REPRESENTATION AND INDEMNIFICATION AGREEMENT

Exhibit 10.3

REPRESENTATION AND INDEMNIFICATION AGREEMENT

by and among

ENTEGRA POWER GROUP LLC, UNION POWER LLC, GILA RIVER POWER LLC

AND TRANS-UNION PIPELINE LLC

as “Transferees”

and

TECO ENERGY, INC.

Dated: June 1, 2005

TABLE OF CONTENTS

ii

EXHIBITS

DISCLOSURE SCHEDULE ITEMS

REPRESENTATION AND INDEMNIFICATION AGREEMENT

This REPRESENTATION AND INDEMNIFICATION AGREEMENT (this “ Agreement ”), dated as of June 1, 2005, is made by and among ENTEGRA POWER GROUP LLC, a Delaware limited liability company (“ Entegra Power Group ”), UNION POWER LLC, a Delaware limited liability company (“ Union Power LLC ”), GILA RIVER POWER LLC, a Delaware limited liability company (“ Gila River Power ”), TRANS-UNION PIPELINE LLC, a Delaware limited liability company (“Trans-Union Pipeline LLC” and together with Entegra Power Group, Union Power LLC, and Gila River Power, the “ Transferees ”), and TECO ENERGY, INC., a Florida corporation (“ TECO ”).

RECITALS

I. Ownership

W HEREAS , Union Power Partners, L.P., a Delaware limited partnership (“ Union Power ”), owns and operates an approximately 2,205 megawatt combined cycle natural gas fired generating facility located in Union County, Arkansas (the “ Union Power Facility ”);

W HEREAS , Panda Gila River L.P., a Delaware limited partnership (“ Gila River ”), owns and operates an approximately 2,145 megawatt combined cycle natural gas fired generating facility located in Gila Bend, Arizona (the “ Gila River Facility ”);

W HEREAS , Trans-Union Interstate Pipeline, L.P., a Delaware limited partnership (“ Trans-Union ”, and, together with Union Power and Gila River, the “ Companies ”), owns and operates an approximately 42 mile interstate natural gas pipeline interconnecting the Union Power Facility to the Sharon, Louisiana Compressor Station which is connected to the natural gas supply pipelines owned and operated by Texas Gas Transmission Corporation (the “ Trans-Union Pipeline ”, and together with the Union Power Facility and the Gila River Facility, the “ Facilities ”);

W HEREAS , each of the Companies is a wholly-owned direct or indirect subsidiary of TECO;

II. Loan Documents

W HEREAS , Union Power is a party to that certain Union Power Project Credit Agreement, dated as of May 31, 2001, among Union Power, the other Persons named as lenders therein (the “ Union Power Banks ”), Citibank, N.A., as Administrative Agent (in such capacity, the “ Union Power Administrative Agent ”), and Societe Generale, as LC Bank, as amended from time to time (the “ UPP Credit Agreement ”), under which principal in the amount of $685,371,540 is currently outstanding (together with interest, fees and other outstanding obligations, the “ Existing Union Debt ”);

W HEREAS , Gila River is a party to that certain Gila River Project Credit Agreement, dated as of May 31, 2001, among Gila River, the other Persons named as lenders therein (the “ Gila River Banks ” and together with the Union Power Banks, the “ Banks ”),

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Citibank, N.A., as Administrative Agent (in such capacity, the “ Gila River Administrative Agent ”), and Societe Generale, as LC Bank, as amended from time to time (the “ Gila River Credit Agreement ”), under which principal in the amount of $777,783,494 is currently outstanding (together with interest, fees and other outstanding obligations, the “ Existing Gila River Debt ”);

W HEREAS , pursuant to the terms of that certain Master Settlement Agreement and Restructuring Support Agreement dated as of January 24, 2005 (as amended, supplemented, amended and restated or otherwise modified from time to time, the “ Settlement Agreement ”), TECO has agreed to enter into this Agreement with the Transferees ;

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I.

DEFINITIONS

1.1 Defined Terms . Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed thereto in the Credit Documents (as defined below). As used herein, the terms below shall have the following meanings:

“ Affiliate ” shall mean, with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with the Person specified, or who holds or beneficially owns 10% or more of the equity interest in the Person specified or 10% or more of any class of voting securities of the Person specified. When used with respect to any Company, “Affiliate” shall include each partner and any affiliate of any partner (other than such Company).

“ Code ” shall mean the Internal Revenue Code of 1986, as amended, and the regulations thereunder.

“ Companies ” is defined in the introductory paragraph of this Agreement.

“ Controlled Group ” shall mean all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with any Company, are treated as a single employer under Section 414(b), (c), (m) or (o) of the Code.

“ Credit Documents ” shall mean the UPP Credit Documents and Gila River Credit Documents.

“ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended, and the regulations issued thereunder.

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“ ERISA Plan ” shall mean (a) any employee benefit plan (as defined in Section 3(3) of ERISA) maintained by the Companies or any member of their respective Controlled Groups, or to which any of them contributes or is obligated to contribute, for its employees, and (b) each other bonus, deferred compensation, severance or termination pay, supplemental unemployment, profit sharing or other fringe benefit plan, program or arrangement applicable to TECO Project Employees.

“ GAAP ” shall mean generally accepted accounting principles in the United States consistently applied.

“ Gila River Credit Documents ” means the Credit Documents as defined in the Gila River Credit Agreement.

“ Governmental Authority ” shall mean any federal, state, local or foreign government, court of competent jurisdiction, or other regulatory, administrative or governmental agency, authority or instrumentality.

“ Intellectual Property ” shall mean all patents, trademarks, tradenames, service marks, copyrights, software, domain names, or registrations or pending applications thereto, and any other such rights or adequate licenses therein that are owned or licensed for use by the Companies, or in which the Companies have any rights or obligations, or are bound in any way.

“ Knowledge ” shall mean, (i) with respect to a named individual, the actual knowledge of such individual after reasonable inquiry of those individuals likely to have knowledge of the relevant facts and those individuals likely to have knowledge of the Disclosed Information (as defined in Section 2.8) or (ii) with respect to an entity, the actual knowledge of an officer or director of such entity after reasonable inquiry of those individuals likely to have knowledge of the relevant facts and those individuals likely to have knowledge of the Disclosed Information.

“ Lien ” shall mean any mortgage, deed of trust, lien, pledge, charge, security interest, option, right of first refusal, or easement or encumbrance of any kind, whether or not filed, recorded, or otherwise perfected or effective under applicable law, as well as the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset.

“ Material Adverse Effect ” shall mean a material adverse effect on the condition (financial or otherwise), operations (financial or otherwise), earnings, business or assets of any Company, whether or not occurring in the ordinary course of business; provided , however , that Material Adverse Effect shall exclude any change or effect due to (a) the negotiation, execution, announcement of this Agreement and the transfer of the Interests to the Transferees contemplated hereby, including the impact thereof on relationships, contractual or otherwise, with customers, suppliers or distributors, (b) any action taken by TECO or any of its representatives or Affiliates that is expressly required by the terms of this Agreement or expressly permitted by the terms of this Agreement, (c) the general state of the electric power generating industry, except for such effects that disproportionately affect any Company, (d) general economic conditions, except for such changes or effects which disproportionately affect any Company, and (e) any matters as and to the extent described in Schedule 1.1 of the Disclosure Schedule hereto.

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“ Organizational Documents ” shall mean, with respect to any Company or the Union Finance Subsidiary, the certificate of formation or limited partnership, and partnership agreement or limited liability company agreement of such Company or the Union Finance Subsidiary, as applicable, and all amendments thereto.

“ Permits ” shall mean all licenses, permits, franchises, approvals, authorizations, or consents or orders of, any Governmental Authority, whether foreign, federal, state or local, required for conduct of the business of the Companies, or the operation of the Facilities or the ownership of the assets of the Companies.

“ Permitted Liens ” shall mean any Liens granted pursuant to the Credit Documents.

“ Person ” shall mean any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization, limited liability company or government or other entity.

“ Senior Executives ” shall mean the Senior Vice President and General Counsel, the Executive Vice President and Chief Financial Officer, and the Vice President and Treasurer of TECO, as of the date of this Agreement.

“ Tax(es) ” shall mean any and all taxes, charges, levies, impositions, tariffs, duties, fees or other assessments of any kind (together with any and all interest, penalties, additions to tax or additional amounts imposed with respect thereto) imposed by any Tax authority or other Governmental Authority, including, without limitation, income, service, license, net worth, payroll, employment, unemployment, workers’ compensation, withholding, retirement, social security, sales, use, value-added, excise, franchise, gross receipts, profits, capital stock, compensation, occupation, real and personal property, ad valorem, environmental, stamp, transfer and recording taxes, and shall include any liability for Taxes of any other Person pursuant to Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law) or as a transferee, successor, by contract or otherwise.

“ TECO Project Employees ” shall mean each employee of TECO or any affiliate thereof who works for or whose primary duties involve performance of services for the Companies or a Facility.

“ Union Finance Subsidiary ” shall mean UPP Finance Co., LLC, a Delaware limited liability company.

“ UPP Credit Documents ” means the Credit Documents as defined in the UPP Credit Agreement.

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1.2 Construction .

(a) Unless the context of this Agreement otherwise requires, (i) words of any gender include each other gender; (ii) words using the singular or plural number also include the plural or singular number, respectively; (iii) the terms “hereof,” “herein,” “hereby” and derivative or similar words refer to this entire Agreement; (iv) the terms “Article” or “Section” refer to the specified Article or Section of this Agreement; (v) the word “including” shall mean “including, without limitation;” and (vi) the word “or” shall be disjunctive but not exclusive.

(b) References to agreements and other documents shall be deemed to include all subsequent amendments and other modifications thereto.

(c) References to statutes shall include all regulations promulgated thereunder and references to statutes or regulations shall be construed as including all statutory and regulatory provisions consolidating, amending or replacing the statute or regulation.

(d) The annexes, schedules and exhibits to this Agreement are a material part hereof and shall be treated as if fully incorporated into the body of the Agreement.

(e) Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless business days are specified, and shall be counted from the day immediately following the date from which such number of days are to be counted.

(f) All accounting terms used herein and not expressly defined herein shall have the meanings given to them under GAAP.

ARTICLE II.

REPRESENTATIONS AND WARRANTIES OF TECO

In connection with the transactions contemplated by the Settlement Agreement TECO hereby makes the following representations and warranties to the Transferees, except as otherwise set forth in the disclosure schedule (the “ Disclosure Schedule ”) attached hereto as Exhibit A , which contains schedules numbered to correspond to various sections of this Article II (each a “ Schedule ”) that set forth certain exceptions to the representations and warranties contained in this Article II and certain other information called for by this Agreement. The inclusion of any matter on any Schedule shall not be deemed to be an admission (a) as to the materiality of such matter or (b) that such disclosure is required.

2.1 Organization . TECO is duly organized, validly existing and in good standing as a corporation under the laws of the jurisdiction of its formation. TECO has full corporate power and authority to execute and deliver this Agreement and perform its obligations hereunder.

2.2 Authorization . TECO has the requisite power, capacity and authority to, and has taken all action necessary to execute and deliver this Agreement, to consummate the transactions contemplated hereby and to perform its obligations contained herein. This Agreement has been duly executed and delivered by TECO and is a valid and binding obligation of TECO, enforceable against TECO in accordance with its terms, except as the enforceability thereof may be limited by (a) applicable bankruptcy, insolvency, moratorium, reorganization or similar laws in effect that affect the enforcement of creditors rights generally or (b) general principles of equity, whether considered in a proceeding at law or in equity.

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2.3 No Conflict or Violation . None of the execution, delivery and performance of this Agreement, compliance with any of the provisions hereof or the consummation of the transactions contemplated hereby by TECO will result in (a) a violation of or a conflict with the articles of incorporation or by-laws of TECO (b) a violation by TECO of any applicable Laws.

2.4 Compliance with Law . Except as otherwise would not reasonably be expected to have a Material Adverse Effect, none of the Companies or the Union Finance Subsidiary has violated, and each Company and the Union Finance Subsidiary is in compliance with, (a) all applicable laws, statutes, ordinances, regulations, decrees, rules and orders of every Governmental Authority and (b) any judgment, decision, decree or order of, or Permit issued by, any Governmental Authority ((a) and (b), collectively, “Laws”). Except as otherwise would not reasonably be expected to have a Material Adverse Effect, none of the Companies or the Union Finance Subsidiary has received any written notice that remains unresolved to the effect that, and TECO does not have any knowledge that, (i) such Company or the Union Finance Subsidiary is not currently in compliance with, or is in violation of, any applicable Laws or (ii) any Governmental Authority has any intention to conduct any investigation or proceeding or any investigation or proceeding by any Governmental Authority is pending or threatened.

2.5 Taxes . Each of the Companies and the Union Finance Subsidiary is, and has been since its formation, disregarded as an entity separate from its owner for federal and state income tax purposes. None of the Companies or the Union Finance Subsidiary is (i) liable for any Taxes of any other Person pursuant to Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law) or as a transferee, successor, by contract or otherwise or (ii) a party to any Tax sharing, indemnity, allocation or similar agreement. The transactions co