Tucson Electric Power

Risks

• A significant decrease in the demand for electricity in TEP's service area would negatively impact retail sales and adversely affect results of operations, net income, and cash flows at TEP.
• The revenues, results of operations, and cash flows of TEP are seasonal and are subject to weather conditions and customer usage patterns, which are beyond the Company’s control.
• TEP is dependent on a small number of customers for a significant portion of future revenues. A reduction in the electricity sales to these customers would negatively affect results of operations, net income, and cash flows at TEP.
• TEP's business is significantly impacted by government legislation, regulation and oversight. TEP's inability to recover its costs, earn a reasonable return on its investments, or comply with current regulations would negatively affect its results of operations, net income, and cash flows.
• Changes made to legislation, regulation, or regulatory structure could negatively affect TEP's results of operations, net income, and cash flows.
• Early closure of TEP's coal-fired generation facilities could result in TEP recognizing regulatory impairments or increased cost of operations if recovery of TEP's remaining investments in such facilities and the costs associated with early closures are not permitted through rates charged to customers.
• Volatility or disruptions in the financial markets, rising interest rates, or unanticipated financing needs, could increase TEP's financing costs, limit access to the credit or bank markets, affect the Company's ability to comply with financial covenants in debt agreements, and increase TEP's pension funding obligations. Such outcomes may negatively affect liquidity and TEP's ability to carry out the Company's financial strategy.
• Generation facility closings or changes in power flows into TEP's service territory could require us to redeem or defease some or all of the tax-exempt bonds issued for the Company's benefit, which could result in increased financing costs.
• The operation of generation facilities and transmission and distribution systems involves risks and uncertainties that could result in reduced generation capability or unplanned outages that could negatively affect TEP’s results of operations, net income, and cash flows.
• The operation of generation facilities and transmission systems on tribal lands may create operational and financial risks for TEP that, if realized, could negatively affect TEP’s results of operations, net income, and cash flows.
• TEP receives power from certain generation facilities that are jointly-owned with, or operated by, third parties. Therefore, TEP may not have the ability to affect the management or operations at such facilities which could negatively affect TEP’s results of operations, net income, and cash flows.
• The effects of climate change may create operational and financial risks for TEP that, if realized, could negatively affect TEP's results of operations, net income, and cash flows.
• TEP is subject to physical attacks which could have a negative impact on the Company's business and results of operations.
• TEP is subject to cyber-attacks which could have a negative impact on the Company's business and results of operations.
• The widespread outbreak of an illness or any other communicable disease, or any other public health crisis, including the COVID-19 pandemic, could adversely affect our business, results of operations and financial condition.
• Changes in tax regulation may negatively affect the results of operations, net income, and cash flows of TEP.
• The failure to attract, retain, and manage an appropriately qualified workforce could negatively impact TEP’s business and results of operations.