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SECURITIES AND EXCHANGE COMMISSION
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission | Registrant; State of Incorporation; | IRS Employer | ||
File Number | Address; and Telephone Number | Identification Number | ||
1-13739 | UNISOURCE ENERGY CORPORATION (An Arizona Corporation) One South Church Avenue, Suite 100 Tucson, AZ 85701 (520) 571-4000 | 86-0786732 | ||
1-5924 | TUCSON ELECTRIC POWER COMPANY (An Arizona Corporation) One South Church Avenue, Suite 100 Tucson, AZ 85701 (520) 571-4000 | 86-0062700 |
Name of Each Exchange | ||||
Registrant | Title of Each Class | on Which Registered | ||
UniSource Energy Corporation | Common Stock, no par value, and Preferred Share Purchase Rights | New York Stock Exchange |
UniSource Energy Corporation | Yesþ | Noo | ||
Tucson Electric Power Company | Yeso | Noþ |
UniSource Energy Corporation | Yeso | Noþ | ||
Tucson Electric Power Company | Yesþ | Noo |
UniSource Energy Corporation | Yesþ | Noo | ||
Tucson Electric Power Company (1) | Yeso | Noþ |
(1) | As indicated above, Tucson Electric Power Company is not required to file reports under the Exchange Act. However, Tucson Electric Power Company has filed all Exchange Act reports for the preceding 12 months. |
UniSource Energy Corporation | Large Accelerated Filerþ | Accelerated Filero | Non-accelerated filero | |||
Smaller Reporting Companyo | ||||||
Tucson Electric Power Company | Large Accelerated Filero | Accelerated Filero | Non-accelerated filerþ | |||
Smaller Reporting Companyo |
UniSource Energy Corporation | Yeso | Noþ | ||
Tucson Electric Power Company | Yeso | Noþ |
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1992 Mortgage | TEP’s Indenture of Mortgage and Deed of Trust, dated as of December 1, 1992, to the Bank of New York Mellon, successor trustee, as supplemented. | |
ACC | Arizona Corporation Commission. | |
ALJ | Administrative Law Judge. | |
AMT | Alternative Minimum Tax. | |
APS | Arizona Public Service Company. | |
BMGS | Black Mountain Generating Station. | |
Btu | British thermal unit(s). | |
CAAA | 1990 Federal Clean Air Act Amendments. | |
Capacity | The ability to produce power; the most power a unit can produce or the maximum that can be taken under a contract; measured in MWs. | |
Citizens | Citizens Communications Company. | |
Collateral Trust Bonds | Bonds issued under the Indenture of Trust, dated as of August 1, 1998, of TEP to The Bank of New York, successor trustee. | |
Common Stock | UniSource Energy’s common stock, without par value. | |
Company or UniSource Energy | UniSource Energy Corporation. | |
Cooling Degree Days | An index used to measure the impact of weather on energy usage calculated by subtracting 75 from the average of the high and low daily temperatures. | |
DSM | Demand side management. | |
Emission Allowance(s) | An allowance issued by the Environmental Protection Agency which permits emission of one ton of sulfur dioxide or one ton of nitrogen oxide. These allowances can be bought and sold. | |
Energy | The amount of power produced over a given period of time; measured in MWh. | |
EPA | The Environmental Protection Agency. | |
EL Paso | El Paso Electric Company. | |
EPNG | El Paso Natural Gas Company. | |
ESP | Energy Service Provider. | |
Express Line | A dedicated 345-kV transmission line from Springerville Unit 2 to TEP’s retail service area. | |
FAS 71 | Statement of Financial Accounting Standards No. 71: Accounting for the Effects of Certain Types of Regulation. | |
FAS 133 | Statement of Financial Accounting Standards No. 133: Accounting for Derivative Instruments and Hedging Activities, as amended. | |
FAS 143 | Statement of Financial Accounting Standards No. 143: Accounting for Asset Retirement Obligations. | |
FAS 157 | Statement of Financial Accounting Standards No. 157: Accounting for Fair Value Measurements. | |
FERC | Federal Energy Regulatory Commission. | |
Fixed CTC | Competition Transition Charge of approximately $0.009 per kWh that was included in TEP’s retail rate for the purpose of recovering TEP’s TRA. Approximately $58 million will be credited to customers through the PPFAC. | |
Four Corners | Four Corners Generating Station. | |
Global Solar | Global Solar Energy, Inc., a company that develops and manufactures thin-film photovoltaic cells. Millennium sold its interest in Global Solar in March 2006. | |
Haddington | Haddington Energy Partners II, LP, a limited partnership that funds energy-related investments. | |
Heating Degree Days | An index used to measure the impact of weather on energy usage calculated by subtracting the average of the high and low daily temperatures from 65. |
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ICRA | Implementation Cost Regulatory Asset. | |
IDBs | Industrial development revenue or pollution control revenue bonds. | |
IRS | Internal Revenue Service. | |
ISO | Independent System Operator. | |
kWh | Kilowatt-hour(s). | |
kV | Kilovolt(s). | |
LIBOR | London Interbank Offered Rate. | |
Luna | Luna Energy Facility. | |
Mark-to-Market Adjustments | Forward energy sales and purchase contracts that are considered to be derivatives are adjusted monthly by recording unrealized gains and losses to reflect the market prices at the end of each month. | |
MEG | Millennium Energy Group, a wholly-owned subsidiary of Millennium Energy Holdings, Inc. | |
Millennium | Millennium Energy Holdings, Inc., a wholly-owned subsidiary of UniSource Energy. | |
MMBtu | Million British Thermal Units. | |
Mortgage Bonds | Bonds issued under the 1992 Mortgage. | |
MW | Megawatt(s). | |
MWh | Megawatt-hour(s). | |
Navajo | Navajo Generating Station. | |
NERC | North American Electric Reliability Corporation. | |
NOL | Net Operating Loss carryback or carryforward for income tax purposes. | |
NOx | Nitrogen oxide. | |
PGA | Purchased Gas Adjuster, a retail rate mechanism designed to recover the cost of gas purchased for retail gas customers. | |
Pima Authority | The Industrial Development Authority of the County of Pima. | |
PNM | Public Service Company of New Mexico. | |
PNMR | PNM Resources. | |
PPA | Purchased Power Agreement. | |
PPFAC | Purchased Power and Fuel Adjustment Clause. | |
PWMT | Pinnacle West Marketing and Trading. | |
REST | Renewable Energy Standard and Tariff rules approved by the ACC in October 2006. | |
Repurchased Bonds | $221 million of fixed-rate tax-exempt bonds that TEP purchased from bondholders on May 11, 2005. | |
RTO | Regional Transmission Organization. | |
RUCO | Residential Utility Consumer Office. | |
Rules | Retail Electric Competition Rules. | |
Sabinas | Carboelectrica Sabinas, S. de R.L. de C.V., a Mexican limited liability company. Millennium owns 50% of Sabinas. | |
San Carlos | San Carlos Resources Inc., a wholly-owned subsidiary of TEP. | |
San Juan | San Juan Generating Station. | |
SES | Southwest Energy Solutions, Inc., a wholly-owned subsidiary of Millennium. | |
1999 Settlement Agreement | TEP’s Settlement Agreement approved by the ACC in November 1999 that provided for electric retail competition and transition asset recovery. | |
SO2 | Sulfur dioxide. | |
Springerville | Springerville Generating Station. | |
Springerville Coal Handling Facilities Leases | Leveraged lease arrangements relating to the coal handling facilities serving Springerville. | |
Springerville Common Facilities | Facilities at Springerville used in common with Springerville Unit 1 and Springerville Unit 2. | |
Springerville Common Facilities Leases | Leveraged lease arrangements relating to an undivided one-half interest in certain Springerville Common Facilities. | |
Springerville Unit 1 | Unit 1 of the Springerville Generating Station. | |
Springerville Unit 1 Leases | Leveraged lease arrangement relating to Springerville Unit 1 and an undivided one-half interest in certain Springerville Common Facilities. |
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Springerville Unit 2 | Unit 2 of the Springerville Generating Station. | |
Springerville Unit 3 | Unit 3 of the Springerville Generating Station. | |
Springerville Unit 4 | Unit 4 of the Springerville Generating Station. | |
SRP | Salt River Project Agricultural Improvement and Power District. | |
Sundt | H. Wilson Sundt Generating Station (formerly known as the Irvington Generating Station). | |
Sundt Lease | The leveraged lease arrangement relating to Sundt Unit 4. | |
Sundt Unit 4 | Unit 4 of the H. Wilson Sundt Generating Station. | |
SWG | Southwest Gas Corporation. | |
TEP | Tucson Electric Power Company, the principal subsidiary of UniSource Energy. | |
TEP Credit Agreement | Amended and Restated Credit Agreement between TEP and a syndicate of Banks, dated as of August 11, 2006. | |
TEP Letter of Credit Facility | Letter of credit facility between TEP and a syndicate of Banks, dated as of April 30, 2008. | |
TEP Revolving Credit Facility | Revolving credit facility under the TEP Credit Agreement. | |
Therm | A unit of heating value equivalent to 100,000 British thermal units (Btu). | |
TOU | Time of use. | |
TRA | Transition Recovery Asset, a $450 million regulatory asset established in TEP’s 1999 Settlement Agreement that was fully recovered in May 2008. | |
Tri-State | Tri-State Generation and Transmission Association. | |
UED | UniSource Energy Development Company, a wholly-owned subsidiary of UniSource Energy, which engages in developing generation resources and other project development services and related activities. | |
UES | UniSource Energy Services, Inc., an intermediate holding company established to own the operating companies (UNS Gas and UNS Electric) which acquired the Citizens Arizona gas and electric utility assets in 2003. | |
UniSource Credit Agreement | Amended and Restated Credit Agreement between UniSource Energy and a syndicate of banks, dated as of August 11, 2006. | |
UniSource Energy | UniSource Energy Corporation. | |
UNS Electric | UNS Electric, Inc., a wholly-owned subsidiary of UES, which acquired the Citizens Arizona electric utility assets in 2003. | |
UNS Gas | UNS Gas, Inc., a wholly-owned subsidiary of UES, which acquired the Citizens Arizona gas utility assets in 2003. | |
UNS Gas/UNS Electric Revolver | Revolving credit facility under the Amended and Restated Credit Agreement among UNS Gas and UNS Electric as borrowers, and UES as guarantor, and a syndicate of banks, dated as of August 11, 2006. | |
Valencia | Valencia power plant owned by UNS Electric. | |
WAPA | Western Area Power Administration. |
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2008 | 2007 | 2006 | ||||||||||
-Millions of Dollars- | ||||||||||||
TEP | $ | 4 | $ | 53 | $ | 67 | ||||||
UNS Gas | 8 | 4 | 4 | |||||||||
UNS Electric | 4 | 5 | 5 | |||||||||
Other(1) | (2 | ) | (4 | ) | (7 | ) | ||||||
Income Before Discontinued Operations | 14 | 58 | 69 | |||||||||
Discontinued Operations — Net of Tax(2) | — | — | (2 | ) | ||||||||
Consolidated Net Income | $ | 14 | $ | 58 | $ | 67 | ||||||
(1) | Includes: UniSource Energy parent company expenses; income and losses from Millennium investments and UED and interest expense (net of tax) on the UniSource Energy Convertible Senior Notes and on the UniSource Energy Credit Agreement. | |
(2) | Relates to the discontinued operations of Global Solar. |
2008 | 2007 | 2006 | ||||||||||
Residential | 41 | % | 42 | % | 41 | % | ||||||
Commercial | 21 | % | 21 | % | 21 | % | ||||||
Non-mining Industrial | 24 | % | 24 | % | 25 | % | ||||||
Mining | 11 | % | 10 | % | 10 | % | ||||||
Public Authority | 3 | % | 3 | % | 3 | % |
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• | Salt River Project Agricultural Improvement and Power District (SRP), which expires in May 2016. In June 2011, the price of energy under the contract to Salt River Project will be market-based. |
• | Navajo Tribal Utility Authority, which expires in December 2015. Beginning in 2010, the price of 50% of the kWh sales from June to September will be market-based. |
• | Tohono O’odham Utility Authority, which expires in August 2009. |
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Net | ||||||||||||||||||||||||||||||||
Unit | Date | Fuel | Capability | Operating | TEP’s Share | |||||||||||||||||||||||||||
Generating Source | No. | Location | In Service | Type | MW | Agent | % | MW | ||||||||||||||||||||||||
Springerville Station(1) | 1 | Springerville, AZ | 1985 | Coal | 380 | TEP | 100.0 | 380 | ||||||||||||||||||||||||
Springerville Station | 2 | Springerville, AZ | 1990 | Coal | 390 | TEP | 100.0 | 390 | ||||||||||||||||||||||||
San Juan Station | 1 | Farmington, NM | 1976 | Coal | 327 | PNM | 50.0 | 164 | ||||||||||||||||||||||||
San Juan Station | 2 | Farmington, NM | 1973 | Coal | 316 | PNM | 50.0 | 158 | ||||||||||||||||||||||||
Navajo Station | 1 | Page, AZ | 1974 | Coal | 750 | SRP | 7.5 | 56 | ||||||||||||||||||||||||
Navajo Station | 2 | Page, AZ | 1975 | Coal | 750 | SRP | 7.5 | 56 | ||||||||||||||||||||||||
Navajo Station | 3 | Page, AZ | 1976 | Coal | 750 | SRP | 7.5 | 56 | ||||||||||||||||||||||||
Four Corners Station | 4 | Farmington, NM | 1969 | Coal | 784 | APS | 7.0 | 55 | ||||||||||||||||||||||||
Four Corners Station | 5 | Farmington, NM | 1970 | Coal | 784 | APS | 7.0 | 55 | ||||||||||||||||||||||||
Luna Energy Facility | 1 | Deming, NM | 2006 | Gas | 570 | PNM | 33.3 | 190 | ||||||||||||||||||||||||
Sundt Station | 1 | Tucson, AZ | 1958 | Gas/Oil | 81 | TEP | 100.0 | 81 | ||||||||||||||||||||||||
Sundt Station | 2 | Tucson, AZ | 1960 | Gas/Oil | 81 | TEP | 100.0 | 81 | ||||||||||||||||||||||||
Sundt Station | 3 | Tucson, AZ | 1962 | Gas/Oil | 104 | TEP | 100.0 | 104 | ||||||||||||||||||||||||
Sundt Station(1) | 4 | Tucson, AZ | 1967 | Coal/Gas | 156 | TEP | 100.0 | 156 | ||||||||||||||||||||||||
Internal Combustion Turbines | Tucson, AZ | 1972 | Gas/Oil | 122 | TEP | 100.0 | 122 | |||||||||||||||||||||||||
Internal Combustion Turbines | Tucson, AZ | 2001 | Gas | 95 | TEP | 100.0 | 95 | |||||||||||||||||||||||||
Solar Electric Generation | Springerville/ Tucson, AZ | 2002-2005 | Solar | 5 | TEP | 100.0 | 5 | |||||||||||||||||||||||||
Total TEP Capacity(2) | 2,204 | |||||||||||||||||||||||||||||||
(1) | Leased assets. | |
(2) | Excludes 966 MW of additional resources, which consist of certain capacity purchases and interruptible retail load. At December 31, 2008, total owned capacity was 1,668 MW and leased capacity was 536 MW. |
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Peak Demand | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
-MW- | ||||||||||||||||||||
Retail Customers | 2,376 | 2,386 | 2,365 | 2,225 | 2,088 | |||||||||||||||
Firm Sales to Other Utilities | 394 | 369 | 331 | 342 | 187 | |||||||||||||||
Coincident Peak Demand (A) | 2,770 | 2,755 | 2,696 | 2,567 | 2,275 | |||||||||||||||
Total Generating Resources | 2,204 | 2,204 | 2,194 | 2,004 | 2,004 | |||||||||||||||
Other Resources(1) | 966 | 785 | 719 | 788 | 454 | |||||||||||||||
Total TEP Resources (B) | 3,175 | 2,989 | 2,913 | 2,792 | 2,458 | |||||||||||||||
Total Margin (B) — (A) | 405 | 234 | 217 | 225 | 183 | |||||||||||||||
Reserve Margin (% of Coincident Peak Demand) | 15 | % | 8 | % | 8 | % | 9 | % | 8 | % |
(1) | Other Resources include firm power purchases and interruptible retail and wholesale loads. Additional firm power purchases were made in 2008 to displace more expensive owned gas generation. |
Average Cost per MMBtu | Percentage of Total Btu | |||||||||||||||||||||||
Consumed | Consumed | |||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 | 2007 | 2006 | |||||||||||||||||||
Coal | $ | 2.08 | $ | 1.81 | $ | 1.69 | 93 | % | 92 | % | 94 | % | ||||||||||||
Gas | $ | 8.02 | $ | 8.30 | $ | 7.03 | 7 | % | 8 | % | 6 | % | ||||||||||||
All Fuels | $ | 2.52 | $ | 2.30 | $ | 2.03 | 100 | % | 100 | % | 100 | % |
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Average | ||||||||||||
Contract | Sulfur | |||||||||||
Station | Coal Supplier | Expiration | Content | Coal Obtained From (A) | ||||||||
Springerville | Peabody Coalsales Company | 2020 | 0.9 | % | Lee Ranch Coal Company | |||||||
Four Corners | BHP Billiton | 2016 | 0.8 | % | Navajo Indian Tribe | |||||||
San Juan | San Juan Coal Company | 2017 | 0.8 | % | Federal and State Agencies | |||||||
Navajo | Peabody Coalsales Company | 2011 | 0.4 | % | Navajo and Hopi Indian Tribes | |||||||
Sundt | Rio Tinto Energy America / Chevron Mining Company | 2009 | 0.4 | % | Colowyo Mine / McKinley Mine |
(A) | Substantially all of the suppliers’ mining leases extend at least as long as coal is being mined in economic quantities. |
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For Years Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Generation and Purchased Power — kWh (000) | ||||||||||||||||||||
Remote Generation (Coal) | 10,438,864 | 11,001,318 | 10,854,710 | 10,059,315 | 10,159,729 | |||||||||||||||
Local Tucson Generation (Oil, Gas & Coal) | 1,016,254 | 1,065,778 | 966,476 | 1,165,001 | 1,174,500 | |||||||||||||||
Purchased Power | 2,905,530 | 2,046,864 | 1,680,495 | 1,638,737 | 1,322,084 | |||||||||||||||
Total Generation and Purchased Power | 14,360,648 | 14,113,960 | 13,501,681 | 12,863,053 | 12,656,313 | |||||||||||||||
Less Losses and Company Use | 882,053 | 921,024 | 885,120 | 806,168 | 821,008 | |||||||||||||||
Total Energy Sold | 13,478,595 | 13,192,936 | 12,616,561 | 12,056,885 | 11,835,305 | |||||||||||||||
Sales — kWh (000) | ||||||||||||||||||||
Residential | 3,852,707 | 4,004,797 | 3,778,269 | 3,633,226 | 3,459,750 | |||||||||||||||
Commercial | 2,034,453 | 2,057,982 | 1,959,141 | 1,855,432 | 1,787,472 | |||||||||||||||
Industrial | 2,263,706 | 2,341,025 | 2,278,244 | 2,302,327 | 2,226,314 | |||||||||||||||
Mining | 1,095,962 | 983,173 | 924,898 | 842,881 | 829,028 | |||||||||||||||
Public Authorities | 255,817 | 247,430 | 260,767 | 241,119 | 240,426 | |||||||||||||||
Total — Electric Retail Sales | 9,502,645 | 9,634,407 | 9,201,419 | 8,874,985 | 8,542,990 | |||||||||||||||
Electric Wholesale Sales | 3,975,950 | 3,558,529 | 3,415,142 | 3,181,900 | 3,292,315 | |||||||||||||||
Total Electric Sales | 13,478,595 | 13,192,936 | 12,616,561 | 12,056,885 | 11,835,305 | |||||||||||||||
Operating Revenues (000) | ||||||||||||||||||||
Residential | $ | 351,078 | $ | 362,967 | $ | 343,459 | $ | 330,614 | $ | 315,402 | ||||||||||
Commercial | 211,639 | 213,364 | 203,284 | 192,966 | 186,625 | |||||||||||||||
Industrial | 164,849 | 168,279 | 165,068 | 165,988 | 161,338 | |||||||||||||||
Mining | 55,619 | 48,707 | 43,724 | 39,749 | 38,549 | |||||||||||||||
Public Authorities | 19,146 | 18,332 | 18,935 | 17,559 | 17,427 | |||||||||||||||
Total — Electric Retail Sales | 802,331 | 811,649 | 774,470 | 746,876 | 719,341 | |||||||||||||||
Less CTC To Be Refunded | (58,092 | ) | — | — | — | — | ||||||||||||||
Net — Electric Retail Sales | 744,239 | 811,649 | 774,470 | 746,876 | 719,341 | |||||||||||||||
Electric Wholesale Sales | 259,844 | 195,999 | 179,022 | 178,428 | 159,918 | |||||||||||||||
Other Revenues | 75,159 | 62,855 | 35,502 | 12,166 | 10,039 | |||||||||||||||
Total Operating Revenues | $ | 1,079,242 | $ | 1,070,503 | $ | 988,994 | $ | 937,470 | $ | 889,298 | ||||||||||
Customers (End of Period) | ||||||||||||||||||||
Residential | 363,861 | 361,945 | 357,646 | 350,628 | 341,870 | |||||||||||||||
Commercial | 35,432 | 34,759 | 34,104 | 33,534 | 32,923 | |||||||||||||||
Industrial | 633 | 641 | 664 | 673 | 676 | |||||||||||||||
Mining | 2 | 2 | 2 | 2 | 2 | |||||||||||||||
Public Authorities | 61 | 61 | 61 | 61 | 61 | |||||||||||||||
Total Retail Customers | 399,989 | 397,408 | 392,477 | 384,898 | 375,532 | |||||||||||||||
Average Retail Revenue per kWh Sold (cents) | ||||||||||||||||||||
Residential | 9.1 | 9.1 | 9.1 | 9.1 | 9.1 | |||||||||||||||
Commercial | 10.4 | 10.4 | 10.4 | 10.4 | 10.4 | |||||||||||||||
Industrial and Mining | 6.6 | 6.6 | 6.6 | 6.5 | 6.5 | |||||||||||||||
Average Retail Revenue per kWh Sold | 8.4 | 8.4 | 8.4 | 8.4 | 8.4 | |||||||||||||||
Average Revenue per Residential Customer | $ | 968 | $ | 1,009 | $ | 971 | $ | 954 | $ | 933 | ||||||||||
Average kWh Sales per Residential Customer | 10,621 | 11,129 | 10,681 | 10,484 | 10,231 |
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• | TEP, UNS Gas and UNS Electric are restricted from lending or transferring funds or issuing securities without ACC approval; |
• | The Federal Power Act restricts electric utilities’ ability to pay dividends out of funds that are properly included in their capital account. TEP has an accumulated deficit rather than positive retained earnings. Although the terms of the Federal Power Act are unclear, we believe there is a reasonable basis for TEP to pay dividends from current year earnings. However, the FERC could attempt to stop TEP from paying further dividends or could seek to impose additional restrictions on the payment of dividends; and |
• | TEP, UNS Gas and UNS Electric must be in compliance with their respective debt agreements to make dividend payments to UniSource Energy. |
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• | requires UniSource Energy and its subsidiaries to dedicate a substantial portion of their cash flow to pay principal and interest on its debt, which could reduce the funds available for working capital, capital expenditures, acquisitions and other general corporate purposes; and |
• | could limit UniSource Energy and its subsidiaries’ ability to borrow additional amounts for working capital, capital expenditures, acquisitions, dividends, debt service requirements, execution of its business strategy or other purposes. |
Leased Asset | Expiration | Renewal/Purchase Option | ||||
Springerville Unit 1 | 2015 | Fair market value purchase option | ||||
Springerville Coal Handling Facilities | 2015 | Fixed price purchase option | ||||
Springerville Common Facilities | 2020 | Fixed price purchase option | ||||
Sundt Unit 4 | 2011 | Fair market value purchase option |
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• | TEP and UNS Electric may need to rely on more costly alternatives to provide energy to their customers; |
• | TEP and UNS Electric may not be able to maintain reliability in their service areas; or |
• | TEP and UNS Electric’s ability to provide electric service to new customers may be negatively impacted. |
• | 512 circuit-miles of 500-kV lines; |
• | 1,098 circuit-miles of 345-kV lines; |
• | 366 circuit-miles of 138-kV lines; |
• | 475 circuit-miles of 46-kV lines; and |
• | 2,625 circuit-miles of lower voltage primary lines. |
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• | on property owned by TEP; |
• | under or over streets, alleys, highways and other public places, the public domain and national forests and state lands under franchises, easements or other rights which are generally subject to termination; |
• | under or over private property as a result of easements obtained primarily from the record holder of title; or |
• | over American Indian reservations under grant of easement by the Secretary of Interior or lease by American Indian tribes. |
• | possible conflicting grants or encumbrances due to the absence of or inadequacies in the recording laws or record systems of the Bureau of Indian Affairs and the American Indian tribes; |
• | possible inability of TEP to legally enforce its rights against adverse claimants and the American Indian tribes without Congressional consent; or |
• | failure or inability of the American Indian tribes to protect TEP’s interests in the easements and leases from disruption by the U.S. Congress, Secretary of the Interior, or other adverse claimants. |
• | coal handling facilities at Springerville; |
• | a 50% undivided interest in the Springerville Common Facilities; |
• | Springerville Unit 1 and the remaining 50% undivided interest in the Springerville Common Facilities; and |
• | Sundt Unit 4 and related common facilities. |
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• | on property owned by UNS Gas or UNS Electric; |
• | under or over streets, alleys, highways and other public places, the public domain and national forests and state lands under franchises, easements or other rights which are generally subject to termination; or |
• | under or over private property as a result of easements obtained primarily from the record holder of title. |
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2008 | 2007 | |||||||||||||||||||||||
Market Price per | Market Price per | |||||||||||||||||||||||
Share of Common | Share of Common | |||||||||||||||||||||||
Stock(1) | Dividends | Stock(1) | Dividends | |||||||||||||||||||||
Quarter: | High | Low | Declared | High | Low | Declared | ||||||||||||||||||
First | $ | 32.18 | $ | 21.35 | $ | 0.240 | $ | 39.17 | $ | 35.46 | $ | 0.225 | ||||||||||||
Second | 34.49 | 22.33 | 0.240 | 39.94 | 33.10 | 0.225 | ||||||||||||||||||
Third | 33.42 | 28.10 | 0.240 | 33.72 | 27.66 | 0.225 | ||||||||||||||||||
Fourth | 29.67 | 20.91 | 0.240 | 32.66 | 29.14 | 0.225 | ||||||||||||||||||
Total | $ | 0.960 | $ | 0.900 | ||||||||||||||||||||
(1) | UniSource Energy’s Common Stock price as reported by the New York Stock Exchange. |
K-24
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2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
-In Thousands- | ||||||||||||||||||||
(except per share data) | ||||||||||||||||||||
Summary of Operations | ||||||||||||||||||||
Operating Revenues | $ | 1,397,511 | $ | 1,381,373 | $ | 1,308,141 | $ | 1,224,056 | $ | 1,164,988 | ||||||||||
Income Before Discontinued Operations and Accounting Change | $ | 14,021 | $ | 58,373 | $ | 69,243 | $ | 52,253 | $ | 50,982 | ||||||||||
Net Income(1) | $ | 14,021 | $ | 58,373 | $ | 67,447 | $ | 46,144 | $ | 45,919 | ||||||||||
Basic Earnings per Share: | ||||||||||||||||||||
Before Discontinued Operations & Accounting Change | $ | 0.39 | $ | 1.64 | $ | 1.96 | $ | 1.51 | $ | 1.49 | ||||||||||
Net Income | $ | 0.39 | $ | 1.64 | $ | 1.91 | $ | 1.33 | $ | 1.34 | ||||||||||
Diluted Earnings per Share: | ||||||||||||||||||||
Before Discontinued Operations & Accounting Change | $ | 0.39 | $ | 1.57 | $ | 1.85 | $ | 1.44 | $ | 1.45 | ||||||||||
Net Income | $ | 0.39 | $ | 1.57 | $ | 1.80 | $ | 1.28 | $ | 1.31 | ||||||||||
Shares of Common Stock Outstanding Average | 35,632 | 35,486 | 35,264 | 34,798 | 34,380 | |||||||||||||||
End of Year | 35,458 | 35,315 | 35,190 | 34,874 | 34,255 | |||||||||||||||
Year-end Book Value per Share | $ | 19.12 | $ | 19.54 | $ | 18.59 | $ | 17.69 | $ | 16.95 | ||||||||||
Cash Dividends Declared per Share | $ | 0.96 | $ | 0.90 | $ | 0.84 | $ | 0.76 | $ | 0.64 | ||||||||||
Financial Position | ||||||||||||||||||||
Total Utility Plant — Net | $ | 2,617,693 | $ | 2,407,295 | $ | 2,259,620 | $ | 2,171,461 | $ | 2,081,137 | ||||||||||
Investments in Lease Debt and Equity | 126,672 | 152,544 | 181,222 | 156,301 | 170,893 | |||||||||||||||
Other Investments and Other Property | 64,096 | 70,677 | 66,194 | 58,468 | 68,846 | |||||||||||||||
Total Assets | $ | 3,509,567 | $ | 3,185,716 | $ | 3,187,409 | $ | 3,180,211 | $ | 3,186,936 | ||||||||||
Long-Term Debt | $ | 1,313,615 | $ | 993,870 | $ | 1,171,170 | $ | 1,212,420 | $ | 1,257,595 | ||||||||||
Non-Current Capital Lease Obligations | 513,517 | 530,973 | 588,771 | 665,737 | 701,931 | |||||||||||||||
Common Stock Equity | 679,274 | 690,075 | 654,149 | 616,741 | 580,718 | |||||||||||||||
Total Capitalization | $ | 2,506,406 | $ | 2,214,918 | $ | 2,414,090 | $ | 2,494,898 | $ | 2,540,244 | ||||||||||
Selected Cash Flow Data | ||||||||||||||||||||
Net Cash Flows From Operating Activities | $ | 277,011 | $ | 322,766 | $ | 282,659 | $ | 273,883 | $ | 306,979 | ||||||||||
Capital Expenditures | $ | (349,289 | ) | $ | (245,366 | ) | $ | (238,261 | ) | $ | (203,362 | ) | $ | (166,861 | ) | |||||
Other Investing Cash Flows(2) | (103,528 | ) | 27,961 | (7,820 | ) | 32,794 | 10,672 | |||||||||||||
Net Cash Flows From Investing Activities | $ | (452,817 | ) | $ | (217,405 | ) | $ | (246,081 | ) | $ | (170,568 | ) | $ | (156,189 | ) | |||||
Net Cash Flows From Financing Activities | $ | 140,605 | $ | (119,229 | ) | $ | (77,016 | ) | $ | (112,664 | ) | $ | (98,028 | ) | ||||||
Ratio of Earnings to Fixed Charges(3) | 1.24 | 1.68 | 1.73 | 1.55 | 1.48 | |||||||||||||||
(1) | Net Income includes an after-tax loss for discontinued operations of $2 million in 2006, $5 million in 2005 and $5 million in 2004. Net income includes an after-tax loss of $0.6 million for the Cumulative Effect of Accounting Change from the implementation of FIN 47 in 2005. | |
(2) | Other Investing Cash Flowsin 2008 includes the $133 million deposit to Trustee for Repayment of Collateral Trust Bond. | |
(3) | For purposes of this computation, earnings are defined as pre-tax earnings from continuing operations before minority interest, or income/loss from equity method investments, plus interest expense, and amortization of debt discount and expense related to indebtedness. Fixed charges are interest expense, including amortization of debt discount and expense on indebtedness. |
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2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
-Thousands of Dollars- | ||||||||||||||||||||
Summary of Operations | ||||||||||||||||||||
Operating Revenues | $ | 1,079,253 | $ | 1,070,503 | $ | 988,994 | $ | 937,470 | $ | 889,298 | ||||||||||
Income Before Accounting Change | 4,363 | 53,456 | 66,745 | 48,893 | 46,127 | |||||||||||||||
Net Income(1) | $ | 4,363 | $ | 53,456 | $ | 66,745 | $ | 48,267 | $ | 46,127 | ||||||||||
Financial Position | ||||||||||||||||||||
Total Utility Plant — Net | $ | 2,120,619 | $ | 1,957,506 | $ | 1,887,387 | $ | 1,866,622 | $ | 1,816,782 | ||||||||||
Investments in Lease Debt and Equity | 126,672 | 152,544 | 181,222 | 156,301 | 170,893 | |||||||||||||||
Other Investments and Other Property | 31,291 | 35,460 | 30,161 | 27,013 | 23,393 | |||||||||||||||
Total Assets | $ | 2,841,771 | $ | 2,573,036 | $ | 2,623,063 | $ | 2,617,219 | $ | 2,742,168 | ||||||||||
Long-Term Debt | $ | 903,615 | $ | 682,870 | $ | 821,170 | $ | 821,170 | $ | 1,097,595 | ||||||||||
Non-Current Capital Lease Obligations | 513,370 | 530,714 | 588,424 | 665,299 | 701,405 | |||||||||||||||
Common Stock Equity | 583,606 | 577,349 | 554,714 | 558,646 | 414,510 | |||||||||||||||
Total Capitalization | $ | 2,000,591 | $ | 1,790,933 | $ | 1,964,308 | $ | 2,045,115 | $ | 2,213,510 | ||||||||||
Selected Cash Flow Data | ||||||||||||||||||||
Net Cash Flows From Operating Activities | $ | 268,706 | $ | 264,112 | $ | 227,228 | $ | 243,013 | $ | 275,151 | ||||||||||
Capital Expenditures | $ | (286,905 | ) | $ | (162,539 | ) | $ | (156,180 | ) | $ | (149,906 | ) | $ | (129,505 | ) | |||||
Other Investing Cash Flows(2) | (103,849 | ) | 25,414 | (25,786 | ) | 21,001 | 3,743 | |||||||||||||
Net Cash Flows From Investing Activities | $ | (390,754 | ) | $ | (137,125 | ) | $ | (181,966 | ) | $ | (128,905 | ) | $ | (125,762 | ) | |||||
Net Cash Flows From Financing Activities | $ | 128,713 | $ | (120,088 | ) | $ | (78,984 | ) | $ | (173,882 | ) | $ | (101,444 | ) | ||||||
Ratio of Earnings to Fixed Charges(3) | 1.13 | 1.75 | 1.84 | 1.60 | 1.52 | |||||||||||||||
(1) | Net Income includes an after-tax loss of $0.6 million for the Cumulative Effect of Accounting Change from the implementation of FIN 47 in 2005. | |
(2) | Other Investing Cash Flowsin 2008 includes the $133 million deposit to Trustee for Repayment of Collateral Trust Bonds. | |
(3) | For purposes of this computation, earnings are defined as pre-tax earnings from continuing operations before minority interest, or income/loss from equity method investments, plus interest expense and amortization of debt discount and expense related to indebtedness. Fixed charges are interest expense, including amortization of debt discount and expense on indebtedness. |
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• | outlook and strategies, |
• | operating results during 2008 compared with 2007, and 2007 compared with 2006, |
• | factors which affect our results and outlook, |
• | liquidity, capital needs, capital resources, and contractual obligations, |
• | dividends, and |
• | critical accounting policies. |
• | Maintain and enhance TEP’s system reliability and safety while operating under a base rate freeze through 2012; |
• | Ensure UniSource Energy continues to have adequate liquidity by maintaining sufficient lines of credit and regularly reviewing and adjusting UniSource Energy’s short-term investment strategies in response to market conditions; |
• | Expand TEP and UNS Electric’s portfolio of renewable energy sources and demand side management programs to meet Arizona’s renewable energy standards; |
• | Enhance the value of TEP’s transmission system while continuing to provide reliable access to generation for TEP and UNS Electric’s retail customers and market access for all generating assets; and |
• | Obtain ACC approval of rate increases for UNS Gas and UNS Electric to provide adequate revenues to cover the rising cost of providing reliable and safe service to their customers. |
K-27
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K-28
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K-29
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2008 | 2007 | 2006 | ||||||||||
-Millions of Dollars- | ||||||||||||
TEP | $ | 4 | $ | 53 | $ | 67 | ||||||
UNS Gas | 8 | 4 | 4 | |||||||||
UNS Electric | 4 | 5 | 5 | |||||||||
Other(1) | (2 | ) | (4 | ) | (7 | ) | ||||||
Income Before Discontinued Operations | 14 | 58 | 69 | |||||||||
Discontinued Operations — Net of Tax(2) | — | — | (2 | ) | ||||||||
Consolidated Net Income | $ | 14 | $ | 58 | $ | 67 | ||||||
(1) | Includes: UniSource Energy parent company expenses; UniSource Energy parent company interest expense (net of tax) on the UniSource Energy Convertible Senior Notes and on the UniSource Energy Credit Agreement; and income and losses from Millennium investments and UED. | |
(2) | Relates to the discontinued operations of Global Solar. |
Borrowings | Amount Available | |||||||||||
Balances As of | Cash and Cash | under Revolving | under Revolving | |||||||||
February 25, 2009 | Equivalents | Credit Facility(3) | Credit Facility | |||||||||
-Millions of Dollars- | ||||||||||||
UniSource Energy stand-alone | $ | 4 | $ | 42 | $ | 28 | ||||||
TEP | 24 | 11 | 139 | |||||||||
UNS Gas | 8 | 10 | 25 | (1) | ||||||||
UNS Electric | 5 | 16 | 19 | (1) | ||||||||
Other | 9 | (2) | N/A | N/A | ||||||||
Total | $ | 50 | ||||||||||
(1) | Currently, either UNS Gas or UNS Electric may borrow up to a maximum of $45 million, but the total combined amount borrowed cannot exceed $60 million. | |
(2) | Includes cash and cash equivalents at Millennium and UED. | |
(3) | Includes LOCs issued under Revolving Credit Facilities |
K-30
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2008 | 2007 | 2006 | ||||||||||
-Millions of Dollars- | ||||||||||||
Cash provided by (used in): | ||||||||||||
Operating Activities | $ | 277 | $ | 323 | $ | 283 | ||||||
Investing Activities | (453 | ) | (217 | ) | (246 | ) | ||||||
Financing Activities | 141 | (119 | ) | (77 | ) |
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Actual | Estimated | |||||||||||||||||||||||
Business Segment | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | ||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||
TEP | $ | 287 | $ | 245 | $ | 227 | $ | 257 | $ | 222 | $ | 188 | ||||||||||||
UNS Gas | 16 | 20 | 19 | 21 | 22 | 23 | ||||||||||||||||||
UNS Electric | 30 | 29 | 24 | 23 | 37 | 16 | ||||||||||||||||||
UED | 16 | — | — | — | — | — | ||||||||||||||||||
UniSource Energy Consolidated | $ | 349 | $ | 294 | $ | 270 | $ | 301 | $ | 281 | $ | 227 | ||||||||||||
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• | UES’ guarantee of senior unsecured notes issued by UNS Gas ($100 million) and UNS Electric ($100 million); |
• | UES’ guarantee of the $60 million UNS Gas/UNS Electric Revolver; and |
• | UniSource Energy’s guarantee of approximately $2 million in building lease payments for UNS Gas. |
K-33
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- -Millions of Dollars-
Payment Due in Years | 2014 | |||||||||||||||||||||||||||||||
Ending December 31, | 2009 | 2010 | 2011 | 2012 | 2013 | and after | Other | Total | ||||||||||||||||||||||||
Long Term Debt | ||||||||||||||||||||||||||||||||
Principal(See Note 7) | $ | 6 | $ | 6 | $ | 573 | $ | — | $ | — | $ | 745 | $ | — | $ | 1,330 | ||||||||||||||||
Interest(1) | 57 | 58 | 55 | 45 | 45 | 608 | — | 868 | ||||||||||||||||||||||||
Capital Lease Obligations (See Note 7) | 63 | 93 | 107 | 118 | 123 | 304 | — | 808 | ||||||||||||||||||||||||
Operating Leases | 2 | 2 | 1 | — | — | 1 | — | 6 | ||||||||||||||||||||||||
Purchase Obligations: | ||||||||||||||||||||||||||||||||
Fuel(2) | 232 | 152 | 81 | 47 | 46 | 200 | — | 758 | ||||||||||||||||||||||||
Purchased Power | 78 | 32 | 15 | 10 | 10 | 3 | — | 148 | ||||||||||||||||||||||||
Transmission | 4 | 4 | 4 | 2 | 2 | 5 | — | 21 | ||||||||||||||||||||||||
Other Long-Term Liabilities(3): | ||||||||||||||||||||||||||||||||
Pension & Other Post Retirement Obligations(4) | 23 | 5 | 6 | 6 | 6 | 30 | — | 76 | ||||||||||||||||||||||||
San Juan Pollution Control Equipment (See Note 5) | 18 | — | — | — | — | — | — | 18 | ||||||||||||||||||||||||
Acquisition of Springerville Coal Handling and Common Facilities (See Note 7) | — | — | — | — | — | 226 | — | 226 | ||||||||||||||||||||||||
Unrecognized Tax Benefits (See Note 10) | — | — | — | — | — | — | 20 | 20 | ||||||||||||||||||||||||
Total Contractual Cash Obligations | $ | 483 | $ | 352 | $ | 842 | $ | 228 | $ | 232 | $ | 2,122 | $ | 20 | $ | 4,279 | ||||||||||||||||
(1) | Excludes interest on revolving credit facilities. | |
(2) | Excludes TEP’s liability for final environmental reclamation at the coal mines which supply the San Juan and Four Corners generating stations as the timing of payment has not been determined. See Note 5. | |
(3) | Excludes asset retirement obligations expected to occur through 2066. | |
(4) | These obligations represent TEP and UES’ minimum contributions to pension plans in 2009 and TEP’s expected postretirement benefit costs to cover medical and life insurance claims as determined by the plans’ actuaries. TEP and UES do not know and have not included pension contributions beyond 2009 due to the significant impact that returns on plan assets and changes in discount rates might have on such amounts. TEP funds the postretirement benefit plan on a pay-as-you-go basis. |
• | We do not have any provisions in any of our debt or lease agreements that would cause an event of default or cause amounts to become due and payable in the event of a credit rating downgrade. |
• | None of our contracts or financing arrangements contains acceleration clauses or other consequences triggered by changes in our stock price. |
K-34
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UniSource Energy | TEP | |||||||||||||||
Amount | Expiring | Amount | Expiring | |||||||||||||
-Millions of Dollars- | Year | -Millions of Dollars- | Year | |||||||||||||
Capital Loss | $ | 2 | 2010-2011 | $ | — | — | ||||||||||
State Net Operating Loss | 43 | 2013 | 28 | 2013 | ||||||||||||
AMT Credit | 49 | — | 35 | — |
• | A $9 million increase in total operating revenues due to: |
• | a $64 million increase in wholesale revenues due to increased short-term wholesale activity and related purchased power volumes, lower retail demand resulting in an increase in the availability of energy to sell into the wholesale market and an increase in the market price of wholesale power. Wholesale sales volumes increased 13% and the average price per MWh of wholesale power sold increased by 16%; and |
• | a $12 million increase in other revenues due primarily to fees and reimbursements received for fuel and O&M costs related to Springerville Units 3 and 4; partially offset by: |
• | a $58 million provision for revenues to be credited equivalent to the Fixed CTC revenue that was collected from customers after the TRA was fully amortized in early May 2008; and | ||
• | a $9 million decrease in retail revenues due to mild summer weather and a weakening local economy. |
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• | A $92 million increase in fuel and purchased power due to: |
• | a $98 million increase in purchased power expense. Purchased power volumes increased by 44% as a result of higher wholesale sales activity and replacement power purchases during the first and third quarters. The average price paid per MWh increased by 18% due to higher market prices for wholesale energy; and |
• | a $6 million decrease in fuel expense. Higher mining costs at San Juan, increased coal costs at Sundt Unit 4 and a 17% increase in the average cost per kWh of gas-fired generation due to higher natural gas prices, were offset by a $25 million gain recorded to fuel expense related to the reinstatement of FAS 71. |
• | a $55 million increase in O&M expense due to: an $11 million increase in O&M related to Springerville Units 3 and 4, which is reimbursed to TEP by the owners of those units and recorded in other revenues; an increase in generation plant maintenance of $18 million; a $13 million decrease in pre-tax gains from the sale of excess SO2 Emission Allowances which is recorded as an offset to O&M; increased transmission expense; and general cost pressures resulting from inflation and other economic factors; |
• | a $6 million increase in depreciation and amortization expense due to additions to plant in service; |
• | a $54 million decrease in the amortization of TEP’s TRA. In May 2008, the TRA was fully amortized; |
• | a $9 million decrease in taxes other than income taxes due primarily to a $7 million gain resulting from the reinstatement of FAS 71; |
• | a $7 million decrease in other income due in part to lower interest income on investment in lease debt. The interest income declines over time as the lease debt is amortized; and |
• | a $15 million decrease in total interest expense resulting primarily from lower balances on capital lease obligations. |
• | a $7 million increase in total operating revenues less fuel and purchased power expense due to the following: |
• | a $37 million increase in retail revenues due to hot weather during the third quarter, cool weather during the first quarter and customer growth; |
• | a $17 million increase in wholesale revenues. Wholesale revenues in 2007 and 2006 included $8 million and $3 million, respectively, of transmission revenues related to Springerville Unit 3. Wholesale revenues also benefited from higher short-term wholesale sales activity; |
• | a $27 million increase in other revenues due primarily to fees and reimbursements received from Tri-State for fuel and O&M costs related to Springerville Unit 3 and reimbursements received from SRP for expenses related to Springerville Unit 4; offset by: |
• | a $40 million increase in purchased power expense due to increased retail energy demand during the third quarter, higher short-term wholesale activity and expenses related to the 100 MW purchased power contract with Tri-State that commenced in September 2006 and ended August 1, 2007; and |
• | a $34 million increase in fuel expense due to an increase in gas-fired generating output, as well as increases in coal and rail expenses. SeeOperating Expenses, Fuel and Purchased Power Expense, below. |
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• | a $13 million increase in O&M expense due in part to planned maintenance outages at San Juan Unit 2 and Springerville Unit 2 during the first quarter of 2007. Other factors contributing to higher O&M include a full year of operating expenses at Luna, and expenses related to Springerville Units 3 and 4 that TEP incurred and for which TEP received reimbursement from Tri-State and SRP. TEP’s O&M expense in 2007 included $24 million related to Springerville Units 3 and 4, compared with $9 million in 2006. O&M expense in 2007 was partially offset by a pre-tax gain of $15 million related to the sale of excess SO2 Emission Allowances, compared with a pre-tax gain of $7 million in 2006; |
• | a $12 million increase in the amortization of TEP’s Transition Recovery Asset (TRA); |
• | a $7 million increase in depreciation and amortization due primarily to additions to plant in service; and |
• | a $10 million decrease in total interest expense due to lower balances on capital lease obligations. In addition, interest expense in 2006 included an interest payment to the IRS for proposed adjustments to previously filed tax returns and the write-off of fees related to the amendment of TEP’s Credit Agreement. |
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Electric Sales — Millions of kWh | Electric Revenues — Millions of Dollars | |||||||||||||||||||||||||||||||
07-08 | 07-08 | |||||||||||||||||||||||||||||||
2008 | 2007 | % Chng | 2006 | 2008 | 2007 | % Chng | 2006 | |||||||||||||||||||||||||
Electric Retail Sales: | ||||||||||||||||||||||||||||||||
Residential | 3,853 | 4,005 | (4 | %) | 3,778 | $ | 351 | $ | 363 | (3 | %) | $ | 343 | |||||||||||||||||||
Commercial | 2,034 | 2,058 | (1 | %) | 1,959 | 212 | 214 | (1 | %) | 203 | ||||||||||||||||||||||
Industrial | 2,264 | 2,341 | (3 | %) | 2,278 | 165 | 168 | (2 | %) | 165 | ||||||||||||||||||||||
Mining | 1,096 | 983 | 11 | % | 925 | 55 | 49 | 12 | % | 44 | ||||||||||||||||||||||
Public Authorities | 256 | 247 | 4 | % | 261 | 19 | 18 | 6 | % | 19 | ||||||||||||||||||||||
Total Electric Retail Sales | 9,503 | 9,634 | (1 | %) | 9,201 | 802 | 812 | (1 | %) | 774 | ||||||||||||||||||||||
CTC Revenue to be Refunded | — | — | — | — | (58 | ) | — | NM | — | |||||||||||||||||||||||
Net Electric Retail Sales | 9,503 | 9,634 | (1 | %) | 9,201 | 744 | 812 | (8 | %) | 774 | ||||||||||||||||||||||
Electric Wholesale Sales Delivered: | ||||||||||||||||||||||||||||||||
Long-term Contracts | 1,096 | 1,101 | 2 | % | 1,076 | 58 | 56 | 4 | % | 51 | ||||||||||||||||||||||
Short-term and Trading | 2,879 | 2,458 | 23 | % | 2,340 | 185 | 125 | 48 | % | 117 | ||||||||||||||||||||||
Transmission | — | — | — | — | 17 | 15 | 13 | % | 11 | |||||||||||||||||||||||
Total Electric Wholesale Sales | 3,975 | 3,559 | 12 | % | 3,416 | 260 | 196 | 33 | % | 179 | ||||||||||||||||||||||
Total Electric Sales | 13,478 | 13,193 | 2 | % | 12,617 | $ | 1,004 | $ | 1,008 | — | $ | 953 | ||||||||||||||||||||
Weather Data: | ||||||||||||||||||||||||||||||||
Cooling Degree Days | 1,336 | 1,517 | (12 | %) | 1,371 | |||||||||||||||||||||||||||
10-Year Average | 1,431 | 1,424 | NA | 1,414 | ||||||||||||||||||||||||||||
Heating Degree Days | 1,367 | 1,506 | (9 | %) | 1,295 | |||||||||||||||||||||||||||
10-Year Average | 1,444 | 1,497 | NA | 1,487 |
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2008 | 2007 | 2006 | ||||||||||
-Millions of Dollars- | ||||||||||||
Reimbursements related to Springerville Units 3 and 4 | $ | 53 | $ | 42 | $ | 22 | ||||||
Revenue collected from customers for renewable energy programs(1) | 3 | 2 | 1 | |||||||||
Other Revenue | 19 | 19 | 13 | |||||||||
Total Other Revenue | $ | 75 | $ | 63 | $ | 36 | ||||||
(1) | Represents revenue collected from customers to fund TEP’s renewable energy programs; the related expense is recorded in O&M. |
Generation/Purchases | Expense | |||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 | 2007 | 2006 | |||||||||||||||||||
-Millions of kWh- | -Millions of Dollars- | |||||||||||||||||||||||
Coal-Fired Generation | ||||||||||||||||||||||||
Four Corners | 721 | 717 | 812 | $ | 12 | $ | 12 | |||||||||||||||||
Navajo | 1,267 | 1,283 | 1,215 | 31 | 21 | 17 | ||||||||||||||||||
San Juan | 2,130 | 2,306 | 2,486 | 61 | 53 | 56 | ||||||||||||||||||
Springerville | 5,674 | 5,914 | 5,827 | 95 | 96 | 96 | ||||||||||||||||||
Sundt 4 | 784 | 750 | 623 | 29 | 25 | 14 | ||||||||||||||||||
FAS 71 Reinstatement(1) | — | — | — | (24 | ) | — | — | |||||||||||||||||
Total Coal-Fired Generation | 10,576 | 10,970 | 10,963 | $ | 205 | $ | 207 | $ | 195 | |||||||||||||||
Gas-Fired Generation | ||||||||||||||||||||||||
Luna | 646 | 782 | 516 | 41 | 40 | 24 | ||||||||||||||||||
Other Units | 224 | 306 | 334 | 29 | 30 | 31 | ||||||||||||||||||
Gas-Fired Generation | 870 | 1,088 | 850 | 70 | 70 | 55 | ||||||||||||||||||
Realized (Gains) / Losses on Gas Hedges | — | — | — | 4 | 9 | |||||||||||||||||||
Total Gas-Fired Generation | 870 | 1,088 | 850 | 74 | 79 | 55 | ||||||||||||||||||
Solar and Other Generation | 9 | 9 | 9 | — | — | — | ||||||||||||||||||
Total Generation(2) | 11,455 | 12,067 | 11,822 | 280 | 286 | 250 | ||||||||||||||||||
Purchased Power | 2,906 | 2,047 | 1,680 | 238 | 140 | 100 | ||||||||||||||||||
Total Resources | 14,361 | 14,114 | 13,502 | $ | 517 | $ | 426 | $ | 350 | |||||||||||||||
Less Line Losses and Company Use | 883 | 921 | 885 | |||||||||||||||||||||
Total Energy Sold | 13,478 | 13,193 | 12,617 | |||||||||||||||||||||
(1) | SeeCritical Accounting Policies, Accounting for Rate Regulation,below. | |
(2) | Fuel expense excludes $5 million in 2008 and 2007, and $9 million in 2006, related to Springerville Unit 3; the fuel costs incurred on behalf of Unit 3 are recorded in Fuel Expense and the reimbursement by Tri-State is recorded in Other Revenue. |
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Avg. Market Price for Around-the-Clock Energy — $/MWh | 2008 | 2007 | 2006 | |||||||||
Quarter ended December 31 | $ | 40 | $ | 52 | $ | 48 | ||||||
Year ended December 31 | 63 | 47 | 50 |
Avg. Market Price for Natural Gas — $/MMBtu | 2008 | 2007 | 2006 | |||||||||
Quarter ended December 31 | $ | 4.24 | $ | 6.06 | $ | 5.58 | ||||||
Year ended December 31 | 7.41 | 6.11 | 6.05 |
2008 | 2007 | 2006 | ||||||||||
-cents per kWh- | ||||||||||||
Coal | 1.94 | 1.89 | 1.78 | |||||||||
Gas* | 8.51 | 7.26 | 6.69 | |||||||||
Purchased Power | 8.19 | 6.84 | 5.95 | |||||||||
All Sources — Average | 3.60 | 3.02 | 2.59 | |||||||||
* | In 2006, the average cost of gas generation per kWh excludes test energy produced at Luna and its associated fuel costs. |
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2008 | 2007 | 2006 | ||||||||||
Other O&M | $ | 229 | $ | 201 | $ | 195 | ||||||
Reimbursed Expenses Related to Springerville Units 3 and 4 | 35 | 24 | 9 | |||||||||
Gain on the Sale of SO2 Emissions Allowances | (1 | ) | (15 | ) | (7 | ) | ||||||
Expenses related to customer-funded renewable energy programs(1) | 3 | 2 | 1 | |||||||||
Reinstatement of FAS 71 | 1 | — | — | |||||||||
Total O&M | $ | 267 | $ | 212 | $ | 199 | ||||||
(1) | Represents expenses related TEP’s customer-funded renewable energy programs; the offsetting funds collected from customers are recorded in other revenue. |
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• | The forward component will be updated on April 1 of each year, starting in 2009. The forward component will be based on the forecasted fuel and purchased power costs for the 12-month period from April 1 to March 31, less the base cost of fuel and purchased power of 2.9 cents per kWh, which is embedded in base rates. At January 1, 2009, the forward component was zero. |
• | The true-up component will reconcile any over/under collected amounts from the preceding 12 month period and will be credited to or recovered from customers in the subsequent year. |
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Pre-tax Gain | ||||||||
Delivery | Allowances Sold | (millions) | ||||||
2006 | 10,000 | $ | 7 | |||||
2007 | 22,000 | 15 | ||||||
2008 | 4,000 | 1 |
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TEP | ||||||||||||||||
Quoted Prices in | Significant | |||||||||||||||
Active Markets for | Significant Other | Unobservable | ||||||||||||||
Identical Assets | Observable Inputs | Inputs | ||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
December 31, 2008 | ||||||||||||||||
-Millions of Dollars- | ||||||||||||||||
Assets | ||||||||||||||||
Cash Equivalents(1) | $ | 8 | $ | — | $ | — | $ | 8 | ||||||||
Rabbi Trust Investments to support the Deferred Compensation and SERP Plans(2) | — | 9 | 9 | |||||||||||||
Energy Contracts(3) | — | — | 10 | 10 | ||||||||||||
Total Assets | $ | 8 | $ | 9 | $ | 9 | $ | 27 | ||||||||
Liabilities | ||||||||||||||||
Energy Contracts(3) | $ | — | $ | (18 | ) | $ | (11 | ) | $ | (29 | ) | |||||
Interest Rate Swap(4) | — | (8 | ) | — | (8 | ) | ||||||||||
Total Liabilities | — | (26 | ) | (11 | ) | (37 | ) | |||||||||
Net Total Assets and (Liabilities) | $ | 8 | $ | (17 | ) | $ | (1 | ) | $ | (10 | ) | |||||
(1) | Cash Equivalents are based on observable market prices and are comprised of the fair value of Money Market Funds. | |
(2) | Level 2 investments comprise of amounts held in mutual and money market funds related to deferred compensation and Supplemental Executive Retirement Plan (SERP) benefits. The valuation is based on quoted prices, traded in active markets. These investments are included in Investments and Other Property — Other in the UniSource Energy and TEP balance sheets. | |
(3) | Energy contracts include gas swap agreements (Level 2), forward power purchase and sales contracts (Level 3), and forward power purchase contracts indexed to gas (Level 3), entered into to take advantage of favorable market conditions and reduce exposure to energy price risk. The valuation techniques are described below. | |
(4) | Interest Rate Swap is valued based on the six month LIBOR index. |
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2008 | 2007 | 2006 | ||||||||||
-Millions of Dollars- | ||||||||||||
Net Cash Flows — Operating Activities (GAAP) | $ | 269 | $ | 264 | $ | 227 | ||||||
Amounts from Statements of Cash Flows: | ||||||||||||
Less: Capital Expenditures | (287 | ) | (163 | ) | (156 | ) | ||||||
Net Cash Flows after Capital Expenditures (non-GAAP)* | (18 | ) | 101 | 71 | ||||||||
Amounts from Statements of Cash Flows: | ||||||||||||
Less: Retirement of Capital Lease Obligations | (74 | ) | (71 | ) | (61 | ) | ||||||
Plus: Proceeds from Investment in Lease Debt | 25 | 28 | 22 | |||||||||
Net Cash Flows after Capital Expenditures and Required Payments on Debt and Capital Lease Obligations (non-GAAP)* | $ | (67 | ) | $ | 58 | $ | 32 | |||||
2008 | 2007 | 2006 | ||||||||||
Net Cash Flows — Operating Activities (GAAP) | $ | 269 | $ | 264 | $ | 227 | ||||||
Net Cash Flows — Investing Activities (GAAP) | (391 | ) | (137 | ) | (182 | ) | ||||||
Net Cash Flows — Financing Activities (GAAP) | 129 | (120 | ) | (79 | ) | |||||||
Net Cash Flows after Capital Expenditures (non-GAAP)* | (18 | ) | 101 | 71 | ||||||||
Net Cash Flows after Capital Expenditures and Required Payments on Debt and Capital Lease | ||||||||||||
Obligations (non-GAAP)* | (67 | ) | 58 | 32 |
* | Net Cash Flows after Capital Expenditures and Net Cash Flows Available after Required Payments, both non-GAAP measures of liquidity, should not be considered as alternatives to Net Cash Flows - Operating Activities, which is determined in accordance with GAAP as a measure of liquidity. We believe that Net Cash Flows after Capital Expenditures and Net Cash Flows Available after Required Payments provide useful information to investors as measures of liquidity and our ability to fund our capital requirements, make required payments on debt and capital lease obligations, and pay dividends to UniSource Energy. |
• | a $44 million decrease in cash receipts from retail and wholesale electric sales, less fuel and purchased power costs, resulting from higher coal-related fuel costs, mild weather, general economic conditions and higher replacement power costs due to unplanned outages; |
• | a $15 million increase in cash receipts related to reimbursements received for the operation of Springerville Units 3 and 4; |
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• | income tax refunds of $21 million; |
• | a $15 million decrease in proceeds from the sale of excess SO2 emission allowances; |
• | a $30 million increase in O&M costs related to higher incurred costs related to Springerville Units 3 and 4, as well as an increase in plant outage and maintenance costs; |
• | a $19 million decrease in total interest paid due to lower capital lease obligation balances; and |
• | a $24 million decrease in income taxes paid due to lower taxable income and payments made last year for amended tax returns. |
Category | 2009 | 2010 | 2011 | 2012 | 2013 | |||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||
Transmission and Distribution | $ | 103 | $ | 123 | $ | 104 | $ | 104 | $ | 74 | ||||||||||
Generation Facilities | 75 | 68 | 117 | 75 | 70 | |||||||||||||||
Environmental | 20 | 6 | 11 | 11 | 17 | |||||||||||||||
General and Other | 47 | 30 | 25 | 32 | 28 | |||||||||||||||
Total | $ | 245 | $ | 227 | $ | 257 | $ | 222 | $ | 188 | ||||||||||
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Lease Debt Investment Balance | ||||||||
Leased Asset | December 31, 2008 | December 31, 2007 | ||||||
-In Millions- | ||||||||
Investments in Lease Debt: | ||||||||
Springerville Unit 1 | $ | 50 | $ | 71 | ||||
Springerville Coal Handling Facilities | 29 | 34 | ||||||
Total Investment in Lease Debt | $ | 79 | $ | 105 | ||||
• | proceeds of $221 million received by TEP related to the issuance of tax-exempt IDB’s through The Pima County Industrial Development Authority; |
• | a $51 million decrease in dividends paid to UniSource Energy; |
• | a $20 million increase in net proceeds from borrowings under the TEP Revolving Credit Facility; partially offset by |
• | $10 million of long-term debt repayments. |
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Capital Lease Obligation | ||||||||||||
Balance | Renewal/Purchase | |||||||||||
Leased Asset | at December 31, 2008 | Expiration | Option | |||||||||
-In Millions- | ||||||||||||
Springerville Unit 1 | $ | 307 | 2015 | Fair market value purchase option | ||||||||
Springerville Coal Handling Facilities | 91 | 2015 | Fixed price purchase option | |||||||||
Springerville Common Facilities | 109 | 2020 | Fixed price purchase option | |||||||||
Sundt Unit 4 | 25 | 2011 | Fair market value purchase option | |||||||||
Total Capital Lease Obligations | $ | 532 | ||||||||||
TEP’s Contractual Obligations - -Millions of Dollars- | ||||||||||||||||||||||||||||||||
Payment Due in Years | 2014 | |||||||||||||||||||||||||||||||
Ending December 31, | 2009 | 2010 | 2011 | 2012 | 2013 | and after | Other | Total | ||||||||||||||||||||||||
Long Term Debt | ||||||||||||||||||||||||||||||||
Principal (See Note 7) | $ | — | $ | — | $ | 469 | $ | — | $ | — | $ | 445 | $ | — | $ | 914 | ||||||||||||||||
Interest | 37 | 38 | 35 | 28 | 28 | 415 | — | 581 | ||||||||||||||||||||||||
Capital Lease Obligations (See Note 7) | 63 | 93 | 107 | 118 | 123 | 304 | — | 808 | ||||||||||||||||||||||||
Operating Leases | 1 | 1 | — | — | — | — | — | 2 | ||||||||||||||||||||||||
Purchase Obligations: | ||||||||||||||||||||||||||||||||
Fuel (including Transportation) | 148 | 101 | 57 | 43 | 39 | 181 | — | 569 | ||||||||||||||||||||||||
Purchased Power | 37 | 3 | 3 | 3 | 2 | 2 | — | 50 | ||||||||||||||||||||||||
Transmission | 2 | 2 | 2 | 2 | 2 | 5 | — | 15 | ||||||||||||||||||||||||
Other Long-Term Liabilities: | ||||||||||||||||||||||||||||||||
Pension & Other Post Retirement Obligations | 21 | 5 | 6 | 6 | 6 | 29 | — | 73 | ||||||||||||||||||||||||
San Juan Pollution Control Equipment (See Note 5) | 18 | — | — | — | — | — | — | 18 | ||||||||||||||||||||||||
Acquisition of Springerville Coal Handling and Common Facilities (See Note 7) | — | — | — | — | — | 226 | — | 226 | ||||||||||||||||||||||||
Unrecognized Tax Benefits (See Note 10) | — | — | — | — | — | — | 20 | 20 | ||||||||||||||||||||||||
Total Contractual Cash Obligations | $ | 327 | $ | 243 | $ | 679 | $ | 200 | $ | 200 | $ | 1,607 | $ | 20 | $ | 3,276 | ||||||||||||||||
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• | TEP’s Credit Agreement and the 2008 TEP Letter of Credit Facility contain pricing based on TEP’s credit ratings. A change in TEP’s credit ratings can cause an increase or decrease in the amount of interest TEP pays on its borrowings, and the amount of fees it pays for its letters of credit and unused commitments. A downgrade in TEP’s credit ratings would not cause a restriction in TEP’s ability to borrow under its revolving credit facility. |
• | TEP’s Credit Agreement and the 2008 TEP Letter of Credit Facility contain certain financial and other restrictive covenants, including interest coverage and leverage tests. Failure to comply with these covenants would entitle the lenders to accelerate the maturity of all amounts outstanding. At December 31, 2008, TEP was in compliance with these covenants. SeeTEP Credit Agreement and TEP Letter of Credit Facility, above. |
• | TEP conducts its wholesale marketing and risk management activities under certain master agreements whereby TEP may be required to post credit enhancements in the form of cash or a letter of credit due to changes in contract values, a change in TEP’s credit ratings or if there has been a material change in TEP’s creditworthiness. As of December 31, 2008, TEP had posted $1 million with counterparties for credit enhancement. |
2008 | 2007 | 2006 | ||||||||||
-Millions of Dollars- | ||||||||||||
Gas Revenues | $ | 171 | $ | 149 | $ | 160 | ||||||
Other Revenues | 3 | 2 | 2 | |||||||||
Total Operating Revenues | 174 | 151 | 162 | |||||||||
Purchased Energy Expense | 119 | 102 | 114 | |||||||||
Other Operations and Maintenance Expense | 25 | 27 | 25 | |||||||||
Depreciation and Amortization | 7 | 7 | 7 | |||||||||
Taxes other than Income Taxes | 3 | 3 | 3 | |||||||||
Total Other Operating Expenses | 154 | 139 | 149 | |||||||||
Operating Income | 20 | 12 | 13 | |||||||||
Total Other Income | — | 2 | 1 | |||||||||
Total Interest Expense | 7 | 7 | 7 | |||||||||
Income Tax Expense | 5 | 3 | 3 | |||||||||
Net Income | $ | 8 | $ | 4 | $ | 4 | ||||||
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Gas Sales (Millions of Therms) | Gas Revenues (Millions of Dollars) | |||||||||||||||||||||||||||||||
08-07 | 08-07 | |||||||||||||||||||||||||||||||
2008 | 2007 | % Chng | 2006 | 2008 | 2007 | % Chng | 2006 | |||||||||||||||||||||||||
Retail Therm Sales: | ||||||||||||||||||||||||||||||||
Residential | 72 | 71 | 1 | % | 70 | $ | 97 | $ | 90 | 8 | % | $ | 96 | |||||||||||||||||||
Commercial | 31 | 31 | — | 30 | 36 | 34 | 6 | % | 38 | |||||||||||||||||||||||
Industrial | 2 | 2 | — | 3 | 2 | 2 | — | 3 | ||||||||||||||||||||||||
Public Authorities | 7 | 8 | (13 | %) | 7 | 8 | 7 | 14 | % | 8 | ||||||||||||||||||||||
Total Retail Therm Sales | 112 | 112 | — | 110 | 143 | 133 | 8 | % | 145 | |||||||||||||||||||||||
Transport | 40 | 25 | 60 | % | 23 | 3 | 3 | — | 3 | |||||||||||||||||||||||
Negotiated Sales Program (NSP) | 32 | 19 | 68 | % | 17 | 25 | 13 | 92 | % | 12 | ||||||||||||||||||||||
Total Therm Sales | 184 | 156 | 18 | % | 150 | $ | 171 | $ | 149 | 15 | % | $ | 160 | |||||||||||||||||||
Test year — December 31, 2005 | ACC Order | |
Original cost rate base | $154 million | |
Revenue deficiency | $5 million | |
Total rate increase (over test year revenues) | 4% | |
Cost of debt | 6.60% | |
Cost of equity | 10.00% | |
Hypothetical capital structure | 50% equity / 50% debt | |
Weighted average cost of capital | 8.30% |
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Test year — 12 months ended June 30, 2008 | Requested by UNS Gas | |
Original cost rate base | $182 million | |
Revenue deficiency | $9.5 million | |
Total rate increase (over test year revenues) | 6% | |
Cost of long-term debt | 6.5% | |
Cost of equity | 11.0% | |
Actual capital structure | 50% equity / 50% debt | |
Weighted average cost of capital | 8.75% | |
Rate of return on fair value rate base | 6.80% |
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UNS Gas December 31, 2008 - -Millions of Dollars- | ||||||||||||||||
Quoted Prices in | ||||||||||||||||
Active Markets | Significant Other | Significant | ||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||
Assets (Level 1) | Inputs (Level 2) | Inputs (Level 3) | Total | |||||||||||||
Cash Equivalents(1) | $ | 1 | $ | — | $ | — | $ | 1 | ||||||||
Cash Collateral(2) | — | 7 | — | 7 | ||||||||||||
Energy Contracts(3) | — | (13 | ) | — | (13 | ) | ||||||||||
Total | $ | 1 | $ | (6 | ) | $ | — | $ | 5 | |||||||
(1) | Cash Equivalents are based on observable market prices and are comprised of the fair value of Money Market Funds. | |
(2) | Collateral provided to energy contract counterparties to reduce credit risk exposure. | |
(3) | Energy contracts include gas swap agreements (Level 2) entered into to take advantage of favorable market conditions and reduce exposure to energy price risk. The amounts include current and non-current assets and are net of current and non-current liabilities. |
2008 | 2007 | 2006 | ||||||||||
-Millions of Dollars- | ||||||||||||
Cash provided by (used in): | ||||||||||||
Operating Activities | $ | 3 | $ | 28 | $ | 32 | ||||||
Investing Activities | (16 | ) | (22 | ) | (23 | ) | ||||||
Financing Activities | 1 | (6 | ) | (4 | ) | |||||||
Net Increase (Decrease) in Cash | (12 | ) | — | 5 | ||||||||
Beginning Cash | 19 | 19 | 14 | |||||||||
Ending Cash | 7 | 19 | 19 | |||||||||
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2009 | 2010 | 2011 | 2012 | 2013 | ||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||
UNS Gas | $ | 20 | $ | 19 | $ | 21 | $ | 22 | $ | 23 |
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UNS Gas’ Contractual Obligations - -Millions of Dollars- | ||||||||||||||||||||||||||||
Payment Due in Years | 2014 | |||||||||||||||||||||||||||
Ending December 31, | 2009 | 2010 | 2011 | 2012 | 2013 | and after | Total | |||||||||||||||||||||
Long Term Debt | ||||||||||||||||||||||||||||
Principal | $ | — | $ | — | $ | 50 | $ | — | $ | — | $ | 50 | $ | 100 | ||||||||||||||
Interest | 6 | 6 | 6 | 3 | 3 | 7 | 31 | |||||||||||||||||||||
Purchase Obligations — Fuel: | 64 | 42 | 23 | 4 | 7 | 19 | 159 | |||||||||||||||||||||
Total Contractual Cash Obligations | $ | 70 | $ | 48 | $ | 79 | $ | 7 | $ | 10 | $ | 76 | $ | 290 | ||||||||||||||
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2008 | 2007 | 2006 | ||||||||||
-Millions of Dollars- | ||||||||||||
Retail Electric Revenues | $ | 182 | $ | 165 | $ | 158 | ||||||
Wholesale Electric Revenues | 10 | — | — | |||||||||
Other Revenues | 3 | 4 | 2 | |||||||||
Total Operating Revenues | 195 | 169 | 160 | |||||||||
Purchased Energy Expense | 128 | 111 | 106 | |||||||||
Fuel Expense | 8 | — | — | |||||||||
Other Operations and Maintenance Expense | 30 | 30 | 26 | |||||||||
Depreciation and Amortization | 13 | 13 | 11 | |||||||||
Taxes other than Income Taxes | 4 | 3 | 4 | |||||||||
Total Other Operating Expenses | 183 | 157 | 147 | |||||||||
Operating Income | 12 | 12 | 13 | |||||||||
Total Other Income | 1 | 2 | 1 | |||||||||
Total Interest Expense | 7 | 6 | 5 | |||||||||
Income Tax Expense | 2 | 3 | 4 | |||||||||
Net Income | $ | 4 | $ | 5 | $ | 5 | ||||||
Electric Sales — Millions of kWh | Electric Revenues — Millions of Dollars | |||||||||||||||||||||||||||||||
08-07 | 08-07 | |||||||||||||||||||||||||||||||
2008 | 2007 | % Chng | 2006 | 2008 | 2007 | % Chng | 2006 | |||||||||||||||||||||||||
Electric Retail Sales: | ||||||||||||||||||||||||||||||||
Residential | 822 | 854 | (4 | %) | 804 | $ | 92 | $ | 86 | 7 | % | $ | 81 | |||||||||||||||||||
Commercial | 620 | 627 | (1 | %) | 613 | 70 | 64 | 9 | % | 61 | ||||||||||||||||||||||
Industrial | 219 | 199 | 10 | % | 191 | 20 | 15 | 33 | % | 15 | ||||||||||||||||||||||
Other | 2 | 2 | — | 3 | — | — | — | 1 | ||||||||||||||||||||||||
Total Electric Retail Sales | 1,663 | 1,682 | (1 | %) | 1,611 | $ | 182 | $ | 165 | 10 | % | $ | 158 | |||||||||||||||||||
Wholesale Electric Sales | 153 | — | NM | — | 10 | — | NM | — | ||||||||||||||||||||||||
Total Electric Sales | 1,816 | 1,682 | 8 | % | 1,611 | $ | 192 | $ | 165 | 13 | % | $ | 158 | |||||||||||||||||||
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Test year — 12 months ended June 30, 2006 | 2008 ACC Order | |
Original cost rate base | $131 million | |
Revenue deficiency | $4 million | |
Total rate increase (over test year revenues) | 2.5% | |
Cost of long-term debt | 8.2% | |
Cost of equity | 10.0% | |
Actual capital structure | 49% equity / 51% debt | |
Weighted average cost of capital | 9.0% |
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UNS Electric December 31, 2008 - -Millions of Dollars- | ||||||||||||||||
Quoted Prices in | ||||||||||||||||
Active Markets | Significant Other | Significant | ||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||
Assets (Level 1) | Inputs (Level 2) | Inputs (Level 3) | Total | |||||||||||||
Cash Equivalents(1) | $ | 4 | $ | — | $ | — | $ | 4 | ||||||||
Cash Collateral(2) | — | 7 | — | 7 | ||||||||||||
Energy Contracts(3) | — | (8 | ) | $ | (16 | ) | (24 | ) | ||||||||
Total | $ | 4 | $ | (1 | ) | $ | (16 | ) | $ | (13 | ) | |||||
(1) | Cash Equivalents are based on observable market prices and are comprised of the fair value of Commercial Paper and Money Market Funds. | |
(2) | Collateral provided to energy contract counterparties to reduce credit risk exposure. | |
(3) | Energy contracts include gas swap agreements (Level 2), forward power purchase and sales contracts (Level 3), and forward power purchase contracts indexed to gas (Level 3), entered into to take advantage of favorable market conditions and reduce exposure to energy price risk. The amounts include current and non-current assets and are net of current and non-current liabilities. The level 3 valuation techniques are described below. |
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2008 | 2007 | 2006 | ||||||||||
-Millions of Dollars- | ||||||||||||
Cash provided by (used in): | ||||||||||||
Operating Activities | $ | 14 | $ | 22 | $ | 14 | ||||||
Investing Activities | (30 | ) | (36 | ) | (39 | ) | ||||||
Financing Activities | 22 | 12 | 22 | |||||||||
Net Increase (Decrease) in Cash | 6 | (2 | ) | (3 | ) | |||||||
Beginning Cash | 3 | 5 | 8 | |||||||||
Ending Cash | 9 | 3 | 5 | |||||||||
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2009 | 2010 | 2011 | 2012 | 2013 | ||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||
UNS Electric | $ | 29 | $ | 24 | $ | 23 | $ | 37 | $ | 16 |
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UNS Electric’s Contractual Obligations - -Milions of Dollars- | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payment Due in Years | 2014 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ending December 31, | 2009 | 2010 | 2011 | 2012 | 2013 | and after | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long Term Debt | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principal | $ | — | $ | — | $ | 8 | $ | — | $ | — | $ | 100 | $ | 108 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest | 7 | 7 | 7 | 7 | 7 | 42 | 77 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchase Obligations: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fuel | 20 | 9 | 2 | — | — | — | 31 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchased Power | 41 | 30 | 13 | 8 | 8 | — | 100 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Transmission | 2 | 2 | 1 | — | — | — | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Contractual Cash Obligations | $ | 70 | $ | 48 | $ | 31 | $ | 15 | $ | 15 | $ | 142 | $ | 321 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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2008 | 2007 | 2006 | ||||||||||
-Millions of Dollars- | ||||||||||||
UniSource Energy Parent Company | $ | (5 | ) | $ | (5 | ) | $ | (6 | ) | |||
Millennium | — | 1 | — | |||||||||
UED | 3 | — | — | |||||||||
Total Other Loss From Continuing Operations | $ | (2 | ) | $ | (4 | ) | $ | (7 | ) | |||
Discontinued Operations — Net of Tax | — | — | (2 | ) | ||||||||
Total Other Net Loss | $ | (2 | ) | $ | (4 | ) | $ | (9 | ) | |||
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December 31, 2008 - -Millions of Dollars- | ||||||||||||||||
Quoted Prices in | ||||||||||||||||
Active Markets | Significant Other | Significant | ||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||
Assets (Level 1) | Inputs (Level 2) | Inputs (Level 3) | Total | |||||||||||||
Investments | $ | 4 | $ | — | $ | 12 | $ | 16 | ||||||||
• | an independent regulator sets rates; |
• | the regulator sets the rates to recover the specific enterprise’s costs of delivering service; and |
• | the service territory lacks competitive pressures to reduce rates below the rates set by the regulator. |
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K-67
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• | Interest Rate Swap; In June 2006, TEP entered into an interest rate swap in order to reduce the risk associated with unfavorable changes in variable interest rate payments related to changes in LIBOR. The swap has the effect of converting approximately $35 million of variable rate lease payments for the Springerville Common Lease to a fixed rate. The swap is designated as a cash flow hedge. The fair value of the interest rate swap is derived from models based on well recognized financial principles, which provide a reasonable approximation of the fair value of the swap as of the valuation date. Other models can be used to estimate the fair value of the swap and these models, which may use different assumptions or methods, may yield different results. At December 31, 2008, the fair value of the swap is a liability of $9 million. |
• | Contracts that qualify asNormal Purchases and Salesare not required to be marked-to-market: |
• | Contracts that qualify asCash Flow Hedgesare required to be marked-to-market with the changes in unrealized gains and losses recorded in Accumulated Other Comprehensive Income (AOCI), rather than the income statement, through November 2008. In December 2008, TEP reapplied FAS 71 to its generation operations and reclassified the unrealized gains (losses) relating to contracts that will settle through the PPFAC, from AOCI to a regulatory asset or liability account. In the future, mark-to-market changes for cash flow hedges will be recorded to the regulatory accounts and not to AOCI. |
• | Contracts that do not qualify as Cash Flow Hedges or Normal Purchases and Sales are required to be marked-to-market with the changes in unrealized gains and losses recorded in earnings through November 2008. In December 2008, TEP reapplied FAS 71 to its generation operations and reclassified the unrealized gains (losses) relating to these system hedges that will settle through the PPFAC, from earnings to a regulatory asset or liability account. In the future, mark-to-market changes for all system hedges will be recorded to the regulatory accounts and not through earnings. |
• | Trading Contractsare required to be marked-to-market to the income statement. |
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• | FAS 157,Fair Value Measurement, issued September 2006, defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. FAS 157 clarifies that the exchange price is the price in the principal market in which the reporting entity would transact for the asset or liability. See Note 13 |
• | FSP FAS 157-3,Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active —issued and effective October 2008, provides guidance clarifying how FAS 157Fair Value Measures(FAS 157) should be applied in markets that are not active. The guidance reaffirms the notion of fair value as an exit price as of the measurement date. The FSP emphasizes that approaches other than the market value approach to determine fair value, such as the use of management’s internal assumptions about future cash flows and appropriately risk-adjusted discount rates, may be appropriate. See Note 13. |
• | EITF 08-6,Equity Method Investment Accounting Considerations, issued January 2009, requires an entity to apply the cost accumulation model when determining the carrying value of an equity investment. Share issuances by the investee should be accounted for as if the equity investee had sold a proportionate share of its investment with any gain or loss recognized in earnings. In addition, the EITF requires that impairment testing be performed at an overall investment level. The standard is applicable for fiscal years beginning on or after December 15, 2008 and is not expected to have a material impact on our financial statements. |
• | FAS 161,Disclosures About Derivative Instruments and Hedging Activities an amendment to FAS 133, Accounting for Derivative Instruments and Hedging Activities,issued March 2008, requires enhanced disclosures about an entity’s derivative and hedging activity. The standard requires that the objectives for using derivative instruments be disclosed in terms of underlying risk so that the reader understands the purpose of derivative use in terms of the risks that the entity is intending to manage. The standard also requires disclosure of the location in the financial statements of derivative balances as well as the location of gains and losses incurred during the reporting period. The standard will be applicable for fiscal years or interim periods beginning on or after November 15, 2008 with early adoption encouraged. We will adopt the requirements of this pronouncement in our 2009 first quarter Form 10-Q. |
• | FSP FAS 132(R)-1Employers’ Disclosures about Postretirement Benefit Plan Assets,issued in December 2008, amends Statement 132(R)-1 to require more detailed disclosures about employers’ plan assets, including employers’ investment strategies, major categories of plan assets, concentrations of risk within plan assets, and valuation techniques used to measure the fair value of plan assets. We will adopt the requirements of this pronouncement in our 2009 Form 10-K. |
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2008 | 2007 | 2006 | ||||||||||
-In Millions- | ||||||||||||
Unrealized (Loss) | $ | (5 | ) | $ | (1 | ) | $ | (2 | ) |
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2008 | 2007 | 2006 | ||||||||||
-In Millions- | ||||||||||||
Unrealized Gain (Loss) | $ | (7 | ) | $ | — | $ | 8 |
2008 | 2007 | 2006 | 2008 | 2007 | 2006 | |||||||||||||||||||
-Millions of MWhs- | % of Total Resources | |||||||||||||||||||||||
Gas-Fired Generation | 871 | 1,088 | 850 | 8 | % | 8 | % | 6 | % | |||||||||||||||
Purchased Power | 2,948 | 2,047 | 1,680 | 26 | % | 15 | % | 12 | % |
2008 | 2007 | 2006 | ||||||||||
-In Millions- | ||||||||||||
Unrealized Gain (Loss) | $ | 3 | $ | (5 | ) | $ | (18 | ) |
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Unrealized Gain (Loss) of TEP’s Hedging and Trading Activities - -Millions of Dollars- | ||||||||||||||||
Total | ||||||||||||||||
Maturity 0 – 6 | Maturity 6 – 12 | Maturity | Unrealized | |||||||||||||
Source of Fair Value At Dec. 31, 2008 | months | months | over 1 yr. | Gain (Loss) | ||||||||||||
Prices actively quoted | $ | (3 | ) | $ | (10 | ) | $ | (4 | ) | $ | (17 | ) | ||||
Prices based on models and other valuation methods | — | (1 | ) | (1 | ) | (2 | ) | |||||||||
Total | $ | (3 | ) | $ | (11 | ) | $ | (5 | ) | $ | (19 | ) | ||||
-Millions of Dollars- | ||||||||
Change in Market Price As of December 31, 2008 | 10% Increase | 10% Decrease | ||||||
Non-Cash Flow Hedges | ||||||||
Forward power sales and purchase contracts | $ | 1 | $ | (1 | ) | |||
Gas swap agreements | — | — | ||||||
Cash Flow Hedges | ||||||||
Forward power sales and purchase contracts | $ | — | $ | — | ||||
Gas swap agreements | 3 | (3 | ) |
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K-77
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K-78
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K-79
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UniSource Energy Corporation:
February 26, 2009
K-80
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Tucson Electric Power Company:
February 26, 2009
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CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
- Thousands of Dollars - | ||||||||||||
(Except Per Share Amounts) | ||||||||||||
Operating Revenues | ||||||||||||
Electric Retail Sales | $ | 983,970 | $ | 976,795 | $ | 932,307 | ||||||
CTC Revenue to be Refunded | (58,092 | ) | — | — | ||||||||
Net Electric Retail Sales | 925,878 | 976,795 | 932,307 | |||||||||
Electric Wholesale Sales | 236,300 | 196,233 | 179,266 | |||||||||
Gas Revenue | 163,590 | 148,597 | 159,598 | |||||||||
Other Revenues | 71,743 | 59,748 | 36,970 | |||||||||
Total Operating Revenues | 1,397,511 | 1,381,373 | 1,308,141 | |||||||||
Operating Expenses | ||||||||||||
Fuel | 292,557 | 291,238 | 257,515 | |||||||||
Purchased Energy | 436,869 | 352,898 | 320,788 | |||||||||
Other Operations and Maintenance | 311,907 | 258,176 | 247,069 | |||||||||
Depreciation and Amortization | 147,690 | 140,638 | 130,502 | |||||||||
Amortization of 1999 Transition Recovery Asset | 23,945 | 77,681 | 65,985 | |||||||||
Taxes Other Than Income Taxes | 39,339 | 47,837 | 46,136 | |||||||||
Total Operating Expenses | 1,252,307 | 1,168,468 | 1,067,995 | |||||||||
Operating Income | 145,204 | 212,905 | 240,146 | |||||||||
Other Income (Deductions) | ||||||||||||
Interest Income | 11,011 | 18,828 | 19,210 | |||||||||
Other Income | 7,838 | 7,622 | 7,453 | |||||||||
Other Expense | (9,286 | ) | (4,380 | ) | (1,887 | ) | ||||||
Total Other Income (Deductions) | 9,563 | 22,070 | 24,776 | |||||||||
Interest Expense | ||||||||||||
Long-Term Debt | 70,227 | 73,095 | 75,039 | |||||||||
Capital Leases | 57,272 | 64,499 | 72,586 | |||||||||
Loss on Extinguishment of Debt | — | — | 1,080 | |||||||||
Other Interest Expense | 1,837 | 5,480 | 7,922 | |||||||||
Interest Capitalized | (5,566 | ) | (5,551 | ) | (4,884 | ) | ||||||
Total Interest Expense | 123,770 | 137,523 | 151,743 | |||||||||
Income Before Income Taxes and Discontinued Operations | 30,997 | 97,452 | 113,179 | |||||||||
Income Tax Expense | 16,976 | 39,079 | 43,936 | |||||||||
Income Before Discontinued Operations | 14,021 | 58,373 | 69,243 | |||||||||
Discontinued Operations — Net of Tax | — | — | (1,796 | ) | ||||||||
Net Income | $ | 14,021 | $ | 58,373 | $ | 67,447 | ||||||
Weighted-Average Shares of Common Stock Outstanding (000) | 35,632 | 35,486 | 35,264 | |||||||||
Basic Earnings per Share | ||||||||||||
Income Before Discontinued Operations | $ | 0.39 | $ | 1.64 | $ | 1.96 | ||||||
Discontinued Operations — Net of Tax | — | — | (0.05 | ) | ||||||||
Net Income | $ | 0.39 | $ | 1.64 | $ | 1.91 | ||||||
Diluted Earnings per Share | ||||||||||||
Income Before Discontinued Operations | $ | 0.39 | $ | 1.57 | $ | 1.85 | ||||||
Discontinued Operations — Net of Tax | — | — | (0.05 | ) | ||||||||
Net Income | $ | 0.39 | $ | 1.57 | $ | 1.80 | ||||||
Dividends Declared per Share | $ | 0.96 | $ | 0.90 | $ | 0.84 | ||||||
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CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
- Thousands of Dollars - | ||||||||||||
Cash Flows from Operating Activities | ||||||||||||
Cash Receipts from Electric Retail Sales | $ | 1,079,964 | $ | 1,061,994 | $ | 1,008,071 | ||||||
Cash Receipts from Electric Wholesale Sales | 353,618 | 301,616 | 254,322 | |||||||||
Cash Receipts from Gas Sales | 182,271 | 165,678 | 173,243 | |||||||||
Cash Receipts from Operating Springerville Unit 3 | 53,495 | 38,887 | 16,659 | |||||||||
Interest Received | 17,246 | 19,197 | 22,231 | |||||||||
Performance Deposits Received | 34,404 | 12,549 | 15,307 | |||||||||
Income Tax Refunds Received | 22,355 | 1,016 | 553 | |||||||||
Refund of Disputed Transmission Costs | 10,665 | — | — | |||||||||
Sale of Excess Emission Allowances | 1,494 | 14,861 | 7,254 | |||||||||
MEG Cash Receipts from Trading Activity | — | 2,829 | 2,704 | |||||||||
Other Cash Receipts | 19,299 | 11,774 | 8,823 | |||||||||
Purchased Energy Costs Paid | (577,751 | ) | (450,197 | ) | (383,943 | ) | ||||||
Fuel Costs Paid | (292,646 | ) | (283,439 | ) | (244,690 | ) | ||||||
Payment of Other Operations and Maintenance Costs | (196,697 | ) | (158,057 | ) | (137,941 | ) | ||||||
Taxes Other Than Income Taxes Paid, Net of Amounts Capitalized | (154,548 | ) | (151,074 | ) | (144,526 | ) | ||||||
Wages Paid, Net of Amounts Capitalized | (108,504 | ) | (106,097 | ) | (100,368 | ) | ||||||
Interest Paid, Net of Amounts Capitalized | (58,774 | ) | (68,446 | ) | (67,006 | ) | ||||||
Performance Deposits Paid | (48,520 | ) | (7,900 | ) | (9,617 | ) | ||||||
Capital Lease Interest Paid | (43,828 | ) | (54,315 | ) | (63,644 | ) | ||||||
Income Taxes Paid | (9,900 | ) | (20,923 | ) | (66,070 | ) | ||||||
Excess Tax Benefit from Stock Options Exercised | (633 | ) | (541 | ) | (1,501 | ) | ||||||
Other Cash Payments | (5,999 | ) | (4,942 | ) | (3,680 | ) | ||||||
MEG Cash Payments for Trading Activity | — | (1,704 | ) | (812 | ) | |||||||
Net Cash Used by Operating Activities of Discontinued Operations | — | — | (2,710 | ) | ||||||||
Net Cash Flows — Operating Activities | 277,011 | 322,766 | 282,659 | |||||||||
Cash Flows from Investing Activities | ||||||||||||
Capital Expenditures | (349,289 | ) | (245,366 | ) | (238,261 | ) | ||||||
Deposit to Trustee for Repayment of Collateral Trust Bonds | (133,111 | ) | — | — | ||||||||
Proceeds from Investment in Springerville Lease Debt | 24,918 | 27,732 | 22,158 | |||||||||
Other Proceeds from Investing Activities | 5,137 | 4,475 | 3,263 | |||||||||
Return of Investment from Millennium Energy Businesses | 839 | 12 | 4,835 | |||||||||
Investment in and Loans to Equity Investees | (600 | ) | (845 | ) | (4,518 | ) | ||||||
Other Payments for Investing Activities | (711 | ) | (3,413 | ) | (1,487 | ) | ||||||
Sale of Subsidiary | — | — | 16,000 | |||||||||
Payments for Investment in Lease Equity | — | — | (48,025 | ) | ||||||||
Net Cash Used by Investing Activities of Discontinued Operations | — | — | (46 | ) | ||||||||
Net Cash Flows — Investing Activities | (452,817 | ) | (217,405 | ) | (246,081 | ) | ||||||
Cash Flows from Financing Activities | ||||||||||||
Proceeds from Issuance of Long-Term Debt | 320,745 | — | 30,000 | |||||||||
Proceeds from Borrowings Under Revolving Credit Facilities | 242,000 | 205,000 | 194,000 | |||||||||
Repayments of Borrowings Under Revolving Credit Facilities | (237,000 | ) | (218,000 | ) | (126,000 | ) | ||||||
Repayment of Long-Term Debt | (76,000 | ) | (6,000 | ) | (93,250 | ) | ||||||
Payments of Capital Lease Obligations | (74,316 | ) | (71,549 | ) | (61,197 | ) | ||||||
Common Stock Dividends Paid | (34,043 | ) | (31,784 | ) | (29,499 | ) | ||||||
Payment of Debt Issue/Retirement Costs | (3,739 | ) | (465 | ) | (2,092 | ) | ||||||
Proceeds from Stock Options Exercised | 1,969 | 1,980 | 4,861 | |||||||||
Excess Tax Benefit from Stock Options Exercised | 633 | 541 | 1,501 | |||||||||
Other Cash Receipts | 6,028 | 8,210 | 11,509 | |||||||||
Other Cash Payments | (5,672 | ) | (7,162 | ) | (6,849 | ) | ||||||
Net Cash Flows — Financing Activities | 140,605 | (119,229 | ) | (77,016 | ) | |||||||
Net Decrease in Cash and Cash Equivalents | (35,201 | ) | (13,868 | ) | (40,438 | ) | ||||||
Cash and Cash Equivalents, Beginning of Year | 90,373 | 104,241 | 144,679 | |||||||||
Cash and Cash Equivalents, End of Year | $ | 55,172 | $ | 90,373 | $ | 104,241 | ||||||
Non-Cash Financing Activity — Repayment of Collateral Trust Bonds | $ | (128,300 | ) | $ | — | $ | — | |||||
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CONSOLIDATED BALANCE SHEETS
December 31, | ||||||||
2008 | 2007 | |||||||
- Thousands of Dollars - | ||||||||
ASSETS | ||||||||
Utility Plant | ||||||||
Plant in Service | $ | 3,870,493 | $ | 3,565,735 | ||||
Utility Plant Under Capital Leases | 702,337 | 702,337 | ||||||
Construction Work in Progress | 171,996 | 195,105 | ||||||
Total Utility Plant | 4,744,826 | 4,463,177 | ||||||
Less Accumulated Depreciation and Amortization | (1,580,308 | ) | (1,534,424 | ) | ||||
Less Accumulated Amortization of Capital Lease Assets | (546,825 | ) | (521,458 | ) | ||||
Total Utility Plant — Net | 2,617,693 | 2,407,295 | ||||||
Investments and Other Property | ||||||||
Investments in Lease Debt and Equity | 126,672 | 152,544 | ||||||
Other | 64,096 | 70,677 | ||||||
Total Investments and Other Property | 190,768 | 223,221 | ||||||
Current Assets | ||||||||
Cash and Cash Equivalents | 55,172 | 90,373 | ||||||
Accounts Receivable — Retail and Other | 74,288 | 67,885 | ||||||
Accounts Receivable — Wholesale Sales | 44,725 | 46,316 | ||||||
Unbilled Accounts Receivable | 60,146 | 62,101 | ||||||
Allowance for Doubtful Accounts | (19,684 | ) | (18,446 | ) | ||||
Materials and Fuel Inventory | 92,170 | 82,433 | ||||||
Energy Contracts — Derivative Instruments | 3,682 | 5,489 | ||||||
Regulatory Assets — Derivative Instruments | 37,596 | 708 | ||||||
Regulatory Assets — Other | 23,299 | 9,554 | ||||||
Deferred Income Taxes — Current | 61,398 | 60,055 | ||||||
Income Tax Receivable | 12,720 | — | ||||||
Interest Receivable on Capital Lease Debt Investment | 4,491 | 6,033 | ||||||
Collateral Posted | 14,120 | — | ||||||
Other | 17,528 | 17,739 | ||||||
Total Current Assets | 481,651 | 430,240 | ||||||
Regulatory and Other Assets | ||||||||
Income Taxes Recoverable Through Future Revenues | 19,814 | 30,009 | ||||||
Regulatory Assets — Pension and Other Postretirement Benefits | 112,035 | 16,460 | ||||||
Regulatory Assets — Derivative Instruments | 17,522 | 298 | ||||||
Regulatory Assets — Other | 39,395 | 20,556 | ||||||
Regulatory Assets — 1999 Transition Recovery Asset | — | 23,944 | ||||||
Energy Contracts — Derivative Instruments | 3,113 | 8,339 | ||||||
Other Assets | 26,340 | 25,354 | ||||||
Total Regulatory and Other Assets | 218,219 | 124,960 | ||||||
Total Assets | $ | 3,508,331 | $ | 3,185,716 | ||||
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UNISOURCE ENERGY CORPORATION |
CONSOLIDATED BALANCE SHEETS |
December 31, | ||||||||
2008 | 2007 | |||||||
- Thousands of Dollars - | ||||||||
CAPITALIZATION AND OTHER LIABILITIES | ||||||||
Capitalization | ||||||||
Common Stock Equity | $ | 679,274 | $ | 690,075 | ||||
Capital Lease Obligations | 513,517 | 530,973 | ||||||
Long-Term Debt | 1,313,615 | 993,870 | ||||||
Total Capitalization | 2,506,406 | 2,214,918 | ||||||
Current Liabilities | ||||||||
Current Obligations Under Capital Leases | 18,334 | 58,599 | ||||||
Borrowing under Revolving Credit Facilities | 10,000 | 10,000 | ||||||
Current Maturities of Long-Term Debt | 6,000 | 204,300 | ||||||
Accounts Payable | 62,514 | 72,003 | ||||||
Accounts Payable — Purchased Power | 49,146 | 50,684 | ||||||
Interest Accrued | 43,440 | 48,091 | ||||||
Accrued Taxes Other than Income Taxes | 36,746 | 36,775 | ||||||
Accrued Employee Expenses | 26,859 | 24,585 | ||||||
Customer Deposits | 22,656 | 21,425 | ||||||
Regulatory Liabilities — Over-Recovered Purchased Energy Costs | 25,665 | 13,084 | ||||||
Regulatory Liabilities — Other | 8,161 | 3,437 | ||||||
Energy Contracts — Derivative Instruments | 40,642 | 3,193 | ||||||
Other | 1,460 | 1,505 | ||||||
Total Current Liabilities | 351,623 | 547,681 | ||||||
Deferred Credits and Other Liabilities | ||||||||
Deferred Income Taxes — Noncurrent | 178,089 | 149,730 | ||||||
Regulatory Liabilities — Net Cost of Removal for Interim Retirements | 151,796 | 106,695 | ||||||
Regulatory Liabilities — Derivatives Instruments | — | 6,426 | ||||||
Regulatory Liabilities — Over-Recovered Purchased Energy Costs | 44,469 | 9,287 | ||||||
Energy Contracts — Derivative Instruments | 29,047 | 4,930 | ||||||
Pension and Other Postretirement Benefits | 157,769 | 76,407 | ||||||
Customer Advances for Construction | 31,062 | 28,798 | ||||||
Other | 58,070 | 40,844 | ||||||
Total Deferred Credits and Other Liabilities | 650,302 | 423,117 | ||||||
Commitments and Contingencies (Note 5) | ||||||||
Total Capitalization and Other Liabilities | $ | 3,508,331 | $ | 3,185,716 | ||||
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CONSOLIDATED STATEMENTS OF CAPITALIZATION
December 31, | ||||||||||||||||
2008 | 2007 | |||||||||||||||
- Thousands of Dollars - | ||||||||||||||||
COMMON STOCK EQUITY | ||||||||||||||||
Common Stock-No Par Value | $ | 687,360 | $ | 702,368 | ||||||||||||
2008 | 2007 | |||||||||||||||
Shares Authorized | 75,000,000 | 75,000,000 | ||||||||||||||
Shares Outstanding | 35,457,780 | 35,314,730 | ||||||||||||||
Accumulated Deficit | (1,231 | ) | (628 | ) | ||||||||||||
Accumulated Other Comprehensive Loss | (6,855 | ) | (11,665 | ) | ||||||||||||
Total Common Stock Equity | 679,274 | 690,075 | ||||||||||||||
PREFERRED STOCK | ||||||||||||||||
No Par Value, 1,000,000 Shares Authorized, None Outstanding | — | — | ||||||||||||||
CAPITAL LEASE OBLIGATIONS | ||||||||||||||||
Springerville Unit 1 | 306,553 | 345,800 | ||||||||||||||
Springerville Coal Handling Facilities | 90,812 | 99,175 | ||||||||||||||
Springerville Common Facilities | 108,516 | 107,630 | ||||||||||||||
Sundt Unit 4 | 25,400 | 36,034 | ||||||||||||||
Other | 570 | 933 | ||||||||||||||
Total Capital Lease Obligations | 531,851 | 589,572 | ||||||||||||||
Less Current Maturities | (18,334 | ) | (58,599 | ) | ||||||||||||
Total Long-Term Capital Lease Obligations | 513,517 | 530,973 | ||||||||||||||
LONG-TERM DEBT | ||||||||||||||||
Issue | Maturity | Interest Rate | ||||||||||||||
UniSource Energy: | ||||||||||||||||
Convertible Senior Notes | 2035 | 4.50 | % | 150,000 | 150,000 | |||||||||||
Credit Agreement | 2011 | Variable | 58,000 | 41,000 | ||||||||||||
Tucson Electric Power Company: | ||||||||||||||||
Variable Rate IDBs | 2011 | Variable | * | 458,600 | 328,600 | |||||||||||
Collateral Trust Bonds | 2008 | 7.50 | % | — | 138,300 | |||||||||||
Unsecured IDBs | 2020-2033 | 5.85% to 7.13 | % | 445,015 | 354,270 | |||||||||||
UNS Gas and UNS Electric: | ||||||||||||||||
Senior Unsecured Notes | 2008-2015 | 6.23% to 7.61 | % | 200,000 | 160,000 | |||||||||||
Credit Agreement | 2011 | Variable | 8,000 | 26,000 | ||||||||||||
Total Stated Principal Amount | 1,319,615 | 1,198,170 | ||||||||||||||
Less Current Maturities | (6,000 | ) | (204,300 | ) | ||||||||||||
Total Long-Term Debt | 1,313,615 | 993,870 | ||||||||||||||
Total Capitalization | $ | 2,506,406 | $ | 2,214,918 | ||||||||||||
* | TEP’s Variable Rate Industrial Development Bonds (IDBs) are backed by letters of credit (LOCs) issued pursuant to TEP’s Credit Agreement which expires in August 2011 and the TEP Letter of Credit facility which expires in April 2011. Although the Variable Rate IDBs mature between 2018 and 2029, the above maturity reflects a redemption or repurchase of such bonds in 2011 as though the LOCs terminate without replacement upon expiration of the TEP Credit Agreement. Weighted average interest rates on this variable rate tax-exempt debt ranged from 0.55% to 8.09% during 2008, 3.11% to 3.95% during 2007, and 2.95% to 3.96% during 2006, and the average interest rate on such debt was 2.11% in 2008, 3.64% in 2007, and 3.47% in 2006. | |
See Notes to Consolidated Financial Statements. |
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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME
Accumulated | ||||||||||||||||||||
Common | Other | Total | ||||||||||||||||||
Shares | Common | Accumulated | Comprehensive | Stockholders’ | ||||||||||||||||
Outstanding* | Stock | Deficit | Loss | Equity | ||||||||||||||||
Balances at December 31, 2005 | 34,874 | $ | 689,185 | $ | (65,861 | ) | $ | (6,583 | ) | $ | 616,741 | |||||||||
Comprehensive Income: | ||||||||||||||||||||
2006 Net Income | — | — | 67,447 | — | 67,447 | |||||||||||||||
Minimum Pension Liability Adjustment (net of $8,915 income taxes) | — | — | — | 13,597 | 13,597 | |||||||||||||||
Unrealized Loss on Cash Flow Hedges (net of $4,897 income taxes) | — | — | — | (7,469 | ) | (7,469 | ) | |||||||||||||
Reclassification of Unrealized Gains on Cash Flow Hedges to Net Income (net of $77 income taxes) | — | — | — | (117 | ) | (117 | ) | |||||||||||||
Total Comprehensive Income | 73,458 | |||||||||||||||||||
Adjustment to Initially Recognize the Funded Status of Employee Benefit Plans (net of $9,698 income taxes) | — | — | — | (14,792 | ) | (14,792 | ) | |||||||||||||
Dividends Declared | — | — | (29,499 | ) | — | (29,499 | ) | |||||||||||||
Shares Issued under Stock Compensation Plans | 11 | — | — | — | — | |||||||||||||||
Shares Issued for Stock Options | 305 | 4,859 | — | — | 4,859 | |||||||||||||||
Tax Benefit Realized from Stock Options Exercised | — | 1,501 | — | — | 1,501 | |||||||||||||||
Other | — | 1,881 | — | — | 1,881 | |||||||||||||||
Balances at December 31, 2006 | 35,190 | 697,426 | (27,913 | ) | (15,364 | ) | 654,149 | |||||||||||||
Implementation of FIN 48 | 696 | 696 | ||||||||||||||||||
Comprehensive Income: | ||||||||||||||||||||
2007 Net Income | — | — | 58,373 | — | 58,373 | |||||||||||||||
Decrease in Pension and Other Post-Retirement Benefit Liabilities (net of $3,929 income taxes) | — | — | — | 5,993 | 5,993 | |||||||||||||||
Unrealized Loss on Cash Flow Hedges (net of $2,500 income taxes) | — | — | — | (3,813 | ) | (3,813 | ) | |||||||||||||
Reclassification of Unrealized Losses on Cash Flow Hedges to Net Income (net of $996 income taxes) | — | — | — | 1,519 | 1,519 | |||||||||||||||
Total Comprehensive Income | 62,072 | |||||||||||||||||||
Dividends Declared | — | — | (31,784 | ) | — | (31,784 | ) | |||||||||||||
Shares Issued under Stock Compensation Plans | 5 | — | — | — | — | |||||||||||||||
Shares Issued for Stock Options | 120 | 1,980 | — | — | 1,980 | |||||||||||||||
Tax Benefit Realized from Stock Options Exercised | — | 540 | — | — | 540 | |||||||||||||||
Other | — | 2,422 | — | — | 2,422 | |||||||||||||||
Balances at December 31, 2007 | 35,315 | 702,368 | (628 | ) | (11,665 | ) | 690,075 | |||||||||||||
Impact of Change in Pension Plan Measurement Date | — | — | (603 | ) | — | (603 | ) | |||||||||||||
Comprehensive Income (Loss): | ||||||||||||||||||||
2008 Net Income | — | — | 14,021 | — | 14,021 | |||||||||||||||
Unrealized Loss on Interest Rate Swap (net of $2,181 income taxes) | — | — | — | (3,326 | ) | (3,326 | ) | |||||||||||||
Reclassification of Unrealized Gain on Cash Flow Hedges to Regulatory Asset (net of $1,370 income taxes) | — | — | — | (2,089 | ) | (2,089 | ) | |||||||||||||
Reclassification of Unrealized Loss on Cash Flow Hedges to Net Income (net of $1,569 income taxes) | — | — | — | 2,393 | 2,393 | |||||||||||||||
Employee Benefit Obligations Amortization of net actuarial loss and prior service credit included in net periodic benefit cost (net of $158 income taxes) | — | — | — | (242 | ) | (242 | ) | |||||||||||||
Increase in SERP Liability (net of $108 income taxes) | — | — | — | (165 | ) | (165 | ) | |||||||||||||
Reclassification of Pension and Other Postretirement Benefit to Regulatory Asset (net of $5,401 income taxes) | — | — | — | 8,239 | 8,239 | |||||||||||||||
Total Comprehensive Income | 18,831 | |||||||||||||||||||
Dividends Declared | — | (20,017 | ) | (14,021 | ) | — | (34,038 | ) | ||||||||||||
Shares Issued under Stock Compensation Plans | 23 | — | — | — | — | |||||||||||||||
Shares Issued for Stock Options | 120 | 1,969 | — | — | 1,969 | |||||||||||||||
Tax Benefit Realized from Stock Options Exercised | — | 633 | — | — | 633 | |||||||||||||||
Other | — | 2,407 | — | — | 2,407 | |||||||||||||||
Balances at December 31, 2008 | 35,458 | $ | 687,360 | $ | (1,231 | ) | $ | (6,855 | ) | $ | 679,274 | |||||||||
* | UniSource Energy has 75 million authorized shares of Common Stock. |
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CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
- Thousands of Dollars - | ||||||||||||
Operating Revenues | ||||||||||||
Electric Retail Sales | $ | 802,331 | $ | 811,649 | $ | 774,470 | ||||||
CTC Revenue to be Refunded | (58,092 | ) | — | — | ||||||||
Net Electric Retail Sales | 744,239 | 811,649 | 774,470 | |||||||||
Electric Wholesale Sales | 259,855 | 195,999 | 179,022 | |||||||||
Other Revenues | 75,159 | 62,855 | 35,502 | |||||||||
Total Operating Revenues | 1,079,253 | 1,070,503 | 988,994 | |||||||||
Operating Expenses | ||||||||||||
Fuel | 285,224 | 291,238 | 257,515 | |||||||||
Purchased Power | 238,024 | 140,498 | 100,090 | |||||||||
Other Operations and Maintenance | 267,100 | 211,851 | 198,573 | |||||||||
Depreciation and Amortization | 126,040 | 119,811 | 112,346 | |||||||||
Amortization of 1999 Transition Recovery Asset | 23,945 | 77,681 | 65,985 | |||||||||
Taxes Other Than Income Taxes | 31,649 | 40,366 | 38,834 | |||||||||
Total Operating Expenses | 971,982 | 881,445 | 773,343 | |||||||||
Operating Income | 107,271 | 189,058 | 215,651 | |||||||||
Other Income (Deductions) | ||||||||||||
Interest Income | 9,900 | 16,072 | 16,429 | |||||||||
Other Income | 5,708 | 3,665 | 7,147 | |||||||||
Other Expense | (6,249 | ) | (3,296 | ) | (3,029 | ) | ||||||
Total Other Income (Deductions) | 9,359 | 16,441 | 20,547 | |||||||||
Interest Expense | ||||||||||||
Long-Term Debt | 47,456 | 50,230 | 51,422 | |||||||||
Capital Leases | 57,252 | 64,477 | 72,556 | |||||||||
Loss on Extinguishment of Debt | — | — | 685 | |||||||||
Other Interest Expense | 1,367 | 4,538 | 6,436 | |||||||||
Interest Capitalized | (4,675 | ) | (2,744 | ) | (4,124 | ) | ||||||
Total Interest Expense | 101,400 | 116,501 | 126,975 | |||||||||
Income Before Income Taxes | 15,230 | 88,998 | 109,223 | |||||||||
Income Tax Expense | 10,867 | 35,542 | 42,478 | |||||||||
Net Income | $ | 4,363 | $ | 53,456 | $ | 66,745 | ||||||
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CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
- Thousands of Dollars - | ||||||||||||
Cash Flows from Operating Activities | ||||||||||||
Cash Receipts from Electric Retail Sales | $ | 883,423 | $ | 883,885 | $ | 840,601 | ||||||
Cash Receipts from Electric Wholesale Sales | 377,579 | 301,616 | 254,322 | |||||||||
Cash Receipts from Operating Springerville Unit 3 | 53,495 | 38,887 | 16,659 | |||||||||
Interest Received | 15,849 | 16,284 | 18,808 | |||||||||
Income Tax Refunds Received | 20,902 | — | — | |||||||||
Reimbursement of Affiliate Charges | 16,534 | — | — | |||||||||
Refund of Disputed Transmission Costs | 10,665 | — | — | |||||||||
Performance Deposits Received | 10,150 | — | — | |||||||||
Sale of Excess Emission Allowances | 1,494 | 16,975 | 7,254 | |||||||||
Other Cash Receipts | 11,936 | 7,931 | 6,579 | |||||||||
Fuel Costs Paid | (284,830 | ) | (283,440 | ) | (244,632 | ) | ||||||
Purchased Power Costs Paid | (364,356 | ) | (245,439 | ) | (182,626 | ) | ||||||
Payment of Other Operations and Maintenance Costs | (185,206 | ) | (144,753 | ) | (121,744 | ) | ||||||
Taxes Other Than Income Taxes Paid, Net of Amounts Capitalized | (117,611 | ) | (116,641 | ) | (109,952 | ) | ||||||
Wages Paid, Net of Amounts Capitalized | (84,857 | ) | (82,661 | ) | (77,627 | ) | ||||||
Capital Lease Interest Paid | (43,807 | ) | (54,293 | ) | (63,615 | ) | ||||||
Interest Paid, Net of Amounts Capitalized | (38,467 | ) | (47,050 | ) | (44,100 | ) | ||||||
Income Taxes Paid | — | (23,609 | ) | (70,457 | ) | |||||||
Performance Deposits Paid | (10,150 | ) | — | — | ||||||||
Other Cash Payments | (4,037 | ) | (3,580 | ) | (2,242 | ) | ||||||
Net Cash Flows — Operating Activities | 268,706 | 264,112 | 227,228 | |||||||||
Cash Flows from Investing Activities | ||||||||||||
Capital Expenditures | (286,905 | ) | (162,539 | ) | (156,180 | ) | ||||||
Deposit to Trustee for Repayment of Collateral Trust Bonds | (133,111 | ) | — | — | ||||||||
Proceeds from Investments in Springerville Lease Debt | 24,918 | 27,732 | 22,158 | |||||||||
Payments for Investments in Lease Debt and Equity | — | — | (48,025 | ) | ||||||||
Other Cash Receipts | 5,055 | 650 | 1,085 | |||||||||
Other Cash Payments | (711 | ) | (2,968 | ) | (1,004 | ) | ||||||
Net Cash Flows — Investing Activities | (390,754 | ) | (137,125 | ) | (181,966 | ) | ||||||
Cash Flows from Financing Activities | ||||||||||||
Proceeds from Issuance of Long-Term Debt | 220,745 | — | — | |||||||||
Proceeds from Borrowings Under Revolving Credit Facility | 170,000 | 160,000 | 135,000 | |||||||||
Repayments of Borrowings Under Revolving Credit Facility | (170,000 | ) | (180,000 | ) | (105,000 | ) | ||||||
Payments of Capital Lease Obligations | (74,228 | ) | (71,464 | ) | (61,111 | ) | ||||||
Repayments of Long-Term Debt | (10,000 | ) | — | — | ||||||||
Dividends Paid to UniSource Energy | (2,500 | ) | (53,000 | ) | (62,000 | ) | ||||||
Equity Investment from UniSource Energy | — | 18,000 | — | |||||||||
Other Cash Receipts | 1,237 | 7,795 | 16,852 | |||||||||
Payment of Debt Issue/Retirement Costs | (3,120 | ) | (451 | ) | (1,631 | ) | ||||||
Other Cash Payments | (3,421 | ) | (968 | ) | (1,094 | ) | ||||||
Net Cash Flows — Financing Activities | 128,713 | (120,088 | ) | (78,984 | ) | |||||||
Net Increase (Decrease) in Cash and Cash Equivalents | 6,665 | 6,899 | (33,722 | ) | ||||||||
Cash and Cash Equivalents, Beginning of Year | 26,610 | 19,711 | 53,433 | |||||||||
Cash and Cash Equivalents, End of Year | $ | 33,275 | $ | 26,610 | $ | 19,711 | ||||||
Non-Cash Financing Activity — Repayment of Collateral Trust Bonds | $ | (128,300 | ) | $ | — | $ | — | |||||
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CONSOLIDATED BALANCE SHEETS
December 31, | ||||||||
2008 | 2007 | |||||||
- Thousands of Dollars - | ||||||||
ASSETS | ||||||||
Utility Plant | ||||||||
Plant in Service | $ | 3,351,474 | $ | 3,143,823 | ||||
Utility Plant Under Capital Leases | 701,631 | 701,631 | ||||||
Construction Work in Progress | 145,457 | 123,833 | ||||||
Total Utility Plant | 4,198,562 | 3,969,287 | ||||||
Less Accumulated Depreciation and Amortization | (1,531,611 | ) | (1,490,724 | ) | ||||
Less Accumulated Amortization of Capital Lease Assets | (546,332 | ) | (521,057 | ) | ||||
Total Utility Plant — Net | 2,120,619 | 1,957,506 | ||||||
Investments and Other Property | ||||||||
Investments in Lease Debt and Equity | 126,672 | 152,544 | ||||||
Other | 31,291 | 35,460 | ||||||
Total Investments and Other Property | 157,963 | 188,004 | ||||||
Current Assets | ||||||||
Cash and Cash Equivalents | 33,275 | 26,610 | ||||||
Accounts Receivable — Retail and Other | 53,091 | 44,431 | ||||||
Accounts Receivable — Wholesale | 44,610 | 46,316 | ||||||
Unbilled Accounts Receivable | 33,554 | 35,941 | ||||||
Allowance for Doubtful Accounts | (17,135 | ) | (16,538 | ) | ||||
Accounts Receivable — Due from Affiliates | 16,614 | 8,740 | ||||||
Materials and Fuel Inventory | 81,067 | 72,732 | ||||||
Energy Contracts — Derivative Instruments | 5,172 | 2,036 | ||||||
Regulatory Assets — Derivative Instruments | 14,242 | — | ||||||
Regulatory Assets — Other | 22,834 | 9,554 | ||||||
Deferred Income Taxes — Current | 59,615 | 59,157 | ||||||
Interest Receivable on Capital Lease Debt Investment | 4,491 | 6,033 | ||||||
Income Taxes Receivable | — | 8,070 | ||||||
Interest Receivable — Current | — | 3,350 | ||||||
Other | 16,088 | 13,062 | ||||||
Total Current Assets | 367,518 | 319,494 | ||||||
Regulatory and Other Assets | ||||||||
Regulatory Assets — Pension and Other Postretirement Benefits | 106,596 | 15,154 | ||||||
Regulatory Assets — Derivatives | 5,400 | — | ||||||
Regulatory Assets — Other | 38,180 | 18,969 | ||||||
Income Taxes Recoverable Through Future Revenues | 19,814 | 30,009 | ||||||
Regulatory Assets — 1999 Transition Recovery Asset | — | 23,945 | ||||||
Energy Contracts — Derivative Instruments | 4,385 | 492 | ||||||
Other Assets | 20,741 | 19,463 | ||||||
Total Regulatory and Other Assets | 195,116 | 108,032 | ||||||
Total Assets | $ | 2,841,216 | $ | 2,573,036 | ||||
K-90
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CONSOLIDATED BALANCE SHEETS
December 31, | ||||||||
2008 | 2007 | |||||||
- Thousands of Dollars - | ||||||||
CAPITALIZATION AND OTHER LIABILITIES | ||||||||
Capitalization | ||||||||
Common Stock Equity | $ | 583,606 | $ | 577,349 | ||||
Capital Lease Obligations | 513,370 | 530,714 | ||||||
Long-Term Debt | 903,615 | 682,870 | ||||||
Total Capitalization | 2,000,591 | 1,790,933 | ||||||
Current Liabilities | ||||||||
Current Obligations Under Capital Leases | 18,231 | 58,502 | ||||||
Current Maturities of Long-Term Debt | — | 138,300 | ||||||
Borrowing Under Revolving Credit Facility | 10,000 | 10,000 | ||||||
Accounts Payable | 56,001 | 64,664 | ||||||
Accounts Payable — Purchased Power | 28,510 | 22,935 | ||||||
Accounts Payable — Due from Affiliates | 3,610 | 4,512 | ||||||
Income Taxes Payable | 2,057 | — | ||||||
Interest Accrued | 35,828 | 41,394 | ||||||
Accrued Taxes Other than Income Taxes | 27,679 | 28,690 | ||||||
Accrued Employee Expenses | 23,990 | 22,557 | ||||||
Energy Contracts — Derivative Instruments | 18,780 | 2,460 | ||||||
Regulatory Liabilities — Over-Recovered Purchased Energy Costs | 14,310 | — | ||||||
Regulatory Liability — Other | 7,083 | — | ||||||
Other | 17,106 | 15,533 | ||||||
Total Current Liabilities | 263,185 | 409,547 | ||||||
Deferred Credits and Other Liabilities | ||||||||
Deferred Income Taxes — Noncurrent | 180,098 | 163,834 | ||||||
Regulatory Liabilities — Net Cost of Removal for Interim Retirements | 122,037 | 87,311 | ||||||
Regulatory Liabilities — Over-Recovered Purchased Energy Costs | 44,469 | — | ||||||
Energy Contracts — Derivative Instruments | 18,196 | 3,278 | ||||||
Pension and Other Postretirement Benefits | 149,955 | 72,755 | ||||||
Other | 62,685 | 45,378 | ||||||
Total Deferred Credits and Other Liabilities | 577,440 | 372,556 | ||||||
Commitments and Contingencies (Note 5) | ||||||||
Total Capitalization and Other Liabilities | $ | 2,841,216 | $ | 2,573,036 | ||||
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CONSOLIDATED STATEMENTS OF CAPITALIZATION
December 31, | ||||||||||||||||
2008 | 2007 | |||||||||||||||
- Thousands of Dollars - | ||||||||||||||||
COMMON STOCK EQUITY | ||||||||||||||||
Common Stock—No Par Value | $ | 813,971 | $ | 813,971 | ||||||||||||
2008 | 2007 | |||||||||||||||
Shares Authorized | 75,000,000 | 75,000,000 | ||||||||||||||
Shares Outstanding | 32,139,434 | 32,139,434 | ||||||||||||||
Capital Stock Expense | (6,357 | ) | (6,357 | ) | ||||||||||||
Accumulated Deficit | (217,153 | ) | (218,488 | ) | ||||||||||||
Accumulated Other Comprehensive Loss | (6,855 | ) | (11,777 | ) | ||||||||||||
Total Common Stock Equity | 583,606 | 577,349 | ||||||||||||||
PREFERRED STOCK | ||||||||||||||||
No Par Value, 1,000,000 Shares Authorized, None Outstanding | — | — | ||||||||||||||
CAPITAL LEASE OBLIGATIONS | ||||||||||||||||
Springerville Unit 1 | 306,553 | 345,800 | ||||||||||||||
Springerville Coal Handling Facilities | 90,812 | 99,175 | ||||||||||||||
Springerville Common Facilities | 108,516 | 107,630 | ||||||||||||||
Sundt Unit 4 | 25,400 | 36,034 | ||||||||||||||
Other Leases | 320 | 577 | ||||||||||||||
Total Capital Lease Obligations | 531,601 | 589,216 | ||||||||||||||
Less Current Maturities | (18,231 | ) | (58,502 | ) | ||||||||||||
Total Long-Term Capital Lease Obligations | 513,370 | 530,714 | ||||||||||||||
LONG-TERM DEBT | ||||||||||||||||
Issue | Maturity | Interest Rate | ||||||||||||||
Variable Rate IDBs | 2011 | Variable | * | 458,600 | 328,600 | |||||||||||
Collateral Trust Bonds | 2008 | 7.50 | % | — | 138,300 | |||||||||||
Unsecured IDBs | 2020-2033 | 5.85% to 7.13% | 445,015 | 354,270 | ||||||||||||
Total Stated Principal Amount | 903,615 | 821,170 | ||||||||||||||
Less Current Maturities | — | (138,300 | ) | |||||||||||||
Total Long-Term Debt | 903,615 | 682,870 | * | |||||||||||||
Total Capitalization | $ | 2,000,591 | $ | 1,790,933 | ||||||||||||
* | TEP’s Variable Rate Industrial Development Bonds (IDBs) are backed by letters of credit (LOCs) issued pursuant to TEP’s Credit Agreement which expires in August 2011 and the TEP Letter of Credit facility which expires in April 2011. Although the Variable Rate IDBs mature between 2018 and 2029, the above maturity reflects a redemption or repurchase of such bonds in 2011 as though the LOCs terminate without replacement upon expiration of the TEP Credit Agreement. Weighted average interest rates on this variable rate tax-exempt debt ranged from 0.55% to 8.09% during 2008, 3.11% to 3.95% during 2007, and 2.95% to 3.96% during 2006 and the average interest rate on such debt was 2.11% in 2008, 3.64% in 2007, and 3.47% in 2006. |
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CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER’S EQUITY AND COMPREHENSIVE INCOME
Accumulated | ||||||||||||||||||||
Capital | Other | Total | ||||||||||||||||||
Common | Stock | Accumulated | Comprehensive | Stockholder’s | ||||||||||||||||
Stock | Expense | Deficit | Loss | Equity | ||||||||||||||||
Balances at December 31, 2005 | $ | 795,971 | $ | (6,357 | ) | $ | (224,385 | ) | $ | (6,583 | ) | $ | 558,646 | |||||||
Comprehensive Income: | ||||||||||||||||||||
2006 Net Income | — | — | 66,745 | — | 66,745 | |||||||||||||||
Minimum Pension Liability Adjustment (net of $8,915 income taxes) | — | — | — | 13,597 | 13,597 | |||||||||||||||
Unrealized Loss on Cash Flow Hedges (net of $4,897 income taxes) | — | — | — | (7,469 | ) | (7,469 | ) | |||||||||||||
Reclassification of Unrealized Gains on Cash Flow Hedges to Net Income (net of $77 income taxes) | — | — | — | (117 | ) | (117 | ) | |||||||||||||
Total Comprehensive Income | 72,756 | |||||||||||||||||||
Adjustment to Initially Recognize the Funded Status of Employee Benefit Plans (net of $9,630 income taxes) | — | — | — | (14,688 | ) | (14,688 | ) | |||||||||||||
Dividends Paid | — | — | (62,000 | ) | — | (62,000 | ) | |||||||||||||
Balances at December 31, 2006 | 795,971 | (6,357 | ) | (219,640 | ) | (15,260 | ) | 554,714 | ||||||||||||
Implementation of FIN 48 | 696 | 696 | ||||||||||||||||||
Comprehensive Income: | ||||||||||||||||||||
2007 Net Income | — | — | 53,456 | — | 53,456 | |||||||||||||||
Decrease in Pension and Other Post-Retirement Benefit Liabilities (net of $3,820 income taxes) | — | — | — | 5,826 | 5,826 | |||||||||||||||
Unrealized Loss on Cash Flow Hedges (net of $2,532 income taxes) | — | — | — | (3,862 | ) | (3,862 | ) | |||||||||||||
Reclassification of Unrealized Losses on Cash Flow Hedges to Net Income to Regulatory Asset (net of $996 income taxes) | — | — | — | 1,519 | 1,519 | |||||||||||||||
Total Comprehensive Income | 56,939 | |||||||||||||||||||
Capital Contribution from UniSource Energy | 18,000 | — | — | — | 18,000 | |||||||||||||||
Dividends Paid | — | — | (53,000 | ) | — | (53,000 | ) | |||||||||||||
Balances at December 31, 2007 | 813,971 | (6,357 | ) | (218,488 | ) | (11,777 | ) | 577,349 | ||||||||||||
Impact of Change in Pension Plan Measurement Date | — | — | (528 | ) | — | (528 | ) | |||||||||||||
Comprehensive Income (Loss): | ||||||||||||||||||||
2008 Net Income | — | — | 4,363 | — | 4,363 | |||||||||||||||
Unrealized Loss on Interest Rate Swap (net of $2,181 income taxes) | — | — | — | (3,326 | ) | (3,326 | ) | |||||||||||||
Reclassification of Unrealized Gain on Cash Flow Hedges to Regulatory Asset (net of $1,337 income taxes) | — | — | — | (2,039 | ) | (2,039 | ) | |||||||||||||
Reclassification of Unrealized Loss on Cash Flow Hedges to Net Income (net of $1,569 income taxes) | — | — | — | 2,393 | 2,393 | |||||||||||||||
Employee Benefit Obligations Amortization of net actuarial loss and prior service credit included in net periodic benefit cost (net of $157 income taxes) | — | — | — | (240 | ) | (240 | ) | |||||||||||||
Increase in SERP Liability (net of $108 income taxes) | — | — | — | (165 | ) | (165 | ) | |||||||||||||
Reclassification of Pension and Other Postretirement Benefit to Regulatory Asset (net of $5,441 income taxes) | — | — | — | 8,299 | 8,299 | |||||||||||||||
Total Comprehensive Income | 9,285 | |||||||||||||||||||
Dividends Paid | — | — | (2,500 | ) | — | (2,500 | ) | |||||||||||||
Balances at December 31, 2008 | $ | 813,971 | $ | (6,357 | ) | $ | (217,153 | ) | $ | (6,855 | ) | $ | 583,606 | |||||||
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UNISOURCE ENERGY, TEP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
Investee | % Owned | |||
UniSource Energy | ||||
Carboelectrica Sabinas, S. de R.L. de C.V. | 50.0 | % | ||
Haddington Energy Partners II, LP | 31.3 | % | ||
Valley Ventures III, LP | 13.6 | % |
• | A portion of the reported amounts of assets and liabilities at the dates of the financial statements; |
• | Our disclosures about contingent assets and liabilities at the dates of the financial statements; and |
• | A portion of revenues and expenses reported during the periods presented. |
• | An independent regulator sets rates; | ||
• | The regulator sets the rates to recover the specific enterprise’s costs of providing service; and | ||
• | The service territory lacks competitive pressures to reduce rates below the rates set by the regulator. |
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UNISOURCE ENERGY, TEP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
TEP | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Average AFUDC rate on regulated construction expenditures | 7.5 | % | 10.05 | % | 8.59 | % | ||||||
AFUDC — Debt (in millions) | $ | 2 | $ | 2 | $ | 1 | ||||||
AFUDC — Equity (in millions) | $ | 3 | $ | 1 | $ | 1 | ||||||
Average capitalized interest rate on generation-related construction expenditures (before December 2008) | 5.02 | % | 5.73 | % | 5.72 | % | ||||||
Capitalized interest (in millions) | $ | 2 | $ | 1 | $ | 3 |
UNS Gas | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Average AFUDC rate on regulated construction expenditures | 8.37 | % | 8.12 | % | 8.29 | % | ||||||
AFUDC — Debt (in millions) | $ | 0.1 | $ | 0.3 | $ | 0.1 | ||||||
AFUDC — Equity (in millions) | $ | 0.1 | $ | 0.3 | $ | 0.1 |
UNS Electric | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Average AFUDC rate on regulated construction expenditures | 8.84 | % | 13.51 | % | 10.93 | % | ||||||
AFUDC — Debt (in millions) | $ | 0.2 | $ | 0.7 | $ | 0.6 | ||||||
AFUDC — Equity (in millions) | $ | 0.3 | $ | 0.4 | $ | 0.5 |
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UNISOURCE ENERGY, TEP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
Year | TEP | UNS Gas | UNS Electric | UED | ||||||||||||
2008 | 3.33 | % | 2.77 | % | 4.47 | % | 2.57 | % | ||||||||
2007 | 3.35 | % | 3.28 | % | 4.60 | % | n/a | |||||||||
2006 | 3.21 | % | 3.05 | % | 4.52 | % | n/a |
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
-Millions of Dollars- | ||||||||||||
Lease Expense: | ||||||||||||
Interest Expense on Capital Leases | $ | 57 | $ | 64 | $ | 72 | ||||||
Amortization of Capital Lease Assets — Included in: | ||||||||||||
Operating Expenses — Fuel | 4 | 4 | 4 | |||||||||
Operating Expenses — Depreciation and Amortization | 21 | 21 | 22 | |||||||||
Total Lease Expense | $ | 82 | $ | 89 | $ | 98 | ||||||
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UNISOURCE ENERGY, TEP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
• | when it is able to reasonably estimate the fair value of any future obligation to retire as a result of an existing or enacted law, statute, ordinance or contract; or |
• | if it can reasonably estimate the fair value. |
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UNISOURCE ENERGY, TEP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
K-99
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UNISOURCE ENERGY, TEP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
K-100
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UNISOURCE ENERGY, TEP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
• | Cash Flow Hedgesare used by TEP to hedge the cash flow risk associated with unfavorable changes in the variable interest rate on the Springerville Common Lease. The effective portion of the changes in the market prices of cash flow hedges are recorded as unrealized gains and losses in (AOCI and the ineffective portion, if any, is recognized in earnings. |
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UNISOURCE ENERGY, TEP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
• | Mark-to-Markettransactions include: |
• | TEP non-trading hedges, such as forward power purchase contracts indexed to gas or short-term forward power sales contracts, that did not qualify for cash flow hedge accounting treatment or did not qualify for the normal scope exception. Prior to December 2008, unrealized gains and losses resulting from changes in the market prices of non-trading hedges or short-term forward power sales contracts were recorded on the same line in the income statement as the hedged transaction. Beginning in December 2008, as a result of the 2008 TEP Rate Order, which permits recovery in the PPFAC of hedging transactions, unrealized gains and losses are recorded as either a regulatory asset or regulatory liability. | ||
• | TEP trading derivatives which are forward power purchase and sale contracts entered into to reduce our exposure to energy and commodity prices. As unrealized gains and losses resulting from changes in the market prices of trading derivatives are not recoverable in the PPFAC, unrealized gains and losses are recorded in the income statement in Electric Wholesale Sales. | ||
• | UNS Electric derivatives such as forward power purchases and gas swaps. In December 2006, UNS Electric received authorization from the ACC to defer the unrealized gains and losses on the balance sheet as a regulatory asset or a regulatory liability rather than as a component of AOCI or in the income statement. | ||
• | UNS Gas derivatives such as forward gas purchases and gas swaps. Beginning in December 2008, unrealized gains and losses are recorded as either a regulatory asset or regulatory liability, as the UNS Gas PGA mechanism permits the recovery of the prudent cost of hedging contracts. |
• | Normal Purchase and Normal Saletransactions are forward energy purchase and sales contracts entered into by TEP, UNS Gas and UNS Electric to support the current load forecast and entered into with a counterparty with load serving requirements or generating capacity. These contracts are not required to be marked-to-market and are accounted for on an accrual basis. On an ongoing basis we evaluate our counterparties for non-performance risk to ensure it does not impact our ability to obtain the normal scope exception. |
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UNISOURCE ENERGY, TEP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
• | FAS 157,Fair Value Measurement, issued September 2006, defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. FAS 157 clarifies that the exchange price is the price in the principal market in which the reporting entity would transact for the asset or liability. See Note 13. |
• | FSP FAS 157-3,Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active —issued and effective October 2008, provides guidance clarifying how FAS 157Fair Value Measures(FAS 157) should be applied in markets that are not active. The guidance reaffirms the notion of fair value as an exit price as of the measurement date. The FSP emphasizes that approaches other than the market value approach to determine fair value, such as the use of management’s internal assumptions about future cash flows and appropriately risk-adjusted discount rates, may be appropriate. See Note 13. |
• | EITF 08-6,Equity Method Investment Accounting Considerations, issued January 2009, requires an entity to apply the cost accumulation model when determining the carrying value of an equity investment. Share issuances by the investee should be accounted for as if the equity investee had sold a proportionate share of its investment with any gain or loss recognized in earnings. In addition, the EITF requires that impairment testing be performed at an overall investment level. The standard is applicable for fiscal years beginning on or after December 15, 2008 and is not expected to have a material impact on our financial statements. |
• | FAS 161,Disclosures About Derivative Instruments and Hedging Activitiesan amendment to FAS 133,Accounting for Derivative Instruments and Hedging Activities,issued March 2008, requires enhanced disclosures about an entity’s derivative and hedging activity.The standard requires that the objectives for using derivative instruments be disclosed in terms of underlying risk so that the reader understands the purpose of derivative use in terms of the risks that the entity is intending to manage. The standard also requires disclosure of the location in the financial statements of derivative balances as well as the location of gains and losses incurred during the reporting period. The standard will be applicable for fiscal years or interim periods beginning on or after November 15, 2008 with early adoption encouraged. We will adopt the requirements of this pronouncement in our 2009 first quarter Form 10-Q. |
• | FSP FAS 132(R)-1Employers’ Disclosures about Postretirement Benefit Plan Assetsissued in December 2008, amends Statement 132(R)-1 to require more detailed disclosures about employers’ plan assets, including employers’ investment strategies, major categories of plan assets, concentrations of risk within plan assets, and valuation techniques used to measure the fair value of plan assets. We will adopt the requirements of this pronouncement in our 2009 Form 10-K. |
In 2008, UniSource Energy recorded a pre-tax charge of approximately $2 million ($1.2 million after-tax) related to an investment impairment for a Millennium investment, $1 million ($0.6 million after-tax) of which should have been recorded prior to 2008.
In September 2008, TEP recorded an additional tax expense of $1 million related to a determination that certain accrued tax penalty payments will not be deductible for tax purposes under IRS regulations.
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
-Millions of Dollars- | ||||||||||||
Transition Costs Being Recovered through the Fixed CTC: | ||||||||||||
Balance, beginning of year | $ | 26 | $ | 112 | $ | 185 | ||||||
Amortization of 1999 Transition Recovery Asset Recorded on the Income Statement | (24 | ) | (78 | ) | (66 | ) | ||||||
Amortization of Generation-Related Plant Assets | (2 | ) | (8 | ) | (7 | ) | ||||||
Balance, end of year | $ | — | $ | 26 | $ | 112 | ||||||
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
-Millions of Dollars- | ||||||||||||
1999 Transition Recovery Regulatory Asset, beginning of year | $ | 24 | $ | 102 | 168 | |||||||
Amortization of 1999 Transition Recovery Asset Recorded on the Income Statement | (24 | ) | (78 | ) | (66 | ) | ||||||
1999 Transition Recovery Regulatory Asset, end of year | $ | — | $ | 24 | 102 | |||||||
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UNISOURCE ENERGY, TEP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
• | The forward component will be updated on April 1 of each year, starting in 2009. The forward component will be based on the forecasted fuel and purchased power costs for the 12-month period from April 1 to March 31, less the base cost of fuel and purchased power of 2.9 cents per kWh, which is embedded in base rates. At January 1, 2009, the forward component was zero because of CTC true-up revenues of $58 million that will be credited to customers. |
• | The true-up component will reconcile any over/under collected amounts from the preceding 12 month period and will be credited to or recovered from customers in the subsequent year. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Balance Sheet | ||||||||||||||||
Income | Regulatory Asset | |||||||||||||||
Statement | Non | |||||||||||||||
(Gain)/Loss | Current | Current | AOCI | |||||||||||||
Recorded in Fuel: | ||||||||||||||||
San Juan Coal Contract Amendment | $ | (9 | ) | $ | 1 | $ | 8 | $ | — | |||||||
Retiree Health Care and Final Mine Reclamation Costs | (15 | ) | — | 15 | — | |||||||||||
Unrealized gains (losses) on derivative contracts (PPFAC) | (8 | ) | 14 | 5 | (11 | ) | ||||||||||
Deregulation Costs Recorded in O&M: | (1 | ) | 1 | — | — | |||||||||||
Property Taxes | (7 | ) | 7 | — | — | |||||||||||
Pension and Other Postretirement Benefits | — | — | 14 | (14 | ) | |||||||||||
Pre-Tax Impact of Reapplying FAS 71 | $ | (40 | ) | $ | 23 | $ | 42 | $ | (25 | ) | ||||||
• | San Juan Coal Contract Amendment costs of $9 million, incurred by TEP in 2000, will be amortized over 9 years beginning in December 2008. | ||
• | Final Mine Reclamation and Retiree Health Care Costs represent costs associated with TEP’s jointly-owned facilities at San Juan, Four Corners and Navajo. TEP is required to recognize the present value of its liability associated with final reclamation and retiree health care obligations. As TEP is permitted to fully recover these costs through the PPFAC when the costs are invoiced by the miners, TEP recorded a regulatory asset. | ||
• | Unrealized gains (losses) on derivative instruments (PPFAC) are contracts for which the settled amounts will be recovered through the PPFAC. As TEP expects to recover the final settled amounts through the PPFAC, TEP reclassified amounts previously recorded in the income statement and in AOCI to a regulatory asset. | ||
• | Deregulation Costs represent deferred expenses that TEP incurred to comply with various ACC deregulation orders. | ||
• | Property taxes related to generation assets which will be recovered in rates as cash is paid rather than as costs are accrued. | ||
• | Pension and Other Postretirement Benefits represent the underfunded status of TEP’s defined benefit and other postretirement benefit plans prior to December 2008. As TEP expects to recover these costs in rates, TEP reclassified amounts previously recorded in AOCI to a regulatory asset. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
-Millions of Dollars- | ||||||||||||
Operating Expenses | ||||||||||||
Amortization of 1999 Transition Recovery Asset | $ | 24 | $ | 78 | $ | 66 | ||||||
Depreciation (related to Net Cost of Removal for Interim Retirements) | 10 | 7 | 5 | |||||||||
Interest Expense | ||||||||||||
Long-Term Debt (amortization of loss on reacquired debt costs) | 1 | 1 | 1 | |||||||||
Income Taxes | 4 | 5 | 5 | |||||||||
Total Expense Increase | $ | 39 | $ | 91 | $ | 77 | ||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, | ||||||||
2008 | 2007 | |||||||
-Millions of Dollars- | ||||||||
Current Regulatory Assets | ||||||||
Property Tax Deferrals(1) | $ | 16 | $ | 9 | ||||
Derivative Instruments(2) | 14 | — | ||||||
Deregulation Costs(3) | 4 | — | ||||||
San Juan Coal Contract Amendment(5) | 1 | — | ||||||
Self-Insured Medical Deferrals(1) | 1 | 1 | ||||||
1999 Transition Recovery Asset | — | 24 | ||||||
Other | 1 | — | ||||||
Total Current Regulatory Assets | 37 | 34 | ||||||
Pension and Other Postretirement Benefits(7) | 107 | 15 | ||||||
Regulatory Assets — Other | ||||||||
Derivative Instruments(2) | 5 | — | ||||||
Deregulation Costs(3) | 10 | 12 | ||||||
San Juan Coal Contract Amendment(5) | 8 | — | ||||||
Final Mine Reclamation Costs(8) | 8 | — | ||||||
Retiree Health Care Costs(8) | 6 | — | ||||||
Rate Case Costs(4) | 1 | 1 | ||||||
Unamortized Loss on Reacquired Debt(9) | 5 | 6 | ||||||
Total Regulatory Assets — Other | 43 | 19 | ||||||
Income Taxes Recoverable through Future Revenues(6) | 20 | 30 | ||||||
Current Regulatory Liabilities | ||||||||
Over-Recovered Purchased Energy Costs | (14 | ) | — | |||||
Derivative Instruments(2) | (1 | ) | — | |||||
Renewable Energy Standards Tariff (REST)(10) | (6 | ) | — | |||||
Total Current Regulatory Liabilities | (21 | ) | — | |||||
Other Regulatory Liabilities | ||||||||
Net Cost of Removal for Interim Retirements(11) | (123 | ) | (87 | ) | ||||
Over-Recovered Purchased Energy Costs | (44 | ) | — | |||||
Total Other Regulatory Liabilities | (167 | ) | (87 | ) | ||||
Total Net Regulatory Assets | $ | 19 | $ | 11 | ||||
1. | Property Tax and Self-Insured Medical Deferrals are recorded based on historical ratemaking treatment allowing recovery as costs are paid out, rather than as costs are accrued. In December 2008, as a result of TEP reapplying FAS 71 for its generation operations, TEP recorded a regulatory property tax asset related to its generation assets. While these assets do not earn a return, the costs are fully recovered in rates over an approximate six month period. | ||
2. | Derivative Instruments represent the unrealized gains or losses on contracts entered into to hedge the variability of purchased energy costs and short-term wholesale sales that are expected to be recovered through the PPFAC. As a result of the rate case and the approval of the PPFAC, TEP deferred the gains and losses on certain contracts that meet the recovery criteria under the PPFAC requirements. | ||
3. | Deregulation costs represent deferred expenses that TEP incurred to comply with various ACC deregulation orders, the recovery of which has been authorized by the ACC in the 2008 TEP Rate Order. These assets are included in rate base and consequently earn a return. TEP will recover these costs through rates over a four-year period, beginning in December 2008. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. | Rate Case Costs. In the 2008 TEP Rate Order, the ACC approved recovery of rate case costs over a four-year period beginning in December 2008. TEP does not earn a return on these assets. | ||
5. | San Juan Coal Contract Amendment costs of $15 million were incurred by TEP in 2000. In the 2008 TEP Rate Order, the ACC approved the recovery of $9 million of these costs over a nine-year period beginning in December 2008. These assets do not earn a return. | ||
6. | Income Taxes Recoverable Through Future Revenues, while not included in rate base, are amortized over the life of the assets. TEP does not earn a return on these assets. | ||
7. | Pension Assets. In December 2008, as a result of TEP reapplying FAS 71 for its generation operations, TEP recorded a regulatory pension and postretirement benefit asset related to its generation employees. Based on past regulatory actions, TEP expects to recover these costs in rates. TEP does not earn a return on these assets. | ||
8. | Final Reclamation and Retiree Health Care Costs represent costs associated with TEP’s jointly-owned facilities at San Juan, Four Corners and Navajo. TEP is required to recognize the present value of its liability associated with final reclamation and retiree health care obligations. As TEP is permitted to fully recover these costs through the PPFAC when the costs are invoiced by the miners, TEP recorded a regulatory asset. TEP expects to recover these costs over the life of the mines, which is estimated to be between 17 and 34 years. TEP will not earn a return on these assets. | ||
9. | Unamortized Loss on Reacquired Debt Costs is amortized for rate recovery over the remaining life of the related debt instruments over a period of 21 years. TEP does not earn a return on these costs. |
10. | Renewable Energy Standards Tariff (REST) represents the REST surcharge collected in excess of qualified renewable expenditures. See below. | ||
11. | Net Cost of Removal for Interim Retirements represents an estimate of the cost of future asset retirement obligations net of salvage value. These are amounts collected through revenue for the net cost of removal of interim retirements for transmission, distribution, general and intangible plant which are not yet expended. In December 2008, as a result of the 2008 TEP Rate Order, TEP began collecting through revenue the net cost of removal of interim retirements for generation plant, which it has not yet expended. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(1) | ThePGA factor, computed monthly, is a calculation of the twelve-month rolling weighted average gas cost, and automatically adjusts monthly, subject to limitations on how much the price per therm may change in a twelve-month period. Effective December 2007, the ACC increased the annual cap on the maximum increase in the PGA factor from $0.10 per therm to $0.15 per therm in a twelve-month period. | ||
(2) | At any time UNS Gas’ PGA bank balance is under-recovered, UNS Gas may request aPGA surchargewith the goal of collecting the amount deferred from customers over a period deemed appropriate by the ACC. When the PGA bank balance reaches an over-collected balance of $10 million on a billed basis, UNS Gas is required to request aPGA surcreditwith the goal of returning the over-collected balance to customers over a period deemed appropriate by the ACC. |
December 31, | ||||||||
2008 | 2007 | |||||||
-Millions of Dollars- | ||||||||
Under (Over) Recovered Purchased Gas Costs — Regulatory Basis as Billed to Customers | $ | 5 | $ | (3 | ) | |||
Estimated Purchased Gas Costs Recovered through Accrued Unbilled Revenues | (10 | ) | (10 | ) | ||||
Over-Recovered Purchased Gas Costs (PGA) Included as a Current Regulatory Liability | $ | (5 | ) | $ | (13 | ) | ||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, | ||||||||
2008 | 2007 | |||||||
-Millions of Dollars- | ||||||||
Current Assets | ||||||||
Derivative Instruments | $ | 7 | $ | — | ||||
Pension Assets | 3 | 1 | ||||||
Other Regulatory Assets | ||||||||
Derivative Instruments | 6 | — | ||||||
Other Regulatory Assets | 1 | 1 | ||||||
Other Regulatory Liabilities | ||||||||
Net Cost of Removal for Interim Retirements | (19 | ) | (17 | ) |
• | Derivative Instruments represent the unrealized gains or losses on contracts entered into to hedge the variability of purchased energy costs that are expected to be recovered through the PGA. UNS Gas does not earn a return on these costs. | ||
• | Pension Assets represent the unfunded status of UNS Gas’ share of the UES pension and other postretirement benefit plans that it expects, based on past regulatory actions, to recover through rates. UNS Gas does not earn a return on these costs. | ||
• | Other Regulatory assets consist of its 2007 rate case costs which are recoverable over 3 years. In addition, UNS Gas deferred its 2008 rate case costs and its low income assistance program costs. UNS Gas requested recovery of these costs in its 2008 rate case filing. UNS Gas does not earn a return on these costs. |
• | Net Cost of Removal for Interim Retirements represents an estimate of the cost of future asset retirement obligations. These are amounts collected through revenue for the net cost of removal of interim retirements for which removal costs have not yet been expended. In December 2007, to comply with ACC requirements, UNS Gas reclassified $12 million of Net Cost of Removal for Interim Retirements from Accumulated Depreciation to a regulatory liability. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
K-112
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, | ||||||||
2008 | 2007 | |||||||
-Millions of Dollars- | ||||||||
Current Regulatory Assets | ||||||||
Derivatives | $ | 17 | $ | 1 | ||||
Other Regulatory Assets | ||||||||
Derivative Instruments | 7 | — | ||||||
Pension Assets | 3 | 1 | ||||||
Rate Case Costs | — | 1 | ||||||
Current Regulatory Liabilities | ||||||||
Derivative Instruments | — | (3 | ) | |||||
REST | (1 | ) | — | |||||
Over-Recovered Purchased Power Costs | (6 | ) | — | |||||
Other Regulatory Liabilities | ||||||||
Over-Recovered Purchased Power Costs | — | (9 | ) | |||||
Derivative Instruments | — | (7 | ) | |||||
Net Cost of Removal for Interim Retirements | (11 | ) | (2 | ) |
• | Derivative Instruments represent the unrealized gains or losses on contracts entered into to hedge the variability of purchased energy costs that are expected to be recovered through the PPFAC. UNS Electric does not earn a return on these costs. | ||
• | Pension Assets represent the unfunded status of UNS Electric’s share of the UES pension and other postretirement benefit plans that it expects, based on past regulatory actions, to recover through rates. UNS Electric does not earn a return on these costs. | ||
• | Rate case costs are included in rate base and consequently earn a return. The recovery period is 3 years. |
• | Renewable Energy Standards Tariff (REST) represents the REST surcharge collected in excess of qualified renewable expenditures. The ACC approved a REST surcharge for UNS Electric, effective June 1, 2008, to allow UNS Electric to recover the cost of qualified renewable expenditures, such as payments to customers who have renewable energy resources or the incremental cost of renewable power generated or purchased by UNS Electric. Any surcharge collected in excess of qualified renewable expenditures will be reflected in the financial statements as a current regulatory liability. Conversely, qualified renewable expenditures in excess of the REST surcharge will be reflected as a current regulatory asset. The REST plan includes an adjustor mechanism which allows UNS Electric to file an application with the ACC to apply any shortage or surplus in the prior year’s program expenses to the subsequent year’s REST surcharge. | ||
• | UNS Electric defers differences between purchased energy costs and the recovery of such costs in revenues. Future billings are adjusted for such deferrals through use of a already deferred PPFAC approved by the ACC. The PPFAC allows for a revenue surcharge or surcredit (that adjusts the customer’s rate for delivered purchased power) to collect or return under- or over-recovery of costs. | ||
• | Net Cost of Removal for Interim Retirements represents an estimate of the cost of future asset retirement obligations. These are amounts collected through revenue for the net cost of removal of interim retirements for which removal costs have not yet been expended. In June 2008, to comply with ACC expectations, UNS Electric reclassified $7 million of Net Cost of Removal for Interim Retirements from Accumulated Depreciation to a regulatory liability. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(1) | TEP, a vertically integrated electric utility business, is our largest subsidiary. | ||
(2) | UNS Gas is a regulated gas distribution utility business. | ||
(3) | UNS Electric is a regulated electric distribution utility business. |
• | In 2006, Millennium recorded an after-tax loss of approximately $2 million related to the discontinued operations and disposal of Global Solar. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Reportable Segments | UniSource | UniSource | ||||||||||||||||||||||
UNS | UNS | Energy | Energy | |||||||||||||||||||||
TEP | Gas | Electric | Other | Eliminations | Consolidated | |||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||
Intersegment Revenue | ||||||||||||||||||||||||
2008: | ||||||||||||||||||||||||
Wholesale Sales — TEP to UNSE | $ | 24 | $ | — | $ | — | $ | — | $ | (24 | ) | $ | — | |||||||||||
Wholesale Sales — UNSE to TEP | — | — | 9 | — | (9 | ) | — | |||||||||||||||||
Wholesale Sales — UED to UNSE | — | — | — | 7 | (7 | ) | — | |||||||||||||||||
Gas Revenue — UNSG to UNSE & UED | — | 8 | — | — | (8 | ) | — | |||||||||||||||||
Other Revenue — TEP to Affiliates(1) | 8 | — | — | — | (8 | ) | — | |||||||||||||||||
Other Revenue — Millennium to TEP & UNSE(2) | — | — | — | 16 | (16 | ) | — | |||||||||||||||||
Other Revenue — TEP to UNSE(3) | 2 | — | — | — | (2 | ) | — | |||||||||||||||||
Total Intersegment Revenue | $ | 34 | $ | 8 | $ | 9 | $ | 23 | $ | (74 | ) | $ | — | |||||||||||
2007: | ||||||||||||||||||||||||
Other Revenue — TEP to Affiliates(1) | $ | 7 | $ | — | $ | — | $ | — | $ | (7 | ) | $ | — | |||||||||||
Other Revenue — Millennium to TEP & UNSE(2) | — | — | — | 15 | (15 | ) | — | |||||||||||||||||
Total Intersegment Revenue | $ | 7 | $ | — | $ | — | $ | 15 | $ | (22 | ) | $ | — | |||||||||||
2006: | ||||||||||||||||||||||||
Other Revenue — TEP to Affiliates(1) | $ | 2 | $ | — | $ | — | $ | — | $ | (2 | ) | $ | — | |||||||||||
Other Revenue — Millennium to TEP & UNSE(2) | — | — | — | 15 | (15 | ) | — | |||||||||||||||||
Total Intersegment Revenue | $ | 2 | $ | — | $ | — | $ | 15 | $ | (17 | ) | $ | — | |||||||||||
(1) | TEP provides corporate services (finance, accounting, tax, information technology services, etc.) to UniSource Energy and its subsidiaries. See Note 15. | |
(2) | A Millennium subsidiary provides a supplemental workforce and meter reading services to TEP and UNS Electric. | |
(3) | TEP provides control area services to UNS Electric. See Note 15. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Reportable Segments | ||||||||||||||||||||||||
UNS | UNS | All | Reconciling | UniSource | ||||||||||||||||||||
2008 | TEP | Gas | Electric | Other | Adjustments | Energy | ||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||
Income Statement | ||||||||||||||||||||||||
Operating Revenues — External | $ | 1,045 | $ | 166 | $ | 186 | $ | — | $ | — | $ | 1,397 | ||||||||||||
Operating Revenues — Intersegment | 34 | 8 | 9 | 23 | (74 | ) | — | |||||||||||||||||
Depreciation and Amortization | 126 | 7 | 14 | 1 | — | 148 | ||||||||||||||||||
Amortization of Transition Recovery Asset | 24 | — | — | — | — | 24 | ||||||||||||||||||
Interest Income | 10 | — | — | 1 | — | 11 | ||||||||||||||||||
Net Loss from Equity Method Entities | — | — | — | (2 | ) | — | (2 | ) | ||||||||||||||||
Interest Expense | 101 | 7 | 7 | 11 | (2 | ) | 124 | |||||||||||||||||
Income Tax Expense (Benefit) | 11 | 6 | 2 | (2 | ) | — | 17 | |||||||||||||||||
Net Income (Loss) | 4 | 9 | 4 | 15 | (18 | ) | 14 | |||||||||||||||||
Cash Flow Statement | ||||||||||||||||||||||||
Net Cash Flows — Operating Activities | 269 | 3 | 14 | (9 | ) | — | 277 | |||||||||||||||||
Net Cash Flows — Investing Activities — Capital Expenditures | (287 | ) | (16 | ) | (30 | ) | (16 | ) | — | (349 | ) | |||||||||||||
Net Cash Flows — Investing Activities — Investments in and Loans to Equity Method Entities | — | — | — | (1 | ) | — | (1 | ) | ||||||||||||||||
Net Cash Flows — Investing Activities — Other | (104 | ) | — | — | 1 | — | (103 | ) | ||||||||||||||||
Net Cash Flows — Financing Activities | 129 | 1 | 22 | (11 | ) | — | 141 | |||||||||||||||||
Balance Sheet | ||||||||||||||||||||||||
Total Assets | 2,842 | 294 | 285 | 1,061 | (972 | ) | 3,510 | |||||||||||||||||
Investments in Equity Method Entities | — | — | — | 25 | — | 25 |
Reportable Segments | ||||||||||||||||||||||||
UNS | UNS | All | Reconciling | UniSource | ||||||||||||||||||||
2007 | TEP | Gas | Electric | Other | Adjustments | Energy | ||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||
Income Statement | ||||||||||||||||||||||||
Operating Revenues — External | $ | 1,064 | $ | 151 | $ | 169 | $ | (3 | ) | $ | — | $ | 1,381 | |||||||||||
Operating Revenues — Intersegment | 7 | — | — | 15 | (22 | ) | — | |||||||||||||||||
Depreciation and Amortization | 120 | 8 | 13 | — | — | 141 | ||||||||||||||||||
Amortization of Transition Recovery Asset | 78 | — | — | — | — | 78 | ||||||||||||||||||
Interest Income | 16 | 1 | — | 2 | — | 19 | ||||||||||||||||||
Interest Expense | 117 | 7 | 6 | 8 | — | 138 | ||||||||||||||||||
Income Tax Expense (Benefit) | 36 | 3 | 3 | (3 | ) | — | 39 | |||||||||||||||||
Net Income (Loss) | 53 | 4 | 5 | (4 | ) | — | 58 | |||||||||||||||||
Cash Flow Statement | ||||||||||||||||||||||||
Net Cash Flows — Operating Activities | 264 | 28 | 22 | 9 | — | 323 | ||||||||||||||||||
Net Cash Flows — Investing Activities — Capital Expenditures | (162 | ) | (23 | ) | (38 | ) | (22 | ) | — | (245 | ) | |||||||||||||
Net Cash Flows — Investing Activities — Investments in and Loans to Equity Method Entities | — | — | — | (1 | ) | — | (1 | ) | ||||||||||||||||
Net Cash Flows — Investing Activities — Other | 26 | 1 | 1 | 1 | — | 29 | ||||||||||||||||||
Net Cash Flows — Financing Activities | (120 | ) | (6 | ) | 12 | (3 | ) | (2 | ) | (119 | ) | |||||||||||||
Balance Sheet | ||||||||||||||||||||||||
Total Assets | 2,573 | 276 | 231 | 1,077 | (971 | ) | 3,186 | |||||||||||||||||
Investments in Equity Method Entities | 3 | — | — | 28 | — | 31 |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Reportable Segments | ||||||||||||||||||||||||
UNS | UNS | All | Reconciling | UniSource | ||||||||||||||||||||
2006 | TEP | Gas | Electric | Other | Adjustments | Energy | ||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||
Income Statement | ||||||||||||||||||||||||
Operating Revenues — External | $ | 987 | $ | 162 | $ | 160 | $ | (1 | ) | $ | — | $ | 1,308 | |||||||||||
Operating Revenues — Intersegment | 2 | — | — | 15 | (17 | ) | — | |||||||||||||||||
Depreciation and Amortization | 112 | 7 | 11 | 1 | — | 131 | ||||||||||||||||||
Amortization of Transition Recovery Asset | 66 | — | — | — | — | 66 | ||||||||||||||||||
Interest Income | 16 | — | — | 3 | — | 19 | ||||||||||||||||||
Interest Expense | 127 | 7 | 5 | 13 | — | 152 | ||||||||||||||||||
Income Tax Expense (Benefit) | 42 | 3 | 3 | (4 | ) | — | 44 | |||||||||||||||||
Discontinued Operations — Net of Tax | — | — | — | (2 | ) | — | (2 | ) | ||||||||||||||||
Net Income (Loss) | 67 | 4 | 5 | (9 | ) | — | 67 | |||||||||||||||||
Cash Flow Statement | ||||||||||||||||||||||||
Net Cash Flows — Operating Activities | 227 | 32 | 14 | 10 | — | 283 | ||||||||||||||||||
Net Cash Flows — Investing Activities — Capital Expenditures | (156 | ) | (23 | ) | (39 | ) | (20 | ) | — | (238 | ) | |||||||||||||
Net Cash Flows — Investing Activities — Investments in and Loans to Equity Method Entities | — | — | — | (5 | ) | — | (5 | ) | ||||||||||||||||
Net Cash Flows — Investing Activities — Other | (26 | ) | — | — | 23 | — | (3 | ) | ||||||||||||||||
Net Cash Flows — Financing Activities | (79 | ) | (4 | ) | 22 | (14 | ) | (2 | ) | (77 | ) | |||||||||||||
Balance Sheet | ||||||||||||||||||||||||
Total Assets | 2,623 | 253 | 195 | 1,038 | (922 | ) | 3,187 | |||||||||||||||||
Investments in Equity Method Entities | 3 | — | — | 27 | — | 30 |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
UniSource Energy | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
-Millions of Dollars- | ||||||||||||
Cash Flow Hedges — Unrealized Gains (Losses) | ||||||||||||
Forward Power Sales | $ | (7 | ) | $ | — | $ | 8 | |||||
Gas Price Swaps | 3 | (5 | ) | (18 | ) | |||||||
Interest Rate Swap | (5 | ) | (1 | ) | (2 | ) | ||||||
Total Pre-Tax Unrealized Gain (Loss) | $ | (9 | ) | $ | (6 | ) | $ | (12 | ) | |||
After-Tax Unrealized Gain (Loss) Recorded in AOCI | $ | (5 | ) | $ | (4 | ) | $ | (7 | ) | |||
Unrealized (Gain) Loss Reclassified to Net Income | $ | 2 | $ | 2 | $ | — | ||||||
TEP | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
-Millions of Dollars- | ||||||||||||
Cash Flow Hedges — Unrealized Gains (Losses) | ||||||||||||
Forward Power Sales | $ | (7 | ) | $ | — | $ | 8 | |||||
Gas Price Swaps | 3 | (6 | ) | (18 | ) | |||||||
Interest Rate Swap | (5 | ) | (1 | ) | (2 | ) | ||||||
Total Pre-Tax Unrealized Gain (Loss) | $ | (9 | ) | $ | (7 | ) | $ | (12 | ) | |||
After-Tax Unrealized Gain (Loss) Recorded in AOCI | $ | (5 | ) | $ | (4 | ) | $ | (7 | ) | |||
Unrealized (Gain) Loss Reclassified to Net Income | $ | 2 | $ | 2 | $ | — | ||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
UniSource Energy | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
-Millions of Dollars- | ||||||||||||
Mark-to-Market Transactions — (Increase) Decrease Recorded in Regulatory Accounts on the Balance Sheet | ||||||||||||
Recorded in Current Regulatory Assets — Derivatives: | ||||||||||||
Gas Swaps | $ | 27 | $ | 1 | $ | — | ||||||
Forward Power Purchases | 11 | — | — | |||||||||
Recorded in Current Regulatory Liabilities — Derivatives: | ||||||||||||
Forward Power Purchases | 3 | (3 | ) | — | ||||||||
Recorded in Other Regulatory Assets — Derivatives: | ||||||||||||
Gas Swaps | 11 | — | — | |||||||||
Forward Power Purchases | 7 | — | — | |||||||||
Recorded in Other Regulatory Liabilities — Derivatives: | ||||||||||||
Forward Power Purchases | 6 | (3 | ) | (3 | ) | |||||||
Total Increase (Decrease) | $ | 65 | $ | (5) | $ | (3 | ) | |||||
TEP | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
-Millions of Dollars- | ||||||||||||
Mark-to-Market Transactions — (Increase) Decrease Recorded in Regulatory Accounts on the Balance Sheet | ||||||||||||
Recorded in Current Regulatory Assets — Derivatives: | ||||||||||||
Gas Swaps | $ | 14 | $ | — | $ | — | ||||||
Recorded in Current Regulatory Liabilities — Derivatives: | ||||||||||||
Forward Power Purchases | (1 | ) | — | — | ||||||||
Recorded in Other Regulatory Assets — Derivatives: | ||||||||||||
Gas Swaps | 4 | — | — | |||||||||
Forward Power Purchases | 2 | — | — | |||||||||
Total Increase (Decrease) | $ | 19 | $ | — | $ | — | ||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
UniSource Energy | ||||||||||||||||||||||||
December 31, 2008 | December 31, 2007 | |||||||||||||||||||||||
Mark-to- | Cash | Mark-to- | Cash | |||||||||||||||||||||
Market | Flow | Market | Flow | |||||||||||||||||||||
Contracts | Hedge | Total | Contracts | Hedges | Total | |||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||
Current Assets | $ | 3 | $ | — | $ | 3 | $ | 4 | $ | 1 | $ | 5 | ||||||||||||
Current Liabilities | (41 | ) | — | (41 | ) | (1 | ) | (2 | ) | (3 | ) | |||||||||||||
Net Current Assets (Liabilities) | $ | (38 | ) | $ | — | $ | (38 | ) | $ | 3 | $ | (1 | ) | $ | 2 | |||||||||
Noncurrent Assets | $ | 3 | $ | — | $ | 3 | $ | 8 | $ | — | $ | 8 | ||||||||||||
Noncurrent Liabilities | (22 | ) | (8 | ) | (30 | ) | (2 | ) | (3 | ) | (5 | ) | ||||||||||||
Net Noncurrent Assets (Liabilities) | $ | (19 | ) | $ | (8 | ) | $ | (27 | ) | $ | 6 | $ | (3 | ) | $ | 3 | ||||||||
TEP | ||||||||||||||||||||||||
December 31, 2008 | December 31, 2007 | |||||||||||||||||||||||
Mark-to- | Cash | Mark-to- | Cash | |||||||||||||||||||||
Market | Flow | Market | Flow | |||||||||||||||||||||
Contracts | Hedge | Total | Contracts | Hedges | Total | |||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||
Current Assets | $ | 5 | $ | — | $ | 5 | $ | 1 | $ | 1 | $ | 2 | ||||||||||||
Current Liabilities | (19 | ) | — | (19 | ) | (1 | ) | (2 | ) | (3 | ) | |||||||||||||
Net Current Assets (Liabilities) | $ | (14 | ) | $ | — | $ | (14 | ) | $ | — | $ | (1 | ) | $ | (1 | ) | ||||||||
Noncurrent Assets | $ | 5 | $ | — | $ | 5 | $ | — | $ | — | $ | — | ||||||||||||
Noncurrent Liabilities | (11 | ) | (8 | ) | (19 | ) | — | (3 | ) | (3 | ) | |||||||||||||
Net Noncurrent Assets (Liabilities) | $ | (6 | ) | $ | (8 | ) | $ | (14 | ) | $ | — | $ | (3 | ) | $ | (3 | ) | |||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2008 | 2007 | 2006 | ||||||||||
-Millions of Dollars- | ||||||||||||
Recorded in Wholesale Sales: | ||||||||||||
Forward Power Sales | $ | 80 | $ | 61 | $ | 73 | ||||||
Forward Purchased Power | (79 | ) | (62 | ) | (71 | ) | ||||||
Net Impact in Wholesale Sales | $ | 1 | $ | (1 | ) | $ | 2 | |||||
2008 | 2007 | 2006 | ||||||||||
-Millions of Dollars- | ||||||||||||
Recorded in Wholesale Sales: | ||||||||||||
Forward Power Sales | $ | 30 | $ | 28 | $ | 6 | ||||||
Forward Purchased Power | (30 | ) | (28 | ) | (6 | ) |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Purchase Commitments | ||||||||||||||||||||||||||||
2009 | 2010 | 2011 | 2012 | 2013 | Thereafter | Total | ||||||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||||||
Fuel (including Transportation) | $ | 148 | $ | 101 | $ | 57 | $ | 43 | $ | 39 | $ | 181 | $ | 569 | ||||||||||||||
Purchased Power | 37 | 3 | 3 | 3 | 2 | 2 | 50 | |||||||||||||||||||||
Transmission | 2 | 2 | 2 | 2 | 2 | 5 | 15 | |||||||||||||||||||||
Total Firm Purchase Commitments | 187 | 106 | 62 | 48 | 43 | 188 | 634 | |||||||||||||||||||||
Operating Lease Payments | 1 | 1 | — | — | — | — | 2 | |||||||||||||||||||||
Total Unrecognized Firm Commitments | $ | 188 | $ | 107 | $ | 62 | $ | 48 | $ | 43 | $ | 188 | $ | 636 | ||||||||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In February 2008, the D.C. Circuit Court of Appeals vacated the CAMR. Unless and until this decision is overturned, the law in effect prior to the adoption of the CAMR becomes the applicable law, and requires the EPA to develop an emission limit for mercury that represents the maximum achievable control technology. It is expected to take the EPA at least two years to establish such a standard, followed by a period of three years during which existing plants would implement any controls needed to comply with the standard.
As of January 31, 2009, TEP and ADEQ reached an agreement that improves regulatory certainty regarding mercury compliance obligations under existing Arizona rules, while achieving mercury reductions substantially similar to those that would be required by the existing Arizona rules. This agreement relates to the Springerville and Sundt generating stations.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Purchase Commitments | ||||||||||||||||||||||||||||
2009 | 2010 | 2011 | 2012 | 2013 | Thereafter | Total | ||||||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||||||
Total Unrecognized Firm Commitments — Fuel | $ | 64 | $ | 42 | $ | 23 | $ | 4 | $ | 7 | $ | 19 | $ | 159 | ||||||||||||||
Purchase Commitments | ||||||||||||||||||||||||||||
2009 | 2010 | 2011 | 2012 | 2013 | Thereafter | Total | ||||||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||||||
Fuel (including Transportation) | $ | 20 | $ | 9 | $ | 2 | $ | — | $ | — | $ | — | $ | 31 | ||||||||||||||
Purchased Power | 41 | 30 | 13 | 8 | 7 | — | 99 | |||||||||||||||||||||
Transmission | 2 | 2 | 1 | — | — | — | 5 | |||||||||||||||||||||
Total Unrecognized Firm Commitments | $ | 63 | $ | 41 | $ | 16 | $ | 8 | $ | 7 | $ | — | $ | 135 | ||||||||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Claims Related to Navajo Generating Station
In June 1999, the Navajo Nation filed suit against Salt River Project, several Peabody Coal Company entities (including Peabody Western Coal Company, the coal supplier to Navajo Generating Station), Southern California Edison Company, and other defendants in the U.S. District Court for the District of Columbia (D.C. Lawsuit). The D.C. Lawsuit alleges, among other things, that the defendants obtained a favorable coal royalty rate of the lease agreements under which Peabody mines coal by improperly influencing the outcome of a federal administrative process pursuant to which the royalty rate was to be adjusted. The suit seeks $600 million in damages, treble damages, and punitive damages of not less than $1 billion, and the ejection of defendants from all possessory interests and Navajo Tribal lands arising out of the primary coal lease. In July 2001, the U.S. District Court dismissed all claims against Salt River Project. In March 2008, the U.S. District Court lifted a stay that had been in place since October 2004 and referred pending discovery related motions to a Magistrate judge. The Magistrate filed his Report and Recommendations on June 13, 2008 and the Navajo thereafter sought judicial review of the Magistrate’s Report and Recommendations by filing an Objection with the District Court on June 27, 2008. The matter was fully briefed and parties are awaiting the Judge’s decision.
In 2004, Peabody Western Coal Company (Peabody) filed a complaint in the Circuit Court for the City of St. Louis, Missouri against the participants at Navajo, including TEP (7.5% owner), for reimbursement of royalties and other costs arising out of the D.C. Lawsuit. In July 2008, the parties entered into a joint stipulation of dismissal of these claims which was approved by the Circuit Court. TEP cannot predict whether the lawsuit will be refiled based upon the final outcome of the D.C. Lawsuit.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
K-126
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
• | UES’ guarantee of senior unsecured notes issued by UNS Gas ($100 million) and by UNS Electric ($100 million), | ||
• | UES’ guarantee of the $60 million UNS Gas/UNS Electric Revolver, and | ||
• | UniSource Energy’s guarantee of approximately $2 million in building lease payments for UNS Gas. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2008 | ||||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||
UNS | UniSource | |||||||||||||||||||
TEP | UNS Gas | Electric | UED | Energy | ||||||||||||||||
Plant in Service: | ||||||||||||||||||||
Electric Generation Plant | $ | 1,398 | $ | — | $ | 17 | $ | 58 | $ | 1,473 | ||||||||||
Electric Transmission Plant | 660 | — | 29 | 4 | 693 | |||||||||||||||
Electric Distribution Plant | 1,044 | — | 163 | — | 1,207 | |||||||||||||||
Gas Distribution Plant | — | 201 | — | — | 201 | |||||||||||||||
Gas Transmission Plant | — | 18 | — | — | 18 | |||||||||||||||
General Plant | 173 | 14 | 9 | — | 196 | |||||||||||||||
Intangible Plant | 71 | 1 | 4 | — | 76 | |||||||||||||||
Electric Plant Held for Future Use | 5 | — | 1 | — | 6 | |||||||||||||||
Total Plant in Service | $ | 3,351 | $ | 234 | $ | 223 | $ | 62 | $ | 3,870 | ||||||||||
Utility Plant under Capital Leases | $ | 701 | $ | — | $ | 1 | $ | — | $ | 702 | ||||||||||
December 31, 2007 | ||||||||||||||||
-Millions of Dollars- | ||||||||||||||||
UNS | UniSource | |||||||||||||||
TEP | UNS Gas | Electric | Energy | |||||||||||||
Plant in Service: | ||||||||||||||||
Electric Generation Plant | $ | 1,343 | $ | — | $ | 17 | $ | 1,360 | ||||||||
Electric Transmission Plant | 580 | — | 28 | 608 | ||||||||||||
Electric Distribution Plant | 985 | — | 143 | 1,128 | ||||||||||||
Gas Distribution Plant | — | 185 | — | 185 | ||||||||||||
Gas Transmission Plant | — | 18 | — | 18 | ||||||||||||
General Plant | 162 | 12 | 10 | 184 | ||||||||||||
Intangible Plant | 69 | 1 | 7 | 77 | ||||||||||||
Electric Plant Held for Future Use | 5 | 1 | — | 6 | ||||||||||||
Total Plant in Service | $ | 3,144 | $ | 217 | $ | 205 | $ | 3,566 | ||||||||
Utility Plant under Capital Leases | $ | 701 | $ | — | $ | 1 | $ | 702 | ||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2008 | ||||||||||||||||||||||||||||
UNS | UNS | UniSource | ||||||||||||||||||||||||||
TEP | Gas | Electric | UED | Energy | ||||||||||||||||||||||||
Total | Total | Total | Total | |||||||||||||||||||||||||
T&D | Gen* | Plant | Plant | Plant | Plant | Plant | ||||||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||||||
Gross Plant in Service | $ | 1,953 | $ | 1,398 | $ | 3,351 | $ | 234 | $ | 223 | $ | 62 | $ | 3,870 | ||||||||||||||
Less Accumulated Depreciation and Amortization | 865 | 667 | 1,532 | 9 | 39 | 1 | 1,581 | |||||||||||||||||||||
Net Plant in Service | $ | 1,088 | $ | 731 | $ | 1,819 | $ | 225 | $ | 184 | $ | 61 | $ | 2,289 | ||||||||||||||
December 31, 2007 | ||||||||||||||||||||||||||||||||
UNS | UNS | |||||||||||||||||||||||||||||||
TEP | Gas | Electric | UniSource Energy | |||||||||||||||||||||||||||||
Total | Total | Total | TEP | Total | ||||||||||||||||||||||||||||
T&D | Gen* | Plant | Plant | Plant | All Other | Gen* | Plant | |||||||||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||||||||||
Gross Plant in Service | $ | 1,801 | $ | 1,343 | $ | 3,144 | $ | 217 | $ | 205 | $ | 2,223 | $ | 1,343 | $ | 3,566 | ||||||||||||||||
Less Accumulated Depreciation and Amortization | 836 | 654 | 1,490 | 5 | 39 | 880 | 654 | 1,534 | ||||||||||||||||||||||||
Net Plant in Service | $ | 965 | $ | 689 | $ | 1,654 | $ | 212 | $ | 166 | $ | 1,343 | $ | 689 | $ | 2,032 | ||||||||||||||||
* | The category Gen includes the generation assets. Beginning December 1, 2008, the ACC sets rates on a cost-of-service basis and as such TEP’s generation operations are now accounted for under the provisions of FAS 71. Prior to December 1, 2008, generation assets were not accounted for under FAS 71. Rates for the remaining utility operations appearing in this table are set by the ACC on a cost-of-service basis, and are accounted for under the provisions of FAS 71 for all periods. The category T&D includes all transmission and distribution Plant in Service. |
UNS Gas, | ||||||||
UNS Electric | ||||||||
Major Class of Utility Plant in Service | TEP | & UED | ||||||
Electric Generation Plant | 20-71 years | 38-49 years | ||||||
Electric Transmission Plant | 10-50 years | 20-50 years | ||||||
Electric Distribution Plant | 27-60 years | 23-50 years | ||||||
Gas Distribution Plant | n/a | 30-55 years | ||||||
General Plant | 5-30 years | 30-65 years | ||||||
Intangible Plant | 3-15 years | 5-40 years |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Plant | Construction | |||||||||||||||
Ownership | in | Work in | Accumulated | |||||||||||||
Percentage | Service | Progress | Depreciation | |||||||||||||
-Millions of Dollars- | ||||||||||||||||
San Juan Units 1 and 2 | 50.0% | $ | 353 | $ | 44 | $ | 223 | |||||||||
Navajo Station Units 1, 2 and 3 | 7.5 | 134 | 3 | 80 | ||||||||||||
Four Corners Units 4 and 5 | 7.0 | 89 | 1 | 65 | ||||||||||||
Transmission Facilities | 7.5 to 95.0 | 247 | — | 169 | ||||||||||||
Luna Energy Facility | 33.3 | 49 | 3 | 3 | ||||||||||||
Total | $ | 872 | $ | 51 | $ | 540 | ||||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
• | The Sundt Lease has an initial term to January 2011 and provides for renewal periods of two or more years through 2020. | ||
• | The Springerville Common Facilities Leases have an initial term to December 2017 for one lease and January 2021 for the other two leases, subject to optional renewal periods of two or more years through 2025. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
• | The Springerville Unit 1 Leases have an initial term to January 2015 and provide for renewal periods of three or more years through 2030. | ||
• | The Springerville Coal Handling Facilities Leases have an initial term to April 2015 and provide for one renewal period of six years, then additional renewal periods of five or more years through 2035. |
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UNISOURCE ENERGY, TEP AND SUBSIDIARIES | ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
TEP | ||||||||||||||||||||||||||||||||
Variable | ||||||||||||||||||||||||||||||||
Rate IDBs | TEP | TEP | ||||||||||||||||||||||||||||||
Supported | Scheduled | Capital | ||||||||||||||||||||||||||||||
by Letters | Debt | Lease | TEP | UNS | UNS | UniSource | ||||||||||||||||||||||||||
of Credit | Retirements | Obligations | Total | Gas | Electric | Energy | Total | |||||||||||||||||||||||||
- Millions of Dollars - | ||||||||||||||||||||||||||||||||
2009 | $ | — | $ | — | $ | 63 | $ | 63 | $ | — | $ | — | $ | 6 | $ | 69 | ||||||||||||||||
2010 | — | — | 92 | 92 | — | — | 6 | 98 | ||||||||||||||||||||||||
2011 | 459 | — | 107 | 566 | 50 | 8 | 46 | 670 | ||||||||||||||||||||||||
2012 | — | — | 118 | 118 | — | — | — | 118 | ||||||||||||||||||||||||
2013 | — | — | 122 | 122 | — | — | — | 122 | ||||||||||||||||||||||||
Total 2009 – 2013 | 459 | — | 502 | 961 | 50 | 8 | 58 | 1,077 | ||||||||||||||||||||||||
Thereafter | — | 445 | 304 | 749 | 50 | 100 | 150 | 1,049 | ||||||||||||||||||||||||
Less: Imputed Interest | — | — | (274 | ) | (274 | ) | — | — | — | (274 | ) | |||||||||||||||||||||
Total | $ | 459 | $ | 445 | $ | 532 | $ | 1,436 | $ | 100 | $ | 108 | $ | 208 | $ | 1,852 | ||||||||||||||||
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UNISOURCE ENERGY, TEP AND SUBSIDIARIES | ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
Long- | ||||||||||||||||||||||||
Current | Term | Current | Long- | |||||||||||||||||||||
Liabilities | Debt | Total | Liabilities | Term Debt | Total | |||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||
December 31, 2008 | December 31, 2007 | |||||||||||||||||||||||
Revolver | $ | — | $ | 43 | $ | 43 | $ | — | $ | 20 | $ | 20 | ||||||||||||
Term Loan | $ | 6 | $ | 9 | $ | 15 | $ | 6 | $ | 15 | $ | 21 | ||||||||||||
Weighted Average Interest Rate on the Revolver | — | 2.48 | % | 2.48 | % | — | 6.27 | % | 6.27 | % | ||||||||||||||
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UNISOURCE ENERGY, TEP AND SUBSIDIARIES | ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
UNS | UNS | UNS | UNS | |||||||||||||
Gas | Electric | Gas | Electric | |||||||||||||
-Millions of Dollars- | ||||||||||||||||
December 31, 2008 | December 31, 2007 | |||||||||||||||
Balance on the Revolver | $ | — | $ | 8 | $ | — | $ | 26 | ||||||||
Weighted Average Interest Rate | — | 1.5 | % | — | 5.89 | % | ||||||||||
Outstanding Letters of Credit | $ | 10 | $ | 7 | $ | 10 | $ | — | ||||||||
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UNISOURCE ENERGY, TEP AND SUBSIDIARIES | ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
• | The carrying amounts of our current assets and liabilities, including Current Maturities of Long-Term Debt and amounts outstanding under our credit agreements, approximate their fair value due to the short-term nature of these instruments. Accordingly, these items have been excluded from the table below. |
• | Investments in Lease Debt and Equity: TEP calculated the present value of remaining cash flows at the balance sheet date using current market rates with similar characteristics with respect to credit rating and time-to-maturity. In 2008, we also incorporated the impact of counterparty credit risk using market credit default swap data. |
• | Fixed Rate Long-Term Debt: UniSource Energy and TEP used quoted market prices, where available, or calculated the present value of remaining cash flows at the balance sheet date using current market rates for bonds with similar characteristics with respect to credit rating and time-to-maturity. In 2008, we also incorporate the impact of our own credit risk using a credit default swap rate when determining the fair value of fixed rate long-term debt. |
• | Variable Rate Long-Term Debt: TEP considers the principal amounts of variable rate debt outstanding to be reasonable estimates of their fair value. In 2008, the fair value of variable rate long-term debt has also been adjusted for credit risk using a credit default swap rate. |
December 31, | ||||||||||||||||
2008 | 2007 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Value | Value | Value | Value | |||||||||||||
-Millions of Dollars- | ||||||||||||||||
Assets: | ||||||||||||||||
TEP Investment in Lease Debt and Equity | $ | 127 | $ | 144 | $ | 153 | $ | 157 | ||||||||
Liabilities: | ||||||||||||||||
Fixed Rate Long-Term Debt | ||||||||||||||||
UniSource Energy | 350 | 339 | 310 | 319 | ||||||||||||
TEP | 445 | 322 | 492 | 498 | ||||||||||||
Variable Rate Long-Term Debt | ||||||||||||||||
UniSource Energy | 66 | 66 | 67 | 67 | ||||||||||||
TEP | 459 | 441 | 329 | 329 |
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UNISOURCE ENERGY, TEP AND SUBSIDIARIES | ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
K-137
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UNISOURCE ENERGY, TEP AND SUBSIDIARIES | ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
UniSource Energy | TEP | |||||||||||||||||||||||
Years Ended December 31, | ||||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 | 2007 | 2006 | |||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||
Federal Income Tax Expense at Statutory Rate | $ | 11 | $ | 34 | $ | 40 | $ | 5 | $ | 31 | $ | 38 | ||||||||||||
State Income Tax Expense, Net of Federal Benefit | 1 | 5 | 5 | 1 | 4 | 5 | ||||||||||||||||||
Depreciation Differences (Flow Through Basis) | 2 | 3 | 2 | 2 | 3 | 2 | ||||||||||||||||||
San Juan Generating Station Environmental Penalties | 3 | — | — | 3 | — | — | ||||||||||||||||||
Federal/State Tax Credits | (3 | ) | (2 | ) | (2 | ) | (3 | ) | (2 | ) | (2 | ) | ||||||||||||
Other | 3 | (1 | ) | (1 | ) | 3 | — | (1 | ) | |||||||||||||||
Total Federal and State Income Tax Expense (before Discontinued Operations) | $ | 17 | $ | 39 | $ | 44 | $ | 11 | $ | 36 | $ | 42 | ||||||||||||
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UNISOURCE ENERGY, TEP AND SUBSIDIARIES | ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
UniSource Energy | TEP | |||||||||||||||||||||||
Years Ended December 31, | ||||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 | 2007 | 2006 | |||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||
Current Tax Expense | ||||||||||||||||||||||||
Federal | $ | (17 | ) | $ | 14 | $ | 37 | $ | (12 | ) | $ | 22 | $ | 32 | ||||||||||
State | (2 | ) | 3 | 12 | (1 | ) | 6 | 10 | ||||||||||||||||
Total | (19 | ) | 17 | 49 | (13 | ) | 28 | 42 | ||||||||||||||||
Deferred Tax Expense (Benefit) | ||||||||||||||||||||||||
Federal | 34 | 20 | — | 23 | 9 | 5 | ||||||||||||||||||
State | 2 | 2 | (5 | ) | 1 | (1 | ) | (5 | ) | |||||||||||||||
Total | 36 | 22 | (5 | ) | 24 | 8 | — | |||||||||||||||||
Total Federal and State Income Tax Expense (before Discontinued Operations) | 17 | 39 | 44 | 11 | 36 | 42 | ||||||||||||||||||
Tax on Discontinued Operations | — | — | (2 | ) | — | — | — | |||||||||||||||||
Total Federal and State Income Tax Expense (including Discontinued Operations) | $ | 17 | $ | 39 | $ | 42 | $ | 11 | $ | 36 | $ | 42 | ||||||||||||
UniSource Energy | TEP | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
-Millions of Dollars- | ||||||||||||||||
Gross Deferred Income Tax Assets | ||||||||||||||||
Capital Lease Obligations | $ | 209 | $ | 230 | $ | 209 | $ | 230 | ||||||||
Customer Advances and Contributions in Aid of Construction | 40 | 39 | 26 | 26 | ||||||||||||
Alternative Minimum Tax Credit | 49 | 38 | 35 | 24 | ||||||||||||
Accrued Postretirement Benefits | 24 | 25 | 24 | 25 | ||||||||||||
Emission Allowance Inventory | 13 | 14 | 12 | 12 | ||||||||||||
Other | 39 | 40 | 27 | 27 | ||||||||||||
Gross Deferred Income Tax Assets | 374 | 386 | 333 | 344 | ||||||||||||
Gross Deferred Income Tax Liabilities | ||||||||||||||||
Plant — Net | (390 | ) | (363 | ) | (357 | ) | (340 | ) | ||||||||
Capital Lease Assets — Net | (61 | ) | (71 | ) | (61 | ) | (71 | ) | ||||||||
Regulatory Asset — Income Taxes Recoverable Through Future Revenues | (8 | ) | (12 | ) | (8 | ) | (12 | ) | ||||||||
1999 Transition Recovery Asset | — | (9 | ) | — | (9 | ) | ||||||||||
Pensions | (7 | ) | (4 | ) | (8 | ) | (5 | ) | ||||||||
Deferred Lease Payment | (6 | ) | (6 | ) | (6 | ) | (6 | ) | ||||||||
Other | (19 | ) | (11 | ) | (13 | ) | (6 | ) | ||||||||
Gross Deferred Income Tax Liabilities | (491 | ) | (476 | ) | (453 | ) | (449 | ) | ||||||||
Net Deferred Income Tax Liabilities | $ | (117 | ) | $ | (90 | ) | $ | (120 | ) | $ | (105 | ) | ||||
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UNISOURCE ENERGY, TEP AND SUBSIDIARIES | ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
UniSource Energy | TEP | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
-Millions of Dollars- | ||||||||||||||||
Deferred Income Taxes — Current Assets | $ | 61 | $ | 60 | $ | 60 | $ | 59 | ||||||||
Deferred Income Taxes — Noncurrent Liabilities | (178 | ) | (150 | ) | (180 | ) | (164 | ) | ||||||||
Net Deferred Income Tax Liability | $ | (117 | ) | $ | (90 | ) | $ | (120 | ) | $ | (105 | ) | ||||
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UNISOURCE ENERGY, TEP AND SUBSIDIARIES | ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
December 31, | ||||||||
2008 | 2007 | |||||||
Unrecognized Tax Benefits, beginning of year | $ | 12 | $ | 13 | ||||
Additions based on tax positions taken in the current year | 6 | — | ||||||
Reductions based on tax positions taken in the current year | — | — | ||||||
Additions based on tax positions taken in the prior year | 3 | — | ||||||
Reductions based on tax positions taken in the prior year | (1 | ) | (1 | ) | ||||
Unrecognized Tax Benefits, end of year | $ | 20 | $ | 12 | ||||
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UNISOURCE ENERGY, TEP AND SUBSIDIARIES | ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
K-142
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UNISOURCE ENERGY, TEP AND SUBSIDIARIES | ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
Other Postretirement | ||||||||||||||||
Pension Benefits | Benefits | |||||||||||||||
Years Ended December 31, | ||||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
-Millions of Dollars- | ||||||||||||||||
Regulatory Pension Asset included in Other Regulatory Assets | $ | 105 | $ | 16 | $ | 7 | $ | — | ||||||||
Accrued Benefit Liability included in Accrued Employee Expenses | — | — | (4 | ) | (4 | ) | ||||||||||
Accrued Benefit Liability included in Pension and Other Postretirement Benefits | (95 | ) | (16 | ) | (63 | ) | (60 | ) | ||||||||
Accumulated Other Comprehensive Loss | 3 | 10 | — | 6 | ||||||||||||
Net Amount Recognized | $ | 13 | $ | 10 | $ | (60 | ) | $ | (58 | ) | ||||||
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UNISOURCE ENERGY, TEP AND SUBSIDIARIES | ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
Other Postretirement | ||||||||||||||||
Pension Benefits | Benefits | |||||||||||||||
Years Ended December 31, | ||||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
-Millions of Dollars- | ||||||||||||||||
Change in Projected Benefit Obligation | ||||||||||||||||
Benefit Obligation at Beginning of Year | $ | 209 | $ | 218 | $ | 65 | $ | 66 | ||||||||
Actuarial (Gain) Loss | 13 | (17 | ) | — | (1 | ) | ||||||||||
Interest Cost | 14 | 13 | 4 | 4 | ||||||||||||
Service Cost | 7 | 8 | 2 | 2 | ||||||||||||
Measurement Date Change | 1 | — | — | — | ||||||||||||
Amendments | (2 | ) | — | — | (3 | ) | ||||||||||
Benefits Paid | (12 | ) | (13 | ) | (4 | ) | (3 | ) | ||||||||
Projected Benefit Obligation at End of Year | 230 | 209 | 67 | 65 | ||||||||||||
Change in Plan Assets | ||||||||||||||||
Fair Value of Plan Assets at Beginning of Year | 193 | 176 | — | — | ||||||||||||
Actual (Loss) Return on Plan Assets | (57 | ) | 20 | — | — | |||||||||||
Benefits Paid | (12 | ) | (13 | ) | (4 | ) | (4 | ) | ||||||||
Employer Contributions | 10 | 10 | 4 | 4 | ||||||||||||
Measurement Date Change | 1 | — | — | — | ||||||||||||
Fair Value of Plan Assets at End of Year | 135 | 193 | — | — | ||||||||||||
Funded Status at End of Year | $ | (95 | ) | $ | (16 | ) | $ | (67 | ) | $ | (65 | ) | ||||
Other | ||||||||
Pension | Postretirement | |||||||
Benefits | Benefits | |||||||
-Millions of Dollars- | ||||||||
Net Loss | $ | 105 | $ | 13 | ||||
Prior Service Cost (Benefit) | 3 | (6 | ) |
K-144
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UNISOURCE ENERGY, TEP AND SUBSIDIARIES | ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
December 31, | ||||||||
2008 | 2007 | |||||||
-Millions of Dollars- | ||||||||
Information for Pension Plans with an Accumulated Benefit Obligation in Excess of Plan Assets: | ||||||||
Projected Benefit Obligation at End of Year | $ | 230 | $ | 10 | ||||
Accumulated Benefit Obligation at End of Year | 198 | 7 | ||||||
Fair Value of Plan Assets at End of Year | 135 | — |
Other Postretirement | ||||||||||||||||||||||||
Pension Benefits | Benefits | |||||||||||||||||||||||
Years Ended December 31, | ||||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 | 2007 | 2006 | |||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||
Service Cost | $ | 7 | $ | 8 | $ | 7 | $ | 2 | $ | 2 | $ | 2 | ||||||||||||
Interest Cost | 14 | 13 | 12 | 4 | 4 | 4 | ||||||||||||||||||
Expected Return on Plan Assets | (16 | ) | (14 | ) | (13 | ) | — | — | — | |||||||||||||||
Prior Service Cost Amortization | 2 | 1 | 2 | (2 | ) | (2 | ) | (1 | ) | |||||||||||||||
Recognized Actuarial Loss | — | 2 | 3 | 1 | 1 | 1 | ||||||||||||||||||
Net Periodic Benefit Cost | $ | 7 | $ | 10 | $ | 11 | $ | 5 | $ | 5 | $ | 6 | ||||||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Pension Benefits | ||||||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||
Regulatory | Regulatory | Regulatory | ||||||||||||||||||||||
Asset | AOCI | Asset | AOCI | Asset | AOCI | |||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||
Current Year Actuarial (Gain) Loss | $ | 85 | $ | 1 | $ | (16 | ) | $ | (6 | ) | $ | — | $ | — | ||||||||||
Amortization of Actuarial Gain (Loss) | — | — | (1 | ) | (1 | ) | — | — | ||||||||||||||||
Prior Service (Cost) Amortization | (2 | ) | — | (1 | ) | (1 | ) | — | — | |||||||||||||||
Plan Amendments | (2 | ) | — | — | — | — | — | |||||||||||||||||
Reclassification from AOCI to Regulatory Asset | 8 | (8 | ) | — | — | — | — | |||||||||||||||||
Change in Additional Minimum Liability | — | — | — | — | 4 | (23 | ) | |||||||||||||||||
Total Recognized | $ | 89 | $ | (7 | ) | $ | (18 | ) | $ | (8 | ) | $ | 4 | $ | (23 | ) | ||||||||
Other Postretirement Benefits | ||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||
Regulatory | ||||||||||||||||
Asset | AOCI | AOCI | AOCI | |||||||||||||
-Millions of Dollars- | ||||||||||||||||
Current Year Actuarial (Gain) Loss | $ | — | $ | — | $ | (1 | ) | $ | — | |||||||
Amortization of Actuarial Gain (Loss) | (1 | ) | — | (1 | ) | — | ||||||||||
Prior Service (Cost) Amortization | 2 | — | 2 | — | ||||||||||||
Change in Additional Minimum Liability | — | — | (2 | ) | — | |||||||||||
Reclassification from AOCI to Regulatory Asset | 6 | (6 | ) | — | — | |||||||||||
Total Recognized | $ | 7 | $ | (6 | ) | $ | (2 | ) | $ | — | ||||||
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UNISOURCE ENERGY, TEP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
Other Postretirement | ||||||||||||||||
Pension Benefits | Benefits | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Weighted-Average Assumptions Used to Determine Benefit Obligations as of the Measurement Date | ||||||||||||||||
Discount Rate | 6.3 | % | 6.6 - 6.8 | % | 6.5 | % | 6.5 | % | ||||||||
Rate of Compensation Increase | 3.0 – 5.0 | % | 3.0 – 5.0 | % | N/A | N/A |
Other Postretirement | ||||||||||||||||
Pension Benefits | Benefits | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Weighted-Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended December 31 | ||||||||||||||||
Discount Rate | 6.6 – 6.8 | % | 5.9 | % | 6.5 | % | 5.6 – 5.8 | % | ||||||||
Rate of Compensation Increase | 3.0 – 5.0 | % | 3.0 – 5.0 | % | N/A | N/A | ||||||||||
Expected Return on Plan Assets | 7.75- 8.3 | % | 8.3 | % | N/A | N/A |
• | market and economic indicators |
• | historical market returns |
• | correlations and volatility |
• | central banks’ and government treasury departments’ forecasts and objectives, and |
• | recent professional or academic research. |
December 31, | ||||||||
2008 | 2007 | |||||||
Assumed Health Care Cost Trend Rates | ||||||||
Health Care Cost Trend Rate Assumed for Next Year | 7.5 | % | 8 | % | ||||
Ultimate Health Care Cost Trend Rate Assumed | 5 | % | 5 | % | ||||
Year that the Rate Reaches the Ultimate Trend Rate | 2017 | 2013 |
K-147
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
One-Percentage- | One-Percentage- | |||||||
Point Increase | Point Decrease | |||||||
-Millions of Dollars- | ||||||||
Effect on Total of Service and Interest Cost Components | $ | 1 | $ | (1 | ) | |||
Effect on Postretirement Benefit Obligation | 4 | (4 | ) |
UNS Gas and UNS Electric | ||||||||||||||||
TEP Plan Assets | Plan Assets | |||||||||||||||
December 31, | December 1, | December 31, | December 1, | |||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Asset Category | ||||||||||||||||
Equity Securities | 51 | % | 54 | % | 67 | % | 66 | % | ||||||||
Debt Securities | 33 | % | 27 | % | 31 | % | — | |||||||||
Fixed Income Securities | — | — | — | 33 | % | |||||||||||
Real Estate | 13 | % | 10 | % | — | 1 | % | |||||||||
Other | 3 | % | 9 | % | 2 | % | — | |||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||
Other | ||||||||
Pension | Postretirement | |||||||
Benefits | Benefits | |||||||
-Millions of Dollars- | ||||||||
2009 | $ | 8 | $ | 5 | ||||
2010 | 9 | 5 | ||||||
2011 | 10 | 6 | ||||||
2012 | 11 | 6 | ||||||
2013 | 12 | 6 | ||||||
Years 2014-2018 | 77 | 29 |
K-148
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2008 | 2007 | 2006 | ||||||||||
Expected Term (years) | 6 | 6 | 6 | |||||||||
Risk-free Rate | 3.1 | % | 4.4 | % | 4.97 | % | ||||||
Expected Volatility | 18.8 | % | 20.2 | % | 22.57 | % | ||||||
Expected Dividend Yield | 2.8 | % | 2.4 | % | 2.45 | % | ||||||
Weighted-Average Grant-Date Fair Value of Options Granted During the Period | $ | 4.23 | $ | 8.13 | $ | 7.38 |
K-149
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Shares in Thousands) | 2008 | 2007 | 2006 | |||||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||
Exercise | Exercise | Exercise | ||||||||||||||||||||||
Stock Options | Shares | Price | Shares | Price | Shares | Price | ||||||||||||||||||
Outstanding, Beginning of Year | 1,451 | $ | 21.21 | 1,388 | $ | 18.59 | 1,537 | $ | 16.75 | |||||||||||||||
Granted | 304 | $ | 26.18 | 184 | $ | 37.88 | 187 | $ | 30.55 | |||||||||||||||
Exercised | (120 | ) | $ | 16.34 | (120 | ) | $ | 16.56 | (304 | ) | $ | 15.97 | ||||||||||||
Forfeited | (33 | ) | $ | 29.24 | (1 | ) | $ | 12.28 | (32 | ) | $ | 25.14 | ||||||||||||
Outstanding, End of Year | 1,602 | $ | 22.36 | 1,451 | $ | 21.21 | 1,388 | $ | 18.59 | |||||||||||||||
Exercisable, End of Year | 1,153 | $ | 19.50 | 1,139 | $ | 17.43 | 1,188 | $ | 16.49 | |||||||||||||||
Aggregate Intrinsic Value of Options Exercised ($000s) | $ | 1,680 | $ | 2,226 | $ | 4,687 |
At December 31, 2008 ($000s) | ||||
Aggregate Intrinsic Value for Options Outstanding | $ | 12,225 | ||
Aggregate Intrinsic Value for Options Exercisable | $ | 12,225 | ||
Weighted Average Remaining Contractual Life of Outstanding Options | 4.6 years | |||
Weighted Average Remaining Contractual Life of Exercisable Options | 3.1 years |
Options Outstanding | Options Exercisable | |||||||||||||||||||
Weighted- | ||||||||||||||||||||
Average | Weighted- | Weighted- | ||||||||||||||||||
Number of | Remaining | Average | Number | Average | ||||||||||||||||
Range of | Shares | Contractual | Exercise | of Shares | Exercise | |||||||||||||||
Exercise Prices | (000s) | Life | Price | (000s) | Price | |||||||||||||||
$11.00 – $15.28 | 413 | 1.2 years | $ | 14.13 | 413 | $ | 14.13 | |||||||||||||
$17.44 – $18.84 | 524 | 3.0 years | $ | 18.02 | 524 | $ | 18.02 | |||||||||||||
$26.18. — $37.88 | 665 | 7.9 years | $ | 30.88 | 216 | $ | 33.33 |
Number of Shares | Weighted-Average | |||||||
Nonvested Shares | (000s) | Grant-Date Fair Value | ||||||
Nonvested at January 1, 2008 | 312 | $ | 7.83 | |||||
Granted | 304 | 4.23 | ||||||
Vested | (134 | ) | 7.73 | |||||
Forfeited | (33 | ) | 5.47 | |||||
Nonvested at December 31, 2008 | 449 | $ | 5.60 | |||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
• | February 2008 — 3,130 stock units at a weighted average fair value of $28.75 per share, |
• | May 2008 — 18,448 stock units at a weighted average fair value of $31.71 per share, and |
• | August 2008 — 1,400 stock units at a weighted average fair value of $32.15 per share. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Performance Shares | Restricted Stock Units | |||||||||||||||
Weighted- | Weighted- | |||||||||||||||
Average | Average | |||||||||||||||
Shares | Grant-Date | Shares | Grant-Date | |||||||||||||
(000s) | Fair Value | (000s) | Fair Value | |||||||||||||
Non-vested at January 1, 2008 | 72 | $ | 31.77 | 20 | $ | 35.91 | ||||||||||
Granted | 49 | 17.10 | 23 | 31.33 | ||||||||||||
Vested | (12 | ) | 28.39 | (20 | ) | 35.91 | ||||||||||
Forfeited | (42 | ) | 25.98 | — | — | |||||||||||
Non-vested at December 31, 2008 | 67 | $ | 25.23 | 23 | $ | 31.33 | ||||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Level 1. | Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market (examples include active exchange-traded equity securities and listed derivatives). | |
Level 2. | Financial assets and liabilities whose values are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in non-active markets (examples include corporate bonds, which trade infrequently), pricing models whose inputs are observable for substantially the full term of the asset or liabilities (examples include most non-exchange-traded derivatives, including interest rate swaps), and pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability. | |
Level 3. | Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability (examples include longdated or complex derivatives including certain long-dated options on gas and power). |
UniSource Energy | ||||||||||||||||
Quoted Prices in | Significant Other | Significant | ||||||||||||||
Active Markets for | Observable | Unobservable | ||||||||||||||
Identical Assets | Inputs | Inputs | ||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
December 31, 2008 | ||||||||||||||||
-Millions of Dollars- | ||||||||||||||||
Assets | ||||||||||||||||
Cash Equivalents(1) | $ | 14 | $ | — | $ | — | $ | 14 | ||||||||
Rabbi Trust Investments to support the Deferred Compensation and SERP Plans(2) | — | 9 | 9 | |||||||||||||
Equity Investments(3) | — | — | 11 | 11 | ||||||||||||
Collateral Posted(4) | — | 14 | — | 14 | ||||||||||||
Energy Contracts(5) | — | 1 | 6 | 7 | ||||||||||||
Total Assets | 14 | 24 | 17 | 55 | ||||||||||||
Liabilities | ||||||||||||||||
Energy Contracts(5) | — | (40 | ) | (23 | ) | (63 | ) | |||||||||
Interest Rate Swap(6) | — | (8 | ) | — | (8 | ) | ||||||||||
Total Liabilities | — | (48 | ) | (23 | ) | (71 | ) | |||||||||
Net Total Assets and (Liabilities) | $ | 14 | $ | (24 | ) | $ | (6 | ) | $ | (16 | ) | |||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
TEP | ||||||||||||||||
Quoted Prices in | Significant Other | Significant | ||||||||||||||
Active Markets for | Observable | Unobservable | ||||||||||||||
Identical Assets | Inputs | Inputs | ||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
December 31, 2008 | ||||||||||||||||
-Millions of Dollars- | ||||||||||||||||
Assets | ||||||||||||||||
Cash Equivalents(1) | $ | 8 | $ | — | $ | — | $ | 8 | ||||||||
Rabbi Trust Investments to support the Deferred Compensation and SERP Plans(2) | — | 9 | — | 9 | ||||||||||||
Energy Contracts(5) | — | — | 10 | 10 | ||||||||||||
Total Assets | 8 | 9 | 10 | 27 | ||||||||||||
Liabilities | ||||||||||||||||
Energy Contracts(5) | — | (18 | ) | (11 | ) | (29 | ) | |||||||||
Interest Rate Swap(6) | — | (8 | ) | — | (8 | ) | ||||||||||
Total Liabilities | — | (26 | ) | (11 | ) | (37 | ) | |||||||||
Net Total Assets and (Liabilities) | $ | 8 | $ | (17 | ) | $ | (1 | ) | $ | (10 | ) | |||||
(1) | Cash Equivalents are based on observable market prices and are comprised of the fair value of Money Market Funds. | |
(2) | Level 2 investments comprise amounts held in mutual and money market funds related to deferred compensation and Supplemental Executive Retirement Plan (SERP) benefits. The valuation is based on quoted prices, traded in active markets. These investments are included in Investments and Other Property — Other in the UniSource Energy and TEP balance sheets. | |
(3) | Equity Investments (UniSource Energy table only) are, in the absence of readily ascertainable market values, based on the investment partners’ valuations and comprise Millennium’s equity investment in unregulated businesses. These investments are included in Investments and Other Property — Other in the UniSource Energy balance sheet. | |
(4) | Collateral provided (UniSource Energy table only) for energy contracts with counterparties to reduce credit risk exposure. | |
(5) | Energy contracts include gas swap agreements (Level 2), forward power purchase and sales contracts (Level 3), and forward power purchase contracts indexed to gas (Level 3), entered into to take advantage of favorable market conditions and reduce exposure to energy price risk. The valuation techniques are described below. | |
(6) | Interest Rate Swap is valued based on the six month LIBOR index. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Year Ended | ||||||||||||||||
December 31, 2008 | ||||||||||||||||
-Millions of Dollars- | ||||||||||||||||
UniSource Energy | TEP | |||||||||||||||
Mark-to- | Mark-to- | |||||||||||||||
Market | Market | |||||||||||||||
Contracts | Investments | Total | Contracts | |||||||||||||
Balance, beginning of year | $ | 10 | $ | 14 | $ | 24 | $ | — | ||||||||
Gains and (Losses) (Realized/Unrealized) Recorded to: | ||||||||||||||||
Other Expense | — | (3 | ) | (3 | ) | — | ||||||||||
Net Regulatory Assets | (27 | ) | — | (27 | ) | (1 | ) | |||||||||
Balance, end of year | $ | (17 | ) | $ | 11 | $ | (6 | ) | $ | (1 | ) | |||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
-In Thousands- | ||||||||||||
Numerator: | ||||||||||||
Net Income | $ | 14,021 | $ | 58,373 | $ | 67,447 | ||||||
Income from Assumed Conversion of Convertible Senior Notes | — | 4,390 | 4,390 | |||||||||
Adjusted Numerator | $ | 14,021 | $ | 62,763 | $ | 71,837 | ||||||
Denominator: | ||||||||||||
Weighted-average Shares of Common Stock Outstanding | 35,632 | 35,486 | 35,264 | |||||||||
Effect of Diluted Securities | ||||||||||||
Convertible Senior Notes | — | 4,000 | 4,000 | |||||||||
Options and Stock Issuable under Employee Benefit Plans and the Directors’ Plan | 537 | 583 | 601 | |||||||||
Total Shares | 36,169 | 40,069 | 39,865 | |||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
-Millions of Dollars- | ||||||||||||
Revenues from Discontinued Operations | $ | — | $ | — | $ | 1 | ||||||
Loss from Discontinued Operations Before Income Taxes | — | — | (4 | ) | ||||||||
Income Tax Benefit | — | — | (2 | ) | ||||||||
Discontinued Operations — Net of Tax | $ | — | $ | — | $ | (2 | ) | |||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
UniSource Energy | ||||||||||||
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
-Thousands of Dollars- | ||||||||||||
Net Income | $ | 14,021 | $ | 58,373 | $ | 67,447 | ||||||
Adjustments to Reconcile Net Income | ||||||||||||
To Net Cash Flows from Operating Activities | ||||||||||||
Depreciation and Amortization Expense | 147,690 | 140,638 | 130,502 | |||||||||
Depreciation and Amortization Recorded to Fuel and Other O&M Expense | 6,467 | 6,897 | 7,604 | |||||||||
CTC Revenue to be Refunded | 58,092 | — | — | |||||||||
Impact of Reapplication of FAS 71 | (40,144 | ) | — | — | ||||||||
Provision for Navajo Retiree Health Care and Mine Reclamation | 10,198 | — | — | |||||||||
Amortization of Transition Recovery Asset | 23,945 | 77,681 | 65,985 | |||||||||
Mark-to-Market Transactions | 9,281 | 2,459 | (929 | ) | ||||||||
Amortization of Deferred Debt-Related Costs included in | ||||||||||||
Interest Expense | 3,891 | 3,831 | 4,622 | |||||||||
Impairment of Millennium Investments | 2,469 | — | — | |||||||||
Provision for Bad Debts | 5,007 | 3,592 | 3,439 | |||||||||
Deferred Income Taxes | 35,739 | 22,021 | (5,530 | ) | ||||||||
Pension and Postretirement Expense | 11,991 | 14,442 | 17,753 | |||||||||
Pension and Postretirement Funding | (13,928 | ) | (13,809 | ) | (12,557 | ) | ||||||
Share Based Compensation Expense | 2,901 | 2,693 | 2,276 | |||||||||
Excess Tax Benefit from Stock Option Exercises | (633 | ) | (541 | ) | (1,501 | ) | ||||||
Net Unrealized Loss (Gain) on MEG Trading Activities | — | 2,562 | 9,955 | |||||||||
Loss on Extinguishment of Debt | — | — | 1,080 | |||||||||
Changes in Assets and Liabilities which Provided (Used) | ||||||||||||
Cash Exclusive of Changes Shown Separately | ||||||||||||
Accounts Receivable | 432 | 4,981 | (33,335 | ) | ||||||||
Materials and Fuel Inventory | (10,176 | ) | (8,805 | ) | (7,912 | ) | ||||||
Over/Under Recovered Purchased Energy Cost | (10,337 | ) | 2,377 | 4,808 | ||||||||
Accounts Payable | 8,164 | (5,057 | ) | 9,163 | ||||||||
Income Taxes Receivable (Payable) | (12,720 | ) | (2,895 | ) | (11,896 | ) | ||||||
Interest Accrued | 16,772 | 10,031 | 7,814 | |||||||||
Taxes Other Than Income Taxes | (29 | ) | 1,344 | 453 | ||||||||
Other | 7,918 | (49 | ) | 24,332 | ||||||||
Discontinued Operations — Net of Tax | — | — | 1,796 | |||||||||
Net Cash Used by Operating Activities of Discontinued Operations | — | — | (2,710 | ) | ||||||||
Net Cash Flows — Operating Activities | $ | 277,011 | $ | 322,766 | $ | 282,659 | ||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
TEP | ||||||||||||
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
-Thousands of Dollars- | ||||||||||||
Net Income | $ | 4,363 | $ | 53,456 | $ | 66,745 | ||||||
Adjustments to Reconcile Net Income | ||||||||||||
To Net Cash Flows from Operating Activities | ||||||||||||
Depreciation and Amortization Expense | 126,040 | 119,811 | 112,346 | |||||||||
Depreciation and Amortization Recorded to Fuel and Other O&M Expense | 5,039 | 5,339 | 6,320 | |||||||||
CTC Revenue to be Refunded | 58,092 | — | — | |||||||||
Impact of Reapplication of FAS 71 | (40,144 | ) | — | — | ||||||||
Provision for Navajo Retiree Health Care and Mine Reclamation | 10,198 | — | — | |||||||||
Amortization of Transition Recovery Asset | 23,945 | 77,681 | 65,985 | |||||||||
Mark-to-Market Transactions | 9,283 | 2,459 | (929 | ) | ||||||||
Amortization of Deferred Debt-Related Costs included in | ||||||||||||
Interest Expense | 2,826 | 2,677 | 3,356 | |||||||||
Loss on Extinguishment of Debt | — | — | 685 | |||||||||
Provision for Bad Debts | 2,957 | 2,161 | 1,869 | |||||||||
Deferred Income Taxes | 24,410 | 8,310 | (233 | ) | ||||||||
Pension and Postretirement Expense | 10,402 | 12,683 | 16,050 | |||||||||
Pension and Postretirement Funding | (12,439 | ) | (12,479 | ) | (11,133 | ) | ||||||
Share Based Compensation Expense | 2,239 | 2,097 | 1,799 | |||||||||
Changes in Assets and Liabilities which Provided (Used) | ||||||||||||
Cash Exclusive of Changes Shown Separately | ||||||||||||
Accounts Receivable | 131 | 4,013 | (45,185 | ) | ||||||||
Materials and Fuel Inventory | (8,774 | ) | (9,103 | ) | (5,814 | ) | ||||||
Accounts Payable | 14,812 | (6,230 | ) | 22 | ||||||||
Interest Accrued | 15,857 | 10,113 | 8,191 | |||||||||
Income Taxes Receivable/Payable | 10,127 | (3,378 | ) | (8,702 | ) | |||||||
Taxes Other Than Income Taxes | (1,011 | ) | 1,463 | (33 | ) | |||||||
Other | 10,353 | (6,961 | ) | 15,889 | ||||||||
Net Cash Flows — Operating Activities | $ | 268,706 | $ | 264,112 | $ | 227,228 | ||||||
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
-Thousands of Dollars- | ||||||||||||
(Decrease)/Increase to Utility Plant Accruals | $ | (25,450 | ) | $ | 24,915 | $ | (3,434 | ) | ||||
Net Cost of Removal of Interim Retirements | 45,100 | 21,301 | 6,859 | |||||||||
Capital Lease Obligations | 16,612 | 13,259 | 12,808 |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
UniSource Energy | ||||||||||||||||
First | Second | Third | Fourth | |||||||||||||
-Thousands of Dollars- | ||||||||||||||||
(except per share data) | ||||||||||||||||
2008 | ||||||||||||||||
Operating Revenue | $ | 330,134 | $ | 360,322 | $ | 387,852 | $ | 319,204 | ||||||||
Operating Income | 23,276 | 35,883 | 15,023 | 71,022 | ||||||||||||
Net Income (Loss) | (2,614 | ) | 4,747 | (11,039 | ) | 22,927 | ||||||||||
Basic EPS | (0.07 | ) | 0.13 | (0.31 | ) | 0.64 | ||||||||||
Diluted EPS | (0.07 | ) | 0.13 | (0.31 | ) | 0.60 | ||||||||||
2007 | ||||||||||||||||
Operating Revenue | $ | 317,841 | $ | 329,772 | $ | 398,204 | $ | 335,556 | ||||||||
Operating Income | 38,199 | 47,131 | 71,608 | 55,967 | ||||||||||||
Net Income | 4,943 | 11,806 | 25,417 | 16,207 | ||||||||||||
Basic EPS | 0.14 | 0.33 | 0.72 | 0.46 | ||||||||||||
Diluted EPS | 0.14 | 0.32 | 0.66 | 0.43 |
TEP | ||||||||||||||||
First | Second | Third | Fourth | |||||||||||||
-Thousands of Dollars- | ||||||||||||||||
2008 | ||||||||||||||||
Operating Revenue | $ | 228,602 | $ | 294,141 | $ | 323,312 | $ | 233,198 | ||||||||
Operating Income | 8,719 | 31,009 | 7,451 | 60,092 | ||||||||||||
Net Income (Loss) | (8,862 | ) | 5,765 | (12,237 | ) | 19,697 | ||||||||||
2007 | ||||||||||||||||
Operating Revenue | $ | 219,629 | $ | 268,371 | $ | 328,841 | $ | 253,662 | ||||||||
Operating Income | 27,099 | 45,420 | 68,020 | 48,519 | ||||||||||||
Net Income | 821 | 12,271 | 25,959 | 14,405 |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (concluded)
• | Fourth Quarter 2008.In the fourth quarter of 2008, as a result of the 2008 TEP Rate Order, TEP reapplied FAS 71 to its generation operations, and consequently, recorded a reduction to fuel expense, O&M and Taxes Other Than Income Taxes of $32 million, $1 million and $7 million, respectively. |
• | Third Quarter 2008.In the third quarter of 2008, as a result of a settlement between Peabody and the Navajo Generating Station participants, TEP recorded, as fuel expense, the present value of its share of the Navajo Generating Station mine reclamation and postretirement benefit costs, totaling $9 million. |
• | Third Quarter 2008.In the third quarter of 2008, TEP recorded an additional tax expense of $1 million related to a determination that certain accrued tax penalty payments will not be deductible for tax purposes under IRS regulations. |
• | Fourth Quarter 2007.In the fourth quarter of 2007, TEP recorded adjustments relating to periods prior to the fourth quarter of 2007 which decreased net income by less than $0.5 million. |
• | Second Quarter 2008.In the second quarter of 2008, UniSource Energy recorded a pre-tax charge of approximately $2 million ($1.2 million after-tax) related to an investment impairment of a Millennium investment, $1 million ($0.6 million after-tax) of which should have been recorded prior to 2008. |
• | First Quarter 2006.On March 31, 2006, Millennium sold Global Solar for $16 million in cash and an option to purchase, under certain conditions, 5% to 10% of Global Solar at a future date. The option is exercisable, upon the occurrence of certain events, beginning in April 2013 and expires in April 2016. In the first quarter of 2006, UniSource Energy recorded an after-tax loss of approximately $3 million related to the discontinued operations and disposal of Global Solar. |
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
-Millions of Dollars- | ||||||||||||
Other Income/(Deductions) | ||||||||||||
Equity in Earnings of Subsidiaries | $ | 19 | $ | 63 | $ | 74 | ||||||
Interest from Affiliates | 2 | 2 | — | |||||||||
Other | — | — | 1 | |||||||||
Total Other Income/(Deductions) | 21 | 65 | 75 | |||||||||
Interest on Long-Term Debt | 10 | 10 | 13 | |||||||||
Income Before Income Taxes | 11 | 55 | 62 | |||||||||
Income Tax Benefit | 3 | 3 | 5 | |||||||||
Net Income | $ | 14 | $ | 58 | $ | 67 | ||||||
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
-Millions of Dollars- | ||||||||||||
Cash Flows from Operating Activities | ||||||||||||
Reimbursement of Affiliate Interest | $ | 2 | $ | 2 | $ | — | ||||||
Reimbursement of Affiliate Income Tax | 3 | 30 | 81 | |||||||||
Reimbursement of Other Affiliate Charges | 5 | — | — | |||||||||
Income Taxes Paid | (10 | ) | (21 | ) | (66 | ) | ||||||
Interest Paid | (9 | ) | (10 | ) | (12 | ) | ||||||
Other Cash Receipts | — | — | 2 | |||||||||
Other Cash Payments | — | (1 | ) | — | ||||||||
Net Cash Flows — Operating Activities | (9 | ) | — | 5 | ||||||||
Cash Flows from Financing Activities | ||||||||||||
Proceeds from Borrowing Under Revolving Credit Facilities | 46 | 31 | — | |||||||||
Dividends Received from Affiliates | 28 | 68 | 62 | |||||||||
Proceeds from Stock Options Exercised | 2 | 2 | 5 | |||||||||
Common Stock Dividends Paid | (34 | ) | (32 | ) | (29 | ) | ||||||
Repayments of Borrowings Under Revolving Credit Facilities | (23 | ) | — | — | ||||||||
Repayment of Long-Term Debt | (6 | ) | (37 | ) | (39 | ) | ||||||
Loans to Subsidiaries | (13 | ) | (24 | ) | (21 | ) | ||||||
Equity Investment in Subsidiaries | — | (28 | ) | (10 | ) | |||||||
Other Cash Receipts | — | 9 | — | |||||||||
Other Cash Payments | — | — | (7 | ) | ||||||||
Net Cash Flows — Financing Activities | — | (11 | ) | (39 | ) | |||||||
Net Decrease in Cash and Cash Equivalents | (9 | ) | (11 | ) | (34 | ) | ||||||
Cash and Cash Equivalents, Beginning of Year | 11 | 22 | 56 | |||||||||
Cash and Cash Equivalents, End of Year | $ | 2 | $ | 11 | $ | 22 | ||||||
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December 31, | ||||||||||||
2008 | 2007 | |||||||||||
-Millions of Dollars- | ||||||||||||
ASSETS | ||||||||||||
Investment in Affiliates | $ | 889 | $ | 835 | ||||||||
Current Assets | ||||||||||||
Cash and Cash Equivalents | 2 | 11 | ||||||||||
Accounts Receivable — Due from Affiliates | 21 | 78 | ||||||||||
Income Taxes Receivable | 15 | — | ||||||||||
Total Current Assets | 38 | 89 | ||||||||||
Other Deferred Debits | 4 | 5 | ||||||||||
Total Assets | $ | 931 | $ | 929 | ||||||||
CAPITALIZATION AND OTHER LIABILITIES | ||||||||||||
Capitalization | ||||||||||||
Common Stock — No Par Value | $ | 687 | $ | 703 | ||||||||
2008 | 2007 | |||||||||||
Shares Authorized | 75,000,000 | 75,000,000 | ||||||||||
Shares Outstanding | 35,457,780 | 35,314,730 | ||||||||||
Accumulated Deficit | (1 | ) | (1 | ) | ||||||||
Accumulated Other Comprehensive Loss | (7 | ) | (12 | ) | ||||||||
Total Common Stock Equity | (679 | ) | 690 | |||||||||
Long-Term Debt | 202 | 185 | ||||||||||
Total Capitalization | 881 | 875 | ||||||||||
Current Liabilities | ||||||||||||
Current Maturities of Long-Term Debt | 6 | 6 | ||||||||||
Accounts Payable — Due to Affiliates | 39 | 35 | ||||||||||
Interest Accrued | 2 | 2 | ||||||||||
Income Taxes Payable | — | 9 | ||||||||||
Total Current Liabilities | 47 | 52 | ||||||||||
Other Liabilities | 3 | 2 | ||||||||||
Total Capitalization and Other Liabilities | $ | 931 | $ | 929 | ||||||||
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Additions- | ||||||||||||||||
Beginning | Charged to | Ending | ||||||||||||||
Balance | Income | Deductions | Balance | |||||||||||||
Description | -Millions of Dollars- | |||||||||||||||
Year Ended December 31, | ||||||||||||||||
Allowance for Doubtful Accounts(1) | ||||||||||||||||
2008 | $ | 18 | $ | 5 | $ | 3 | $ | 20 | ||||||||
2007 | 17 | 4 | 3 | 18 | ||||||||||||
2006 | 15 | 4 | 2 | 17 | ||||||||||||
Deferred Tax Assets Valuation Allowance(2) | ||||||||||||||||
2008 | $ | — | $ | — | $ | — | $ | — | ||||||||
2007 | — | — | — | — | ||||||||||||
2006 | 7 | — | 7 | — |
(1) | TEP, UNS Gas and UNS Electric record additions to the Allowance for Doubtful Accounts based on historical experience and any specific customer collection issues identified.Deductions principally reflect amounts charged off as uncollectible, less amounts recovered. Balances related primarily to TEP reserves for sales to the CPX and CISO in 2000 and 2001. See Note 5. |
(2) | The deferred tax assets valuation allowance reduced the deferred tax asset balance. It related to NOL and ITC carryforward amounts. The $7 million valuation allowance at January 1, 2006, relates to losses generated by Global Solar. Global Solar was sold in March 2006 and is no longer included in our consolidated tax returns. |
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Additions- | ||||||||||||||||
Beginning | Charged to | Ending | ||||||||||||||
Balance | Income | Deductions | Balance | |||||||||||||
Description | -Millions of Dollars- | |||||||||||||||
Year Ended December 31, | ||||||||||||||||
Allowance for Doubtful Accounts(1) | ||||||||||||||||
2008 | $ | 17 | $ | 3 | $ | 3 | $ | 17 | ||||||||
2007 | 16 | 2 | 1 | 17 | ||||||||||||
2006 | 15 | 2 | 1 | 16 | ||||||||||||
(1) | TEP records additions to the Allowance for Doubtful Accounts based on historical experience and any specific customer collection issues identified.Deductions principally reflect amounts charged off as uncollectible, less amounts recovered. Balances related primarily to TEP reserves for sales to the CPX and CISO in 2000 and 2001. See Note 5. |
TEP had no deferred tax assets valuation allowance in the periods presented. |
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Board | Director | |||||||||||
Name | Age | Committee* | Since | |||||||||
Paul J. Bonavia | 57 | None | 2009 | |||||||||
Lawrence J. Aldrich | 56 | 2, 4 | 2000 | |||||||||
Barbara M. Baumann | 53 | 1, 3 | 2005 | |||||||||
Larry W. Bickle | 63 | 2, 3 | 1998 | |||||||||
Elizabeth T. Bilby | 69 | 4, 5 | 1995 | |||||||||
Harold W. Burlingame | 68 | 2, 5, 6 | 1998 | |||||||||
John L. Carter | 74 | 1, 2, 3, 4, 5, 6 | 1996 | |||||||||
Robert A. Elliott | 53 | 3, 4, 6 | 2003 | |||||||||
Daniel W.L. Fessler | 67 | 1, 3, 6 | 2005 | |||||||||
Louise L. Francesconi | 56 | 2, 4 | 2008 | |||||||||
Warren Y. Jobe | 68 | 1, 4, 6 | 2001 | |||||||||
Ramiro G. Peru | 53 | 2, 4 | 2008 | |||||||||
Gregory A. Pivirotto | 56 | 1, 3 | 2008 | |||||||||
Joaquin Ruiz | 57 | 3, 5 | 2005 |
* | Board Committees | |
(1) | Audit | |
(2) | Compensation | |
(3) | Corporate Governance and Nominating | |
(4) | Finance | |
(5) | Environmental, Safety and Security | |
(6) | Corporate Development |
Paul J. Bonavia | Mr. Bonavia became Chairman, President and Chief Executive Officer of UniSource Energy and TEP in January 2009. Prior to joining UniSource Energy and TEP, Mr. Bonavia served as President of the Utilities Group of Xcel Energy. Mr. Bonavia previously served as President of Xcel Energy’s Commercial Enterprises business unit and President of the company’s Energy Markets unit. | |
Lawrence J. Aldrich | President and Chief Executive Officer of University Physicians Healthcare since January 2009.; President of Aldrich Capital Company since January 2007; Chief Operating Officer of The Critical Path Institute from January 2006 to December 2006; General Partner of Valley Ventures, LP from September 2002 to December 2005; Managing Director and Founder of Tucson Ventures, LLC, from February 2000 to September 2002. | |
Barbara M. Baumann | President and Owner of Cross Creek Energy Corporation since 2003; Executive Vice President of Associated Energy Managers, LLC from 2000 to 2003; former Vice President of Amoco Production Company; Director of St. Mary Land & Exploration since 2002. | |
Larry W. Bickle | Director of St. Mary Land & Exploration since 1995; Retired private equity investor; Managing Director of Haddington Energy Partners from 1997 to 2005. | |
Elizabeth T. Bilby | Retired President of Gourmet Products, Inc., an agricultural product marketing company; retired Director of Marketing of Green Valley Pecans. | |
Harold W. Burlingame | Former Executive Vice President of AT&T; Chairman of ORC Worldwide since December 2004. |
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John L. Carter | Retired as Executive Vice President and Chief Financial Officer of Burr Brown Corporation in 1996. | |
Robert A. Elliott | President and owner of The Elliott Accounting Group since 1983; Director and Corporate Secretary of Southern Arizona Community Bank since 1998; Television Analyst/Pre-game Show Co-host for Fox Sports Arizona since 1999; Chairman of the Board of Tucson Metropolitan Chamber of Commerce from 2002 to 2003; Treasurer of Tucson Urban League from 2002 to 2003; Chairman of the Board of Tucson Urban League from 2003 to 2004; Chairman of the Board of the Tucson Airport Authority from January 2006 to January 2007. | |
Daniel W.L. Fessler | Professor Emeritus of the University of California; Partner in the law firm of LeBoeuf, Lamb, Greene & MacRae LLP from 1997 to 2003; previously served on the UniSource Energy and TEP boards of directors from 1998 to 2003; Managing Principal of Clear Energy Solutions, LLC since December 2004. | |
Louise L. Francesconi | Retired Vice President and General Manager of Raytheon Missile Systems. | |
Warren Y. Jobe | Certified Public Accountant (licensed, but not practicing); Senior Vice President of Southern Company from 1998 to 2001; Director of WellPoint Health Networks, Inc. from 2001 to December 2004; Director of WellPoint, Inc. since December 2004; Director of HomeBanc Corporation since 2004; Trustee of STI Classic Funds since 2004. | |
Ramiro G. Peru | Executive Vice President and Chief Financial Officer of Phelps Dodge Corporation from 2004 to 2007; Director of WellPoint Health Networks, Inc. since 2003; Director of Southern Peru Copper Corporation from 2002 to 2004; Director of University of Arizona Foundation since 2005. | |
Gregory A. Pivirotto | President and Chief Executive Officer and Director of University Medical Center Corporation since 1994; Certified Public Accountant since 1978; Director of Arizona Hospital & Healthcare Association from 1997 to 2005. | |
Joaquin Ruiz | Professor of Geosciences, University of Arizona since 1983; Dean, College of Science, University of Arizona since 2000. |
above,for a listing and description of TEP’s directors. TEP’s board of directors has one committee, the Finance Committee, of which the members are the same as the Finance Committee of the UniSource Energy board of directors.
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Executive | ||||||||||
Name | Age | Position(s) Held | Officer Since | |||||||
Paul J. Bonavia | 57 | Chairman, President and Chief Executive Officer | 2009 | |||||||
Michael J. DeConcini | 44 | Senior Vice President and Chief Operating Officer, Transmission and Distribution | 1999 | |||||||
Raymond S. Heyman | 53 | Senior Vice President and General Counsel | 2005 | |||||||
Kevin P. Larson | 52 | Senior Vice President, Chief Financial Officer and Treasurer | 2000 | |||||||
Philip Dion III | 40 | Vice President, Legal and Environmental Services | 2008 | |||||||
Kentton C. Grant | 50 | Vice President, Finance and Rates | 2007 | |||||||
Arie Hoekstra | 61 | Vice President, Generation | 2007 | |||||||
David G. Hutchens | 42 | Vice President, Wholesale Energy | 2007 | |||||||
Karen G. Kissinger | 54 | Vice President, Controller and Chief Compliance Officer | 1998 | |||||||
Steven W. Lynn | 62 | Vice President, Communications and Government Relations | 2003 | |||||||
Thomas A. McKenna | 60 | Vice President, Engineering | 2007 | |||||||
Catherine E. Ries | 49 | Vice President, Human Resources | 2007 | |||||||
Herlinda H. Kennedy | 47 | Corporate Secretary | 2006 |
Paul J. Bonavia | Mr. Bonavia became Chairman, President and Chief Executive Officer of UniSource Energy and TEP in January 2009. Prior to joining UniSource Energy and TEP, Mr. Bonavia served as President of the Utilities Group of Xcel Energy. Mr. Bonavia previously served as President of Xcel Energy’s Commercial Enterprises business unit and President of the company’s Energy Markets unit. | |
Michael J. DeConcini | Mr. DeConcini joined TEP in 1988 and was elected Senior Vice President and Chief Operating Officer of the Energy Resources business unit of TEP, effective January 1, 2003. In August 2006, he was named Senior Vice President and Chief Operating Officer, Transmission and Distribution. | |
Raymond S. Heyman | Mr. Heyman was elected to the position of Senior Vice President and General Counsel of TEP and UniSource Energy in September 2005. Prior to joining UniSource Energy and TEP, Mr. Heyman was a member of the Phoenix, Arizona law firm Roshka, Heyman & DeWulf, PLC. | |
Kevin P. Larson | Mr. Larson joined TEP in 1985 and thereafter held various positions in its finance department and at TEP’s investment subsidiaries. He was elected Treasurer of TEP in August 1994 and Vice President in March 1997. In October 2000, he was elected Vice President and Chief Financial Officer of both UniSource Energy and TEP and serves as Treasurer of both organizations. He was named Senior Vice President in September 2005. | |
Philip Dion III | Mr. Dion was named Vice President of Legal and Environmental Services at UniSource Energy and TEP in February 2008. Prior to joining TEP, Mr. Dion was chief of staff and chief legal advisor to Commissioner Marc Spitzer of the Federal Energy Regulatory Commission. Mr. Dion previously worked in various rolls at the ACC, including as an administrative law judge and as an advisor to Mr. Spitzer, prior to his appointment to FERC. | |
Kentton C. Grant | Mr. Grant joined TEP in 1995. In January 2007, Mr. Grant was elected Vice President of Finance and Rates at UniSource Energy and TEP. | |
Arie Hoekstra | Mr. Hoekstra joined TEP in 1979. In January 2007, Mr. Hoekstra was elected Vice President of Generation at UniSource Energy and TEP. |
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David G. Hutchens | Mr. Hutchens joined TEP in 1995. In January 2007, Mr. Hutchens was elected Vice President of Wholesale Marketing at UniSource Energy and TEP, and Vice President of UNS Gas. | |
Karen G. Kissinger | Ms. Kissinger joined TEP as Vice President and Controller in January 1991. She was named Vice President, Controller and Principal Accounting Officer of UniSource Energy in January 1998. She serves as Chief Compliance Officer of UniSource Energy and TEP since 2003. | |
Steven W. Lynn | Mr. Lynn joined TEP in 2000. In January 2003, he was elected Vice President of Communications and Government Relations at UniSource Energy and TEP. | |
Thomas A. McKenna | Mr. McKenna joined Nations Energy Corporation (a wholly-owned subsidiary of Millennium) in 1998. In January 2007, Mr. McKenna was elected Vice President of Engineering at UniSource Energy and TEP, and Vice President of UNS Electric. | |
Catherine E. Ries | Ms. Ries joined UniSource Energy and TEP in June 2007 as Vice President of Human Resources. Prior to joining UniSource Energy and TEP, Ms. Ries worked for Clopay Building Products, a division of Griffon Corporation, from 2000-2007 and held the position of Vice President of Human Resources prior to joining UniSource Energy and TEP. | |
Herlinda H. Kennedy | Ms. Kennedy joined TEP in 1980. Ms. Kennedy was named assistant Corporate Secretary of TEP and UniSource Energy in 1999 and was elected Corporate Secretary of UniSource Energy and TEP in September 2006. |
ITEM 12. — SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
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Page | ||||
(a) 1. Consolidated Financial Statements as of December 31, 2008 and 2007 and for Each of the Three Years in the Period Ended December 31, 2008 | ||||
UniSource Energy Corporation | ||||
80 | ||||
82 | ||||
83 | ||||
84 | ||||
86 | ||||
87 | ||||
94 | ||||
Tucson Electric Power Company | ||||
81 | ||||
88 | ||||
89 | ||||
90 | ||||
92 | ||||
93 | ||||
94 | ||||
2. UniSource Energy Stand-Alone | ||||
Schedule I | ||||
UniSource Energy Stand-Alone Financial Statements | ||||
3. Financial Statement Schedule | ||||
Schedule II | ||||
165 | ||||
4. Exhibits | ||||
Reference is made to the Exhibit Index commencing on page 178. |
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UNISOURCE ENERGY CORPORATION | ||||
Date: February 27, 2009�� | By: | /s/ Kevin P. Larson | ||
Kevin P. Larson | ||||
Senior Vice President and Principal Financial Officer |
Date: February 27, 2009 | /s/ Paul J. Bonavia* | |||
Paul J. Bonavia | ||||
Chairman of the Board, President and Principal Executive Officer | ||||
Date: February 27, 2009 | /s/ Kevin P. Larson | |||
Kevin P. Larson | ||||
Principal Financial Officer | ||||
Date: February 27, 2009 | /s/ Karen G. Kissinger* | |||
Karen G. Kissinger | ||||
Principal Accounting Officer | ||||
Date: February 27, 2009 | /s/ Lawrence J. Aldrich* | |||
Lawrence J. Aldrich | ||||
Director | ||||
Date: February 27, 2009 | /s/ Barbara Baumann* | |||
Barbara Baumann | ||||
Director | ||||
Date: February 27, 2009 | /s/ Larry W. Bickle* | |||
Larry W. Bickle | ||||
Director | ||||
Date: February 27, 2009 | /s/ Elizabeth T. Bilby* | |||
Elizabeth T. Bilby | ||||
Director | ||||
Date: February 27, 2009 | /s/ Harold W. Burlingame* | |||
Harold W. Burlingame | ||||
Director | ||||
Date: February 27, 2009 | /s/ John L. Carter* | |||
John L. Carter | ||||
Director |
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Date: February 27, 2009 | /s/ Robert A. Elliott* | |||
Robert A. Elliott | ||||
Director | ||||
Date: February 27, 2009 | /s/ Daniel W.L. Fessler* | |||
Daniel W.L. Fessler | ||||
Date: February 27, 2009 | /s/ Louise L. Francesconi* | |||
Louise L. Francesconi | ||||
Director | ||||
Date: February 27, 2009 | /s/ Warren Y. Jobe* | |||
Warren Y. Jobe | ||||
Director | ||||
Date: February 27, 2009 | /s/ Ramiro Peru* | |||
Ramiro Peru | ||||
Director | ||||
Date: February 27, 2009 | /s/ Gregory A. Pivirotto* | |||
Gregory Pivirotto | ||||
Director | ||||
Date: February 27, 2009 | /s/ Joaquin Ruiz* | |||
Joaquin Ruiz | ||||
Director | ||||
Date: February 27, 2009 | By: | /s/ Kevin P. Larson | ||
Kevin P. Larson | ||||
As attorney-in-fact for each of the persons indicated |
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TUCSON ELECTRIC POWER COMPANY | ||||
Date: February 27, 2009 | By: | /s/ Kevin P. Larson | ||
Kevin P. Larson | ||||
Senior Vice President and Principal Financial Officer |
Date: February 27, 2009 | /s/ Paul J. Bonavia* | |||
Paul J. Bonavia | ||||
Chairman of the Board, President and Principal Executive Officer | ||||
Date: February 27, 2009 | /s/ Kevin P. Larson | |||
Kevin P. Larson | ||||
Principal Financial Officer | ||||
Date: February 27, 2009 | /s/ Karen G. Kissinger* | |||
Karen G. Kissinger | ||||
Principal Accounting Officer | ||||
Date: February 27, 2009 | /s/ Lawrence J. Aldrich* | |||
Lawrence J. Aldrich | ||||
Director | ||||
Date: February 27, 2009 | /s/ Barbara Baumann* | |||
Barbara Baumann | ||||
Director | ||||
Date: February 27, 2009 | /s/ Larry W. Bickle* | |||
Larry W. Bickle | ||||
Director | ||||
Date: February 27, 2009 | /s/ Elizabeth T. Bilby* | |||
Elizabeth T. Bilby | ||||
Director | ||||
Date: February 27, 2009 | /s/ Harold W. Burlingame* | |||
Harold W. Burlingame | ||||
Director | ||||
Date: February 27, 2009 | /s/ John L. Carter* | |||
John L. Carter | ||||
Director |
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Date: February 27, 2009 | /s/ Robert A. Elliott* | |||
Robert A. Elliott | ||||
Director | ||||
Date: February 27, 2009 | /s/ Daniel W.L. Fessler* | |||
Daniel W.L. Fessler | ||||
Date: February 27, 2009 | /s/ Louise L. Francesconi* | |||
Louise L. Francesconi | ||||
Director | ||||
Date: February 27, 2009 | /s/ Warren Y. Jobe* | |||
Warren Y. Jobe | ||||
Director | ||||
Date: February 27, 2009 | /s/ Ramiro Peru* | |||
Ramiro Peru | ||||
Director | ||||
Date: February 27, 2009 | /s/ Gregory A. Pivirotto* | |||
Gregory Pivirotto | ||||
Director | ||||
Date: February 27, 2009 | /s/ Joaquin Ruiz* | |||
Joaquin Ruiz | ||||
Director | ||||
Date: February 27, 2009 | By: | /s/ Kevin P. Larson | ||
Kevin P. Larson | ||||
As attorney-in-fact for each of the persons indicated |
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*2(a) | — | Agreement and Plan of Exchange, dated as of March 20, 1995, between TEP, UniSource Energy and NCR Holding, Inc. | ||
*3(a) | — | Restated Articles of Incorporation of TEP, filed with the ACC on August 11, 1994, as amended by Amendment to Article Fourth of our Restated Articles of Incorporation, filed with the ACC on May 17, 1996. (Form 10-K for year ended December 31, 1996, File No. 1-5924 — Exhibit 3(a).) | ||
*3(b) | — | Bylaws of TEP, as amended April 7, 1995 (Form 10-K for the year ended December 31, 2007, File No. 13739 – Exhibit 3(b)). | ||
*3(c) | — | Amended and Restated Articles of Incorporation of UniSource Energy. (Form 8-A/A, dated January 30, 1998, File No. 1-13739 — Exhibit 2(a).) | ||
*3(d) | — | Bylaws of UniSource Energy, as amended February 27, 2008 (Form 10-K for the year ended December 31, 2007, File No. 13739 – Exhibit 3(b)). | ||
*4(a)(1) | — | Installment Sale Agreement, dated as of December 1, 1973, among the City of Farmington, New Mexico, Public Service Company of New Mexico and TEP. (Form 8-K for the month of January 1974, File No. 0-269 — Exhibit 3.) | ||
*4(a)(2) | — | Ordinance No. 486, adopted December 17, 1973, of the City of Farmington, New Mexico. (Form 8-K for the month of January 1974, File No. 0-269 — Exhibit 4.) | ||
*4(a)(3) | — | Amended and Restated Installment Sale Agreement dated as of April 1, 1997, between the City of Farmington, New Mexico and TEP relating to Pollution Control Revenue bonds, 1997 Series A (Tucson Electric Power Company San Juan Project). (Form 10-Q for the quarter ended March 31,1997, File No. 1-5924 — Exhibit 4(a).) | ||
*4(a)(4) | — | City of Farmington, New Mexico Ordinance No. 97-1055, adopted April 17, 1997, authorizing Pollution Control Revenue bonds, 1997 Series A (Tucson Electric Power Company San Juan Project). (Form 10-Q for the quarter ended March 31, 1997, File No. 1-5924 — Exhibit 4(b).) | ||
*4(b)(1) | — | Loan Agreement, dated as of October 1, 1982, between the Pima County Authority and TEP relating to Floating Rate Monthly Demand Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric Power Company Sundt Project). (Form 10-Q for the quarter ended September 30, 1982, File No. 1-5924 — Exhibit 4(a).) | ||
*4(b)(2) | — | Indenture of Trust, dated as of October 1, 1982, between the Pima County Authority and Morgan Guaranty authorizing Floating Rate Monthly Demand Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric Power Company Sundt Project). (Form 10-Q for the quarter ended September 30, 1982, File No. 1-5924 — Exhibit 4(b).) | ||
*4(b)(3) | — | First Supplemental Loan Agreement, dated as of March 31, 1992, between the Pima County Authority and TEP relating to Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric Power Company Sundt Project). (Form S-4, Registration No. 33-52860 — Exhibit 4(h)(3).) | ||
*4(b)(4) | — | First Supplemental Indenture of Trust, dated as of March 31, 1992, between the Pima County Authority and Morgan Guaranty relating to Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric Power Company Sundt Project). (Form S-4, Registration No. 33-52860 — Exhibit 4(h)(4).) | ||
*4(c)(1) | — | Loan Agreement, dated as of December 1, 1982, between the Pima County Authority and TEP relating to Floating Rate Monthly Demand Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric Power Company Projects). (Form 10-K for the year ended December 31, 1982, File No. 1-5924 — Exhibit 4(k)(1).) |
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*4(c)(2) | — | Indenture of Trust dated as of December 1, 1982, between the Pima County Authority and Morgan Guaranty authorizing Floating Rate Monthly Demand Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric Power Company Projects). (Form 10-K for the year ended December 31, 1982, File No. 1-5924 — Exhibit 4(k)(2).) | ||
*4(c)(3) | — | First Supplemental Loan Agreement, dated as of March 31, 1992, between the Pima County Authority and TEP relating to Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric Power Company Projects). (Form S-4, Registration No. 33-52860 — Exhibit 4(i)(3).) | ||
*4(c)(4) | — | First Supplemental Indenture of Trust, dated as of March 31, 1992, between the Pima County Authority and Morgan Guaranty relating to Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric Power Company Projects). (Form S-4, Registration No. 33-52860 — Exhibit 4(i)(4).) | ||
*4(d)(1) | — | Loan Agreement, dated as of December 1, 1983, between the Apache County Authority and TEP relating to Floating Rate Monthly Demand Industrial Development Revenue Bonds, 1983 Series A (Tucson Electric Power Company Springerville Project). (Form 10-K for the year ended December 31, 1983, File No. 1-5924 — Exhibit 4(I)(1).) | ||
*4(d)(2) | — | Indenture of Trust, dated as of December 1, 1983, between the Apache County Authority and Morgan Guaranty authorizing Floating Rate Monthly Demand Industrial Development Revenue Bonds, 1983 Series A (Tucson Electric Power Company Springerville Project). (Form 10-K for the year ended December 31, 1983, File no. 1-5924 — Exhibit 4(I)(2).) | ||
*4(d)(3) | — | First Supplemental Loan Agreement, dated as of December 1, 1985, between the Apache County Authority and TEP relating to Floating Rate Monthly Demand Industrial Development Revenue Bonds, 1983 Series A (Tucson Electric Power Company Springerville Project). (Form 10-K for the year ended December 31, 1987, File No. 1-5924 — Exhibit 4(k)(3).) | ||
*4(d)(4) | — | First Supplemental Indenture, dated as of December 1, 1985, between the Apache County Authority and Morgan Guaranty relating to Floating Rate Monthly Demand Industrial Development Revenue Bonds, 1983 Series A (Tucson Electric Power Company Springerville Project). (Form 10-K for the year ended December 31, 1987, File No. 1-5924 — Exhibit 4(k)(4).) | ||
*4(d)(5) | — | Second Supplemental Loan Agreement, dated as of March 31, 1992, between the Apache County Authority and TEP relating to Industrial Development Revenue Bonds, 1983 Series A (Tucson Electric Power Company Springerville Project). (Form S-4, Registration No. 33-52860 — Exhibit 4(k)(5).) | ||
*4(d)(6) | — | Second Supplemental Indenture of Trust, dated as of March 31, 1992, between the Apache County Authority and Morgan Guaranty relating to Industrial Development Revenue Bonds, 1983 Series A (Tucson Electric Power Company Springerville Project). (Form S-4, Registration No. 33-52860 — Exhibit 4(k)(6).) | ||
*4(e)(1) | — | Loan Agreement, dated as of December 1, 1983, between the Apache County Authority and TEP relating to Variable Rate Demand Industrial Development Revenue Bonds, 1983 Series B (Tucson Electric Power Company Springerville Project). (Form 10-K for the year ended December 31, 1983, File No. 1-5924 — Exhibit 4(m)(1).) | ||
*4(e)(2) | — | Indenture of Trust dated as of December 1, 1983, between the Apache County Authority and Morgan Guaranty authorizing Variable Rate Demand Industrial Development Revenue Bonds. 1983 Series B (Tucson Electric Power Company Springerville Project). (Form 10-K for the year ended December 31, 1983, File No. 1-5924 — Exhibit 4(m)(2).) | ||
*4(e)(3) | — | First Supplemental Loan Agreement, dated as of December 1, 1985, between the Apache County Authority and TEP relating to Floating Rate Monthly Demand Industrial Developmental Revenue Bonds, 1983 Series B (Tucson Electric Power Company Springerville Project). (Form 10-K for the year ended December 31, 1987, File No. 1-5924 — Exhibit 4(I)(3).) |
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*4(e)(4) | — | First Supplemental Indenture, dated as of December 1, 1985, between the Apache County Authority and Morgan Guaranty relating to Floating Rate Monthly Demand Industrial Development Revenue Bonds, 1983 Series B (Tucson Electric Power Company Springerville Project). (Form 10-K for the year ended December 31, 1987, File No. 1-5924 — Exhibit 4(I)(4).) | ||
*4(e)(5) | — | Second Supplemental Loan Agreement, dated as of March 31, 1992, between the Apache County Authority and TEP relating to Industrial Development Revenue Bonds, 1983 Series B (Tucson Electric Power Company Springerville Project). (Form S-4, Registration No. 33-52860 — Exhibit 4(I)(5).) | ||
*4(e)(6) | — | Second Supplemental Indenture of Trust, dated as of March 31, 1992, between the Apache County Authority and Morgan Guaranty relating to Industrial Development Revenue Bonds, 1983 Series B (Tucson Electric Power Company Springerville Project). (Form S-4, Registration No. 33-52860 — Exhibit 4(I)(6).) | ||
*4(f)(1) | — | Loan Agreement, dated as of December 1, 1983, between the Apache County Authority and TEP relating to Variable Rate Demand Industrial Development Revenue Bonds, 1983 Series C (Tucson Electric Power Company Springerville Project). (Form 10-K for year ended December 31, 1983, File No. 1-5924 — Exhibit 4(n)(1).) | ||
*4(f)(2) | — | Indenture of Trust dated as of December 1, 1983, between the Apache County Authority and Morgan Guaranty authorizing Variable Rate Demand Industrial Development Revenue Bonds, 1983 Series C (Tucson Electric Power Company Springerville Project). (Form 10-K for the year ended December 31, 1983, File No. 1-5924 — Exhibit 4(n)(2).) | ||
*4(f)(3) | — | First Supplemental Loan Agreement, dated as of December 1, 1985, between the Apache County Authority and TEP relating to Floating Rate Monthly Demand Industrial Development Revenue Bonds, 1983 Series C (Tucson Electric Power Company Springerville Project). (Form 10-K for the year ended December 31, 1987, File No. 1-5924 — Exhibit 4(m)(3).) | ||
*4(f)(4) | — | First Supplemental Indenture, dated as of December 1, 1985, between the Apache County Authority and Morgan Guaranty relating to Floating Rate Monthly Demand Industrial Development Revenue Bonds, 1983 Series C (Tucson Electric Power Company Springerville Project). (Form 10-K for the year ended December 31, 1987, File No. 1-5924 — Exhibit 4(m)(4).) | ||
*4(f)(5) | — | Second Supplemental Loan Agreement, dated as of March 31, 1992, between the Apache County Authority and TEP relating to Industrial Development Revenue Bonds, 1983 Series C (Tucson Electric Power Company Springerville Project). (Form S-4, Registration No. 33-52860 — Exhibit 4(m)(5).) | ||
*4(f)(6) | — | Second Supplemental Indenture of Trust, dated as of March 31, 1992, between the Apache County Authority and Morgan Guaranty relating to Industrial Development Revenue Bonds, 1983 Series C (Tucson Electric Power Company Springerville Project). (Form S-4, Registration No. 33-52860 — Exhibit 4(m)(6).) | ||
*4(g) | — | Reimbursement Agreement, dated as of September 15, 1981, as amended, between TEP and Manufacturers Hanover Trust Company. (Form 10-K for the year ended December 31, 1984, File No. 1-5924 — Exhibit 4(o)(4).) | ||
*4(h)(1) | — | Loan Agreement, dated as of December 1, 1985, between the Apache County Authority and TEP relating to Variable Rate Demand Industrial Development Revenue Bonds, 1985 Series A (Tucson Electric Power Company Springerville Project). (Form 10-K for the year ended December 31, 1985, File No. 1-5924 — Exhibit 4(r)(1).) | ||
*4(h)(2) | — | Indenture of Trust dated as of December 1, 1985, between the Apache County Authority and Morgan Guaranty authorizing Variable Rate Demand Industrial Development Revenue Bonds, 1985 Series A (Tucson Electric Power Company Springerville Project). (Form 10-K for the year ended December 31, 1985, File No. 1-5924 — Exhibit 4(r)(2).) |
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*4(h)(3) | — | First Supplemental Loan Agreement, dated as of March 31, 1992, between the Apache County Authority and TEP relating to Industrial Development Revenue Bonds, 1985 Series A (Tucson Electric Power Company Springerville Project). (Form S-4, Registration No. 33-52860 — Exhibit 4(o)(3).) | ||
*4(h)(4) | — | First Supplemental Indenture of Trust, dated as of March 31, 1992, between the Apache County Authority and Morgan Guaranty relating to Industrial Development Revenue Bonds, 1985 Series A (Tucson Electric Power Company Springerville Project). (Form S-4, Registration No. 33-52860 — Exhibit 4(o)(4).) | ||
*4(i)(1) | — | Indenture of Mortgage and Deed of Trust dated as of December 1, 1992, to Bank of Montreal Trust Company, Trustee. (Form S-1, Registration No. 33-55732 — Exhibit 4(r)(1).) | ||
*4(i)(2) | — | Supplemental Indenture No. 1 creating a series of bonds designated Second Mortgage Bonds, Collateral Series A, dated as of December 1, 1992. (Form S-1, Registration No. 33-55732 — Exhibit 4(r)(2).) | ||
*4(i)(3) | — | Supplemental Indenture No. 2 creating a series of bonds designated Second Mortgage Bonds, Collateral Series B, dated as of December 1, 1997. (Form 10-K for year ended December 31, 1997, File No. 1-5924 — Exhibit 4(m)(3).) | ||
*4(i)(4) | — | Supplemental Indenture No. 3 creating a series of bonds designated Second Mortgage Bonds, Collateral Series, dated as of August 1, 1998. (Form 10-Q for the quarter ended June 30, 1998, File No. 1-5924 — Exhibit 4(c).) | ||
*4(i)(5) | — | Supplemental Indenture No. 4 creating a series of bonds designated Second Mortgage Bonds, Collateral Series C, dated as of November 1, 2002. (Form 8-K dated November 27, 2002, File Nos. 1-05924 and 1-13739 — Exhibit 99.2.) | ||
*4(i)(6) | — | Supplemental Indenture No. 5 creating a series of bonds designated Second Mortgage Bonds, Collateral Series D, dated as of March 1, 2004. (Form 8-K dated March 31, 2004, File Nos. 1-05924 and 1-13739 — Exhibit 10 (b).) | ||
*4(i)(7) | — | Supplemental Indenture No. 6 creating a series of bonds designated Second Mortgage Bonds, Collateral Series E, dated as of May 1, 2005. (Form 10-Q for the quarter ended March 31, 2005, File Nos. 1-5924 and 1-13739 – Exhibit 4(b).) | ||
*4(i)(8) | — | Supplemental Indenture No. 7 creating a series of bonds designated First Mortgage Bonds, Collateral Series F, dated as of December 1, 2006. (Form 8-K dated December 22, 2006, File Nos. 1-5924 and 1-13739 – Exhibit 4.1.) | ||
*4(i)(9) | — | Supplemental Indenture No. 8 creating a series of bonds designated First Mortgage Bonds, Collateral Series G, dated as of June 1, 2008. (Form 8-K dated June 25, 2008, File Nos. 1-5924 and 1-13739 – Exhibit 4(b).) | ||
4(i)(10) | — | Supplemental Indenture No. 9 dated as of July 3, 2008. | ||
*4(j)(1) | — | Loan Agreement, dated as of April 1, 1997 between Coconino County, Arizona Pollution Control Corporation and TEP relating to Pollution Control Revenue Bonds, 1997 Series A (Tucson Electric Power Company Navajo Project). (Form 10-Q for the quarter ended March 31, 1997, File No. 1-5924 — Exhibit 4(c).) | ||
*4(j)(2) | — | Indenture of Trust, dated as of April 1, 1997, between Coconino County, Arizona Pollution Control Corporation and First Trust of New York, National Association, authorizing Pollution Control Revenue Bonds, 1997 Series A (Tucson Electric Power Company Navajo Project). (Form 10-Q for the quarter ended March 31, 1997, File No. 1-5924 — Exhibit 4(d).) |
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*4(k)(1) | — | Loan Agreement, dated as of April 1, 1997, between Coconino County, Arizona Pollution Control Corporation and TEP relating to Pollution Control Revenue Bonds, 1997 Series B (Tucson Electric Power Company Navajo Project). (Form 10-Q for the quarter ended March 31, 1997, File No. 1-5924 — Exhibit 4(e).) | ||
*4(k)(2) | — | Indenture of Trust, dated as of April 1, 1997, between Coconino County, Arizona Pollution Control Corporation and First Trust of New York, National Association, authorizing Pollution Control Revenue Bonds, 1997 Series B (Tucson Electric Power Company Navajo Project). (Form 10-Q for the quarter ended March 31, 1997, File No. 1-5924 — Exhibit 4(f).) | ||
*4(l)(1) | — | Loan Agreement, dated as of September 15, 1997, between The Industrial Development Authority of the County of Pima and TEP relating to Industrial Development Revenue Bonds, 1997 Series A (Tucson Electric Power Company Project). (Form 10-Q for the quarter ended September 30, 1997, File No. 1-5924 — Exhibit 4(a).) | ||
*4(l)(2) | — | Indenture of Trust, dated as of September 15, 1997, between The Industrial Development Authority of the County of Pima and First Trust of New York, National Association, authorizing Industrial Development Revenue Bonds, 1997 Series A (Tucson Electric Power Company Project). (Form 10-Q for the quarter ended September 30, 1997, File No. 1-5924 — Exhibit 4(b).) | ||
*4(m)(1) | — | Loan Agreement, dated as of March 1, 1998, between The Industrial Development Authority of the County of Apache and TEP relating to Pollution Control Revenue Bonds, 1998 Series A (Tucson Electric Power Company Project). (Form 10-Q for the quarter ended March 31, 1998, File No. 1-5924 — Exhibit 4(a).) | ||
*4(m)(2) | — | Indenture of Trust, dated as of March 1, 1998, between The Industrial Development Authority of the County of Apache and First Trust of New York, National Association, authorizing Pollution Control Revenue Bonds, 1998 Series A (Tucson Electric Power Company Project). (Form 10-Q for the quarter ended March 31, 1998, File No. 1-5924 — Exhibit 4(b).) | ||
*4(n)(1) | — | Loan Agreement, dated as of March 1, 1998, between The Industrial Development Authority of the County of Apache and TEP relating to Pollution Control Revenue Bonds, 1998 Series B (Tucson Electric Power Company Project). (Form 10-Q for the quarter ended March 31, 1998, File No. 1-5924 — Exhibit 4(c).) | ||
*4(n)(2) | — | Indenture of Trust, dated as of March 1, 1998, between The Industrial Development Authority of the County of Apache and First Trust of New York, National Association, authorizing Pollution Control Revenue Bonds, 1998 Series B (Tucson Electric Power Company Project). (Form 10-Q for the quarter ended March 31, 1998, File No. 1-5924 — Exhibit 4(d).) | ||
*4(o)(1) | — | Loan Agreement, dated as of March 1, 1998, between The Industrial Development Authority of the County of Apache and TEP relating to Industrial Development Revenue Bonds, 1998 Series C (Tucson Electric Power Company Project). (Form 10-Q for the quarter ended March 31, 1998, File No. 1-5924 — Exhibit 4(e).) | ||
*4(o)(2) | — | Indenture of Trust, dated as of March 1, 1998, between The Industrial Development Authority of the County of Apache and First Trust of New York, National Association, authorizing Industrial Development Revenue Bonds, 1998 Series C (Tucson Electric Power Company Project). (Form 10-Q for the quarter ended March 31, 1998, File No. 1-5924 — Exhibit 4(f).) | ||
*4(p)(1) | — | Rights Agreement dated as of March 5, 1999, between UniSource Energy Corporation and The Bank of New York, as Rights Agent. (Form 8-K dated March 5, 1999, File No. 1-13739 — Exhibit 4.) | ||
*4(q)(1) | — | Amended and Restated TEP Credit Agreement dated as of August 11, 2006, among TEP, the Lenders Party Thereto, the Issuing Banks Party Thereto, Union Bank of California, N.A., as Lead Arranger and Administrative Agent, The Bank of New York and JPMorgan Chase, N.A., as Co-Syndication Agents, and Wells Fargo Bank, National Association, and ABN Amro Bank N.V. as Co-Documentation Agents. (Form 8-K dated August 15, 2006, File Nos. 1-5924 and 1-13739 — Exhibit 4.3.) |
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*4(r)(2) | — | Amendment No. 1 to Amended and Restated TEP Credit Agreement, dated September 1, 2006. (Form 10-Q for the quarter ended September 30, 2006, File No. 1-5924 – Exhibit 4.) | ||
4(r)(3) | — | Amendment No. 2 to Amended and Restated TEP Credit Agreement, dated May 30, 2008. | ||
4(r)(4) | — | Amendment No. 3 to Amended and Restated TEP Credit Agreement, dated September 16, 2008. | ||
*4(s)(1) | — | Note Purchase and Guaranty Agreement dated August 11, 2003 among UNS Gas, Inc., and UniSource Energy Services, Inc., and certain institutional investors. (Form 8-K dated August 21, 2003, File Nos. 1-5924 and 1-13739 — Exhibit 99.2.) | ||
*4(t)(1) | — | Note Purchase and Guaranty Agreement date August 5, 2008 among UNS Electric, Inc., and UniSource Energy Services, Inc., and certain institutional investors. (Form 10-Q for the quarter ended June 30, 2008, File Nos. 1-5924 and 1-13739 — Exhibit 4.). | ||
*4(u)(1) | — | Indenture dated as of March 1, 2005, to The Bank of New York, as Trustee. (Form 8-K dated March 3, 2005, File Nos. 1-5924 and 1-13739 — Exhibit 4.1). | ||
*4(v)(1) | — | Registration Rights Agreement dated as of March 1, 2005, between UniSource Energy Corporation and Credit Suisse First Boston LLC, as representative of the several initial purchasers. (Form 8-K dated March 3, 2005, File Nos. 1-5924 and 1-13739 — Exhibit 4.2). | ||
*4(w)(1) | — | Amended and Restated Credit Agreement dated as of August 11, 2006, among UniSource Energy, the Lenders Party Hereto, Union Bank of California, N.A., as Lead Arranger and Administrative Agent, The Bank of New York and JPMorgan Chase, N.A., as Co-Syndication Agents, and Wells Fargo Bank, National Association, and ABN Amro Bank N.V. as Co-Documentation Agents. (Form 8-K dated August 15, 2006, File Nos. 1-5924 and 1-13739 — Exhibit 4.1.) | ||
4(w)(2) | — | Amendment No. 1 to the Amended and Restated UniSource Energy Credit Agreement, dated September 16, 2008. | ||
4(w)(3) | — | Amendment No. 2 to the Amended and Restated UniSource Energy Credit Agreement, dated February 26, 2009. | ||
*4(x)(1) | — | Amended and Restated Credit Agreement dated as of August 11, 2006, among UNS Electric and UNS Gas, UniSource Energy Services as Guarantor, and the Banks Named Herein and the Other Lenders from Time to Time party Hereto, Union Bank of California, N.A., as Lead Arranger and Administrative Agent, The Bank of New York and JPMorgan Chase, N.A., as Co-Syndication Agents, and Wells Fargo Bank, National Association, and ABN Amro Bank N.V. as Co-Documentation Agents. (Form 8-K dated August 15, 2006, File Nos. 1-5924 and 1-13739 — Exhibit 4.4.) | ||
4(x)(2) | — | Amendment No. 1 to the Amended and Restated UNS Gas/UNS Electric Credit Agreement, dated as of April 30, 2007. | ||
4(x)(3) | — | Amendment No. 2 to the Amended and Restated UNS Gas/UNS Electric Credit Agreement, dated as of July 31, 2008. | ||
*4(y)(1) | — | Letter of Credit and Reimbursement Agreement, dated as of April 30, 2008, among TEP, as Borrower, JPMorgan Chase Bank, N.A., as Issuing Bank, Union Bank of California, N.A., as Syndication Agent, ABN Amro Bank N.V., SunTrust Bank and Wells Fargo Bank, National Association, as Co-Documentation Agents, JPMorgan Chase Bank, N.A., as Administrative Agent, and the Lenders party thereto. (Form 8-K dated June 25, 2008, File Nos. 1-5924 and 1-13739 — Exhibit 4(d).) |
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4(y)(2) | — | Amendment No. 1 to the TEP Letter of Credit and Reimbursement Agreement, dated as of May 30, 2008. | ||
4(y)(3) | — | Amendment No. 2 to the TEP Letter of Credit and Reimbursement Agreement, dated as of September 16, 2008. | ||
*4(z)(1) | — | Indenture of Trust, dated as of March 1, 2008, between The Industrial Development Authority of the County of Pima and U.S. Trust National Association authorizing Industrial Development Revenue Bonds, 2008 Series A (Tucson Electric Power Company Project). (Form 8-K dated March 19, 2008, File Nos. 1-5924 and 1-13739 — Exhibit 4(a).) | ||
*4(z)(2) | — | Loan Agreement, dated as of March 1, 2008, between the Industrial Development Authority of the County of Pima and TEP relating to Industrial Development Revenue Bonds, 2008 Series A (Tucson Electric Power Company Project). (Form 8-K dated March 19, 2008, File Nos. 1-5924 and 1-13739 — Exhibit 4(b).) | ||
*4(aa)(1) | — | Indenture of Trust, dated as of June 1, 2008, between The Industrial Development Authority of the County of Pima and U.S. Trust National Association authorizing Industrial Development Revenue Bonds, 2008 Series B (Tucson Electric Power Company Project). (Form 8-K dated June 25, 2008, File Nos. 1-5924 and 1-13739 — Exhibit 4(a).) | ||
*4(aa)(2) | — | Loan Agreement, dated as of June 1, 2008, between the Industrial Development Authority of the County of Pima and TEP relating to Industrial Development Revenue Bonds, 2008 Series B (Tucson Electric Power Company Project). (Form 8-K dated June 25, 2008, File Nos. 1-5924 and 1-13739 — Exhibit 4(b).) | ||
*10(a)(1) | — | Lease Agreements, dated as of December 1, 1984, between Valencia and United States Trust Company of New York, as Trustee, and Thomas B. Zakrzewski, as Co-Trustee, as amended and supplemented. (Form 10-K for the year ended December 31, 1984, File No. 1-5924 — Exhibit 10(d)(1).) | ||
*10(a)(2) | — | Guaranty and Agreements, dated as of December 1, 1984, between TEP and United States Trust Company of New York, as Trustee, and Thomas B. Zakrzewski, as Co-Trustee. (Form 10-K for the year ended December 31, 1984, File No. 1-5924 — Exhibit 10(d)(2).) | ||
*10(a)(3) | — | General Indemnity Agreements, dated as of December 1, 1984, between Valencia and TEP, as Indemnitors; General Foods Credit Corporation, Harvey Hubbell Financial, Inc. and J.C. Penney Company, Inc. as Owner Participants; United States Trust Company of New York, as Owner Trustee; Teachers Insurance and Annuity Association of America as Loan Participant; and Marine Midland Bank, N.A., as Indenture Trustee. (Form 10-K for the year ended December 31, 1984, File No. 1-5924 — Exhibit 10(d)(3).) | ||
*10(a)(4) | — | Tax Indemnity Agreements, dated as of December 1, 1984, between General Foods Credit Corporation, Harvey Hubbell Financial, Inc. and J.C. Penney Company, Inc., each as Beneficiary under a separate Trust Agreement dated December 1, 1984, with United States Trust of New York as Owner Trustee, and Thomas B. Zakrzewski as Co-Trustee, Lessor, and Valencia, Lessee, and TEP, Indemnitors. (Form 10-K for the year ended December 31, 1984, File No. 1-5924 — Exhibit 10(d)(4).) | ||
*10(a)(5) | — | Amendment No. 1, dated December 31, 1984, to the Lease Agreements, dated December 1, 1984, between Valencia and United States Trust Company of New York, as Owner Trustee, and Thomas B. Zakrzewski as Co-Trustee. (Form 10-K for the year ended December 31, 1986, File No. 1-5924 — Exhibit 10(e)(5).) | ||
*10(a)(6) | — | Amendment No. 2, dated April 1, 1985, to the Lease Agreements, dated December 1, 1984, between Valencia and United States Trust Company of New York, as Owner Trustee, and Thomas B. Zakrzewski as Co-Trustee. (Form 10-K for the year ended December 31, 1986, File No. 1-5924 — Exhibit 10(e)(6).) |
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*10(a)(7) | — | Amendment No. 3 dated August 1, 1985, to the Lease Agreements, dated December 1, 1984, between Valencia and United States Trust Company of New York, as Owner Trustee, and Thomas Zakrzewski as Co-Trustee. (Form 10-K for the year ended December 31, 1986, File No. 1-5924 — Exhibit 10(e)(7).) | ||
*10(a)(8) | — | Amendment No. 4, dated June 1, 1986, to the Lease Agreement, dated December 1, 1984, between Valencia and United States Trust Company of New York as Owner Trustee, and Thomas Zakrzewski as Co-Trustee, under a Trust Agreement dated as of December 1, 1984, with General Foods Credit Corporation as Owner Participant. (Form 10-K for the year ended December 31, 1986, File No. 1-5924 — Exhibit 10(e)(8).) |
*10(a)(9) | — | Amendment No. 4, dated June 1, 1986, to the Lease Agreement, dated December 1, 1984, between Valencia and United States Trust Company of New York as Owner Trustee, and Thomas Zakrzewski as Co-Trustee, under a Trust Agreement dated as of December 1, 1984, with J.C. Penney Company, Inc. as Owner Participant. (Form 10-K for the year ended December 31, 1986, File No. 1-5924 — Exhibit 10(e)(9).) | ||
*10(a)(10) | — | Amendment No. 4, dated June 1, 1986, to the Lease Agreement, dated December 1, 1984, between Valencia and United States Trust Company of New York as Owner Trustee, and Thomas Zakrzewski as Co-Trustee, under a Trust Agreement dated as of December 1, 1984, with Harvey Hubbell Financial Inc. as Owner Participant. (Form 10-K for the year ended December 31, 1986, File No. 1-5924 — Exhibit 10(e)(10).) | ||
*10(a)(11) | — | Lease Amendment No. 5 and Supplement No. 2, to the Lease Agreement, dated July 1, 1986, between Valencia, United States Trust Company of New York as Owner Trustee, and Thomas Zakrzewski as Co-Trustee and J.C. Penney as Owner Participant. (Form 10-K for the year ended December 31, 1986, File No. 1-5924 — Exhibit 10(e)(11).) | ||
*10(a)(12) | — | Lease Amendment No. 5, to the Lease Agreement, dated June 1, 1987, between Valencia, United States Trust Company of New York as Owner Trustee, and Thomas Zakrzewski as Co-Trustee and General Foods Credit Corporation as Owner Participant. (Form 10-K for the year ended December 31, 1988, File No. 1-5924 — Exhibit 10(f)(12).) | ||
*10(a)(13) | — | Lease Amendment No. 5, to the Lease Agreement, dated June 1, 1987, between Valencia, United States Trust Company of New York as Owner Trustee, and Thomas Zakrzewski as Co-Trustee and Harvey Hubbell Financial Inc. as Owner Participant. (Form 10-K for the year ended December 31, 1988, File No. 1-5924 — Exhibit 10(f)(13).) | ||
*10(a)(14) | — | Lease Amendment No. 6, to the Lease Agreement, dated June 1, 1987, between Valencia, United States Trust Company of New York as Owner Trustee, and Thomas Zakrzewski as Co-Trustee and J.C. Penney Company, Inc. as Owner Participant. (Form 10-K for the year ended December 31, 1988, File No. 1-5924 — Exhibit 10(f)(14).) | ||
*10(a)(15) | — | Lease Supplement No. 1, dated December 31, 1984, to Lease Agreements, dated December 1, 1984, between Valencia, as Lessee and United States Trust Company of New York and Thomas B. Zakrzewski, as Owner Trustee and Co-Trustee, respectively (document filed relates to General Foods Credit Corporation; documents relating to Harvey Hubbell Financial, Inc. and JC Penney Company, Inc. are not filed but are substantially similar). (Form S-4 Registration No. 33-52860 — Exhibit 10(f)(15).) | ||
*10(a)(16) | — | Amendment No. 1, dated June 1, 1986, to the General Indemnity Agreement, dated as of December 1, 1984, between Valencia and TEP, as Indemnitors, General Foods Credit Corporation, as Owner Participant, United States Trust Company of New York, as Owner Trustee, Teachers Insurance and Annuity Association of America, as Loan Participant, and Marine Midland Bank, N.A., as Indenture Trustee. (Form 10-K for the year ended December 31, 1986, File No. 1-5924 — Exhibit 10(e)(12).) | ||
*10(a)(17) | — | Amendment No. 1, dated June 1, 1986, to the General Indemnity Agreement, dated as of December 1, 1984, between Valencia and TEP, as Indemnitors, J.C. Penney Company, Inc., as Owner Participant, United States Trust Company of New York, as Owner Trustee, Teachers Insurance and Annuity Association of America, as Loan Participant, and Marine Midland Bank, N.A., as Indenture Trustee. (Form 10-K for the year ended December 31, 1986, File No. 1-5924 — Exhibit 10(e)(13).) |
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*10(a)(18) | — | Amendment No. 1, dated June 1, 1986, to the General Indemnity Agreement, dated as of December 1, 1984, between Valencia and TEP, as Indemnitors, Harvey Hubbell Financial, Inc., as Owner Participant, United States Trust Company of New York, as Owner Trustee, Teachers Insurance and Annuity Association of America, as Loan Participant, and Marine Midland Bank, N.A., as Indenture Trustee. (Form 10-K for the year ended December 31, 1986, File No. 1-5924 — Exhibit 10(e)(14).) | ||
*10(a)(19) | — | Amendment No. 2, dated as of July 1, 1986, to the General Indemnity Agreement, dated as of December 1, 1984, between Valencia and TEP, as Indemnitors, J.C. Penney Company, Inc., as Owner Participant, United States Trust Company of New York, as Owner Trustee, Teachers Insurance and Annuity Association of America, as Loan Participant, and Marine Midland Bank, N.A., as Indenture Trustee. (Form S-4, Registration No. 33-52860 — Exhibit 10(f)(19).) | ||
*10(a)(20) | — | Amendment No. 2, dated as of June 1, 1987, to the General Indemnity Agreement, dated as of December 1, 1984, between Valencia and TEP, as Indemnitors, General Foods Credit Corporation, as Owner Participant, United States Trust Company of New York, as Owner Trustee, Teachers Insurance and Annuity Association of America, as Loan Participant, and Marine Midland Bank, N.A., as Indenture Trustee. (Form S-4, Registration No. 33-52860 —Exhibit 10(f)(20).) | ||
*10(a)(21) | — | Amendment No. 2, dated as of June 1, 1987, to the General Indemnity Agreement, dated as of December 1, 1984, between Valencia and TEP, as Indemnitors, Harvey Hubbell Financial, Inc., as Owner Participant, United States Trust Company of New York, as Owner Trustee, Teachers Insurance and Annuity Association of America, as Loan Participant, and Marine Midland Bank, N.A., as Indenture Trustee. (Form S-4, Registration No. 33-52860 — Exhibit 10(f)(21).) | ||
*10(a)(22) | — | Amendment No. 3, dated as of June 1, 1987, to the General Indemnity Agreement, dated as of December 1, 1984, between Valencia and TEP, as Indemnitors, J.C. Penney Company, Inc., as Owner Participant, United States Trust Company of New York, as Owner Trustee, Teachers Insurance and Annuity Association of America, as Loan Participant, and Marine Midland Bank, N.A., as Indenture Trustee. (Form S-4, Registration No. 33-52860 — Exhibit 10(f)(22).) | ||
*10(a)(23) | — | Supplemental Tax Indemnity Agreement, dated July 1, 1986, between J.C. Penney Company, Inc., as Owner Participant, and Valencia and TEP, as Indemnitors. (Form 10-K for the year ended December 31, 1986, File No. 1-5924 — Exhibit 10(e)(15).) | ||
*10(a)(24) | — | Supplemental General Indemnity Agreement, dated as of July 1, 1986, among Valencia and TEP, as Indemnitors, J.C. Penney Company, Inc., as Owner Participant, United States Trust Company of New York, as Owner Trustee, Teachers Insurance and Annuity Association of America, as Loan Participant, and Marine Midland Bank, N.A., as Indenture Trustee. (Form 10-K for the year ended December 31, 1986, File No. 1-5924 — Exhibit 10(e)(16).) | ||
*10(a)(25) | — | Amendment No. 1, dated as of June 1, 1987, to the Supplemental General Indemnity Agreement, dated as of July 1, 1986, among Valencia and TEP, as Indemnitors, J.C. Penney Company, Inc., as Owner Participant, United States Trust Company of New York, as Owner Trustee, Teachers Insurance and Annuity Association of America, as Loan Participant, and Marine Midland Bank, N.A., as Indenture Trustee. (Form S-4, Registration No. 33-52860 — Exhibit 10(f)(25).) | ||
*10(a)(26) | — | Valencia Agreement, dated as of June 30, 1992, among TEP, as Guarantor, Valencia, as Lessee, Teachers Insurance and Annuity Association of America, as Loan Participant, Marine Midland Bank, N.A., as Indenture Trustee, United States Trust Company of New York, as Owner Trustee, and Thomas B. Zakrzewski, as Co-Trustee, and the Owner Participants named therein relating to the Restructuring of Valencia’s lease of the coal-handling facilities at the Springerville Generating Station. (Form S-4, Registration No. 33-52860 — Exhibit 10(f)(26).) |
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*10(a)(27) | — | Amendment, dated as of December 15, 1992, to the Lease Agreements, dated December 1, 1984, between Valencia, as Lessee, and United States Trust Company of New York, as Owner Trustee, and Thomas B. Zakrzewski, as Co-Trustee. (Form S-1, Registration No. 33-55732 — Exhibit 10(f)(27).) | ||
*10(b)(1) | — | Lease Agreements, dated as of December 1, 1985, between TEP and San Carlos Resources Inc. (San Carlos) (a wholly-owned subsidiary of the Registrant) jointly and severally, as Lessee, and Wilmington Trust Company, as Trustee, as amended and supplemented. (Form 10-K for the year ended December 31, 1985, File No. 1-5924 — Exhibit 10(f)(1).) | ||
*10(b)(2) | — | Tax Indemnity Agreements, dated as of December 1, 1985, between Philip Morris Credit Corporation, IBM Credit Financing Corporation and Emerson Finance Co., each as beneficiary under a separate trust agreement, dated as of December 1, 1985, with Wilmington Trust Company, as Owner Trustee, and William J. Wade, as Co-Trustee, and TEP and San Carlos, as Lessee. (Form 10-K for the year ended December 31, 1985, File No. 1-5924 — Exhibit 10(f)(2).) | ||
*10(b)(3) | — | Participation Agreement, dated as of December 1, 1985, among TEP and San Carlos as Lessee, Philip Morris Credit Corporation, IBM Credit Financing Corporation, and Emerson Finance Co. as Owner Participants, Wilmington Trust Company as Owner Trustee, The Sumitomo Bank, Limited, New York Branch, as Loan Participant, and Bankers Trust Company, as Indenture Trustee. (Form 10-K for the year ended December 31, 1985, File No. 1-5924 — Exhibit 10(f)(3).) | ||
*10(b)(4) | — | Restructuring Commitment Agreement, dated as of June 30, 1992, among TEP and San Carlos, jointly and severally, as Lessee, Philip Morris Credit Corporation, IBM Credit Financing Corporation and Emerson Capital Funding, William J. Wade, as Owner Trustee and Co-Trustee, respectively, The Sumitomo Bank, Limited, New York Branch, as Loan Participant and United States Trust Company of New York, as Indenture Trustee. (Form S-4, Registration No. 33-52860 — Exhibit 10(g)(4).) | ||
*10(b)(5) | — | Lease Supplement No.1, dated December 31, 1985, to Lease Agreements, dated as of December 1, 1985, between TEP and San Carlos, jointly and severally, as Lessee Trustee and Co-Trustee, respectively (document filed relates to Philip Morris Credit Corporation; documents relating to IBM Credit Financing Corporation and Emerson Financing Co. are not filed but are substantially similar). (Form S-4, Registration No. 33-52860 — Exhibit 10(g)(5).) | ||
*10(b)(6) | — | Amendment No. 1, dated as of December 15, 1992, to Lease Agreements, dated as of December 1, 1985, between TEP and San Carlos, jointly and severally, as Lessee, and Wilmington Trust Company and William J. Wade, as Owner Trustee and Co-Trustee, respectively, as Lessor. (Form S-1, Registration No. 33-55732 — Exhibit 10(g)(6).) | ||
*10(b)(7) | — | Amendment No. 1, dated as of December 15, 1992, to Tax Indemnity Agreements, dated as of December 1, 1985, between Philip Morris Credit Corporation, IBM Credit Financing Corporation and Emerson Capital Funding Corp., as Owner Participants and TEP and San Carlos, jointly and severally, as Lessee. (Form S-1, Registration No. 33-55732 — Exhibit 10(g)(7).) | ||
*10(b)(8) | — | Amendment No. 2, dated as of December 1, 1999, to Lease Agreement, dated as of December 1, 1985, between TEP and San Carlos, jointly and severally, as Lessee, and Wilmington Trust Company and William J. Wade, as Owner Trustee and Co-Trustee, respectively, under a Trust Agreement with Philip Morris Capital Corporation as Owner Participant. (Form 10-K for the year ended December 31, 1999, File No. 1-5924 — Exhibit 10(b)(8).) |
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*10(b)(9) | — | Amendment No. 2, dated as of December 1, 1999, to Lease Agreement, dated as of December 1, 1985, between TEP and San Carlos, jointly and severally, as Lessee, and Wilmington Trust Company and William J. Wade, as Owner Trustee and Co-Trustee, respectively, under a Trust Agreement with IBM Credit Financing Corporation as Owner Participant. (Form 10-K for the year ended December 31, 1999, File No. 1-5924 — Exhibit 10(b)(9).) | ||
*10(b)(10) | — | Amendment No. 2, dated as of December 1, 1999, to Lease Agreement, dated as of December 1, 1985, between TEP and San Carlos, jointly and severally, as Lessee, and Wilmington Trust Company and William J. Wade, as Owner Trustee and Co-Trustee, respectively, under a Trust Agreement with Emerson Finance Co. as Owner Participant. (Form 10-K for the year ended December 31, 1999, File No. 1-5924 — Exhibit 10(b)(10).) | ||
*10(b)(11) | — | Amendment No. 2, dated as of December 1, 1999, to Tax Indemnity Agreement, dated as of December 1, 1985, between TEP and San Carlos, jointly and severally, as Lessee, and Philip Morris Capital Corporation as Owner Participant, beneficiary under a Trust Agreement dated as of December 1, 1985, with Wilmington Trust Company and William J. Wade, as Owner Trustee and Co-Trustee, respectively, together as Lessor. (Form 10-K for the year ended December 31, 1999, File No. 1-5924 — Exhibit 10(b)(11).) | ||
*10(b)(12) | — | Amendment No. 2, dated as of December 1, 1999, to Tax Indemnity Agreement, dated as of December 1, 1985, between TEP and San Carlos, jointly and severally, as Lessee, and IBM Credit Financing Corporation as Owner Participant, beneficiary under a Trust Agreement dated as of December 1, 1985, with Wilmington Trust Company and William J. Wade, as Owner Trustee and Co-Trustee, respectively, together as Lessor. (Form 10-K for the year ended December 31, 1999, File No. 1-5924 — Exhibit 10(b)(12).) | ||
*10(b)(13) | — | Amendment No. 2, dated as of December 1, 1999, to Tax Indemnity Agreement, dated as of December 1, 1985, between TEP and San Carlos, jointly and severally, as Lessee, and Emerson Finance Co. as Owner Participant, beneficiary under a Trust Agreement dated as of December 1, 1985, with Wilmington Trust Company and William J. Wade, as Owner Trustee and Co-Trustee, respectively, together as Lessor. (Form 10-K for the year ended December 31, 1999, File No. 1-5924 — Exhibit 10(b)(13).) | ||
*10(b)(14) | — | Amendment No. 3 dated as of June 1, 2003, to Lease Agreements, dated as of December 1, 1985, between TEP and San Carlos, jointly and severally, as Lessee, and Wilmington Trust Company and William J. Wade, as Owner Trustee and Co-Trustee, respectively, under a Trust Agreement with Philip Morris Capital Corporation as Owner Participant. (Form 10-Q for the quarter ended June 30, 2003, File No. 1-5924 – Exhibit 10(a).) | ||
*10(b)(15) | — | Amendment No. 3 dated as of June 1, 2003, to Lease Agreements, dated as of December 1, 1985, between TEP and San Carlos, jointly and severally, as Lessee, and Wilmington Trust Company and William J. Wade, as Owner Trustee and Co-Trustee, respectively, under a Trust Agreement with IBM Credit, LLC as Owner Participant. (Form 10-Q for the quarter ended June 30, 2003, File No. 1-5924 – Exhibit 10(b).) | ||
*10(b)(16) | — | Amendment No. 3 dated as of June 1, 2003, to Lease Agreements, dated as of December 1, 1985, between TEP and San Carlos, jointly and severally, as Lessee, and Wilmington Trust Company and William J. Wade, as Owner Trustee and Co-Trustee, respectively, under a Trust Agreement with Emerson Finance Co. as Owner Participant. (Form 10-Q for the quarter ended June 30, 2003, File No. 1-5924 – Exhibit 10(c).) | ||
*10(b)(17) | — | Amendment No. 3 dated as of June 1, 2003, to Tax Indemnity Agreement, dated as of December 1, 1985, between TEP and San Carlos, jointly and severally, as Lessee, and Philip Morris Capital Corporation as Owner Participant, beneficiary under a Trust Agreement dated as of December 1, 1985, with Wilmington Trust Company and William J. Wade, as Owner Trustee and Co-Trustee, respectively, together as Lessor. (Form 10-Q for the quarter ended June 30, 2003, File No. 1-5924 – Exhibit 10(d).) |
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*10(b)(18) | — | Amendment No. 3 dated as of June 1, 2003, to Tax Indemnity Agreement, dated as of December 1, 1985, between TEP and San Carlos, jointly and severally, as Lessee, and IBM Credit, LLC as Owner Participant, beneficiary under a Trust Agreement dated as of December 1, 1985, with Wilmington Trust Company and William J. Wade, as Owner Trustee and Co-Trustee, respectively, together as Lessor. (Form 10-Q for the quarter ended June 30, 2003, File No. 1-5924 – Exhibit 10(e).) | ||
*10(b)(19) | — | Amendment No. 3 dated as of June 1, 2003, to Tax Indemnity Agreement, dated as of December 1, 1985, between TEP and San Carlos, jointly and severally, as Lessee, and Emerson Finance Co. as Owner Participant, beneficiary under a Trust Agreement dated as of December 1, 1985, with Wilmington Trust Company and William J. Wade, as Owner Trustee and Co-Trustee, respectively, together as Lessor. (Form 10-Q for the quarter ended June 30, 2003, File No. 1-5924 – Exhibit 10(f).) | ||
*10(b)(20) | — | Amendment No. 4, dated as of June 1, 2006, to Lease Agreement, dated as of December 1, 1985, between TEP and San Carlos, jointly and severally, as Lessee, and Wilmington Trust Company and William J. Wade, as Owner Trustee and Cotrustee, respectively, under a Trust Agreement with Philip Morris Capital Corporation as Owner Participant. (Form 8-K dated June 12, 2006, File No. 1-5924 – Exhibit 10.1.) | ||
*10(b)(21) | — | Amendment No. 4, dated as of June 1, 2006, to Lease Agreement, dated as of December 1, 1985, between TEP and San Carlos, jointly and severally, as Lessee, and Wilmington Trust Company and William J. Wade, as Owner Trustee and Cotrustee, respectively, under a Trust Agreement with Selco Service Corporation as Owner Participant. (Form 8-K dated June 12, 2006, File No. 1-5924 – Exhibit 10.2.) | ||
*10(b)(22) | — | Amendment No. 4, dated as of June 1, 2006, to Lease Agreement, dated as of December 1, 1985, between TEP and San Carlos, jointly and severally, as Lessee, and Wilmington Trust Company and William J. Wade, as Owner Trustee and Cotrustee, respectively, under a Trust Agreement with Emerson Finance LLC as Owner Participant. (Form 8-K dated June 12, 2006, File No. 1-5924 – Exhibit 10.3.) | ||
*10(b)(23) | — | Amendment No. 4, dated as of June 1, 2006 to Tax Indemnity Agreement, dated as of December 1, 1985, between TEP and San Carlos, as Lessee, and Philip Morris Capital Corporation as Owner Participant, beneficiary under a Trust Agreement, dated as of December 1, 1985, with Wilmington Trust Company and William J. Wade, as Owner Trustee and Cotrustee, respectively, together as Lessor. (Form 8-K dated June 12, 2006, File No. 1-5924 – Exhibit 10.4.) | ||
*10(b)(24) | — | Amendment No. 4, dated as of June 1, 2006 to Tax Indemnity Agreement , dated as of December 1, 1985, between TEP and San Carlos, as Lessee, and Selco Service Corporation as Owner Participant, beneficiary under a Trust Agreement, dated as of December 1, 1985, with Wilmington Trust Company and William J. Wade, as Owner Trustee and Cotrustee, respectively, together as Lessor. (Form 8-K dated June 12, 2006, File No. 1-5924 – Exhibit 10.5.) | ||
*10(b)(25) | — | Amendment No. 4, dated as of June 1, 2006 to Tax Indemnity Agreement , dated as of December 1, 1985, between TEP and San Carlos, as Lessee, and Emerson Finance LLC as Owner Participant, beneficiary under a Trust Agreement, dated as of December 1, 1985, with Wilmington Trust Company and William J. Wade, as Owner Trustee and Cotrustee, respectively, together as Lessor. (Form 8-K dated June 12, 2006, File No. 1-5924 – Exhibit 10.6.) | ||
*10(c)(1) | — | Amended and Restated Participation Agreement, dated as of November 15, 1987, among TEP, as Lessee, Ford Motor Credit Company, as Owner Participant, Financial Security Assurance Inc., as Surety, Wilmington Trust Company and William J. Wade in their respective individual capacities as provided therein, but otherwise solely as Owner Trustee and Co-Trustee under the Trust Agreement, and Morgan Guaranty, in its individual capacity as provided therein, but Secured Party. (Form 10-K for the year ended December 31, 1987, File No. 1-5924 — Exhibit 10(j)(1).) |
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*10(c)(2) | — | Lease Agreement, dated as of January 14, 1988, between Wilmington Trust Company and William J. Wade, as Owner Trust Agreement described therein, dated as of November 15, 1987,between such parties and Ford Motor Credit Company, as Lessor, and TEP, as Lessee. (Form 10-K for the year ended December 31, 1987, File No.1-5924 — Exhibit 10(j)(2).) | ||
*10(c)(3) | — | Tax Indemnity Agreement, dated as of January 14, 1988, between TEP, as Lessee, and Ford Motor Credit Company, as Owner Participant, beneficiary under a Trust Agreement, dated as of November 15, 1987, with Wilmington Trust Company and William J. Wade, Owner Trustee and Co-Trustee, respectively, together as Lessor. (Form 10-K for the year ended December 31, 1987, File No. 1-5924 — Exhibit 10(j)(3).) | ||
*10(c)(4) | — | Loan Agreement, dated as of January 14, 1988, between the Pima County Authority and Wilmington Trust Company and William J. Wade in their respective individual capacities as expressly stated, but otherwise solely as Owner Trustee and Co-Trustee, respectively, under and pursuant to a Trust Agreement, dated as of November 15, 1987, with Ford Motor Credit Company as Trustor and Debtor relating to Industrial Development Lease Obligation Refunding Revenue Bonds, 1988 Series A (TEP’s Sundt Project). (Form 10-K for the year ended December 31, 1987, File No. 1-5924 — Exhibit 10(j)(4).) | ||
*10(c)(5) | — | Indenture of Trust, dated as of January 14, 1988, between the Pima County Authority and Morgan Guaranty authorizing Industrial Development Lease Obligation Refunding Revenue Bonds, 1988 Series A (Tucson Electric Power Company Sundt Project). (Form 10-K for the year ended December 31, 1987, File No. 1-5924 — Exhibit 10(j)(5).) | ||
*10(c)(6) | — | Lease Amendment No. 1, dated as of May 1, 1989, between TEP, Wilmington Trust Company and William J. Wade as Owner Trustee and Co-Trustee, respectively under a Trust Agreement dated as of November 15, 1987 with Ford Motor Credit Company. (Form 10-K for the year ended December 31, 1990, File No. 1-5924 — Exhibit 10(i)(6).) | ||
*10(c)(7) | — | Lease Supplement, dated as of January 1, 1991, between TEP, Wilmington Trust Company and William J. Wade as Owner Trustee and Co-Trustee, respectively, under a Trust Agreement dated as of November 15, 1987, with Ford. (Form 10-K for the year ended December 31, 1991, File No. 1-5924 — Exhibit 10(i)(8).) | ||
*10(c)(8) | — | Lease Supplement, dated as of March 1, 1991, between TEP, Wilmington Trust Company and William J. Wade as Owner Trustee and Co-Trustee, respectively, under a Trust Agreement dated as of November 15, 1987, with Ford. (Form 10-K for the year ended December 31, 1991, File No. 1-5924 — Exhibit 10(i)(9).) | ||
*10(c)(9) | — | Lease Supplement No. 4, dated as of December 1, 1991, between TEP, Wilmington Trust Company and William J. Wade as Owner Trustee and Co-Trustee, respectively, under a Trust Agreement dated as of November 15, 1987, with Ford. (Form 10-K for the year ended December 31, 1991, File No. 1-5924 — Exhibit 10(i)(10).) | ||
*10(c)(10) | — | Supplemental Indenture No. 1, dated as of December 1, 1991, between the Pima County Authority and Morgan Guaranty relating to Industrial Lease Development Obligation Revenue Project. (Form 10-K for the year ended December 31, 1991, File No. 1-5924 — Exhibit 10(l)(11).) | ||
*10(c)(11) | — | Restructuring Commitment Agreement, dated as of June 30, 1992, among TEP, as Lessee, Ford Motor Credit Company, as Owner Participant, Wilmington Trust Company and William J. Wade, as Owner Trustee and Co-Trustee, respectively, and Morgan Guaranty, as Indenture Trustee and Refunding Trustee, relating to the restructuring of the Registrant’s lease of Unit 4 at the Sundt Generating Station. (Form S-4, Registration No. 33-52860 — Exhibit 10(i)(12).) | ||
*10(c)(12) | — | Amendment No. 1, dated as of December 15, 1992, to Amended and Restated Participation Agreement, dated as of November 15, 1987, among TEP, as Lessee, Ford Motor Credit Company, as Owner Participant, Wilmington Trust Company and William J. Wade, as Owner Trustee and Co-Trustee, respectively, Financial Security Assurance Inc., as Surety, and Morgan Guaranty, as Indenture Trustee. (Form S-1, Registration No. 33-55732 — Exhibit 10(h)(12).) |
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*10(c)(13) | — | Amended and Restated Lease, dated as of December 15, 1992, between TEP as Lessee and Wilmington Trust Company and William J. Wade, as Owner Trustee and Co-Trustee, respectively, as Lessor. (Form S-1, Registration No. 33-55732 — Exhibit 10(h)(13).) | ||
*10(c)(14) | — | Amended and Restated Tax Indemnity Agreement, dated as of December 15, 1992, between TEP as Lessee and Ford Motor Credit Company, as Owner Participant. (Form S-1, Registration No. 33-55732 — Exhibit 10(h)(14).) | ||
*10(d) | — | Participation Agreement, dated as of June 30, 1992, among TEP, as Lessee, various parties thereto, as Owner, Wilmington Trust Company and William J. Wade, as Owner Trustee and Co-Trustee, respectively, and LaSalle National Bank, as Indenture Trustee relating to TEP’s lease of Springerville Unit 1. (Form S-1, Registration No. 33-55732 — Exhibit 10(u).) | ||
*10(e) | — | Lease Agreement, dated as of December 15, 1992, between TEP, as Lessee and Wilmington Trust Company and William J. Wade, as Owner Trustee and Co-Trustee, respectively, as Lessor. (Form S-1, Registration No. 33-55732 — Exhibit 10(v).) | ||
*10(f) | — | Tax Indemnity Agreements, dated as of December 15, 1992, between the various Owner Participants parties thereto and TEP, as Lessee. (Form S-1, Registration No. 33-55732 — Exhibit 10(w).) | ||
*10(g) | — | Restructuring Agreement, dated as of December 1, 1992, between TEP and Century Power Corporation. (Form S-1, Registration No. 33-55732 — Exhibit 10(x).) | ||
+*10(h) | — | 1994 Omnibus Stock and Incentive Plan of UniSource Energy. (Form S-8 dated January 6, 1998, File No. 333-43767.) | ||
+*10(i) | — | Management and Directors Deferred Compensation Plan of UniSource Energy. (Form S-8 dated January 6, 1998, File No. 333-43769.) | ||
+*10(j) | — | TEP Supplemental Retirement Account for Classified Employees. (Form S-8 dated May 21, 1998, File No. 333-53309.) | ||
+*10(k) | — | TEP Triple Investment Plan for Salaried Employees. (Form S-8 dated May 21, 1998, File No. 333-53333.) | ||
+*10(l) | — | Officer Change in Control Agreement between TEP and Karen G. Kissinger, dated as of December 4, 1998 (including a schedule of other officers who are covered by substantially identical agreements.) (Form 10-K for the year ended December 31, 2004, File No. 1-5924 – Exhibit 10(p)) | ||
+*10(m) | — | Notice of Termination of Change in Control Agreement from TEP to Karen G. Kissinger, dated as of March 3, 2005 (including a schedule of other officers who received substantially identical notices.) (Form 10-K for the year ended December 31, 2004, File No. 1-5924 – Exhibit 10(q)) | ||
+*10(n) | — | Amended and Restated UniSource Energy 1994 Outside Director Stock Option Plan of UniSource Energy. (Form S-8 dated September 9, 2002, File No. 333-99317.) | ||
*10(o)(1) | — | Asset Purchase Agreement dated as of October 29, 2002, by and between UniSource Energy and Citizens Communications Company relating to the Purchase of Citizens’ Electric Utility Business in the State of Arizona. (Form 8-K dated October 31, 2002. File No. 1-13739 — Exhibit 99-1.) | ||
*10(o)(2) | — | Asset Purchase Agreement dated as of October 29, 2002, by and between UniSource Energy and Citizens Communications Company relating to the Purchase of Citizens’ Gas Utility Business in the State of Arizona. (Form 8-K dated October 31, 2002. File No. 1-13739 — Exhibit 99-2.) |
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+*10(p) | — | UniSource Energy 2006 Omnibus Stock and Incentive Plan (Form S-8 dated January 31, 2007. File No. 333-140353.) | ||
+*10(q) | — | Stock Option Agreement between UniSource Energy and Raymond S. Heyman dated as of September 15, 2005. (Form 10-K for the year ended December 31, 2007, File No. 1-13739, Exhibit 10(r).) | ||
+*10(r) | — | Management and Directors Deferred Compensation Plan II of UniSource Energy. (Form S-8 dated December 30, 2008, File No. 333-156491.) | ||
+*10(s) | — | Employment agreement dated as of December 9, 2008, between UniSource Energy and Paul J. Bonavia. (Form 8-K dated December 15, 2008, File No. 1-13739.) | ||
12(a) | — | Computation of Ratio of Earnings to Fixed Charges – TEP. | ||
12(b) | — | Computation of Ratio of Earnings to Fixed Charges – UniSource Energy. | ||
21 | — | Subsidiaries of the Registrants. | ||
23 | — | Consent of Independent Registered Public Accounting Firm. | ||
24(a) | — | Power of Attorney – UniSource Energy. | ||
24(b) | — | Power of Attorney – TEP. | ||
31(a) | — | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act – UniSource Energy, by Paul J. Bonavia. | ||
31(b) | — | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act – UniSource Energy by Kevin P. Larson. | ||
31(c) | — | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act – TEP, by Paul J. Bonavia. | ||
31(d) | — | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act – TEP, by Kevin P. Larson. | ||
**32 | — | Statements of Corporate Officers (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002). |
(*) | Previously filed as indicated and incorporated herein by reference. | |
(+) | Management contracts or compensatory plans or arrangements required to be filed as exhibits to this Form 10-K by item 601(b)(10)(iii) of Regulation S-K. | |
** | Pursuant to Item 601(b)(32)(ii) of Regulation S-K, this certificate is not being “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. |
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