Exhibit 99
UNISOURCE ENERGY NEWS
FOR IMMEDIATE RELEASE July 30, 2003
Media Contact: Art McDonald, (520) 884-3628 Page 1 of 6
Financial Analyst Contact: Jo Smith, (520) 884-3650
UNISOURCE ENERGY REPORTS EARNINGS FOR SECOND QUARTER OF 2003,
REVISES EARNINGS OUTLOOK FOR REMAINDER OF YEAR
TUCSON, ARIZ. - UniSource Energy Corporation (NYSE:UNS) reported net income for
the second quarter of 2003 of $4.6 million, or $0.14 per share of common stock.
UniSource Energy also updated its estimated range for 2003 full year earnings
from $3.10 to $3.30 per share to $2.90 to $3.20 per share.
Quarterly net income was down $7.3 million, or 61 percent, from the second
quarter of 2002. The reduction was caused primarily by lower retail kilowatt
hour (kWh) sales due to moderate weather, decreased wholesale kWh sales, higher
gas prices and the purchase of replacement energy due to unplanned outages at
power plants owned by Tucson Electric Power Company (TEP), UniSource Energy's
principal subsidiary.
"I'm disappointed by our second quarter performance," said James S. Pignatelli,
Chairman, President and CEO of UniSource Energy. "We were significantly affected
by extended power plant outages, and milder weather eroded our energy sales
despite the continuing growth of TEP's customer base."
Temperatures in TEP's service territory during the second quarter of 2003 fell
short of last year's higher-than-normal levels. The resulting decline of 2.9
percent in cooling degree days contributed to a $1.6 million reduction in retail
revenues between the second quarters of 2003 and 2002.
To help meet the energy needs of its retail customers, TEP spent an additional
$2.5 million in the second quarter of 2003 to replace energy lost to unplanned
outages at coal-fired generators. Those outages also resulted in lost wholesale
market opportunities totaling an estimated $3.5 million in the second quarter.
"Our coal-fired generating stations have outstanding track records for
reliability, so these outages were unusual," Pignatelli said.
TEP's wholesale kWh sales decreased by 38 percent in the second quarter of 2003,
compared with the same period in 2002. Unplanned generation outages left TEP, at
times, unable to capitalize on average around-the-clock energy prices that
increased to $39 per megawatt hour (MWh) during the second quarter of 2003 from
$24 per MWh during the same period in 2002.
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UNISOURCE ENERGY REPORTS EARNINGS, REVISES OUTLOOK July 30, 2003
Page 2 of 6
TEP's customer base continued its strong growth during the second quarter of
2003. The utility's average number of retail customers increased by 2.3 percent
to 362,375 between the second quarters of 2002 and 2003.
UniSource Energy made progress during the second quarter of 2003 toward the
planned acquisition of Arizona gas and electric system assets from Citizens
Communications (NYSE: CZN). The Arizona Corporation Commission endorsed the
proposed purchase and approved rate increases for both gas and electric
customers. The acquisition is now expected to be finalized August 11.
Tucson Electric Power Company
- -----------------------------
TEP reported net income of $11.2 million, or $0.33 per UniSource Energy share,
in the second quarter of 2003, compared to $17.5 million, or $0.52 per
UniSource Energy share, in the second quarter of 2002.
The difference was due primarily to decreased retail kWh sales, higher gas
prices as well as power plant outages that required TEP to purchase replacement
power and limited its ability to sell power on the wholesale market.
TEP's retail kWh sales were down 1.4 percent in the second quarter of 2003
compared to the same period last year. Total retail revenues were $173 million
in the second quarter of 2003, down approximately 1 percent from the second
quarter of 2002. Sales volumes to residential and commercial customers increased
slightly in the second quarter of 2003 compared to the second quarter of 2002.
Sales to industrial customers declined 4.2 percent quarter to quarter.
Wholesale revenues fell to $35.5 million in the second quarter of 2003 from
$49.2 million in the second quarter of 2002. Other factors affecting results in
the second quarter of 2003 included increased interest expense and higher
operating and maintenance costs.
Millennium Energy Holdings (MEH)
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MEH lost $4.4 million, or $0.13 per UniSource Energy share, during the second
quarter of 2003, matching its losses from the second quarter of 2002. The loss
in the second quarter of 2003 was due, in part, to ongoing operating expenses at
Global Solar Energy and Infinite Power Solutions as well as from discontinued
subsidiaries.
Year-to-Date
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UniSource Energy's consolidated year-to-date earnings through June 30, 2003, are
$57.9 million, or $1.71 per share, compared to $5.6 million, or $0.17 per share,
during the same period last year.
This year's results reflect the adoption of Financial Accounting Standard 143
(FAS 143), a new rule related to accounting for plant retirement and removal
costs. The company recorded a $67.5 million after-tax gain as a result of
adopting FAS 143. Excluding the
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UNISOURCE ENERGY REPORTS EARNINGS, REVISES OUTLOOK July 30, 2003
Page 3 of 6
impact of FAS 143, UniSource Energy's consolidated year-to-date loss through
June 2003 is $9.6 million, or $0.29 per share.
TEP's year-to-date earnings through June 30, 2003, were $71.5 million, or $2.11
per UniSource Energy share, compared to $15.5 million, or $0.46 per UniSource
Energy share. Excluding the impact of FAS 143, TEP's year-to-date earnings
through June 30, 2003, are $4.0 million, or $0.11 per UniSource Energy share.
MEH's year-to-date loss through June 30, 2003, was $9.4 million, or $0.28 per
UniSource Energy share, compared to $7.7 million, or $0.23 per UniSource Energy
share, in 2002.
EARNINGS PER SHARE SUMMARY
- --------------------------
REPORTED
---------------------
PER UNISOURCE ENERGY SHARE 2Q 2003 2Q 2002
Tucson Electric Power $0.33 $0.52
Millennium Energy Holdings (0.13) (0.13)
Other* (0.06) (0.04)
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Consolidated Net Income (Loss) $0.14 $0.35
Average Number of Shares Outstanding - millions 33.8 33.7
*Includes Inter-company and other transactions
REPORTED
---------------------
PER UNISOURCE ENERGY SHARE Year-to-Date June 30,
2003 2002
Tucson Electric Power $2.11 $0.46
Millennium Energy Holdings (0.28) (0.23)
Other* (0.12) (0.06)
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Consolidated Net Income $1.71 $0.17
Cumulative Effect of Accounting Change - Net of Tax $2.00 -
---------------------
Gain (Loss) Before Cumulative Effect of Accounting Change ($0.29) $0.17
Average Number of Shares Outstanding - millions 33.8 33.6
*Includes Inter-company and other transactions
Earnings Outlook
- ----------------
UniSource Energy is revising the range for its 2003 full-year earnings estimate
to $2.90 - $3.20 per share. The estimate range includes the $2.00 per share
impact of adopting Financial Accounting Standard 143 (FAS 143).
Numerous factors can affect UniSource Energy's ability to reach the 2003
estimate. The factors include, but are not limited to: ability of the company to
reach financial closing of
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UNISOURCE ENERGY REPORTS EARNINGS, REVISES OUTLOOK July 30, 2003
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the Springerville Unit No. 3 expansion project and the recognition of a related
development fee; impacts from the Citizens' utility transaction; uncertainties
prevailing in the wholesale power market; regulatory decisions; performance of
TEP's generating plants; the weather; the pace and strength of the economic
recovery in the region; fuel and purchased power expense; changes to long-term
contracts; changes in accounting standards; and the amount of research,
development and operating expenses incurred by UniSource Energy's unregulated
energy technology investments.
UniSource Energy's earnings are subject to TEP's seasonal energy sales.
Generally, TEP records a significant portion of its earnings during the third
quarter as a result of peak energy usage during the summer. Conversely, TEP
generally records a loss during the first quarter due to moderate temperatures
and lower customer demand.
Second Quarter 2003 Earnings Conference Call and Webcast
- --------------------------------------------------------
UniSource Energy officials will discuss the company's second quarter 2003
earnings on Thursday, July 31 during a conference call that will begin at
11 a.m. EDT. James S. Pignatelli, UniSource Energy Chairman, President and Chief
Executive Officer, and Kevin Larson, Vice President and Chief Financial Officer,
will host the call.
TELEPHONE ACCESS
To listen to the live conference call, dial (877) 582-0446 five to 10 minutes
prior to the event and reference confirmation code 2000936. A telephone replay
will be available for seven days starting July 31, 2003. To listen to the
replay, dial (800) 642-1687 and reference confirmation code 2000936.
INTERNET ACCESS
A live audio-only webcast of the conference call is available through a link at
www.UniSourceEnergy.com. Listeners are encouraged to visit the Web site at least
30 minutes before the event to register, download and install any necessary
audio software. A recording of the webcast will be available for 30 days through
a link at www.UniSourceEnergy.com.
UniSource Energy's primary subsidiaries include Tucson Electric Power Company,
Arizona's second-largest investor-owned electric utility, and Millennium Energy
Holdings, parent company of UniSource Energy's unregulated energy businesses.
For more information about UniSource Energy and its subsidiaries, visit
www.UniSourceEnergy.com.
This news release contains forward-looking information that involves risks and
uncertainties, that include, but are not limited to, the outcome of regulatory
proceedings; the ongoing restructuring of the electric industry; regional
economic and market conditions which could affect customer growth and the cost
of power supplies; the Citizens' utility acquisition; the cost of debt and
equity capital; changes in accounting standards; weather variations affecting
customer usage; and other factors. The preceding factors may cause future
results to differ materially from outcomes currently expected by UniSource
Energy.
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UNISOURCE ENERGY REPORTS EARNINGS, REVISES OUTLOOK July 30, 2003
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UNISOURCE ENERGY 2003 RESULTS
UNISOURCE ENERGY CORPORATION
Condensed Consolidated Statements of Income
(in thousands of dollars, except per share amounts)
Three Months Ended
June 30, Increase /(Decrease)
----------------------
(UNAUDITED) 2003 2002 Amount Percent
- ----------------------------------------------------------------------------
Operating Revenues
Electric Retail Sales $ 173,238 $ 174,800 $ (1,562) (0.9)
Electric Wholesale Sales 35,527 49,240 (13,713) (27.8)
Net Loss on TEP Forward
Contracts and MEG
Trading Activities (203) (460) 257 55.9
Other Revenues 2,779 3,623 (844) (23.3)
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Total Operating Revenues 211,341 227,203 (15,862) (7.0)
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Operating Expenses
Fuel 51,763 58,196 (6,433) (11.1)
Purchased Power 18,042 22,094 (4,052) (18.3)
Other Operations and
Maintenance 49,490 45,346 4,144 9.1
Depreciation and
Amortization 30,920 31,518 (598) (1.9)
Amortization of Transition
Recovery Asset 7,762 6,639 1,123 16.9
Taxes Other Than Income
Taxes 11,152 11,439 (287) (2.5)
- ----------------------------------------------------------------------------
Total Operating Expenses 169,129 175,232 (6,103) (3.5)
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Operating Income 42,212 51,971 (9,759) (18.8)
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Other Income (Deductions)
Interest Income 5,056 4,926 130 2.6
Other Income 2,025 1,896 129 6.8
Other Expense (150) (1,769) 1,619 91.5
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Total Other Income
(Deductions) 6,931 5,053 1,878 37.2
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Interest Expense
Long-Term Debt 19,113 16,118 2,995 18.6
Interest on Capital Leases 20,796 21,708 (912) (4.2)
Other Interest Expense,
Net of Amounts
Capitalized 393 360 33 9.2
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Total Interest Expense 40,302 38,186 2,116 5.5
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Income Before Income Taxes 8,841 18,838 (9,997) (53.1)
Income Tax Expense 4,258 6,950 (2,692) (38.7)
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Net Income $ 4,583 $ 11,888 $ (7,305) (61.4)
============================================================================
Average Shares of Common
Stock Outstanding (000) 33,821 33,684 137 0.4
============================================================================
Basic Earnings per Share $0.14 $0.35 $(0.21) (60.0)
============================================================================
Diluted Earnings per Share $0.13 $0.35 $(0.22) (62.9)
============================================================================
Dividends Paid per Share $0.15 $0.125 $0.025 20.0
============================================================================
Three Months Ended
June 30, Increase /(Decrease)
----------------------
Electric kWh Sales (000): 2003 2002 Amount Percent
- ----------------------------------------------------------------------------
Retail Sales 2,068,238 2,096,903 (28,665) (1.4)
Wholesale Sales 798,404 1,295,051 (496,647) (38.3)
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Total 2,866,642 3,391,954 (525,312) (15.5)
============================================================================
N/M - Not Meaningful
Reclassifications have been made to prior periods to conform to the current
period's presentation.
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UNISOURCE ENERGY REPORTS EARNINGS, REVISES OUTLOOK July 30, 2003
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UNISOURCE ENERGY 2003 RESULTS
UNISOURCE ENERGY CORPORATION
Condensed Consolidated Statements of Income
(in thousands of dollars, except per share amounts)
Six Months Ended
June 30, Increase /(Decrease)
----------------------
(UNAUDITED) 2003 2002 Amount Percent
- ----------------------------------------------------------------------------
Operating Revenues
Electric Retail Sales $ 303,783 $ 306,632 $ (2,849) (0.9)
Electric Wholesale Sales 75,697 84,786 (9,089) (10.7)
Net Gain (Loss) on TEP
Forward Contracts and
MEG Trading Activities (545) 561 (1,106) N/M
Other Revenues 5,572 6,419 (847) (13.2)
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Total Operating Revenues 384,507 398,398 (13,891) (3.5)
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Operating Expenses
Fuel 98,265 106,515 (8,250) (7.7)
Purchased Power 33,698 23,564 10,134 43.0
Other Operations and
Maintenance 101,646 94,222 7,424 7.9
Depreciation and
Amortization 61,440 64,968 (3,528) (5.4)
Amortization of Transition
Recovery Asset 11,370 9,521 1,849 19.4
Taxes Other Than Income
Taxes 22,743 22,951 (208) (0.9)
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Total Operating Expenses 329,162 321,741 7,421 2.3
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Operating Income 55,345 76,657 (21,312) (27.8)
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Other Income (Deductions)
Interest Income 10,290 9,682 608 6.3
Other Income 3,532 3,962 (430) (10.9)
Other Expense (2,375) (3,640) 1,265 34.8
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Total Other Income
(Deductions) 11,447 10,004 1,443 14.4
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Interest Expense
Long-Term Debt 38,385 32,090 6,295 19.6
Interest on Capital Leases 41,534 43,952 (2,418) (5.5)
Other Interest Expense,
Net of Amounts
Capitalized 300 591 (291) (49.2)
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Total Interest Expense 80,219 76,633 3,586 4.7
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Income (Loss) Before Income
Taxes and Cumulative
Effect of Accounting
Change (13,427) 10,028 (23,455) N/M
Income Tax Expense
(Benefit) (3,809) 4,454 (8,263) N/M
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Income (Loss) Before
Cumulative Effect of
Accounting Change (9,618) 5,574 (15,192) N/M
Cumulative Effect of
Accounting Change - Net
of Tax 67,471 - 67,471 N/M
- ----------------------------------------------------------------------------
Net Income $ 57,853 $ 5,574 $ 52,279 N/M
============================================================================
Average Shares of Common
Stock Outstanding (000) 33,780 33,635 145 0.4
============================================================================
Basic Earnings per Share
Income (Loss) Before
Cumulative Effect of
Accounting Change $(0.29) $0.17 $(0.46) N/M
Cumulative Effect of
Accounting Change - Net
of Tax $2.00 - $2.00 N/M
Net Income $1.71 $0.17 $1.54 N/M
============================================================================
Diluted Earnings per Share
Income (Loss) Before
Cumulative Effect of
Accounting Change $(0.29) $0.16 $(0.45) N/M
Cumulative Effect of
Accounting Change - Net
Of Tax $2.00 - $2.00 N/M
Net Income $1.71 $0.16 $1.55 N/M
============================================================================
Dividends Paid per Share $0.30 $0.25 $0.05 20.0
============================================================================
Six Months Ended
June 30, Increase /(Decrease)
----------------------
Electric kWh Sales (000): 2003 2002 Amount Percent
- ----------------------------------------------------------------------------
Retail Sales 3,715,967 3,778,167 (62,200) (1.6)
Wholesale Sales 1,737,241 2,186,047 (448,806) (20.5)
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Total 5,453,208 5,964,214 (511,006) (8.6)
============================================================================
N/M - Not Meaningful
Reclassifications have been made to prior periods to conform to the current
period's presentation.