(2)

Aggregate number of securities to which transaction applies: As of January 16, 2014, 41,633,535 shares of UNS Energy Corporation Common Stock outstanding; 281,700 outstanding options granted under the company equity plans with exercise prices below $60.25 per share; 469,120 performance shares, restricted stock units and deferred stock units granted under the company equity plans; and 42,618 shares of common stock held in the company nonqualified deferred compensation plan.

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): The filing fee was determined based upon the sum of (A) 41,633,535 shares of UNS Energy Corporation Common Stock outstanding multiplied by $60.25 per share; (B) 281,700 options granted under the company equity plans with exercise prices below $60.25 per share multiplied by $31.62 (which is the difference between $60.25 and the weighted average exercise price of $28.63 per share); (C) 469,120 performance shares, restricted stock units and deferred stock units granted under the company equity plans multiplied by $60.25 per share; and (D) 42,618 shares of common stock held in the company nonqualified deferred compensation plan multiplied by $60.25 per share. In accordance with Section 14(g) of the Securities Exchange Act of 1934, as amended, the filing fee was determined by multiplying 0.0001288 by the sum calculated in the preceding sentence.

¨	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11 and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

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Q:	When and where will the special meeting of shareholders be held?

A:	The special meeting of UNS Energy shareholders will be held at the offices of UNS Energy, 88 East Broadway Boulevard, Tucson, Arizona 85701, on [_______], 2014, at [_______] (Mountain Standard Time). See “The Special Meeting” beginning on page 18.

Q:	When is the merger expected to be completed?

A:

We and FortisUS are working toward completing the merger as quickly as possible. We and FortisUS expect to complete the merger promptly after we receive approval by our shareholders at the special meeting and receive all necessary regulatory approvals. We currently anticipate that the merger will be completed in the fourth quarter of 2014. See “The Merger Agreement—Conditions to the Merger” beginning on page 72.

Q:	What are the proposals that will be voted on at the special meeting?

A:

You will be asked to consider and vote upon (1) the approval and adoption of the merger agreement, (2) the approval of the advisory say-on-merger-pay proposal, as described in the section of the proxy statement entitled “The Merger—Interests of UNS Energy’s Directors and Executive Officers in the Merger—Quantification of Change of Control and Termination Payments and Benefits to the UNS Energy Named Executive Officers” beginning on page 51, (3) the adjournment of the special meeting to a later date, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting, and (4) such other business as may properly come before the special meeting.

Q:	What will a UNS Energy shareholder receive when the merger occurs?

A:	For every share of UNS Energy common stock held at the time of the merger, UNS Energy shareholders will be entitled to receive $60.25 in cash, without interest, less any applicable withholding taxes. We refer to this amount in this proxy statement as the per share merger consideration.

Q:	What will happen in the merger to stock options and other equity-based awards that have been granted to employees, officers and directors of UNS Energy?

A:	Stock options and other equity-based awards that have been granted to employees, officers and directors of UNS Energy will be treated as follows:

•

Stock Options. Immediately prior to the closing of the merger, each outstanding option to acquire UNS Energy common stock will be cancelled in exchange for the right to receive a cash payment equal to the number of shares of UNS Energy common stock underlying the option multiplied by the amount by which the per share merger consideration exceeds the applicable exercise price of the option, less any applicable withholding taxes.

•

Equity-Based Awards Other than Options. Immediately prior to the closing of the merger, other equity-based awards that are not subject to performance criteria will vest in full and be cancelled and converted into a right to receive a cash payment equal to the number of shares of UNS Energy common stock subject to the award multiplied by the per share merger consideration, less any applicable withholding taxes. Other equity-based awards subject to performance criteria will vest based on target or actual performance levels (with any expenses or costs arising in connection with the merger or any non-recurring charges that would not reasonably be expected to have been incurred had the merger not occurred excluded in determining the level of attainment), whichever results in a higher number of shares, and be cancelled

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Q:	Who is entitled to attend and vote at the special meeting?

A:	The record date for the special meeting is [_______], 2014. If you owned shares of UNS Energy common stock as of the close of business on the record date, you are entitled to notice of, and to vote at, the special meeting or any adjournment or postponement of the special meeting. As of the record date, there were [_______] shares of UNS Energy common stock issued and outstanding.

Q:	Do I need to attend the special meeting in person?

A:	No. It is not necessary for you to attend the special meeting in person in order to vote your shares.

Q:	What vote of our shareholders is required to approve and adopt the merger agreement?

A:	Under Arizona law, the approval and adoption of the merger agreement requires the affirmative vote of the holders of at least a majority of the outstanding shares of UNS Energy common stock entitled to vote on the merger proposal. If a UNS Energy shareholder does not vote in person or by proxy, it will have the same effect as a vote “AGAINST” the adoption of the merger agreement.

Q:	What vote of our shareholders is required to approve the advisory say-on-merger-pay proposal?

A:

The approval of the advisory say-on-merger-pay proposal requires the affirmative vote of a majority of the votes cast by holders of shares of UNS Energy common stock present or represented by proxy at the special meeting and entitled to vote thereon. If a UNS Energy shareholder does not vote in person or by proxy, it will have no effect on the outcome of any vote on the advisory say-on-merger-pay proposal. Because the vote is advisory only, if the proposal does not receive the affirmative vote of the holders of a majority of the votes cast by holders of shares of UNS Energy common stock, the failure to obtain such vote would not be binding on UNS Energy.

Q:	What vote of our shareholders is required to adopt the proposal to adjourn the special meeting to a later time, if necessary or appropriate, to solicit additional proxies?

A:

Whether or not a quorum is present, a proposal to approve an adjournment of the special meeting to a later time, if necessary or appropriate, to solicit additional proxies requires the affirmative vote of at least a majority of shares of UNS Energy common stock represented in person or by proxy at the special meeting and entitled to vote thereon. If a UNS Energy shareholder does not vote in person or by proxy, it will have no effect on the outcome of any vote to adjourn the special meeting.

Q:	Why am I being asked to consider and cast an advisory, nonbinding vote to approve the compensation that may be paid or become payable to UNS Energy’s named executive officers that is based on or otherwise relates to the merger?

A:

In July 2010, the SEC adopted rules that require companies to seek a non-binding, advisory vote to approve certain compensation that may be paid or become payable to their named executive officers that is based on or otherwise relates to the proposed merger (such payments referred to as change of control payments). See “Proposals to be Considered at the Special Meeting—Item 2—Advisory Vote Regarding Certain Executive Compensation.”

Q:	What will happen if UNS Energy shareholders do not approve the advisory say-on-merger-pay proposal?

A:

The vote to approve the advisory say-on-merger-pay proposal is a vote separate and apart from the vote to adopt the merger agreement. Accordingly, you may vote in favor of Item 2 and not in favor of Item 1, or vice versa. Approval of the advisory say-on-merger-pay proposal is not a condition to consummation of the merger, and it is advisory in nature only, meaning it will not be binding on either UNS Energy or FortisUS. Accordingly,

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Q:	How does the UNS Energy board recommend that I vote on the proposals?

A:

The UNS Energy board has unanimously determined that the merger and the other transactions contemplated by the merger agreement are fair to and in the best interests of UNS Energy and the UNS Energy shareholders and unanimously recommends that you vote “FOR” the proposal to approve and adopt the merger agreement and “FOR” the approval of the advisory say-on-merger-pay proposal, as described in the section entitled “The Merger—Interests of UNS Energy’s Directors and Executive Officers in the Merger—Change of Control and Termination Benefits Under UNS Energy Plans.” You should read the section entitled “The Merger—Reasons for the Merger; Recommendation of the UNS Energy Board” beginning on page 35. The UNS Energy board also recommends that you vote “FOR” the adoption of the proposal to adjourn the special meeting, if necessary or appropriate to solicit additional proxies to facilitate the adoption of the merger agreement.

Q:	Do any of UNS Energy’s directors or officers have interests in the merger that may differ from those of UNS Energy shareholders?

A:

Yes. In considering the recommendation of the UNS Energy board with respect to the proposal to adopt the merger agreement, you should be aware that our directors and executive officers may have interests in the merger that are different from, or in addition to, the interests of our shareholders generally. Our board of directors was aware of, and considered, these differing interests, to the extent such interests existed at the time, in evaluating and negotiating the merger agreement and the merger, and in unanimously recommending that the merger agreement be adopted by the shareholders of UNS Energy. See “The Merger—Interests of UNS Energy’s Directors and Executive Officers in the Merger” beginning on page 48 of this proxy statement for a more detailed discussion of these interests.

Q:	How are votes counted?

A:

Votes will be counted by the inspector of election appointed for the special meeting, who will separately count “FOR” and “AGAINST” votes and abstentions. Because under Arizona law the adoption of the merger agreement requires the affirmative vote of at least a majority of the outstanding shares of UNS Energy common stock entitled to vote on the merger proposal, the failure to vote in person or by proxy, or the abstention from voting, will have the same effect as a vote “AGAINST” the adoption of the merger agreement. Because the approval of the advisory say-on-merger-pay proposal requires the affirmative vote of a majority of the votes cast by holders of shares of UNS Energy common stock present or represented by proxy at the special meeting and entitled to vote thereon, abstentions and shares not represented at the special meeting in person or by proxy will have no effect on the proposal. Because the adoption of a proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies, requires the affirmative vote of at least a majority of the shares of UNS Energy common stock represented in person or by proxy at the special meeting and entitled to vote thereon, abstentions will count as a vote “AGAINST” such proposal, but the failure to vote your shares in person or by proxy will have no effect on the outcome of the proposal.

Q:	What do I need to do now?

A:	After carefully reading and considering the information contained in this proxy statement, including the annexes and the other documents referred to in this proxy statement, please vote your shares in one of the ways described below. You have one vote for each share of UNS Energy common stock you own as of the record date.

Q:	How do I vote if I am a shareholder of record?

A:	You may vote by:

•	submitting your proxy by using the Internet voting instructions printed on each proxy card you receive;

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•	submitting your proxy by using the telephone number printed on each proxy card you receive;

•	submitting your proxy by completing, signing and dating each proxy card you receive and returning it in the enclosed prepaid envelope; or

•	by appearing in person at the special meeting and voting by ballot.

Q:	How do I vote if my shares of UNS Energy common stock are held by my brokerage firm, bank, trust or other nominee?

A:

If your shares of UNS Energy common stock are held in a brokerage account or by another nominee, such as a bank or trust, then the brokerage firm, bank, trust or other nominee is considered to be the shareholder of record with respect to those shares. However, you still are considered to be the beneficial owner of those shares of UNS Energy common stock, with your shares being held in “street name.” “Street name” holders generally cannot vote their shares directly and must instead instruct the brokerage firm, bank, trust or other nominee how to vote their shares. Your brokerage firm, bank, trust or other nominee will only be permitted to vote your shares of UNS Energy common stock for you at the special meeting if you instruct it how to vote. Therefore, it is important that you promptly follow the directions provided by your brokerage firm, bank, trust or other nominee regarding how to instruct them to vote your shares. If you wish to vote in person at the special meeting, you must bring a proxy from your brokerage firm, bank, trust or other nominee authorizing you to vote at the special meeting.

Q:	What if I fail to instruct my brokerage firm, bank, trust or other nominee how to vote?

A:

Your brokerage firm, bank, trust or other nominee will not be able to vote your shares of UNS Energy common stock unless you have properly instructed your nominee on how to vote. Because the approval and adoption of the merger agreement requires an affirmative vote of at least a majority of the outstanding shares of UNS Energy common stock, the failure to provide your nominee with voting instructions will have the same effect as a vote “AGAINST” the proposal to approve and adopt the merger agreement. The failure to instruct your broker or other nominee with voting instructions on how to vote your shares will have no effect on the approval of the other proposals to be voted on at the special meeting.

Q:	What constitutes a quorum for the special meeting?

A:	The presence, in person or by proxy, of shareholders representing a majority of the shares of UNS Energy common stock entitled to vote at the special meeting will constitute a quorum for the special meeting. All shares of UNS Energy common stock held by shareholders that are present in person or represented by proxy

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Q:	What does it mean if I receive more than one proxy?

A:

If you receive more than one proxy, it means that you hold shares of UNS Energy common stock that are registered in more than one account. For example, if you own your shares in various registered forms, such as jointly with your spouse, as trustee of a trust or as custodian for a minor, you will receive, and you will need to sign and return, a separate proxy card for those shares because they are held in a different form of record ownership. Therefore, to ensure that all of your shares are voted, you will need to sign and return each proxy card you receive by mail or submit your proxy by telephone or via the Internet by using the different control number(s) on each proxy card.

Q:	May I change my vote after I have delivered my proxy?

A:	Yes. If you are the shareholder of record of UNS Energy common stock, you have the right to change or revoke your proxy at any time prior to it being voted at the special meeting:

•	if you submitted your proxy by telephone or the Internet, by submitting another proxy by telephone or the Internet in accordance with the instructions on the proxy card;

•	by delivering to UNS Energy’s Corporate Secretary a signed written notice of revocation bearing a date later than the date of the proxy, stating that the proxy is revoked;

•	by submitting a later-dated proxy card relating to the same shares of UNS Energy common stock; or

•	by attending the special meeting and voting in person (your attendance at the meeting will not, by itself, revoke your proxy; you must vote in person at the meeting).

Q:	Should I send in my stock certificates now?

A:

No. After the merger is completed, you will be sent a letter of transmittal with detailed written instructions for exchanging your shares of UNS Energy common stock for the per share merger consideration. If your shares of UNS Energy common stock are held in “street name” by your brokerage firm, bank, trust or other nominee, you will receive instructions from your brokerage firm, bank, trust or other nominee as to how to effect the surrender of your “street name” shares in exchange for the merger consideration. PLEASE DO NOT SEND IN YOUR STOCK CERTIFICATES NOW.

Q:	Should I send in my stock options, restricted stock units, and/or deferred stock units now?

A:	No. After the merger is completed, your stock options, restricted stock units and/or deferred stock units will either be automatically exchanged for the applicable merger consideration, or you will receive further instructions for such exchange. PLEASE DO NOT SEND IN YOUR STOCK OPTIONS, RESTRICTED STOCK UNITS AND/OR DEFERRED STOCK UNITS NOW.

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Q:	What happens if I sell my shares of UNS Energy common stock before the special meeting?

A:

The record date for shareholders entitled to vote at the special meeting is earlier than the date of the special meeting and the expected closing date of the merger. If you transfer your shares of UNS Energy common stock after the record date but before the special meeting, you will, unless special arrangements are made, retain your right to vote at the special meeting, but the right to receive the merger consideration will go to the person who holds your shares at the time the merger is consummated.

Q:	Am I entitled to dissenters’ rights in connection with the merger?

A:	No. Under Arizona law, UNS Energy’s shareholders will not be entitled to exercise dissenters’ rights if the merger is adopted and consummated because our common stock was listed on the NYSE on the record date. For more information regarding appraisal rights, see “No Dissenters’ Rights” on page 75.

Q:	Who can answer further questions?

A:	For additional questions about the merger, assistance in submitting proxies or voting shares of UNS Energy common stock, or additional copies of the proxy statement or the enclosed proxy card, please contact our proxy solicitor:

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•	the possibility that various conditions precedent to the consummation of the merger will not be satisfied or waived;

•	the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement;

•	the ability to obtain shareholder and regulatory approvals of the merger on the timing and terms thereof;

•	state and federal regulatory and legislative decisions and actions;

•	regional economic and market conditions that could affect customer growth and energy usage;

•	weather variations affecting energy usage;

•	the cost of debt and equity capital and access to capital markets;

•	the performance of the stock market and changing interest rate environment, which affect the value of our pension and other retiree benefit plan assets and the related contribution requirements and expense;

•	unexpected increases in O&M expense;

•	resolution of pending litigation matters;

•	changes in accounting standards;

•	changes in critical accounting estimates;

•	the ongoing restructuring of the electric industry;

•	changes to long-term contracts;

•	the cost of fuel and power supplies;

•	cyber attacks or challenges to our information security;

•	the performance of Tucson Electric Power Company’s generating plants;

•	energy supply and demand;

•	potential future acquisitions;

•	the outcome of any legal proceedings that have been or may be instituted against UNS Energy and/or others relating to the merger agreement, and the transactions contemplated thereby, including the merger;

•	limitations placed on our ability to operate our business by the merger agreement;

•	the amount of the costs, fees, expenses, potential expense reimbursement, impairments, and other charges related to the merger;

•	the effect of the announcement of the merger on our business and customer relationships, standing with regulators, operating results and business generally;

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•	any downgrade in our credit ratings as a result of the merger;

•	retention of key employees;

•	diversion of management’s attention from ongoing business concerns; and

•	certain presently unknown or unforeseen factors, including, but not limited to, acts of terrorism.

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•	if a proxy was submitted by telephone or the Internet, by submitting another proxy by telephone or the Internet in accordance with the instructions on the proxy card;

•	by delivering to UNS Energy’s Corporate Secretary a signed written notice of revocation bearing a date later than the date of the proxy, stating that the proxy is revoked;

•	by submitting a later-dated proxy card relating to the same shares of UNS Energy common stock; or

•	by attending the special meeting and voting in person (a UNS Energy shareholder’s attendance at the meeting will not, by itself, revoke his or her proxy; the shareholder must vote in person at the meeting).

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•	the current and prospective business climate in the industry in which UNS Energy operates, including the potential for future rate changes or other regulatory actions;

•	the potential impact of macroeconomic changes on UNS Energy or the trading price of its common stock, including changes in interest rates or the taxation of dividends;

•	the significant value offered by the per share merger consideration relative to UNS Energy’s current and projected earnings and other financial metrics and analyses, as more fully described in “—Opinion of Lazard Frères & Co. LLC” beginning on page 37;

•	the fact that the consideration to be received by UNS Energy’s common shareholders in the merger will consist entirely of cash, which will provide liquidity and certainty of value;

•

the fact that the merger agreement permits UNS Energy to continue paying a quarterly cash dividend, which it paid in an amount equal to $0.435 per share of UNS Energy common stock on December 27, 2013, and is permitted to pay a dividend of up to $0.48 for quarterly dividends for periods thereafter, as well as a stub dividend for any partial dividend period immediately prior to the closing, subject to the discretion of the UNS Energy board;

•	the fact that the per share merger consideration also represents a 31.4% premium over the closing stock price of $45.84 on December 11, 2013, the last trading session prior to the announcement of the proposed merger and a 26.0% premium over the volume-weighted trading average of $47.82 for the twenty trading days prior to the announcement of the proposed merger;

•	the risks of adverse changes to UNS Energy’s trading valuation, including due to potential increases in interest rates (which have historically been correlated with downward movement of the trading prices in dividend-paying utility stocks) and to the potential approval of proposals to increase the tax rates on dividends;

•	the value of achieving UNS Energy’s long-term strategic plan as a stand-alone company as compared to the opportunity afforded to UNS Energy’s shareholders to receive an attractive price/premium in cash today;

•	the likelihood of achieving UNS Energy’s long-term strategic plan, including risks associated with competition in the energy industry, the small scale of UNS Energy’s operations, volatile wholesale power supply markets, and the possibility of future regulatory challenges that would impact allowed rates of return, rate structures and ability to recover costs;

•	the limited alternatives reasonably available to UNS Energy if it did not pursue a merger and the limited number of potential alternative merger partners;

•

the oral opinion of Lazard, which was subsequently confirmed in writing by delivery of Lazard’s written opinion, that, based upon and subject to the factors, assumptions and limitations set forth therein, as of December 11, 2013, the per share merger consideration to be paid to the holders of UNS Energy common stock (other than UNS Energy or any of its subsidiaries, Fortis, FortisUS, Merger Sub or any of their respective wholly-owned subsidiaries) pursuant to the merger agreement was fair from a financial point of view to such holders, as more fully described in “—Opinion of Lazard Frères & Co. LLC” beginning on page 37;

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•

the provisions in the merger agreement permitting UNS Energy to terminate the merger agreement in order to accept a superior proposal, subject to payment of a $63.9 million termination fee, or approximately 2.5% of the equity market value of UNS Energy at the $60.25 per share deal value, all as more fully described in “The Merger Agreement—No Solicitation” beginning on page 68 and “The Merger Agreement—Termination of the Merger Agreement” beginning on page 73;

•	the other terms and conditions of the merger agreement, including the commitments by Fortis and FortisUS contained therein with respect to obtaining regulatory approvals, and the likelihood of completing the proposed merger on the anticipated schedule;

•	the reputation of Fortis and the “federation” model of the operations of Fortis, which would permit UNS Energy to maintain its existing management and practices with respect to its customers, employees and community while taking advantage of the knowledge base, experiences and best practices of Fortis and its subsidiaries;

•	the commitments by FortisUS in the merger agreement to continue UNS Energy’s record of charitable contributions and community involvement, including keeping UNS Energy’s headquarters in Tucson, and to maintain compensation and benefits levels for UNS Energy’s employees, including officers, until at least the second anniversary of the effective time of the merger; and

•	the benefits to UNS Energy customers deriving from the opportunity to adopt the best practices of Fortis and its subsidiaries and enhanced access to capital to fund investments and technology that will improve services.

•	the risk that regulatory agencies may not approve the proposed merger or may impose onerous terms and conditions on their approvals that Fortis would not be willing or able to accept (see “—Regulatory Approvals” beginning on page 55);

•	the risks and costs to UNS Energy if the merger is not consummated, including the diversion of management and employee attention, the restrictions on the operation of the business under the merger agreement, and the potential effect of such diversion and restrictions on UNS Energy’s business and relations with customers and suppliers;

•	the fact that the directors and officers of UNS Energy may have interests that differ from or conflict with the interests of the shareholders of UNS Energy (see “The Merger—Interests of UNS Energy’s Directors and Executive Officers in the Merger” beginning on page 48);

•	the fact that under Arizona law, UNS Energy shareholders would not be entitled to appraisal rights with respect to the merger;

•	the fact that UNS Energy had not solicited proposals from companies other than Fortis;

•	the fact that, following the merger, due to the fact that the consideration was all-cash consideration, UNS Energy’s shareholders will cease to participate in any future earnings growth of UNS Energy or benefit from any future increase in value; and

•	the risks of the type and nature described in the “Risk Factors” sections of the annual and quarterly reports incorporated herein by reference and the matters described under “Cautionary Statement Concerning Forward-Looking Information” beginning on page 16.

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•	Reviewed the financial terms and conditions of a final draft of the merger agreement, dated December 11, 2013;

•	Reviewed certain publicly available historical business and financial information relating to UNS Energy;

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•	Reviewed various financial forecasts and other data provided to Lazard by UNS Energy relating to the business of UNS Energy;

•	Held discussions with members of the senior management of UNS Energy with respect to the business and prospects of UNS Energy;

•	Reviewed public information with respect to certain other companies in lines of business Lazard believed to be generally relevant in evaluating the business of UNS Energy;

•	Reviewed the financial terms of certain business combinations involving companies in lines of business Lazard believed to be generally relevant in evaluating the business of UNS Energy;

•	Reviewed historical stock prices and trading volumes of UNS Energy common stock; and

•	Conducted such other financial studies, analyses and investigations as Lazard deemed appropriate.

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•	Avista Corporation

•	El Paso Electric Company

•	IDACORP, Inc.

•	Pinnacle West Capital Corporation

•	PNM Resources, Inc.

•	Portland General Electric Company

•	TECO Energy, Inc.

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•	the ratio of each company’s December 10, 2013 closing share price to its calendar year 2014 and 2015 estimated earnings per share, commonly referred to as “EPS”; and

•

the ratio of each company’s enterprise value, calculated as the market capitalization of each company (based on each company’s closing share price as of December 10, 2013 and fully-diluted share count as of September 30, 2013), plus debt, less cash, cash equivalents and marketable securities as of September 30, 2013, to its calendar year 2014 and 2015 estimated earnings before interest, taxes, depreciation and amortization, commonly referred to as “EBITDA.”

•	14.5x to 15.5x for share price to 2014 estimated EPS and 13.75x to 14.75x for share price to 2015 estimated EPS; and

•	7.25x to 7.75x for enterprise value to estimated 2014 EBITDA and for enterprise value to estimated 2015 EBITDA.

•	the estimated future cash flows that UNS Energy is expected to generate for each of years 2014 through 2023; and

•	the estimated value of UNS Energy at the end of 2023, or the terminal value.

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•	average annual retail sales growth at TEP of approximately 2.0% during the period from 2015 through 2024, assuming the addition of a new industrial customer representing approximately 85 MW of new load in 2016, but only 1.4% if the planned large industrial customer were excluded;

•	the purchase of roughly an additional 35% interest in Springerville Unit 1 in late 2014 and early 2015, as well as the purchase of the 550 MW Gila River Unit 3 combined cycle plant at the end of 2014 with the effect of reducing power purchase contracts while adding rate base;

•	planned capital spending totaling approximately $4.9 billion during the period from 2013 through 2024 in electric and gas utility plant; and

•	issuances of 2 million shares of common stock in 2014 and 1 million shares of common stock in 2015.

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•	an enhanced load growth scenario of 1% greater projected load growth for TEP, which would result in additional cumulative retail margins and would help reduce rate pressure on TEP’s customers;

•	the potential for incremental large retail customers, which would increase revenues and margins;

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•	an increase in UNS Energy’s utilities’ authorized equity capitalization ratio in the near-to-medium-term, which would provide a higher equity base;

•	an increase in renewable energy assets through buyouts of existing renewable power purchase agreements, which would increase rate base on which to earn; and

•	the procurement of additional gas-fired generation over and above the purchases included in the base case projections, and the forecasted addition of additional peaking units in 2021-2023, which would increase rate base.

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(1)

Represents the value of cash severance for termination following a change of control equal to the sum of (i) a single lump sum payment in an amount equal to two (for Mr. Bonavia), one and one-half (for Messrs. Hutchens, Dion and Larson) or one (for Ms. Kissinger) times the sum of (a) the executive officer’s annualized base salary as of the date of the executive officer’s separation from service, (b) the average payment which the executive officer received pursuant to the short-term incentive compensation plan for the three calendar years immediately preceding the calendar year in which the executive officer’s separation from service occurs, or, if not available, the current target bonus, (ii) a single lump sum cash payment in an amount equal to a prorated portion of the actual payment to which the executive officer would have been entitled under the short-term incentive compensation plan for the calendar year in which the executive officer’s separation from service occurs; and (iii) a single lump sum cash payment in the amount of the payment, if any, to which the executive officer is entitled under the short-term incentive compensation plan (based on the executive officer’s actual performance) for the year prior to the year in which the executive officer’s separation from service occurs, to the extent not already paid to the executive officer.

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(2)	Represents the aggregate payments to be made in respect to the restricted stock units and other stock based awards based on the merger consideration of $60.25 per share.

(3)

In the event of the executive officer’s termination following a change of control, the executive officer is entitled to continue to participate in TEP’s health benefit plans for a period expiring on the earlier of (a) 24 months (for Mr. Bonavia), 18 months (for Messrs. Hutchens, Larson and Dion), or 12 months (for Ms. Kissinger) or (b) the day on which the executive officer becomes eligible to receive any substantially similar benefits, on a benefit-by-benefit basis, under any plan or program of any successor employer.

(4)

In the event of the executive officer’s termination following a change of control, no excise tax gross-ups are provided. Rather, severance payments to executives are cut back to the “safe harbor” limit if the reduction results in the executive receiving a greater after-tax benefit than if the excise tax were paid by the executive on the “excess parachute payments”; otherwise, all payments would be paid and the executive would pay the excise tax.

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•	a citizen or resident of the United States;

•	a corporation (or any other entity or arrangement treated as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof, or the District of Columbia;

•	a trust if (i) a court within the United States is able to exercise primary supervision over the trust’s administration and one or more U.S. persons are authorized to control all substantial decisions of the trust or (ii) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person; or

•	an estate that is subject to U.S. federal income tax on its worldwide income from all sources.

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•	The gain is effectively connected with the conduct by the non-U.S. holder of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a U.S. permanent establishment of the non-U.S. holder); or

•	The non-U.S. holder is an individual who was present in the United States for 183 days or more in the taxable year of the exchange of shares of UNS Energy common stock for cash pursuant to the merger and certain other conditions are met.

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•	the effect of the merger on competition in electric power markets;

•	the effect of the merger on the applicants’ transmission and wholesale power rates; and

•	the effect of the merger on state and federal regulation of the applicants.

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•	the due organization, valid existence, good standing, corporate power and authority of UNS Energy and its subsidiaries;

•	its capitalization, including in particular the number of shares of UNS Energy common stock and preferred stock issued and outstanding, and common stock and preferred stock of TEP issued and outstanding, and options and other equity-based awards issued and outstanding pursuant to UNS Energy benefit plans;

•	its authority to enter into the merger agreement and to complete the transactions contemplated by the merger agreement (subject to receipt of the vote of the holders of at least a majority of the outstanding shares of UNS Energy common stock), and the enforceability of the merger agreement against UNS Energy;

•	the unanimous approval by the UNS Energy board of the merger agreement, the merger and the other transactions contemplated by the merger agreement;

•	the absence of conflicts with or breaches of UNS Energy’s or its subsidiaries’ governing documents, certain agreements or applicable laws as a result of entering into the merger agreement and the consummation of the merger and the other transactions contemplated by the merger agreement;

•	the required filings with, and the consents and approvals of, governmental entities in connection with the transactions contemplated by the merger agreement;

•	compliance with laws and permits;

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•	its and TEP’s SEC filings since January 1, 2011, including financial statements contained therein;

•	internal controls and compliance with the Sarbanes-Oxley Act of 2002;

•	the absence of undisclosed liabilities;

•	the conduct by UNS Energy of its business in the ordinary course since December 31, 2012;

•	the accuracy of the information supplied by UNS Energy in this proxy statement;

•	matters related to employee benefit plans and ERISA;

•	labor and employment matters;

•	matters with respect to certain of UNS Energy’s contracts;

•	litigation or investigations;

•	matters with respect to UNS Energy’s owned and leased real and personal property;

•	environmental matters;

•	intellectual property matters;

•	tax matters;

•	receipt by the UNS Energy board of the Lazard opinion;

•	insurance matters;

•	the required vote of UNS Energy shareholders to adopt the merger agreement;

•	the absence of undisclosed brokers’ fees and expenses;

•	its regulation as a utility;

•	its regulatory filings since January 1, 2011;

•	the inapplicability of state takeover statutes to the merger;

•	trading policies;

•	regulatory proceedings; and

•	the unavailability of dissenters’ rights to the merger.

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•	changes affecting the general economy or political, regulatory, business, economic, financial, credit or capital market conditions in the U.S., including interest rates or exchange rates, except to the extent disproportionately affecting UNS Energy;

•	changes affecting the national, regional, state or local wholesale or retail markets for natural gas or electric power or the national, regional, state or local electric or natural gas transmission or distribution systems, except to the extent disproportionately affecting UNS Energy;

•

changes attributable to the execution or announcement of the merger agreement, or the pendency of the merger, including any change attributable to the proceeding in connection with the application for the ACC approval, reduction in sales, adverse changes in supplier, distributor, employee, financing source, shareholder, partner or similar relationships, or changes in the credit rating of UNS Energy or its subsidiaries resulting from the execution or announcement of the merger agreement, or the pendency of the merger;

•	actions taken, or failures to act, at the written request of FortisUS or Merger Sub;

•	acts of war (whether or not declared), the commencement, continuation or escalation of a war, acts of armed hostility, sabotage or terrorism or other international or national calamity or any material worsening of such conditions threatened or existing as of December 11, 2013, except to the extent disproportionately affecting UNS Energy;

•	changes in national, regional, state or local wholesale or retail electric power and capacity or natural gas prices or in the market price for commodities, except to the extent disproportionately affecting UNS Energy;

•	hurricanes, earthquakes, floods or other natural disasters or acts of God, except to the extent disproportionately affecting UNS Energy;

•	changes resulting from weather conditions or customer use patterns, except to the extent disproportionately affecting UNS Energy;

•	adoptions, proposals or implementations of, or changes in, applicable law after December 11, 2013, or any interpretation thereof by a governmental entity, except to the extent disproportionately affecting UNS Energy,

•	changes in GAAP after December 11, 2013, or any interpretation thereof by a governmental entity, except to the extent disproportionately affecting UNS Energy;

•	failures by UNS Energy to meet any estimates of revenues, earnings, projections or other economic performance, whether published, internally prepared or provided to FortisUS and any of its representatives; and

•	changes in the price or trading volume of UNS Energy’s common stock on the NYSE or any suspension of trading in securities generally on the NYSE.

•	the due organization, valid existence, good standing, corporate power and authority of FortisUS and Merger Sub;

•	the authority of each of FortisUS and Merger Sub to enter into the merger agreement and to complete the transactions contemplated by the merger agreement and the enforceability of the merger agreement against each of FortisUS and Merger Sub;

•	the absence of conflicts with, or breaches of, FortisUS’s or Merger Sub’s governing documents, certain agreements or applicable laws as a result of entering into the merger agreement and the consummation of the merger and the other transactions contemplated by the merger agreement;

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•	the required filings with, and the consents and approvals of, governmental entities in connection with the transactions contemplated by the merger agreement;

•	the accuracy of the information supplied by FortisUS and Merger Sub contained in this proxy statement;

•	the absence of certain litigation or investigations;

•	the absence of ownership of UNS Energy common stock by Fortis and any of its subsidiaries;

•	the sufficiency of funds necessary to consummate the transactions contemplated by the merger agreement and to pay all fees, costs and expenses in connection with the merger agreement and the transactions contemplated thereby;

•	the ownership and operations of Merger Sub;

•	the absence of undisclosed brokers’ fees and expenses; and

•	the absence of any contracts between FortisUS, Merger Sub or any of their respective controlled affiliates, on the one hand, and any director, officer, employee or shareholder of UNS Energy, on the other hand, relating to the transactions contemplated by the merger agreement or the operations of the surviving corporation following the merger.

•	conduct its operations only in the ordinary course of business;

•	comply in all material respects with all laws, orders and permits applicable to it;

•	use its commercially reasonable best efforts to preserve substantially intact its business organization and maintain satisfactory relationships with third parties and governmental entities having significant business dealings with it; and

•	keep available the services of its key officers and employees.

•	amend or restate its articles of incorporation, by-laws or equivalent organizational documents;

•

issue, sell, pledge or otherwise encumber any equity interests other than to the extent required by law or permitted by any UNS Energy equity or 401(k) plan (in each case, not to exceed a value (assuming a payout at target in the case of any award containing performance criteria) of $3,750,000 in any calendar year) or in connection with the exercise of options or the vesting of other equity-based awards;

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•	sell, pledge, dispose of, transfer, lease, license or encumber any material property or assets other than obsolete assets or assets in the ordinary course of business consistent with past practice or with an individual fair market value not to exceed $4,000,000, or an aggregate fair value market not to exceed $15,000,000;

•

declare or pay dividends or distributions, other than regular quarterly cash dividends not in excess of $0.435 per share for quarterly dividends payable to shareholders on or before December 31, 2013, and $0.48 per share for quarterly dividends payable to shareholders after December 31, 2013, and a “stub period” dividend to shareholders as of the merger date equal to the product of (x) the number of days from the record date for payment of the last quarterly dividend paid by UNS Energy prior to the merger date through and including the effective time of the merger and (y) a daily dividend rate determined by dividing the amount of the last quarterly dividend prior the merger date by ninety-one, and other specified exceptions;

•	other than (A) in the case of wholly-owned subsidiaries or (B) in the case of cashless exercises of options, or tax withholdings on the vesting or payment of equity awards, reclassify, combine, split, subdivide or amend the terms of, or redeem, purchase or otherwise acquire, directly or indirectly, any of its equity interests;

•	merge or consolidate with any other person or adopt or implement a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization;

•	acquire (including by exercising any right to acquire) or obtain any right to acquire any interest in any business or any assets, other than inventory in the ordinary course of business or assets that have an individual fair market value not to exceed $4,000,000 or an aggregate fair market value not to exceed $15,000,000, or assets in connections with UNS Energy’s capital expenditures plan;

•	incur indebtedness except for (i) refinancings of existing indebtedness as it matures upon market terms and conditions and in an amount not to exceed the amount of indebtedness prior to the refinancing, (ii) draw-downs or refinancings of credit facilities outstanding as of the date the merger agreement in the ordinary course or (iii) borrowings in accordance with UNS Energy’s financing plan;

•	make any loans, advances or capital contributions to, or investments in, any other person other than wholly-owned subsidiaries that exceed $7,500,000 in aggregate other than in accordance with UNS Energy’s capital expenditures budget or the financing plan;

•

except to the extent required by law (including to avoid the imposition of penalty taxes under Section 409A of the Code) or the existing terms of any benefit plan and other than in connection with hiring an officer as permitted: (i) other than in the ordinary course of business consistent with past practice, increase the compensation or benefits payable to its employees, directors or officers; (ii) grant any rights to severance or termination pay to, or enter into or amend any employment or severance agreement with, any director, executive officer or, other than in the ordinary course of business, employee of UNS Energy or any of its subsidiaries, or establish, adopt, enter into or amend any collective bargaining, bonus, profit sharing, thrift, pension, retirement, deferred compensation, employment, termination, severance or other plan or agreement for the benefit of any director, executive officer or, other than in the ordinary course of business, for the benefit of any employee; or (iii) other than in accordance with the merger agreement, take any action to amend or waive any performance or vesting criteria or accelerate vesting, exercisability or funding under any benefit plan;

•	make or rescind any material tax election, settle or compromise any material liability for taxes, or amend any material tax return, in each case, that is not consistent with past practice;

•	make any change in accounting policies or procedures, other than as required by a change in GAAP;

•	make or commit to make any capital expenditures, in the period from December 11, 2013 until December 31, 2014, or in the twelve-month period ending on December 31, 2015, that in the aggregate exceed UNS Energy’s capital expenditures budget plus $10,000,000 in either such period, other than certain emergency capital expenditures;

•	terminate or permit any material permit to lapse, other than in accordance with regular expirations of the permits’ terms, or fail to apply to renew those permits that are renewable in a timely manner;

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(i) enter into, terminate early, amend or modify in any material respect certain contracts, other than in the ordinary course of business, or enter into any transaction with a director or officer of UNS Energy or any of its subsidiaries or (ii) waive, release, assign, pay, discharge, settle or satisfy any material claims, liabilities or obligations unless required by their terms as in effect on the date of the merger agreement;

•	announce, implement or effect any reduction in force, lay-off, early retirement program, severance program or other program or effort concerning the termination of employment of employees other than terminations in the ordinary course of business;

•	other than hiring officers to replace any officers (not including UNS Energy’s chief executive officer, chief financial officer or chief operating officer) who voluntarily terminate their employment or whose employment is terminated for cause, hire any officer-level employee or terminate the employment, other than for cause, of any officer-level employee;

•	settle, or agree to settle any litigation, investigation, proceeding, or other claim pending or threatened before any arbitrator, court or other governmental entity that involves the payment of an amount in excess of $2,000,000 individually or $5,000,000 in the aggregate;

•	redeem, repurchase, defease, cancel or otherwise acquire any indebtedness other than those (i) within 120 days of maturity, (ii) pursuant to any required amortization payments and mandatory prepayments, (iii) in connection with permitted refinancings, or (iv) in accordance with UNS Energy’s financing plan;

•	permit any material change in policies relating to energy price risk management or marketing of energy or enter into any physical commodity transactions, exchange-traded futures and options transactions, over-the-counter transactions and derivatives thereof or similar transactions other than as permitted by the trading guidelines;

•	other than in the ordinary course of business, make or agree to make any material changes in insurance policies that would affect the insurance coverage of UNS Energy, its subsidiaries or its assets following the effective time of the merger;

•	other than in the ordinary course of business consistent with current business practices, seek to lower any reference price or bid or cap price for energy or capacity sold wholesale;

•	assign or license any material intellectual property owned by it to any third party; or

•	enter into any written agreement, contract, commitment or arrangement to do any of the foregoing, or authorize in writing any of the foregoing.

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•	initiate, solicit or knowingly encourage or facilitate the submission of any proposal or offer that constitutes or may reasonably be expected to lead to, an acquisition proposal; or

•	participate in any discussions or negotiations with any person, or furnish to any person any information, with respect to any proposal or offer that constitutes, or may reasonably be expected to lead to, an acquisition proposal.

•

furnish information to the third party making such acquisition proposal and any of its representatives (which must also be furnished to FortisUS as promptly as reasonably practicable if UNS Energy has not already done so) under a confidentiality agreement that contains terms that are no less favorable in the aggregate to UNS Energy than those contained in its confidentiality agreement with FortisUS (except that UNS Energy shall be permitted to enter into a less favorable confidentiality agreement, provided that the terms of the confidentiality agreement with FortisUS are deemed modified to the same extent), and that does not include any provision having the effect of prohibiting UNS Energy from satisfying its obligations under the merger agreement (which confidentiality agreement must be provided to FortisUS promptly after the execution thereof); and

•	participate in discussions or negotiations with the third party with respect to the acquisition proposal.

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•	approve or recommend an acquisition proposal or any inquiry or proposal that could reasonably be expected to lead to an acquisition proposal (or publicly propose to do so), or take any action or make any public announcement inconsistent with the recommendation of the UNS Energy board in favor of the merger;

•	withdraw or modify the UNS Energy board’s recommendation in favor of the merger or publicly propose to do so, in a manner adverse to FortisUS;

•	fail to issue a press release that expressly reaffirms the UNS Energy board’s recommendation in favor of the merger within ten business days following FortisUS’s written request to do so after any acquisition proposal or material modification thereto is first made public or given to UNS Energy’s shareholders;

•

allow or cause UNS Energy or any of its subsidiaries to enter into any letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition agreement, option agreement, joint venture agreement, partnership agreement or other similar agreement relating to an acquisition proposal or requiring UNS Energy to abandon, terminate, delay or fail to consummate the merger or any other transaction contemplated by the merger agreement; or

•	take any action pursuant to which any person (other than FortisUS, Merger Sub or their respective affiliates) or acquisition proposal would become exempt from or not otherwise subject to any take-over statute or certificate of incorporation provision relating to acquisition proposals.

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•	the UNS Energy board taking steps to cause the disposition of UNS Energy’s common stock and other equity awards in connection with the merger by each of UNS Energy’s officers and directors who are covered persons for purposes of Section 16 of the Exchange Act to be exempt transactions for purposes of Section 16(b) of the Exchange Act pursuant to Rule 16b-3 promulgated under the Exchange Act;

•	FortisUS’s access to UNS Energy’s information and FortisUS’s agreement to keep the information provided to it confidential;

•	UNS Energy notifying FortisUS of certain communications from government entities and any actions, suits, claims, investigations or proceedings relating to the merger agreement, the merger and the other transactions contemplated by the merger agreement;

•	the inapplicability of any state takeover laws;

•	indemnification of UNS Energy directors, officers and employees for certain acts occurring prior to the merger (see “The Merger— Interests of UNS Energy’s Directors and Executive Officers in the Merger— Insurance and Indemnification of UNS Energy Directors and Officers”);

•	the performance by Merger Sub of its obligations under the merger agreement;

•	the maintenance of UNS Energy’s existing Tucson headquarters;

•	the maintenance of UNS Energy’s current levels of charitable contributions and community involvement at the level prior to the consummation of the merger for a period of five years thereafter;

•	transfer taxes;

•	transition planning;

•	changes to rates or charges;

•	the prohibition of any acquisition of UNS Energy common stock (or securities convertible into or exchangeable or exercisable for UNS Energy common stock) by FortisUS, Merger Sub, or any of their affiliates prior to the consummation of the merger; and

•	UNS Energy’s cooperation in connection with the capital markets and bank financings to be undertaken by Fortis in connection with the merger.

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•	adoption of the merger agreement by an affirmative vote of the holders of at least a majority of the outstanding shares of UNS Energy common stock entitled to vote at the special meeting;

•	absence of any order, decree, judgment, injunction or other ruling by any governmental entity that prevents or prohibits the consummation of the merger;

•

the obtaining of required governmental approvals (including that of the FERC and the ACC and the expiration or termination of any applicable HSR waiting period) without any conditions that would reasonably be expected to have, individually or in the aggregate, a regulatory burdensome effect, which means (x) any divestiture or other undertaking or (y) proposing, accepting or entering into any consent decree, hold separate order or operational restriction, in each case, that would reasonably be expected to have a material adverse effect on the business, assets, liabilities, financial condition or results of operations of (a) the surviving corporation and its subsidiaries, taken as a whole, or (b) Fortis and its subsidiaries, taken as a whole, following the merger, provided that Fortis and its subsidiaries, taken as a whole, shall be deemed to be 100% of the size and scale of the surviving corporation and its subsidiaries, taken as a whole; and

•	the receipt of written confirmation from the Committee on Foreign Investment in the United States that it has reviewed the information provided to it regarding the merger, and that based on its review it has determined that there are no unresolved national security concerns with respect to the merger.

•

the representations and warranties of FortisUS and Merger Sub must be true and correct without regard to materiality qualifiers at and as of the date of the merger agreement and at and as of the date of the closing of the merger (or in the case of representations and warranties that are made as of a particular date or period, as of such date or period), except for such failures to be true and correct as would not, individually or in the aggregate, reasonably be expected to materially delay or materially impair FortisUS’s and Merger Sub’s ability

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•	FortisUS’s and Merger Sub’s performance in all material respects of and compliance in all material respects with all agreements and covenants required to be performed or complied with by them under the merger agreement on or prior to the effective time; and

•	the Arizona Corporation Commission’s approval of the merger shall not contain any terms that have the effect of reducing the merger consideration to be received by the holders of UNS Energy’s shares of common stock and that any required governmental approval that would reasonably be expected to contain such a term be obtained by final order.

•

the representations and warranties of UNS Energy must be true and correct without regard to materiality qualifiers at and as of the date of the merger agreement and at and as of the date of the closing of the merger (or in the case of representations and warranties that are made as of a particular date or period, as of such date or period), so long as any failure of such representations and warranties to be true and correct, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect (the representations and warranties relating to capitalization, however, must be true in all respects (except for de minimis inaccuracies) and the representations and warranties relating to the authority and the absence of conflicts with UNS Energy’s governing documents to enter into the merger agreement must be true in all material respects);

•	UNS Energy’s performance in all material respects of and compliance in all material respects with all obligations and covenants required to be performed or complied with by it under the merger agreement; and

•	there not having occurred since the date of the merger agreement any material adverse effect or any event that, individually or in the aggregate, has had or would reasonably be expected to result in a material adverse effect on UNS Energy and its subsidiaries.

•

the merger has not been completed on or before December 11, 2014 (which we refer to as the outside date) and the failure of the effective time to occur was not caused by the breach of the obligations under the merger agreement of the party seeking to terminate the merger agreement (the outside date is subject to an extension to June 11, 2015 if the closing conditions other than those relating to governmental approvals have been satisfied and further extensions in some cases where governmental approvals have been obtained but have not yet become final orders);

•	the approval of the merger shall not have been obtained at the special meeting;

•	any court of competent jurisdiction or other governmental entity shall have issued a final and non-appealable order or injunction or taken any other action that has the effect of permanently enjoining, restraining or prohibiting the merger (and the party seeking to terminate the merger agreement has used its reasonable best efforts to resist, resolve or lift such order or injunction); and

•

the other party has breached or failed to perform its representations, warranties, covenants or agreements contained in the merger agreement, which breach or failure to perform (1) would cause certain of the conditions to the terminating party’s obligation to consummate the merger not to be reasonably capable of being satisfied, and (2) cannot be cured or has not been cured within 30 days, but only if the party seeking to terminate is not itself in such a breach of any representation, warranty, covenant or agreement in the merger agreement.

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(1)	In a statement (Schedule 13G) filed with the SEC on January 10, 2014, Black Rock, Inc., indicated that it has sole voting power over 6,507,236 shares of UNS Energy common stock and sole dispositive power over 6,638,409 shares of UNS Energy common stock.

(2)	As reported in a statement (Schedule 13F) filed with the SEC covering the period ended September 30, 2013.

(3)	As reported in a statement (Schedule 13F) filed with the SEC covering the period ended September 30, 2013.

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•

Any shares held in the name of the spouse, minor children or other relatives sharing the home of the director or executive officer. Except as otherwise indicated below, the directors and executive officers have sole voting and investment power over the shares shown. Voting power includes the power to direct the voting of the shares held, and investment power includes the power to direct the disposition of the shares held.

•	Shares subject to options exercisable within 60 days, based on information from E*Trade, UNS Energy’s stock option plan administrator.

•	Equivalent share amounts allocated to the individuals’ 401(k) Plan, which has a UNS Energy Stock Fund investment option.

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•	Annual Report on Form 10-K for the fiscal year ended December 31, 2012 (filed on February 27, 2013);

•	Quarterly Reports on Form 10-Q for the quarters ended March 31, 2013 (filed on April 29, 2013), June 30, 2013 (filed on July 30, 2013) and September 30, 2013 (filed on November 7, 2013);

•	Current Reports on Form 8-K filed on March 14, 2013, May 6, 2013, May 20, 2013, June 12, 2013, July 25, 2013, August 5, 2013, September 5, 2013, September 16, 2013, October 7, 2013, November 1, 2013, November 14, 2013, December 9, 2013, December 11, 2013 and December 12, 2013; and

•	Proxy Statement for the 2013 Annual Meeting (filed on March 21, 2013).

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(i)

Certificates. As promptly as practicable after the Effective Time, Parent shall cause the Paying Agent to mail to each holder of record of a Certificate whose Shares were converted into the right to receive the Merger Consideration at the Effective Time pursuant to this Agreement: (x) a letter of transmittal, which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the

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(ii)

Book-Entry Shares. Any holder of non-certificated Shares represented by book-entry (“Book-Entry Shares”) whose Shares were converted into the right to receive the Merger Consideration at the Effective Time pursuant to this Agreement, shall not be required to deliver a Certificate or an executed letter of transmittal to the Paying Agent to receive the Merger Consideration that such holder is entitled to receive pursuant to this Agreement. In lieu thereof, each holder of record of one or more Book-Entry Shares whose Shares were converted into the right to receive the Merger Consideration at the Effective Time pursuant to this Agreement shall, upon receipt by the Paying Agent of an “agent’s message” (or such other evidence, if any, of surrender as the Paying Agent may reasonably request) be entitled to receive in exchange therefor cash in an amount equal to the Merger Consideration multiplied by the number of Shares formerly represented by such Book-Entry Shares. Payment of the Merger Consideration with respect to Book-Entry Shares shall only be made to the Person in whose name such Book-Entry Shares are registered.

(iii)

In the event of a transfer of ownership of Company Common Stock that is not registered in the transfer records of the Company, payment may be made and Merger Consideration may be issued to a Person other than the Person in whose name the Certificate so surrendered is registered, if such Certificate shall be properly endorsed or shall otherwise be in proper form for transfer and the Person requesting such payment shall pay any transfer and other similar Taxes required by reason of the payment of the Merger Consideration to a Person other than the registered holder of the Certificate so surrendered or shall establish to the satisfaction of Parent that such Taxes either have been paid or are not required to be paid. Until surrendered as contemplated by this Section 2.2, each Certificate and each Book-Entry Share shall be deemed at any time after the Effective Time to represent only the right to receive the portion of the Aggregate Merger Consideration into which the Shares theretofore represented by such Certificate or such Book-Entry Shares have been converted pursuant to Section 2.1(a). No

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Section 2.3	Treatment of Company Options, Restricted Shares, Restricted Stock Units, Other Equity-Based Awards and Equity Plans.

(i)

Treatment of Company Options. Each outstanding option to purchase Shares (each, a “Company Option”) granted pursuant to any equity incentive plan of the Company, including the Company’s 2011 Omnibus Stock and Incentive Plan, 2006 Omnibus Stock and Incentive Plan, Amended and Restated 1994 Outside Director Stock Option Plan and any other plan, agreement or arrangement of the Company or any Company Subsidiary (collectively, the “Company Equity Plans”), shall, without any action on the part of the holder thereof, be fully vested and cancelled and, in exchange therefor, each former holder of any such cancelled Company Option shall be entitled to receive, in settlement therefor and full satisfaction thereof, a payment in cash (subject to any withholding in accordance with Section 2.2(e)) equal to the product of (i) the total number of Shares previously subject to such Company Option and (ii) the amount, if any, by which the Merger Consideration exceeds the exercise price per Share previously subject to such Company Option (such amounts payable hereunder, the “Option Payments”). In each case, the Option Payment shall be made within five (5) Business Days after the Closing Date. From and after the Effective Time, any such cancelled Company Option shall no longer be exercisable by the former holder thereof, but shall only entitle such holder to the payment of the Option Payment. No interest shall be paid or accrued on any cash payable with respect to any Company Option.

(ii)

Treatment of Restricted Shares. Each unvested Share subject to forfeiture restrictions, repurchase rights or other restrictions (each, a “Restricted Share”) granted pursuant to any Company Equity Plan shall, without any action on the part of the holder thereof, vest in full, and all restrictions (including forfeiture restrictions or repurchase rights) otherwise applicable to such Restricted Share shall lapse, and each Restricted Share shall be converted into the right to receive a payment in cash equal to the Merger

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(i)	amend or restate the Company Charter, Company By-laws, any subsidiary’s articles of incorporation or by-laws, or any equivalent organizational documents;

(ii)

issue or authorize the issuance, pledge, transfer, subject to any Lien, sell or otherwise encumber or dispose of, any Equity Interests in the Company or any Company Subsidiary, or securities convertible into, or exchangeable or exercisable for, any such Equity Interests, or any rights of any kind to acquire any such Equity Interests or such convertible or exchangeable securities, other than (A) grants of Company Options, Restricted Shares, Restricted Stock Units and Other Equity-Based Awards, but only if and to the extent required by Law or permitted by the terms of any Company Equity Plan or the Company’s 401(k) plan in each case as in effect as of the close of business on the Business Day immediately preceding the date of this Agreement, and not exceeding an aggregate value (assuming a payout at target in the case of any award containing performance criteria) at the time of grant of $3,750,000 in any calendar year, in each case, in amounts, at times and on terms and conditions as in the ordinary course of business; (B) the issuance of Shares upon the exercise of Company Options outstanding as of December 6, 2013, or otherwise permitted to be granted under clause (A) of this Section 5.1(a)(ii), and the vesting or settlement of Other Equity-Based Awards outstanding as of December 6, 2013, or otherwise permitted to be granted under clause (A) of this Section 5.1(a)(ii), in accordance with their terms; and (C) the issuance of Equity Interests in a wholly owned Company Subsidiary to its parent, in each case of the foregoing clauses “(A)” through “(C)” in the ordinary course of business;

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(iii)

sell, pledge, dispose of, transfer, lease, license or encumber any material property or assets of the Company or any Company Subsidiary, except pursuant to existing Company Scheduled Contracts and except for (x) dispositions of obsolete equipment or assets, in each case, in the ordinary course of business consistent with past practice, or (y) dispositions in amounts not to exceed $4,000,000 individually or $15,000,000 in the aggregate;

(iv)

declare, set aside, make or pay any dividend or other distribution (whether payable in cash, stock, property or a combination thereof) with respect to any of its capital stock (other than (A) regular quarterly cash dividends paid by the Company at the times and in the manner paid in the past by the Company and in an amount per share of Company Common Stock not more than (x) $0.435 for quarterly dividends payable to shareholders on or before December 31, 2013, and (y) $0.48 for quarterly dividends payable to shareholders after December 31, 2013, (B) a “stub period” dividend to shareholders of record as of the Effective Time equal to the product of (x) the number of days from the record date for payment of the last quarterly dividend paid by the Company prior to the Effective Time through and including the Effective Time and (y) a daily dividend rate determined by dividing the amount of the last quarterly dividend prior to the Effective Time by ninety-one (91), (C) dividends paid by a wholly-owned Company Subsidiary to the Company or another wholly-owned Company Subsidiary or (D) dividend equivalent rights on Other Equity-Based Awards payable by the Company pursuant to the Company Equity Plans), enter into any agreement with respect to the voting or registration of its Equity Interests or reduce its authorized capital;

(v)	other than (A) in the case of wholly-owned Company Subsidiaries or (B) in the case of cashless exercises of Company Options, or Tax withholdings on the vesting or payment of Restricted Units and Other Equity-Based Awards, reclassify, combine, split, subdivide or amend the terms of, or redeem, purchase or otherwise acquire, directly or indirectly, any of its Equity Interests;

(vi)	merge or consolidate the Company or any Company Subsidiary with any Person or adopt a plan of complete or partial liquidation or resolutions providing for a complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of the Company or any Company Subsidiary;

(vii)	acquire (including by exercising any right to acquire) or obtain any right to acquire (including by merger, consolidation or acquisition of stock or assets) any interest in any Person or any assets, other than acquisitions of (A) inventory in the ordinary course of business, (B) any assets for consideration that is individually not in excess of $4,000,000, or in the

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(viii)

incur any Indebtedness, except (A) in connection with refinancings of existing indebtedness for borrowed money as such Indebtedness matures upon market terms and conditions, so long as the amount of Indebtedness (or credit facility capacity) following such refinancing shall not exceed the amount of Indebtedness (or credit facility capacity) immediately prior to the refinancing, (B) draw-downs of credit facilities outstanding as of the date hereof (or refinancings of such credit facilities permitted under clause (A)) in the ordinary course of business or (C) for borrowings in accordance with the financing plan set forth in Section 5.1(a)(viii) of the Company Disclosure Letter;

(ix)

make any loans, advances or capital contributions to, or investments in, any other Person (other than any wholly-owned Company Subsidiary as disclosed in Section 5.1(a)(ix) of the Company Disclosure Letter) in excess of $7,500,000 in the aggregate other than as set forth in the Company’s capital expenditures budget as disclosed in Section 5.1(a)(xiii) or the financing plan set forth in Section 5.1(a)(viii), in each case, of the Company Disclosure Letter;

(x)

except to the extent required by Law (including to avoid the imposition of penalty taxes under Section 409A of the Code) or the existing terms of any Company Benefit Plan and other than in connection with any hiring of an officer permitted by Section 5.1(a)(xvii): (A) other than in the ordinary course of business consistent with past practice, increase the compensation or benefits payable or to become payable to its employees, directors or officers; (B) grant any rights to severance or termination pay to, or enter into or amend any employment or severance agreement with, any director, executive officer or, other than in the ordinary course of business, employee of the Company or any Company Subsidiary, or establish, adopt, enter into or amend any collective bargaining, bonus, profit sharing, thrift, pension, retirement, deferred compensation, employment, termination, severance or other plan or agreement for the benefit of any director, executive officer or, other than in the ordinary course of business, employee; or (C) other than, in accordance with Section 2.3, take any action to amend or waive any performance or vesting criteria or accelerate vesting, exercisability or funding under any Company Benefit Plan;

(xi)	(A) make any material Tax election, (B) settle or compromise any material liability for Taxes, or (C) amend any material Tax Return, in each case in a manner which is inconsistent with the past practices of any of the Company or any Company Subsidiary, as applicable, with respect to the treatment of items on such Tax Returns;

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(xii)	make any material change in accounting policies or procedures, other than as required by GAAP;

(xiii)

make or commit to make any capital expenditures, in the period from the date hereof until December 31, 2014, or in the twelve (12) month period ending December 31, 2015, that in the aggregate exceed the Company’s capital expenditures budget as disclosed in Section 5.1(a)(xiii) of the Company Disclosure Letter for such period plus $10,000,000 in either such period; provided, however, that notwithstanding the foregoing, the Company and any Company Subsidiary shall be permitted to make emergency capital expenditures in any amount (A) required by a Governmental Entity or (B) that the Company determines is incurred in connection with the repair or replacement of facilities destroyed or damaged due to casualty or accident or natural disaster or other force majeure event necessary to maintain or restore safe, adequate and reliable natural gas and electric service to customers; provided, that the Company shall use commercially reasonable efforts to consult with Parent prior to making or agreeing to make any such expenditure;

(xiv)	terminate or permit any material Company Permit to lapse, other than in accordance with the terms and regular expiration of any such Company Permit, or fail to apply on a timely basis for any renewal of any renewable material Company Permit;

(xv)

(A) enter into, terminate early, amend or modify in any material respect a Company Scheduled Contract, other than in the ordinary course of business, or enter into any transaction with a director or officer of the Company or any Company Subsidiary, or (B) waive, release, assign, pay, discharge, settle or satisfy any material claims, liabilities or obligations (whether absolute, accrued, asserted or unasserted, contingent or otherwise), other than the waiver, release, assignment, payment, discharge, settlement or satisfaction of any such claims, liabilities or obligations in the ordinary course of business consistent with past practices, or as required by their terms as in effect on the date of this Agreement;

(xvi)	announce, implement or effect any reduction in force, lay-off, early retirement program, severance program (except as permitted by Section 5.1(a)(x)(B)) or other program or effort concerning the termination of employment of employees of the Company (other than employee terminations in the ordinary course of business);

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(xix)

except for transactions between (A) the Company and wholly-owned Company Subsidiaries or (B) among wholly-owned Company Subsidiaries, redeem, repurchase, defease, cancel or otherwise acquire any Indebtedness, other than (w) at or within one hundred twenty (120) days of stated maturity, (x) pursuant to any required amortization payments and mandatory prepayments or (y) in connection with refinancings permitted by clause (viii) above, or (z) in accordance with the financing plan set forth in Section 5.1(a)(viii) of the Company Disclosure Letter;

(xx)	(A) permit any material change in policies governing or otherwise relating to energy price risk management or marketing of energy or (B) enter into any physical commodity transactions, exchange-traded futures and options transactions, over-the-counter transactions and derivatives thereof or similar transactions other than as permitted by the Trading Guidelines;

(xxi)	other than in the ordinary course of business, make or agree to any material changes to be made to any insurance policies so as to affect the insurance coverage of the Company or any Company Subsidiary or their respective assets following the Closing;

(xxii)	seek to lower any reference price or bid or cap price for energy or capacity sold wholesale by the Company or any Company Subsidiary, other than in the ordinary course of business, consistent with current business practices;

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(i)

by (A) Parent pursuant to Section 7.1(e), or (B) the Company pursuant to Section 7.1(f), then the Company shall pay (or cause to be paid) to Parent, within two (2) Business Days following the date of such termination by Parent pursuant to clause (A), or prior to or concurrently with such termination by the Company pursuant to clause (B), a termination fee of $63,900,000 (the “Company Termination Fee”); or

(ii)	(A) by (1) either Parent or the Company pursuant to Section 7.1(b) or Section 7.1(c) or (2) Parent pursuant to Section 7.1(g), (B) prior to the termination pursuant to Section 7.1(b), the Company Shareholder Meeting or the breach of or failure to perform giving rise to Parent's right to

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(iii)

(A) by (1) either Parent or the Company pursuant to Section 7.1(b) or Section 7.1(c) or (2) Parent pursuant to Section 7.1(g), and (B) prior to the termination pursuant to Section 7.1(b), the Company Shareholder Meeting or the breach or failure to perform giving rise to Parent’s right to terminate under Section 7.1(g), as the case may be, an Acquisition Proposal involving the Company shall have been made to the Company or the Company Board or publicly disclosed and, in each case, not withdrawn, then the Company shall reimburse Parent promptly upon demand, but in no event later than three (3) Business Days after the date of such demand, by wire transfer of same day funds, for all fees and expenses incurred or paid by or on behalf of Parent in connection with the Merger or the other transactions contemplated by this Agreement, including all fees and expenses incurred in connection with Parent’s equity and debt Financing and fees and expenses of counsel (“Parent Transaction Expenses”); provided, however, that the Company shall not be obligated to reimburse Parent for Parent Transaction Expenses pursuant to this Section 7.2(b)(iii) in excess of $12,500,000 in the aggregate.

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(i)	Reviewed the financial terms and conditions of a final draft, dated December 11, 2013, of the Agreement;

(ii)	Reviewed certain publicly available historical business and financial information relating to Company;

(iii)	Reviewed various financial forecasts and other data provided to us by Company relating to the business of Company;

(iv)	Held discussions with members of the senior management of Company with respect to the business and prospects of Company;

(v)	Reviewed public information with respect to certain other companies in lines of business we believe to be generally relevant in evaluating the business of Company;

(vi)	Reviewed the financial terms of certain business combinations involving companies in lines of business we believe to be generally relevant in evaluating the business of Company;

(vii)	Reviewed historical stock prices and trading volumes of Company Common Stock; and

(viii)	Conducted such other financial studies, analyses and investigations as we deemed appropriate.

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