New Luna Energy Facility Now Delivering Power to TEP

5 April 2006 -- The new gas-fired combined cycle Luna Energy Facility began commercial operation April 4, providing Tucson Electric Power (TEP) and others with a new source of power to meet the region's growing demand for energy.

TEP will receive 190 MW from the new 570-MW plant, which is located near Deming, N.M. TEP's share of the plant's year-round output will increase its generating capacity by nearly 10 percent and allow it to make less use of some older, less efficient gas turbines.

"This new power plant expands our wholesale sales opportunities while giving us a clean, economical way to serve the growing energy needs of our retail customers," said James S. Pignatelli, chairman, president and chief executive officer of TEP and its parent company, UniSource Energy Corp.

Ownership of the new facility is split equally among TEP, Phelps Dodge Energy Services, a subsidiary of Phelps Dodge Corp. and PNM, a New Mexico utility and subsidiary of PNM Resources.

The three companies paid a total of $40 million to purchase the unfinished plant from Duke Energy in November 2004. Together, they spent about $100 million to complete construction and purchase necessary inventory items. TEP met its $47 million share of those costs with internally generated cash, issuing no new debt or equity for the project.

The Luna Energy Facility is equipped with new emissions control equipment, including technology that reduces the output of nitrogen oxides. The plant also relies on recycled wastewater to reduce its use of fresh water. Power from the plant will be delivered to TEP via existing interstate transmission lines.

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