EX-99 2 newsrelease.htm PRESS RELEASE, DATED NOVEMBER 1, 2006 Press Release, dated November 1, 2006
Exhibit 99
 
 
FOR IMMEDIATE RELEASE
November 1, 2006
Media Contact: Joe Salkowski, (520) 884-3625
Page 1 of 6
Financial Analyst Contact: Jo Smith, (520) 884-3650
  

UNISOURCE ENERGY REPORTS THIRD QUARTER 2006 EARNINGS
 
Tucson, Ariz. - UniSource Energy Corp. (NYSE: UNS) reported earnings today for the third quarter of 2006 of $28 million, or $0.80 per basic share of common stock. During the same period last year, the company reported earnings of $18 million, or $0.53 per basic share.

The strong performance of coal-fired generating plants serving Tucson Electric Power Co. (TEP), UniSource Energy's largest subsidiary, and the addition of the Luna Energy Facility (Luna) to TEP’s generating fleet contributed to the year-over-year increase in third-quarter earnings.

“Our plants provided us with a steady supply of power when we needed it the most,” said James S. Pignatelli, Chairman, President and CEO of UniSource Energy. “That output and the energy we received from Luna helped reduce our reliance on less-efficient gas-fired units and market power during periods of peak demand.”

TEP also gained access to 100 MW of system capacity from Tri-State Generation and Transmission Association (Tri-State) during the third quarter in association with the commencement of commercial operations at Springerville Generating Station (SGS) Unit 3. Tri-State, a wholesale power cooperative, is leasing the new 400-MW coal-fired unit from a financial owner and controlling its output. TEP operates all three SGS units and will do the same for SGS Unit 4, which Phoenix-based Salt River Project plans to complete by late 2009.

Last year, an unplanned outage at SGS Unit 2 and mark-to-market adjustments on forward energy transactions reduced the Company’s pre-tax earnings by $22 million during the third quarter of 2005. The absence of those negative impacts contributed significantly to the year-over-year increase in third-quarter earnings in 2006.

Cooler summer temperatures led to a slight reduction in TEP’s retail revenues during the third quarter of 2006 despite 2 percent annual growth in the utility’s customer base. Cooling degree days in TEP’s southern Arizona service territory fell 22 percent from the same period last year and were 16 percent below average.

Tucson Electric Power Co.

TEP reported earnings for the third quarter of 2006 of $30 million, or $0.84 per basic UniSource Energy share, compared with $20 million, or $0.59 per basic share, during the same period last year.

Factors affecting TEP's third quarter 2006 results include:
 
 
·  
Retail customer growth of 2 percent and a 24 percent increase in kWh sales to TEP’s mining customers was offset by mild summer weather, leading to a small decline in TEP’s retail revenues compared with the third quarter of 2005;

·  
Solid operating performance at TEP’s coal-fired generating plants and the availability of power from Luna contributed to a $10 million decrease in fuel and purchased power costs;

·  
A net unrealized gain of $1 million on forward sales and purchases of energy compared with a net unrealized loss of $8 million in the third quarter of 2005. Forward energy sales in 2005 that were made before Gulf Coast hurricanes drove up wholesale power prices, contributed to the large mark-to-market adjustment last year;

·  
A $12 million increase in operating and maintenance expenses due primarily to higher operating costs at generating plants;

·  
A $3 million contribution related to SGS Unit 3. Tri-State reimburses TEP for O&M expenses and its share of the common costs and pays transmission and operating fees. The reimbursement of O&M expenses and operating fees are recorded in other revenue, while the associated costs are recorded in fuel and O&M;

·  
A $2 million increase in expenses related to the amortization of the Transition Recovery Asset.

UNS Gas

UNS Gas reported net losses of $2 million in the third quarters of 2006 and 2005. Retail therm sales increased approximately 6 percent from the same period last year but were offset by higher fuel costs. UNS Gas’ retail customer base grew nearly 5 percent since the same period last year.

UNS Electric

UNS Electric reported earnings of $2 million in the third quarters of 2006 and 2005. This quarter’s results include a $1 million net unrealized loss related to a mark-to-market adjustment on forward energy purchases.

UNS Electric's customer base grew by about 5 percent since the same period last year.

Year-to-Date Earnings

UniSource Energy's consolidated year-to-date earnings through September 30, 2006, were $55 million, or $1.56 per basic share of common stock. During the same period last year, UniSource Energy reported earnings of $24 million, or $0.69 per basic share.
 

Earnings Per Basic Share Summary
 
 
    
3rd Quarter
    
Year-to-Date
Sept. 30,
  
Net Income (millions)
    
2006
    
2005
    
2006
    
2005
  
Tucson Electric Power
  
$
29.6
  
$
20.4
  
$
57.4
  
$
27.8
  
UNS Gas
    
(1.7
)
  
(2.1
)
  
1.7
   
2.2
 
UNS Electric
    
2.3
   
2.3
   
4.4
   
3.7
 
Other1
    
(2.0
)
  
(0.8
)
  
(5.8
)
  
(5.2
)
Consolidated Net Income
                          
from Continuing Operations
  
$
28.2
  
$
19.8
  
$
57.7
  
$
28.5
  
Discontinued Operations2
    
-
   
(1.4
)
  
(2.7
)
  
(4.4
)
Consolidated Net Income
  
$
28.2
  
$
18.4
  
$
55.0
  
$
24.1
  
                           
 
   
3rd Quarter 
  
Year-to-Date
Sept. 30,
  
Per UniSource Energy Share
    
2006
    
2005
    
2006
    
2005
  
Tucson Electric Power
  
$
0.84
  
$
0.59
  
$
1.63
  
$
0.80
  
UNS Gas
    
(0.05
)
  
(0.06
)
  
0.05
   
0.06
 
UNS Electric
    
0.07
   
0.06
   
0.12
   
0.11
 
Other1
    
(0.06
)
  
(0.02
)
  
(0.16
)
  
(0.15
)
Consolidated Net Income
                         
from Continuing Operations
    
0.80
   
0.57
 
$
1.64
  
$
0.82
  
Discontinued Operations2
    
-
   
(0.04
)
  
(0.08
)
  
(0.13
)
Consolidated Net Income
  
$
0.80
  
$
0.53
  
$
1.56
  
$
0.69
  
                           
Avg. Shares Outstanding (millions)
    
35.3
   
34.9
   
35.2
   
34.7
 
 
(1) Includes UniSource Energy on a stand-alone basis and results from Millennium Energy Holdings, Inc. (Millennium), a wholly-owned subsidiary of UniSource Energy.

(2) Relates to the discontinued operations and sale of Global Solar Energy, Inc. by Millennium on March 31, 2006.

UniSource Energy believes that the presentation of Tucson Electric Power, UNS Gas, UNS Electric, and Other net income or loss on a per basic UniSource Energy share basis, which are non-GAAP financial measures, provides useful information to investors by disclosing the results of operations of its business segments on a basis consistent with UniSource Energy's reported earnings.
 
Earnings Outlook
 
UniSource Energy affirmed its 2006 full-year earnings outlook to be between $1.75 and $2.15 per basic share.
 
Numerous factors can affect UniSource Energy's ability to reach the 2006 estimate. Factors include, but are not limited to: changes in accounting standards; uncertainties in the wholesale power market; regulatory decisions; performance of TEP's generating plants; weather; pace and strength of the regional economy; fuel and purchased power expense; changes to long-term contracts; and changes in asset depreciable lives.
 
 
UniSource Energy's earnings are subject to the seasonal energy sales of its utilities. Generally, TEP records a significant portion of its earnings during the third quarter as a result of peak energy usage during the summer.
 
Conference Call and Webcast
 
UniSource Energy officials will discuss the company's 2006 third quarter earnings and its outlook for 2006 on Thursday, Nov. 2. The conference call will be hosted by James S. Pignatelli, UniSource Energy's Chairman, President and CEO. The live telephone and audio-only webcast is scheduled for Thursday, Nov 2, beginning at 11:00 a.m. EST.
 
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 9855742. A telephone replay will be available for seven days starting November 2. To listen to the replay, dial 800-642-1687 and reference confirmation code 9855742.
 
Internet Access
 
A live audio-only webcast of the presentation is available through a link at uns.com. Listeners are encouraged to visit the Web site at least 30 minutes before the presentation to register, download and install any necessary audio software. A recording of the webcast will be available for 30 days through a link at uns.com.
 
UniSource Energy's primary subsidiaries include TEP, which serves approximately 389,000 customers in southern Arizona, and UES, a provider of natural gas and electric service for approximately 235,000 customers in northern and southern Arizona. For more information about UniSource Energy and its subsidiaries, visit uns.com.
 
This news release contains forward-looking information that involves risks and uncertainties, that include, but are not limited to: changes in accounting standards; 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 fuel and power supplies; changes to long-term contracts; performance of TEP's generating plants; the weather; changes in asset depreciable lives; changes related to the recognition of unbilled revenue; the cost of debt and equity capital; and other factors listed in UniSource Energy's Form 10-K and 10-Q filings with the Securities and Exchange Commission. The preceding factors may cause future results to differ materially from outcomes currently expected by UniSource Energy.
 
 
UNISOURCE ENERGY 2006 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)
  
2006
    
2005
    
Amount
    
Percent
  
                         
Operating Revenues
                        
Electric Retail Sales
$
298,641
  
$
296,003
  
$
2,638
    
0.9
 
Electric Wholesale Sales
  
46,488
   
30,830
   
15,658
   
50.8
 
Gas Revenue
  
20,615
   
16,231
   
4,384
   
27.0
 
Other Revenues
  
9,896
   
3,934
   
5,962
   
N/M
  
Total Operating Revenues
  
375,640
   
346,998
   
28,642
   
8.3
 
                         
Operating Expenses
                        
Fuel
  
78,301
   
66,510
   
11,791
   
17.7
 
Purchased Energy
  
91,327
   
105,982
   
(14,655
)
  
(13.8
)
Other Operations and Maintenance
  
59,856
   
49,048
   
10,808
   
22.0
 
Depreciation and Amortization
  
33,330
   
33,136
   
194
   
0.6
 
Amortization of Transition Recovery Asset
  
21,959
   
20,242
   
1,717
   
8.5
 
Taxes Other Than Income Taxes
 
10,232
   
10,248
   
(16
)
  
(0.2
)
Total Operating Expenses
  
295,005
   
285,166
   
9,839
   
3.5
 
Operating Income
  
80,635
   
61,832
   
18,803
   
30.4
 
                         
Other Income (Deductions)
                        
Interest Income
  
4,582
   
4,657
   
(75
)
  
(1.6
)
Other Income
 
1,814
   
3,261
   
(1,447
)
  
(44.4
)
Other Expense
  
(206
)
  
(25
)
  
(181
)
  
N/M
  
Total Other Income (Deductions)
  
6,190
   
7,893
   
(1,703
)
  
(21.6
)
                         
Interest Expense
                        
Long-Term Debt
  
18,855
   
18,002
   
853
   
4.7
 
Interest on Capital Leases
  
17,974
   
20,078
   
(2,104
)
  
(10.5
)
Loss on Extinguishment of Debt
  
1,080
   
-
   
1,080
   
N/M
  
Other Interest Expense
  
4,303
   
833
   
3,470
   
N/M
  
Interest Capitalized
  
(1,304
)
  
(845
)
  
(459
)
  
(54.3
)
Total Interest Expense
  
40,908
   
38,068
   
2,840
   
7.5
 
                         
Income from Continuing Operations
                       
Before Income Taxes
  
45,917
   
31,657
   
14,260
   
45.0
 
Income Tax Expense
 
17,714
   
11,856
   
5,858
   
49.4
 
                         
Income from Continuing Operations
  
28,203
   
19,801
   
8,402
   
42.4
 
Discontinued Operations - Net of Tax
  
-
   
(1,404
)
  
1,404
   
N/M
  
                         
Net Income
$
28,203
  
$
18,397
  
$
9,806
    
53.3
 
                         
Weighted-average Shares of Common Stock Outstanding (000)
  
35,308
   
34,863
   
445
   
1.3
 
                         
Basic Earnings (Loss) per Share
                        
Income from Continuing Operations
$
0.80
  
$
0.57
  
$
0.23
    
40.4
 
Discontinued Operations - Net of Tax
  
-
   
(0.04
)
  
0.04
   
N/M
  
Net Income
$
0.80
  
$
0.53
  
$
0.27
    
50.9
 
                         
Diluted Earnings (Loss) per Share
                        
Income from Continuing Operations
$
0.73
  
$
0.53
  
$
0.20
    
37.7
 
Discontinued Operations - Net of Tax
  
-
   
(0.04
)
  
0.04
   
N/M
  
Net Income
$
0.73
  
$
0.49
  
$
0.24
    
49.0
 
                         
Dividends Declared per Share
$
0.21
  
$
0.19
  
$
0.02
    
10.5
 
                         
 
  
Three Months Ended 
              
Tucson Electric Power
  
September 30,
    
Increase / (Decrease)
  
Electric MWh Sales:
  
2006
    
2005
    
Amount
    
Percent
  
Retail Sales
  
2,837,918
   
2,828,827
   
9,091
   
0.3
 
Wholesale Sales
 
797,976
   
659,776
   
138,200
   
20.9
 
Total
  
3,635,894
   
3,488,603
   
147,291
   
4.2
 
                         
 
N/M - Not Meaningful
Reclassifications have been made to prior periods to conform to the current period's presentation.
 
 
UNISOURCE ENERGY 2006 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)
  
2006
    
2005
    
Amount
    
Percent
  
                         
Operating Revenues
                        
Electric Retail Sales
$
728,697
  
$
699,378
  
$
29,319
    
4.2
 
Electric Wholesale Sales
  
137,790
   
107,881
   
29,909
   
27.7
 
Gas Revenue
  
109,150
   
88,838
   
20,312
   
22.9
 
Other Revenues
  
23,352
   
10,866
   
12,486
   
N/M
  
Total Operating Revenues
  
998,989
   
906,963
   
92,026
   
10.1
 
                         
Operating Expenses
                        
Fuel
  
197,660
   
169,664
   
27,996
   
16.5
 
Purchased Energy
  
250,417
   
239,286
   
11,131
   
4.7
 
Other Operations and Maintenance
  
175,406
   
166,964
   
8,442
   
5.1
 
Depreciation and Amortization
  
96,767
   
99,800
   
(3,033
)
  
(3.0
)
Amortization of Transition Recovery Asset
  
51,080
   
43,865
   
7,215
   
16.4
 
Taxes Other Than Income Taxes
 
35,145
   
36,037
   
(892
)
  
(2.5
)
Total Operating Expenses
  
806,475
   
755,616
   
50,859
   
6.7
 
Operating Income
  
192,514
   
151,347
   
41,167
   
27.2
 
                         
Other Income (Deductions)
                        
Interest Income
  
14,651
   
14,694
   
(43
)
  
(0.3
)
Other Income
 
5,436
   
6,064
   
(628
)
  
(10.4
)
Other Expense
  
(1,181
)
  
(2,267
)
  
1,086
   
47.9
 
Total Other Income (Deductions)
  
18,906
   
18,491
   
415
   
2.2
 
                         
Interest Expense
                        
Long-Term Debt
  
56,747
   
58,098
   
(1,351
)
  
(2.3
)
Interest on Capital Leases
  
55,047
   
59,225
   
(4,178
)
  
(7.1
)
Loss on Extinguishment of Debt
  
1,080
   
5,261
   
(4,181
)
  
(79.5
)
Other Interest Expense
  
6,876
   
2,502
   
4,374
   
N/M
  
Interest Capitalized
  
(4,652
)
  
(3,234
)
  
(1,418
)
  
(43.8
)
Total Interest Expense
  
115,098
   
121,852
   
(6,754
)
  
(5.5
)
                         
Income from Continuing Operations
                       
Before Income Taxes
  
96,322
   
47,986
   
48,336
   
N/M
  
Income Tax Expense
 
38,630
   
19,483
   
19,147
   
98.3
 
                         
Income from Continuing Operations
  
57,692
   
28,503
   
29,189
   
N/M
  
Discontinued Operations - Net of Tax
  
(2,669
)
  
(4,421
)
  
1,752
   
39.6
 
                         
Net Income
$
55,023
  
$
24,082
  
$
30,941
    
N/M
  
                         
Weighted-average Shares of Common Stock Outstanding (000)
  
35,223
   
34,734
   
489
   
1.4
 
                         
Basic Earnings (Loss) per Share
                        
Income from Continuing Operations
$
1.64
  
$
0.82
  
$
0.82
    
N/M
  
Discontinued Operations - Net of Tax
  
(0.08
)
  
(0.13
)
  
0.05
   
38.5
 
Net Income
$
1.56
  
$
0.69
  
$
0.87
    
N/M
  
                         
Diluted Earnings (Loss) per Share
                        
Income from Continuing Operations
$
1.53
  
$
0.80
  
$
0.73
    
91.3
 
Discontinued Operations - Net of Tax
  
(0.07
)
  
(0.12
)
  
0.05
   
41.7
 
Net Income
$
1.46
  
$
0.68
  
$
0.78
    
N/M
  
                         
Dividends Declared per Share
$
0.63
  
$
0.57
  
$
0.06
    
10.5
 
                         
 
Nine Months Ended 
        
Tucson Electric Power
  
September 30,
    
Increase / (Decrease)
  
Electric MWh Sales:
  
2006
    
2005
    
Amount
    
Percent
  
Retail Sales
 
7,140,479
   
6,897,412
   
243,067
   
3.5
 
Wholesale Sales
 
2,470,507
   
2,175,145
   
295,362
   
13.6
 
Total
  
9,610,986
   
9,072,557
   
538,429
   
5.9
 
                         
 
N/M - Not Meaningful
Reclassifications have been made to prior periods to conform to the current period's presentation.