Tucson Electric Power Company (TEP) entered into a second amended and restated credit agreement with MUFG Bank, Ltd. as administrative agent on October 15, 2026. This agreement, referred to as the 2026 Credit Agreement, amends and restates the credit facility established on October 15, 2021.
The new facility provides for a $350 million revolving credit facility, which includes a $15 million swingline sublimit and a $50 million letter of credit sublimit. This represents an increase from the previous facility, which had a $250 million revolving credit limit. The 2026 Credit Agreement allows TEP to request increases in the aggregate commitments, up to an additional $50 million, on no more than two occasions, subject to specific conditions.
The facility expires on October 15, 2031, with the final maturity date subject to two one-year extensions if certain conditions are met. Borrowings under the facility are expected to be used for working capital and general corporate purposes, while letters of credit will be issued to support energy procurement and hedging activities.
Interest rates are determined by a pricing grid tied to TEP’s credit ratings. Borrowings bear interest at a variable rate based on SOFR or Alternate Base Rate. The current interest rate is Term SOFR plus 1.00% for SOFR loans or Alternate Base Rate plus 0.00% for Alternate Base Rate loans. The agreement is unsecured and ranks pari passu with TEP’s other senior unsecured debt obligations.
The 2026 Credit Agreement includes covenants that restrict TEP and its subsidiaries, including limitations on liens, mergers, and asset sales. It requires TEP to maintain a maximum leverage ratio of 0.65 to 1.00 at the end of any fiscal quarter. Additionally, TEP is prohibited from paying dividends to its parent, UNS Energy Corporation, unless it remains in compliance with the agreement.
Events of default under the agreement include the failure to make payments, non-compliance with covenants, a change in control, or certain bankruptcy events. The agreement also specifies that an event of default would occur if TEP or certain subsidiaries fail to make required payments on indebtedness in excess of $40 million or if such indebtedness becomes due and payable.
