The ratings on Tucson Electric Power Co. (TEP), a wholly owned subsidiary of UniSource Energy Corp. (unrated), reflect the highly leveraged financial profile and the satisfactory business profile of this regulated, vertically integrated electric utility that serves areas in and around Tucson, Ariz. TEP's business risk profile is rated '6' on Standard&Poor's Ratings Services' 10-point scale. (Business profiles are categorized from '1' (strong) to '10' (weak)). Including capital leases, consolidated adjusted debt to total capitulation stood at 76.8% as of March 31, 2005. This very high leverage remains the most critical credit concern. UniSources' adjusted consolidated funds from operations (FFO) to total debt is also weak, and improved only slightly in the first quarter of 2005 to 12.6%
