As filed with the Securities and Exchange Commission on August 6, 1998
Registration No. 333-31043-99
=======================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
UNISOURCE ENERGY CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
ARIZONA 86-0786732
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
220 WEST SIXTH STREET
TUCSON, ARIZONA 85701
(520) 571-4000
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
Dennis R. Nelson, Esq. John T. Hood, Esq.
UniSource Energy Corporation J. Anthony Terrell, Esq.
220 West Sixth Street Thelen Reid & Priest LLP
Tucson, Arizona 85701 40 West 57th Street
(520) 571-4000 (212) 603-2000
(Names, Addresses, Including Zip Codes, and Telephone Numbers,
Including Area Codes, of Agents for Service)
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON
SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE
DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
EXPLANATORY NOTE
On May 26, 1995, the shareholders of Tucson Electric Power
Company ("TEP") voted to approve, and on January 1, 1998 there
became effective, a statutory share exchange to change the
corporate organization of TEP into a holding company structure
whereby the outstanding shares of TEP common were exchanged, on a
share-for-share basis, for shares of Common Stock (the "Common
Stock") of UniSource Energy Corporation (the "Company"). This
transaction resulted in TEP becoming a subsidiary of UniSource
Energy Corporation which became the holder of all of the
outstanding common stock of TEP, and the holders of outstanding
TEP common stock became the holders of Common Stock.
Pursuant to Rule 414(d) under the Securities Act, the
Company hereby expressly adopts as its own, for all purposes of
the Securities Act and the Exchange Act, this Registration
Statement applicable to the Investment Plus Plan previously filed
by TEP.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR
AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES
HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE
ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY
SALE OF THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER,
SOLICITATION, OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION.
SUBJECT TO COMPLETION AUGUST , 1998
--
P R O S P E C T U S
UNISOURCE ENERGY CORPORATION
INVESTMENT PLUS PLAN
1,000,000 SHARES
COMMON STOCK
WITHOUT PAR VALUE
---------------
The Investment Plus Plan (the "Plan") of UniSource Energy
Corporation (the "Company") provides a simple and convenient
method of investing in the Company's common stock, without par
value (the "Common Stock"), without brokerage commissions or
service charges. Anyone, whether or not a current shareholder of
the Company, is eligible to join the Plan (subject to certain
legal restrictions).
The Plan is designed to promote long-term ownership among
investors who are committed to building their ownership of Common
Stock over time. Interested investors may enroll by making an
Initial Investment of $250 or more. Once enrolled, investors are
eligible to make additional Optional Investments as frequently as
twice per month of $50 or more to purchase additional shares of
Common Stock.
To enroll in the Plan, simply complete a Direct Stock
Purchase Plan New Enrollment Form (an "Enrollment Form") and
return it in the envelope provided. Enrollment in the Plan is
entirely voluntary and participants in the Plan may terminate
their participation at any time.
PARTICIPANTS IN THE PLAN MAY:
. Make optional investments by electronic funds transfer
(monthly)
. Make optional investments by check (twice monthly)
. Make gifts of shares from their Plan account
. Deposit share certificates for safekeeping
. Receive, upon written request, certificates of whole
shares credited to their Plan account
. Sell shares of stock credited to their Plan account,
paying a reduced commission
Participants do not pay any fees for purchases of Common
Stock under the Plan. However, the Participant pays brokerage
commissions and any applicable taxes for any sale of shares. See
"Costs."
To the extent required by applicable law in certain
jurisdictions, shares of Common Stock offered under the Plan to
persons not presently shareholders of record are offered only
through a registered broker/dealer in such jurisdictions. The
Company has selected The Bank of New York as the Plan
Administrator. The Bank of New York uses BNY ESI & Co., a
<PAGE>
wholly-owned subsidiary of The Bank of New York Company, Inc., as
the registered broker/dealer through whom Common Stock will be
offered in such instances and for all Plan trading activity.
On May 26, 1995, the shareholders of Tucson Electric Power
Company ("TEP") voted to change the corporate organization of TEP
into a holding company structure. On January 1, 1998, a
statutory share exchange took place where the holders of TEP
common stock automatically became owners of Common Stock. Any
outstanding shares of TEP common stock were automatically
exchanged, on a share-for-share basis, for shares of Common
Stock. Shareholders were not required to take any action to
effect this exchange, as TEP stock certificates automatically
represent shares of the Company.
TEP's Dividend Reinvestment and Common Stock Purchase Plan
(the "Prior Plan"), which was suspended in 1990 with respect to
optional cash payments, has been amended and restated and
constitutes a part of this Plan. EACH PARTICIPANT IN THE PRIOR
PLAN IS, WITHOUT ANY FURTHER ACTION, ENROLLED IN THIS PLAN.
Prior Plan shares are automatically credited to a Participant's
Plan account as shares of Common Stock.
This Plan does not provide for automatic reinvestment of
dividends, as the Company is not currently paying dividends. See
"Dividends on Common Stock."
This Prospectus contains the provisions of the Plan. It is
suggested that this Prospectus be read and retained for future
reference.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK.
SEE "CERTAIN RISK FACTORS."
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
---------------
The date of this Prospectus is August , 1998.
----
<PAGE>
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . 1
CERTAIN RISK FACTORS . . . . . . . . . . . . . . . . . . . . 2
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . 5
THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . 7
CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . 7
PURPOSE OF THE PLAN . . . . . . . . . . . . . . . . . . 9
ADVANTAGES AND DISADVANTAGES OF THE PLAN . . . . . . . . 9
PLAN ADMINISTRATION . . . . . . . . . . . . . . . . . . 10
PARTICIPATION IN THE PLAN . . . . . . . . . . . . . . . 11
INITIAL INVESTMENTS AND OPTIONAL INVESTMENTS . . . . . . 12
PURCHASES . . . . . . . . . . . . . . . . . . . . . . . 14
CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . 15
SAFEKEEPING OF CERTIFICATES . . . . . . . . . . . . . . 15
GIVING PLAN SHARES TO OTHERS . . . . . . . . . . . . . . 16
SALE OF SHARES . . . . . . . . . . . . . . . . . . . . . 17
TERMINATION OF PLAN PARTICIPATION . . . . . . . . . . . 17
COSTS . . . . . . . . . . . . . . . . . . . . . . . . . 19
REPORTS TO PARTICIPANTS . . . . . . . . . . . . . . . . 19
OTHER INFORMATION . . . . . . . . . . . . . . . . . . . 20
FEDERAL INCOME TAX INFORMATION . . . . . . . . . . . . . 21
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . 22
DESCRIPTION OF CAPITAL STOCK . . . . . . . . . . . . . . . . 22
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
PARTICIPANT INFORMATION . . . . . . . . . . . . . . . . . . . 25
<PAGE>
AVAILABLE INFORMATION
This Prospectus is a prospectus of the Company delivered in
compliance with the Securities Act of 1933, as amended (the
"Securities Act"). A Registration Statement (the "Registration
Statement") has been filed by the Company with the Securities and
Exchange Commission (the "SEC") under the Securities Act with
respect to the shares of Common Stock offered hereby. As
permitted by the rules and regulations of the SEC, this
Prospectus omits certain information contained in the
Registration Statement on file with the SEC. For further
information pertaining to the securities offered hereby,
reference is made to the Registration Statement, including
exhibits filed as a part thereof. The Company is subject to the
informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and in accordance
therewith, files periodic reports, proxy statements, and other
information with the SEC. The Registration Statement, as well as
such reports, proxy statements, and other information, can be
inspected and copied at the public reference facilities
maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and the Regional Offices of the SEC
located at 500 West Madison Street, 14th Floor, Chicago, Illinois
60661-2511, and 7 World Trade Center, Suite 1300, New York, New
York 10048. Copies of such documents can be obtained from the
Public Reference Section of the SEC at prescribed rates by
writing to it at 450 Fifth Street, N.W., Washington, D.C. 20549
The SEC also maintains a Web site that contains periodic
reports, proxy statements and other information regarding the
Company and other registrants that file electronically with the
SEC at http://www.sec.gov.
Finally, reports, proxy statements, and other information
concerning the Company are available for inspection and copying
at the offices of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005, and the offices of the Pacific
Exchange, Inc., 301 Pine Street, San Francisco, California 94104.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference, and as of any
time hereafter prior to the termination of the offering made by
this Prospectus the Company shall be deemed to have incorporated
herein by reference, (1) the latest Annual Report on Form 10-K
(the "Latest Annual Report"), filed by the Company with the
Commission pursuant to the Securities Exchange Act, and (2) all
other reports and documents filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act subsequent to the filing of the Latest
Annual Report, and all of such documents shall be deemed to be a
part hereof from the respective dates of filing thereof. The
documents incorporated herein by reference are sometimes called
the "Incorporated Documents". Any statement contained in an
Incorporated Document shall be deemed to be modified or
superseded to the extent that a statement contained in any
subsequently filed Incorporated Document modifies or replaces
such statement.
The Incorporated Documents, incorporated herein by reference
as of the date of this Prospectus, are the Company's Annual
Report on Form 10-K for the year ended December 31, 1997, as
amended by Form 10-K/A, dated March 5, 1998 (the "1997 10-K"),
Quarterly Report on Form 10-Q for the quarter ended March 31,
1998 (the "First Quarter 10-Q"), and Current Reports on Form 8-K
dated January 6, 1998, June 26, 1998 (the "June 26 8-K"), July
16, 1998 (the "July 16 8-K") and July 22, 1998, which have been
filed by the Company with the SEC.
The Company will provide without charge upon the request of
any person to whom this Prospectus is delivered, a copy of any or
all of the Incorporated Documents, excluding the exhibits (unless
any such exhibit is specifically incorporated by reference into
an Incorporated Document). Requests for such documents should be
directed to the Company at the following address: UniSource
Energy Corporation, Records & Library Services - DAB03, P. O. Box
711, Tucson, Arizona 85702, or by calling (520) 884-3781.
<PAGE>
CERTAIN RISK FACTORS
The shares of Common Stock described herein and being offered
hereby are subject to a number of material risks, and, therefore,
involve a high degree of risk of loss. The following summary of
the principal factors that make the securities being offered an
investment of high risk is qualified in its entirety by reference
to the detailed information contained in the Incorporated
Documents. Prior to deciding whether or not to make an
investment in the shares of Common Stock being offered, investors
should consider carefully all the information contained herein
and in the Incorporated Documents.
OVERVIEW
The financial condition and results of operations of TEP are
currently the principal factors affecting the financial condition
and results of operations of the Company on an annual basis since
TEP currently accounts for substantially all of the Company's
assets, revenues and net income.
The Company's and TEP's financial prospects are subject to
significant regulatory, economic, and other uncertainties, some
of which are beyond the Company's and TEP's control. These
uncertainties include the extent to which TEP, in light of its
continued high financial and operating leverage, can alter
operations and reduce costs in response to industry changes or
unanticipated economic downturns. The Company's and TEP's
success will depend, in part, on TEP's ability to contain and/or
reduce the costs of serving retail customers and the level of
sales to such customers. In a deregulated environment, revenues
from sales of energy may become less certain.
The Company's financial prospects are also subject to
uncertainties relating to the start-up and developmental
activities of the unregulated energy-related affiliates.
Although the Company's investments in unregulated energy-related
affiliates comprise less than 1% of total assets, start-up costs
and other subsidiary developmental activities have contributed to
losses from these activities in 1998. These losses have
contributed to the losses reported by the Company for the six-
months ending June 30, 1998.
Depending on the nature of future investment opportunities,
the Company expects to make additional investments in these
subsidiaries and in other energy-related ventures. The Arizona
Corporation Commission (the "ACC") Holding Company Order requires
that the capitalization (debt and equity) of the Company's
affiliates other than TEP not exceed 30% of TEP's capitalization
unless otherwise approved by the ACC.
RETAIL COMPETITION
In December 1996, the
ACC adopted rules that, if implemented as adopted, would
require a phase-in of retail electric competition in Arizona
beginning January 1, 1999. The adopted rules are a framework to
implement competition. On June 25, 1998, the ACC Staff issued a
First Draft of Proposed Revisions of the Retail Electric
Competition Rules. Among other things, the Proposed Revisions to
the Rules state that "an Affected Utility shall divest itself of
all competitive generation assets and services prior to January
1, 2001. Such divestiture shall either be to an unaffiliated
party or to a separate corporate affiliate or affiliates. If an
Affected Utility chooses to divest its competitive generation
assets to a competitive electric affiliate, such transfer shall
be at a value determined by the ACC to be fair and reasonable."
The Proposed Revisions of the Rules were adopted
by the ACC at an Open Meeting on August 5, 1998. It
is difficult to predict the outcome of this process and the
ultimate impact of increased retail competition on TEP's and the
Company's future sales, revenues or profitability. See Item 2. -
- Management's Discussion and Analysis of Financial Condition
and Results of Operations -- "Competition, Retail" and
"Accounting for the Effects of Regulation" in the First Quarter
10-Q, the June 26 8-K and the July 16 8-K.
-2-
<PAGE>
As discussed in the June 26 8-K, the ACC has issued an order
concerning stranded cost quantification and recovery. The order
provides TEP with two methods for quantifying and recovering
stranded costs: (1) Divestiture/Auction Methodology and (2)
Transition Revenues Methodology. The order encourages, but does
not require, full divestiture of generating assets through an
auction to unaffiliated third parties. The order states that
only those Affected Utilities choosing divestiture through the
Divestiture/Auction Methodology shall have the opportunity to
recover 100% of unmitigated stranded costs. TEP must file its
choice of options and preliminary plan with the ACC by August 21,
1998. The amount of stranded costs and method of recovery that
-2-
<PAGE>
the ACC approves for TEP will determine whether write-offs will
be incurred at that time. The ACC is not expected to make a
final determination of a stranded cost recovery plan for TEP
until at least the fourth quarter of 1998. The Company and TEP
are unable to predict the amount of write-offs, if any, that may
be incurred at that time.
DEBT LEVERAGE
The Company's and TEP's capital structure is highly
leveraged. Although TEP was able to refinance and extend the
maturities of certain debt obligations at favorable rates and
terms in 1997 and 1998, there can be no assurance that continued
access to the capital markets at such rates and terms will be
available. Despite a reduction in variable rate debt obligations
in 1997 and 1998, the Company's and TEP's earnings and cash flow
would still be affected by changes in interest rate levels on the
remaining variable rate debt. As of June 30, 1998, TEP had $329
million aggregate principal amount of variable rate debt
obligations. See Item 8. -- Consolidated Financial Statements
and Supplementary Data in the 1997 10-K, and Item 2. -
Management's Discussion and Analysis of Financial Condition and
Results of Operations -- "Overview" in the First Quarter 10-Q.
TAX EXEMPT LOCAL FURNISHING BONDS
A substantial portion of TEP's utility plant assets qualify as
"facilities for the local furnishing of electric energy" within
the meaning of the Internal Revenue Code, and have been financed
with the proceeds from the issuance of industrial development
revenue bonds (approximately $580 million at the date of this
Prospectus). The interest on these bonds is, generally, excluded
from gross income for federal income tax purposes. Should TEP's
local furnishing system become disqualified, in whole or in part,
due to asset divestitures or unanticipated changes in tax laws,
industry structure or system operations, it likely would be
necessary for some or all of these bonds to be redeemed or
defeased. See Item 7. -- Management's Discussion and Analysis of
Financial Condition and Results of Operations -- "Liquidity and
Capital Resources, Tax Exempt Local Furnishing Bonds," in the
1997 10-K.
LOSSES FROM ENERGY-RELATED AFFILIATES
The Company's investments in the energy-related ventures of
MEH Corporation ("MEH") and its subsidiaries (included in
Investments and Other
Property in the Company's consolidated balance sheet) comprise
less than 1% of total assets. However, the net loss related to
these start-up operations totaled $5.6 million for the second
quarter and $9.7 million for the first six months of 1998. This
loss is included in the Other Income (Deductions) section on the
Company's income statement. Almost all of MEH's losses in both
the second quarter and first six months of 1998 occurred at New
Energy Ventures, L.L.C. (NEV), a buyer's agent providing electric
land aggregation and advisory services to retail purchasers of
electric energy. The California electricity market was
originally scheduled to open to competitors such as NEV on
January 1, 1998. However, technical matters related to the
California Independent System Operator and the California Power
Exchange delayed the opening of the electricity market until
March 31, 1998. Therefore, NEV could not make retail power sales
in California in the first quarter. Start-up costs associated
with expansion into additional regions of the country also
contributed to the losses in the first half of 1998. NEV may
continue to experience losses in future periods. In addition,
other of such energy-related ventures are in the developmental
and start-up stages, have limited operating histories and, to
date, have not been profitable. Consequently, there can be no
assurance that the Company will not experience additional losses
from the activities of its energy-related affiliates in future
periods.
-3-
<PAGE>
DIVIDENDS ON COMMON STOCK
UNISOURCE ENERGY
The Company's ability to pay dividends is dependent upon cash
flow from its subsidiaries, TEP and MEH. TEP
comprises substantially all of the Company's assets. As
described below, although TEP is currently unable to declare or
pay dividends, it has called for redemption in the third quarter
of 1998 those First Mortgage Bonds which have covenants
restricting the payment of dividends. No dividend on common
stock has been declared or paid by TEP since 1989. Until such
time as TEP is able to pay dividends to the Company, it is
unlikely that the Company would declare and pay dividends to
holders of Common Stock.
TEP
Five outstanding issues of First Mortgage Bonds (aggregating
$137 million in principal amount) prevent TEP from paying
dividends until specific cash flow coverage and retained
earnings tests are met. As of June 30, 1998, TEP met the cash
flow coverage test, but did not meet the retained earnings test,
which requires positive retained earnings. These covenants will
apply until these First Mortgage Bonds have been paid or redeemed
or the applicable mortgage indentures have been amended. The
latest maturity of these First Mortgage Bonds is in 2003. To
amend these bonds would require approval by 75% of all First
Mortgage Bond holders. During the third quarter of 1998, TEP
issued bonds to refinance all of the First Mortgage Bonds that
prohibit the payment of dividends and has called such First
Mortgage Bonds for redemption.
TEP's Credit Agreement allows TEP to pay dividends if it
maintains compliance with the agreement and meets certain
financial covenants, including a covenant that requires TEP to
maintain a minimum level of net worth. As of June 30, 1998, the
required minimum net worth was $169 million. As of June 30,
1998, TEP is in compliance with the terms of the Credit
Agreement.
Pursuant to the Arizona Corporation Commission Holding Company
Order, until such time as TEP's equity ratio equals 37.5% of
total capital (excluding capital lease obligations), TEP may not
pay dividends to the Company in excess of 75% of TEP's earnings.
As of June 30, 1998, TEP's equity ratio, as so calculated, was
15.6%.
In addition to these restrictive covenants, the Federal Power
Act states that dividends shall not be paid out of funds properly
included in the capital account. Although the terms of the
Federal Power Act are unclear, TEP believes that there is a
reasonable basis to pay dividends from current year earnings.
See the Incorporated Documents for more information on Common
Stock dividends.
THE COMPANY
The Company was incorporated under the laws of the State of
Arizona on March 8, 1995. The Company is a holding company which
owns all of the outstanding common stock of TEP and MEH. On
January 1, 1998, TEP and the Company completed a statutory share
exchange, pursuant to which the outstanding common stock of TEP
was exchanged, on a share-for-share basis, for shares of Company
common stock, no par value. Following the share exchange, TEP
transferred the stock of its subsidiary, MEH, to the Company in
exchange for a promissory note in the approximate amount of $95
million. The Company's stock is traded on the New York and
Pacific Stock Exchanges under the ticker symbol UNS.
TEP is the principal subsidiary of the Company and accounts
for substantially all of its assets, revenues and net income.
TEP is an operating public utility engaged in delivering energy
services to retail customers primarily in the Tucson, Arizona
-4-
<PAGE>
metropolitan area and to wholesale customers throughout the
Western United States. As a public utility, TEP falls under the
jurisdiction of the Arizona Corporation Commission which has the
authority to approve rates and certain other corporate actions.
TEP provides electric power to approximately 317,000 retail
customers. In 1997, TEP generated and sold more than 7,400
gigawatt hours of energy to retail customers and 3,400 gigawatt
hours to other customers at wholesale. Operating revenues from
such sales exceeded $729 million. TEP owns or leases 1,896 MW of
generating capacity located in Arizona and New Mexico. TEP also
has transmission and distribution assets to transmit electricity
from TEP's remote generating facilities to the Tucson area for
use by TEP's retail customers and to provide interconnections to
neighboring utilities.
MEH owns all of the outstanding common stock of (i) Nations
Energy Corporation, which is active in the
development of independent power projects worldwide, (ii)
Millennium Energy Holdings, Inc., which holds a 50%
interest in NEV, a buyer's agent
providing electric load aggregation and advisory services to
retail purchasers of electric energy, (iii) Advanced Energy
Technologies, Inc. which holds a 50% interest in Global
Solar Energy, L.L.C., a manufacturer of thin-film
photovoltaic cells, and (iv) Southwest Energy Solutions, Inc.
(SES), a provider of ancillary energy services to electric
consumers. SES owns all of the outstanding common stock of SWPP
Investment Company and SWPP International, Ltd.,
which hold ownership interests in businesses engaged in the
manufacture and sale of concrete power poles.
In 1997, earnings for the Company declined relative to 1996
primarily due to the lower recognition of non-cash income tax
benefits in 1997. Net income was $83.6 million in 1997, compared
with $120.9 million recorded in 1996 and $54.9 million recorded
in 1995. Income tax benefits related to prior period net
operating losses totaled $43.4 million in 1997, $88.6 million in
1996 and $23.3 million in 1995, accounting for the majority of
the fluctuation in reported net income for the last three years.
See Item 7. - Management's Discussion and Analysis of Financial
Condition and Results of Operations - "Income Tax Position," in
the 1997 10-K. The Company's common stock equity was $216.9
million at year-end, compared to $133.3 million as of December
31, 1996, benefiting from a fourth consecutive year of
profitability.
In addition to the reduction in income tax benefits described
above, items having a one-time effect on earnings resulted in net
reductions to earnings of $2.4 million in 1997 and $6.1 million
in 1996. Excluding each of these one-time items from the periods
in which they were recorded, ongoing net income increased by 11%
to $42.6 million in 1997 from $38.3 million in 1996. See Item 7.
- Management's Discussion and Analysis - "Overview" and Item 8. -
Consolidated Financial Statements and Supplementary Data - Notes
4, 7 and 9 of Notes to Consolidated Financial Statements in the
1997 10-K for information pertaining to certain of these items.
The Company's net cash flows from operating activities were
$124.4 million in 1997, $151.3 million in 1996 and $119.4 million
in 1995. After capital expenditures, scheduled debt maturities
and payments to retire capital lease obligations, net cash flows
available for other investing and financing activities were $38.1
million in 1997, $36.9 million in 1996, and $25.9 million in
1995.
The Company recorded net income of $1.1 million for the second
quarter and a net loss of $6.0 million for the first six months
of 1998. This compares with net income of $29.9 million in the
second quarter and $41.4 million for the first six months of
1997. The results in the second quarter of 1997 included the
effect of non-recurring tax benefits and a reversal of a loss
provision relating to the dissolution of one of TEP's former
investment subsidiaries, which were partially offset by non-
recurring expenses.
Excluding these one-time adjustments, the Company would have
recorded net income of $10.4 million in the second quarter of
1997. Results in the second quarter of 1998 were affected
primarily by lower tax benefit recognition, lower non-cash
regulatory revenues, higher interest expense and lower retail
-5-
<PAGE>
sales due to mild weather conditions, as well as startup costs of
new unregulated energy-related subsidiaries.
The results of the first six months of 1997 also included the
effects of non-recurring tax benefits, reversal of loss provision
and non-recurring expenses. Excluding these one-time
adjustments, the Company would have recorded net income of $10.0
millon in the first six months of 1997. Results in the first six
months of 1998 were effected primarily by losses from unregulated
energy-related subsidiaries, lower non-cash regulatory revenues,
and higher interest expense.
The unregulated energy subsidiaries owned by MEH reported a
net loss of $5.6 million for the second quarter and $9.7 million
for the first half of 1998, compared with net income of $0.5
million in the second quarter and a net loss of $0.4 million for
the first half of 1997. The delayed implementation of
California's competitive electricity market until March 31, 1998,
expansion into additional regions of the country, and other
subsidiary development activities affected the financial results
for these businesses.
Net cash flows from operating activities increased in
aggregate by $27.5 million in the first six months of 1998
compared with the same period in 1997. This increase was due
mainly to the payment of $30 million in contract termination fees
to the coal supplier at the Company's Springerville Generating
Station in the first half of 1997 compared to only $10.0 million
paid in the first half of 1998 and the receipt of $11.3 million
in June 1998 from the sale of emission allowances. During the
remainder of 1998 TEP expects to be able to fund operating
activities and construction expenditures with internal cash
flows, existing cash balances, and, if necessary, borrowings
under a revolving credit facility.
-6-
<PAGE>
THE PLAN
The following is a complete statement of the Plan.
Nothing contained herein or in any other Plan information
represents a recommendation that any person buy, hold or sell
Common Stock. A decision to purchase shares of Common Stock
through the Plan should only be made after an eligible investor
has read this prospectus and independently made an investment
decision.
CERTAIN DEFINITIONS
For convenience of reference, the definitions of certain terms
are provided below.
Acknowledgement A form acknowledging the Participant's
Form -- enrollment in the Plan.
Business Day -- A day on which the Plan Administrator
is open for business.
Common Stock -- The common stock, without par value, of
the Company.
Company -- UniSource Energy Corporation.
Enrollment Form -- A "Direct Stock Purchase Plan New
Enrollment Form." The form that the
investor must complete to be able to
participate in the Plan and to express
other directions with respect to the
Plan account. The completion of an
Enrollment Form is not necessary for
participants in the Prior Plan.
Independent Agent - BNY ESI & Co., a wholly-owned
- subsidiary of The Bank of New York
Company, Inc., the registered broker-
dealer selected by the Plan
Administrator to purchase and/or sell
shares of Common Stock for
Participants.
Initial A payment made to the Company by those
Investment -- participants who were not part of the
Prior Plan for the initial purchase of
shares of Common Stock to open a Plan
account. The minimum Initial
Investment is $250.
Investment Date -- Investments from Participants will be
invested on the 10th and 25th day of
each month (or, if not a Business Day,
the preceding Business Day).
Investments made automatically through
Electronic Funds Transfer are deducted
on the 25th day of each month and will
be invested on such Investment Date.
Latest Annual The latest Annual Report on Form 10-K
Report -- that is filed by the Company.
Optional A payment made subsequent to the
Investment -- Initial Investment and enrollment in
the Plan. An Optional Investment is
$50 or more.
Participant -- A person who is enrolled in the Plan.
-7-
<PAGE>
Plan -- UniSource Energy Corporation Investment
Plus Plan.
Plan The Bank of New York.
Administrator --
Prior Plan -- Tucson Electric Power Company Dividend
Reinvestment and Common Stock Purchase
Plan.
Safekeeping -- The Plan's "safekeeping" service which
Participants may use to deposit any
Common Stock certificates in their
possession with the Plan Administrator
and have credited to their Plan
account.
Shareholder of An investor whose shares of Common
Record -- Stock are registered on the books of
the Company as maintained by the
Transfer Agent.
Statement of A statement providing detailed account
Account -- information such as amount invested,
purchase price, number of shares
accumulated and other investment
information.
Transaction Request A form completed by the investor in
Form -- order to make Optional Investments,
address changes, deposit of
certificates, withdrawal of shares,
sale of shares, or account termination.
Transfer Agent -- The Bank of New York.
PURPOSE OF THE PLAN
1. WHAT IS THE PURPOSE OF THE PLAN?
The purpose of the Plan is to provide interested investors with a
convenient method of purchasing Common Stock directly through the
Plan Administrator without payment of any brokerage commission.
ADVANTAGES AND DISADVANTAGES OF THE PLAN
2. WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF THE PLAN?
ADVANTAGES:
DIRECT PURCHASE OF STOCK--Participants may purchase Common
Stock directly through the Plan Administrator, without the
cost of brokerage or other fees.
FULL INVESTMENT OF FUNDS--The full amount of Initial
Investments and Optional Investments is invested because the
Plan permits fractional shares to be credited to Plan
accounts.
CERTIFICATE SAFEKEEPING--Participants may deposit their Common
Stock certificates with the Plan Administrator, whether or not
the Common Stock represented by such certificates was
purchased through the Plan. This convenience is provided at
no cost to the Participant and eliminates the possibility of
loss, inadvertent destruction or theft of certificates. Also,
because shares deposited for Safekeeping are treated in the
-8-
<PAGE>
same manner as shares purchased through the Plan, they may be
transferred or sold through the Plan.
GIVING PLAN SHARES--An investor may give Plan shares by:
. making an Initial Investment to establish a Plan account
for the recipient;
. by making Optional Investments to the recipient's
existing Plan account; or
. transferring shares from the investor's Plan account to
the recipient's Plan account.
SELL STOCK--Participants may sell shares held in their Plan
account, including odd-lot sales.
BROKERAGE COMMISSIONS--No brokerage commissions are charged in
connection with purchases under the Plan.
SIMPLIFIED RECORDKEEPING--A Statement of Account will be
mailed to Participants after any investment activity and a
comprehensive statement will be mailed to Participants
annually.
DISADVANTAGES:
NO INTEREST ON FUNDS PENDING INVESTMENT--No interest is paid
on Initial Investments or Optional Investments held pending
investment.
DELAY IN DETERMINING PURCHASE PRICE--The number of shares
purchased for a Participant's Plan account and the purchase
price will not be determined until all shares for the relevant
Investment Date have been purchased. Therefore, Participants
will not know the number of shares purchased or the purchase
price until after the applicable Investment Date.
RETURN OF OPTIONAL INVESTMENTS--Initial Investments or
Optional Investments sent to the Plan Administrator will not
be returned to a Participant unless a written request is
received by the Plan Administrator two Business Days prior to
the applicable Investment Date. However, the Plan
Administrator reserves the right to return an Optional
Investment for any reason (an unsigned check, for example).
BROKERAGE COMMISSIONS--Sales under the Plan are subject to
brokerage commissions.
PRICE OF SHARES--Participants cannot designate a specific
price at which to sell or purchase Common Stock. Therefore,
Participants bear the risk of fluctuations in the market price
of Common Stock.
INSURANCE--Plan accounts are not insured by the Securities
Investor Protection Corporation, the Federal Deposit Insurance
Corporation or any other entity.
PLAN ADMINISTRATION
3. WHO ADMINISTERS THE PLAN?
The Company has retained The Bank of New York as plan
administrator (the "Plan Administrator"). The Bank of New York
is a recognized leader in the securities processing industry and
is committed to providing shareholders of the Company with
quality service.
As Plan Administrator, The Bank of New York will purchase and
hold shares of Common Stock acquired under the Plan, keep
records, send reports of account activity to Participants, and
perform other duties relating to the Plan. Shares purchased
under the Plan and held by the Plan Administrator for each
Participant's account, will be registered in the Plan
Administrator's name or the name of its nominee for the benefit
-9-
<PAGE>
of the Participants. In the event that the Plan Administrator
resigns or otherwise ceases to act as plan administrator, the
Company will appoint a new plan administrator to administer the
Plan.
The Plan Administrator also acts as transfer agent and registrar
for the Common Stock. Questions can be answered by contacting
The Bank of New York at the following locations:
. Participants may contact the Plan Administrator toll free
1-888-269-8845.
. The Plan Administrator's website address is
http://stock.bankofny.com
. The Plan Administrator's e-mail address is Shareowner-
[email protected] Messages sent through the Internet
will be responded to within one business day.
. The Plan Administrator's mailing address is as follows
(other address(es) may be published for the Plan
Administrator from time to time):
For Inquiries: For Transaction Processing:
------------- --------------------------
The Bank of New York The Bank of New York
Shareholder Relations Dividend Reinvestment
Department - 11E Department
PO Box 11258 P.O. Box 1958
Church Street Station Newark, NJ 07101-1958
New York, NY 10286
THE BANK OF NEW YORK PROVIDES NO ADVICE AND MAKES NO
RECOMMENDATIONS WITH RESPECT TO ANY SECURITY. ANY DECISION TO
PURCHASE OR SELL MUST BE MADE BY EACH INDIVIDUAL PLAN PARTICIPANT
BASED ON HIS OR HER OWN RESEARCH AND JUDGMENT.
PARTICIPATION IN THE PLAN
4. WHO IS ELIGIBLE TO PARTICIPATE IN THE PLAN?
Any interested investor is eligible to participate in the Plan
provided that (i) they meet the requirements for participation as
described in the following paragraph outlined below and (ii) in
the case of citizens or residents of a country other than the
United States, its territories or possessions, participation
would not violate local laws applicable to the Company or the
Participant.
In certain jurisdictions, applicable laws require that Common
Stock offered under the Plan to persons not presently
Shareholders of Record be offered only through a registered
broker-dealer. No offers or sales will be effected in those
jurisdictions unless the Company has satisfied the requirements
of the state securities laws applicable to the operation of the
Plan. To the extent required by applicable law in certain
jurisdictions, shares of Common Stock offered under the Plan to
persons not presently Shareholders of Record of Common Stock are
offered only through a registered broker/dealer in such
jurisdictions. The Plan Administrator has selected BNY ESI & Co.
as the registered broker/dealer through whom shares will be
offered in such instances and for all plan trading activity.
5. HOW DOES AN ELIGIBLE INVESTOR ENROLL THE PLAN?
PARTICIPANTS IN THE PRIOR PLAN are, without further action,
enrolled in the Plan. Prior Plan shares are automatically
credited to their Plan account as shares of UniSource Energy
Corporation common stock. Prior Plan participants are not
required to make any Initial Investment. Prior Plan participants
who wish to withdraw from the Plan may do so by following the
procedure outlined in Question 25.
After being furnished with a Plan Prospectus, OTHER ELIGIBLE
INVESTORS may join the Plan by completing and signing an
Enrollment Form and returning it to the Plan Administrator at the
address shown in "Plan Administration." See Question 3.
Shareholders of Record should sign their names on the Enrollment
Form exactly as they appear on their certificates.
-10-
<PAGE>
The Enrollment Form serves both to initiate participation and to
appoint the Independent Agent to act on behalf of the Participant
in buying and selling shares of Common Stock under the Plan. An
eligible applicant's Initial Investment of $250 or more must be
enclosed with the Enrollment Form. See Questions 8 and 9.
Requests for Enrollment Forms, as well as other Plan forms and
this Prospectus, should be made by writing to the Plan
Administrator or by calling the Plan Administrator. See "Plan
Administration," Question 3.
6. WHEN WILL PLAN ENROLLMENT COMMENCE?
Enrollment Forms will be processed promptly by the Plan
Administrator. Once enrolled in the Plan, Participants will
remain enrolled until (i) they withdraw from the Plan, (ii) the
Company terminates their participation in the Plan, or (iii) the
Company terminates the Plan. See "Termination of Plan
Participation," Questions 24-27.
7. MAY THE PLAN ADMINISTRATOR RESTRICT PARTICIPATION IN THE
PLAN?
Yes. The Plan Administrator reserves the right to restrict or
terminate participation in the Plan if such participation appears
to be contrary to the general intent of the Plan or in violation
of applicable law. See "Termination of Plan Participation,"
Questions 24-27.
INITIAL INVESTMENTS AND OPTIONAL INVESTMENTS
8. HOW IS AN INITIAL INVESTMENT MADE?
Any investor whose signed Enrollment Form has been accepted by
the Plan Administrator is eligible to make Initial Investments.
A Participant may make the Initial Investment when enrolling. An
Initial Investment must be $250 or more and should be in the form
of a check, money order, or wire transfer payable through a U.S.
bank or other financial institution, to "The Bank of New York."
Third party checks will not be accepted. DO NOT SEND CASH.
Investors making wire transfers should contact the Plan
Administrator for wire instructions and may be charged fees by
their institution. Please use the pre-addressed envelope
provided to send the signed Enrollment Form and any Initial
Investment.
NOTICE TO TEP CUSTOMERS: Do NOT include Initial Investments and
Enrollment Form with payment for utility service billings or
other payments due TEP or affiliates.
9. WHAT ARE OPTIONAL INVESTMENTS?
Once enrolled, Plan Participants are eligible to make periodic
Optional Investments, as frequently as twice monthly to purchase
additional shares of Common Stock. The minimum Optional
Investment is $50.
Participants may make Optional Investments in the form of a
check, money order or wire transfers through a U.S. bank or other
financial institution, in U.S. dollars, payable to "The Bank of
New York." Third party checks will not be accepted. DO NOT SEND
CASH. A Participant may also make Option Investments on a
monthly basis automatically through Electronic Funds Transfer.
See Question 10.
Participants are under no obligation to make Optional Investments
and may cease making Optional Investments at any time without
withdrawing from the Plan.
Optional Investments will not be accepted by the Plan
Administrator if a Participant imposes any restrictions with
respect to the number of shares to be purchased, the price at
-11-
<PAGE>
which shares are to be purchased, the timing of a purchase, or
what the Participant's balance will be following a purchase. In
addition, the Plan Administrator will not purchase shares for a
Participant without advance payment, nor will it refund any part
of a Participant's Optional Investment after shares are
purchased. It is not possible for the Plan Administrator to
inform a Participant in advance of how much money to send for the
purchase of a full or fractional share because the per-share
price will not be known until the shares are purchased.
10. HOW DOES A PARTICIPANT MAKE OPTIONAL INVESTMENTS?
OPTIONAL INVESTMENTS BY MAIL
A Participant may make an Optional Investment by enclosing a
check with the Transaction Request form attached to the Statement
of Account, which will be sent to each Participant by the Plan
Administrator. A Participant may also send in a check without
this form, however, your Plan account number must be included on
your check. Payments should be mailed to the following address:
The Bank of New York
Dividend Reinvestment Department
P.O. Box 1958
Newark, NJ 07101-1958
OPTIONAL INVESTMENTS BY ELECTRONIC FUNDS TRANSFER
A Participant may contact the Plan Administrator to arrange for
Optional Investments to be made automatically through Electronic
Fund Transfers (EFT). EFT payments are deducted monthly from the
Participant's designated account through any financial
institution that participates in the Automated Clearing House.
Deductions are made on the 25th day of each month, or if such
date is not a Business Day, the deduction will be made on the
preceding Business Day. Amounts received will be invested on
such Investment Date after receipt of the funds. Participants
may be charged by their financial institution for this service.
11. WHEN WILL A PARTICIPANT'S INITIAL INVESTMENT OR OPTIONAL
INVESTMENT BE INVESTED?
The Plan Administrator must receive Optional Investments and
Initial Investments at least three Business Days prior to an
Investment Date to be invested on that Investment Date.
Otherwise, the Optional Investment or Initial Investment will be
held by the Plan Administrator for investment until the next
Investment Date. See Question 10 for information regarding when
EFT funds will be invested.
Initial Investments and Optional Investments received by the
Company are deposited promptly into a segregated escrow account
pending investment. No Initial Investment or Optional Investment
will remain uninvested more than 35 days following receipt by the
Company.
12. WHAT HAPPENS IF A CHECK SUBMITTED FOR INVESTMENT IS
RETURNED UNPAID?
In the event that a check submitted for investment is returned
unpaid for any reason, the Plan Administrator will consider the
request for investment of such funds null and void. Any shares
purchased with such funds will be immediately removed from the
Participant's account. The Plan Administrator will be entitled
to sell those shares to satisfy any uncollected amounts,
including the returned-check fee. If the net proceeds of the
sale of such shares are insufficient to satisfy the balance of
such uncollected amounts, the Plan Administrator will be entitled
to sell additional shares from the Participant's account to
satisfy the uncollected balance.
-12-
<PAGE>
13. MAY A PARTICIPANT REQUEST THAT AN INITIAL INVESTMENT OR
OPTIONAL INVESTMENT BE RETURNED?
Yes. A Participant may request, in writing, the return of an
Initial Investment or Optional Investment that has not yet been
invested. The funds will be returned if the request is received
at least two Business Days immediately preceding the applicable
Investment Date. However, no refund of a check or money order
will be made until the funds have been actually deposited into
escrow by the Plan Administrator. Accordingly, such refund may
be delayed for up to three weeks.
PURCHASES
14. HOW IS COMMON STOCK PURCHASED FOR THE PLAN PARTICIPANTS?
Common Stock purchased through the Plan will be purchased, either
directly from the Company or on the open market, at the Company's
sole discretion. Shares purchased directly from the Company are
issued from the Company's previously authorized but unissued
shares. Open market transactions are effected through the
Independent Agent appointed by the Plan Administrator. In either
case, there are no commission charges to participants on the
purchase of Common Stock. The Independent Agent will have full
discretion in all matters related to open market purchases,
including the day and time of purchase, price paid, number of
shares purchased, and the markets or persons through whom the
purchases are made. The purchase price to the Plan Participant
is the same, however, the tax basis may differ. See Question 38.
15. WHEN ARE SHARES PURCHASED FOR THE PLAN?
Shares will be purchased on each Investment Date. See definition
of Investment Date.
16. WHEN WILL SHARES BE CREDITED TO A PARTICIPANT'S ACCOUNT?
Shares purchased will be considered settled and credited to a
Participant's Plan account on the Investment Date.
17. HOW IS THE PURCHASE PRICE OF THE COMMON STOCK DETERMINED?
The purchase price of Common Stock will be the average of the
high and low sale prices of the Common Stock on the consolidated
tape as reported by Dow Jones on the respective Investment Date.
The purchase price of Common Stock purchased by the Independent
Agent on the open market will be the weighted average purchase
price per share of all shares purchased on the applicable
Investment Date.
18. HOW MANY SHARES OF COMMON STOCK WILL BE PURCHASED FOR A
PARTICIPANT?
The number of shares purchased for a Participant will be equal to
the Participant's Initial Investment or Optional Investment for
the applicable Investment Date divided by the purchase price of
the shares. The Participant's Plan account will be credited with
the whole and fractional shares (to four decimal places).
19. CAN A PARTICIPANT REQUEST THE PURCHASE OF A SPECIFIC
NUMBER OF SHARES OR A SPECIFIC PRICE?
No. Since the purchase price of the Common Stock cannot be
calculated until the Common Stock is purchased, a Participant may
not request the purchase of a specific number of shares.
-13-
<PAGE>
CERTIFICATES
20. WILL CERTIFICATES BE ISSUED FOR SHARES PURCHASED THROUGH
THE PLAN?
No. The certificates for shares purchased through the Plan are
registered in the name of the Plan Administrator, or its nominee.
Participants requesting the issuance of a certificate for their
Plan shares must submit a Transaction Request Form to the Plan
Administrator, specifying the number of whole shares and
certificates to be issued. Certificates cannot be issued for
fractional shares; fractional shares must be sold when
terminating participation. The certificate will be issued in the
name(s) of the Participant(s) only. After the issuance of a
certificate, the shares represented thereby are deemed withdrawn
from the Plan. Certificates will be issued within five Business
Days following the receipt of the request. See Questions 22 and
23 for information on giving or transferring plan shares to
others.
SAFEKEEPING OF CERTIFICATES
21. CAN CERTIFICATES BE DEPOSITED WITH THE PLAN ADMINISTRATOR
TO BE HELD IN THE PARTICIPANT'S PLAN ACCOUNT?
Yes. Participant's may use the Plan's "safekeeping" service to
deposit any Common Stock certificates in their possession with
the Plan Administrator. Some of the advantages of certificate
safekeeping are:
. The risk associated with the loss of stock certificates
is eliminated. If certificates are lost or stolen, the
owner cannot sell or transfer them without first
obtaining replacement certificates. This process could
take several weeks and results in cost and paperwork for
the owner and the Transfer Agent.
. Certificates deposited in the Plan for safekeeping are
treated in the same manner as shares of Common Stock
purchased through the Plan and may be conveniently sold
or transferred through the Plan.
Participants may submit certificates for Safekeeping at any time.
The method used to submit certificates for Safekeeping is at the
option and risk of the Participant. The Company strongly
recommends that Participants use registered mail with insurance
when sending stock certificates.
All shares represented by the certificates submitted for
Safekeeping will be transferred into the name of the Plan
Administrator or its nominee and credited to the Participant's
Plan account. The physical certificate submitted to the Plan
Administrator for safekeeping will then be marked "canceled" and
ultimately discarded. A Statement of Account showing the number
of shares credited to the Participant's Plan account will be
mailed to the Participant.
Shares of Common Stock held in a Participant's account may not be
assigned or pledged. (See Question 35) Lost certificates must
be replaced before they can be submitted for Safekeeping.
It is the Participant's responsibility to establish and maintain
a record of the cost of shares represented by certificates sent
to the Plan Administrator for Safekeeping. In addition, the Plan
Administrator reserves the right to establish limits on the
number of shares held for Safekeeping and minimum time periods
for retention of these shares in the Plan. This reservation is
intended to minimize administrative expense and discourage use of
the Plan for purposes other than as a continuing investment
service.
GIVING PLAN SHARES TO OTHERS
22. CAN PLAN SHARES BE GIVEN TO OTHERS?
-14-
<PAGE>
Yes. Common Stock can be given to others in three ways:
. A donor may make an Initial Investment to establish an
account in the recipient's name. Under this method, the
donor completes and submits to the Plan Administrator an
Enrollment Form in the recipient's name together with an
Initial Investment of $250 or more.
. A donor may submit an Optional Investment in an amount of
$50 or more on behalf of an existing Participant; or
--------
. An existing Participant may transfer shares from his or
her account to a new or existing recipient's account.
See Question 23.
In order to establish a new account for a gift recipient a
Participant must complete and submit to the Plan Administrator an
Enrollment Form in the recipient's name. See Question 23.
Unless otherwise requested by the donor, the recipient will
receive a Statement of Account showing the number of shares given
to and held in the recipient's Plan account.
23. MAY PARTICIPANTS ASSIGN OR TRANSFER ALL OR PART OF THEIR
SHARES HELD UNDER THE PLAN TO ANOTHER PERSON?
Yes. Participants may transfer the ownership of all or part of
the shares of Common Stock held in their Plan account through a
gift, a private sale or otherwise by delivering written
instructions and a properly executed stock assignment (stock
power) to the Plan Administrator. The completed assignment must
specify the number of shares of Common Stock and the name,
address, and federal identification number of the transferee.
Requests for transfer are subject to the same requirements as for
the transfer of Common Stock certificates, including signatures
of all account owners, guaranteed by a member of a Medallion
program. UPON SUCH A TRANSFER, THE RECIPIENT WILL BE DEEMED A
PARTICIPANT IN THE PLAN.
In order to establish a new account for the transferee the
Participant must complete and submit to the Plan Administrator an
Enrollment Form in the recipient's name. The transferees will
receive a statement showing the number of shares transferred and
now held in their Plan accounts.
Stock power forms are available at local banks, brokerage firms
and from the Plan Administrator. See Question 3.
SALE OF SHARES
24. HOW MAY PARTICIPANTS SELL THEIR PLAN SHARES?
Participants may sell their Plan shares by submitting a
Transaction Request Form to the Plan Administrator. The request
should indicate the number of shares to be sold and must be
signed by ALL account owners. Shares acquired through and held
in the Plan, as well as shares surrendered for Safekeeping, may
be sold in this manner. A request to sell shares is irrevocable
after it is received by the Plan Administrator.
If a Participant requests that shares be sold, the Plan
Administrator will aggregate such shares from other Participants
during that week, and will then place a market order with the
Independent Agent to sell such shares during the following week.
A check will be issued for the proceeds of the sale less any
brokerage commission, service fee and applicable taxes within
four Business Days following the date of such sale. The check
will be made payable to the registered account owners only. See
Questions 28 and 38.
-15-
<PAGE>
The Independent Agent will have full discretion in all matters
related to the sale, including the day and time of sale, sale
price, and the markets or persons through whom the shares are
sold. Participants cannot specify a price at which to sell their
shares.
Shares held outside the Plan may not be sold through the Plan.
PARTICIPANTS WHO SELL ALL OF THEIR SHARES THAT ARE HELD IN THE
PLAN AUTOMATICALLY TERMINATE THEIR PARTICIPATION IN THE PLAN. A
REQUEST TO SELL SHARES IS IRREVOCABLE AFTER IT IS RECEIVED BY THE
PLAN ADMINISTRATOR. HOWEVER, PARTICIPANTS MAY ELECT TO RE-ENROLL
AT ANY TIME PROVIDED THAT THEY REMAIN ELIGIBLE TO PARTICIPATE.
SEE QUESTIONS 4 AND 5.
TERMINATION OF PLAN PARTICIPATION
25. HOW MAY A PARTICIPANT TERMINATE PARTICIPATION IN THE
PLAN?
Participants may terminate participation in the Plan at any time
by notifying the Plan Administrator of their intention to
terminate participation in the Plan, having all account owners
sign the request and indicating whether they wish to receive a
stock certificate or to sell their Plan shares. Proceeds from
the sale of the shares will be reduced by brokerage commissions,
a $5.00 service fee and applicable taxes. Certificates cannot be
issued for fractional shares; fractional shares must be sold when
terminating participation. See Questions 28 and 38.
Optional Investments received prior to the request to terminate
Plan participation will be invested on the next Investment Date
unless the Participant timely requests the return of that
Optional Investment. See Question 13.
26. WHAT HAPPENS TO FRACTIONAL SHARES WHEN PARTICIPANTS
TERMINATE THEIR PLAN ACCOUNTS?
When Participants terminate their Plan accounts, cash payments
representing any fractional share held will be mailed directly to
them as soon as practicable after the settlement for the
applicable sale less brokerage commissions, taxes and service
fees. For Participants selling fractional shares, the proceeds,
if any, of the sale of fractional shares will be the fraction
multiplied by the whole-share price less applicable brokerage
commissions.
27. MAY THE PLAN ADMINISTRATOR TERMINATE A PARTICIPANT'S PLAN
PARTICIPATION?
Yes. The Plan Administrator may terminate a Plan account for any
of the following reasons:
. The Plan account becomes subject to any unclaimed
property law;
. The Plan Administrator receives proper notification of a
Participant's death or incapacity;
. The Participant does not maintain at least one whole
share of Common Stock in the Plan account; or
. The Plan Administrator believes that a Participant's
participation in the Plan is contrary to the general
intent of the Plan or in violation of applicable law.
The Plan Administrator will notify the Participant prior to such
termination. The Plan Administrator will issue a certificate for
whole shares and a check for the net cash value of any fractional
share in the Plan account less applicable brokerage commissions,
taxes and service fees.
In the event that the Plan account is terminated for any of the
foregoing reasons, the account assets will be distributed to the
appropriate state for unclaimed property purposes, the
Participant, or his or her beneficiary, as the case may be.
-16-
<PAGE>
In addition, the Company retains the right, in its sole
discretion, to terminate or suspend the Plan. See Question 34
below.
COSTS
28. WHAT COSTS ARE ASSOCIATED WITH PARTICIPATION IN THE PLAN?
No broker fees, commissions or other charges will be incurred by
Participants for shares PURCHASED from the Company for their Plan
accounts. The cost to the Participant in administrative service
fees and brokerage commission for each type of transaction are as
follows and are considered part of the "Terms and Conditions" of
the Plan:
PURCHASES
Initial Investments / Enrollment . . . . . . . . Company Paid
Optional Investments . . . . . . . . . . . . . . Company Paid
Brokerage commissions - newly-issued stock . . . . . . . None
Brokerage commissions - open market purchases . Company Paid
This may result in taxable income and an increase in tax
basis. See Question 38.
SALES
Service fee . . . . . . . . . . . . . $ 5.00 per transaction
Plus brokerage commission . . . . . . $ 0.10 per share sold
See Question 38.
OTHER
Deposit of Certificates for Safekeeping . . . . Company Paid
Transfer of shares to another
Participant (Book to Book) . . . . . . . . . . . Company Paid
Account Termination . . . . . . . . . . . $ 5.00 per account
Issuance of Certificates . . . . . . . . . . . . Company Paid
FEES ARE SUBJECT TO CHANGE; WRITTEN NOTIFICATION WILL BE
PROVIDED 90 DAYS PRIOR.
MINIMUM INVESTMENTS
Initial Investment . . . . . . . . . . . . . . . . . . $250.00
Optional Investments . . . . . . . . . . . . . . . . . $50.00
Maximum Investments . . . . . . . . . . . . . . . . . . None
REPORTS TO PARTICIPANTS
29. WHAT REPORTS ARE SENT TO PARTICIPANTS?
Participants will receive a confirmation following each
transaction with respect to shares for their Plan accounts.
Participants will also receive a year-end Statement of Account
showing the amount invested, purchase price, the number of shares
purchased, deposited, sold, transferred, or withdrawn during the
calendar year and the total number of shares accumulated.
EACH PARTICIPANT SHOULD RETAIN ALL CONFIRMATIONS AND STATEMENTS
OF ACCOUNT FOR THEIR RECORDS SO AS TO BE ABLE TO ESTABLISH THE
COST BASIS OF SHARES PURCHASED UNDER THE PLAN FOR INCOME TAX AND
OTHER PURPOSES.
A Statement of Account will be provided upon request to the Plan
Administrator.
-17-
<PAGE>
In addition, Participants will receive copies of any amendments
to the Prospectus relating to the Plan and will receive copies of
the same communications sent to all other shareholders, including
the Company's quarterly reports and Annual Report to
Shareholders, Notice of the Annual Meeting and accompanying proxy
material. All communication from the Plan Administrator to
Participants will be addressed to the latest address of record;
therefore, it is important that Participants promptly notify the
Plan Administrator of any change of address.
OTHER INFORMATION
30. WHAT HAPPENS IF THE COMPANY DECLARES A DIVIDEND PAYABLE
IN COMMON STOCK OR A STOCK SPLIT?
Any dividends in the form of shares of Common Stock and any
shares resulting from a Common Stock split on shares held in a
Participant's Plan account will be credited to the Participant's
Plan account. Notification of a stock dividend or stock split
will be mailed directly to the Participant in the same manner as
to shareholders who are not participating in the Plan.
Transaction processing may be curtailed or suspended until the
completion of any stock dividend or stock split.
31. IF THE COMPANY HAS A RIGHTS OFFERING, HOW WILL A
PARTICIPANT'S ENTITLEMENT BE COMPUTED?
Participant's entitlement in a regular rights offering will be
based upon his total holdings. Rights certificates will be
issued for the number of whole shares only, however, and rights
based on a fraction of a share held in a Participant's account
will be sold for his account and the net proceeds will be
invested. Transaction processing may be curtailed or suspended
until the completion of any rights offering.
32. WILL A PARTICIPANT'S SHARES BE VOTED AT MEETINGS OF
SHAREHOLDERS?
Participants in the Plan will receive a proxy statement and a
proxy card representing whole Plan account shares as well as any
Common Stock held of record. Shares held in the Plan may be
voted in person or by proxy, just like any other share.
33. WHAT IS THE RESPONSIBILITY OF THE COMPANY AND ITS AGENTS
UNDER THE PLAN?
Neither the Company, the Plan Administrator, nor the Independent
Agent (nor any of their respective agents, representatives,
employees, officers or directors) will be liable for any act done
in good faith or for any good faith omission to act with respect
to the Plan, including, without limitation, any claim of
liability arising out of failure to terminate a Participant's
account upon such Participant's death prior to receipt of notice
in writing of such death or with respect to the prices or times
at which, or sources from which, shares are purchased or sold for
Participants, or with respect to any fluctuation in market value
before or after any purchase or sale of shares. This limitation
of liability will not constitute a waiver by any Participant of
their rights under the federal securities laws of the United
States.
THE COMPANY CANNOT AND WILL NOT GUARANTEE A PROFIT, OR PROTECT
PARTICIPANTS AGAINST LOSS, ON SHARES PURCHASED OR SOLD PURSUANT
TO THE PLAN. THE MARKET PRICE OF COMMON STOCK CAN FLUCTUATE
SUBSTANTIALLY.
34. MAY THE PLAN BE CHANGED OR DISCONTINUED?
Yes. The Company may suspend, modify or terminate the Plan at
any time in whole or in part. The Plan Administrator will notify
all Participants of any suspension, modification or termination
of the Plan. The Company also reserves the right to interpret
and regulate the Plan as it deems necessary or desirable in
connection with its operation. The Company may register
additional shares for sale under the Plan from time to time.
-18-
<PAGE>
35. MAY COMMON STOCK HELD IN A PLAN ACCOUNT BE PLEDGED AS
COLLATERAL?
No. Common Stock held in a Plan account may not be assigned or
pledged as collateral. Participants wishing to assign or pledge
their Common Stock as collateral must have certificates issued
for the shares. The certificates can then be delivered for
collateral.
36. HOW MAY INSTRUCTIONS BE GIVEN TO THE PLAN ADMINISTRATOR?
All instructions from a Participant to the Plan Administrator
should be made by using the Transaction Request Form, however,
the Plan Administrator may in the future allow certain
instructions to be given by telephone or in any other manner
agreed to by the Plan Administrator and the Participant.
37. UNDER WHAT STATE'S LAW WILL THE PLAN BE GOVERNED?
Arizona law governs the terms and conditions of the Plan.
FEDERAL INCOME TAX INFORMATION
38. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF PLAN
PARTICIPATION?
The Company believes the following is an accurate summary of the
federal tax consequences of participation in the Plan. PLEASE
CONSULT YOUR TAX OR FINANCIAL ADVISOR WITH RESPECT TO FEDERAL,
STATE, LOCAL AND OTHER TAX LAWS WHICH APPLY TO YOUR SPECIFIC
SITUATION.
PURCHASES
---------
Participants who purchase Common Stock through voluntary payments
to the Plan are not treated for federal income tax purposes as
receiving income by virtue of the purchase of Common Stock with
the voluntary payment. Any brokerage commissions paid by the
Company upon the purchase of shares in the open market will
constitute TAXABLE INCOME to the Participant on whose behalf such
commissions are paid and, accordingly, such Participant will be
furnished with the appropriate tax form. The TAX BASIS of shares
purchased with Initial Investments and Optional Investments will
be equal to the amount of such investment plus the amount of any
brokerage commissions, if any, paid by the Company on behalf of
the Participant and included in the taxable income of the
Participant.
Employees who purchase Common Stock through automatic payroll
deductions, should this option become available, will recognize
the same amount of compensation income (wages) for federal income
tax purposes which they would have recognized had they not
purchased Common Stock through automatic payroll deductions.
Compensation income exists even though the amount of automatic
payroll deductions is not paid to the employee in cash but
instead is applied to the purchase of Common Stock for the
participant's Plan Account.
SALES
-----
Upon the sale of either a portion or all of shares from the Plan,
a Participant may recognize a capital gain or loss based on the
difference between the sales proceeds, net of broker commissions,
and the tax basis in the shares sold, including any fractional
shares.
For Participants who are subject to U. S. withholding tax, backup
withholding, or foreign taxes, the Plan Administrator will
withhold the required taxes from proceeds from the sale of shares
sold through the Plan. The proceeds received by the Participant
will be net of the required taxes.
-19-
<PAGE>
The sale of shares through the Plan will be reported to the
Internal Revenue Service on the appropriate tax form.
USE OF PROCEEDS
To the extent that shares are purchased directly from the
Company, the Company intends to use the net proceeds for general
corporate purposes. The Company has no basis for estimating
either the number of shares of Common Stock that will ultimately
be sold pursuant to the Plan or the prices at which such shares
will be sold. The Company will receive no net proceeds from the
offering of shares which are purchased by the Independent Agent
in open market transactions.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company presently consists
of 76,000,000 shares, consisting of 75,000,000 shares of Common
Stock without par value, and 1,000,000 shares of preferred stock
without par value ("Preferred Stock"). As of August 4, 1998,
there were 32,145,080 shares of Common Stock outstanding and no
shares of Preferred Stock outstanding.
The following is a summary of certain rights and privileges of
the holders of the Company's stock. This summary does not
purport to be complete. Reference is made to the Company's
Restated Articles of Incorporation and to the laws of the State
of Arizona, the following information being qualified in its
entirety by such reference.
COMMON STOCK
Dividend Rights. Subject to certain limitations, if any,
specified with respect to the Preferred Stock, or any series
thereof, dividends may be paid on shares of Common Stock, out of
any funds legally available therefor, when and as declared by the
Company's Board of Directors.
Liquidation Rights. Subject to the limitations, if any,
specified with respect to the Preferred Stock, or any series
thereof, in the event of any dissolution or other winding up of
the Company, whether voluntary or involuntary, the assets of the
Company available for payment and distribution to shareholders
shall be distributed ratably in accordance with their holdings to
the holders of shares of the Common Stock.
Voting Rights. All voting power is vested in the holders of
the Common Stock, except as and to the extent otherwise specified
with respect to the Preferred Stock, or any series thereof. Each
holder of the Common Stock shall, in the election of directors
and upon each other matter coming before any meeting of
shareholders, be entitled to one (1) vote for each share of such
stock outstanding in the name of such holder on the books of the
Company.
The Participant will vote the shares held in the Plan in the
same manner as shares in certificated form. Each Participant in
the Plan will receive a Notice of the Annual Meeting, a Proxy
Statement, a proxy voting card and the Company's Annual Report to
Shareholders. The proxy voting card will solicit proxies for the
whole Plan shares held in a Participant's Plan account along with
any certificated shares a Participant may hold in certificated
form outside of the Plan.
Miscellaneous. The Common Stock has no preemptive or
conversion rights or redemption or sinking fund provisions and
the outstanding Common Stock is fully paid and non-assessable.
-20-
<PAGE>
PREFERRED STOCK
The Board of Directors of the Company has authority to divide
the Preferred Stock into series and to determine the designation,
preferences, and voting powers of the shares of each series so
established and the restrictions and qualifications thereof, all
to the extent and in the manner provided by law.
RELATED SECURITIES
In December 1992, TEP issued warrants (the "Warrants") for the
purchase of approximately 2.4 million shares of TEP common stock
(adjusted for TEP's reverse stock split in 1996). The exercise
terms are five Warrants plus an exercise price of $16 for each
share of TEP common stock. The Warrants are currently
exercisable and expire December 15, 2002. The number and kind of
shares purchasable upon the exercise of the Warrants and the
exercise price are subject to adjustment in certain
circumstances. The Warrants grant rights to purchase shares of
TEP common stock, and the consummation of the Share Exchange did
not convert such rights into rights to purchase shares of Common
Stock.
The Company is offering to exchange (the "Exchange Offer") any
and all outstanding warrants to purchase shares of common stock
of TEP (the "TEP Warrants") for Warrants expiring in 1999 to
purchase shares of common stock of the Company (the "1999 UNS
Warrants") and Warrants expiring in 2000 to purchase shares of
common stock of the Company (the "2000 UNS Warrants" and,
together with the 1999 UNS Warrants, the "UNS Warrants"). For
each TEP Warrant surrendered to and accepted by the Company
pursuant to the Exchange Offer, the holder of such TEP Warrant
will receive 0.20 1999 UNS Warrant and 2000 UNS Warrant.
----
Each 1999 UNS Warrant will entitle the holder to purchase one
share of Common Stock at a purchase price of $16.00 through and
including March 15, 1999 and each 2000 UNS Warrant will entitle
the holder to purchase one share of Common Stock at a purchase
price of $16.00 through and including December 15, 2000. The
Exchange Offer will commence on , 1998 and will expire on
-------
September , 1998.
--
EXPERTS
The consolidated financial statements incorporated in this
prospectus by reference from the 1997 Form 10-K have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been
so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
With respect to the unaudited consolidated financial
information of the Company for the three-month period ended March
31, 1998, incorporated by reference in this Prospectus,
PricewaterhouseCoopers LLP reported that they have applied
limited procedures in accordance with professional standards for
a review of such information. However, their separate report
dated May 5, 1998 incorporated by reference herein, stated that
they did not audit and they do not express an opinion on that
unaudited consolidated financial information. PricewaterhouseCoopers
LLP has not carried out any significant or additional audit tests
beyond those which would have been necessary if their report had
not been included. Accordingly, the degree of reliance on their
report on such information should be restricted in light of the
limited nature of the review procedures applied. Pricewater-
houseCoopers LLP is not subject to the liability provisions of
Section 11 of the Securities Act for their report on the unaudited
consolidated financial information because that report is not a
"report" or a "part" of the registration statement prepared or
certified by PricewaterhouseCoopers LLP within the meaning of
Sections 7 and 11 of the Securities Act.
-21-
<PAGE>
PARTICIPANT INFORMATION
UniSource Energy Corporation
COMPANY HEADQUARTERS: UniSource Energy
Corporation
220 West Sixth Street
Tucson, AZ 85701
(520) 571-4000
ACCOUNT INFORMATION:
--Stock Transfer The Bank of New York
Requirements, Shareholder Relations
Plan and Account Dept. - 11E
Information: P.O. Box 11258
Church Street Station
New York, NY 10286-1258
--Telephone Number: (888) 269-8845
--Home page: http://stock.bankofny.com
--Email address: shareowner-
[email protected]
Plan Transaction Processing The Bank of New York
Mailing Address: Dividend Reinvestment
Department
P.O. Box 1958
Newark, NJ 07101-1958
OTHER COMPANY INFORMATION: UniSource Energy
--Mailing Address: Corporation
Investor Relations
P.O. Box 711
Tucson, AZ 85702
--Telephone Number: (520) 884-3661
--Home Page: [http:\\www.UniSourceEnergy
.com]
--Fax Number: (520) 770-2015
--Email address [email protected]
To Order Company Reports UniSource Energy
and Copies of Corporation
Incorporated Records & Library
Documents: Services-DAB03
P.O. Box 711
Tucson, AZ 85702
(520) 884-3781
Stock Listing Information:
--Ticker Symbol (NYSE
& PEX): UNS
--Financial Listings
(Wall Street Jrnl): UniSrcEngy
CUSIP Number: 909205 10 6
-22-
<PAGE>
=================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATION OTHER THAN THOSE CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY UNISOURCE ENERGY CORPORATION. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN
OFFER TO BUY, ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED
IN THIS PROSPECTUS, OR AN OFFER TO SELL, OR THE SOLICITATION OF
AN OFFER TO BUY, SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH
SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
=================================================================
=================================================================
UNISOURCE ENERGY CORPORATION
-----------------
INVESTMENT PLUS PLAN
----------------
COMMON STOCK
without par value
----------------
PROSPECTUS
----------------
1,000,000 Shares
August , 1998
----
=================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
S.E.C. Filing Fee . . . . . . . . . . . . . . . . . $ 4,425
Listing Fees . . . . . . . . . . . . . . . . . . . . 17,250
Printing Expenses* . . . . . . . . . . . . . . . . . 22,000
Transfer Agent Fees* . . . . . . . . . . . . . . . . 70,000
Accounting Fees and Expenses . . . . . . . . . . . . 8,000
Legal Fees and Expenses* . . . . . . . . . . . . . . 40,000
Marketing Fees and Expenses* . . . . . . . . . . . . 25,000
Miscellaneous* . . . . . . . . . . . . . . . . . . . 1,500
--------
Total . . . . . . . . . . . . . . . . . . . . . . $188,175
========
--------------
* Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article SIXTH of the Restated Articles of Incorporation of the
Company, as amended provides in pertinent part as follows:
SIXTH:
(B) No director of the Corporation shall be personally liable
to the Corporation or its shareholders for money damages for any
action taken or any failure to take any action as a Director;
provided, however, that nothing herein shall be deemed to
eliminate or limit any liability which may not be so eliminated
or limited under the laws of the State of Arizona, as in effect
at the effective date of this paragraph (B) of Article SIXTH or
as thereafter amended. No amendment, modification or repeal of
this paragraph (B) shall eliminate or limit the protection
afforded by this paragraph (B) to a director with respect to any
act or omission occurring before the effective date thereof.
(C) (1) The Corporation shall, to the maximum extent
permitted by applicable law, as from time to time in effect,
indemnify any individual who is or was a party to or otherwise
involved in (or threatened to be made a party to or otherwise
involved in) any Proceeding (as hereafter defined) because such
individual is or was a director or officer of the Corporation, or
is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee or agent of another
foreign or domestic corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against all
Liability (as hereinafter defined) incurred by such individual in
connection with such Proceeding.
As used in this paragraph (C) of Article SIXTH, (a) the term
"Expenses" includes attorneys' fees and all other costs and
expenses reasonably related to a Proceeding, (b) the term
"Liability" means the obligation to pay a judgment, settlement,
penalty or fine (including any excise tax assessed with respect
to an employee benefit plan) and reasonable Expenses incurred
with respect to a Proceeding, and includes without limitation
obligations and Expenses that have not yet been paid but that
have been or may be incurred, and (c) the term "Proceeding" means
any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative and
whether formal or informal, including without limitation any
action, suit or proceeding by or in the right of the Corporation
and including, further, any appeal in connection with any such
action, suit or proceeding.
(2) The Corporation shall, to the maximum extent permitted
by applicable law, pay any Expenses incurred by a director or
officer of the Corporation in defending any such Proceeding in
advance of the final disposition thereof upon receipt of any
undertaking by or on behalf of such individual to repay such
advances if it is ultimately determined that such individual did
not meet any standard of conduct prescribed by applicable law and
upon the satisfaction of such other conditions as may be imposed
by applicable law.
II-1
<PAGE>
(3) The Corporation, by resolution of the Board of
Directors, may extend the benefits of this paragraph (C) of
Article SIXTH to employees and agents of the Corporation (each
individual entitled to benefits under this paragraph (C) being
hereinafter sometimes called an "Indemnified Person").
(4) All rights to indemnification and to the advancement of
expenses granted under or pursuant to this paragraph (C) shall be
deemed to arise out of a contract between the Corporation and
each person who is an Indemnified Person at any time while this
paragraph (C) is in effect and may be evidenced by a separate
contract between the Corporation and each Indemnified Person; and
such rights shall be effective in respect of all Proceedings
commenced after the effective date of this paragraph (C), whether
arising from acts or omissions occurring before or after such
date. No amendment, modification or repeal of this Article shall
affect any rights or obligations theretofore existing.
(5) The Corporation may purchase and maintain insurance on
behalf of, or insure or cause to be insured, any person who is an
Indemnified Person against any Liability asserted against or
incurred by him in any capacity in respect of which he is an
Indemnified Person, or arising out of his status in such
capacity, whether or not the Corporation would have the power to
indemnify him against such liability under this Article. As used
in this Section, "insurance" includes retrospectively rated and
self-insured programs; provided, however, that no such program
shall provide coverage for directors and officers which is
prohibited by applicable law. The Corporation's indemnity of any
individual who is an Indemnified Person shall be reduced by any
amounts such individual may collect with respect to such
liability (a) under any policy of insurance purchased and
maintained on his behalf by the Corporation or (b) from any other
entity or enterprise served by such individual.
(6) The rights to indemnification and to the advancement of
Expenses and all other benefits provided by, or granted pursuant
to, this Article shall continue as to a person who has ceased to
serve in the capacity in respect of which such person was an
Indemnified Person and shall inure to the benefit of the heirs,
executors and administrators of such person.
(7) The Board of Directors shall have the power and
authority to make, alter, amend and repeal such procedural rules
and regulations relating to indemnification and the advancement
of Expenses as it, in its discretion, may deem necessary or
expedient in order to carry out the purposes of this Article,
such rules and regulations, if any, to be set forth in the Bylaws
of the Corporation or in a resolution of the Board of Directors.
ITEM 16. EXHIBITS
Reference is made to the Exhibit Index on page II-6 hereof.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post effective amendment to this registration
statement (i) to include any prospectus required by Section
10(a) (3) of the Securities Act; (ii) to reflect in the
prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information
set forth in the registration statement; notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from
the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement; (iii) to include any
material information with respect to the plan of distribution
not previously disclosed in the registration statement or any
material change to such information in the registration
statement; provided, however, that the registrant need not
file a post-effective amendment to include the information
required to be included by subsection (i) or (ii) if the
II-2
<PAGE>
information is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to
section 13 or section 15(d) of the Exchange Act that are
incorporated by reference in the registration statement;
(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered
which remain unsold at the termination of the offering; and
(4) That, for purposes of determining any liability under
the Securities Act, each filing of the registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in this
registration statement shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
POWER OF ATTORNEY
Each director and/or officer of the registrant whose signature
appears below hereby appoints Ira R. Adler, Dennis R. Nelson and
Karen G. Kissinger, and each of them severally, as his attorney-
in-fact to sign in his name and behalf, in any and all capacities
stated below, and to file with the Commission, any and all
amendments, including post-effective amendments, to this
registration statement, and the registrant hereby also appoints
each such agent for service as its attorney-in-fact with the
authority to sign and file any such amendments in its name and
behalf.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form
S-3 and has duly caused this Pre-Effective Amendment No. 1 to its
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized to sign, in the City of
Tucson, and the State of Arizona, on August 6, 1998.
UNISOURCE ENERGY CORPORATION
By: /s/ Ira R. Adler
------------------------------------------
IRA R. ADLER
Executive Vice President, Principal
Financial Officer and Director
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
Date: August 6, 1998 /s/ James S. Pignatelli
-----------------------------------
James S. Pignatelli
Chairman of the Board, President and
Principal Executive Officer
Date: August 6, 1998 /s/ Ira R. Adler
-----------------------------------
Ira R. Adler
Executive Vice President, Principal
Financial Officer and Director
Date: August 6, 1998 /s/ Karen G. Kissinger
-----------------------------------
Karen G. Kissinger
Principal Accounting Officer
Date: , 1998
----- -----------------------------------
Elizabeth T. Bilby
Director
Date: August 6, 1998 /s/ Larry W. Bickle
-----------------------------------
Larry W. Bickle
Director
Date: August 6, 1998 /s/ Harold W. Burlingame
-----------------------------------
Harold W. Burlingame
Director
Date: August 6, 1998 /s/ Jose L. Canchola
-----------------------------------
Jose L. Canchola
Director
II-4
<PAGE>
Date: August 6, 1998 /s/ John L. Carter
-----------------------------------
John L. Carter
Director
Date: , 1998
----- -----------------------------------
Daniel W.L. Fessler
Director
Date: August 6, 1998 /s/ John A. Jeter
-----------------------------------
John A. Jeter
Director
Date: August 6, 1998 /s/ R. B. O'Rielly
-----------------------------------
R. B. O'Rielly
Director
Date: August 6, 1998 /s/ Martha R. Seger
-----------------------------------
Martha R. Seger
Director
Date: August 6, 1998 /s/ H. Wilson Sundt
-----------------------------------
H. Wilson Sundt
Director
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description of Exhibit
----------- ----------------------
4(a) -- Amended and Restated Articles of Incorporation
(filed with the Commission on January 30, 1998 as
Exhibit 2(a) to Registrant's Amendment No. 1 to
Form 8-A and incorporated herein by reference
thereto).
4(b) -- Bylaws (filed with the Commission on December 23,
1997 as Exhibit 2(b) to Registrant's Form 8-A and
incorporated herein by reference thereto).
5(a) -- Opinion of Dennis R. Nelson, Esq.
5(b) and 8 -- Opinion of Thelen Reid & Priest LLP.
15(a) -- Letter of Deloitte & Touch LLP regarding
unaudited interim financial information.
15(b) -- Letter of PricewaterhouseCoopers LLP regarding
unaudited interim financial information.
23(a) -- The Consents of Dennis R. Nelson and Thelen Reid &
Priest LLP are contained in their opinions as
Exhibit 5(a) and 5(b), respectively.
23(b) -- Independent Auditors' Consent
24 -- Power of Attorney is contained herein at page
II-4.
II-6
Exhibit 5(a)
UNISOURCE ENERGY CORPORATION
220 West Sixth Street
P.O. Box 711
Tucson, Arizona 85702
August 6, 1998
UniSource Energy Corporation
220 West Sixth Street
Tucson, Arizona 85701
Ladies and Gentlemen:
I am Vice President and General Counsel of UniSource
Energy Corporation, an Arizona corporation (the "Company"), and
have acted as such in connection with the filing by the Company
of a Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act of 1933, as amended (the
"Act"), relating to the registration of one million shares (the
"Shares") of the Company's common stock, without par value
("Common Stock"), to be issued under its Investment Plus Plan
(the "Plan").
Subject to the qualifications hereinafter expressed, I
am of the opinion that:
(1) The Company is a corporation duly organized,
validly existing and in good standing under the
laws of the State of Arizona.
(2) With respect to the outstanding shares of Common
Stock to be purchased in the open market for sale
pursuant to the Plan, when
(a) the Registration Statement shall have
become effective under the Act, and
(b) such shares of Common Stock shall have
been so purchased,
such Common Stock will have been legally and validly
issued and will be fully paid and nonassessable;
provided, however, that with respect to such Common
Stock heretofore issued pursuant to the Plan and other
offerings to employees and directors, I have
necessarily assumed, without investigation, that the
certificates for such Common Stock have been duly
countersigned and registered by a transfer agent and
registrar and that, upon the issuance of such Common
Stock, the Company received the full consideration
therefor authorized by the Company's Board of
Directors; and provided, further, that this opinion
does not extend to Common Stock issued subsequent to
the date hereof (except as indicated in paragraph (3)
below).
(3) With respect to authorized but unissued shares of
Common Stock to be issued and sold pursuant to the
Plan, when
(a) the Registration Statement shall have become
effective under the Act,
(b) the Company's Board of Directors or a duly
authorized committee thereof shall have taken
such action as may be necessary to authorize
the issuance and sale of the Shares on the
terms set forth in or contemplated by the
Registration Statement, as to be amended or
supplemented, and the exhibits thereto, and
to authorize such other action as may be
necessary in connection with the consummation
of the issuance and sale of the Shares, and
(c) such Shares shall have been issued, sold and
delivered by the Company pursuant to the
Plan, all as contemplated by, and in
conformity with, the acts, proceedings and
documents referred to above and the Company's
Amended and Restated Articles of
Incorporation,
such Common Stock will have been validly issued and
will be fully paid and nonassessable.
As a member of the Bar of the State of Arizona, I do
not hold myself out as an expert on the laws of other states.
I hereby consent to the filing of this opinion with the
Securities and Exchange Commission as Exhibit 5(a) to the
Registration Statement and the use of my name, as counsel,
therein. In giving the foregoing consent, I do not thereby admit
that I belong to the category of persons whose consent is
required under Section 7 of the Act, or the rules and regulations
promulgated by the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Dennis R. Nelson
Dennis R. Nelson, Esq.
Vice President and General Counsel
THELEN REID & PRIEST LLP
40 West 57th Street
New York, NY 10019
Exhibit 5(b) and 8
New York, New York
August 6, 1998
UniSource Energy Corporation
220 West Sixth Street
Tucson, Arizona 85701
Ladies and Gentlemen:
We are acting as counsel to UniSource Energy
Corporation, an Arizona corporation (the "Company"), in
connection with the filing by the Company of a Registration
Statement on Form S-3 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Act"), relating to the
registration of one million shares (the "Shares") of the
Company's Common Stock, without par value ("Common Stock"), to be
issued under its Investment Plus Plan (the "Plan").
Subject to the qualifications hereinafter expressed, we
are of the opinion that:
(1) The Company is a corporation duly organized,
validly existing and in good standing under the
laws of the State of Arizona.
(2) With respect to authorized but unissued shares of
Common Stock to be issued and sold pursuant to the
Plan, when
(a) the Registration Statement shall have become
effective under the Act,
(b) the Company's Board of Directors or a duly
authorized committee thereof shall have taken
such action as may be necessary to authorize
the issuance and sale of the Shares on the
terms set forth in or contemplated by the
Registration Statement, as to be amended or
supplemented, and the exhibits thereto, and
to authorize such other action as may be
necessary in connection with the consummation
of the issuance and sale of the Shares, and
(c) such Shares shall have been issued, sold and
delivered by the Company pursuant to the
Plan, all as contemplated by, and in
conformity with, the acts, proceedings and
documents referred to above and the Company's
Amended and Restated Articles of
Incorporation,
such Common Stock will have been validly issued
and will be fully paid and nonassessable.
We are further of the opinion that the statements
contained in the Prospectus portion of the Registration Statement
under the caption "FEDERAL INCOME TAX INFORMATION" describing
certain federal income tax consequences to holders of the Shares
issued pursuant to the Plan, as qualified therein, constitutes an
accurate description, in general terms, of the indicated United
States federal income tax consequences to holders of such Shares.
As members of the New York bar, we do not hold
ourselves out as experts of the laws of other states. To the
extent the opinions expressed are dependent upon matters governed
by the law of the State of Arizona, we have relied, with your
consent, upon the opinion of even date herewith rendered to you
by Dennis R. Nelson, Esq.
We hereby consent to the filing of this opinion with
the Securities and Exchange Commission as Exhibit 5(b) and 8 to
the Registration Statement. In giving the foregoing consent, we
do not thereby admit that we belong to the category of persons
whose consent is required under Section 7 of the Act, or the
rules and regulations promulgated by the Securities and Exchange
Commission thereunder.
Very truly yours,
/s/ Thelen Reid & Priest LLP
THELEN REID & PRIEST LLP
Exhibit 15(a)
UniSource Energy Corporation
220 West Sixth Street
Tucson, Arizona 85701
We have made a review, in accordance with standards established
by the American Institute of Certified Public Accountants, of the
unaudited interim financial information of UniSource Energy
Corporation and subsidiaries (the Company) for the period ended
March 31, 1997 as indicated in our report dated February 23,
1998; because we did not perform an audit, we expressed no
opinion on that information.
We are aware that our report referred to above, which was
included in your Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998 is incorporated by reference in this Pre-
Effective Amendment No. 1 to Registration Statement No. 333-31043
of the Company on Form S-3.
We are also aware that the aforementioned report, pursuant to
Rule 436(c) under the Securities Act of 1933, is not considered a
part of the Registration Statements prepared or certified by an
accountant or a report prepared or certified by an accountant
within the meaning of Sections 7 and 11 of that Act.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Tucson, Arizona
August 4, 1998
Exhibit 15(b)
August 4, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
We are aware that UniSource Energy Corporation has included our
report dated May 5, 1998 (issued pursuant to the provisions of
Statement on Auditing Standards No. 71) in the Prospectus
constituting part of its Pre-Effective Amendment No. 1 to the
Registration Statement (No. 333-31043) on Form S-3 to be filed on
or about August 5, 1998. We are also aware of our
responsibilities under the Securities Act of 1933.
Yours very truly,
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Exhibit 23(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Pre-
Effective Amendment No. 1 to Registration Statement No. 333-31043
of UniSource Energy Corporation on Form S-3 of our report dated
February 23, 1998, appearing in the Annual Report on Form 10-K of
UniSource Energy Corporation, as amended by Form 10K/A, dated
March 5, 1998, for the year ended December 31, 1997 and to the
reference to us under the heading "Experts" in the Prospectus,
which is part of this Registration Statement.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Tucson, Arizona
August 4, 1998
