TEP Invites Bondowners to Offer to Sell Tax-Exempt Bonds for Cash

    Business Editors/Energy Editors

    TUCSON, Ariz.--(BUSINESS WIRE)--March 17, 2005--Tucson Electric Power Co. (TEP), a subsidiary of UniSource Energy Corp. (NYSE:UNS), has invited bondowners of each series of bonds listed below to offer to sell to TEP for cash all or a part of their bonds:

Current Minimum Optional Purchase Redemp- Price tion (per Feature $100 in (per princi- $100 in pal Principal princi- amount) Name of Amount Interest pal Issuer Bonds Outstanding Rate CUSIP amount) ---------------------------------------------------------------------- Industrial Beginning Develop- Industrial 9/1/2004 ment Develop- @ 100(1) Authority ment of the Revenue $22,460,000 6.10% 721774DE4 County of Bonds, Pima 1997 (Arizona) Series A $100.50 ---------------------------------------------------------------------- Industrial Beginning Develop- 9/1/2004 ment @ 100(1) Revenue 6.00% 721774DF1 Bonds, 1997 Series B $150,000,000 $100.50 ---------------------------------------------------------------------- Industrial Beginning Develop- 9/1/2004 ment @ 100(1) Revenue $75,000,000 6.00% 721774DG9 Bonds, 1997 Series C $100.50 ---------------------------------------------------------------------- Pollution Beginning Control 10/1/2007 Revenue @ 102 City of Bonds, Farmington, 1997 $80,410,000 6.95% 311450DJ6 N.M. Series A $102.50 ---------------------------------------------------------------------- Coconino Pollution Beginning County, Control 10/1/2007 Arizona Revenue @ 102 Pollution Bonds, Control 1997 $36,700,000 7.125% 191855AP0 Corp. Series A $102.50 ---------------------------------------------------------------------- Pollution Beginning Control 10/1/2007 Revenue @ 102 Bonds, 1997 $14,700,000 7.00% 191855AQ8 Series B $102.50 ---------------------------------------------------------------------- Industrial Beginning Development Pollution 3/1/2005 @ Authority Control 100(1) of the Revenue $83,700,000 5.85% 037433AE9 County of Bonds, Apache 1998 (Arizona) Series A $100.50 ---------------------------------------------------------------------- Pollution Beginning Control 3/1/2005 @ Revenue $99,800,000 5.875% 037433AF6 100(1) Bonds, 1998 Series B $100.50 ---------------------------------------------------------------------- Industrial Beginning Develop- 3/1/2005 @ ment 100(1) Revenue $16,500,000 5.85% 037435AS3 Bonds, 1998 Series C $100.50 ----------------------------------------------------------------------

    (1) Currently redeemable upon 30 days' notice

    These bonds were issued to fund projects for the benefit of TEP. The decision to invite bondowners to offer to sell bonds to TEP is consistent with the company's long-standing goal of reducing debt leverage and increasing financial flexibility. TEP desires to purchase up to $225,000,000 in aggregate principal amount of offered bonds.
    A bondowner may make an offer to sell bonds at a minimum offer price specified by the bondowner. Alternatively, a bondowner may make an offer to sell bonds without specifying an offer price. If TEP elects to purchase bonds of a series, it will determine a single purchase price (not including accrued interest) expressed in dollars per $100 in principal amount for that series. TEP will accept all offers of bonds of that series specifying an offer price equal to or less than the purchase price for that series and all offers of bonds of that series that did not state an offer price, subject to its option to pro rate such acceptances. All bondowners of a series whose offers are accepted by TEP will receive the same purchase price even if that price is higher than a bondowner's offer prices. The purchase price for each series of bonds accepted for purchase will be at least the minimum purchase price with respect to such series set forth in the table above.
    Each invitation will expire at 5 p.m. EST on Thursday, April 14, 2005, unless such invitation is earlier terminated or extended. The purchase prices of bonds purchased is expected to be paid on April 20, 2005. An amount equal to accrued interest on purchased bonds through the day before purchase will also be paid. Bonds not accepted for purchase will be returned as promptly as practicable after the expiration date of the invitations.
    TEP may decide to purchase some, all or none of the offered bonds of a particular series, and the company is not obligated to accept any offers. TEP has the right to extend, terminate or amend the terms of any invitation. Information with respect to the invitations will be given by release through Bloomberg Financial Market System, Financial Information Inc., DPC Data Inc., Interactive Data, Standard & Poor's, J.J. Kenny Municipal Repository and The Depository Trust Co., and by posting to www.bondcom.com/tep.
    The dealer manager for the invitations is Morgan Stanley. The information and tender agent is Bondholder Communications Group.

    This press release is neither an offer to buy nor a solicitation of an offer to sell any securities. Each invitation is made solely by the invitations by Tucson Electric Power Co. dated March 17, 2005, which contains important information which should be read before offers are made. Invitations can be obtained from the information and tender agent at the telephone numbers listed below or from www.bondcom.com/tep. Institutional investors with questions about the invitations should contact the dealer manager, Morgan Stanley. Individual investors and their brokers and account executives with questions about the invitations should contact the information and tender agent at the information below:

    Contact: Desiree Rose
    Bondholder Communications Group
    30 Broad St., 46th floor
    New York, NY 10004
    www.bondcom.com/tep
    E-mail: drose@bondcom.com
    Tel: 888-385-BOND (2663)
    Fax: 212-437-9827

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CONTACT: Tucson Electric Power Co., Tucson Joe Salkowski, 520-884-3625 (News Media) Jo Smith, 520-884-3650 (Financial Analyst)

KEYWORD: ARIZONA INDUSTRY KEYWORD: ENERGY UTILITIES SOURCE: Tucson Electric Power Co.

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