UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED: November 8, 2004)
IRS Employer
Commission Registrant; State of Incorporation; Identification
File Number Address; and Telephone Number Number
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1-13739 UNISOURCE ENERGY CORPORATION 86-0786732
(An Arizona Corporation)
One South Church Avenue, Suite 100
Tucson, AZ 85701
(520) 571-4000
1-5924 TUCSON ELECTRIC POWER COMPANY 86-0062700
(An Arizona Corporation)
One South Church Avenue, Suite 100
Tucson, AZ 85701
(520) 571-4000
ITEM 7.01 REGULATION FD DISCLOSURE
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In November 2003, UniSource Energy entered into an acquisition
agreement that provides for the acquisition of all of UniSource Energy's
outstanding common stock for $25.25 per share by an affiliate of Saguaro
Utility Group L.P. (Saguaro), an Arizona limited partnership whose general
partner is Sage Mountain, L.L.C. and whose limited partners include investment
funds associated with Kohlberg Kravis Roberts & Co., L.P., J.P. Morgan Partners,
LLC, and Wachovia Capital Partners.
The acquisition still requires the approval of the Arizona Corporation
Commission (ACC).
On November 8, 2004, an ACC administrative law judge (ALJ), appointed
by the ACC to review the acquisition, recommended that the ACC deny the
application of UniSource Energy seeking approval for the acquisition. The ALJ's
recommendation was contained in a form of opinion and order which concludes that
the acquisition is not in the public interest.
Listed below are a series of questions and answers regarding the status
of the proposed acquisition.
Q: What is UniSource Energy's response to the ALJ's recommendation?
A: UniSource Energy vigorously disputes the ALJ's recommendation, which is
not binding on the ACC. UniSource Energy believes the transaction would
provide significant benefits for its customers and communities. The
ACC's rules permit the filing of exceptions to the ALJ's recommendation
and UniSource Energy intends to file exceptions.
Q: Are the ACC Commissioners bound by the ALJ's recommendation?
A: No. The ACC Commissioners are not bound by the ALJ's recommendation and
may change it, deny it or accept it as written. Following the filing of
exceptions, the ACC and its staff will set the date for an open meeting
of the ACC to deliberate the acquisition. The ACC will then issue its
own opinion and order regarding the acquisition.
Q: How often do the ACC Commissioners make rulings opposing or modifying
an ALJ recommendation?
A: While it is unusual for the ACC Commissioners to reject the
recommendation of an ALJ, it is not unprecedented. The ACC
Commissioners commonly modify the provisions of recommended orders
prior to adopting them.
Q: Does the proposed acquisition provide immediate benefits to UniSource
Energy's utility customers?
A: Yes. We believe the proposed acquisition would provide significant
benefits to UniSource Energy's customers, communities, employees and
shareholders. Moreover, the more than 40 conditions to the acquisition
that UniSource Energy has agreed to in the ACC proceeding, provide
additional assurances and verification that the benefits and
protections built into the proposed acquisition will be realized.
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Q: What happens if the ACC requires UniSource Energy to lower its utility
rates as a condition of the acquisition?
A: The acquisition agreement does not provide for a reduced price to the
UniSource Energy shareholders in the event of rate concessions. If the
ACC imposed rate concessions, then, under the acquisition agreement,
Saguaro could terminate the agreement and UniSource Energy would be
obligated to reimburse up to $7 million of Saguaro's expenses.
Q: The ALJ recommended a finding that the proposed acquisition does not
meet the standard of affiliated interest rule R-14-2-803c. What
standard is included in that rule?
A: Essentially, the rule says that the ACC may reject the proposal if it
determines that the proposal would impair the financial status of the
utility, otherwise prevent it from attracting capital at fair and
reasonable terms, or impair the ability of the public utility to
provide safe, reasonable and adequate service. We believe the evidence
presented clearly demonstrates that the standard has been met.
Q: What termination fees would UniSource Energy be required to pay if the
ACC fails to approve the proposed acquisition?
A: In the event that the ACC denies the acquisition, issues an order
approving the acquisition which does not satisfy the conditions of the
acquisition agreement or fails to approve the transaction by March 31,
2005, Saguaro may terminate the acquisition agreement and UniSource
Energy would be obligated to reimburse up to $7 million of Saguaro's
expenses.
Q: What additional regulatory approvals are required?
A: In addition to approval by the ACC, the acquisition still requires
approval from the Securities and Exchange Commission under the Public
Utility Holding Company Act. The requirements under the
Hart-Scott-Rodino Antitrust Improvements Act were satisfied on March
19,2004. On October 12, 2004, the Federal Energy Regulatory Commission
issued anorder approving the proposed acquisition and concluded that
the proposed acquisition was "consistent with the public interest."
Q: Is UniSource Energy planning to pay a 4th quarter dividend to its
shareholders?
A: The acquisition agreement allows UniSource Energy to continue to pay
regular quarterly cash dividends until the closing of the acquisition,
subject to limitations upon its ability to increase the amount of such
dividends. UniSource Energy's Board of Directors will decide on the
quarterly cash dividends on UniSource Energy's Common Stock in
December.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature for each undersigned
company shall be deemed to relate only to matters having reference to such
company or its subsidiaries.
UNISOURCE ENERGY CORPORATION
(Registrant)
/s/ Kevin P. Larson
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Date: November 10, 2004 Vice President and Principal
Financial Officer
TUCSON ELECTRIC POWER COMPANY
(Registrant)
/s/ Kevin P. Larson
Date: November 10, 2004 -----------------------------------
Vice President and Principal
Financial Officer
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