission File Nos. 1-8180 and 1-5007, respectively.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|** | Indicates a compensatory plan in which executive officers of TECO Energy, Inc. may participate in.
|-- | --------------------------------------------------------------------------------------------------



57