UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT
(DATE OF EARLIEST EVENT REPORTED): November 22, 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
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 7.01 REGULATION FD DISCLOSURE
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), the approval of the Securities and Exchange Commission under
the Public Utility Holding Company Act of 1935 and the satisfaction of other
conditions set forth in the acquisition agreement.
On November 8, 2004, an 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.
On November 22, 2004, UniSource Energy filed exceptions (Exceptions) to
the ALJ's recommended opinion and order (ROO). In the Exceptions, UniSource
Energy vigorously disputes the ROO.
In its Exceptions, UniSource Energy states that:
o The proposed acquisition provides significant tangible benefits to
customers and communities by:
o Strengthening Tucson Electric Power Company's (TEP) balance
sheet through a substantial infusion of equity and reduction
of debt;
o Committing to future deleveraging of TEP; and
o Improving the access to capital of TEP and UniSource Energy
Services, Inc. (UES).
o In addition to the advantages noted above, UniSource Energy
offers additional tangible economic benefits to customers and
communities by:
o Extending an offer to fund $10 million of programs to be
approved by the ACC for use between 2005 and 2008 to support
customers of TEP and UES through demand side management,
weatherization and low income assistance programs (or such
other programs as directed by the ACC), which would double
TEP's historical expenditures for these programs; and
o Extending an offer to fund an additional $2.5 million in
excess of historical giving levels in cash expenditures for
charitable and community giving programs between 2005 and
2008.
o UniSource Energy has addressed perceived risks of the acquisition
by accepting all 43 conditions proposed by ACC Staff, including 3
conditions that were not previously accepted:
o a commitment to make reductions in long-term debt and
capital lease obligations of at least $500 million through
2008,
o an ACC-sponsored management and operations audit, and
o an additional condition relating to the bankruptcy
protections for TEP and UES.
o Private ownership of UniSource Energy and the existence of
Saguaro's partnership structure are consistent with good
governance. To address specific governance concerns described in
the ROO:
o UniSource Energy disclosed that Saguaro limited partners
have agreed to narrow their consent rights to further ensure
that limited partner consent is only necessary for
extraordinary events that could alter their investment; and
o Saguaro and UniSource Energy committed to increase the size
of their respective boards of directors and those of TEP and
UES.
o Saguaro's limited partners are providing the additional
information requested by certain ACC Commissioners.
In the Exceptions, UniSource Energy concluded with its belief that the
acquisition is in the public interest, provides significant tangible economic
benefits to customers and local communities and should be approved.
The Exceptions include a proposed form of ACC opinion and order
approving the acquisition.
The ACC and its Staff will set the date for an open meeting of the ACC
Commissioners to deliberate the acquisition. The ACC will then issue its own
opinion and order regarding the acquisition.
While UniSource Energy is hopeful that the ACC will recognize the
benefits of the acquisition and approve the transaction, in light of the ROO we
are unable to predict whether the required regulatory approvals will be obtained
in order to permit the transaction to close. If the required regulatory
approvals are obtained and the other closing conditions are satisfied, we would
expect to close the transaction by the end of the first quarter of 2005.
A copy of the Exceptions is posted on UniSource Energy's website at
www.unisourceenergy.com.
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.
Date: November 23, 2004 UNISOURCE ENERGY CORPORATION
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(Registrant)
/s/ Kevin P. Larson
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Vice President and Principal
Financial Officer
Date: November 23, 2004 TUCSON ELECTRIC POWER COMPANY
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(Registrant)
/s/ Kevin P. Larson
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Vice President and Principal
Financial Officer