Exhibit 99
UNISOURCE ENERGY NEWS
FOR IMMEDIATE RELEASE October 23, 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 THIRD QUARTER OF 2003
Tucson, Ariz. - UniSource Energy Corporation (NYSE: UNS) reported net
income for the third quarter of 2003 of $26.7 million, or $0.79 per
share of common stock.
Reported quarterly net income increased $3.9 million, or 17 percent,
over the same period last year. The increase is due in part to a 7
percent rise in retail revenues at Tucson Electric Power (TEP),
UniSource Energy's principal subsidiary.
"We provided our growing customer base with record levels of power
during a hot summer, bolstering our earnings and providing our
customers with the high level of reliable service they've come to
expect," said James S. Pignatelli, Chairman, President and CEO of
UniSource Energy.
Warmer temperatures and the continuing growth of TEP's customer base
during the third quarter of 2003 led to a 7 percent increase in
retail kWh sales over the same period last year. Higher energy use
by its retail customers left the utility with less power to sell,
leading to a 38 percent reduction in wholesale kWh sales compared
to the third quarter of 2002. Unplanned plant outages also had a
greater impact on earnings this past quarter compared to the same
period last year. Last year's results included an $11.3 million
coal contract termination fee at TEP and various tax benefits of $4.8
million.
UniSource Energy's interest expense rose $4.2 million in the third
quarter of 2003 compared to the same period last year. The increase
was driven by higher debt facility costs at TEP and the cost of
financing used to purchase Arizona gas and electric system assets
from Citizens Communications Company (NYSE: CZN) on Aug. 11, 2003.
UniSource Energy Services (UES), a new subsidiary formed to run the
systems acquired from Citizens, was slightly accretive to third
quarter earnings during less than two months of operations. "The
transition from Citizens to UES has gone very smoothly," Pignatelli
said, "and we're looking forward to solid performance from UES for
years to come."
TUCSON ELECTRIC POWER COMPANY
TEP reported net income of $31.5 million, or $0.93 per UniSource
Energy share, in the third quarter of 2003, compared to $26.6
million, or $0.79 per UniSource Energy share, in the third quarter of
2002.
Total retail revenues reached $229.7 million during the third quarter
of 2003, a 7 percent increase over the same quarter last year. Sales
volumes to residential and commercial
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UNISOURCE ENERGY REPORTS EARNINGS October 23, 2003
Page 2 of 6
customers increased by 10 percent and 8 percent, respectively,
compared to last year. Sales to industrial and mining customers
increased a combined 2 percent during the quarter compared to the
same period last year.
Cooling degree days in TEP's service territory increased 9 percent
over the third quarter of 2002. The utility's growing customer base
also contributed to increased sales. TEP's average number of retail
customers reached 364,363 in the third quarter of 2003, a 2 percent
increase over the third quarter of 2002. Wholesale revenues fell to
$32 million, a 22 percent reduction from the third quarter of 2002.
The combined cost of fuel and purchased power in the third quarter of
2003 increased $5 million, or 6 percent, over the same period last
year. The average around the clock price of wholesale power on the
Dow Jones Palo Verde Index was $46 per megawatt hour (MWh) during the
third quarter of 2003, up from $28 per MWh during the same period
last year. The average cost of natural gas, meanwhile, rose 76
percent between those two periods.
UNISOURCE ENERGY SERVICES
UES reported net income of $0.1 million in the third quarter of 2003.
Third quarter results include operations from Aug. 11, 2003, through
the end of the quarter.
Total revenues from UES electric operations reached $23.7 million
during the third quarter of 2003. Total revenues from UES gas
operations reached $10.3 million during the third quarter, including
$6.2 million in retail sales and $3.8 million in contracted supply
agreements.
MILLENNIUM ENERGY HOLDINGS (MEH)
MEH reported a $2.7 million loss, or $0.08 per UniSource Energy
share, in the third quarter of 2003, compared to $2.8 million in
losses, or $0.08 per UniSource Energy share, in the same period last
year. Losses last year were reduced by a $1.5 million tax benefit.
Global Solar Energy reported a $1.5 million loss during the quarter,
an improvement over the $3.3 million loss during the same quarter
last year. Losses at Infinite Power Solutions were $0.4 million in
the third quarter of 2003 compared to $0.8 million during the same
period last year. Operating expenses at other subsidiaries offset
modest earnings recorded by Southwest Energy Solutions and
Millennium Environmental Group.
YEAR TO DATE
UniSource Energy's consolidated year-to-date earnings through Sep.
30, 2003, were $84.5 million, or $2.50 per share, compared to $28.4
million, or $0.84 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 impact
of FAS 143, UniSource Energy's consolidated year-to-date earnings
through Sep. 30, 2003, were $17.0 million, or $0.50 per share.
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UNISOURCE ENERGY REPORTS EARNINGS October 23, 2003
Page 3 of 6
TEP's year-to-date earnings through Sep. 30, 2003, were $103.0
million, or $3.05 per UniSource Energy share, compared to $42.1
million, or $1.25 per UniSource Energy share, during the same period
last year. Excluding the impact of FAS 143, TEP's year-to-date
earnings through Sep. 30, 2003, were $35.5 million, or $1.05 per
UniSource Energy share.
MEH's year-to-date loss through Sep. 30, 2003, was $12.1 million, or
$0.36 per UniSource Energy share, compared to $10.5 million, or $0.31
per UniSource Energy share, during the same period last year.
EARNINGS PER SHARE SUMMARY
3rd Quarter
PER UNISOURCE ENERGY SHARE 2003 2002
----------------------
Tucson Electric Power $0.93 $0.79
UniSource Energy Services - -
Millennium Energy Holdings (0.08) (0.08)
Inter-Company and Other (0.06) (0.03)
- --------------------------------------------------------------------------------
UniSource Energy Consolidated $0.79 $0.68
Average Shares Outstanding (millions) 33.8 33.7
PER UNISOURCE ENERGY SHARE Year-to-Date Sep 30,
2003 2002
-----------------------
Tucson Electric Power $1.05 $1.25
UniSource Energy Services - -
Millennium Energy Holdings (0.36) (0.31)
Inter-Company and Other (0.19) (0.10)
- --------------------------------------------------------------------------------
Income Before Cumulative Effect
Of Accounting Change $0.50 $0.84
Cumulative Effect of Accounting
Change - Net of Tax $2.00 -
- --------------------------------------------------------------------------------
UniSource Energy Consolidated $2.50 $0.84
Average Shares Outstanding (millions) 33.8 33.7
EARNINGS OUTLOOK
UniSource Energy expects its 2003 full-year earnings will be within
the projected range of $2.90 - $3.20 per share, including the $2.00
per share impact of adopting Financial Accounting Standard 143 (FAS
143).
UniSource Energy management currently estimates that its 2004 full-
year earnings will be between $1.25 to 1.60 per share.
Numerous factors can affect UniSource Energy's ability to reach the
2003 and 2004 estimates. The factors include, but are not limited
to: uncertainties prevailing in the
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UNISOURCE ENERGY REPORTS EARNINGS October 23, 2003
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wholesale power market; regulatory decisions; performance of TEP's
generating plants; the ability to recognize a development fee
related to the construction of Springerville Generating Station
Unit 3; 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 its utilities' 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.
THIRD QUARTER 2003 EARNINGS CONFERENCE CALL AND WEBCAST
UniSource Energy officials will discuss the company's third quarter
2003 earnings on Friday, October 24 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 3500389. A
telephone replay will be available for seven days starting October
24, 2003. To listen to the replay, dial (800) 642-1687 and reference
confirmation code 3500389.
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;
UniSource Energy Services, provider of natural gas and electric
service in northern and southern Arizona; 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 cost
of debt and equity capital; changes in accounting standards; weather
variations affecting customer usage; and other factors listed in
UniSource Energy's Form 10K and 10Q filings with the Securities and
Exchange Commission. 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 October 23, 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
September 30, Increase /(Decrease)
----------------------
(UNAUDITED) 2003 2002 Amount Percent
- ----------------------------------------------------------------------------
Operating Revenues
Electric Retail Sales $ 253,391 $ 214,432 $ 38,959 18.2
Electric Wholesale Sales 32,297 41,125 (8,828) (21.5)
Gas Revenue 10,336 - 10,336 N/M
Net Gain on TEP Forward
Contracts and MEG
Trading Activities 863 375 488 N/M
Other Revenues 5,911 2,833 3,078 N/M
- ----------------------------------------------------------------------------
Total Operating Revenues 302,798 258,765 44,033 17.0
- ----------------------------------------------------------------------------
Operating Expenses
Fuel 64,247 58,422 5,825 10.0
Purchased Energy 47,200 23,345 23,855 N/M
Coal Contract Termination
Fee - 11,250 (11,250) N/M
Other Operations and
Maintenance 48,597 46,668 1,929 4.1
Depreciation and
Amortization 34,032 31,107 2,925 9.4
Amortization of Transition
Recovery Asset 13,472 10,790 2,682 24.9
Taxes Other Than Income
Taxes 12,676 11,753 923 7.9
- ----------------------------------------------------------------------------
Total Operating Expenses 220,224 193,335 26,889 13.9
- ----------------------------------------------------------------------------
Operating Income 82,574 65,430 17,144 26.2
- ----------------------------------------------------------------------------
Other Income (Deductions)
Interest Income 5,090 5,231 (141) (2.7)
Other Income 1,358 2,113 (755) (35.7)
Other Expense (950) (2,571) 1,621 63.0
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Total Other Income
(Deductions) 5,498 4,773 725 15.2
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Interest Expense
Long-Term Debt 20,532 16,025 4,507 28.1
Interest on Capital Leases 21,257 21,944 (687) (3.1)
Other Interest Expense,
Net of Amounts
Capitalized 603 208 395 N/M
- ----------------------------------------------------------------------------
Total Interest Expense 42,392 38,177 4,215 11.0
- ----------------------------------------------------------------------------
Income Before Income Taxes 45,680 32,026 13,654 42.6
Income Tax Expense 18,996 9,207 9,789 N/M
- ----------------------------------------------------------------------------
Net Income $ 26,684 $ 22,819 $ 3,865 16.9
============================================================================
Average Shares of Common
Stock Outstanding (000) 33,838 33,692 146 0.4
============================================================================
Basic Earnings per Share $0.79 $0.68 $0.11 16.2
============================================================================
Diluted Earnings per Share $0.78 $0.67 $0.11 16.4
============================================================================
Dividends Paid per Share $0.15 $0.125 $0.025 20.0
============================================================================
Three Months Ended
September 30, Increase /(Decrease)
Tucson Electric Power ----------------------
Electric kWh Sales (000): 2003 2002 Amount Percent
- ----------------------------------------------------------------------------
Retail Sales 2,643,174 2,475,712 167,462 6.8
Wholesale Sales 638,862 1,024,457 (385,595) (37.6)
- ----------------------------------------------------------------------------
Total 3,282,036 3,500,169 (218,133) (6.2)
============================================================================
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 October 23, 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)
Nine Months Ended
September 30, Increase /(Decrease)
----------------------
(UNAUDITED) 2003 2002 Amount Percent
- ----------------------------------------------------------------------------
Operating Revenues
Electric Retail Sales $ 557,174 $ 521,064 $ 36,110 6.9
Electric Wholesale Sales 107,994 125,911 (17,917) (14.2)
Gas Revenue 10,336 - 10,336 N/M
Net Gain on TEP Forward
Contracts and MEG Trading
Activities 318 936 (618) (66.0)
Other Revenues 12,850 10,672 2,178 20.4
- ----------------------------------------------------------------------------
Total Operating Revenues 688,672 658,583 30,089 4.6
- ----------------------------------------------------------------------------
Operating Expenses
Fuel 162,512 164,937 (2,425) (1.5)
Purchased Energy 80,898 46,909 33,989 72.5
Coal Contract Termination
Fee - 11,250 (11,250) N/M
Other Operations and
Maintenance 150,243 140,890 9,353 6.6
Depreciation and
Amortization 95,472 96,075 (603) (0.6)
Amortization of Transition
Recovery Asset 24,842 20,311 4,531 22.3
Taxes Other Than Income
Taxes 35,419 34,704 715 2.1
- ----------------------------------------------------------------------------
Total Operating Expenses 549,386 515,076 34,310 6.7
- ----------------------------------------------------------------------------
Operating Income 139,286 143,507 (4,221) (2.9)
- ----------------------------------------------------------------------------
Other Income (Deductions)
Interest Income 15,380 14,913 467 3.1
Other Income 3,440 4,657 (1,217) (26.1)
Other Expense (3,242) (6,213) 2,971 47.8
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Total Other Income
(Deductions) 15,578 13,357 2,221 16.6
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Interest Expense
Long-Term Debt 58,917 48,115 10,802 22.5
Interest on Capital Leases 62,791 65,896 (3,105) (4.7)
Other Interest Expense,
Net of Amounts
Capitalized 903 799 104 13.0
- ----------------------------------------------------------------------------
Total Interest Expense 122,611 114,810 7,801 6.8
- ----------------------------------------------------------------------------
Income Before Income Taxes
and Cumulative Effect of
Accounting Change 32,253 42,054 (9,801) (23.3)
Income Tax Expense 15,187 13,661 1,526 11.2
- ----------------------------------------------------------------------------
Income Before Cumulative
Effect of Accounting
Change 17,066 28,393 (11,327) (39.9)
Cumulative Effect of
Accounting Change - Net
of Tax 67,471 - 67,471 N/M
- ----------------------------------------------------------------------------
Net Income $ 84,537 $ 28,393 $ 56,144 N/M
============================================================================
Average Shares of Common
Stock Outstanding (000) 33,799 33,654 145 0.4
============================================================================
Basic Earnings per Share
Income Before Cumulative
Effect of Accounting
Change $0.50 $0.84 $(0.34) (40.5)
Cumulative Effect of
Accounting Change - Net
of Tax $2.00 - $2.00 N/M
Net Income $2.50 $0.84 $1.66 N/M
============================================================================
Diluted Earnings per Share
Income Before Cumulative
Effect of Accounting
Change $0.50 $0.83 $(0.33) (39.8)
Cumulative Effect of
Accounting Change - Net
Of Tax $1.97 - $1.97 N/M
Net Income $2.47 $0.83 $1.64 N/M
============================================================================
Dividends Paid per Share $0.45 $0.375 $0.075 20.0
============================================================================
Nine Months Ended
September 30, Increase /(Decrease)
Tucson Electric Power ----------------------
Electric kWh Sales (000): 2003 2002 Amount Percent
- ----------------------------------------------------------------------------
Retail Sales 6,359,142 6,253,878 105,264 1.7
Wholesale Sales 2,376,103 3,210,505 (834,402) (26.0)
- ----------------------------------------------------------------------------
Total 8,735,245 9,464,383 (729,138) (7.7)
============================================================================
N/M - Not Meaningful
Reclassifications have been made to prior periods to conform to the current
period's presentation.