Dealmakers:Rod Bell and Carlos Mastrapa
The Deal: The partners in Holland & Knight’s Miami office represented TECO Energy Inc. in a series of transactions selling its international operations for $227.5 million in cash.
Details: The Tampa-based energy holding company sold its oil-fired power plant in Alborada, Guatemala, for $12.5 million to Sur Electrica Holding Ltd., which also wanted to buy the company’s San Jose power station and solid fuel handling and port facilities in the Central American nation for $213.5 million.
But C.F. Financeco Ltd., TECO’s longtime minority partner in Guatemala, had a right of first refusal and matched Sur Electrica’s offer for the San Jose package.
"It was a pretty large transaction to have right of first refusal and then have it go through," Bell said.
C.F. Financeco also purchased TECO’s remaining real estate assets and business operations in Guatemala for $1.5 million.
TECO Energy announced the agreements with Sur Electrica on Sept. 27, the day the Alborada deal closed. C.F. Financeco exercised its preferential rights Oct. 17. The seller was TECO’s international power subsidiary, TECO Guatemala, which completed the transactions Dec. 19.
"Our sale of the Guatemalan companies reflects our commitment to our core utility operations. We took advantage of an attractive opportunity to obtain good value and closed on the sale of those operations in December," TECO Energy president and chief executive officer John Ramil said in a statement.
Unlike many other deals that closed in the waning weeks of 2012, Bell said he was not struggling to meet a deadline for the sale.
"It was the way it worked out. It closed when it closed," he said.
Citi was the company’s exclusive financial adviser on the sales.
TECO Energy used $25.3 million of the net proceeds to repay San Jose power station project debt at closing, it reported in a filing with the Securities and Exchange Commission. The company reclassified TECO Guatemala as a discontinued operation in the third quarter.
The company posted 2012 losses for discontinued operations of $33.3 million, which included power plant operations in Guatemala through the closing, a $28.6 million loss on assets sold including transaction costs and a $22.9 million charge associated with foreign tax credits.
TECO Energy planned to apply the remaining $202 million in proceeds to repurchase common stock and reduce debt.
Its principal subsidiary, Tampa Electric Co., has both electric and gas divisions. Its other major subsidiary, TECO Coal, owns and operates coal production facilities in Kentucky and Virginia.
TECO Energy expected the sales to dilute earnings per share in 2013 and 2014 because the share repurchase and debt retirements will not fully offset the elimination of about $20 million in annual profits from TECO Guatemala. In addition, the business absorbed about a pretax $6 million in annual interest.
But the company said the sale eliminated three uncertainties in 2015 and beyond — the expiration of the Alborada power sales contract, the expiration and extension of the San Jose power sales contract and C.F. Financeco’s right to purchase a half stake in the San Jose station.
"Over the life of the investments, our Guatemalan power stations have provided good returns and cash that we’ve used to help strengthen TECO Energy’s balance sheet and invest in our U.S. utilities." Ramil said.
Quote: "It’s always an intriguing negotiation when you have someone out there with the right of first refusal," Bell said.
Background:Bell leads Holland & Knight’s securities and public companies practice in South Florida. Mastrapa, who also is a certified public accountant, focuses on general corporate and business law with an emphasis on mergers and acquisitions. Both are partners in the Miami office. Partner Bill Sherman in Fort Lauderdale handled international tax issues.