"Today's vote underscores the fact that the process established by our board of directors, under the able leadership of board member John Carter, produced a fair and valuable opportunity for our shareholders," said James S. Pignatelli, chairman, president and chief executive officer of UniSource Energy.

"This transaction would give us the financial resources to meet the growing demand in our utility service territories while maintaining the high levels of service and reliability our customers have come to expect," Pignatelli said.

An affiliate of Saguaro Utility Group, L.P., an Arizona limited partnership, has agreed to purchase all of UniSource Energy's outstanding shares for $25.25 per share. The price represents a 30 percent premium over the closing price on the last trading day before the agreement was announced. UniSource Energy's board of directors accepted the offer on Nov. 21, 2003.

The general partner of Saguaro Utility Group L.P. is Sage Mountain, L.L.C., an Arizona company whose managing member is Frederick B. Rentschler, former president and chief executive officer of Armour-Dial, Beatrice Cos. and Northwest Airlines. Saguaro Utility's limited partners include investment funds affiliated with Kohlberg Kravis Roberts & Co., L.P., J.P. Morgan Partners, LLC, and Wachovia Capital Partners.

The transaction would provide up to $263 million to Tucson Electric Power Co. (TEP), UniSource Energy's principal subsidiary, through the retirement of a $95 million inter-company loan from TEP to UniSource Energy and a capital contribution to TEP. TEP will use a significant portion of these funds to retire some of its outstanding debt.

UniSource Energy's senior management team is expected to remain in place under the proposal, and the company's headquarters would remain in Tucson. No changes in UniSource Energy's operations or personnel are expected to result from this transaction.

The acquisition still requires approval by the Arizona Corporation Commission (ACC), the Securities and Exchange Commission (SEC) under the Public Utility Holding Company Act and the Federal Energy Regulatory Commission (FERC) under the Federal Power Act, and the satisfaction of other conditions set forth in the acquisition agreement. The company expects the SEC and FERC filings to be made in the next 30 days. Hearings before the ACC are scheduled to begin on June 21, 2004. UniSource Energy expects to close the transaction during the second half of 2004.

UniSource Energy's primary subsidiaries include TEP, which provides electric service to more than 367,000 customers in the Tucson area; UniSource Energy Services, provider of natural gas and electric service to more than 200,000 customers in northern and southern Arizona; and Millennium Energy Holdings, parent company of UniSource Energy's unregulated energy businesses. For more information about UniSource Energy and its subsidiaries, visit www.UniSourceEnergy.com.

This news release contains forward-looking information that involves risks and uncertainties, that include, but are not limited to: the ability to obtain necessary approvals and satisfy other closing conditions contained in the acquisition agreement; the outcome of regulatory proceedings; the ongoing restructuring of the electric industry; regional economic and market conditions which could affect customer growth and the cost of power supplies; the cost of debt and equity capital; changes in accounting standards; weather variations affecting customer usage; and other factors listed in UniSource Energy's Form 10-K and 10-Q filings with the Securities and Exchange Commission. The preceding factors may cause future results to differ materially from outcomes currently expected by UniSource Energy.