This Management's Discussion and Analysis contains forward-looking statements, which are subject to the inherent uncertainties in predicting future results and conditions. Actual results may differ materially from those forecasted. The forecasted results are based on the company's current expectations and assumptions, and the company does not undertake to update that information or any other information contained in this Form 10-Q, except as may be required by law. Factors that could impact actual results include: regulatory actions by federal, state or local authorities, including the decision by the Florida Public Service Commission regarding new base rates at Peoples Gas System scheduled for May; unexpected capital needs or unanticipated reductions in cash flow that affect liquidity; access to capital and credit markets when required in the current unsettled economic conditions; the availability of adequate rail transportation capacity for the shipment of TECO Coal's production; general economic conditions affecting energy sales at the utility companies; economic conditions, both national and international, affecting the Florida economy and demand for TECO Coal's production; weather variations and changes in customer energy usage patterns affecting sales and operating costs at Tampa Electric and Peoples Gas and the effect of extreme weather conditions or hurricanes; operating conditions, commodity price and operating cost changes affecting the production levels and margins at TECO Coal, fuel cost recoveries and cash at Tampa Electric and natural gas demand at Peoples Gas; the ability of TECO Energy's subsidiaries to operate equipment without undue accidents, breakdowns or failures; the ability to increase the amount of power generated by the San Josè Power Station during a period of lower oil prices; and the ultimate outcome of efforts to revise the significantly lower EEGSA VAD tariff rates implemented by regulatory authorities in Guatemala effective Aug. 1, 2008 affecting TECO Guatemala's results. Additional information is contained under "Risk Factors" in TECO Energy, Inc.'s Annual Report on Form 10-K for the period ended Dec. 31, 2008.

Earnings Summary - Unaudited



                                                      Three months ended
                                                           Mar. 31,
            (millions, except per share amounts)       2009         2008
            Consolidated revenues                   $    824.0    $  791.7

            Net income from continuing operations         34.7        30.8

            Net income                              $     34.7    $   30.8

            Average common shares outstanding
            Basic                                        211.4       209.7
            Diluted                                      212.2       210.6

            Earnings per share - basic
            Continuing operations                   $     0.16    $   0.15

            Earnings per share - basic              $     0.16    $   0.15

            Earnings per share - diluted
            Continuing operations                   $     0.16    $   0.15

            Earnings per share - diluted            $     0.16    $   0.15

Operating Results

Three Months Ended Mar. 31, 2009:

TECO Energy, Inc. reported first-quarter net income of $34.7 million or $0.16 per share, compared to $30.8 million, or $0.15 per share, in the first quarter of 2008. First-quarter 2009 net income included an $8.7 million net gain on the sale of TECO Guatemala's 16.5% interest in the Central American fiber optic telecommunications provider Navega, and a $3.6 million valuation adjustment to student loan securities held at TECO Energy parent. First-quarter 2008 net income included a $0.6 million charge for adjustments to previously estimated costs associated with the sale of TECO Transport.

Operating Company Results

All amounts included in the operating company and "Other and Eliminations" discussions are after-tax, unless otherwise noted.

Tampa Electric Company - Electric division (Tampa Electric)

Tampa Electric reported net income for the first quarter of $18.3 million, compared with $15.9 million for the same period in 2008. Results for the quarter reflected slightly higher retail energy sales, a 0.2% lower average number of customers, and higher operations and maintenance expenses. Net income included $3.3 million of Allowance for Funds Used During Construction (AFUDC) - equity, which represents allowed equity cost capitalized to construction costs, related to the installation of nitrogen oxide pollution control equipment and combustion turbines for peak loads, compared with $1.3 million in the 2008 period. Sales to other utilities declined 23% from the 2008 period, reflecting lower demand and lower natural gas prices.

In the first quarter of 2009, there was no reduction in net income due to the waterborne transportation disallowance for the transporation of solid fuel, compared to a $1.6 million reduction in the 2008 period. In November 2008, the Florida Public Service Commission (FPSC)-approved Tampa Electric's fuel adjustment filing, which included full recovery of waterborne transportation costs under new contracts effective Jan. 1, 2009. This approval eliminates the annual reduction in net income that occurred in 2004 through 2008 during the previous transportation contract.

Total retail energy sales increased 0.1%, driven primarily by higher sales to weather-sensitive residential customers partially offset by lower sales to commercial and non-phosphate industrial customers. Sales to the residential customer segment increased 6.2% in the first quarter primarily due to colder winter weather patterns. Total degree days in Tampa Electric's service area were 3% above normal and 14% above the first quarter 2008. Pretax base revenues increased $4.8 million in the quarter primarily due to the colder winter weather; other operating income was essentially unchanged from the 2008 period, as higher earnings on the new selective catalytic reduction equipment through the environmental cost recovery clause and increased by-product sales were offset primarily by lower off-system sales of electricity.

Operations and maintenance expense, excluding all FPSC-approved cost recovery clauses, increased $2.9 million. The increase included $0.8 million related to maintenance on power generating equipment, $0.3 million higher bad-debt expense, $1.0 million of higher employee benefit related costs, primarily pension, and $0.6 million higher distribution system maintenance expense.

Compared to the first quarter of 2008, depreciation expense increased $1.7 million, reflecting additions to facilities to serve customers. Interest expense at Tampa Electric decreased slightly due to lower interest on tax-exempt debt remarketed in March 2008, which more than offset the impact of higher long-term debt balances outstanding, and interest income decreased due to lower under-recovered fuel balances on which interest is accrued.

On Mar. 17, 2009 the FPSC made a final determination of the revenue requirements in Tampa Electric's base revenue increase filing. The total annual revenue increase in 2010 is approximately $138 million, consisting of two components. The first component is the 2009 annual base revenue increase of approximately $104 million, with new rates effective May 7, 2009. Tampa Electric will benefit from almost eight months of the new base rates in 2009, with a full-year benefit in 2010. The second component is a step increase effective in January 2010 of approximately $34 million to reflect the revenue requirements associated with combustion turbines to serve peak load requirements and rail unloading facilities to provide bimodal fuel delivery capability that are currently under construction and expected to be in service by year-end 2009. This second step increase is subject to two conditions: 1) the facilities being in service by year-end 2009, and 2) a prudence review as to whether the combustion turbines are required to serve customer load.

The revenue requirements for 2009 and 2010 reflect a mid-point return on equity (ROE) of 11.25%. The allowed equity in the capital structure is 53.94% from all financial sources of capital (and 46.04% including other regulatory sources of capital such as deferred taxes and customer deposits) on an allowed rate base of $3.4 billion. The allowed ROE also applies to other regulatory calculations such as AFUDC and the allowed return on investments recovered through the Environmental Cost Recovery Clause.

As part of its base rate increase Tampa Electric also requested modifications to its cost of service methodology and rate design, which were also approved by the FPSC. Based on the approved 2009 revenue requirements the FPSC voted on Apr. 7, 2009 to approve the resulting base rates and service charges, effective May 7, 2009. The new base rates and service charges will remain in effect until such time as changes are occasioned by an agreement approved by the FPSC or other FPSC actions as a result of rate or other proceedings initiated by Tampa Electric, FPSC staff or other interested parties.

A summary of Tampa Electric's operating statistics for the three months ended Mar. 31, 2009 and 2008 follows:

                                                 Operating Revenues                Kilowatt-hour sales
(millions, except average customers)       2009        2008       % Change      2009      2008     % Change
Three months ended Mar. 31,
By Customer Type
Residential                               $ 251.0     $ 207.0         21.3     1,887.7   1,778.1        6.2
Commercial                                  166.3       147.5         12.7     1,399.9   1,468.0       (4.6 )
Industrial - Phosphate                       21.0        16.6         26.5       246.8     244.7        0.9
Industrial - Other                           29.3        27.3          7.3       272.2     305.8      (11.0 )
Other sales of electricity                   50.0        42.6         17.4       414.5     418.6       (1.0 )
Deferred and other revenues (1)             (32.5 )      (7.3 )      345.2          -         -          -

                                            485.1       433.7         11.9     4,221.1   4,215.2        0.1
Sales for resale                             12.1        16.0        (24.4 )     145.5     189.1      (23.1 )
Other operating revenue                      10.4        10.8         (3.7 )        -         -          -
SO2 Allowance sales                            -          1.0       (100.0 )        -         -          -

                                          $ 507.6     $ 461.5         10.0     4,366.6   4,404.3       (0.9 )

Average customers (thousands)               667.3       668.9         (0.2 )
Retail output to line (kilowatt hours)                                         4,362.6   4,357.7        0.1

(1) Primarily reflects the timing of environmental and fuel clause recoveries.

Tampa Electric Company - Natural gas division (PGS)

Peoples Gas reported net income of $11.2 million for the first quarter, compared to $10.0 million in the same period in 2008. Quarterly results reflect a 0.2% lower average number of customers, increased sales to residential and commercial customers due to colder winter weather, and higher base rates due to an interim rate increase of $2.4 million (annual) granted in October 2008. Gas transported for power generation customers increased over the first quarter of 2008, when volumes were reduced due to mild weather and the use of other fuels for power generation. Non-fuel operations and maintenance expense increased, primarily due to higher spending on pipeline integrity inspections partially offset by lower medical claims costs. Results also reflect higher depreciation expense due to routine plant additions.

A summary of PGS' regulated operating statistics for the three months ended Mar. 31, 2009 and 2008 follows:

Tampa Electric Company - Natural gas division (PGS)

                                                  Operating Revenues                   Therms
(millions, except average customers)          2009      2008     % Change     2009    2008    % Change
Three months ended Mar. 31,
By Customer Type
Residential                                  $  59.4   $  48.8       21.7      33.1    27.8       19.1
Commercial                                      47.2      44.3        6.5     110.1   107.0        2.9
Industrial                                       2.2       2.2         -       46.9    46.7        0.4
Off system sales                                26.4      68.6      (61.5 )    51.0    78.6      (35.1 )
Power generation                                 2.7       3.4      (20.6 )   108.1   106.7        1.3
Other revenues                                  13.0       9.8       32.7        -       -          -

Total                                        $ 150.9   $ 177.1      (14.8 )   349.2   366.8       (4.8 )

By Sales Type
System supply                                $ 113.7   $ 142.7      (20.3 )   102.2   123.9      (17.5 )
Transportation                                  24.2      24.6       (1.6 )   247.0   242.9        1.7
Other revenues                                  13.0       9.8       32.7        -       -          -

Total                                        $ 150.9   $ 177.1      (14.8 )   349.2   366.8       (4.8 )

Average customers (thousands)                  335.6     336.1       (0.2 )

TECO Coal

TECO Coal achieved first-quarter net income of $8.0 million, compared to $7.5 million in the same period in 2008. In 2008, net income included a $0.6 million after-tax benefit reflecting the final adjustment to the 2007 inflation factor applied to the tax credit available on the production of synthetic fuel. Due to tax depletion differences between periods, in the first quarter of 2009, TECO Coal's effective income tax rate was 14% compared to 20% in the 2008 period. TECO Coal's normal effective tax rate is expected to be about 25% annually.

Total sales were 2.3 million tons in the 2009 first quarter, compared with 2.4 million tons in the 2008 period and reflected a sales mix more heavily weighted to lower-margin steam coal due to the timing of metallurgical coal shipments. Average net selling prices, excluding all transportation allowances, in the first quarter of 2009 increased 22% over the average net selling prices in the first quarter of 2008 due to the benefit of contracts signed in the favorable 2008 price environment. The average selling price increase was restrained in the first quarter due to carry-over tons from 2008 at lower contract prices. In the first quarter of 2009, the fully-loaded per-ton cost of production, which includes depreciation, depletion, amortization, interest expense, taxes other than income and general and administrative expense, at $66 per ton, was 23% higher than in the first quarter of 2008, driven by higher costs for petroleum-related products hedged in 2008, higher royalties related to higher selling prices and higher labor costs.

For the past several years, the issuance of permits by the U.S. Army Corp of Engineers (USACE) under Section 404 of the Clean Water Act required for surface mining activities in the Central and Northern Appalachian mining regions has been challenged in the courts. These challenges have been appealed by various mining companies affected on a number of occasions, but very few permits have been issued over the past several years. In March 2009, the U.S. Environmental Protection Agency (EPA) announced that it would further review new permits to be issued by the USACE. The impact of additional reviews by EPA is uncertain. To date, TECO Coal has had one permit for one new mine delayed by the ongoing court challenges to new permits; however, a portion of TECO Coal's planned 2009 production, approximately 3%, is based on the expectation that it will receive a new surface mine permit in a timely manner. In the event that the permit is not received as anticipated, TECO Coal expects to meet contract requirements through production from other facilities or through purchased coal.

TECO Guatemala

TECO Guatemala reported first-quarter net income of $13.2 million in 2009, compared to $10.5 million in the 2008 period. TECO Guatemala's first quarter net income included the $8.7 million gain on the sale of Navega. The 2009 results reflect $2.0 million of lower net income from the distribution utility, Empresa Eléctrica de Guatemala (EEGSA), as a result of the reduction in the value added distribution tariff (VAD) in August 2008, which was partially offset by customer and energy sales growth. The 2009 results also reflect significantly lower contract and spot energy sales by the San Jose Power Station due to unplanned outages for most of the first quarter as a result of turbine and generator problems.

In Guatemala, the electricity rates for regulated end-users consist of several components, including the costs associated with electricity generation and transmission, as well as the VAD. The VAD serves as the principal source of income for the Guatemalan electricity distribution companies such as EEGSA and is recalculated through regulatory proceedings every five years. In accordance with established regulatory procedures, EEGSA submitted its proposal for the VAD reset to the National Electric Energy Commission (CNEE) on Mar. 31, 2008. CNEE and EEGSA were unable to agree on the VAD reset and a Technical Committee was formed to settle the disagreement over the VAD. Rejecting the report of the Technical Committee, the CNEE ordered the dissolution of the Technical Committee and then issued resolutions establishing new tariff schedules for end-users which came into force on Aug. 1, 2008. The new tariff rates imposed by CNEE deviated significantly from the rates calculated in accordance with the Technical Committee's ruling and are, on average, approximately 50% lower than the VAD rates that were in force during the 2003-2008 tariff period. The new lower VAD set by CNEE essentially puts all of EEGSA's earnings at risk during the time this tariff remains in effect. TECO Guatemala's share of EEGSA's net income had previously averaged about $10 million annually.

As a result of these actions, on Jan. 13, 2009, our subsidiary, TECO Guatemala Holdings, LLC, (TGH) delivered a Notice of Intent to the Guatemalan government indicating its intent to file an arbitration claim against the Republic of Guatemala under the Dominican Republic-Central America-United States Free Trade Agreement (DR-CAFTA). A Notice of Intent is the first step in the process of filing an arbitration claim under the DR-CAFTA. A claimant must wait at least 90 days after the Notice of Intent before submitting a claim to arbitration. EEGSA continues to seek to resolve the VAD issue with the Guatemalan regulators; however an arbitration filing under DR-CAFTA by TECO Guatemala remains an option.

In the normal course of business, TECO Guatemala evaluated its $150.3 million investment in DECA II, including associated goodwill at Dec. 31, 2008 and determined that the value was not impaired. However, the outcome of the ongoing efforts and a potential arbitration under a DR-CAFTA claim is uncertain, and could impact this determination in the future.

An uncertainty has emerged with respect to TECO Guatemala's extension of its power purchase agreement (PPA) with EEGSA for the Alborada Power Station. The original 15-year term of the PPA expires in September 2010. In 2001, the owner of the Alborada Power Station paid for and secured an option to extend the term of the PPA for five years (the Option). At that time, the CNEE expressly authorized the pass-through of all costs under the extension of the PPA to EEGSA's regulated customer base. Most recently, the same entity issued a letter to EEGSA denying the pass-through of any costs under an extension of the PPA, citing electricity regulations adopted in 2007. EEGSA has initiated an appeal of CNEE's position on this matter and TECO Guatemala continues to evaluate the situation considering potential political and legal action to protect the interests of the owner of the Alborada Power Station.

Other and Eliminations

The cost for Parent/other in the first quarter was $16.0 million compared to a cost of $13.1 million in the 2008 period. Included in first quarter 2009 Parent/other cost was the $3.6 million valuation adjustment on student-loan securities held at TECO Energy parent. In 2008, the cost for Parent/other in the first quarter included the $0.6 million of after-tax adjustment to previously estimated transaction costs related to the sale of TECO Transport.

Income Taxes

The provisions for income taxes from continuing operations for the three month periods ended Mar. 31, 2009 and Mar. 31, 2008 were $17.8 million and $13.1 million, respectively. The provision for income taxes from continuing operations in the three months ended Mar. 31, 2009 was impacted by TECO Guatemala's sale of its 16.5% interest in Navega.

Liquidity and Capital Resources

The table below sets forth the Mar. 31, 2009 consolidated liquidity and cash
balances, the cash balances at the operating companies and TECO Energy parent,
and amounts available under the TECO Energy/TECO Finance and Tampa Electric
Company credit facilities.



                                                 Balances as of Mar. 31, 2009
                                                       Tampa Electric
   (millions)                        Consolidated         Company        Other    Parent
   Credit facilities                 $       675.0    $          475.0   $   -    $ 200.0
   Drawn amounts / LCs                       144.5                97.4       -       47.1

   Available credit facilities               530.5               377.6       -      152.9

   Cash and short-term investments            34.9                 9.3      8.3      17.3

   Total liquidity                   $       565.4    $          386.9   $  8.3   $ 170.2

Consolidated other cash and short-term investments includes $8.2 million of cash at the unregulated operating companies for normal operations. In addition to consolidated cash, as of Mar. 31, 2009, unconsolidated affiliates owned by TECO Guatemala, CGESJ (San José) and TCAE (Alborada) had unrestricted cash balances of $29.0 million, which are not included in the table above. As a result of the sale of Navega, $29.0 million of cash was repatriated to TECO Energy in the first quarter.

In general, we target to maintain consolidated liquidity (unrestricted cash on hand plus undrawn credit facilities) of at least $500 million. As shown in the preceding table, at Mar. 31, 2009 our consolidated liquidity was $565 million, consisting of $387 million at Tampa Electric Company, $170 million at TECO Energy parent and $8 million at the other consolidated operating companies.

We expect our sources of cash in 2009 to include the expected collection of under-recovered fuel balances from 2008, supplemented by an expected issuance of long-term debt by Tampa Electric Company. We plan to use cash in 2009 for capital spending and for dividends to shareholders. We have no significant debt maturities in 2009.

Tampa Electric Company expects to access the debt capital markets in 2009 for long-term debt to support its capital spending program, and expects to utilize its credit facilities for normal working capital fluctuations.

Covenants in Financing Agreements

In order to utilize their respective bank credit facilities, TECO Energy, TECO Finance and Tampa Electric Company must meet certain financial tests as defined in the applicable agreements. In addition, TECO Energy, TECO Finance, Tampa Electric Company and other operating companies have certain restrictive covenants in specific agreements and debt instruments. TECO Energy, TECO Finance, Tampa Electric Company and the other operating companies are in compliance with all applicable financial covenants. The table that follows lists the covenants and the performance relative to them at Mar. 31, 2009. Reference is made to the specific agreements and instruments for more details.

Significant Financial Covenants



(millions, unless
otherwise indicated)   Financial Covenant                                Calculation at
     Instrument                (1)           Requirement/Restriction     Mar. 31, 2009
Tampa Electric
Company
PGS senior notes       EBIT/interest (2)     Minimum of 2.0 times      3.0 times
                       Restricted payments   Shareholder equity at     $2,074
                                             least $500
                       Funded debt/capital   Cannot exceed 65%         49.4%
                       Sale of assets        Less than 20% of total    0%
                                             assets
Credit facility (3)    Debt/capital          Cannot exceed 65%         49.1%
Accounts receivable    Debt/capital          Cannot exceed 65%         49.1%
credit facility (3)
6.25% senior notes     Debt/capital          Cannot exceed 60%         49.1%
                       Limit on liens (5)    Cannot exceed $700        $0 liens
                                                                       outstanding
Insurance agreements   Limit on liens (5)    Cannot exceed $416        $0 liens
relating to certain                          (7.5% of net assets)      outstanding
pollution bonds

TECO Energy/TECO
Finance
Credit facility (3)    Debt/EBITDA (2)       Cannot exceed 5.0 times   4.4 times
                       EBITDA/interest (2)   Minimum of 2.6 times      3.6 times
                       Limit on additional   Cannot exceed $1,087      $0
                       indebtedness
                       Dividend              Cannot exceed $51 per     $43
                       restriction (4)       quarter
TECO Energy 7.5%       Limit on liens        Cannot exceed $283 (5%    $0 liens
notes                  (5)(7)                of tangible assets)       outstanding
TECO Energy floating   Restrictions on                 (6)                    (6)
rate and 6.75% notes   secured debt (7)
and TECO Finance
6.75% notes

TECO Diversified
Coal supply            Dividend              Net worth not less than   $536
agreement guarantee    restriction           $305 (40% of tangible
                                             net assets)

(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 agreements.

(3) See description of credit facilities in Note 6 to Amendment No. 1 to the 2008 TECO Energy, Inc. Annual Report on Form 10-K.

(4) TECO Energy cannot declare quarterly dividends in excess of the restricted amount unless liquidity projections demonstrating sufficient cash or cash equivalents to make each of the next three quarterly dividend payments are delivered to the Administrative Agent.

(5) If the limitation on liens is exceeded, the company is required to provide ratable security to the holders of these notes.

(6) The indentures for these notes contain restrictions which limit secured debt of TECO Energy if secured by Principal Property or Capital Stock or . . .