EX-99.1 2 ex99112312013.htm EXHIBIT Ex 99.1 12.31.2013


Exhibit 99.1
 
FOR IMMEDIATE RELEASE
February 25, 2014
Media Contact: Joseph Barrios, (520) 884-3725
Page 1 of 8
Financial Analyst Contact: Chris Norman, (520) 884-3649
 
UNS ENERGY REPORTS 2013 EARNINGS, DECLARES DIVIDEND

•
UNS Energy’s net income for 2013 was $127 million, or $3.04 per diluted share of common stock, compared with net income of $91 million, or $2.20 per diluted share in 2012.

•
UNS Energy’s primary subsidiary, Tucson Electric Power Company (TEP), reported net income of $101 million million in 2013 compared with net income of $65 million in 2012. The improvement is primarily due to the non-fuel base rate increase at TEP effective on July 1, 2013, as well as a decrease in capital lease interest expense, partially offset by higher generating plant maintenance expense and expenses related to UNS Energy's pending merger with Fortis Inc. (Fortis).
 
•
UNS Energy's 2013 net income also includes: an $11.0 million reduction to income tax expense related to a regulatory asset that was recorded during the second quarter for deferred tax expenses that will be recovered in future periods; and a $3.0 million pre-tax ($1.8 million after-tax) charge to fuel expense related to a credit to retail customers that was approved in TEP's recently completed rate case. Results in 2012 include a $1.8 million pre-tax loss ($1.1 million after-tax) related to an unplanned outage at a power plant that TEP operates on behalf of another party.

•
UNS Energy's Board of Directors declared a first quarter 2014 dividend for common shareholders of 48 cents per share.

Tucson, Ariz. – UNS Energy Corporation (NYSE: UNS) today reported 2013 net income of $127 million, or $3.04 per diluted share of common stock, compared with net income of $91 million, or $2.20 per diluted share in 2012.

"I am very proud of the company's accomplishments during 2013," said Paul Bonavia, UNS Energy's Chairman and Chief Executive Officer. "We reached several significant milestones while achieving financial results that were consistent with our expectations."

Bonavia continued, "In 2013, we implemented a new rate structure at TEP with adjustor mechanisms designed to smooth out future customer bill impacts. We also executed two key phases of our integrated resource strategy with the expected addition of a modern, natural gas-fired generating facility, while blending down the future amount of coal-based resources in TEP's generating portfolio. And late last year, our Board of Directors unanimously approved a merger agreement that, if finalized, will provide our company with new financial strength, ensuring our ability to maintain safe, reliable and affordable service for our utility customers."

As previously disclosed, on December 11, 2013, UNS Energy's Board of Directors approved a definitive merger agreement with Fortis, Inc. (Fortis), Canada's largest investor-owned gas and electric distribution utility.

"Fortis shares our deep commitment to customer service and community support. They have pledged to maintain or expand our charitable giving, philanthropic partnerships and low-income assistance programs," said David Hutchens, UNS Energy's President and Chief Operating Officer.

The merger agreement calls for Fortis to acquire all of the outstanding common stock of UNS Energy for $60.25 per share in cash. The transaction is subject to the approval of regulators, including the Arizona Corporation

1


Commission (ACC) and Federal Energy Regulatory Commission; the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; and the satisfaction of customary closing conditions. UNS Energy shareholders will vote on the proposed merger at a special meeting scheduled for March 26, 2014. UNS Energy anticipates the transaction will be finalized by the end of 2014.

Tucson Electric Power

Retail kWh Sales and Revenues
TEP’s retail kWh sales increased by 0.2 percent in 2013, due in part to a 4.8 percent increase in cooling degree days when compared with 2012. The implementation of new base rates on July 1, 2013 as well as higher sales volumes, led to a $41 million, or 7.7 percent, increase in TEP’s retail margin revenues compared with 2012.

Other Expenses
TEP’s Base Operations and Maintenance (Base O&M) expense was $246 million on in 2013 compared with $234 million in 2012. The increase was due in part to scheduled and unscheduled maintenance at generating plants operated by TEP and others, as well as $6 million of expenses related to the proposed merger transaction. Base O&M excludes costs directly offset by customer surcharges and third-party reimbursements.
TEP's total interest expense declined by $9 million in 2013 primarily due to the reduction in the balance of capital lease obligations compared with the same period last year.
Other Factors
TEP's 2013 results include: an $11.0 million reduction to income tax expense related to a regulatory asset that was recorded during the second quarter for deferred tax expenses that will be recovered in future periods; and a $3.0 million pre-tax ($1.8 million after-tax) charge to fuel expense related to a credit to retail customers that was approved in TEP's recently completed rate case. Results in 2012 include a $1.8 million pre-tax loss ($1.1 million after-tax) related to an unplanned outage at a power plant that TEP operates on behalf of another party.
UNS Electric
UNS Electric reported net income of $12 million in 2013 compared with $17 million in 2012. The decrease in net income was due in part to the loss of an industrial customer and lower mining kWh sales.
UNS Gas
UNS Gas reported net income of $11 million in 2013 compared with $9 million in 2012. The increase in net income is due to a non-fuel base rate increase that was effective in May 2012 and colder weather in 2013 than in 2012.

Common Stock Dividend
UNS Energy's Board of Directors declared a first quarter dividend of 48 cents per share. The dividend will be paid on March 25, 2014, to common shareholders of record as of March 13, 2014.

The declaration of dividend payments is at the board's sole discretion and is subject to numerous factors that ordinarily affect dividend policy, including the results of UNS Energy's operations and its financial position as well as general economic and business conditions.

2




Net Income and Earnings Per Share Summary
 
 
4th Quarter
 
YTD December 31,
Net Income (Loss)
2013
 
2012
 
2013
 
2012
 
Millions of Dollars
Tucson Electric Power
$
4.9

 
$
0.5

 
$
101.3

 
$
65.5

UNS Electric
0.9

 
3.2

 
12.2

 
16.9

UNS Gas
4.5

 
4.1

 
10.9

 
9.1

Other(1)
3.2

 
(0.3
)
 
3.1

 
(0.6
)
Net Income
$
13.5

 
$
7.5

 
$
127.5


$
90.9

Avg. Basic Shares Outstanding (millions)
41.7

 
41.5

 
41.6

 
40.4

Avg. Diluted Shares Outstanding (millions)
42.1

 
41.9

 
42.0

 
41.8

 
 
4th Quarter
 
YTD December 31,
Earnings (Loss) Per UNS Energy Share
2013
 
2012
 
2013
 
2012
Tucson Electric Power
$
0.12

 
$
0.01

 
$
2.44

 
$
1.62

UNS Electric
0.02

 
0.08

 
0.29

 
0.42

UNS Gas
0.11

 
0.10

 
0.26

 
0.23

Other(1)
0.07

 
(0.01
)
 
0.07

 
(0.02
)
Net Income per Basic Share
$
0.32

 
$
0.18

 
$
3.06

 
$
2.25

Net Income per Diluted Share
$
0.32

 
$
0.18

 
$
3.04

 
$
2.20

 
(1) 
Includes UNS Energy on a stand-alone basis and results from Millennium Energy Holdings, Inc. and UniSource Energy Development, wholly owned subsidiaries of UNS Energy.
UNS Energy believes the presentation of TEP, UNS Electric and UNS Gas net income or loss on a per basic UNS 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 UNS Energy's reported earnings or losses.
Seasonality of Earnings
The net income and results of operations of TEP as well as of UNS Electric and UNS Gas – operating subsidiaries of UniSource Energy Services – are seasonal in nature. TEP and UNS Electric typically record the majority of their net income during the second and third quarters when hot weather contributes to higher energy consumption. TEP’s retail rates, which include higher charges for higher levels of energy use, also shift a larger share of the company’s earnings into those periods.
Energy demand from UNS Gas customers typically peaks during the winter. Accordingly, UNS Gas typically records the majority of its net income during the first and fourth quarters.

About UNS Energy
UNS Energy is a Tucson, Arizona-based company with consolidated assets of approximately $4 billion. TEP serves approximately 413,000 customers in southern Arizona. UES provides natural gas and electric service for approximately 243,000 customers in northern and southern Arizona. UNS Energy shares are listed on the New York Stock Exchange and trade under the symbol UNS. To learn more, visit uns.com.

3


Forward Looking Statements
Statements included in this news release and any documents incorporated by reference which are not historical in nature are intended to be, and are hereby identified as, “forward-looking statements” for purposes of the safe harbor provided by Section 21E of the Exchange Act. Forward-looking statements may be identified by words including “anticipates,” “intends,” “estimates,” “believes,” “projects,” “expects,” “plans,” “assumes,” “seeks,” and similar expressions. Forward-looking statements including, without limitation, those relating to UNS Energy Corporation’s and its subsidiaries’ future business prospects, revenues, proceeds, working capital, investment valuations, liquidity, income, and margins, as well as the timing and consequences of the Fortis acquisition, are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated in the forward-looking statements, due to several important factors, including those identified from time-to-time in the forward-looking statements. Those factors include, but are not limited to: the possibility that various conditions precedent to the consummation of the Fortis transaction will not be satisfied or waived; the ability to obtain shareholder and regulatory approvals of the Fortis transaction on the timing and terms thereof; state and federal regulatory and legislative decisions and actions; regional economic and market conditions which could affect customer growth and energy usage; weather variations affecting energy usage; the cost of debt and equity capital and access to capital markets; the performance of the stock market and changing interest rate environment, which affect the value of our pension and other retiree benefit plan assets and the related contribution requirements and expense; unexpected increases in O&M expense; resolution of pending litigation matters; changes in accounting standards; changes in critical accounting estimates; the ongoing restructuring of the electric industry; changes to long-term contracts; the cost of fuel and power supplies; cyber attacks or challenges to our information security; and the performance of TEP's generating plants; and certain presently unknown or unforeseen factors, including, but not limited to, acts of terrorism. UNS Energy Corporation and its subsidiaries undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. Given these uncertainties, undue reliance should not be placed on the forward-looking statements.




4


UNS Energy Corporation
Comparative Consolidated Statements of Income

 
Three Months Ended
 
 
 
 
(in thousands of dollars, except per share amounts)
December 31,
 
Increase / (Decrease)
(UNAUDITED)
2013
 
2012
 
Amount
 
Percent
Operating Revenues
 
 
 
 
 
 
 
Electric Retail Sales
$
234,245

 
$
236,304

 
$
(2,059
)
 
(0.9
)
Electric Wholesale Sales
42,578

 
36,946

 
5,632

 
15.2

Gas Retail Sales
39,047

 
37,512

 
1,535

 
4.1

Other Revenues
34,291

 
37,512

 
(3,221
)
 
(8.6
)
Total Operating Revenues
350,161

 
348,274

 
1,887

 
0.5

Operating Expenses
 
 
 
 
 
 
 
Fuel
79,030

 
81,899

 
(2,869
)
 
(3.5
)
Purchased Energy
63,148

 
59,618

 
3,530

 
5.9

Transmission and Other PPFAC Recoverable Costs
7,243

 
3,802

 
3,441

 
90.5

Increase (Decrease) to Reflect PPFAC/PGA Recovery Treatment
(9,498
)
 
2,516

 
(12,014
)
 
(477.5
)
Total Fuel and Purchased Energy
139,923

 
147,835

 
(7,912
)
 
(5.4
)
Operations and Maintenance
111,454

 
100,102

 
11,352

 
11.3

Depreciation
38,440

 
35,984

 
2,456

 
6.8

Amortization
5,957

 
8,939

 
(2,982
)
 
(33.4
)
Taxes Other Than Income Taxes
13,354

 
12,495

 
859

 
6.9

Total Operating Expenses
309,128

 
305,355

 
3,773

 
1.2

Operating Income
41,033

 
42,919

 
(1,886
)
 
(4.4
)
Other Income (Deductions)
 
 
 
 
 
 
 
Interest Income
503

 
125

 
378

 
302.4

Other Income
2,334

 
1,074

 
1,260

 
117.3

Other Expense
(1,645
)
 
(6,217
)
 
4,572

 
(73.5
)
Appreciation (Depreciation) in Fair Value of Investments
969

 
271

 
698

 
257.6

Total Other Income (Deductions)
2,161

 
(4,747
)
 
6,908

 
(145.5
)
Interest Expense
 
 
 
 
 
 
 
Long-Term Debt
17,646

 
18,098

 
(452
)
 
(2.5
)
Capital Leases
6,319

 
8,507

 
(2,188
)
 
(25.7
)
Other Interest Expense
355

 
271

 
84

 
31.0

Interest Capitalized
(1,131
)
 
(507
)
 
(624
)
 
123.1

Total Interest Expense
23,189

 
26,369

 
(3,180
)
 
(12.1
)
Income Before Income Taxes
20,005

 
11,803

 
8,202

 
69.5

Income Tax Expense
6,480

 
4,298

 
2,182

 
50.8

Net Income
13,525

 
7,505

 
6,020

 
80.2

Weighted-Average Shares of Common Stock Outstanding (000)
 
 
 
 
 
 
 
Basic
41,684

 
41,500

 
184

 
0.4

Diluted
42,077

 
41,867

 
210

 
0.5

Earnings Per Share
 
 
 
 
 
 
 
Basic
$
0.32

 
$
0.18

 
$
0.14

 
77.8

Diluted
$
0.32

 
$
0.18

 
$
0.14

 
77.8

Dividends Declared Per Share
$
0.435

 
$
0.43

 
$
0.005

 
1.2




5


UNS Energy Corporation
Comparative Consolidated Statements of Income

(in thousands of dollars, except per share amounts)
Year Ended December 31,
 
Increase / (Decrease)
(UNAUDITED)
2013
 
2012
 
Amount
 
Percent
Operating Revenues
 
 
 
 
 
 
 
Electric Retail Sales
$
1,102,769

 
$
1,087,279

 
$
15,490

 
1.4

Electric Wholesale Sales
135,160

 
125,414

 
9,746

 
7.8

Gas Retail Sales
125,478

 
123,133

 
2,345

 
1.9

Other Revenues
121,153

 
125,940

 
(4,787
)
 
(3.8
)
Total Operating Revenues
1,484,560

 
1,461,766

 
22,794

 
1.6

Operating Expenses
 
 
 
 
 
 
 
Fuel
332,279

 
327,832

 
4,447

 
1.4

Purchased Energy
252,532

 
224,696

 
27,836

 
12.4

Transmission and Other PPFAC Recoverable Costs
23,012

 
14,540

 
8,472

 
58.3

Increase (Decrease) to Reflect PPFAC/PGA Recovery Treatment
(16,313
)
 
32,246

 
(48,559
)
 
(150.6
)
Total Fuel and Purchased Energy
591,510

 
599,314

 
(7,804
)
 
(1.3
)
Operations and Maintenance
389,699

 
383,689

 
6,010

 
1.6

Depreciation
149,615

 
141,303

 
8,312

 
5.9

Amortization
27,557

 
35,784

 
(8,227
)
 
(23.0
)
Taxes Other Than Income Taxes
54,683

 
49,881

 
4,802

 
9.6

Total Operating Expenses
1,213,064

 
1,209,971

 
3,093

 
0.3

Operating Income
271,496

 
251,795

 
19,701

 
7.8

Other Income (Deductions)
 
 
 
 
 
 
 
Interest Income
534

 
1,106

 
(572
)
 
(51.7
)
Other Income
7,880

 
4,928

 
2,952

 
59.9

Other Expense
(3,463
)
 
(7,723
)
 
4,260

 
(55.2
)
Appreciation in Fair Value of Investments
2,833

 
1,892

 
941

 
49.7

Total Other Income (Deductions)
7,784

 
203

 
7,581

 
3,734.5

Interest Expense
 
 
 
 
 
 
 
Long-Term Debt
71,180

 
71,909

 
(729
)
 
(1.0
)
Capital Leases
25,140

 
33,613

 
(8,473
)
 
(25.2
)
Other Interest Expense
538

 
1,983

 
(1,445
)
 
(72.9
)
Interest Capitalized
(3,483
)
 
(2,153
)
 
(1,330
)
 
61.8

Total Interest Expense
93,375

 
105,352

 
(11,977
)
 
(11.4
)
Income Before Income Taxes
185,905

 
146,646

 
39,259

 
26.8

Income Tax Expense
58,427

 
55,727

 
2,700

 
4.8

Net Income
$
127,478

 
$
90,919

 
$
36,559

 
40.2

Weighted-Average Shares of Common Stock Outstanding (000)
 
 
 
 
 
 
 
Basic
41,618

 
40,362

 
1,256

 
3.1

Diluted
41,975

 
41,755

 
220

 
0.5

Earnings Per Share
 
 
 
 
 
 
 
Basic
$
3.06

 
$
2.25

 
$
0.81

 
36.0

Diluted
$
3.04

 
$
2.20

 
$
0.84

 
38.2

Dividends Declared Per Share
$
1.74

 
$
1.72

 
$
0.02

 
1.2


6


Tucson Electric Power Company
Comparative Consolidated Statements of Income

 
Three Months Ended
 
 
 
 
(in thousands of dollars, except per share amounts)
December 31,
 
Increase / (Decrease)
(UNAUDITED)
2013
 
2012
 
Amount
 
Percent
Operating Revenues
 
 
 
 
 
 
 
Electric Retail Sales
$
195,210

 
$
198,886

 
$
(3,676
)
 
(1.8
)
Electric Wholesale Sales
41,997

 
33,706

 
8,291

 
24.6

Other Revenues
36,230

 
38,761

 
(2,531
)
 
(6.5
)
Total Operating Revenues
273,437

 
271,353

 
2,084

 
0.8

Operating Expenses
 
 
 
 
 
 
 
Fuel
78,488

 
80,971

 
(2,483
)
 
(3.1
)
Purchased Power
22,636

 
18,073

 
4,563

 
25.2

Transmission and Other PPFAC Recoverable Costs
4,697

 
1,445

 
3,252

 
225.1

Increase (Decrease) to Reflect PPFAC Recovery Treatment
(7,379
)
 
5,962

 
(13,341
)
 
(223.8
)
Total Fuel and Purchased Energy
98,442

 
106,451

 
(8,009
)
 
(7.5
)
Operations and Maintenance
96,151

 
86,462

 
9,689

 
11.2

Depreciation
30,347

 
28,274

 
2,073

 
7.3

Amortization
6,902

 
9,872

 
(2,970
)
 
(30.1
)
Taxes Other Than Income Taxes
10,581

 
9,998

 
583

 
5.8

Total Operating Expenses
242,423

 
241,057

 
1,366

 
0.6

Operating Income
31,014

 
30,296

 
718

 
2.4

Other Income (Deductions)
 
 
 
 
 
 
 
Interest Income
106

 
39

 
67

 
171.8

Other Income
1,866

 
912

 
954

 
104.6

Other Expense
(3,221
)
 
(8,689
)
 
5,468

 
(62.9
)
Appreciation (Depreciation) in Fair Value of Investments
969

 
271

 
698

 
257.6

Total Other Income (Deductions)
(280
)
 
(7,467
)
 
7,187

 
(96.3
)
Interest Expense
 
 
 
 
 
 
 
Long-Term Debt
13,966

 
14,476

 
(510
)
 
(3.5
)
Capital Leases
6,319

 
8,507

 
(2,188
)
 
(25.7
)
Other Interest Expense
173

 
108

 
65

 
60.2

Interest Capitalized
(883
)
 
(400
)
 
(483
)
 
120.8

Total Interest Expense
19,575

 
22,691

 
(3,116
)
 
(13.7
)
Income Before Income Taxes
11,159

 
138

 
11,021

 
7,986.2

Income Tax Expense (Benefit)
6,249

 
(314
)
 
6,563

 
(2,090.1
)
Net Income (Loss)
4,910

 
452

 
4,458

 
986.3



7


Tucson Electric Power Company
Comparative Consolidated Statements of Income

(in thousands of dollars, except per share amounts)
Year Ended December 31,
 
Increase / (Decrease)
(UNAUDITED)
2013
 
2012
 
Amount
 
Percent
Operating Revenues
 
 
 
 
 
 
 
Electric Retail Sales
$
934,357

 
$
915,879

 
$
18,478

 
2.0

Electric Wholesale Sales
132,500

 
111,194

 
21,306

 
19.2

Other Revenues
129,833

 
134,587

 
(4,754
)
 
(3.5
)
Total Operating Revenues
1,196,690

 
1,161,660

 
35,030

 
3.0

Operating Expenses
 
 
 
 

 


Fuel
325,903

 
318,901

 
7,002

 
2.2

Purchased Power
112,452

 
80,137

 
32,315

 
40.3

Transmission and Other PPFAC Recoverable Costs
12,233

 
5,722

 
6,511

 
113.8

Increase (Decrease) to Reflect PPFAC Recovery Treatment
(12,458
)
 
31,113

 
(43,571
)
 
(140.0
)
Total Fuel and Purchased Energy
438,130

 
435,873

 
2,257

 
0.5

Operations and Maintenance
335,321

 
334,553

 
768

 
0.2

Depreciation
118,076

 
110,931

 
7,145

 
6.4

Amortization
31,294

 
39,493

 
(8,199
)
 
(20.8
)
Taxes Other Than Income Taxes
43,498

 
40,323

 
3,175

 
7.9

Total Operating Expenses
966,319

 
961,173

 
5,146

 
0.5

Operating Income
230,371

 
200,487

 
29,884

 
14.9

Other Income (Deductions)
 
 
 
 

 


Interest Income
120

 
136

 
(16
)
 
(11.8
)
Other Income
5,770

 
3,953

 
1,817

 
46.0

Other Expense
(10,715
)
 
(13,574
)
 
2,859

 
(21.1
)
Appreciation (Depreciation) in Fair Value of Investments
2,833

 
1,892

 
941

 
49.7

Total Other Income (Deductions)
(1,992
)
 
(7,593
)
 
5,601

 
(73.8
)
Interest Expense
 
 
 
 

 

Long-Term Debt
56,378

 
55,038

 
1,340

 
2.4

Capital Leases
25,140

 
33,613

 
(8,473
)
 
(25.2
)
Other Interest Expense
87

 
1,446

 
(1,359
)
 
(94.0
)
Interest Capitalized
(2,554
)
 
(1,782
)
 
(772
)
 
43.3

Total Interest Expense
79,051

 
88,315

 
(9,264
)
 
(10.5
)
Income Before Income Taxes
149,328

 
104,579

 
44,749

 
42.8

Income Tax Expense (Benefit)
47,986

 
39,109

 
8,877

 
22.7

Net Income (Loss)
$
101,342

 
$
65,470

 
$
35,872

 
54.8










8