ITEM 1. - BUSINESS
THE COMPANY
Tucson Electric Power Company was incorporated under the laws of the State of Arizona on December 16, 1963. The Company is the successor by merger as of February 20, 1964, to a Colorado corporation which was incorporated on January 25, 1902. The Company is an operating public utility engaged in the generation, purchase, transmission, distribution and sale of electricity for customers in the City of Tucson and the surrounding area and to wholesale customers. The Company holds a franchise which expires in 2001 to provide electric service to customers in the City of Tucson.
The Company owns all of the outstanding stock of Valencia Energy Company (Valencia), which supplies coal to the Springerville Generating Station (see Fuel Supply, Valencia), all of the outstanding stock of San Carlos Resources Inc. (San Carlos), which holds title to Springerville Unit 2, and all of the outstanding stock of Nations Energy Corporation. See Competition below for a description of Nations Energy. The Company owns all of the outstanding stock of two investment subsidiaries, Tucson Resources Inc. (TRI) and Sierrita Resources Inc. (SRI). See Consolidated Statements of Income (Loss) and Note 5 of Notes to Consolidated Financial Statements, Discontinued Operations for comparative financial information relating to the Company's investment business segments. TRI and SRI have substantially completed the process of liquidating their respective investments.
CERTAIN RISKS
For descriptions of certain factors affecting the Company, including commitments and contingencies, which subject the Company to continuing risks, see (i) 1994 Rate Order; (ii) Discontinued Investment Subsidiary Operations; (iii) Item 3., Legal Proceedings; (iv) Item 7., Management's Discussion and Analysis of Financial Condition and Results of Operations, Overview; and (v) Notes 2 and 7 of Notes to Consolidated Financial Statements, 1994 Rate Order, and Commitments and Contingencies, respectively.
THE FINANCIAL RESTRUCTURING
In December 1992, the Company consummated a comprehensive restructuring of obligations to certain creditors and reclassified its preferred stock into common stock. The Financial Restructuring was concluded following negotiations with various creditors including, but not limited to, bank lenders and lease participants. See Note 3 of Notes to Consolidated Financial Statements, 1992 Consummation of the Financial Restructuring. The Company initiated the Financial Restructuring because it projected that it might have insufficient liquidity to meet its cash obligations by the end of the first quarter of 1991. A payment moratorium on certain of the Company's debt, lease, coal and rail obligations during part of the period of negotiations provided cash flow sufficient to meet the Company's other obligations.
The Company believes that the Financial Restructuring provides the Company the opportunity to return gradually to long-term financial viability. However, the Financial Restructuring itself will not be sufficient to assure the Company's long-term financial viability. Also, the Company's capital structure remains highly leveraged and the Company's financial prospects and cash flows remain subject to significant economic, regulatory and other uncertainties, many of which are beyond the Company's control.
UTILITY OPERATIONS
PEAK DEMAND AND CUSTOMERS
Certain operating and system data related to the Company's utility operations for each of the last five years were as follows:
The peak demand for the Company's retail service area occurs during the summer months due to the space cooling requirements of its retail customers. The Company has experienced growth in peak demand (excluding the demand of its copper mining customers which fluctuates widely) at an average annual rate of approximately 4.9% for the past five years. Including the load of its mining customers, which comprised approximately 8.0% of the retail peak demand for the past five years, the Company experienced growth in peak demand of retail customers at an average annual rate of approximately 4.0% during the same period.
In 1994, based on non-coincident peak demand, the Company's reserve margin was only 9% compared with 18% in the prior year. The Company seeks to maintain a reserve margin equal to its largest single hazard plus 5% of its non- coincident peak demand in accordance with guidelines established by the WSCC. The targeted reserve requirement was 295 MW in 1994 or 16% of non-coincident peak demand. The Company's operations were not adversely affected by the Company's failure to maintain its targeted reserve requirement in 1994. It is expected that near-term growth in demand will be met with existing resources and the additional capacity provided under a power exchange agreement between the Company and SCE. See SCE/TEP Power Exchange Agreement below. Also, see Generating Resources below for a discussion of the Company's electric generating resources.
The average number of retail customers served by the Company increased 2.9% in 1994 compared with 1993 and 2.1% on average annually over the past five years. The Company is currently projecting an average annual customer growth rate of approximately 2.5% and an average annual growth rate in the peak demand of retail customers of approximately 1.4% for the period 1995 through 1999. Realized growth in customers and retail demand may be affected by factors discussed under Competition below. Customer growth rates are projected to exceed historical growth rates because the Company anticipates greater population and economic growth than occurred in the past five years.
Also, the Company is projecting a 2.3% average annual growth rate in sales to retail customers over the next five years. Sales to residential, non-mining industrial and mining customers account for approximately 41%, 26% and 10%, respectively, of the projected sales.
The Company has two principal copper mining customers. In 1994, sales to such customers represented 11% and 6% of the Company's retail sales and their contract demands were 6% and 5%, respectively, of the Company's 1994 retail non- coincident peak demand. The total coincident peak load for the Company's two mining customers was 8.6% of the Company's 1994 retail peak demand. Revenues from sales to mining customers have comprised between 10% and 11% of the Company's revenues from retail customers in each of the three years in the period ended December 31, 1994.
In March 1994, the Company and the large mining customer to which the Company supplied approximately 50 MW, executed a new contract that included a reduced rate designed to induce such customer to remain on the Company's system rather than self-generate. In April 1994, the ACC approved such contract. Revenues from this customer were $23.6 million and $22.3 million in 1993 and 1994, respectively. In 1993, the Company entered into a similar contract with its largest mining customer although at a different rate level. These contracts expire after the year 2000. However, such contracts contain various provisions allowing the customers to terminate partially or entirely, under certain circumstances, provided that the Company has been notified at least one and up to two years prior to such termination. The ability to extend contracts, and to avoid early termination, will be dependent on market conditions at the time and alternatives available to customers at that time.
Future markets and prices for fuel, access to capital, as well as ACC decisions regarding rate design and the timing of rate decisions will affect the economics of self-generation projects (including cogeneration) and may ultimately affect whether customers, such as the mining customers described above, if any, might reduce or terminate their contract demand on the Company's system. See Competition below.
SALES FOR RESALE
The Company makes sales for resale to others on both a firm and an interruptible basis. To the extent capacity is not providing energy to the Company's retail customers, such as during off-peak periods, the Company markets this capacity and energy at wholesale. Surplus energy is sold from time to time under various power pooling arrangements. The Company currently has contracts to sell firm capacity as follows:
Minimum (or Maximum) Contract Company Demand MW Contract Term
SRP 100 June 1, 1991 - May 31, 2011 NPC 50 May 16, 1990 - December 31, 1995 NTUA (1) 45 June 1, 1993 - May 31, 1999
(1)The agreement with NTUA provides for a minimum contract demand of 45 MW and requires NTUA to obtain all of its electric power requirements from the Company. NTUA's peak demand is expected to be about 70 MW.
COMPETITION
Under current law, the Company is not in direct competition with any other regulated electric utility for electric service in the Company's retail service territory. Regardless of such regulation, the Company competes for retail markets against gas service suppliers and others who may provide energy services which would be substitutes for, or bypass of, the Company's services.
The Company does compete with other utilities, marketers and independent power producers in the sale of electric capacity and energy in the wholesale market. It is expected that competition to sell capacity will remain vigorous and that prices will remain depressed for several years due to increased competition and surplus capacity in the southwestern United States. Competition for the sale of capacity and energy is influenced by many factors, including the availability of capacity of the 3,810 MW Palo Verde nuclear generating station and other generating stations in the southwestern United States, the availability and prices of natural gas and oil, spot energy prices and transmission access. In addition, the Energy Act has increased competition in the wholesale electric power markets.
The Energy Act addresses a wide range of energy issues, including several matters affecting bulk power competition in the electric utility industry. It creates exemptions from regulation under the Holding Company Act for persons or corporations that own and/or operate in the United States certain generating and interconnecting transmission facilities dedicated exclusively to wholesale sales, thereby encouraging the participation of utility affiliates, independent power producers and other non-utility participants in the development of power generation. In order to facilitate competition in power generation, the Energy Act also confers expanded authority upon FERC to issue orders requiring electric utilities to transmit power and energy to or for wholesale purchasers and sellers, and to require electric utilities to enlarge or construct additional transmission capacity to provide these services. While the Energy Act prohibits FERC from issuing any such order that would unreasonably impair the continuing reliability of affected electric systems or that would be conditioned upon or require transmission services directly to an ultimate consumer, the Energy Act creates the potential for utilities and other power producers to gain increased access to the transmission systems of other entities to facilitate wholesale sales. FERC is encouraging all parties interested in transmission access to form RTGs to facilitate access to and development of transmission service and to assist in settling disputes regarding such matters. RTGs will not relieve FERC of its responsibilities related to transmission access; however, such organizations could provide for more efficient handling of transmission service requests and planning for regional transmission needs. The Company is currently involved in the development of two RTGs in the West, SWRTA and WRTA. WRTA and SWRTA both filed applications for approval with the FERC during 1994 which have yet to be accepted. The Company currently intends to become a member of SWRTA and is also considering membership in WRTA.
On the retail level, industrial and large commercial customers may have the ability to own and operate facilities to generate their own electric energy requirements and, if such facilities are qualifying facilities, to require the displaced electric utility to purchase the output of such facilities at "avoided costs" pursuant to PURPA. Such facilities may be operated by the customers themselves or by other entities engaged for such purpose.
Finally, the legislatures and/or the regulatory commissions in several states have considered or are considering "retail wheeling" which, in general terms, means the transmission by an electric utility of energy produced by another entity over its transmission and distribution system to a retail customer in such utility's service territory. A requirement to transmit directly to retail customers could have the result of permitting retail customers to purchase electric capacity and energy from, at the election of such customers, the electric utility in whose service area they are located or from other electric utilities or independent power producers.
In Arizona, the ACC Staff issued its first report on a retail electric competition workshop held in October of 1994. This report is the first in a series of reports that will be issued on various workshops that will be held from time to time to identify and address policy issues related to competition. While other states are considering competition proposals, the ACC effort is designed to obtain information about competition. No specific proposals are currently being considered. The report proposes that Staff develop a comprehensive set of options to better inform the ACC about its choices. Staff recommended that three options be considered: 1) encouraging retail competition, 2) tolerating limited retail competition, and 3) discouraging retail competition by prohibiting retail wheeling and tolerating distributed energy services. The ACC has also established a working group on retail electric competition. Membership in the working group includes ACC Staff, Arizona utilities, and other interested parties, and the first meeting of the group took place in January 1995. A report from the group is expected by August 1995. The Company cannot predict what the working group will recommend and what, if any, changes in electric regulation and competition will be implemented by the ACC.
See Peak Demand and Customers above for information concerning mining customers which have considered self-generation and Generating and Other Resources and Other Purchases and Item 2.
ITEM 2. - PROPERTIES
The Company's transmission facilities are located within the states of Arizona and New Mexico. The primary purpose of the Company's transmission facilities is to transmit electricity from the Company's remote electric generating stations at Four Corners, Navajo, San Juan and Springerville to the Tucson area for use by the Company's retail customers. The transmission system is directly interconnected with systems operated by the following utilities:
Utility Location
Arizona Public Service Co. Arizona Arizona Electric Power Cooperative Arizona El Paso Electric Co. New Mexico, Texas Public Service Co. of New Mexico New Mexico Salt River Project Arizona
The Company has arrangements with approximately 74 companies, including the five listed above, which are utilized to interchange capacity and energy.
As of December 31, 1994, the Company owned or participated in an overhead electric transmission and distribution system consisting of 511 circuit-miles of 500 kV lines, 1,122 circuit-miles of 345 kV lines, 335 circuit-miles of 138 kV lines, 454 circuit-miles of 46 kV lines and 8,947 circuit-miles of lower voltage primary lines. The underground electric distribution system was comprised of 4,223 cable-miles. Approximately 25% of the poles upon which the lower voltage lines are located are not owned by the Company. Electric substation capacity associated with the above-described electric system consisted of 165 substations with a total installed transformer capacity of 5,209,355 kVA.
The electric generating stations (except as noted below), the Company's general office building, operating headquarters and the warehouse and service center are located on land owned by the Company in fee. The electric distribution and transmission facilities owned by the Company are located (1) on property owned in fee by the Company, (2) under or over streets, alleys, highways and other public places, the public domain and national forests and state lands under franchises, easements or other rights which, with some exceptions, are subject to termination, (3) under or over private property by virtue of easements obtained for the most part from the record holder of title, and (4) under Indian reservations under grant of easement by the Secretary of Interior or lease by Indian tribes. In most instances, no examination has been made by counsel for the Company as to the title to easements of the Company from the record holder or to the property over which the easement has been granted, or as to possible liens, encumbrances, reservations or restrictions thereon. Therefore, some of the easements and the property over which the easements have been secured may be subject to title defects and encumbered by, or subject to, mortgages and liens existing at the time the easements were acquired.
Most of the land parcels comprising Springerville are held by the Company under a long-term surface ownership agreement with the State of Arizona. The Company's 50% interest in the common facilities of Springerville and its 100% interest in Irvington Unit 4 and related common facilities were sold and are leased back by the Company. The coal-handling facilities at Springerville were sold and leased back by Valencia. The Company leases Springerville Unit 1 and the remaining 50% interest in the common facilities at Springerville.
Four Corners and Navajo are located on properties held under easements from the United States and under leases from the Navajo Indian Tribe. The Company, individually and in conjunction with PNM in connection with San Juan, has acquired easements and leases for transmission lines and a water diversion facility located on the Navajo Indian Reservation. The Company has also acquired easements for transmission facilities, related to San Juan and Navajo, across the Zuni, Navajo and Tohono O'odham Indian Reservations.
The Company's rights under the various easements and leases described under this heading may be subject to possible defects (including conflicting grants or encumbrances not ascertainable because of absence of or inadequacies in the recording laws or the record systems of the Bureau of Indian Affairs and the Indian tribes, the possible inability of the Company to resort to legal process to enforce its rights against certain possible adverse claimants and the Indian tribes without Congressional consent, the possible failure or inability of the Indian tribes to protect the Company's interests in, and use and occupancy of, these facilities from interference or interruption, and, in the case of the leases, possible impairment or termination under certain circumstances by Congress, the Secretary of the Interior or certain possible adverse claimants). However, these possible defects have not and are not expected to materially interfere with the Company's interest in and operation of its facilities.
With the exception of Springerville Unit 2, substantially all of the utility assets of the Company are subject to the lien of the General First Mortgage and the General Second Mortgage. Legal title to Springerville Unit 2, which is not subject to such lien, is held by San Carlos. Springerville Unit 2 is subject to the Unit 2 First Mortgage.
The Company provided to certain banks, at the time of the Closing, the Unit 2 First Mortgage, a first mortgage lien on and security interest in Springerville Unit 2, and $50 million in principal amount of collateral bonds issued under the General Second Mortgage, a second mortgage, junior to the lien of the General First Mortgage, on all the utility assets (other than excepted property).
ITEM 3.
ITEM 3. - LEGAL PROCEEDINGS
SDGE/FERC PROCEEDINGS
See SDGE/FERC Proceedings in Note 7 of Notes to Consolidated Financial Statements.
WATER RIGHTS ADJUDICATION
On March 13, 1975, the State of New Mexico filed an action entitled State of New Mexico v. United States, et al., in the District Court of San Juan County, New Mexico, to adjudicate all water rights in the San Juan River Stream System. The action is expected to adjudicate certain water rights applicable to the water supply for San Juan and Four Corners. The Company was made a party to this action in June 1976 and an answer was filed on behalf of the Company and others in May 1978. For the past several years, the State of New Mexico Engineer's Office has reportedly been completing reports on hydrographic surveys performed in conjunction with the litigation. It is anticipated that once those reports are completed, offers of judgment will be issued to the Company and other parties. The Company is unable to predict the effect, if any, of any adjudication on its present arrangements for a water supply to these stations. However, pursuant to an agreement reached in 1985, the Navajo Tribe will provide sufficient water to Four Corners from its own allocation to offset any portion of the water rights affected by this proceeding.
TAX ASSESSMENTS
See Tax Assessments in Note 7 of Notes to Consolidated Financial Statements.
ITEM 4.
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
PART II
ITEM 5.
ITEM 5. - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The following table sets forth, for the periods indicated, the high and low sale prices of the Company's Common Stock on the consolidated tape as reported by The Wall Street Journal. No dividends were paid on Common Stock during such periods.
Market Price per Quarter Share of Common Stock
High Low
First $4.13 $3.38 Second 3.88 2.88 Third 3.75 2.88 Fourth 3.88 3.00
First $3.75 $1.88 Second 4.50 2.75 Third 4.63 3.63 Fourth 4.38 3.25
The closing price of the Common Stock on March 6, 1995 was $3.375.
The Common Stock is traded on the New York Stock Exchange and the Pacific Stock Exchange. At March 6, 1995, there were 39,199 shareholders of record of the Common Stock.
See Item 7., Management's Discussion and Analysis of Financial Condition and Results of Operations, Dividends on Common Stock.
ITEM 6.
ITEM 6. - SELECTED CONSOLIDATED FINANCIAL DATA
ITEM 7.
ITEM 7. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following contains information regarding the Company's continuing and discontinued operations during 1994 compared with 1993 and 1993 compared with 1992 and changes in liquidity and capital resources of the Company during 1994. Also, management's expectations of identifiable material trends are discussed herein.
OVERVIEW
In December 1992, the Company consummated a comprehensive Financial Restructuring of obligations to certain creditors and reclassified its preferred stock into common stock. The Financial Restructuring was concluded following nearly two years of negotiations with various creditors including, but not limited to, bank lenders and lease participants. The Company initiated the Financial Restructuring because it projected that it might have insufficient liquidity to meet its cash obligations by the end of the first quarter of 1991. A payment moratorium on certain of the Company's debt, lease, coal and rail obligations during part of the period of negotiations provided cash flow sufficient to meet the Company's other obligations.
The Company believes that the Financial Restructuring provides the Company the opportunity to return gradually to long-term financial viability. However, the Financial Restructuring itself is not sufficient to assure the Company's long-term financial viability.
The Company's capital structure remains highly leveraged and the Company's financial prospects and cash flows remain subject to significant economic, regulatory and other uncertainties, some which are beyond the Company's control. These uncertainties include the degree of utilization of capacity through either retail electric service or wholesale sales and the extent to which the Company can alter operations and reduce costs in response to unanticipated economic downturns or industry changes due to continued high financial and operating leverage. The Company's ability to recover the costs of serving retail customers is dependent upon pricing of the Company's services, which requires ACC approval, and the level of sales to such customers. The Company anticipates continued growth in sales over the next five years primarily as a result of anticipated population and economic growth in the Tucson area. However, a number of factors such as changes in economic conditions and the increasingly competitive electric markets, could affect the Company's levels of sales.
Increased revenues, including increases for the recovery of plant and operating costs associated with the remaining 37.5% of Springerville Unit 2, which is not currently included in rate base, may be required in order for the Company to maintain its existing level of liquidity over the longer term as obligations become due. See Item 1., Business, Rates and Regulation, 1994 Rate Order. Also, see Notes 2 and 7 of Notes to Consolidated Financial Statements, 1994 Rate Order and Commitments and Contingencies, respectively. The level of cash flow from wholesale sales is affected generally by factors affecting the market for such sales, including the availability of capacity and energy in the western United States with pricing and procurement processes influenced by the ongoing review of bulk power markets by FERC and the various state public utility commissions. In addition, because the Company has a significant amount of variable rate debt, the Company's future cash flows are also affected by the level of interest rates. See Liquidity and Capital Resources, Cash Flows below.
If the Company is unable to make sales at prices adequate to recover its costs or if for other reasons the Company fails to maintain or improve its cash flows, the Company's ability to meet its obligations may be jeopardized. The Company has approximately $1.1 billion of long-term debt maturing, including approximately $774 million in reimbursement agreements relating to letters of credit which expire, during the 1997-2001 period. See Consolidated Statements of Capitalization and Note 6 of Notes to Consolidated Financial Statements. The Company intends to pay or refinance maturing bonds and bank loans and to replace or extend such reimbursement agreements. There can be no assurance, however, that the Company will be able to pay such debt or replace or extend such reimbursement agreements.
In addition, the Company's ability to raise capital (through either public or private financings) is limited. The Company's ability to obtain debt financing will be limited by reason of limited free cash flow available to meet additional interest expense and due to the restrictive covenants contained in its obligations to creditors. Further, if the Company is required to refinance its debt obligations in order to repay them when due, such refinancing may be made on terms which are adverse to the Company. Access to equity capital may be limited because of the Company's likely limited future profitability and its inability to pay dividends for the foreseeable future. See Dividends below.
During the next twelve months, the Company does not expect any need to obtain new debt financing to fund continuing operating activities and construction expenditures. The Company instead will rely on internal cash flows, existing cash balances and, if necessary, borrowings under the Renewable Term Loan and/or a revolving credit line provided under the MRA. The Company's cash balance, excluding the cash of the investment subsidiaries, but including cash equivalents, at December 31, 1994, was approximately $233 million. Cash balances are invested in investment grade, money-market securities with an emphasis on preserving the principal amount invested.
In 1993 and 1992, the Company's results from continuing operations were affected by certain unusual and infrequent adjustments and accruals. The table below shows the Company's income or losses from continuing operations and income/loss from continuing operations per average share of Common Stock had such unusual and infrequent adjustments and accruals not been recorded.
December 31, 1994 1993 1992 - Thousands of Dollars -
Income (Loss) From Continuing Operations $20,740 $(21,816) $(79,022) ------- -------- -------- Regulatory Disallowances and Adjustments-Net - 13,177 - Financial Restructuring Costs - 1,498 29,511 Loss on Financial Restructuring - - 26,669 SCECorp/SCE Litigation Settlement - - (40,000) ------- -------- -------- Total Adjustments to Income (Loss) From Continuing Operations - 14,675 16,180 ------- -------- -------- Adjusted Income (Loss) From Continuing Operations $20,740 $ (7,141) $(62,842) ======= ======== ========
Adjusted Income (Loss) From Continuing Operations Per Average Share of Common Stock $0.13 $(0.04) $(1.97) ===== ====== ======
PROPOSED HOLDING COMPANY
The Company intends to establish in early 1996 a new corporate structure in which the Company will be a subsidiary of a new holding company, UniSource Energy Corporation (UniSource). The Company proposes to establish a holding company structure because the Company believes that it is in the best interests of its shareholders for the Company to participate in various segments of the evolving and expanding electric energy business. The Company believes that such participation would be enhanced by the holding company structure, a commonly used structure in the electric and other industries, to conduct different lines of business.
Approval of a holding company structure will require the affirmative vote of holders of shares of common stock representing not less than a majority of all votes entitled to be cast by all holders of shares of common stock. In addition to shareholder approval, consummation of the holding company plan is predicated upon receiving approval from the ACC and FERC. The Company will also seek a "no action" position from the Staff of the SEC under the Public Utility Holding Company Act of 1935, as amended, or, in the alternative, will seek approval of the SEC under such Act. The Company is in the process of obtaining such approvals.
If approved by the requisite vote of the Company shareholders and if required regulatory approvals are satisfactorily obtained, the outstanding shares of the Company common stock would be exchanged, on a share-for-share basis, for shares of UniSource. As a result, the holders of the Company common stock will become the owners of UniSource common stock, and UniSource will become the owner of the Company common stock.
During the second quarter of 1995, the Company intends to provide a proxy statement-prospectus to all shareholders which will set forth in detail the holding company structure, the plan of the share exchange and a shareholder meeting date. Accompanying the proxy statement-prospectus will be a form of proxy solicited on behalf of the Board of Directors of the Company.
RESULTS OF OPERATIONS
RESULTS OF UTILITY OPERATIONS
SALES AND REVENUES
Revenues from sales to retail customers increased 9.0% in 1994 compared with 1993 and 2.1% in 1993 compared with 1992. The table below identifies the components of the increases in 1994 and 1993.
1994 1993 - Millions of Dollars -
Price Change $17 $(3) Consumption Change 15 3 Customer Growth 15 12 --- --- Increase in Retail Revenues $47 $12 === ===
The revenue increase in 1994 resulted from greater kWh sales due to continued growth in the average number of retail customers, increase in usage due to warmer than normal temperatures, and increased prices as a result of the 1994 Rate Order. There were 289,697 electric customers on average during 1994, an increase of 2.9% over 1993. Based on billed cooling degree days, a commonly used measure in the electric industry, that are calculated by subtracting 75 degrees from the daily average of the high and low temperatures, the Tucson area registered a 26% increase in such cooling degree days in 1994 over 1993, and a 33% increase in such cooling degree days in 1994 over the 10 year average from 1984 to 1993. The 1993 revenue decrease due to change in price, shown in the table above, resulted from lower rates charged under a renegotiated contract with one of the Company's mining customers.
Amortization of the MSR Option Gain Regulatory Liability increased in 1994 compared with 1993 as a result of the 1991 Rate Order which set the non-cash operating revenue for the amortization of the regulatory liability for the MSR option gain at $6 million for 1992 and 1993, $20 million in 1994, 1995 and 1996, and $8 million in 1997 at which point the MSR Option Gain will be fully amortized. See Note 1 of Notes to Consolidated Financial Statements, Nature of Operations and Summary of Significant Accounting Policies.
In 1994, revenues from Other Utilities increased 7.2% over 1993 as a result of a 13% increase in revenues from firm sales of energy, offset by a 4% decrease in revenues from economy sales. Revenues from Other Utilities increased 33% in 1993 compared with 1992 primarily due to a 56% increase in revenues from firm sales of energy and a 12% increase in the average revenue per kWh sold on a non- firm basis. In 1994, firm sales accounted for 37% of sales to Other Utilities and 58% of revenues from Other Utilities. In 1993, firm sales accounted for 33% of sales to Other Utilities and 56% of revenues from Other Utilities. The Company's ability to market available capacity and energy in the future, at levels comparable with 1994, may be limited due to lower prevailing prices and other market conditions.
OPERATING EXPENSES
As a result of the Financial Restructuring, the Company's Irvington Lease, Valencia Leases and the Springerville Common Facilities Leases were reclassified from operating leases to capital lease obligations. The effect of this reclassification significantly increased recorded assets and liabilities relating to these leases and resulted in the reallocations of the lease expenses relating to the Irvington and Springerville Common Facilities Leases from Other Operations expense to Capital Lease Expense. The Valencia Leases expense continues to be expensed as a component of Fuel expense. In addition, as part of the Financial Restructuring, the Company became the direct lessee under the Springerville Unit 1 Leases which is also stated as a capital lease obligation. The assumption of the Springerville Unit 1 Leases and the termination of the Restated Century Purchase Contract increased assets and liabilities relating to capital leases and, for periods subsequent to the Financial Restructuring, result in the recognition of certain expenses, which were previously included in Purchased Power-Demand expense, as Capital Lease Expense and various other operating expenses.
Fuel expenses increased 6.4% in 1994 over 1993 as a result of the fourth quarter 1994 reallocation of a reserve for sales tax disputes from Taxes Other than Income Taxes. See Note 7 of Notes to Consolidated Financial Statements, Commitments and Contingencies, Tax Assessments. Aggregate fuel expense increased 48.6% in 1993 compared with 1992 due to greater generation to accommodate increased sales to Other Utilities and Retail Customers and fuel expenses from Springerville Unit 1, which were previously accounted for as Purchased Power-Energy. Average cost per kWh of fuel and its transportation only were 1.79 cents in 1994 and 1.76 cents in 1993. Following the Financial Restructuring, the Company no longer makes purchases under the Restated Century Purchase Contract, which was terminated, but purchases fuel directly from Valencia. Increased generation requirements were met primarily through increased generation at Springerville Unit 1.
Purchased Power-Energy increased in 1994 over 1993 as a result of greater kWh requirements to provide for increased sales. Purchased Power-Energy expense decreased in 1993 compared with 1992 as a result of the termination of the Restated Century Purchase Contract and the change in the status of Springerville Unit 1 described above.
Purchased Power-Demand expense decreased in 1993 compared with 1992 due to the termination of the Restated Century Purchase Contract.
The increase in Capital Lease Expense in 1993 compared with 1992 reflects the reclassification of the Irvington Lease and Springerville Common Facilities Leases to capital lease obligations and the assumption of the Springerville Unit 1 Leases.
Amortization of Springerville Unit 1 Allowance, a non-cash item, decreased in 1994 compared with 1993 due to lower projected operation and maintenance expenses included in the calculation of the Springerville Unit 1 Allowance. The Springerville Unit 1 Allowance was originally calculated by projecting the yearly costs associated with Springerville Unit 1 over the remaining life of the Springerville Unit 1 Leases and taking the present value of the difference between such costs and the ACC allowed level of recovery. Such costs are then recognized in each period along with a corresponding interest accrual and amortization of the allowance as a credit to operating expenses. The interest accrual is included in the Consolidated Statements of Income (Loss) as Regulatory Interest. Amortization of Springerville Unit 1 Allowance, a non- cash credit originally resulting from the write-off of the portion of Springerville Unit 1 demand charges under the Restated Century Purchase Contract in excess of the $15 per kW per month allowed by the ACC, increased in 1993 compared with 1992 due to increased Springerville Unit 1 Leases expense. As a result of the assumption of the Springerville Unit 1 Leases, the Company's levelized amortization of lease expenses is based on rents over the full primary term of the leases rather than through 2001, the date utilized when the rents were paid by Century and passed through under the Restated Century Purchase Contract. See Note 1 of Notes to Consolidated Financial Statements, Nature of Operations and Summary of Significant Accounting Policies.
Other Operations expense increased in 1994 compared with 1993 as a result of the accrual of increased employee expenses related to compensation and pension benefits. Other Operations expense decreased in 1993 compared with 1992 primarily due to the reclassification of the Irvington Lease and the Springerville Common Facilities Leases expenses to Capital Lease Expense.
Maintenance and Repairs expense was higher in 1993 compared with 1992 because of the change in the status of Springerville Unit 1 described above.
Depreciation and Amortization increased in 1994 over 1993 as a result of the amortization of 62.5% of the Springerville Unit 2 rate synchronization deferral costs over 3 years (beginning in January 1994) pursuant to the 1994 Rate Order. Depreciation expense increased in 1993 compared with 1992 primarily reflecting various additions to plant and equipment and a one-time adjustment decreasing depreciation expense mandated by FERC which was recorded in the second quarter of 1992.
Taxes Other than Income Taxes decreased in 1994 compared with 1993 as a result of the fourth quarter 1994 reallocation of a reserve for sales tax disputes to Fuel. See Note 7 of Notes to Consolidated Financial Statements, Commitments and Contingencies, Tax Assessments. The increase in Taxes Other than Income Taxes in 1993 compared with 1992 reflects that property tax expense related to the Company's assumption of the Springerville Unit 1 Leases, which expense previously had been part of demand charges paid under the Restated Century Purchase Contract and included in Purchased Power-Demand is currently recorded as Taxes Other than Income Taxes.
Financial Restructuring costs decreased in 1993 compared with 1992 as a result of the completion of the Financial Restructuring in December 1992.
OTHER INCOME (DEDUCTIONS)
Regulatory Disallowances and Adjustments in 1993 reflect primarily the write-off of Springerville Unit 2 deferred expenses mandated by the 1994 Rate Order.
Deferred Springerville Unit 2 Carrying Costs decreased in 1994 compared with 1993 as a result of the incorporation into rate base of 62.5% of Springerville Unit 2.
The Loss on Financial Restructuring in 1992 was based on, among other things, the excess of the fair value of the Common Stock and Warrants issued, at values of $2.33 per share and $0.82 per warrant, respectively, compared to the amount of plant, materials and supplies inventories received by the Company from Century and accrued rent under the Springerville Unit 1 Leases, reflected on the Company's financial statements as of December 15, 1992 as demand charges payable to Century. In addition, the Company reversed a reserve of approximately $9 million due to the dismissal of related regulatory matters as a part of the Financial Restructuring. The restructuring of Bank obligations gave rise to a deferred gain of $21 million, which is being amortized as a reduction of interest expense over an eight-year period. See Note 3 of Notes to Consolidated Financial Statements, 1992 Consummation of the Financial Restructuring.
Litigation Settlement income in 1993 decreased compared with 1992 due to the settlement of litigation against SCE in the third quarter of 1992. See Item 1., Business, SCE/TEP Power Exchange Agreement.
Other Income increased in 1994 compared with 1993 due to greater interest earned on cash and cash equivalents. Other Income decreased in 1993 compared with 1992 due to the collection in 1992 of approximately $8 million in interest income on a Federal income tax refund.
INTEREST EXPENSE
Interest expense on Long-Term Debt-Net increased in 1994 compared with 1993 as a result of slightly higher interest rates. Interest expense on Long-Term Debt-Net decreased in 1993 compared with 1992 due to the prepayment of $68 million of long-term debt combined with significantly lower interest rates on the Company's obligations in the first quarter of 1993 compared with interest rates during the same period of 1992. The lower rates reflect primarily the elimination of default rates on such obligations in 1993 as a result of the Financial Restructuring (discussed below), and in part, lower market rates. The effect of lower rates was partly offset by the reclassification of previously outstanding short-term debt into the Term Loan which is classified as Long-Term Debt.
In the first quarter of 1992, the Payment Moratorium was in effect on most obligations of the Company. Therefore, the Company accrued interest on such obligations at default rates, which were substantially higher than market rates. Interest at default rates was accrued on approximately $900 million of bank credit obligations including approximately $650 million of reimbursement obligations related to LOCs that provide credit support for variable-rate tax- exempt bond issues. The irrevocable LOCs were fully drawn through the first quarter of 1992. In March 1992, such issues were remarketed and the proceeds were used to pay reimbursement obligations for the drawn LOCs and interest was no longer accrued at default rates.
There was no interest expense on Short-Term Debt in 1994 and 1993 as a result of the reclassification of previously outstanding short-term debt into the Term Loan which is classified as Long-Term Debt.
Interest Expense - Other decreased in 1994 compared with 1993 due to an accrual in 1993 for interest on contested tax payments and litigation settlement. Interest Expense - Other increased in 1993 compared with 1992 primarily due to the reinstatement of LOC fees and remarketing fees related to the remarketing of the tax exempt bonds supported by the LOCs. LOC fees and remarketing fees were not paid for part of 1992 because the LOCs were drawn and the IDBs were held by the banks.
RESULTS OF DISCONTINUED OPERATIONS
See Note 5 of Notes to Consolidated Financial Statements.
ACCOUNTING FOR THE EFFECTS OF REGULATION
The Company prepares its financial statements in accordance with the provisions of FAS 71. This statement requires a cost-based rate-regulated utility to reflect the effect of regulatory decisions in its financial statements. In certain circumstances, FAS 71 requires that certain costs and/or obligations be reflected in a deferral account in the balance sheet and not be reflected in the statement of income or loss until matching revenues are recognized. Therefore, the Company's Consolidated Balance Sheets at December 31, 1994 and 1993 contain certain line items solely as a result of the application of FAS 71. In addition, a number of line items in the Company's Consolidated Statements of Income (Loss) for the years ended December 31, 1994, 1993 and 1992 also reflect the application of FAS 71. See Note 1 of Notes to Consolidated Financial Statements, Nature of Operations and Summary of Significant Accounting Policies, Accounting for the Effects of Regulation.
If, at some point in the future, the Company determines that all or a portion of the Company's regulated operations no longer meet the criteria for continued application of FAS 71, the Company would be required to adopt the provisions of FAS 101 for that portion of the operations for which FAS 71 no longer applied. Adoption of FAS 101 would require the Company to write off its regulatory assets and liabilities as of the date of adoption of FAS 101 and would preclude the future deferral in the balance sheet of costs not recovered through rates at the time such costs were incurred, even if such costs were expected to be recovered in the future. Based on the balances of the Company's regulatory assets and liabilities as of December 31, 1994, the Company estimates that future adoption of FAS 101 for all of the Company's regulated operations would result in an extraordinary loss of $142 million, which includes a reduction for the related deferred income taxes. The Company's cash flows would not be affected by the adoption of FAS 101.
DIVIDENDS
The Company does not expect to be able to pay cash dividends on its Common Stock for the foreseeable future. The Company is currently precluded by State statute and restrictive covenants in certain debt agreements from declaring or paying dividends. No dividends on Common Stock have been declared or paid since 1989.
Under current applicable provisions of the Arizona General Corporation Law, the Company is permitted to declare and pay dividends on its shares in cash, property, or its own shares, only out of unreserved and unrestricted earned surplus or out of the unreserved and unrestricted net earnings of the current fiscal year and the immediately preceding fiscal year taken as a single period, except that the Company may not declare or pay dividends when the Company is insolvent (unable to pay its debts as they become due in the ordinary course of business) or when the payment of the dividend would render the Company insolvent, or when the declaration or payment of the dividend would be contrary to any restriction contained in the Articles.
At December 31, 1994, the Company had no earned surplus (its accumulated deficit on that date was $681 million), and the Company had no net earnings for the two fiscal years then ended taken together. Also, the Company expects to have no earned surplus and limited net earnings and cash flow for several years.
Under applicable provisions of amendments to the Arizona General Corporation Law, which will be effective in 1996, a company will be permitted to make distributions to shareholders unless, after giving effect to such distribution, either (i) the company would not be able to pay its debts as they come due in the usual course of business, or (ii) the company's total assets would be less than the sum of its total liabilities plus the amount necessary to satisfy any liquidation preferences of shareholders with preferential rights. As of December 31, 1994, the Company's common stock deficit was $42 million.
Although the Company expects to meet the requirements under the amended corporation law for making distributions to shareholders within several years, restrictive covenants in certain existing debt agreements may continue to preclude the Company from declaring or paying dividends.
The General First Mortgage contains covenants, applicable so long as certain series of First Mortgage Bonds (aggregating $194 million in principal amount) are outstanding, which restrict the payment of dividends on Common Stock if certain cash flow coverage and retained earnings tests are not met. The retained earnings test will prevent the Company from paying dividends on its Common Stock until such time as the Company has positive retained earnings rather than an accumulated deficit. Such covenants will remain in effect until the First Mortgage Bonds of such series have been paid or redeemed. The latest maturity of such First Mortgage Bonds is in 2003. The MRA includes a similar dividend restriction based on retained earnings.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
The Company's cash and cash equivalents, including such amounts held by the Company's investment subsidiaries, increased $86 million or 53%, over the 1993 year end balance of $162 million, to the 1994 year end balance of $248 million.
Receipts from retail customers increased $55 million over 1993 reflecting the sales and customers growth discussed above. Cash expenditures for continuing operating activities increased, in aggregate, $10 million, due primarily to increased sales levels. As a result, Net Cash Flow - Continuing Operating Activities increased 61% to $144 million for 1994.
Construction expenditures, primarily for expansion and reinforcement of the Company's transmission and distribution systems, increased $14 million over 1993 levels. In addition, the Company continued reducing its debt and lease obligations by retiring $37 million of such obligations in 1994.
During 1995, the Company expects to generate sufficient internal cash flows to fund its continuing operating activities and construction expenditures provided short-term interest rates remain near current levels and revenues from wholesale sales are similar to last year. An increase in short-term interest rates of 100 basis points (1%) would result in an approximate $10 million increase in interest expense. If 1994 cash flows fall short of expectations, the Company would expect to use its cash balances or its Renewable Term Loan and/or a revolving credit line provided under the MRA to meet operating and capital requirements.
The Company's cash balance including cash equivalents at March 7, 1995 was approximately $185 million (including the cash and cash equivalents of the investment subsidiaries). Cash balances are invested in investment grade, money-market securities with an emphasis on preserving the principal amounts invested.
FINANCING DEVELOPMENTS
On December 30, 1994, the Company purchased and cancelled $17.25 million principal amount of its First Mortgage Bonds 12.22% Series due June 1, 2000. The payment was made to fulfill the Company's requirement under the MRA to utilize Extraordinary Cash to reduce outstanding indebtedness. The Extraordinary Cash was generated from cash dividends paid to the Company by the investment subsidiaries. See Restrictive Covenants, Prepayments.
On March 7, 1995, the Company and its banks completed the Sixth Amendment to the MRA which eased certain debt prepayment restrictions and modified the Term Loan to allow reborrowing of amounts which will have been previously prepaid (Renewable Term Loan). The amendment will allow the Company to better manage its cash position and reduce capital costs while maintaining liquidity.
Prior to the amendment the Company was not permitted to prepay non-MRA debt except to the extent that Excess Cash and Extraordinary Cash were generated, see Restrictive Covenants, Prepayments below for the description of such terms. The amendment, now in effect, renders the Excess Cash and Extraordinary Cash provisions inapplicable and allows the Company to optionally prepay outstanding debt of the Company provided certain conditions are met. Such conditions include that $1 of principal outstanding under the Renewable Term Loan is permanently prepaid, and the commitment therefore terminated, for every $2 used to permanently prepay other debt such as First Mortgage Bonds. The Renewable Term Loan allows the Company to reborrow amounts paid down to the extent of the remaining outstanding loan commitment. The commitment fee on the Renewable Term Loan will be 0.5% of the unused portion of such commitment.
As a condition to the amendment becoming effective, the Company permanently prepaid $19.3 million of the Term Loan reducing the outstanding balance from $193.4 million to approximately $174 million. Thus, the initial commitment and outstanding balance of the Renewable Term Loan was approximately $174 million.
SHORT-TERM CREDIT FACILITIES
REVOLVING CREDIT
The Banks provided as part of the MRA a $50 million Revolving Credit for working capital purposes. The Revolving Credit has a termination and maturity date of December 31, 1999, and bears interest at a variable rate based upon, at the option of the Company, either (i) prime rate or (ii) an adjusted eurodollar rate plus a percentage ranging from 0.75% during 1994, gradually increasing to 2% by 1998 and thereafter. The Company is required to repay loans under the Revolving Credit in full for at least 30 consecutive days in each twelve-month period prior to November 30 of each year. The annual commitment fee for the Revolving Credit equals 0.5% of the unused portion. The Revolving Credit is secured and contains restrictive covenants. See Restrictive Covenants below.
As of December 31, 1994 the Company had not borrowed any funds under the $50 million Revolving Credit.
OTHER
The balances of $12 million, $12 million and $18 million of short-term debt of the investment subsidiaries as of December 31, 1994, 1993 and 1992, respectively, were associated with wholly-owned subsidiaries indirectly owned by SRI and, therefore, such debt is reflected in net assets of discontinued operations. Such debt is without recourse to SRI or the Company. Approximately $220 million of utility and utility-related short-term debt was restructured upon the Closing and reclassified as long-term debt.
RESTRICTIVE COVENANTS
GENERAL FIRST MORTGAGE COVENANTS
The Company's General First Mortgage places limits on the amount of additional First Mortgage Bonds which can be issued. Under the General First Mortgage, the Company may issue additional First Mortgage Bonds (a) to the extent of 60% of net additions to utility property if net earnings, as defined therein, for a specified period of 12 consecutive calendar months out of the 15 calendar months preceding the date of issuance are at least two (2.0) times the annual interest requirements on all First Mortgage Bonds to be outstanding and (b) to the extent of the principal amount of retired bonds. The net earnings test specified in clause (a) above generally need not be satisfied prior to the issuance of bonds in accordance with clause (b) above unless (x) (i) the new bonds are issued within one year after the issuance of, or more than two years prior to the stated maturity of, the retired bonds and (ii) the new bonds bear a greater rate of interest than the retired bonds or (y) the new bonds are issued in respect of retired bonds the interest charges on which have been excluded from any net earnings certificate filed with the indenture trustee since the retirement of such bonds. At December 31, 1994, the Company had the ability to issue approximately $152 million of new First Mortgage Bonds on the basis of property additions, as described above, and, in addition, the Company had the ability to issue approximately $74 million of new First Mortgage Bonds on the basis of retired bonds. However, issuance of such amounts may be limited by MRA covenants. See Additional Restrictive Covenants below.
See Dividends above for discussion of restrictions on the payment of Common Stock dividends under the General First Mortgage.
GENERAL SECOND MORTGAGE COVENANTS
The General Second Mortgage establishes a second mortgage lien on and security interest in substantially all of the utility assets of the Company, subordinate only to the first mortgage lien and security interest. At December 31, 1994, $50 million of such General Second Mortgage bonds had been issued and provided to the Banks as collateral for the Revolving Credit and, subsequent to January 2, 1997, subject to certain conditions, the Renewable Term Loan and the Replacement Reimbursement Agreement.
The Company's General Second Mortgage allows the issuance of additional Second Mortgage Bonds under certain circumstances. The Company may issue additional Second Mortgage Bonds (a) to the extent of 70% of net additions to utility property if net earnings as defined therein, for a specified period of 12 consecutive calendar months within the 16 calendar months preceding the date of issuance are at least one and three-quarter (1-3/4) times the annual interest requirements on all First Mortgage Bonds and Second Mortgage Bonds to be outstanding and (b) to the extent of the principal amount of retired Second Mortgage Bonds and First Mortgage Bonds. Issuance of Second Mortgage Bonds on the basis of an amount of retired First Mortgage Bonds reduces by the same amount of First Mortgage Bonds which could be issued under the General First Mortgage on the basis of retired bonds. The net earnings test specified in clause (a) above generally need not be satisfied prior to the issuance of bonds in accordance with clause (b) above unless (x) (i) the new bonds are issued within one year after the issuance of, or more than two years prior to the stated maturity of, the retired bonds and (ii) the new bonds bear a greater rate of interest than the retired bonds or (y) the new bonds are issued in respect of retired bonds the interest charges on which have been excluded from any net earnings certificate filed with the indenture trustee since the retirement of such bonds. At December 31, 1994, the amount of net additions and retired bonds would permit (and the net earnings test would not prohibit) the issuance of $455 million aggregate principal amount of new Second Mortgage Bonds (at an assumed interest rate of 12% per annum). The issuance of such amount of Second Mortgage Bonds assumes that the $226 million of First Mortgage Bonds available to be issued at December 31, 1994 would be issued first at a rate of 11%. However, issuance of such amounts may be limited by MRA covenants. See Additional Restrictive Covenants below.
PREPAYMENTS
Prior to the Sixth Amendment to the MRA becoming effective on March 7, 1995, see Financing Developments above, certain prepayments of indebtedness were required. The required prepayment equaled the Company's adjusted operating income, as defined in the MRA, less certain capital expenditures and charges, for the preceding twelve-month period as of June 30 of each year; provided, however, that the prepayment amount (Excess Cash) was limited to the excess (if any) over $25 million of (i) the Company's cash balance, including cash equivalents, as of each June 30 plus (ii) the cumulative amount of all dividends, if any, paid on Common Stock from December 15, 1992 to such June 30. The Company was required to apply the Excess Cash to the prepayment of indebtedness. For the period ended June 30, 1994, the Company had $31 million which constituted Excess Cash. The Company had no such Excess Cash for the period ended June 30, 1993.
The Company was also required to apply other funds as defined in the MRA (Extraordinary Cash) to the prepayment of its indebtedness. Extraordinary Cash included the net proceeds from the issuance of equity and certain debt securities of the Company or any subsidiary; provided, however, that upon prepayment of the Term Loan in a principal amount of $50 million, Extraordinary Cash did not include proceeds from the issuance of equity securities, and included only 50% of the proceeds from the issuance of debt securities. Extraordinary Cash also included all cash dividends received by the Company from its investment subsidiaries, TRI and SRI, or any subsidiary thereof. In 1993 and 1994, the Company received cash dividends of $6 million and $50 million, respectively, from TRI which constituted Extraordinary Cash.
In April 1993, the MRA lenders waived, to the extent of $68 million, as consideration for certain prepayments, the requirement that the Company use Excess Cash and Extraordinary Cash to prepay debt as described above. Therefore, no mandatory prepayments were made during 1993 as a result of such prepayment provisions and although $81 million of excess cash and extraordinary cash was generated in 1994 ($87 million for 1993 and 1994 combined), the Company was required to prepay only $19 million of indebtedness in 1994. See Financing Developments above.
ADDITIONAL RESTRICTIVE COVENANTS
In addition to the prepayment provisions described above, the MRA contains a number of restrictive covenants including, but not limited to, covenants limiting, with certain exceptions, (i) the incurrence of additional indebtedness, including lease obligations, or the prepayment of existing indebtedness, or the guarantee of any such indebtedness, (ii) the incurrence of liens, (iii) the sale of assets or the merger with or into any other entity, (iv) the declaration or payment of dividends on Common Stock or any other class of capital stock, (v) the making of capital expenditures beyond those contemplated in the Company's 1992 ten-year capital budget, and (vi) the Company's ability to enter into sale-leaseback arrangements, operating lease arrangements and coal and railroad arrangements. All of these restrictive covenants described above, other than (i), (iv) and (vi), will be in effect until at least December 1997. The covenants described in (i), (iv) and (vi) will cease to be binding on the Company when both the Renewable Term Loan and the Revolving Credit are paid in full and commitments thereunder terminate and the Company's senior long-term debt is rated at least investment grade. In addition, the Company is required pursuant to the MRA to maintain an interest coverage ratio of (a) operating cash flows plus interest paid to (b) interest paid, through the year 2003, ranging from 1.2 to 1 in 1994 and gradually increasing to 2 to 1 in 2000 continuing through the year 2003. For the year ended December 31, 1994, the Company's MRA interest coverage ratio was 2.98 to 1. With respect to dividends, the MRA incorporates, until the Renewable Term Loan and the Revolving Credit are paid in full and commitments thereunder terminate, a restrictive covenant similar to that currently in the General First Mortgage which limits the Company's ability to pay dividends on Common Stock until it has positive retained earnings (through future earnings or otherwise) rather than an accumulated deficit (such accumulated deficit was $681 million at December 31, 1994). The Company does not anticipate being able to satisfy the test of this and other dividend restrictions (see Dividends above) and therefore, does not anticipate being permitted to pay cash dividends on its Common Stock for the foreseeable future.
CONSTRUCTION EXPENDITURES
Estimated construction expenditures of the Company, including AFDC, for the five years 1995 through 1999, respectively, are $74 million, $67 million, $81 million, $85 million and $62 million. These amounts include the following: $190 million for transmission and distribution facilities in the Tucson area; $44 million for expenditures which are necessary to upgrade pollution control facilities at Navajo (see Item 1., Business, Environmental Matters, Navajo Generating Station); and $135 million for modifications to existing production facilities. These estimated construction expenditures include costs to comply with current federal and state environmental regulations. All of these estimates are subject to continuing review and adjustment. Actual construction expenditures may vary from these estimates due to factors such as changes in business conditions, construction schedules and environmental requirements. Due to the limitation on the Company's ability to issue debt or equity capital and to apply such proceeds, if any, to capital requirements, the Company must finance these construction expenditures with internally generated funds and/or reductions of its cash and short-term investments. In the event that funds from such sources are unavailable, the Company would be unable to expend the amounts shown above.
Also, see Note 6 of Notes to Consolidated Financial Statements, Long and Short-Term Debt and Capital Lease Obligations.
ITEM 8.
ITEM 8. - CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 14, page 57, for a list of the Consolidated Financial Statements which are included in the following pages. See Note 11 of Notes to Consolidated Financial Statements.
INDEPENDENT AUDITORS' REPORT
TUCSON ELECTRIC POWER COMPANY
We have audited the accompanying consolidated balance sheets and statements of capitalization of Tucson Electric Power Company and subsidiaries (the Company) as of December 31, 1994 and 1993, and the related consolidated statements of income (loss), cash flows, and changes in stockholders' equity (deficit) for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles.
As discussed in Note 2 to the financial statements, the timing of the recovery of the costs associated with 37.5% of Springerville Unit 2 cannot presently be determined because the Company has not yet received rate relief for such costs.
DELOITTE & TOUCHE LLP
Tucson, Arizona January 31, 1995 (March 7, 1995 as to Note 6)
CONSOLIDATED STATEMENTS OF INCOME (LOSS) For the Years Ended December 31, 1994 1993 1992 - Thousands of Dollars - Operating Revenues Retail Customers $ 571,433 $ 524,813 $ 514,014 Amortization of MSR Option Gain Regulatory Liability 20,053 6,053 6,053 Other Utilities 99,987 93,273 70,026 ---------- ---------- ---------- Total Operating Revenues 691,473 624,139 590,093 ---------- ---------- ---------- Operating Expenses Fuel 209,889 197,323 132,775 Purchased Power - Energy 13,878 9,032 62,726 Purchased Power - Demand - - 88,288 Deferred Fuel and Purchased Power 7,359 10,716 7,030 Capital Lease Expense 93,056 92,844 19,854 Amortization of Springerville Unit 1 Allowance (26,204) (33,398) (31,228) Other Operations 100,948 90,880 95,218 Maintenance and Repairs 42,122 42,300 34,386 Depreciation and Amortization 89,905 74,184 69,445 Taxes Other than Income Taxes 46,118 54,814 48,632 Financial Restructuring Costs - 1,498 29,511 ---------- ---------- ---------- Total Operating Expenses 577,071 540,193 556,637 ---------- ---------- ---------- Operating Income 114,402 83,946 33,456 ---------- ---------- ---------- Other Income (Deductions) Regulatory Disallowances and Adjustments - (13,777) - Deferred Springerville Unit 2 Carrying Costs 1,133 5,359 4,143 Loss on Financial Restructuring - - (26,669) Litigation Settlement - - 27,576 Interest Income 7,556 3,909 4,568 Income Taxes 4,820 5,186 5,654 Other Income 489 805 7,744 ---------- ---------- ---------- Total Other Income (Deductions) 13,998 1,482 23,016 ---------- ---------- ---------- Interest Expense Long-Term Debt - Net 69,353 68,053 72,687 Regulatory Interest 32,280 31,303 29,781 Short-Term Debt - - 26,311 Other 7,118 8,604 7,770 Allowance for Borrowed Funds Used During Construction (1,091) (716) (1,055) ---------- ---------- ---------- Total Interest Expense 107,660 107,244 135,494 ---------- ---------- ---------- (continued on next page)
CONSOLIDATED STATEMENTS OF INCOME (LOSS) (Continued) For the Years Ended December 31, 1994 1993 1992 - Thousands of Dollars -
Income (Loss) from Continuing Operations 20,740 (21,816) (79,022) Provision for Loss on Disposal of Discontinued Operations - (4,000) (44,047) ---------- ---------- ---------- Net Income (Loss) $ 20,740 $ (25,816) $(123,069) ========== ========== ========== Average Shares of Common Stock Outstanding (000) 160,724 160,544 31,872 ========== ========== ========== Net Income (Loss) per Average Share Continuing Operations $ 0.13 $ (0.14) $ (2.48) Discontinued Operations - (0.02) (1.38) ---------- ---------- ---------- Total Net Income (Loss) per Average Share $ 0.13 $ (0.16) $ (3.86) ========== ========== ==========
See Notes to Consolidated Financial Statements.
CONSOLIDATED BALANCE SHEETS
ASSETS December 31, 1994 1993 - Thousands of Dollars -
Utility Plant Plant in Service $2,053,123 $2,004,112 Utility Plant Under Capital Leases 893,064 894,508 Construction Work in Progress 40,870 33,568 ----------- ----------- Total Utility Plant 2,987,057 2,932,188 Less Accumulated Depreciation and Amortization (791,617) (727,101) Less Accumulated Amortization of Capital Leases (25,595) (12,634) Less Allowance for Springerville Unit 1 (162,423) (162,689) ----------- ----------- Total Utility Plant - Net 2,007,422 2,029,764 ----------- -----------
Investments Net Assets of Discontinued Operations 8,685 58,480 Other Investments 4,307 4,370 ----------- ----------- Total Investments 12,992 62,850 ----------- -----------
Current Assets Cash and Cash Equivalents 233,300 139,817 Accounts Receivable 66,332 65,212 Materials and Fuel 36,109 36,312 Deferred Income Tax - Current 12,870 8,927 Other 10,719 10,538 ----------- ----------- Total Current Assets 359,330 260,806 ----------- -----------
Deferred Debits - Regulatory Assets Income Taxes Recoverable Through Future Rates 143,372 149,508 Deferred Common Facility Costs 65,843 68,383 Deferred Springerville Unit 2 Costs 54,983 67,543 Deferred Lease Expense 25,228 32,602 Deferred Fuel and Purchased Power Expense 5,872 13,231 Other Deferred Regulatory Assets 9,362 8,165 Deferred Debits - Other 17,532 21,244 ----------- ----------- Total Deferred Debits 322,192 360,676 ----------- ----------- Total Assets $2,701,936 $2,714,096 =========== ===========
See Notes to Consolidated Financial Statements.
CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND OTHER LIABILITIES December 31, 1994 1993 - Thousands of Dollars - Capitalization Common Stock Equity (Deficit) $ (42,233) $ (62,973) Capital Lease Obligations 922,735 927,201 Long-Term Debt 1,381,935 1,416,352 ----------- ----------- Total Capitalization 2,262,437 2,280,580 ----------- -----------
Current Liabilities Current Maturities of Long-Term Debt 17,167 2,203 Accounts Payable 39,777 40,190 Interest Accrued 59,480 65,738 Taxes Accrued 29,215 20,269 Accrued Employee Expenses 15,247 4,222 Current Obligations Under Capital Leases 12,803 14,825 Other 6,624 6,389 ----------- ----------- Total Current Liabilities 180,313 153,836 ----------- -----------
Deferred Credits and Other Liabilities MSR Option Gain Regulatory Liability 41,214 54,924 Accumulated Deferred Investment Tax Credits Regulatory Liability 24,368 29,279 Accumulated Deferred Income Taxes 166,684 168,833 Other 26,920 26,644 ----------- ----------- Total Deferred Credits and Other Liabilities 259,186 279,680 ----------- ----------- Total Capitalization and Other Liabilities $2,701,936 $2,714,096 =========== ===========
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CAPITALIZATION December 31, 1994 1993 COMMON STOCK EQUITY (DEFICIT) - Thousands of Dollars - Common Stock--No Par Value 1994 1993 ----------- ----------- Shares Authorized 200,000,000 200,000,000 Shares Outstanding 160,723,702 160,723,702 $ 645,479 $ 645,479 Capital Stock Expense (6,357) (6,357) Accumulated Deficit (681,355) (702,095) ----------- ----------- Total Common Stock Equity (Deficit) (42,233) (62,973) ----------- ----------- PREFERRED STOCK, No Par Value, 1,000,000 Shares Authorized, None Outstanding - -
CAPITAL LEASE OBLIGATIONS Springerville Unit 1 458,092 449,984 Springerville Common Facilities 139,076 144,114 Irvington Unit 4 143,407 143,909 Valencia Coal Handling Facilities 187,523 195,309 Other Leases 7,440 8,710 ----------- ----------- Total Capital Lease Obligations 935,538 942,026 Less Current Maturities (12,803) (14,825) ----------- ----------- Total Long-Term Capital Lease Obligations 922,735 927,201 ----------- ----------- LONG-TERM DEBT Interest Issue Maturity Rate - ----------------------------------------------------- First Mortgage Bonds Corporate 1995 - 2009 4.55% to 12.22% 269,750 287,000
Industrial Development 2005 - 2025 6.10% to 8.25% Revenue Bonds (IDBs) and variable* 232,200 232,200
Loan Agreements (IDBs) 2003 - 2022 6.25% and variable* 703,600 704,555
Term Loan 1997 - 1999 variable* 193,400 193,400
Promissory Note 1992 - 1995 8.00% 152 1,400 ----------- ----------- Total Stated Principal Amount 1,399,102 1,418,555 Less Current Maturities (17,167) (2,203) ----------- ----------- Total Long-Term Debt 1,381,935 1,416,352 ----------- ----------- Total Capitalization $2,262,437 $2,280,580 =========== =========== * Interest rates on variable rate tax-exempt (IDB) debt ranged from 1.50% to 5.75% during 1994 and 1993, and the average interest rate on such debt was 2.96% in 1994 and 2.65% in 1993. Interest rates on the Term Loan ranged from 3.63% to 6.69% in 1994 and 1993, and the average interest rate on such debt was 4.92% in 1994 and 4.03% in 1993.
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1994 1993 1992 - Thousands of Dollars - Cash Flows from Continuing Operating Activities Cash Receipts from Retail Customers $611,917 $557,222 $546,801 Cash Receipts from Other Utilities 99,198 91,799 68,775 Purchased Power - Energy (15,829) (9,610) (7,896) Purchased Power - Demand - (1,006) (34,114) Fuel Costs Paid (171,301) (157,075) (139,146) Wages Paid, Net of Amounts Capitalized (49,284) (44,394) (37,275) Payment of Other Operations and Maintenance Costs (78,808) (91,924) (110,993) Capital Lease Interest Paid (82,511) (81,932) - Interest Paid, Net of Amounts Capitalized (72,556) (70,316) (91,531) Taxes Paid, Net of Amounts Capitalized (104,498) (103,005) (92,673) Litigation Settlements - Net - (5,000) 35,000 Lease Payments, Net of Amounts Capitalized - - (61,328) Interest Received 7,288 4,652 11,588 Federal Income Tax Refund Received - - 1,440 Other - (80) (18) --------- --------- --------- Net Cash Flows - Continuing Operating Activities 143,616 89,331 88,630 --------- --------- --------- Net Cash Flows - Discontinued Operations 42,685 5,677 41,878 --------- --------- --------- Cash Flows from Capital Transactions Construction Expenditures (62,599) (48,162) (34,512) Other Investments 103 (286) 58 --------- --------- --------- Net Cash Flows - Capital Transactions (62,496) (48,448) (34,454) --------- --------- --------- Cash Flows from Financing Activities Proceeds from Long-Term Debt - 20,000 16,732 Payments to Retire Long-Term Debt (19,424) (72,187) (32,908) Payments to Retire Capital Lease Obligations (17,747) (10,690) (320) Other (478) 862 (306) --------- --------- --------- Net Cash Flows - Financing Activities (37,649) (62,015) (16,802) --------- --------- --------- Net Increase (Decrease) in Cash and Cash Equivalents 86,156 (15,455) 79,252 Cash and Cash Equivalents, Beginning of Year * 161,996 177,451 98,199 --------- --------- --------- Cash and Cash Equivalents, End of Year ** $248,152 $161,996 $177,451 ========= ========= ========= * Beginning of year balance includes cash and cash equivalents from discontinued operations of $22,179,000 for 1994, $22,502,000 for 1993 and $11,856,000 for 1992. ** End of year balance includes cash and cash equivalents from discontinued operations of $14,852,000 for 1994, $22,179,000 for 1993 and $22,502,000 for 1992.
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Premium on Capital Accumulated Preferred Common Capital Stock Earnings Stock Stock Stock Expense (Deficit) ---------------------------------------------- - Thousands of Dollars -
Balances at December 31, 1991 $82,793 $357,782 $7,007 $(3,482) $(553,210) 1992 Net Loss - - - - (123,069) 1992 Issuances: 134,713,860 Shares of Common Stock, including the reclassification of all Preferred Stock to Common Stock. See Note 3. (82,793) 286,645 (7,007) (2,875) - -------- -------- ------- -------- ---------- Balances at December 31, 1992 - 644,427 - (6,357) (676,279) 1993 Net Loss - - - - (25,816) 1993 Sale of Treasury Stock: 294,050 Shares of Common Stock - 1,052 - - - -------- -------- ------- -------- ---------- Balances at December 31, 1993 - 645,479 - (6,357) (702,095) 1994 Net Income - - - - 20,740 -------- -------- ------- -------- ---------- Balances at December 31, 1994 $ - $645,479 $ - $(6,357) $(681,355) ======== ======== ======= ======== ==========
See Note 6. Long-Term Debt - Additional Restrictive Covenants for discussion of restrictions on the Company's ability to pay dividends.
See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - ----------------------------------------------------------------------------
NATURE OF OPERATIONS
The Company is a public utility engaged in the business of generation, transmission, distribution and sale of electricity. The Company's retail service area encompasses 1,155 square miles in Pima and Cochise counties in Southern Arizona. The Company also engages in wholesale sales to other utilities in Arizona, California, Colorado, New Mexico, Oregon, Texas and Utah. Approximately 63% of the Company's work force is subject to a collective bargaining unit. The collective bargaining agreement in place at December 31, 1994 terminates on December 1, 1996.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company and three wholly-owned, utility-related subsidiaries on a consolidated basis. All significant intercompany balances and transactions have been eliminated in the consolidation. The results of operations, estimated net realizable value of net assets and cash flows of the Company's two investment subsidiaries have been classified as discontinued operations since June 30, 1990.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
REGULATION
The Company's utility accounting practices and electricity rates are subject to regulation by the ACC and, in certain areas, by the FERC.
ACCOUNTING FOR THE EFFECTS OF REGULATION
The Company prepares its financial statements in accordance with the provisions of FAS 71. A regulated enterprise can prepare its financial statements in accordance with FAS 71 only if (i) the enterprise's rates for regulated services are established by or subject to approval by an independent third-party regulator, (ii) the regulated rates are designed to recover the enterprise's costs of providing the regulated services and (iii) in view of demand for the regulated services and the level of competition, it is reasonable to assume that rates set at levels that will recover the enterprise's costs can be charged to and collected from customers. FAS 71 requires a cost-based, rate-regulated enterprise to reflect the impact of regulatory decisions in its financial statements. In certain circumstances, FAS 71 requires that certain costs and/or obligations (such as incurred costs not currently recovered through rates, but expected to be so recovered in the future) be reflected in a deferral account in the balance sheet and not be reflected in the statement of income or loss until matching revenues are recognized. It is the Company's policy to assess the recoverability of costs recognized as regulatory assets and the Company's ability to continue to account for its activities in accordance with FAS 71, based on each rate action and the criteria set forth in FAS 71.
The Company's Consolidated Balance Sheets at December 31, 1994 and 1993 contain certain amounts solely as a result of the application of FAS 71:
Assets (Liabilities) 1994 1993 -------------------- ----- ----- - Millions of Dollars -
Income Taxes Recoverable Through Future Rates $143 $150 Deferred Common Facility Costs 66 68 Deferred Springerville Unit 2 Costs 55 68 Deferred Lease Expense 25 33 Deferred Fuel and Purchased Power Expense 6 13 Other Deferred Charges 9 8 MSR Option Gain Regulatory Liability (41) (55) Deferred Investment Tax Credits (24) (29) Other Deferred Credits (1) (1)
Regulatory assets are recorded based on prior rate orders issued by the ACC which provide a mechanism for recovery in regulated rates or historical rate treatment which provides evidence as to the probability of future rate recovery. The material regulatory assets listed above earn either a return on investment through inclusion in rate base or earn a set rate of interest stipulated by the ACC.
A number of accounts in the Company's Consolidated Statements of Income (Loss) for the three years in the period ended December 31, 1994 also reflect the application of FAS 71:
Income (Expense) 1994 1993 1992 ---------------- ----- ----- ----- - Millions of Dollars - Amortization of MSR Option Gain Regulatory Liability $ 20 $ 6 $ 6 Amortization of Springerville Unit 2 Rate Synchronization (14) - - Deferred Fuel and Purchased Power (7) (11) (7) Amortization of Deferred Common Facility Costs (3) (3) (4) Deferred Springerville Unit 2 Carrying Costs 1 5 4 Regulatory Disallowances and Adjustments - (14) - Amortization of Investment Tax Credit 5 5 6 Regulatory Interest Relating to MSR Option Gain Regulatory Liability (6) (7) (7)
If the Company had not applied the provisions of FAS 71 in these years, each of these amounts appearing in the Consolidated Statements of Income (Loss) would have been reflected in the Consolidated Statements of Income or Loss in prior periods, except for two items which would not have been recorded: 1) the amortization of the MSR Option Gain Regulatory Liability, including regulatory interest; and 2) the Springerville Unit 2 carrying cost deferrals. Lease expense relating to the capital leases, while the same over the life of the leases, would be recognized at different annual amounts if the Company were to discontinue the application of FAS 71. See Utility Plant Under Capital Leases below.
If at some point in the future the Company determines that it no longer meets the criteria for continued application of FAS 71 to all or a portion of the Company's regulated operations, the Company would be required to adopt the provisions of FAS 101 for that portion of the operations for which FAS 71 no longer applied. Adoption of FAS 101 would require the Company to write off its regulatory assets and liabilities as of the date of adoption of FAS 101 and would preclude the future deferral in the Consolidated Balance Sheet of costs not recovered through rates at the time such costs were incurred, even if such costs were expected to be recovered in the future. Based on the balances of the Company's regulatory assets and liabilities as of December 31, 1994, the Company estimates that future adoption of FAS 101, if applied to all of the Company's regulated operations, would result in an extraordinary loss of $142 million, which includes a reduction for the related deferred income taxes. The Company's cash flows would not be affected by the adoption of FAS 101.
UTILITY PLANT
Utility Plant by major classes at December 31, 1994 and 1993 is as follows:
1994 1993 ---------- ---------- - Thousands of Dollars - Utility Plant: Production Plant $1,002,409 $ 988,241 Transmission Plant 460,055 454,105 Distribution Plant 495,336 473,830 General Plant 84,441 77,874 Intangible Plant 10,238 8,685 Electric Plant Held for Future Use 644 1,377 ---------- ---------- Total Utility Plant $2,053,123 $2,004,112 ========== ==========
Utility plant is stated at original cost. In accordance with the Uniform System of Accounts prescribed by the FERC and accepted by the ACC, the Company capitalizes AFDC based on the cost of borrowed funds and a reasonable rate upon equity funds used to finance CWIP, when recovery of such costs from ratepayers is probable. The component of AFDC attributable to borrowed funds is presented as a reduction of Interest Expense. The Consolidated Statements of Income (Loss) reflect no AFDC - Equity as all construction expenditures were deemed under FERC prescribed rules to be financed with debt. In accordance with FERC Accounting Release No. 13, AFDC is recorded on construction expenditures and on the balances of construction funds held in trust, if any are held. Interest income from construction funds held in trust, if any, net of income taxes, is credited to CWIP. Interest Expense on Long-Term Debt - Net reflects interest expense on the stated principal amount of bonds in excess of the average month-end balance of construction funds held in trust during the period. Interest expense on stated bond principal equal to the average month-end balance of construction funds held in trust is charged against AFDC. In 1994, 1993 and 1992, gross AFDC rates of 4.94%, 4.85% and 8.01%, respectively, were used for all CWIP.
Depreciation is computed on a straight-line basis at component rates which are based on the economic lives of the assets. These component rates, which are authorized by the ACC, averaged 3.73%, 3.68% and 3.71% in 1994, 1993 and 1992, respectively. The economic lives for production plant are based on remaining lives. The economic lives for transmission plant, distribution plant, general plant and intangible plant are based on average lives. The component rates also reflect estimated removal costs, net of estimated salvage value. Minor replacements and repairs are expensed as incurred. Retirements of utility plant, together with removal costs less salvage, are charged to accumulated depreciation.
UTILITY PLANT UNDER CAPITAL LEASES
As described in Note 3, since December 15, 1992, the date of closing of the Company's Financial Restructuring, the Company's leases of the Springerville Common Facilities, Springerville Unit 1, Valencia coal handling facilities and Irvington Unit 4 have been classified as capital leases in the Consolidated Balance Sheets. For rate making purposes, the ACC treats these leases as operating leases and has allowed for recovery of the lease costs by straight-line amortization of the total amount of lease rent payments over the primary term of the leases, except for the Valencia coal handling facilities lease. The Valencia coal handling facilities lease is being amortized on a straight-line basis over the primary term of the lease plus the first optional renewal period of six years to reflect the recovery period mandated by the ACC. Under GAAP, the lease term would have been only the primary term of the lease. Interest and depreciation relating to the leases are recorded as expense on a basis which reflects the regulatory straight- line treatment. The amount of lease amortization incurred for the four above- described leases, as well as the Company's remaining leases, for the years 1994, 1993 and 1992 amounted to:
Years Ended December 31, 1994 1993 1992 ----- ----- ----- - Millions of Dollars - Lease Amortization: Interest $ 94 $ 93 $ 22 Depreciation 13 12 2 ---- ---- ---- Total Lease Amortization $107 $105 $ 24 ==== ==== ==== Lease Amortization Included In: Operating Expenses - Fuel $ 20 $ 17 $ 1 Operating Expenses - Capital Lease Expense 93 93 20 Balance Sheet - Deferred Lease Expense (6) (5) 3 ----- ----- ---- Total Lease Amortization $107 $105 $ 24 ===== ===== ====
The Deferred Lease Expense of $25 million and $33 million at December 31, 1994 and 1993, respectively, reflects: 1) the cumulative difference between the straight-line method of amortizing the leases for regulatory purposes and capital lease amortization as promulgated by GAAP; and 2) the balance of the deferred costs described under Fuel and Purchased Power Costs below. Also, see Allowance for Springerville Unit 1 below.
ALLOWANCE FOR SPRINGERVILLE UNIT 1
The 1989 Rate Order limited recovery through retail rates of Century demand charges for Springerville Unit 1 under the Restated Century Purchase Contract to a rate of only $15 per kW per month. From inception through termination of such contract on December 15, 1992, capacity costs for Springerville Unit 1 averaged approximately $20 per kW per month.
Prior to its termination as a part of the Financial Restructuring described in Note 3, the Restated Century Purchase Contract required the Company to purchase all of Springerville Unit 1 capacity through 2014, but was subject to cancellation by Century after 2001 on five years' advance notice. In addition, in 1990, industry and Company projections for the demand for power in the western United States indicated that excess capacity conditions would be likely to continue for a few years, but should not exist by the year 2000. Due to the significant uncertainties regarding the power markets beyond 2001 and the existence of Century's cancellation option, the amount of loss, if any, which may have been incurred as a result of the $15 per kW per month limitation beyond such date appeared significantly uncertain. In December 1990, the Company, therefore, recognized a loss of approximately $178 million and established a deferred liability for this estimated loss, the Allowance for Springerville Unit 1, equal to the present value of the excess of the Company's costs estimated to be incurred during the period through 2001 over $15 per kW per month using a discount rate of 13%.
In connection with the Financial Restructuring, the Company assumed Century's lease of Springerville Unit 1 under a capital lease agreement extending to January 1, 2015. Accordingly, in December 1992, the remaining unamortized balance of the Allowance for Springerville Unit 1 was recalculated based on the $15 per kW rate currently permitted pursuant to the 1991 Rate Order and current cost estimates through the year 2014. This resulted in an additional loss of approximately $7 million, which was recorded as a component of the Loss on Financial Restructuring in the Consolidated Statement of Income (Loss) for the year ended December 31, 1992. In addition, the liability was reclassified to a contra-asset, Allowance for Springerville Unit 1. The Allowance for Springerville Unit 1 increases each year by the accrual of interest and decreases by the amount which is being amortized to income, as a contra-expense, through 2014. The imputed interest expense, calculated using a 13% discount rate, associated with this liability is included as part of Regulatory Interest in the Interest Expense section in the Consolidated Statements of Income (Loss).
DEFERRED COMMON FACILITY COSTS
Springerville Common Facility Costs are lease costs and operating costs incurred for the Springerville Common Facilities during the period after Springerville Unit 1 was placed in service and before Springerville Unit 2 was placed in service. Pursuant to an accounting order from the ACC, these costs were deferred and are being amortized over the primary term of the Springerville Common Facilities Leases. The ACC has allowed for the recovery of the amortization costs plus a return on investment.
UTILITY OPERATING REVENUES
Operating Revenues include accruals for unbilled revenues, thereby recognizing revenue that is earned, but not billed, at the end of an accounting period.
AMORTIZATION OF MSR OPTION GAIN REGULATORY LIABILITY
The 1989 Rate Order allocated to retail customers a portion of the price paid to the Company upon the 1982 sale of an option to purchase a 28.8% interest in San Juan Unit 4, asserting that such option was related to an interconnection agreement which the Company also entered into with MSR at that time. In the 1989 Rate Order, the ACC ordered the MSR Option Gain be amortized over a six-year period through 1995 as a $20 million per year revenue credit, and in 1990 the Company established a deferred liability for the present value of the amount to be amortized, calculated using a 13% discount rate. Such deferred liability increases each year by the accrual of interest at 13% and decreases by the amount of revenue credit prescribed by the ACC. Such revenue credit is included in Operating Revenues. The interest accrual is included as part of Regulatory Interest in the Interest Expense section of the Consolidated Statements of Income (Loss). The 1991 Rate Order deferred amortization of a portion of the regulatory liability to 1996 and 1997.
FUEL AND PURCHASED POWER COSTS
Fuel inventory, primarily coal, is stated on a basis which approximates weighted average cost. The Company utilizes full absorption costing.
Certain lease and interest costs incurred by Valencia, the Company's fuel-handling and procurement subsidiary for Springerville, are accounted for as deferred costs, which were allocated to fuel inventory based on fuel quantities purchased and then amortized to Fuel expense and, prior to the closing of the Financial Restructuring on December 15, 1992, to Purchased Power - Energy, based on the rate of fuel burn at Springerville through December 31, 1992. Effective January 1, 1993, these costs are amortized to Fuel expense on a straight-line basis over 37.4 years pursuant to the 1994 Rate Order.
FINANCIAL RESTRUCTURING COSTS
Financial Restructuring costs include costs incurred for legal, accounting and other consulting services in connection with the restructuring of the Company's obligations, as described in Note 3.
INCOME TAXES
Reductions in federal income taxes resulting from ITC relating to utility operations have been deferred. As authorized by the ACC, these amounts are amortized over the tax lives of the related property. As the Company has been in a net operating loss carryforward position, the income tax benefits reflected in the Consolidated Statements of Income (Loss) result only from such ITC amortization.
Income taxes are allocated to the subsidiaries based on contributions to the consolidated tax return liability. The investment subsidiaries' losses in 1994, 1993 and 1992 provided no tax benefits to the consolidated group and, therefore, no tax benefits are recorded as a reduction of the 1993 and 1992 Provisions for Loss on Disposal of Discontinued Operations in the Consolidated Statements of Income (Loss).
DEBT EXPENSE
Debt discount and issuance costs are amortized over the lives of the related issues or the related refunding issues.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value and fair value at December 31, 1994 and 1993 of the Company's financial instruments are as follows: 1994 1993 ------ ------ Carrying Fair Carrying Fair Value Value Value Value -------- ----- -------- ----- - Thousands of Dollars - Assets: Cash and Cash Equivalents $ 233,300 $ 233,300 $ 139,817 $ 139,817 Accounts Receivable 66,332 66,332 65,212 65,212 Other Investments 4,307 4,307 4,370 4,370 Liabilities: Accounts Payable (39,777) (39,777) (40,190) (40,190) Long-Term Debt, Including Current Portion (See Note 6) (1,399,102) (1,372,236) (1,418,555) (1,397,838)
The carrying amounts of all financial instruments, except Long-Term Debt, are considered to be reasonable estimates of the fair value of each because of the short maturity of those instruments.
RECLASSIFICATION
Minor reclassifications have been made to the prior year financial statements presented to conform to the current year's presentation.
Beginning in the fourth quarter of 1994, state and city sales taxes and similar taxes collected on revenues were removed from Operating Revenues and Taxes Other Than Income Taxes on the Consolidated Statements of Income (Loss). These taxes are included as part of Accounts Receivable and Taxes Accrued on the Consolidated Balance Sheets. Such reclassification was made to enhance the comparability of the Company's income statements with those of other companies. All financial information presented has been restated to conform to this presentation. The tax amounts reclassified were as follows:
Years Ended December 31, 1994 1993 1992 ------- ------- ------- - Thousands of Dollars -
State Sales Taxes $28,392 $26,027 $25,379 City Sales and Franchise Taxes 12,585 11,351 11,052 ACC Assessment Fee 934 920 952 ------- ------- ------- Total Taxes Reclassified $41,911 $38,298 $37,383 ======= ======= =======
NOTE 2. 1994 RATE ORDER - ------------------------
Effective January 11, 1994, the ACC authorized a 4.2% increase in base rates. The 1994 Rate Order recognized that an additional 17.5% of the Springerville Unit 2 capacity was used and useful for the retail jurisdiction, which lowered the percentage of that unit's capacity that is not in rate base to 37.5%. Therefore, the Company is not presently recovering through retail rates the depreciation, property taxes, operating and maintenance expenses other than fuel, or interest costs associated with the 37.5% of Springerville Unit 2 capacity which was not then considered to be used and useful for the retail jurisdiction and therefore was not included in rate base (hereinafter referred to as "retail excess capacity deferrals"). These expenses are being expensed as incurred. However, the 1994 Rate Order permits such costs to be deferred for future recovery over the remaining useful life of Springerville Unit 2. This phase-in plan does not qualify under FAS 92 and, therefore, such retail excess capacity deferrals, while deferred for regulatory purposes, cannot be deferred for financial reporting purposes. Such regulatory deferrals associated with the excluded Springerville Unit 2 capacity, not included in the financial statements, totaled $63 million at December 31, 1994. Either inclusion in costs recoverable through retail rates or additional wholesale sales at sufficient prices of an equivalent amount of capacity (or a combination thereof) will be required to recover these retail excess capacity deferrals.
As a result of the 1994 Rate Order, the retail excess capacity deferrals allocable to the 62.5% of Springerville Unit 2 capacity allowed in rate base was also included in rate base. At December 31, 1993, the retail excess capacity deferrals allocable to the 17.5% of the Springerville Unit 2 capacity amounted to $17 million. As specified in the 1994 Rate Order, for rate purposes, these costs are being recovered over a 37.4 year period.
The 1994 Rate Order allowed in rate base 62.5% of deferred Springerville Unit 2 rate synchronization costs, $42 million at December 31, 1993, which were non-fuel costs of Springerville Unit 2 incurred from January 1, 1991 through October 14, 1991, including an interest carrying charge, deferred pursuant to the 1991 Rate Order. For rate making purposes, such costs are being recovered over a three-year period and are included in Depreciation and Amortization on the Consolidated Statements of Income (Loss), in accordance with the 1994 Rate Order. The Company is not presently recovering through retail rates 37.5% of the deferred Springerville Unit 2 rate synchronization costs ($26 million at December 31, 1994). This amount, together with the balance of such costs ($29 million at December 31, 1994) that the Company is presently recovering through rates, are reported in the Company's consolidated financial statements as Deferred Springerville Unit 2 Costs.
The 1994 Rate Order provided that the rate synchronization and retail excess capacity deferrals associated with the 37.5% of Springerville Unit 2 capacity not found to be used and useful for the retail jurisdiction will continue to incur an interest charge of 7.19% until authorized to be included in rate base or for a period of three years ending in 1997, whichever occurs first.
The 1994 Rate Order disallowed recovery of $13.6 million of previously capitalized Springerville Unit 2 rate synchronization costs and certain other minor costs. The $13.6 million is comprised of $5.2 million for wholesale power sale revenue credits which the Company had offset against the off- balance sheet retail excess capacity deferrals which the ACC stated should have been offset against the rate synchronization deferrals. The remaining $8.4 million of disallowance results from the ACC's finding that the Company should have calculated the 7.19% carrying charge on a net-of-tax basis rather than pre-tax, as calculated by the Company. Such disallowances were recorded in December 1993 and are reflected in Regulatory Disallowances and Adjustments in the Consolidated Statement of Income (Loss) for the year ended December 31, 1993.
In connection with the 1994 Rate Order, on August 26, 1993, the ACC authorized the Company to collect the sum of $2.1 million through a temporary fuel surcharge of .96 mills per kWh beginning September 1, 1993 until further order of the ACC. The Company had requested a temporary rate surcharge to recover $4 million of previously authorized but uncollected deferred fuel expenses. The Company wrote-off $1.9 million of unrecovered deferred fuel costs in 1993.
NOTE 3. 1992 CONSUMMATION OF THE FINANCIAL RESTRUCTURING - ---------------------------------------------------------
On December 15, 1992, the Company consummated the transactions required to finalize its financial restructuring plan, including the comprehensive restructuring of obligations to certain of its creditors, lease participants, Century and the Springerville Unit 1 lease participants and the reclassification of all outstanding Preferred Stock into Common Stock. Approximately 135 million shares of Common Stock were issued in the Financial Restructuring, increasing the number of common shares outstanding to approximately 160 million. In addition, warrants to purchase an additional 12 million shares of Common Stock at an exercise price of $3.20 per share were issued in the Financial Restructuring. The issuance of Common Stock and Warrants is further discussed below. In accordance with FAS 15 such stock (other than the 55 million shares of Common Stock into which the Preferred Stock was reclassified) was recorded at fair value as determined by the Company on or about the date of issuance. In the accompanying financial statements, the Common Stock issued pursuant to the Financial Restructuring was recorded based on a fair value of $2.33 per share, which was the average of the high and low trading price reported by the Dow Jones Stock Quote Reporter Service during the period December 16, 1992 through December 31, 1992, the period immediately following the Closing. The Warrants were valued for purposes of these financial statements at an estimated value of $0.82 per share, calculated using an option pricing model and the $2.33 estimated fair value per share of Common Stock. Losses and deferred gains related to the issuance of the Common Stock and Warrants in the Financial Restructuring described in the succeeding paragraphs were determined using these values for such Common Stock and Warrants. Such values are not intended to be indicative of current or future trading values for either the Common Stock or the Warrants.
BANKS
The Company provided the banks approximately 32 million shares of Common Stock, a first mortgage lien on Springerville Unit 2, $50 million of bonds issued under a second mortgage as collateral, and $20.8 million in first mortgage bonds as collateral and became subject to certain restrictive financial and operating covenants. In exchange, the Company received the waiver of $96 million in accrued interest payments, more favorable credit terms, extensions of LOCs and related agreements, the restructuring of several prior debt agreements into the Term Loan, a new $20 million LOC and a new $50 million working capital revolving credit facility. The restructuring of these Bank obligations gave rise to a deferred gain of $21 million, which is being amortized as a reduction of interest expense over an eight-year period, the weighted average life of the restructured credit arrangements. These restructured bank credit arrangements also increased Common Stock Equity $75 million. See the Consolidated Statements of Changes in Stockholders' Equity (Deficit).
SPRINGERVILLE UNIT 1
The Company provided the participants in the Springerville Unit 1 Leases approximately 48 million shares of Common Stock and Warrants to purchase 12,054,278 shares of Common Stock at an exercise price of $3.20 per share. The Warrants were exercisable at the Closing of the Financial Restructuring and expire in 2002. In addition, the Company assumed Century's former obligations under the Springerville Unit 1 Leases and released Century from its obligations relating to the 1981 Apache A Bonds. Amendments were also made to the Interconnection Agreement which the Company has with Century. In exchange, the Company received Century's leasehold interests in Springerville Unit 1, Century's investment in plant and inventories at Springerville Unit 1 and the Restated Century Purchase Contract was terminated. The Company also received the waiver of demand charge payments due under the Restated Century Purchase Contract equivalent to $57 million, the release from certain tax indemnification liabilities related to Springerville Unit 1, and the dismissal with prejudice of certain actions which had been filed against the Company by some of the Springerville Unit 1 owner participants.
The restructuring of these obligations gave rise to approximately $31 million of the Loss on Financial Restructuring appearing in the Consolidated Statement of Income (Loss) for the year ended December 31, 1992. These transactions also increased Common Stock Equity by $122 million. See the Consolidated Statements of Changes in Stockholders' Equity (Deficit). Also, see Note 1 regarding the loss of approximately $7 million, which was recorded as a component of the Loss on Financial Restructuring in the Consolidated Statement of Income (Loss) for the year ended December 31, 1992, as a result of the assumption of the Springerville Unit 1 Leases.
CAPITAL LEASES
The terms of the Irvington Lease, the Valencia Leases, the Springerville Common Facilities Leases and the assumed Springerville Unit 1 Leases (see Note 1) were amended to waive certain accrued payment obligations, defer certain lease payments due in the next several years to later years, and extend the terms of certain leases. As a result of the lease amendments, in accordance with FAS 13, as amended by FAS 98, these leases are accounted for as capital leases subsequent to December 15, 1992. Amendment of these leases increased rent expense by $18 million in the Consolidated Statement of Income (Loss) for the year ended December 31, 1992.
PREFERRED STOCK
All of the Company's outstanding Preferred Stock was reclassified into approximately 55 million shares of newly issued Common Stock. The reclassification was recorded at the book value of the Preferred Stock. This increased Common Stock Equity by $90 million, decreased the Premium on Capital Stock by $7 million and decreased Preferred Stock by $83 million. See the Consolidated Statements of Changes in Stockholders' Equity (Deficit).
OTHER
The reversal of other reserves and accruals that were resolved by the Closing, primarily through the dismissal of certain regulatory proceedings, reduced the Loss on Financial Restructuring included in the Consolidated Statement of Income (Loss) for the year ended December 31, 1992 by $11 million.
NOTE 4. INCOME TAXES - ---------------------
In January 1993, the Company adopted Statement of Financial Accounting Standards No. 109 (FAS 109), Accounting for Income Taxes, on a prospective basis. The adoption of FAS 109 changed the Company's method of accounting for income taxes from the deferred method (APB 11) to an asset and liability approach. Previously, the Company deferred the past income tax effects of timing differences between financial reporting and taxable income. The asset and liability approach requires the recognition of deferred income tax liabilities and assets for the expected future income tax consequences of temporary differences between the carrying amounts and the tax bases of other assets and liabilities.
The adoption of FAS 109 increased both total assets and total liabilities of the Company by $149 million in 1993. The increase in assets results primarily from the recording of a regulatory asset for the recovery of income taxes from future ratepayers. See Note 1. Such regulatory asset consists primarily of the right to recover income taxes relating to previously flowed-through differences, both timing and permanent, which provided rate benefits to past ratepayers. The increase in liabilities is primarily the net increase in deferred income tax assets and deferred income tax liabilities resulting from the adoption of FAS 109.
Deferred tax assets (liabilities) are comprised of the following:
December 31, 1994 1993 ----------- ---------- - Thousands of Dollars - Gross Deferred Income Tax Liabilities: Electric Plant - Net $(558,509) $(554,441) Regulatory Asset (Income Taxes Recoverable Through Future Rates) (57,902) (60,615) Deferred Springerville Unit 2 Costs (22,206) (27,384) Deferred Valencia Inventory Costs (21,780) (21,628) Deferred Lease Payments (15,510) (16,329) Property Taxes (10,465) (10,340) Deferred Fuel (2,372) (5,364) Other (6,016) (7,371) ---------- ---------- Gross Deferred Income Tax Liability (694,760) (703,472) ---------- ----------
Gross Deferred Income Tax Assets: Capital Lease Obligations 377,825 384,506 Tax Operating Loss Carryforwards 199,564 181,200 Springerville Unit 1 Disallowed Costs 65,597 65,959 Investment in Loans and Partnerships 7,757 34,205 Investment Tax Credit Carryforwards 28,088 28,100 MSR Option Gain Regulatory Liability 16,645 22,268 Capital Loss Carryforwards 19,078 20,700 Lease Interest Payable 17,429 17,570 Deferred Regulatory Capital Lease Expense 11,397 8,213 Financial Restructuring Costs Not Yet Deductible for Tax Purposes 8,034 7,773 Gain on Financial Restructuring of Long-Term Debt 6,458 7,571 Other 27,166 29,492 ---------- ---------- Gross Deferred Income Tax Asset 785,038 807,557 Deferred Tax Assets Valuation Allowance (244,092) (263,991) ---------- ---------- Net Deferred Income Tax Liability $(153,814) $(159,906) ========== ==========
The decrease in the gross deferred tax assets valuation allowance of approximately $20 million primarily resulted from the sale of the discontinued operation's assets (see Note 5) which had corresponding deferred tax assets, which were fully reserved by the valuation allowance.
The net deferred income tax liability is included in the Consolidated Balance Sheets in the following accounts:
December 31, 1994 1993 ---------- ---------- - Thousands of Dollars -
Deferred Income Tax - Current $ 12,870 $ 8,927 Accumulated Deferred Income Taxes (166,684) (168,833) ---------- ---------- Net Deferred Income Tax Liability $(153,814) $(159,906) ========== ==========
Income Tax Benefit is included in the Consolidated Statements of Income (Loss) in the following accounts:
Years Ended December 31, 1994 1993 1992 ---------- ---------- ---------- - Thousands of Dollars -
Operating Expenses - Other Operations $ 91 $ 91 $ 91 Other Income (Deductions) - Income Taxes 4,820 5,186 5,654 ---------- ---------- ---------- Total Income Tax Benefit $ 4,911 $ 5,277 $ 5,745 ========== ========== ==========
The differences between income tax benefit and the amount obtained by multiplying income (loss) before income taxes by the U.S. statutory federal income tax rate for each of the three years in the period ended December 31, 1994, are as follows:
Years Ended December 31, 1994 1993 1992 ---------- ---------- ---------- - Thousands of Dollars - Federal Income Tax (Expense) Benefit at Statutory Rate $ (5,540) $ 10,883 $ 43,797 Investment Tax Credit amortization 4,911 5,277 5,745 Loss for Which No Tax Benefit is Available - (10,883) (43,797) Net Operating Loss Carryforwards 5,540 - - ---------- ---------- ---------- Total Benefit for Federal and State Income Taxes $ 4,911 $ 5,277 $ 5,745 ========== ========== ==========
On August 10, 1993, the Revenue Reconciliation Act of 1993 was signed into law which, among other things, raised the maximum corporate U.S. statutory federal income tax rate from 34% to 35%, retroactively effective to January 1, 1993. The Company increased its deferred tax balances and the corresponding deferred tax asset valuation allowance at December 31, 1993 as a result of this rate change.
At December 31, 1994, the Company had, for federal income tax purposes, $28 million of unused ITC, the use of which will expire during 2001 through 2005, $2 million of alternative minimum tax credit which will carry forward to future years, and $47 million of capital loss carryforwards which expire during 1995 through 1999. In addition, for federal income tax purposes the Company has approximately $494 million of net operating loss carryforwards expiring in 2004 through 2009 and $169 million of alternative minimum tax loss carryforwards expiring in 2005 through 2007. For state income tax purposes, the Company has approximately $352 million of net operating loss carryforwards expiring in 1995 through 1999.
Due to the Company's Financial Restructuring, as described in Note 3, the Company experienced a change in ownership under section 382 of the Internal Revenue Code in December 1991. As a result of that change, the amount of the taxable income for any post-change year which may be offset by pre-change loss will be limited to the section 382 limitation. The section 382 limitation is based on the value of the Company on the ownership change date. The Company estimates an annual section 382 limit of approximately $23 million. This limit may be increased to the extent of gain recognized on sales of assets whose fair market value was greater than tax basis at the ownership change date, the built-in-gain. The section 382 limitation may increase by built-in-gain recognized within a period of five years after the change in ownership. The 1992 section 382 limitation increased by approximately $84 million of built-in-gain recognized due to asset sales. Unused section 382 limitation may be carried forward until the pre-change tax attributes expire. At December 31, 1994, the Company had pre-change net operating loss, ITC, capital loss and alternative minimum tax carryforwards of approximately $365 million, $28 million, $31 million and $136 million, respectively.
The 1980 through 1985 Federal Income Tax Audit resulted in a 1992 federal tax refund of approximately $1 million and approximately $8 million in interest. The interest income had not been previously accrued and is included as Other Income in the Consolidated Statement of Income (Loss) for the year ended December 31, 1992.
NOTE 5. DISCONTINUED OPERATIONS - --------------------------------
In July 1990, the Boards of Directors of the Company's investment subsidiaries adopted formal plans of liquidation of the investment operations. Pursuant to such actions, investment subsidiaries' results of operations, estimated net realizable value of net assets and cash flows have been classified as discontinued operations in the Company's consolidated financial statements since June 30, 1990. The Company recorded a provision for losses on disposal of discontinued operations of $105 million in 1990 to reduce the carrying values of the assets to their then-estimated net realizable values. The financial results of activities from discontinued operations subsequent to June 30, 1990 have been recorded as an adjustment to the reserve for losses. Additional provisions for losses on disposal of discontinued operations of $36 million in 1991, $44 million in 1992, and $4 million in 1993 were made to reflect further weakening of markets for certain subsidiary investments, increased estimates of holding-period costs for those assets and a $10 million addition to the reserve for litigation in 1992.
The components of net assets of discontinued operations are summarized as follows: December 31, 1994 1993 --------- --------- - Thousands of Dollars -
Cash and Cash Equivalents $ 14,852 $ 22,179 Investment in Citadel - 23,374 Real Estate Investments 17,127 65,119 Vehicle Contracts Receivable 17,509 17,509 Other Assets and Investments 6,859 19,403 Reserve for Loss on Disposal of Discontinued Operations (34,494) (74,109) --------- --------- Total Assets 21,853 73,475 Current Liabilities (13,168) (14,995) --------- --------- Net Assets of Discontinued Operations $ 8,685 $ 58,480 ========= =========
Loss from discontinued operations is as follows:
Years Ended December 31 1994 1993 1992 --------- --------- --------- - Thousands of Dollars -
Investment Losses $(35,447) $(20,403) $(27,473) Hotel Revenues 13,171 13,930 13,669 Hotel Depreciation and Other Expense (16,242) (17,129) (16,914) Other Investment Expense (1,097) (2,289) (1,927) --------- --------- --------- Operating Loss (39,615) (25,891) (32,645) Reduction in Reserve for Losses 39,615 25,891 32,645 --------- --------- --------- Loss from Discontinued Operations $ - - $ - ========= ========= =========
Net assets of discontinued operations declined by approximately $50 million between December 31, 1993 and December 31, 1994 as a result of dividends paid by TRI to the Company.
Gross investment losses during 1994 included losses of: $21 million on sales of real estate; $21 million on the sale of the remaining Citadel common stock; and $5 million on the sale of two small power projects. Offsetting these losses were gains of: $9 million on the sale of various marketable securities and $1 million on the sale of a vehicle contracts receivable portfolio. The resulting net losses reduced the Reserve for Losses by an equal amount. Also included in Investment Losses is $2 million of other investment income.
As of December 31, 1994, Real Estate Investments consist of 1) loans collateralized by real property and 2) land held for sale in Arizona. Vehicle Contracts Receivable consists principally of automobile installment sales contracts of Brookland, a financial services company. In January 1991, the Board of Directors of Brookland elected to discontinue its business operations. Brookland remains liable for credit obligations to outside lenders of $12 million. These credit obligations are collateralized by Brookland's vehicle contracts portfolio and other interests in Vehicle Contracts Receivable.
As of December 31, 1994, the Company has substantially completed its disposal of discontinued operations. The losses from discontinued operations for the period June 30, 1990 through December 31, 1994 of $139 million have been recorded as reductions in the Reserve for Losses. The gross proceeds from the sale of assets, excluding scheduled collections on loans and notes receivable, for the period June 30, 1990 through December 31, 1994 amounted to $498 million. The remaining assets and liabilities will be accounted for as a part of continuing operations beginning January 1, 1995.
NOTE 6. LONG AND SHORT-TERM DEBT AND CAPITAL LEASE OBLIGATIONS - ---------------------------------------------------------------
LONG-TERM-DEBT
First Mortgage Bonds and Installment Sale Agreement
First Mortgage Bond and Installment Sale Agreement maturities and cash sinking fund requirements for the next five years include $17 million in 1995, $12 million in 1996, $2 million in 1997, $3 million in 1998, and $19 million in 1999. In addition, certain First Mortgage Bonds have additional annual sinking fund requirements which total approximately $3 million for each of the next five years. These sinking fund requirements can be and have been satisfied to date primarily by pledges of additional property. The Company's utility plant, with the exception of Springerville Unit 2, is subject to the lien of the General First Mortgage and the General Second Mortgage.
Restructured Arrangements
Approximately $900 million of the Company's previous bank obligations including bank lines, LOCs and related reimbursement agreements (excluding the reimbursement agreement relating to the 1981 Apache B Bonds) were combined and restructured into a master restructuring agreement between the Company and the Banks (the MRA) on December 15, 1992. The MRA provided for a $243.3 million Term Loan, Replacement LOCs supporting $674 million of IDBs, and a $50 million Revolving Credit. Obligations under the MRA are secured by a first mortgage lien on and security interest in Springerville Unit 2, and, under certain conditions, are secured by $50 million in principal amount of collateral bonds issued under the General Second Mortgage, junior to the General First Mortgage securing the Company's First Mortgage Bonds.
Additionally, the MRA provided for an additional $20 million LOC which was issued in March 1993 to the indenture trustee for industrial development revenue bonds originally issued in 1990. The reimbursement agreement related to that LOC, which is secured by first mortgage bonds, allowed the debt proceeds to be released to the Company which reimbursed the Company for costs of qualifying facilities. See Letters of Credit below.
In March 1995, the Company and its banks completed an amendment to the MRA which eased certain debt prepayment restrictions and modified the Term Loan to allow reborrowing of amounts which will have been previously prepaid (Renewable Term Loan) (see Term Loan below). The amendment will allow the Company to better manage its cash position and reduce capital costs while maintaining liquidity. Prior to the amendment the Company was not permitted to prepay non-MRA debt except to the extent that certain cash amounts, as defined in the MRA, were generated. The amendment, now in effect, allows the Company to optionally prepay non-MRA debt provided certain conditions are met. Such conditions include that $1 of principal outstanding under the Renewable Term Loan is permanently prepaid and the commitment therefore terminated for every $2 used to permanently prepay other debt such as First Mortgage Bonds.
To comply with provisions of the MRA prior to the March 7, 1995 amendment, the Company prepaid $17.25 million of First Mortgage Bonds during 1994. During 1993 the Company, under a bank waiver to certain restrictions of the MRA, voluntarily prepaid $49 million of First Mortgage Bonds and $19 million of the Term Loan.
Additional details regarding the components and covenants of the MRA are described below.
Letters of Credit
At December 31, 1994 there were $774 million principal amount of variable rate tax-exempt IDBs outstanding. Payment of principal and interest on these bonds is secured by LOCs. The LOCs expire at various dates during the period December 31, 1999 through December 31, 2002. However, all the LOCs could expire by December 31, 2000, including an expiration as early as August 1997, if the Company's senior long-term debt is rated investment grade on certain dates or during certain periods subsequent to December 31, 1996. The reimbursement agreement related to the 1981 Apache B Bonds is secured by First Mortgage Bonds. The weighted average commitment fee on the Replacement LOCs is approximately 0.53% through 1997 and increases to 0.82% in 1998, 1.07% in 1999 and thereafter.
Term Loan
The Term Loan, on March 7, 1995, was amended and renamed the Renewable Term Loan. As a condition to the amendment becoming effective the Company permanently prepaid $19.34 million of the Term Loan reducing the outstanding balance from $193.4 million to approximately $174 million at March 7, 1995. Thus, the initial commitment and outstanding balance of the Renewable Term Loan was approximately $174 million.
The Renewable Term Loan commitment amount at March 31, 1997 will be reduced as follows: 20% in 1997, 40% in 1998 and 40% in 1999. Any outstanding Renewable Term Loan balance in excess of the commitment will be payable immediately. The Renewable Term Loan bears interest at a variable rate based on an adjusted eurodollar rate plus 0.5% and the commitment fee is 0.5% of the unused portion. The adjusted eurodollar rate was approximately 4.92% per annum and 4.03% per annum for the years ended December 31, 1994 and 1993, respectively, and was approximately 3.66% for the one month period ended December 31, 1992. During 1993 and 1992 the Company prepaid $19 million and $31 million, respectively, of the outstanding balance.
Additional Restrictive Covenants
In addition to the prepayment provisions described above, the MRA contains a number of restrictive covenants including, but not limited to, covenants limiting, with certain exceptions, (i) the incurrence of additional indebtedness, including lease obligations, or the prepayment of existing indebtedness, or the guarantee of any such indebtedness, (ii) the incurrence of liens, (iii) the sale of assets or the merger with or into any other entity, (iv) the declaration or payment of dividends on Common Stock or any other class of capital stock, (v) the making of capital expenditures beyond those contemplated in the Company's 1992 ten-year capital budget, and (vi) the Company's ability to enter into sale-leaseback arrangements, operating lease arrangements and coal and railroad arrangements. All of these restrictive covenants described above, other than (i), (iv) and (vi), will be in effect until at least December 1997. The covenants described in (i), (iv) and (vi) will cease to be binding on the Company when both the Renewable Term Loan and the Revolving Credit are paid in full and commitments thereunder terminate, and the Company's senior long-term debt is rated at least investment grade. In addition, the Company is required pursuant to the MRA to maintain an interest coverage ratio of (a) operating cash flows plus interest paid to (b) interest paid, through the year 2003, ranging from 1.2 to 1 in 1994 and gradually increasing to 2 to 1 in 2000 continuing through the year 2003. For the year ended December 31, 1994, the Company's MRA interest coverage ratio was 2.98 to 1. With respect to dividends, the MRA incorporates, until the Renewable Term Loan and the Revolving Credit are paid in full and commitments thereunder terminate, a restrictive covenant similar to that currently in the General First Mortgage which limits the Company's ability to pay dividends on Common Stock until it has positive retained earnings (through future earnings or otherwise) rather than an accumulated deficit (such accumulated deficit was $681 million at December 31, 1994). For the foreseeable future, the Company does not anticipate being able to satisfy the tests of this restrictive covenant, and therefore, does not anticipate being permitted to pay cash dividends on its Common Stock.
Fair Value of Long-Term Debt
1994 1993 Carrying Fair Carrying Fair Value Value Value Value -------- ----- -------- ----- - Thousands of Dollars - First Mortgage Bonds: Corporate $ 269,750 $ 256,009 $ 287,000 $ 275,687 IDBs 1981 Apache B Bonds 100,000 100,000 100,000 100,000 Pollution Control Financing Bonds 112,200 102,944 112,200 106,030 1990 Pima A Bonds 20,000 20,000 20,000 20,000 Loan Agreements: Installment Sale Agreement 50,000 46,131 50,955 47,646 IDBs 653,600 653,600 653,600 653,600 Term Loan 193,400 193,400 193,400 193,400 Promissory Note 152 152 1,400 1,475 ---------- ---------- ---------- ---------- $1,399,102 $1,372,236 $1,418,555 $1,397,838 ========== ========== ========== ==========
The principal amount of variable rate debt outstanding at December 31, 1994 and 1993 of the 1981 Apache B Bonds, the 1990 Pima A Bonds, the Loan Agreements-IDBs, and the Term Loan are considered reasonable estimates of their fair value as these are variable interest rate liabilities. The fair value of the Company's fixed rate obligations including the Corporate First Mortgage Bonds, the Pollution Control Financing Bonds, the Installment Sale Agreement and Promissory Note was determined by calculating the present value of the cash flows of each fixed rate obligation. The discount rate used for each calculation was a rate consistent with market yields generally available as of December 1994 for 1994 amounts and December 1993 for 1993 amounts, obtained from the Moody's Bond Survey report, for bonds with similar characteristics with respect to: credit rating, time-to-maturity, and the tax status of the bond coupon for Federal income tax purposes. The use of different market assumptions and/or estimation methodologies may yield different estimated fair value amounts.
SHORT-TERM DEBT
Revolving Credit
The $50 million Revolving Credit, provided as part of the MRA, has a termination and maturity date of December 31, 1999. No amounts have been borrowed by the Company under this facility. Revolving Credit borrowings would bear interest at variable rates based upon, at the option of the Company, either (i) prime rate or (ii) an adjusted eurodollar rate plus a margin of 0.75% in 1994 and 1995 which gradually increases to 2% by 1998 and thereafter. The Company is required to repay the Revolving Credit in full for at least 30 consecutive days in each twelve-month period prior to November 30 of each year. The annual commitment fee for the Revolving Credit equals 0.5% of the unused portion.
Discontinued Operations
Vehicle contracts receivable and other interests in vehicle contracts receivable held by Brookland are financed through a warehouse line of credit and a loan which totaled approximately $12 million at December 31, 1994 and 1993. The weighted average interest rate applicable to the warehouse line of credit at December 31, 1994 and 1993 was 17%.
CAPITAL LEASE OBLIGATIONS
A schedule by years of future minimum lease payments under capital leases together with the present value of the net minimum lease payments (Capital Lease Obligations) as of December 31, 1994 follows:
Years ending December 31, - Thousands of Dollars -
1995.......................... $ 99,262 1996.......................... 119,155 1997.......................... 95,019 1998.......................... 97,200 1999.......................... 103,277 Thereafter.................... 1,913,905 ------------ 2,427,818 Imputed Interest.............. (1,492,280) ------------ Capital Lease Obligations..... $ 935,538 ============
The Irvington Lease has an initial term to January 2011 and provides for renewal periods of two or more years through 2020. The Springerville Common Facilities Leases have an initial term of 2017 for one owner participant and 2021 for the other two owner participants, subject to optional renewal periods of two or more years through 2025. The Springerville Unit 1 Leases have an initial term to January 2015 and provide for renewal periods of three or more years through 2030. The Valencia Leases have an initial term to April 2015 and provide for an initial renewal period of six years, then additional renewal periods of five or more years through 2035.
NOTE 7. COMMITMENTS AND CONTINGENCIES - -------------------------------------
UTILITY CONTRACTUAL MATTERS
Coal and Transportation Contracts
On October 14, 1991, amendments to the contract with the Springerville coal supplier were entered into, and became effective, which, among other things, reduced the price of coal shipments at Springerville. The amended contract contains provisions which protect the claims of the Springerville coal supplier under the original agreement in the event that the Company does not perform its obligations under the terms of the amended agreement at any time prior to August 23, 1995. If such a failure to perform occurs, the Company would be responsible for approximately $7 million per year in additional payments to the Springerville coal supplier. Also, at December 31, 1994, a $3 million accrued liability remained on the Company's Consolidated Balance Sheet which will be forgiven if all conditions are met during the four years subsequent to the amendment of the Springerville coal agreement.
The Company has contracted with P&M to supply coal to Irvington. Originally, all units at Irvington were scheduled to be converted and coal supplies were contracted for those units. The original contract required annual minimum quantities of 650,000 tons. However, the conversion of Units 1, 2 and 3 at Irvington was canceled. The then-existing P&M contract contained minimum take-or-pay provisions which required the Company to pay one-half of the base price of coal for any contract quantities not scheduled and delivered. On November 5, 1991, amendments to the contract with P&M were entered into and became effective, which, among other things, substantially reduced the minimum annual coal quantities to levels which the Company estimates can be utilized by Irvington Unit 4 alone (Irvington Unit 4 is expected to burn approximately 225,000 tons of coal per year), amended contract price adjustment procedures, extended the expiration date of the agreement from 2002 to 2015 and provided for an exchange of the proceeds of the sale of undeveloped land for the $8 million 1990 penalty payment which was withheld during the period of the Payment Moratorium (the $8 million 1990 penalty payment remains an accrued liability on the Company's Consolidated Balance Sheet at December 31, 1994). Additionally, the penalty provisions of the contract were amended. P&M maintains their claim under the prior contract if the Company does not perform its obligations under the terms of the amended agreement at any time prior to November 4, 1995. If the Company fails to perform, the Company would be required, pursuant to the prior contract, to pay for approximately 5.1 million tons, that would not be delivered to the Company, at one-half the base price of coal through 2002, at an estimated aggregate cost of $98 million.
Amendments to transportation agreements have also been executed, effective October 18, 1991, with the Springerville and Irvington rail transportation suppliers which, among other things, reduced the price for coal shipments and limited annual changes in the contract price. As discussed above with respect to the coal contracts, the Springerville amended rail transportation agreement includes provisions which protect the supplier's claims under the original contract in the event the Company does not perform its obligations under the terms of the amended agreement at any time during the four years subsequent to the amendment. If such a failure to perform occurs, the Company would be responsible for approximately $3 million per year to the Springerville transportation supplier at current contract prices. At December 31, 1994, a $3 million accrued liability remained on the Company's Consolidated Balance Sheet which will be forgiven, if all conditions are met during the four years subsequent to amendment of the Springerville agreement.
The Company's contracts to purchase coal for use at the joint projects in which the Company participates expire at various dates from 2005 to 2017 and, in the aggregate, require the Company to take 1.5 million tons of coal per year at an estimated annual cost of $16 million.
Fuel Purchase Commitments
The Company's contracts to purchase coal for use at Springerville, Irvington and each of the joint projects in which the Company participates contain various provisions calling for the payment of a take-or-pay amount, if certain minimum quantities of coal are not scheduled and delivered. The Company's present fuel requirements are generally in excess of the stated take-or-pay minimum amounts; however, from time to time, the Company has purchased spot market alternative fuels or switched fuel burn from one generating station to another in order to achieve lower overall fuel costs, while incurring take-or-pay minimum charges. As a result, the Company incurred take-or-pay minimum charges of approximately $1 million during 1993 and 1992. The Company incurred no take-or-pay charges in 1994.
COMMITMENTS - ENVIRONMENTAL REGULATION
In the fall of 1990, Congress adopted certain Federal Clean Air Act Amendments (CAAA) with respect to reductions in sulfur dioxide and nitrogen oxide emissions which will affect the Company's operation. The nitrogen oxide reductions will be based upon EPA regulations expected to be finalized in 1995 for certain boilers and by 1997 for all remaining boilers. In addition, the rules expected to be promulgated in 1995 may be revised in 1997. The required reductions of sulfur dioxide emissions will be implemented in two phases which will be effective in 1995 and 2000, respectively.
The Company is not affected by the requirements for sulfur dioxide emissions and nitrogen oxide reductions which go into effect in 1995 (Phase I), but is subject to the requirements that go into effect January 1, 2000 (Phase II). In Phase II, the maximum sulfur dioxide emission rates are set at 1.2 pounds per million BTU. Because of the Company's general use of low- sulfur coal and installed scrubbers at certain units, the Company's coal- fired generating stations already meet the sulfur dioxide emission rate requirements for Phase II. Additionally, further reductions are to be met through a proposed market-based system. Affected Company generating units will be allocated allowances based on required emission reductions and past use. An allowance permits emission of one ton of sulfur dioxide and may be sold. Generating station units must hold allowances equal to their level of emissions or face penalties and a requirement to offset excess tons in future years. On March 23, 1993, the EPA published the final sulfur dioxide allowance allocations for all Phase I and Phase II affected utility units, including the allowances that will be allocated to all Company units. An analysis of the sulfur dioxide allowances that were allocated to the Company shows that the Company would have sufficient allowances to permit normal plant operation and be in compliance with the sulfur dioxide regulations once the Phase II requirements become effective. However, until all the rulemaking regulation processes for implementing the CAAA are completed, the Company is unable to predict the specific impacts of all such amendments.
The CAAA also require multi-year studies of visibility impairment in specified areas and studies of hazardous air pollutants which relate to the necessity of future regulations of electric utility generating units. Since these activities involve the gathering of information not currently available, the Company cannot predict the outcome of these studies.
As a result of recent and possible future changes in federal and state environmental laws, regulations and permit requirements, the Company may incur additional costs for the purchase or upgrading of pollution control emission monitoring equipment on existing electric generating facilities and may experience a reduction in operating efficiency. There may be a need for variances from certain environmental standards and operating permit conditions until required equipment and processes for control, handling and disposal of emissions are operational and reliable. Failure to comply with any EPA or state compliance requirements may result in substantial penalties or fines which are provided for by law and which in some cases are mandatory.
In 1991, the EPA adopted a rule for the reduction of Navajo's sulfur dioxide emissions on an annual averaging basis by 90% to address visibility impairment at Grand Canyon National Park. The Company estimates that its share of the required capital expenditures remaining as of December 31, 1994 relating to the rule's implementation will be approximately $44 million, including AFDC, through 1999.
CONTINGENCIES
SDGE/FERC Proceedings
San Diego Gas & Electric v. Tucson Electric Power Company
On February 11, 1993, SDGE filed a complaint and motion for summary disposition against the Company and Century before the FERC (San Diego Gas & Electric Company v. Tucson Electric Power Company and Century Power Corporation, Docket No. EL93-13-000). The complaint alleges that the Company and Century overbilled SDGE during Phases 3 through 5 of the Ten Year Power Sale Agreement (Ten Year Agreement) and requests that the FERC order refunds by the Company of an aggregate amount of approximately $14.5 million, plus interest. On April 23, 1993, the Company filed an answer denying the allegations of the complaint. The matter is pending.
Alamito Company, Docket No. ER79-97-009
On September 27, 1993, SDGE filed a motion for decision by the FERC in Alamito Company, Docket No. ER79-97-009. This proceeding involved the proper capital structure and rate of return for rates under which Century Power Corporation (formerly Alamito Company) sold Company system power to SDGE during Phase 5 of the Ten Year Agreement, from June 1, 1987 through May 31, 1989. An initial decision of an administrative law judge in January 1986, found the Company's capital structure was inflated and its return on equity excessive. SDGE claimed that the Company would owe Century on SDGE's behalf up to approximately $12 million plus interest. On October 8, 1993, the Company filed an answer opposing SDGE's motion. It was the Company's position that the FERC's order of July 19, 1991 approving a settlement between SDGE and Century in Docket No. ER79-97-009, as well as the Company's and Century's mutual release of all claims against each other as part of their Financial Restructuring, bars SDGE's claim. On December 23, 1993, the FERC issued an order confirming that the July 19, 1991 order disposed of this case, and denied SDGE's September 27, 1993 motion. On January 21, 1994, SDGE requested rehearing of the FERC's order. That request is pending.
Based on consultations with counsel, the Company believes that the resolution of the SDGE/FERC Proceedings described herein should not have a material adverse effect, if any, on the Company's Consolidated Financial Statements.
Tax Assessments
During the first quarter of 1993, the IRS completed an examination of the Company's consolidated federal income tax returns for tax years 1986 through 1990. The Company has reached a tentative settlement with the IRS, pending final approval, which would result in the Company paying additional taxes and interest, of approximately $5.4 million, as of December 31, 1994.
The Arizona Department of Revenue has issued transaction privilege tax assessments to the Company for the period November 1985 through May 1993 alleging that Valencia is liable for sales tax on gross income received from coal sales, transportation, and coal-handling services during such period. The Company protested the assessments. On March 11, 1994, the Arizona Tax Court issued a Minute Entry granting Summary Judgment to the Arizona Department of Revenue and upholding the validity of the assessment issued for the period November 1985 through March 1990. The Company appealed this decision to the Court of Appeals.
Also, the Arizona Department of Revenue has issued transaction privilege tax assessments to the lessors from whom the Company leases certain property alleging sales tax liability on a component of rents paid by the Company on the Springerville Unit 1 Leases, Springerville Common Facilities Leases, Irvington Lease and Valencia Leases. Assessments cover the period August 1, 1988 to September 30, 1993. Under the terms of the lease agreements, if the Arizona Department of Revenue prevails the Company must indemnify the lessors for taxes paid.
In the opinion of management, the Company has recorded, through the Consolidated Statement of Income (Loss) in current and prior years, a liability for the amount of federal and state taxes and interest thereon which the Company feels is probable of incurrence as of December 31, 1994. In the event that all or most of the Arizona Department of Revenue's proposed assessments are sustained, additional liabilities would result. Based on the current status of the legal proceedings, the Company believes that the ultimate resolution of such disputes will occur over a period of one and a half to four years. Although it is reasonably possible that the ultimate resolution of such matters could result in a loss of up to approximately $25 million in excess of amounts accrued, management and outside tax counsel believe that the Company has meritorious defenses to mitigate or eliminate the assessed amounts. Based on consultations with counsel, the Company believes that the resolution of the tax matters described herein should not have a material adverse effect on the Company's Consolidated Financial Statements.
NOTE 8. SCECorp/SCE LITIGATION SETTLEMENT - ------------------------------------------
On September 5, 1990, the Company commenced an action against SCECorp and SCE in the Superior Court of California for the County of San Diego. On September 15, 1992, the action was settled. Under the terms of the settlement agreement, SCECorp paid the Company $25 million in settlement of claims of interference with the proposed merger between the Company and SDGE, plus $15 million to cover the Company's litigation and related expenses. Pursuant to the terms of the settlement agreement, the lawsuit was dismissed with prejudice on September 28, 1992. In the Consolidated Statement of Income (Loss) for the year ended December 31, 1992, the proceeds from the settlement agreement are included as a reduction of Other Operations to the extent of litigation expenses incurred by the Company in pursuit of its claim (approximately $12 million as of December 31, 1992) and the remainder of the proceeds are included as Litigation Settlement.
The Company and SCE also agreed to a ten-year power exchange agreement beginning in 1995. Under the agreement, beginning in 1995 SCE will provide firm system capacity of 110 MW to the Company during summer months, for which the Company will pay an annual capacity charge of approximately $1 million annually increasing to a maximum of approximately $2 million annually. The Company will be entitled to schedule firm energy deliveries from SCE during the summer of up to 36,300 MWh per month, and will be obligated to return to SCE on an interruptible basis the same amount of energy the following winter season.
NOTE 9. JOINTLY OWNED FACILITIES - ---------------------------------
At December 31, 1994, the Company's interests in jointly owned generating and transmission facilities were as follows:
Percent Plant Construction Owned By in Work in Accumulated Company Service Progress Depreciation ----------- -------- ------------ ------------ - Thousands of Dollars -
San Juan Units 1 and 2 50.0 $294,156 $ 1,712 $190,721 Navajo Station 7.5 77,963 6,524 36,819 Four Corners Units 4 and 5 7.0 75,725 1,520 47,565 Transmission Facilities 7.5 to 95.0 204,930 1,166 90,159 -------- ------- -------- Total $652,774 $10,922 $365,264 ======== ======= ========
The Company has financed or provided funds for the above facilities and its share of operating expenses is included in the Consolidated Statements of Income (Loss).
NOTE 10. EMPLOYEE BENEFITS PLANS - ---------------------------------
PENSION PLANS
The Company has noncontributory pension plans for all regular employees. Benefits are based on years of service and the employee's average compensation. The Company makes annual contributions to the plans that are not greater than the maximum tax deductible contribution and not less than the minimum funding requirement by the Employee Retirement Income Security Act of 1974. Contributions are intended to provide for both current and future accrued benefits.
The following table sets forth the plans' funded status and amount recognized in the Company's Consolidated Financial Statements at December 31, 1994 and 1993. The actuarial present value of benefit obligations and reconciliation of funding status at October 1, were as follows:
1994 1993 -------- -------- - Thousands of Dollars - Accumulated Benefit Obligations Vested $46,679 $51,955 Non-Vested 6,318 6,497 -------- -------- Total $52,997 $58,452 ======== ========
Plan Assets at Fair Value, Principally Equity and Fixed Income Securities $77,021 $78,478 Projected Benefit Obligations (67,393) (78,997) -------- -------- Plan Assets in Excess of (Less Than) Projected Benefit Obligations 9,628 (519) Unrecognized Net (Gain) Loss from Past Experience (10,549) 568 Prior Service Cost Not Yet Recognized in Net Periodic Pension Cost 5,198 5,404 Unrecognized Net Assets at Transition Being Amortized Over 15 Years (2,017) (2,305) -------- -------- Prepaid Pension Cost Included in the Balance Sheet $ 2,260 $ 3,148 ======== ========
Years Ended December 31, 1994 1993 1992 -------- -------- -------- - Thousands of Dollars - Components of Net Pension Cost Service Cost of Benefits Earned During Period $ 2,680 $ 1,558 $ 1,390 Interest Cost of Projected Benefit Obligation 5,615 4,689 4,283 Actual (Gain) Loss on Plan Assets 492 (14,508) (4,075) Net Amortization and Deferral (6,214) 10,187 54 -------- -------- -------- Net Periodic Pension Cost $ 2,573 $ 1,926 $ 1,652 ======== ======== ========
Assumed Rates Used to Determine Pension Cost 1994 1993 1992 ---- ---- ---- Discount Rate - Funding Status 8.5% 7.0% 8.0% Average Compensation Increase 5.0 5.5 5.5 Expected Long-Term Rate of Return on Plan Assets 9.0 7.5 7.5
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Health care and life insurance benefits are provided for retired employees. All regular employees may become eligible for those benefits if they reach retirement age while working for the Company. Those and similar benefits are provided through an independent administrator handling health claims and a life insurance company that has premiums based on group rates.
The Company adopted FAS 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, in 1993. The accumulated postretirement benefit obligation as of January 1, 1993 of $19 million is being amortized to expense over a twenty-year period, in accordance with the provisions of FAS 106. The Company recognizes the FAS 106 periodic benefit cost as expense. In January 1994, the Company was authorized by the ACC to recover through rates the costs of benefits only as payments are made to retired employees; the postretirement benefits are currently funded entirely on a pay-as-you-go basis. Therefore, the Company has not recorded a regulatory asset for the excess of FAS 106 expense over actual benefit payments.
1994 1993 --------- --------- - Thousands of Dollars - Accumulated Postretirement Benefits Obligation Retirees $ (5,270) $ (5,832) Fully Eligible Active Plan Participants (3,286) (3,130) Other Active Participants (9,849) (11,295) --------- --------- Total Accumulated Postretirement Benefits Obligation (18,405) (20,257) Unrecognized Net Gain from Past Experience (4,429) (786) Unrecognized Portion of the Transition Obligation Being Amortized Over 20 Years 17,247 18,205 --------- --------- Accrued Postretirement Benefit Cost Included in the Balance Sheet $ (5,587) $(2,838) ========= =========
1994 1993 --------- --------- - Thousands of Dollars - Components of Net Postretirement Benefit Cost Service Cost of Benefits Earned During Period $ 931 $ 950 Interest Cost of Projected Benefit Obligation 1,395 1,491 Amortization of the Unrecognized Transition Obligation 958 958 --------- --------- Net Periodic Postretirement Benefit Cost $ 3,284 $ 3,399 ========= =========
The accumulated postretirement benefit obligation was determined using an 8.5% and 7% discount rate for 1994 and 1993, respectively. The health care cost trend rates were assumed to be 10% and 11% for 1994 and 1993, respectively, gradually declining to 5% in 2003 and thereafter. The effect of a one percentage point increase in the assumed health care cost trend rate would increase the accumulated postretirement benefit obligation as of December 31, 1994 by approximately $2.8 million and the net periodic cost by $0.4 million for the year.
ADOPTION OF FAS 112
In January 1994 the Company adopted FAS 112, Employers' Accounting for Postemployment Benefits. Prior to 1994, postemployment benefits other than those related to retirement benefits were recognized on a pay-as-you-go basis. The effect of this change was an increase in postemployment benefits expense of $0.6 million for the year ended December 31, 1994.
STOCK OPTION PLANS
On May 20, 1994, the Shareholders of the Company approved two stock option plans, the 1994 Outside Director Stock Option Plan (Directors' Plan) and the 1994 Omnibus Stock and Incentive Plan (Omnibus Plan).
The Directors' Plan provides for the annual grant of 6,000 non- qualified stock options to each eligible director. Under the Directors' Plan, the first grant on January 3, 1995 consisted of 48,000 options at an exercise price of $3.125; these options vest ratably and become exercisable in one-third increments on each anniversary date of the grant and expire in 2005.
The Omnibus Plan allows the Compensation Committee, a committee comprised solely of non-employee directors, to grant any or all of the following types of awards to each eligible employee of the Company: stock options, including incentive stock options, non-qualified stock options and discounted stock options; stock appreciation rights; restricted stock; performance units; performance shares; and dividend equivalents. The total number of shares of the Company's stock which may be awarded under the Omnibus Plan cannot exceed eight million.
During 1994, the Compensation Committee granted stock options intended to qualify as incentive stock options under the Internal Revenue Code to all employees, with exercise prices of $3.25 - $3.50. The options vest ratably over a three year period, with the first third becoming exercisable in 1995, and expire in 2004. The aggregate number of shares attributable to the 1994 grants is 2,214,205.
The Company's 1985 Stock Option Plan remains in effect and the options outstanding thereunder, which are fully exercisable, expire in 1995 to 1997. No options were exercised and the Company incurred no expense for the 1985 Plan during 1992 through 1994. The following summarizes the stock option transactions during the period December 31, 1992 through December 31, 1994:
Number of Exercise Options Price ------- ----------- Options Outstanding, December 31, 1992 and 1993: 1985 Plan - Primary 23,750 $40.375 to $58.625 Dividend Equivalents 14,053 --- Granted During 1994: 1994 Omnibus Plan 2,214,205 $3.25 to $3.50 --------- Options Outstanding, December 31, 1994 2,252,008 =========
NOTE 11. QUARTERLY FINANCIAL DATA (unaudited) - ----------------------------------------------
First Second Third Fourth --------- --------- --------- --------- - Thousands of Dollars - (except per share data) Operating Revenue $146,579 $171,097 $220,486 $153,311 Operating Income 8,259 27,951 64,310 13,882 Net Income (Loss) (14,580) 4,432 40,688 (9,800) Net Income (Loss) per Average Share (0.09) 0.03 0.25 (0.06)
Operating Revenue $136,149 $148,349 $189,432 $150,209 Operating Income 4,511 14,179 44,902 20,354 Income (Loss) from Continuing Operations (18,522) (7,978) 22,386 (17,702) Provision for Loss on Disposal of Discontinued Operations - - - (4,000) Net Income (Loss) (18,522) (7,978) 22,386 (21,702) Net Income (Loss) per Average Share Continuing Operations (0.12) (0.05) 0.14 (0.11) Provision for Loss on Disposal of Discontinued Operations - - - (0.02) Total Net Income (Loss) per Average Share (0.12) (0.05) 0.14 (0.13)
Due to seasonal fluctuations in sales, recognition of regulatory disallowances and adjustments, and provisions for loss on discontinued operations, the quarterly results are not indicative of annual operating results. See Notes 2 and 5 regarding significant adjustments which were recorded during the fourth quarter of 1993.
Beginning in the fourth quarter of 1994, state and city sales taxes and similar taxes collected on revenues were removed from Operating Revenues and Taxes Other Than Income Taxes on the Consolidated Statement of Income (Loss). See Note 1. The tax amounts reclassified were as follows:
First Second Third Fourth --------- --------- --------- --------- - Thousands of Dollars - Operating Revenue - Historical $155,475 $180,671 $234,083 N/A Total Taxes Reclassified (8,896) (9,574) (13,597) N/A --------- --------- --------- --------- Operating Revenue - Restated $146,579 $171,097 $220,486 N/A ========= ========= ========= =========
Operating Revenue - Historical $144,424 $157,434 $201,204 $159,375 Total Taxes Reclassified (8,275) (9,085) (11,772) (9,166) --------- --------- --------- --------- Operating Revenue - Restated $136,149 $148,349 $189,432 $150,209 ========= ========= ========= =========
NOTE 12. SUPPLEMENTAL CASH FLOW INFORMATION - --------------------------------------------
For purposes of this statement, the Company defines Cash and Cash Equivalents as cash (unrestricted demand deposits) and all highly liquid investments purchased with a maturity of three months or less related to all of the Company's operations, including discontinued operations (see below). A reconciliation of net income (loss) to net cash flows from operating activities for the three years ended December 31, 1994 follows:
1994 1993 1992 ---------- ---------- ---------- - Thousands of Dollars -
Income (Loss) from Continuing Operations $ 20,740 $ (21,816) $ (79,022) Adjustments to Reconcile Income (Loss) from Continuing Operations to Net Cash Flow Depreciation Expense 89,905 74,184 69,445 Capital Lease Rent Expense - - 13,161 Taxes Accrued 8,946 (2,303) 6,578 Deferred Income Taxes and Investment Tax Credits - Net (4,911) (5,277) (11,194) Deferred Fuel and Purchased Power 7,359 10,716 7,030 Litigation Settlements - Net - (5,000) (5,000) Lease Payments Deferred 32,024 29,870 10,830 Deferred Springerville Unit 2 Costs (1,133) (5,359) (4,143) Regulatory Disallowances and Adjustments, Net of Amortization (13,977) 5,629 (4,501) Loss on Financial Restructuring - - 26,669 Payments Withheld due to Payment Moratorium - - 46,665 Other (506) 314 13,188 Changes in Assets and Liabilities which Provided (Used) Cash Exclusive of Changes Shown Separately Accounts Receivable - Other (375) 1,119 4,526 Materials and Fuel 343 6,484 (629) Unbilled Revenues 625 (1,438) (631) Other Current Assets and Liabilities 601 (2,029) 3,034 Other Deferred Assets and Liabilities 3,975 4,237 (7,376) ---------- ---------- ---------- Net Cash Flows - Continuing Operating Activities $ 143,616 $ 89,331 $ 88,630 ========== ========== ==========
Non-cash capital transactions and financing activities of the Company that affected recognized assets and liabilities but did not result in cash receipts or payments during the three years ended December 31, 1994 were:
1994 1993 1992 ---------- ---------- ---------- - Thousands of Dollars -
Capital Lease Obligations $ 8,107 $ 10,523 $ 926,169 Acquisition of Leased Assets - 3,385 883,607 Issuance of Common Stock and Warrants - - 197,128 Acquisition of Springerville Assets - - 30,645
ITEM 9.
ITEM 9. - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10.
ITEM 10. - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
Information concerning Directors is contained under Election of Directors in the Company's Proxy Statement relating to the 1995 Annual Meeting of Shareholders, which information is incorporated herein by reference.
EXECUTIVE OFFICERS
Executive Officers of the Company who are elected annually by the Company's Board of Directors, are as follows:
Executive
Officer Name Age Title Since
Charles E. Bayless 52 Chairman of the Board, President and Chief Executive Officer (a) 1989
Ira R. Adler 44 Senior Vice President and Chief Financial Officer (b) 1988
James S. Pignatelli 51 Senior Vice President - Business Development (c) 1994
Thomas A. Delawder 48 Vice President - Energy Resources (d) 1985
Gary L. Ellerd 44 Vice President - Operations (e) 1985
Steven J. Glaser 37 Vice President - Wholesale /Retail Pricing and System Planning (f) 1994
Thomas N. Hansen 44 Vice President - Technical Advisor (g) 1992
Karen G. Kissinger 40 Vice President and Controller (h) 1991
George W. Miraben 53 Vice President - Human Resources and Public Affairs (i) 1990
Dennis R. Nelson 44 Vice President, General Counsel and Corporate Secretary (j) 1991
Gerald A. O'Brien 53 Vice President - Customer Services & Marketing (k) 1990
Romano Salvatori 57 Vice President - Independent Power (l) 1994
Susan R. Wallach 47 Vice President - Business Development (m) 1990
Kevin P. Larson 38 Treasurer (n) 1994
(a) Charles E. Bayless: Mr. Bayless joined the Company as Senior Vice President and Chief Financial Officer in December 1989. He was elected President and Chief Executive Officer in July 1990 and was elected to the Board of Directors in June 1990. On January 28, 1992, Mr. Bayless was named Chairman of the Board of Directors. Prior to joining the Company, he was Senior Vice President and Chief Financial Officer of Public Service Company of New Hampshire from 1981 through 1989.
(b) Ira R. Adler: Mr. Adler joined the Company in 1986 as Manager of Financial Planning. In 1987 he was elected as Vice President and Treasurer of TRI, one of the Company's investment subsidiaries, from which position he resigned in October 1988, when he was elected Treasurer of the Company. He was elected Vice President - Finance and Treasurer in July 1989 and was elected Senior Vice President and Chief Financial Officer in July 1990 and President of TRI and SRI in April 1992. Prior to joining the Company, he was Vice President - Finance of US WEST Financial Services, Inc.
(c) James S. Pignatelli: Mr. Pignatelli joined the Company as Senior Vice President in August 1994. Prior to joining the Company, he was President and Chief Executive Officer from 1988 to 1993 of Mission Energy Company, a subsidiary of SCE Corp.
(d) Thomas A. Delawder: Mr. Delawder joined the Company in 1974 and thereafter served in various engineering and operations positions. In April 1985 he was named Manager, Systems Operations and was elected Vice President - Power Supply and System Control in November 1985. In February 1991, he became Vice President - - Engineering and Power Supply and in January 1992 he became Vice President - System Operations. In 1994, he became Vice President - Energy Resources.
(e) Gary L. Ellerd: Mr. Ellerd joined the Company as Vice President and Controller in January 1985. He was elected Vice President - Services and Chief Information Officer in January 1991 and in January 1992 he became Vice President - - Corporate Information Services and Chief Information Officer. In 1994, he was named Vice President - Retail Customers. In 1995, he was named Vice President - - Operations.
(f) Steven J. Glaser: Mr. Glaser joined the Company in 1990 as a Senior Attorney in charge of Regulatory Affairs. He was Manager of the Company's Legal department from 1992 to 1994, and Manager of Contracts and Wholesale Marketing from 1994 until elected Vice President - Business Development. In 1995, he was named Vice President - Wholesale/Retail Pricing and System Planning.
(g) Thomas N. Hansen: Mr. Hansen joined the Company in December 1992 as Vice President - Power Production. Prior to joining the Company, Mr. Hansen was Century's Vice President - Operations from 1989 and Plant Manager at Springerville from 1987 through 1988. In 1994, he was named Vice President - Technical Advisor.
(h) Karen G. Kissinger: Ms. Kissinger joined the Company as Vice President and Controller in January 1991. Prior to joining the Company, she was a Manager with Deloitte & Touche from 1986 through 1989 and a Senior Manager through 1990.
(i) George W. Miraben: Mr. Miraben was elected Vice President, Public Affairs, effective March 1990, and named Vice President - Human Resources and Public Affairs in 1994. Prior to joining the Company, he was Director of External Affairs for US WEST Communications' Arizona operation from 1981 through March 1990.
(j) Dennis R. Nelson: Mr. Nelson joined the Company in 1976. He was manager of the Legal Department from 1985 to 1990. He was elected Vice President, General Counsel and Corporate Secretary in January 1991.
(k) Gerald A. O'Brien: Mr. O'Brien joined the Company in 1961. Formerly Manager, Customer and Corporate Services, he was elected Vice President - - Customer Services and Human Resources in May 1990 and in January 1992 he became Vice President - Customer Operations. In 1994, he was named Vice President - Operations Support. In 1995, he was named Vice President - - Customer Services & Marketing.
(l) Romano Salvatori: Mr. Salvatori joined the Company as Vice President - Independent Power in December 1994. Prior to joining the Company, he was Deputy General Manager, Power Generation Business Unit and General Manager, Power Generation Strategic Affairs Division of Westinghouse Electric Corporation from 1990 to 1994, and General Manager, Power Generation Commercial Operations Division from 1990 to 1993. In 1995, he was named President of Nations Energy Corporation, in addition to his responsibilities as Vice President - Independent Power.
(m) Susan R. Wallach: Ms. Wallach joined the Company in 1974. Formerly Manager of Accounting Services and Assistant Controller, she was elected Vice President and Treasurer in July 1990. She was named Vice President - Future Marketing/Sales/Planning in 1994. In 1995, she was named Vice President - Business Development.
(n) Kevin P. Larson: Mr. Larson joined the Company in 1985 and thereafter held various positions in its finance department and at the Company's investment subsidiaries. In January 1991, he was elected Assistant Treasurer of the Company and named Manager of Financial Programs. He was elected Treasurer in August 1994.
ITEM 11.
ITEM 11. - EXECUTIVE COMPENSATION
Information concerning Executive Compensation is contained under Executive Compensation and Other Information in the Company's Proxy Statement relating to the 1995 Annual Meeting of Shareholders, which information is incorporated herein by reference.
ITEM 12.
ITEM 12. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
GENERAL
At March 6, 1995, the Company had outstanding 160,723,702 shares of Common Stock. As of March 6, 1995, the number of shares of Common Stock beneficially owned by all directors and officers of the Company as a group amounted to less than 1% of the outstanding Common Stock.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Information concerning the security ownership of certain beneficial owners of the Company is contained under Security Ownership of Certain Beneficial Owners in the Company's Proxy Statement relating to the 1995 Annual Meeting of Shareholders, which information is incorporated herein by reference.
SECURITY OWNERSHIP OF MANAGEMENT
Information concerning the security ownership of the Directors and Executive Officers of the Company is contained under Security Ownership of Certain Beneficial Owners in the Company's Proxy Statement relating to the 1995 Annual Meeting of Shareholders, which information is incorporated herein by references.
ITEM 13.
ITEM 13. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14.
ITEM 14. - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Page
(a) 1. Consolidated Financial Statements as of December 31, 1994 and 1993 and for Each of the Three Years in the Period Ended December 31, 1994.
Independent Auditors' Report 27 Consolidated Statements of Income (Loss) 28 Consolidated Balance Sheets 29 Consolidated Statements of Capitalization 30 Consolidated Statements of Cash Flows 31 Consolidated Statements of Changes in Stockholders' Equity (Deficit) 32 Notes to Consolidated Financial Statements 33
2. Supplemental Consolidated Schedules for the Years Ended December 31, 1992 to 1994.
Schedules I to V, inclusive, are omitted because they are not applicable or not required.
3. Exhibits.
Reference is made to the Exhibit Index commencing on page 60
(b) Reports on Form 8-K.
The Company has not filed any Current Reports on Form 8-K during the last quarter of the period covered in this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
TUCSON ELECTRIC POWER COMPANY
Date: March 8, 1995 By Ira R. Adler ----------------------------------- IRA R. ADLER Senior Vice President and Principal Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: March 8, 1995 Charles E. Bayless* ------------------------------------- Charles E. Bayless Chairman of the Board, President and Principal Executive Officer
Date: March 8, 1995 Ira R. Adler ------------------------------------ Ira R. Adler Principal Financial Officer
Date: March 8, 1995 Karen G. Kissinger* ------------------------------------ Karen G. Kissinger Principal Accounting Officer
Date: March 8, 1995 Jose Canchola* ------------------------------------ Jose Canchola Director
Date: March 8, 1995 Kathryn N. Dusenberry* ------------------------------------ Kathryn N. Dusenberry Director
Date: March 8, 1995 John Jeter* ------------------------------------ John Jeter Director
Date: March 8, 1995 R. B. O'Rielly* ------------------------------------ R. B. O'Rielly Director
Date: March 8, 1995 Martha R. Seger* ------------------------------------ Martha R. Seger Director
Date: March 8, 1995 Donald G. Shropshire* ------------------------------------ Donald G. Shropshire Director
Date: March 8, 1995 H. Wilson Sundt* ------------------------------------ H. Wilson Sundt Director
Date: March 8, 1995 By Ira R. Adler --------------------------------- Ira R. Adler as attorney-in-fact for each of the persons indicated
EXHIBIT INDEX
*3(a) -- Restated Articles of Incorporation, filed with the ACC on August 11, 1994. (Form 10-Q for the quarter ended September 30, 1994, File No. 1-5924--Exhibit 3).)
*3(b) -- Bylaws of the Registrant, as amended May 20, 1994. (Form 10-Q for the quarter ended June 30, 1994, File No. 1-5924--Exhibit 3).)
*4(a)(1) -- Indenture dated as of April 1, 1941, to The Chase National Bank of the City of New York, as Trustee. (Form S-7, File No. 2-59906-- Exhibit 2(b)(1).)
*4(a)(2) -- First Supplemental Indenture, dated as of October 1, 1946. (Form S-7, File No. 2-59906--Exhibit 2(b)(2).)
*4(a)(3) -- Second Supplemental Indenture dated as of October 1, 1947. (Form S-7, File No. 2-59906--Exhibit 2(b)(3).)
*4(a)(4) -- Third Supplemental Indenture, dated as of April 1, 1949. (Form S-7, File No. 2-59906--Exhibit 2(b)(4).)
*4(a)(5) -- Fourth Supplemental Indenture, dated as of December 1, 1952. (Form S-7, File No. 2-59906--Exhibit 2(b)(5).)
*4(a)(6) -- Fifth Supplemental Indenture, dated as of January 1, 1955. (Form S-7, File No. 2-59906--Exhibit 2(b)(6).)
*4(a)(7) -- Sixth Supplemental Indenture, dated as of January 1, 1958. (Form S-7, File No. 2-59906--Exhibit 2(b)(7).)
*4(a)(8) -- Seventh Supplemental Indenture, dated as of November 1, 1959. (Form S-7, File No. 2-59906--Exhibit 2(b)(8).)
*4(a)(9) -- Eighth Supplemental Indenture, dated as of November 1, 1961. (Form S-7, File No. 2-59906--Exhibit 2(b)(9).)
*4(a)(10)-- Ninth Supplemental Indenture, dated as of February 20, 1964. (Form S-7, File No. 2-59906--Exhibit 2(b)(10).)
*4(a)(11)-- Tenth Supplemental Indenture, dated as of February 1, 1965. (Form S-7, File No. 2-59906--Exhibit 2(b)(11).)
*4(a)(12)-- Eleventh Supplemental Indenture, dated as of February 1, 1966. (Form S-7, File No. 2-59906--Exhibit 2(b)(12).)
*4(a)(13)-- Twelfth Supplemental Indenture, dated as of November 1, 1969. (Form S-7, File No. 2-59906--Exhibit 2(b)(13).)
*4(a)(14)-- Thirteenth Supplemental Indenture, dated as of January 20, 1970. (Form S-7, File No. 2-59906--Exhibit 2(b)(14).)
*4(a)(15)-- Fourteenth Supplemental Indenture, dated as of September 1, 1971. (Form S-7, File No. 2-59906--Exhibit 2(b)(15).)
*4(a)(16)-- Fifteenth Supplemental Indenture, dated as of March 1, 1972. (Form S-7, File No. 2-59906--Exhibit 2(b)(16).)
*4(a)(17)-- Sixteenth Supplemental Indenture, dated as of May 1, 1973. (Form S-7, File No. 2-59906--Exhibit 2(b)(17).)
*4(a)(18)-- Seventeenth Supplemental Indenture, dated as of November 1, 1975. (Form S-7, File No. 2-59906--Exhibit 2(b)(18).)
*4(a)(19)-- Eighteenth Supplemental Indenture, dated as of November 1, 1975. (Form S-7, File No. 2-59906--Exhibit 2(b)(19).)
*4(a)(20)-- Nineteenth Supplemental Indenture, dated as of July 1, 1976. (Form S-7, File No. 2-59906--Exhibit 2(b)(20).) *4(a)(21)-- Twentieth Supplemental Indenture, dated as of October 1, 1977. (Form S-7, File No. 2-59906--Exhibit 2(b)(21).)
*4(a)(22)-- Twenty-first Supplemental Indenture, dated as of November 1, 1977. (Form 10-K for year ended December 31, 1980, File No. 1-5924-- Exhibit 4(v).)
*4(a)(23)-- Twenty-second Supplemental Indenture, dated as of January 1, 1978. (Form 10-K for year ended December 31, 1980, File No. 1-5924-- Exhibit 4(w).)
*4(a)(24)-- Twenty-third Supplemental Indenture, dated as of July 1, 1980. (Form 10-K for year ended December 31, 1980, File No. 1-5924--Exhibit 4(x).)
*4(a)(25)-- Twenty-fourth Supplemental Indenture, dated as of October 1, 1980. (Form 10-K for year ended December 31, 1980, File No. 1-5924-- Exhibit 4(y).)
*4(a)(26)-- Twenty-fifth Supplemental Indenture, dated as of April 1, 1981. (Form 10-Q for quarter ended March 31, 1981, File No. 1-5924--Exhibit 4(a).)
*4(a)(27)-- Twenty-sixth Supplemental Indenture, dated as of April 1, 1981. (Form 10-Q for quarter ended March 31, 1981, File No. 1-5924--Exhibit 4(b).)
*4(a)(28)-- Twenty-seventh Supplemental Indenture, dated as of October 1, 1981. (Form 10-Q for quarter ended September 30, 1982, File No. 1-5924- -Exhibit 4(c).)
*4(a)(29)-- Twenty-eighth Supplemental Indenture, dated as of June 1, 1990. (Form 10-Q for quarter ended June 30, 1990, File No. 1-5924--Exhibit 4(a)(1).)
*4(a)(30)-- Twenty-ninth Supplemental Indenture, dated as of December 1, 1992. (Form S-1, Registration No. 33-55732--Exhibit 4(a)(30).)
*4(a)(31)-- Thirtieth Supplemental Indenture, dated as of December 1, 1992. (Form S-1, Registration No. 33-55732--Exhibit 4(a)(31).)
*4(b)(1) -- Installment Sale Agreement, dated as of December 1, 1973, among the City of Farmington, New Mexico, Public Service Company of New Mexico and the Registrant. (Form 8-K for the month of January 1974, File No. 0-269--Exhibit 3.)
*4(b)(2) -- Ordinance No. 486, adopted December 17, 1973, of the City of Farmington, New Mexico. (Form 8-K for the month of January 1974, File No. 0-269--Exhibit 4.)
*4(c)(1) -- Loan Agreement, dated as of September 15, 1981, between the Industrial Development Authority of the County of Apache, Arizona and the Registrant, relating to Floating Rate Monthly Demand Pollution Control Revenue Bonds, 1981 Series B (Tucson Electric Power Company Project). (Form 10-K for year ended December 31, 1981, File No. 1- 5924--Exhibit 4(d)(1).)
*4(c)(2) -- Indenture of Trust, dated as of September 15, 1981, between the Apache County Authority and Morgan Guaranty Trust Company of New York, authorizing Floating Rate Monthly Demand Pollution Control Revenue Bonds, 1981 Series B (Tucson Electric Power Company Project). (Form 10-K for year ended December 31, 1981, File No. 1-5924--Exhibit 4(d)(2).)
*4(d)(1) -- Second Supplemental Loan Agreement, dated as of October 1, 1981, between the Apache County Authority and the Registrant, relating to Floating Rate Monthly Demand Pollution Control Revenue Bonds, 1981 Series B (Tucson Electric Power Company Project). (Form 10-K for year ended December 31, 1982, File No. 1-5924--Exhibit 4(f)(1).)
*4(d)(2) -- Second Supplemental Indenture, dated as of October 1, 1981, between the Apache County Authority and Morgan Guaranty, relating to Floating Rate Monthly Demand Pollution Control Revenue Bonds, 1981 Series B (Tucson Electric Power Company Project). (Form 10-K for year ended December 31, 1982, File No. 1-5924--Exhibit 4(f)(2).)
*4(d)(3) -- Third Supplemental Loan Agreement, dated as of December 1, 1985, between the Apache County Authority and the Registrant, relating to Floating Rate Monthly Demand Pollution Control Revenue Bonds, 1981 Series B (Tucson Electric Power Company Project). (Form 10-K for the year ended December 31, 1987, File No. 1-5924--Exhibit 4(d)(3).)
*4(d)(4) -- Third Supplemental Indenture, dated as of December 1, 1985, between the Apache County Authority and Morgan Guaranty, relating to Floating Rate Monthly Demand Pollution Control Revenue Bonds, 1981 Series B (Tucson Electric Power Company Project). (Form 10-K for the year ended December 31, 1987, File No. 1-5924--Exhibit 4(d)(4).)
*4(d)(5) -- Fourth Supplemental Indenture of Trust, dated as of March 31, 1992, between the Apache County Authority and Morgan Guaranty, relating to Pollution Control Revenue Bonds, 1981 Series B (Tucson Electric Power Company Project). (Form S-4, Registration No. 33-52860- -Exhibit 4(d)(5).)
*4(d)(6) -- Fourth Supplemental Loan Agreement, dated as of March 31, 1992, between the Apache County Authority and the Registrant, relating to Pollution Control Revenue Bonds, 1981 Series B (Tucson Electric Power Company Project). (Form S-4, Registration No. 33-52860--Exhibit 4(d)(6).)
*4(e)(1) -- Loan Agreement, dated as of October 1, 1981, between The Industrial Development Authority of the County of Pima, Arizona (the Pima County Authority) and the Registrant, relating to Floating Rate Monthly Demand Pollution Control Revenue Bonds, 1981 Series A (Tucson Electric Power Company Project). (Form 10-K for year ended December 31, 1981, File No. 1-5924--Exhibit 4(f)(1).)
*4(e)(2) -- Indenture of Trust, dated as of October 1, 1981, between the Pima County Authority and Morgan Guaranty, authorizing Floating Rate Monthly Demand Pollution Control Revenue Bonds, 1981 Series A (Tucson Electric Power Company Project). (Form 10-K for year ended December 31, 1981, File No. 1-5924--Exhibit 4(f)(2).)
*4(f)(1) -- Loan Agreement, dated as of July 1, 1982, between the Pima County Authority and the Registrant, relating to Floating Rate Monthly Demand Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric Power Company General Project). (Form 10-Q for quarter ended June 30, 1982, File No. 1-5924--Exhibit 4(a).)
*4(f)(2) -- Indenture of Trust, dated as of July 1, 1982, between the Pima County Authority and Morgan Guaranty, authorizing Floating Rate Monthly Demand Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric Power Company General Project). (Form 10-Q for quarter ended June 30, 1982, File No. 1-5924--Exhibit 4(b).)
*4(f)(3) -- First Supplemental Loan Agreement, dated as of March 31, 1992, between the Pima County Authority and the Registrant relating to Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric Power Company General Project). (Form S-4, Registration No. 33-52860- -Exhibit 4(f)(3).)
*4(f)(4) -- First Supplemental Indenture of Trust, dated as of March 31, 1992, between the Pima County Authority and Morgan Guaranty relating to Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric Power Company General Project). (Form S-4, Registration No. 33-52860--Exhibit 4(f)(4).)
*4(g)(1) -- Loan Agreement, dated as of July 1, 1982, between the Pima County Authority and the Registrant, relating to Quarterly Tender Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric Power General Project). (Form 10-Q for quarter ended June 30, 1982, File No. 1-5924--Exhibit 4(c).)
*4(g)(2) -- Indenture of Trust, dated as of July 1, 1982, between the Pima County Authority and Morgan Guaranty, authorizing Quarterly Tender Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric Power Company General Project). (Form 10-Q for quarter ended June 30, 1982, File No. 1-5924--Exhibit 4(d).)
*4(g)(3) -- First Supplemental Loan Agreement, dated as of March 31, 1992, between the Pima County Authority and the Registrant relating to Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric Power Company General Project). (Form S-4, Registration No. 33-52860- -Exhibit 4(g)(3).)
*4(g)(4) -- First Supplemental Indenture of Trust, dated as of March 31, 1992, between the Pima County Authority and Morgan Guaranty relating to Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric Power Company General Project). (Form S-4, Registration No. 33-52860--Exhibit 4(g)(4).)
*4(h)(1) -- Loan Agreement, dated as of October 1, 1982, between the Pima County Authority and the Registrant relating to Floating Rate Monthly Demand Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric Power Company Irvington Project). (Form 10-Q for quarter ended September 30, 1982, File No. 1-5924--Exhibit 4(a).)
*4(h)(2) -- Indenture of Trust, dated as of October 1, 1982, between the Pima County Authority and Morgan Guaranty authorizing Floating Rate Monthly Demand Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric Power Company Irvington Project). (Form 10-Q for quarter ended September 30, 1982, File No. 1-5924--Exhibit 4(b).)
*4(h)(3) -- First Supplemental Loan Agreement, dated as of March 31, 1992, between the Pima County Authority and the Registrant relating to Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric Power Company Irvington Project). (Form S-4, Registration No. 33- 52860--Exhibit 4(h)(3).)
*4(h)(4) -- First Supplemental Indenture of Trust, dated as of March 31, 1992, between the Pima County Authority and Morgan Guaranty relating to Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric Power Company Irvington Project). (Form S-4, Registration No. 33-52860--Exhibit 4(h)(4).)
*4(i)(1) -- Loan Agreement, dated as of December 1, 1982, between the Pima County Authority and the Registrant relating to Floating Rate Monthly Demand Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric Power Company Projects). (Form 10-K for year ended December 31, 1982, File No. 1-5924--Exhibit 4(k)(1).)
*4(i)(2) -- Indenture of Trust, dated as of December 1, 1982, between the Pima County Authority and Morgan Guaranty authorizing Floating Rate Monthly Demand Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric Power Company Projects). (Form 10-K for year ended December 31, 1982, File No. 1-5924--Exhibit 4(k)(2).)
*4(i)(3) -- First Supplemental Loan Agreement, dated as of March 31, 1992, between the Pima County Authority and the Registrant relating to Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric Power Company Projects). (Form S-4, Registration No. 33-52860--Exhibit 4(i)(3).)
*4(i)(4) -- First Supplemental Indenture of Trust, dated as of March 31, 1992, between the Pima County Authority and Morgan Guaranty relating to Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric Power Company Projects). (Form S-4, Registration No. 33-52860- -Exhibit 4(i)(4).)
*4(j)(1) -- Loan Agreement, dated as of March 1, 1983, between the Pima County Authority and the Registrant relating to Floating Rate Monthly Demand Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric Power Company General Project). (Form 10-Q for the quarter ended March 31, 1983, File No. 1-5924--Exhibit 4(a).)
*4(j)(2) -- Indenture of Trust, dated as of March 1, 1983, between the Pima County Authority and Morgan Guaranty authorizing Floating Rate Monthly Demand Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric Power Company General Project). (Form 10-Q for the quarter ended March 31, 1983, File No. 1-5924--Exhibit 4(b).)
*4(j)(3) -- First Supplemental Loan Agreement, dated as of March 31, 1992, between the Pima County Authority and the Registrant relating to Industrial Development Revenue Bonds, 1983 Series A (Tucson Electric Power Company General Project) (Form S-4 dated October 2, 1992, Registration No. 33-52860--Exhibit 4(j)(3).)
*4(j)(4) -- First Supplemental Indenture of Trust, dated as of March 31, 1992, between the Pima County Authority and Morgan Guaranty relating to Industrial Development Revenue Bonds, 1983 Series A (Tucson Electric Power Company General Project) (Form S-4 dated October 2, 1992, Registration No. 33-52860--Exhibit 4(j)(4).)
*4(k)(1) -- Loan Agreement, dated as of December 1, 1983, between the Apache County Authority and the Registrant relating to Floating Rate Monthly Demand Industrial Development Revenue Bonds, 1983 Series A (Tucson Electric Power Company Springerville Project). (Form 10-K for year ended December 31, 1983, File No. 1-5924--Exhibit 4(l)(1).)
*4(k)(2) -- Indenture of Trust, dated as of December 1, 1983, between the Apache County Authority and Morgan Guaranty authorizing Floating Rate Monthly Demand Industrial Development Revenue Bonds, 1983 Series A (Tucson Electric Power Company Springerville Project). (Form 10-K for year ended December 31, 1983, File No. 1-5924--Exhibit 4(l)(2).)
*4(k)(3) -- First Supplemental Loan Agreement, dated as of December 1, 1985, between the Apache County Authority and the Registrant relating to Floating Rate Monthly Demand Industrial Development Revenue Bonds, 1983 Series A (Tucson Electric Power Company Springerville Project). (Form 10-K for the year ended December 31, 1987, File No. 1-5924-- Exhibit 4(k)(3).)
*4(k)(4) -- First Supplemental Indenture, dated as of December 1, 1985, between the Apache County Authority and Morgan Guaranty relating to Floating Rate Monthly Demand Industrial Development Revenue Bonds, 1983 Series A (Tucson Electric Power Company Springerville Project). (Form 10-K for the year ended December 31, 1987, File No. 1-5924-- Exhibit 4(k)(4).)
*4(k)(5) -- Second Supplemental Loan Agreement, dated as of March 31, 1992, between the Apache County Authority and the Registrant relating to Industrial Development Revenue Bonds, 1983 Series A (Tucson Electric Power Company Springerville Project). (Form S-4, Registration No. 33- 52860--Exhibit 4(k)(5).)
*4(k)(6) -- Second Supplemental Indenture of Trust, dated as of March 31, 1992, between the Apache County Authority and Morgan Guaranty relating to Industrial Development Revenue Bonds, 1983 Series A (Tucson Electric Power Company Springerville Project). (Form S-4, Registration No. 33-52860--Exhibit 4(k)(6).)
*4(l)(1) -- Loan Agreement, dated as of December 1, 1983, between the Apache County Authority and the Registrant relating to Variable Rate Demand Industrial Development Revenue Bonds, 1983 Series B (Tucson Electric Power Company Springerville Project). (Form 10-K for year ended December 31, 1983, File No. 1-5924--Exhibit 4(m)(1).)
*4(l)(2) -- Indenture of Trust, dated as of December 1, 1983, between the Apache County Authority and Morgan Guaranty authorizing Variable Rate Demand Industrial Development Revenue Bonds, 1983 Series B (Tucson Electric Power Company Springerville Project). (Form 10-K for year ended December 31, 1983, File No. 1-5924--Exhibit 4(m)(2).)
*4(l)(3) -- First Supplemental Loan Agreement, dated as of December 1, 1985, between the Apache County Authority and the Registrant relating to Floating Rate Monthly Demand Industrial Development Revenue Bonds, 1983 Series B (Tucson Electric Power Company Springerville Project). (Form 10-K for the year ended December 31, 1987, File No. 1-5924-- Exhibit 4(l)(3).)
*4(l)(4) -- First Supplemental Indenture, dated as of December 1, 1985, between the Apache County Authority and Morgan Guaranty relating to Floating Rate Monthly Demand Industrial Development Revenue Bonds, 1983 Series B (Tucson Electric Power Company Springerville Project). (Form 10-K for the year ended December 31, 1987, File No. 1-5924-- Exhibit 4(l)(4).)
*4(l)(5) -- Second Supplemental Loan Agreement, dated as of March 31, 1992, between the Apache County Authority and the Registrant relating to Industrial Development Revenue Bonds, 1983 Series B (Tucson Electric Power Company Springerville Project). (Form S-4, Registration No. 33- 52860--Exhibit 4(l)(5).)
*4(l)(6) -- Second Supplemental Indenture of Trust, dated as of March 31, 1992, between the Apache County Authority and Morgan Guaranty relating to Industrial Development Revenue Bonds, 1983 Series B (Tucson Electric Power Company Springerville Project). (Form S-4, Registration No. 33-52860--Exhibit 4(l)(6).)
*4(m)(1) -- Loan Agreement, dated as of December 1, 1983, between the Apache County Authority and the Registrant relating to Variable Rate Demand Industrial Development Revenue Bonds, 1983 Series C (Tucson Electric Power Company Springerville Project). (Form 10-K for year ended December 31, 1983, File No. 1-5924--Exhibit 4(n)(1).)
*4(m)(2) -- Indenture of Trust, dated as of December 1, 1983, between the Apache County Authority and Morgan Guaranty authorizing Variable Rate Demand Industrial Development Revenue Bonds, 1983 Series C (Tucson Electric Power Company Springerville Project). (Form 10-K for year ended December 31, 1983, File No. 1-5924--Exhibit 4(n)(2).)
*4(m)(3) -- First Supplemental Loan Agreement, dated as of December 1, 1985, between the Apache County Authority and the Registrant relating to Floating Rate Monthly Demand Industrial Development Revenue Bonds, 1983 Series C (Tucson Electric Power Company Springerville Project). (Form 10-K for the year ended December 31, 1987, File No. 1-5924-- Exhibit 4(m)(3).)
*4(m)(4) -- First Supplemental Indenture, dated as of December 1, 1985, between the Apache County Authority and Morgan Guaranty relating to Floating Rate Monthly Demand Industrial Development Revenue Bonds, 1983 Series C (Tucson Electric Power Company Springerville Project). (Form 10-K for the year ended December 31, 1987, File No. 1-5924-- Exhibit 4(m)(4).)
*4(m)(5) -- Second Supplemental Loan Agreement, dated as of March 31, 1992, between the Apache County Authority and the Registrant relating to Industrial Development Revenue Bonds, 1983 Series C (Tucson Electric Power Company Springerville Project). (Form S-4, Registration No. 33- 52860--Exhibit 4(m)(5).)
*4(m)(6) -- Second Supplemental Indenture of Trust, dated as of March 31, 1992, between the Apache County Authority and Morgan Guaranty relating to Industrial Development Revenue Bonds, 1983 Series C (Tucson Electric Power Company Springerville Project). (Form S-4, Registration No. 33-52860--Exhibit 4(m)(6).)
*4(n) -- Reimbursement Agreement, dated as of September 15, 1981, as amended, between the Registrant and Manufacturers Hanover Trust Company. (Form 10-K for the year ended December 31, 1984, File No. 1- 5924--Exhibit 4(o)(4).)
*4(o)(1) -- Loan Agreement, dated as of December 1, 1985, between the Apache County Authority and the Registrant relating to Variable Rate Demand Industrial Development Revenue Bonds, 1985 Series A (Tucson Electric Power Company Springerville Project). (Form 10-K for the year ended December 31, 1985, File No. 1-5924---Exhibit 4(r)(1).)
*4(o)(2) -- Indenture of Trust, dated as of December 1, 1985, between the Apache County Authority and Morgan Guaranty authorizing Variable Rate Demand Industrial Development Revenue Bonds, 1985 Series A (Tucson Electric Power Company Springerville Project). (Form 10-K for the year ended December 31, 1985, File No. 1-5924--Exhibit 4(r)(2).)
*4(o)(3) -- First Supplemental Loan Agreement, dated as of March 31, 1992, between the Apache County Authority and the Registrant relating to Industrial Development Revenue Bonds, 1985 Series A (Tucson Electric Power Company Springerville Project). (Form S-4, Registration No. 33- 52860--Exhibit 4(o)(3).)
*4(o)(4) -- First Supplemental Indenture of Trust, dated as of March 31, 1992, between the Apache County Authority and Morgan Guaranty relating to Industrial Development Revenue Bonds, 1985 Series A (Tucson Electric Power Company Springerville Project). (Form S-4, Registration No. 33-52860--Exhibit 4(o)(4).)
*4(p)(1) -- Loan Agreement, dated as of February 22, 1991, between the Industrial Development Authority of the County of Pima and the Registrant, amending and restating the Loan Agreement, dated as of May 1, 1990, relating to Industrial Development Revenue Bonds, 1990 Series A (Tucson Electric Power Company Project). (Form 10-K for the year ended December 31, 1990, File No. 1-5924--Exhibit 4(p)(1).)
*4(p)(2) -- Indenture of Trust, dated as of February 22, 1991, between the Industrial Development Authority of the County of Pima and Texas Commerce Bank National Association, amending and restating the Indenture of Trust, dated as of May 1, 1990, authorizing Industrial Development Revenue Bonds, 1990 Series A (Tucson Electric Power Company Project). (Form 10-K for the year ended December 31, 1990, File No. 1-5924--Exhibit 4(p)(2).)
*4(q) -- Warrant Agreement and Form of Warrant, dated as of December 15, 1992. (Form S-1, Registration No. 33-55732--Exhibit 4(q).)
*4(r)(1) -- Indenture of Mortgage and Deed of Trust dated as of December 1, 1992, to Bank of Montreal Trust Company, Trustee. (Form S-1, Registration No. 33-55732--Exhibit 4(r)(1).)
*4(r)(2) -- Supplemental Indenture No. 1 creating a series of bonds designated Second Mortgage Bonds, Collateral Series A, dated as of December 1, 1992. (Form S-1, Registration No. 33-55732-Exhibit 4(r)(2).)
*+10(a) -- 1985 Stock Option Plan of the Registrant. (Form 10-K for the year ended December 31, 1985, File No. 1-5924--Exhibit 10(b).)
*+10(b) -- 1987 Phantom Stock Plan of the Registrant. (Form 10-K for the year ended December 31, 1987, File No. 1-5924--Exhibit 10(c).)
*10(c)(1)-- Lease Agreements, dated as of December 1, 1984, between Valencia Energy Company ("Valencia") and United States Trust Company of New York, as Trustee, and Thomas B. Zakrzewski, as Co-Trustee, as amended and supplemented. (Form 10-K for the year ended December 31, 1984, File No. 1-5924--Exhibit 10(d)(1).)
*10(c)(2)-- Guaranty and Agreements, dated as of December 1, 1984, between the Registrant and United States Trust Company of New York, as Trustee, and Thomas B. Zakrzewski, as Co-Trustee. (Form 10-K for the year ended December 31, 1984, File No. 1-5924--Exhibit 10(d)(2).)
*10(c)(3)-- General Indemnity Agreements, dated as of December 1, 1984, between Valencia and the Registrant, as Indemnitors; General Foods Credit Corporation, Harvey Hubbell Financial, Inc. and J. C. Penney Company, Inc. as Owner Participants; United States Trust Company of New York, as Owner Trustee; Teachers Insurance and Annuity Association of America as Loan Participant; and Marine Midland Bank, N.A., as Indenture Trustee. (Form 10-K for the year ended December 31, 1984, File No. 1-5924--Exhibit 10(d)(3).)
*10(c)(4)-- Tax Indemnity Agreements, dated as of December 1, 1984, between General Foods Credit Corporation, Harvey Hubbell Financial, Inc. and J. C. Penney Company, Inc., each as Beneficiary under a separate Trust Agreement dated December 1, 1984, with United States Trust of New York as Owner Trustee, and Thomas B. Zakrzewski as Co-Trustee, Lessor, and Valencia, Lessee, and the Registrant, Indemnitors. (Form 10-K for the year ended December 31, 1984, File No. 1-5924--Exhibit 10(d)(4).)
*10(c)(5)-- Amendment No. 1, dated December 31, 1984, to the Lease Agreements, dated December 1, 1984, between Valencia and United States Trust Company of New York, as Owner Trustee, and Thomas B. Zakrzewski as Co-Trustee. (Form 10-K for the year ended December 31, 1986, File No. 1-5924--Exhibit 10(e)(5).)
*10(c)(6)-- Amendment No. 2, dated April 1, 1985, to the Lease Agreements, dated December 1, 1984, between Valencia and United States Trust Company of New York, as Owner Trustee, and Thomas B. Zakrzewski as Co- Trustee. (Form 10-K for the year ended December 31, 1986, File No. 1- 5924--Exhibit 10(e)(6).)
*10(c)(7)-- Amendment No. 3, dated August 1, 1985, to the Lease Agreements, dated December 1, 1984, between Valencia and United States Trust Company of New York, as Owner Trustee, and Thomas Zakrzewski as Co- Trustee. (Form 10-K for the year ended December 31, 1986, File No. 1- 5924--Exhibit 10(e)(7).)
*10(c)(8)-- Amendment No. 4, dated June 1, 1986, to the Lease Agreement, dated December 1, 1984, between Valencia and United States Trust Company of New York as Owner Trustee, and Thomas Zakrzewski as Co- Trustee, under a Trust Agreement dated as of December 1, 1984, with General Foods Credit Corporation as Owner Participant. (Form 10-K for the year ended December 31, 1986, File No. 1-5924--Exhibit 10(e)(8).)
*10(c)(9)-- Amendment No. 4, dated June 1, 1986, to the Lease Agreement, dated December 1, 1984, between Valencia and United States Trust Company of New York as Owner Trustee, and Thomas Zakrzewski as Co- Trustee, under a Trust Agreement dated as of December 1, 1984, with J. C. Penney Company, Inc. as Owner Participant. (Form 10-K for the year ended December 31, 1986, File No. 1-5924--Exhibit 10(e)(9).)
*10(c)(10) -- Amendment No. 4, dated June 1, 1986, to the Lease Agreement, dated December 1, 1984, between Valencia and United States Trust Company of New York as Owner Trustee, and Thomas Zakrzewski as Co- Trustee, under a Trust Agreement dated as of December 1, 1984, with Harvey Hubbell Financial Inc. as Owner Participant. (Form 10-K for the year ended December 31, 1986, File No. 1-5924--Exhibit 10(e)(10).)
*10(c)(11) -- Lease Amendment No. 5 and Supplement No. 2, to the Lease Agreement, dated July 1, 1986, between Valencia, United States Trust Company of New York as Owner Trustee, and Thomas Zakrzewski as Co- Trustee and J. C. Penney as Owner Participant. (Form 10-K for the year ended December 31, 1986, File No. 1-5924--Exhibit 10(e)(11).)
*10(c)(12) -- Lease Amendment No. 5, to the Lease Agreement, dated June 1, 1987, between Valencia, United States Trust Company of New York as Owner Trustee, and Thomas Zakrzewski as Co-Trustee and General Foods Credit Corporation as Owner Participant. (Form 10-K for the year ended December 31, 1988, File No. 1-5924--Exhibit 10(f)(12).)
*10(c)(13) -- Lease Amendment No. 5, to the Lease Agreement, dated June 1, 1987, between Valencia, United States Trust Company of New York as Owner Trustee, and Thomas Zakrzewski as Co-Trustee and Harvey Hubbell Financial Inc. as Owner Participant. (Form 10-K for the year ended December 31, 1988, File No. 1-5924--Exhibit 10(f)(13).)
*10(c)(14) -- Lease Amendment No. 6, to the Lease Agreement, dated June 1, 1987, between Valencia, United States Trust Company of New York as Owner Trustee, and Thomas Zakrzewski as Co-Trustee and J. C. Penney Company, Inc. as Owner Participant. (Form 10-K for the year ended December 31, 1988, File No. 1-5924--Exhibit 10(f)(14).)
*10(c)(15) -- Lease Supplement No. 1, dated December 31, 1984, to Lease Agreements, dated December 1, 1984, between Valencia, as Lessee and United States Trust Company of New York and Thomas B. Zakrzewski, as Owner Trustee and Co-Trustee, respectively (document filed relates to General Foods Credit Corporation; documents relating to Harvey Hubbel Financial, Inc. and JC Penney Company, Inc. are not filed but are substantially similar). (Form S-4, Registration No. 33-52860--Exhibit 10(f)(15).)
*10(c)(16) -- Amendment No. 1, dated June 1, 1986, to the General Indemnity Agreement, dated as of December 1, 1984, between Valencia and the Registrant, as Indemnitors, General Foods Credit Corporation, as Owner Participant, United States Trust Company of New York, as Owner Trustee, Teachers Insurance and Annuity Association of America, as Loan Participant, and Marine Midland Bank, N.A., as Indenture Trustee. (Form 10-K for the year ended December 31, 1986, File No. 1-5924-- Exhibit 10(e)(12).)
*10(c)(17) -- Amendment No. 1, dated June 1, 1986, to the General Indemnity Agreement, dated as of December 1, 1984, between Valencia and the Registrant, as Indemnitors, J. C. Penney Company, Inc., as Owner Participant, United States Trust Company of New York, as Owner Trustee, Teachers Insurance and Annuity Association of America, as Loan Participant, and Marine Midland Bank, N.A., as Indenture Trustee. (Form 10-K for the year ended December 31, 1986, File No. 1-5924-- Exhibit 10(e)(13).)
*10(c)(18) -- Amendment No. 1, dated June 1, 1986, to the General Indemnity Agreement, dated as of December 1, 1984, between Valencia and the Registrant, as Indemnitors, Harvey Hubbell Financial, Inc., as Owner Participant, United States Trust Company of New York, as Owner Trustee, Teachers Insurance and Annuity Association of America, as Loan Participant, and Marine Midland Bank, N.A., as Indenture Trustee. (Form 10-K for the year ended December 31, 1986, File No. 1- 5924--Exhibit 10(e)(14).)
*10(c)(19) -- Amendment No. 2, dated as of July 1, 1986, to the General Indemnity Agreement, dated as of December 1, 1984, between Valencia and the Registrant, as Indemnitors, J. C. Penney Company, Inc., as Owner Participant, United States Trust Company of New York, as Owner Trustee, Teachers Insurance and Annuity Association of America, as Loan Participant, and Marine Midland Bank, N.A., as Indenture Trustee. (Form S-4, Registration No. 33-52860--Exhibit 10(f)(19).)
*10(c)(20) -- Amendment No. 2, dated as of June 1, 1987, to the General Indemnity Agreement, dated as of December 1, 1984, between Valencia and the Registrant, as Indemnitors, General Foods Credit Corporation, as Owner Participant, United States Trust Company of New York, as Owner Trustee, Teachers Insurance and Annuity Association of America, as Loan Participant, and Marine Midland Bank, N.A., as Indenture Trustee. (Form S-4, Registration No. 33-52860--Exhibit 10(f)(20).)
*10(c)(21) -- Amendment No. 2, dated as of June 1, 1987, to the General Indemnity Agreement, dated as of December 1, 1984, between Valencia and the Registrant, as Indemnitors, Harvey Hubbell Financial, Inc., as Owner Participant, United States Trust Company of New York, as Owner Trustee, Teachers Insurance and Annuity Association of America, as Loan Participant, and Marine Midland Bank, N.A., as Indenture Trustee. (Form S-4, Registration No. 33-52860--Exhibit 10(f)(21).)
*10(c)(22) -- Amendment No. 3, dated as of June 1, 1987, to the General Indemnity Agreement, dated as of December 1, 1984, between Valencia and the Registrant, as Indemnitors, J. C. Penney Company, Inc., as Owner Participant, United States Trust Company of New York, as Owner Trustee, Teachers Insurance and Annuity Association of America, as Loan Participant, and Marine Midland Bank, N.A., as Indenture Trustee. (Form S-4, Registration No. 33-52860--Exhibit 10(f)(22).)
*10(c)(23) -- Supplemental Tax Indemnity Agreement, dated July 1, 1986, between J. C. Penney Company, Inc., as Owner Participant, and Valencia and the Registrant, as Indemnitors. (Form 10-K for the year ended December 31, 1986, File No. 1-5924--Exhibit 10(e)(15).)
*10(c)(24) -- Supplemental General Indemnity Agreement, dated as of July 1, 1986, among Valencia and the Registrant, as Indemnitors, J. C. Penney Company, Inc., as Owner Participant, United States Trust Company of New York, as Owner Trustee, Teachers Insurance and Annuity Association of America, as Loan Participant, and Marine Midland Bank, N.A., as Indenture Trustee. (Form 10-K for the year ended December 31, 1986, File No. 1-5924--Exhibit 10(e)(16).)
*10(c)(25) -- Amendment No. 1, dated as of June 1, 1987, to the Supplemental General Indemnity Agreement, dated as of July 1, 1986, among Valencia and the Registrant, as Indemnitors, J. C. Penney Company, Inc., as Owner Participant, United States Trust Company of New York, as Owner Trustee, Teachers Insurance and Annuity Association of America, as Loan Participant, and Marine Midland Bank, N.A., as Indenture Trustee. (Form S-4, Registration No. 33-52860--Exhibit 10(f)(25).)
*10(c)(26) -- Valencia Agreement, dated as of June 30, 1992, among the Registrant, as Guarantor, Valencia, as Lessee, Teachers Insurance and Annuity Association of America, as Loan Participant, Marine Midland Bank, N.A., as Indenture Trustee, United States Trust Company of New York, as Owner Trustee, and Thomas B. Zakrzewski, as Co-Trustee, and the Owner Participants named therein relating to the Restructuring of Valencia's lease of the coal-handling facilities at the Springerville Generating Station. (Form S-4, Registration No. 33-52860--Exhibit 10(f)(26).)
*10(c)(27) -- Amendment, dated as of December 15, 1992, to the Lease Agreements, dated December 1, 1984, between Valencia, as Lessee, and United States Trust Company of New York, as Owner Trustee, and Thomas B. Zakrzewski, as Co-Trustee. (Form S-1, Registration No. 33-55732-- Exhibit 10(f)(27).)
*10(d)(1)-- Lease Agreements, dated as of December 1, 1985, between the Registrant and San Carlos Resources Inc. (San Carlos) (a wholly-owned subsidiary of the Registrant) jointly and severally, as Lessee, and Wilmington Trust Company, as Trustee, as amended and supplemented. (Form 10-K for the year ended December 31, 1985, File No. 1-5924-- Exhibit 10(f)(1).)
*10(d)(2)-- Tax Indemnity Agreements, dated as of December 1, 1985, between Philip Morris Credit Corporation, IBM Credit Financing Corporation and Emerson Finance Co., each as beneficiary under a separate trust agreement, dated as of December 1, 1985, with Wilmington Trust Company, as Owner Trustee, and William J. Wade, as Co-Trustee, and the Registrant and San Carlos, as Lessee. (Form 10-K for the year ended December 31, 1985, File No. 1-5924--Exhibit 10(f)(2).)
*10(d)(3)-- Participation Agreement, dated as of December 1, 1985, among the Registrant and San Carlos as Lessee, Philip Morris Credit Corporation, IBM Credit Financing Corporation, and Emerson Finance Co. as Owner Participants, Wilmington Trust Company as Owner Trustee, The Sumitomo Bank, Limited, New York Branch, as Loan Participant, and Bankers Trust Company, as Indenture Trustee. (Form 10-K for the year ended December 31, 1985, File No. 1-5924--Exhibit 10(f)(3).)
*10(d)(4)-- Restructuring Commitment Agreement, dated as of June 30, 1992, among the Registrant and San Carlos, jointly and severally, as Lessee, Philip Morris Credit Corporation, IBM Credit Financing Corporation and Emerson Capital Funding William J. Wade, as Owner Trustee and Cotrustee, respectively, The Sumitomo Bank, Limited, New York Branch, as Loan Participant and United States Trust Company of New York, as Indenture Trustee. (Form S-4, Registration No. 33-52860--Exhibit 10(g)(4).)
*10(d)(5)-- Lease Supplement No. 1, dated December 31, 1985, to Lease Agreements, dated as of December 1, 1985, between the Registrant and San Carlos, jointly and severally, as Lessee Trustee and Co-Trustee, respectively (document filed relates to Philip Morris Credit Corporation; documents relating to IBM Credit Financing Corporation and Emerson Financing Co. are not filed but are substantially similar). (Form S-4, Registration No. 33-52860--Exhibit 10(g)(5).)
*10(d)(6)-- Amendment No. 1, dated as of December 15, 1992, to Lease Agreements, dated as of December 1, 1985, between the Registrant and San Carlos, jointly and severally, as Lessee, and Wilmington Trust Company and William J. Wade, as Owner Trustee and Co-Trustee, respectively, as Lessor. (Form S-1, Registration No. 33-55732-- Exhibit 10(g)(6).)
*10(d)(7)-- Amendment No. 1, dated as of December 15, 1992, to Tax Indemnity Agreements, dated as of December 1, 1985, between Philip Morris Credit Corporation, IBM Credit Financing Corporation and Emerson Capital Funding Corp., as Owner Participants and the Registrant and San Carlos, jointly and severally, as Lessee. (Form S-1, Registration No. 33-55732--Exhibit 10(g)(7).)
*10(e)(1)-- Amended and Restated Participation Agreement, dated as of November 15, 1987, among the Registrant, as Lessee, Ford Motor Credit Company, as Owner Participant, Financial Security Assurance Inc., as Surety, Wilmington Trust Company and William J. Wade in their respective individual capacities as provided therein, but otherwise solely as Owner Trustee and Co-Trustee under the Trust Agreement, and Morgan Guaranty, in its individual capacity as provided therein, but Secured Party. (Form 10-K for the year ended December 31, 1987, File No. 1-5924--Exhibit 10(j)(1).)
*10(e)(2)-- Lease Agreement, dated as of January 14, 1988, between Wilmington Trust Company and William J. Wade, as Owner Trust Agreement described therein, dated as of November 15, 1987, between such parties and Ford Motor Credit Company, as Lessor, and the Registrant, as Lessee. (Form 10-K for the year ended December 31, 1987, File No. 1- 5924--Exhibit 10(j)(2).)
*10(e)(3)-- Tax Indemnity Agreement, dated as of January 14, 1988, between the Registrant, as Lessee, and Ford Motor Credit Company, as Owner Participant, beneficiary under a Trust Agreement, dated as of November 15, 1987, with Wilmington Trust Company and William J. Wade, Owner Trustee and Co-Trustee, respectively, together as Lessor. (Form 10-K for the 10(j)(3).)
*10(e)(4)-- Loan Agreement, dated as of January 14, 1988, between the Pima County Authority and Wilmington Trust Company and William J. Wade in their respective individual capacities as expressly stated, but otherwise solely as Owner Trustee and Co-Trustee, respectively, under and pursuant to a Trust Agreement, dated as of November 15, 1987, with Ford Motor Credit Company as Trustor and Debtor relating to Industrial Development Lease Obligation Refunding Revenue Bonds, 1988 Series A (the Registrant's Irvington Project). (Form 10-K for the year ended December 31, 1987, File No. 1-5924--Exhibit 10(j)(4).)
*10(e)(5)-- Indenture of Trust, dated as of January 14, 1988, between the Pima County Authority and Morgan Guaranty authorizing Industrial Development Lease Obligation Refunding Revenue Bonds, 1988 Series A (Tucson Electric Power Company Irvington Project). (Form 10-K for the year ended December 31, 1987, File No. 1-5924--Exhibit 10(j)(5).)
*10(e)(6)-- Lease Amendment No. 1, dated as of May 1, 1989, between the Registrant, Wilmington Trust Company and William J. Wade as Owner Trustee and Co-trustee, respectively under a Trust Agreement dated as of November 15, 1987 with Ford Motor Credit Company. (Form 10-K for the year ended December 31,1990, File No. 1-5924--Exhibit 10(i)(6).)
*10(e)(7)-- Lease Supplement, dated as of January 1, 1991, between the Registrant, Wilmington Trust Company and William J. Wade as Owner Trustee and Co-Trustee, respectively, under a Trust Agreement dated as of November 15, 1987, with Ford. (Form 10K for the year ended December 31, 1991, File No. 1-5924--Exhibit 10(i)(8).)
*10(e)(8)-- Lease Supplement, dated as of March 1, 1991, between the Registrant, Wilmington Trust Company and William J. Wade as Owner Trustee and Co-Trustee, respectively, under a Trust Agreement dated as of November 15, 1987, with Ford. (Form 10-K for the year ended December 31, 1991, File No. 1-5924--Exhibit 10(i)(9).)
*10(e)(9)-- Lease Supplement No. 4, dated as of December 1, 1991, between the Registrant, Wilmington Trust Company and William J. Wade as Owner Trustee and Co-Trustee, respectively, under a Trust Agreement dated as of November 15, 1987, with Ford. (Form 10-K for the year ended December 31, 1991, File No. 1-5924--Exhibit 10(i)(10).)
*10(e)(10) -- Supplemental Indenture No. 1, dated as of December 1, 1991, between the Pima County Authority and Morgan Guaranty relating to Industrial Lease Development Obligation Revenue Project). (Form 10-K for the year ended December 31, 1991, File No. 1-5924--Exhibit 10(i)(11).)
*10(e)(11) -- Restructuring Commitment Agreement, dated as of June 30, 1992, among the Registrant, as Lessee, Ford Motor Credit Company, as Owner Participant, Wilmington Trust Company and William J. Wade, as Owner Trustee and Co-Trustee, respectively, and Morgan Guaranty, as Indenture Trustee and Refunding Trustee, relating to the restructuring of the Registrant's lease of Unit 4 at the Irvington Generating Station. (Form S-4, Registration No. 33-52860--Exhibit 10(i)(12).)
*10(e)(12) -- Amendment No. 1, dated as of December 15, 1992, to Amended and Restated Participation Agreement, dated as of November 15, 1987, among the Registrant, as Lessee, Ford Motor Credit Company, as Owner Participant, Wilmington Trust Company and William J. Wade, as Owner Trustee and Co-Trustee, respectively, Financial Security Assurance Inc., as Surety, and Morgan Guaranty, as Indenture Trustee. (Form S- 1, Registration No. 33-55732--Exhibit 10(h)(12).)
*10(e)(13) -- Amended and Restated Lease, dated as of December 15, 1992, between the Registrant, as Lessee and Wilmington Trust Company and William J. Wade, as Owner Trustee and Co-Trustee, respectively, as Lessor. (Form S-1, Registration No. 33-55732--Exhibit 10(h)(13).)
*10(e)(14) -- Amended and Restated Tax Indemnity Agreement, dated as of December 15, 1992, between the Registrant, as Lessee, and Ford Motor Credit Company, as Owner Participant. (Form S-1, Registration No. 33- 55732--Exhibit 10(h)(14).)
*10(f) -- Power Sale Agreement for the years 1990 to 2011, dated as of March 10, 1988, between the Registrant and Salt River Project Agricultural Improvement and Power District. (Form 10-K for the year ended December 31, 1987, File No. 1-5924--Exhibit 10(k).)
*+10(g)(1) -- Employment Agreements between the Registrant and Thomas A. Delawder and Gary L. Ellerd. (Form 10-K for the year ended December 31, 1987, File No. 1-5924--Exhibit 10(l).)
*+10(g)(2) -- Employment Agreements between the Registrant and currently in effect with Ira R. Adler, Charles E. Bayless, Karen G. Kissinger, George W. Miraben, Dennis R. Nelson, Gerald A. O'Brien, Susan R. Wallach, James S. Pignatelli and Steven J. Glaser. (Form 10-K for the year ended December 31, 1989, File No. 1-5924--Exhibit 10(n)(2).)
+10(g)(3)-- Release and Settlement Agreement between the Registrant and Frederic N. Finney.
+10(g)(4)-- Release and Settlement Agreement between the Registrant and Norman B. Johnsen.
*10(g)(5)-- Letter, dated February 25, 1992, from Dr. Martha R. Seger to the Registrant and Capital Holding Corporation. (Form S-4, Registration No. 33-52860--Exhibit 10(k)(4).)
*+10(g)(6) -- Employment Agreement between the Registrant and Thomas N. Hansen. (Form 10-K for the year ended December 31, 1993, File No. 1- 5924--Exhibit 10(i)(5).)
*10(h) -- Power Sale Agreement, dated April 29, 1988, for the dates of May 16, 1990 to December 31, 1995, between the Registrant and Nevada Power Company. (Form 10-K for the year ended December 31, 1988, File No 1- 5924--Exhibit 10(m)(2).)
*10(i) -- Master Restructuring Agreement, dated as of June 30, 1992, among the Registrant, Escavada Company, Gallo Wash Development Company, Valencia, Barclays Bank PLC, New York Branch, as administrative agent and collateral agent and the several banks parties thereto. (Form S-4, Registration No. 33-52860--Exhibit 10(bb).)
*10(j) -- Amendment No. 1, dated as of December 15 , 1992, to Master Restructuring Agreement, dated as of June 30, 1992, among the Registrant, Escavada Company, Gallo Wash Development Company, Valencia, Barclays Bank PLC, New York Branch, as administrative agent and collateral agent and the several banks parties thereto. (Form S- 1, Registration No. 33-55732--Exhibit 10(s)(2).)
*10(k) -- Amendment No. 2, dated as of October 12, 1993, to Master Restructuring Agreement, dated as of June 30, 1992, among the Registrant, Escavada Company, Gallo Wash Development Company, Valencia, Barclays Bank PLC, New York Branch, as administrative agent and collateral agent and the several banks parties thereto. (Form 10- K for the year ended December 31, 1993, File No. 1-5924--Exhibit 10(n).)
*10(l) -- Amendment No. 3, dated as of December 20, 1993, to Master Restructuring Agreement, dated as of June 30, 1992, among the Registrant, Escavada Company, Gallo Wash Development Company, Valencia, Barclays Bank PLC, New York Branch, as administrative agent and collateral agent and the several banks parties thereto. (Form 10- K for the year ended December 31, 1993, File No. 1-5924--Exhibit 10(o).)
*10(m) -- Amendment No. 4, dated as of April 13, 1994, to Master Restructuring Agreement, dated as of June 30, 1992, among the Registrant, Escavada Company, Gallo Wash Development Company, Valencia, Barclays Bank PLC, New York Branch, as administrative agent and collateral agent and the several banks parties thereto. (Form 10- Q for the quarter ended June 30, 1994, File No. 1-5924--Exhibit 10(a).)
*10(n) -- Amendment No. 5, dated as of June 30, 1994, to Master Restructuring Agreement, dated as of June 30, 1992, among the Registrant, Escavada Company, Gallo Wash Development Company, Valencia, Barclays Bank PLC, New York Branch, as administrative agent and collateral agent and the several banks parties thereto. (Form 10- Q for the quarter ended June 30, 1994, File No. 1-5924--Exhibit 10(b).)
10(o) -- Amendment No. 6, dated as of November 1, 1994, to Master Restructuring Agreement, dated as of June 30, 1992, among the Registrant, Escavada Company, Gallo Wash Development Company, Valencia, Barclays Bank PLC, New York Branch, as administrative agent and collateral agent and the several banks parties thereto.
*10(p) -- Deed of Trust, Assignment of Rents and Leases and Security Agreement, dated as of June 30, 1992, from San Carlos to Transamerica Title Insurance Company, as trustee for the use and benefit of Barclays Bank PLC, New York Branch, as collateral agent. (Form S-1, Registration No. 33-55732--Exhibit 10(t).)
*10(q) -- Participation Agreement, dated as of June 30, 1992, among the Registrant, as Lessee, various parties thereto, as Owner Wilmington Trust Company and William J. Wade, as Owner Trustee and Co-Trustee, respectively, and LaSalle National Bank, as Indenture Trustee relating to the Registrant's lease of Springerville Unit 1. (Form S-1, Registration No. 33-55732--Exhibit 10(u).)
*10(r) -- Lease Agreement, dated as of December 15, 1992, between the Registrant, as Lessee and Wilmington Trust Company and William J. Wade, as Owner Trustee and Co-Trustee, respectively, as Lessor. (Form S-1, Registration No. 33-55732--Exhibit 10(v).)
*10(s) -- Tax Indemnity Agreements, dated as of December 15, 1992, between the various Owner Participants parties thereto and the Registrant, as Lessee. (Form S-1, Registration No. 33-55732, Exhibit 10(w).)
*10(t) -- Restructuring Agreement, dated as of December 1, 1992, between the Registrant and Century Power Corporation. (Form S-1, Registration No. 33-55732--Exhibit 10(x).)
*10(u) -- Voting Agreement, dated as of December 15, 1992, between the Registrant and Chrysler Capital Corporation (documents relating to CILCORP Lease Management, Inc., MWR Capital Inc., US West Financial Services, Inc. and Philip Morris Capital Corporation are not filed but are substantially similar). (Form S-1, Registration No. 33-55732-- Exhibit 10(y).)
*10(v) -- Wholesale Power Supply Agreement between the Registrant and Navajo Tribal Utility Authority dated January 5, 1993. (Form 10-K for the year ended December 31, 1992, File No. 1-5924--Exhibit 10(t).)
11 -- Statement re computation of per share earnings.
21 -- Subsidiaries of the Registrant.
23 -- Consents of experts and counsel.
24 -- Power of Attorney.
27 -- Financial Data Schedule.
(*)Previously filed as indicated and incorporated herein by reference. (+)Management contracts or compensatory plans or arrangements required to be filed as exhibits to this Form 10-K by item 601(10)(iii) of Regulation S-K.