Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS

Operating Company Results

Amounts included below are pre-tax, except net income and income taxes.

Tampa Electric's net income for the third quarter of 2025 was $220 million, compared with $185 million for the same period in 2024. Results primarily reflected higher base revenue resulting from the 2024 rate case. Base revenues are energy sales excluding revenues from clauses, gross receipts taxes and franchise fees. Clauses, gross receipts taxes and franchise fees do not have a material effect on net income as these revenues substantially represent a dollar-for-dollar recovery of clause and other pass-through costs.

Revenues for the third quarter of 2025 were $197 million higher than in the same period in 2024, driven by higher base revenue due to new base rates as a result of the 2024 rate case, storm surcharge revenue, increased regulatory deferral revenue, and customer growth. Total degree days (a measure of heating and cooling demand) in Tampa Electric's service area in the third quarter of 2025 were 5% above normal (a 20-year statistical degree day average) and consistent with same period in 2024.

O&M expense for the third quarter of 2025 was $85 million higher than in 2024 due to increased storm cost recognition of $84 million related to storm surcharge revenue (offset in revenue) and increased operational expenses of $14 million, partially offset by decreased regulatory deferrals of $13 million. The increase in operating expenses was primarily due to higher costs for employee benefits, operations related to solar investments, and software maintenance. The decrease in regulatory deferrals is primarily due to the 2024 deferral of the benefit from production tax credits. During 2022 through 2024, TEC recorded a regulatory liability of $57 million to defer the benefit of PTCs. Starting in 2025, the deferred PTC benefit is being amortized over a three-year period (see Note 3 to the TEC Condensed Financial Statements for further information). O&M related to regulatory deferrals decreased by $16 million in 2025 due to the absence of the $11 million deferral of benefits from PTCs in the third quarter of 2024 and the $5 million amortization of the regulatory liability in the third quarter of 2025. Depreciation and amortization expense increased $13 million for the third quarter of 2025 compared to 2024 as a result of additions to facilities and the in-service of capital projects.

Tampa Electric's net income year-to-date 2025 was $522 million, compared with $384 million for the same period in 2024. Results primarily reflected higher base revenues resulting from the 2024 rate case.

Revenues were $465 million higher than year-to-date 2024 primarily driven by higher base revenue due to new base rates as a result of the 2024 rate case, storm surcharge revenue, increased regulatory deferral revenue, favorable weather compared to the same period in 2024, and customer growth. Total degree days (a measure of heating and cooling demand) in Tampa Electric's service area year-to-date 2025 were 8% above normal (a 20-year statistical degree day average) and 4% above the 2024 period, reflecting favorable weather year-to-date in 2025 compared to 2024. Results also reflect a 1% increase in the number of customers year-to-date in 2025 compared to the same period in 2024.

O&M expense was $157 million higher than year-to-date 2024 due to storm cost recognition of $168 million related to storm surcharge revenue (offset in revenue) and increased operational expenses of $24 million, partially offset by decreased regulatory deferrals of $35 million. The increase in operating expenses was primarily due to higher costs for employee benefits, operations related to solar investments, and software maintenance, partially offset by timing of generation outages. The decrease in regulatory deferrals is primarily due to the deferred benefit from production tax credits. During 2022 through 2024, TEC recorded a regulatory liability of $57 million to defer the benefit of PTCs. Starting in 2025, the deferred PTC benefit is being amortized over a three-year period (see Note 3 to the TEC Condensed Financial Statementsfor further information). O&M related to regulatory deferrals decreased by $43 million in 2025 due to the absence of the $29 million deferral of benefits from PTCs in year-to-date 2024 and the $14 million amortization of the regulatory liability in year-to-date 2025. Depreciation and amortization expense increased $34 million year-to-date 2025 compared to the same period in 2024 primarily due to additions to facilities and the in-service of capital projects.

TEC's regulated operating statistics for the three and nine months ended September 30, 2025 and 2024 were as follows:

Other Income

For the third quarter of 2025 and 2024, respectively, TEC's other income was $14 million and $13 million, which included AFUDC-equity of $7 million and $9 million and other income of $7 million and $4 million. For the year-to-date periods in 2025 and 2024, respectively, TEC's other income was $47 million and $33 million, which included AFUDC-equity of $28 million and $20 million and other income of $19 million and $13 million. The decrease in AFUDC-equity in the third quarter of 2025 compared to the third quarter of 2024 is due to the timing of the in-service of resiliency projects. The increase in AFUDC-equity in year-to-date 2025 compared to year-to-date 2024 is primarily due to the timing of solar, resiliency and other projects and an increase in the applicable AFUDC rate. On April 24, 2025, the FPSC approved to change the rate used to account for AFUDC from 6.07% to 6.65% effective January 1, 2025.

Interest Expense

For the third quarter of 2025 and 2024, TEC's interest expense, excluding AFUDC-debt, was $59 million and $52 million, respectively. For the year-to-date periods in 2025 and 2024, TEC's interest expense, excluding AFUDC-debt, was $171 million and $152 million, respectively. The increase is due to higher borrowings, primarily resulting from storm costs incurred in 2024 and support of TEC's capital program.

Income Taxes

The provisions for income taxes were $37 million and $27 million for the three months ended September 30, 2025 and 2024, respectively, and $88 million and $53 million for the nine months ended September 30, 2025 and 2024, respectively. Compared to the 2024 periods, the increase in the provision for income taxes for the three and nine months ended September 30, 2025 was primarily due to higher pre-tax income, partly offset by higher benefit from production tax credits related to solar facilities and increased amortization of the deferred investment tax credit related to battery storage facilities.

Liquidity and Capital Resources

The table below sets forth the September 30, 2025 liquidity, cash balances and amounts available under the TEC credit facilities.

Cash Impacts Related to Operating Activities

Cash flows from operating activities in the nine months ended September 30, 2025 were $632 million, a decrease of $221 million compared to the same period in 2024. Decreases to cash from operations were primarily due to higher fuel costs driving under-recoveries and changes in accounts receivable balances resulting from increased base rates reflected in customer bills.

Cash Impacts Related to Financing Activities

Cash flows from financing activities for the nine months ended September 30, 2025 resulted in net cash inflows of $481 million. TEC received $400 million of equity contributions from Parent and $593 million of net proceeds from a long-term debt issuance, partially offset by $126 million of net payments in short-term debt with maturities with 90 days or less and $386 million of dividends to Parent.

Covenants in Financing Agreements

In order to utilize its bank credit facilities, TEC must meet certain financial tests as defined in the applicable agreements. In addition, TEC has certain restrictive covenants in specific agreements and debt instruments. At September 30, 2025, TEC was in compliance with all applicable financial covenants. The following table contains the significant financial covenant and the performance relative to it at September 30, 2025.

Significant Financial Covenants

Credit Ratings of Senior Unsecured Debt at September 30, 2025

Certain of TEC's derivative instruments contain provisions that require TEC's debt to maintain investment-grade credit ratings.

Commitments and Contingencies

See Note 8to the TEC Condensed Financial Statements for information regarding TEC's commitments and contingencies as of September 30, 2025.

Regulatory Matters

See Note 3to the TEC Condensed Financial Statements for information regarding TEC's regulatory matters, including TEC's request for a base rate increase and TEC's storm restoration cost recovery.

Fair Value Measurements

TEC considered the impact of nonperformance risk in determining the fair value of derivatives. TEC considered the net position with each counterparty, past performance and the intent of the parties, indications of credit deterioration and whether the markets in which TEC transacts have experienced dislocation. At September 30, 2025, the fair value of derivatives was not materially affected by nonperformance risk.

Critical Accounting Policies and Estimates

Critical accounting policies and estimates have not materially changed in 2025. For further discussion of critical accounting policies and estimates, see TEC's Annual Report on Form 10-Kfor the year ended December 31, 2024.