Pinnacle West Reports 2013 First-Quarter Results

  Pinnacle West Reports 2013 First-Quarter Results

  *Customer growth and colder weather drive higher retail electricity sales
  *2012 regulatory settlement contributes to improved financial results
  *Company continues operational excellence and cost management execution
  *Company affirms full-year 2013 earnings guidance

Business Wire

PHOENIX -- May 3, 2013

Pinnacle West Capital Corp. (NYSE: PNW) today reported consolidated on-going
earnings of $24.4 million, or $0.22 per diluted share of common stock, for the
quarter ended March 31, 2013. This result compares with a consolidated
on-going loss of $7.5 million, or $0.07 per share, in the same 2012 period.

The Company’s net income attributable to common shareholders for the 2013
first quarter was $24.4 million, or $0.22 per diluted share, compared with a
net loss of $8.3 million, or $0.08 per diluted share, for the same quarter a
year ago. On-going earnings exclude results of discontinued operations. A
reconciliation of reported earnings to on-going earnings is provided at the
end of this release.

“It was a strong first quarter, building on our momentum from 2012,” said
Pinnacle West Chairman, President and Chief Executive Officer Don Brandt.
“Economic improvement in our market area, combined with superior operational
performance by our employees, continued execution of our cost management
program, and colder-than-normal weather allowed us to produce solid financial
and operating results.

“As growth in our state begins to increase, we must maintain top-tier customer
service and reliability, while providing solid financial returns for

The 2013 first-quarter on-going results were positively impacted by the
following factors:

  *The Company’s 2012 regulatory settlement, which included a retail non-fuel
    base rate increase,  improved earnings by $0.13 per share. The settlement
    became effective July 1, 2012.
  *Higher retail electricity sales –  excluding the effects of weather
    variations, but including the effects of customer conservation, energy
    efficiency programs and distributed renewable generation – improved
    earnings by $0.06 per share. The 0.6 percent sales increase compared to
    the same quarter a year ago was related to customer growth of 1.4 percent
    and changes in customer usage patterns and related pricing.
  *Colder-than-normal weather improved the Company’s earnings by $0.06 per
    share compared to the 2012 first quarter, during which warmer weather
    adversely affected earnings by $0.01 per share compared with historically
    normal conditions. In the 2013 first quarter, there were 613 residential
    heating degree-days (a measure of the effects of weather) – 24 percent
    more than normal and 47 percent more than the year-ago first quarter.
  *Higher transmission revenues improved earnings by $0.06 per share,
    primarily because of  retail transmission rate changes implemented in
  *Lower infrastructure-related costs increased results by $0.06 per share,
    due to decreased interest expense resulting from lower debt balances and
    interest rates; and lower property taxes.  These lower costs were
    partially offset by  higher depreciation and amortization expenses.

The positive factors were partially offset by higher operations and
maintenance expenses, which impacted earnings by $0.07 per share compared with
the prior-year quarter. The expense increase primarily related to higher
performance-based labor and employee benefit costs, including amortization of
certain retirement benefits in 2013 compared with the regulatory deferral of
such costs in 2012. The O&M variance excludes costs associated with renewable
energy, energy efficiency and similar regulatory programs, which are largely
offset by comparable amounts of operating revenues.

Arizona Public Service (APS), the Company’s principal subsidiary, reported
2013 first-quarter net income attributable to common shareholder of $26.0
million, compared with a net loss of $4.1 million for the comparable 2012

Financial Outlook

Pinnacle West expects its 2013 consolidated on-going earnings will be near the
top of the range of $3.45 to $3.60 per diluted share. Key factors and
assumptions underlying the outlook remain unchanged, except for actual weather
through March and normal weather patterns for the remainder of the year.

Longer term, the Company’s goal is to achieve a consolidated earned return on
average common equity of at least 9.5 percent annually in 2013 through 2015.
Key factors and assumptions underlying the outlook can be found in the
earnings presentation slides for the first-quarter 2013 on the Company’s
website at

Conference Call and Webcast

Pinnacle West invites interested parties to listen to the live webcast of
management’s conference call to discuss the Company’s 2013 first-quarter
results, as well as recent developments, at 12 noon ET (9 a.m. AZ time) today,
May 3. The webcast can be accessed at and will
be available for replay on the website for 30 days. To access the live
conference call by telephone, dial (877) 407-8035 or (201) 689-8035 for
international callers. A replay of the call also will be available until 11:55
p.m. (ET), Friday, May 10, 2013, by calling (877) 660-6853 in the U.S. and
Canada or (201) 612-7415 internationally and entering conference ID number

General Information

Pinnacle West Capital, an energy holding company based in Phoenix, has
consolidated assets of about $13.3 billion, more than 6,300 megawatts of
generating capacity and about 6,600 employees in Arizona and New Mexico.
Through its principal subsidiary, Arizona Public Service, the Company provides
retail electricity service to more than 1.1 million Arizona homes and
businesses. For more information about Pinnacle West, visit the Company’s
website at

Dollar amounts in this news release are after income taxes. Earnings per share
amounts are based on average diluted common shares outstanding. For more
information on Pinnacle West’s operating statistics and earnings, please visit


                                 Three Months Ended     Three Months Ended
                                 March 31, 2013         March 31, 2012
                                 Dollars in   Diluted   Dollars in   Diluted
                                 Millions     EPS       Millions     EPS
Net Income (Loss) Attributable   $   24.4     $  0.22   $  (8.3  )   $ (0.08 )
to Common Shareholders
Loss from Discontinued              --         --       0.8       0.01  
On-going Earnings (Loss)         $   24.4     $  0.22   $  (7.5  )   $ (0.07 )

                        NON-GAAP FINANCIAL INFORMATION

In this press release, we refer to “on-going earnings.” On-going earnings is a
“non-GAAP financial measure,” as defined in accordance with SEC rules. We
believe on-going earnings provide investors with a useful indicator of our
results that is comparable among periods because it excludes the effects of
unusual items that may occur on an irregular basis. Investors should note that
these non-GAAP financial measures involve judgments by management, including
whether an item is classified as an unusual item. We use on-going earnings, or
similar concepts, to measure our performance internally in reports for

                          FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements based on our current
expectations, including statements regarding our earnings guidance and
financial outlook and goals. These forward-looking statements are often
identified by words such as “estimate,” “predict,” “may,” “believe,” “plan,”
“expect,” “require,” “intend,” “assume” and similar words. Because actual
results may differ materially from expectations, we caution readers not to
place undue reliance on these statements. A number of factors could cause
future results to differ materially from historical results, or from outcomes
currently expected or sought by Pinnacle West or APS. These factors include,
but are not limited to:

  *our ability to manage capital expenditures and operations and maintenance
    costs while maintaining reliability and customer service levels;
  *variations in demand for electricity, including those due to weather, the
    general economy, customer and sales growth (or decline), and the effects
    of energy conservation measures and distributed generation;
  *power plant and transmission system performance and outages;
  *volatile fuel and purchased power costs;
  *fuel and water supply availability;
  *our ability to achieve timely and adequate rate recovery of our costs,
    including returns on debt and equity capital;
  *regulatory and judicial decisions, developments and proceedings;
  *new legislation or regulation including those relating to environmental
    requirements and nuclear plant operations;
  *our ability to meet renewable energy and energy efficiency mandates and
    recover related costs;
  *risks inherent in the operation of nuclear facilities, including spent
    fuel disposal uncertainty;
  *competition in retail and wholesale power markets;
  *the duration and severity of the economic decline in Arizona and current
    real estate market conditions;
  *the cost of debt and equity capital and the ability to access capital
    markets when required;
  *changes to our credit ratings;
  *the investment performance of the assets of our nuclear decommissioning
    trust, pension, and other postretirement benefit plans and the resulting
    impact on future funding requirements;
  *the liquidity of wholesale power markets and the use of derivative
    contracts in our business;
  *potential shortfalls in insurance coverage;
  *new accounting requirements or new interpretations of existing
  *generation, transmission and distribution facility and system conditions
    and operating costs;
  *the ability to meet the anticipated future need for additional baseload
    generation and associated transmission facilities in our region;
  *the willingness or ability of our counterparties, power plant participants
    and power plant land owners to meet contractual or other obligations or
    extend the rights for continued power plant operations;
  *technological developments affecting the electric industry; and
  *restrictions on dividends or other provisions in our credit agreements and
    Arizona Corporation Commission orders.

These and other factors are discussed in Risk Factors described in Part 1,
Item 1A of the Pinnacle West/APS Annual Report on Form 10-K for the fiscal
year ended December 31, 2012, which readers should review carefully before
placing any reliance on our financial statements or disclosures. Neither
Pinnacle West nor APS assumes any obligation to update these statements, even
if our internal estimates change, except as required by law.

(dollars and shares in thousands, except per share amounts)
                                                     THREE MONTHS ENDED
                                                     MARCH 31,
                                                      2013       2012    
Operating Revenues                                   $ 686,652     $ 620,631
Operating Expenses
Fuel and purchased power                               230,679       216,309
Operations and maintenance                             223,250       210,663
Depreciation and amortization                          103,730       100,109
Taxes other than income taxes                          40,021        42,475
Other expenses                                        2,049       3,068   
Total                                                 599,729     572,624 
Operating Income                                      86,923      48,007  
Other Income (Deductions)
Allowance for equity funds used during                 6,864         4,756
Other income                                           758           760
Other expense                                         (3,752  )    (4,068  )
Total                                                 3,870       1,448   
Interest Expense
Interest charges                                       49,478        56,967
Allowance for borrowed funds used during              (3,990  )    (3,151  )
Total                                                 45,488      53,816  
Income (Loss) From Continuing Operations Before        45,305        (4,361  )
Income Taxes
Income Taxes                                          12,469      (4,645  )
Income From Continuing Operations                      32,836        284
Loss From Discontinued Operations
Net of Income Taxes                                   -           (765    )
Net Income (Loss)                                      32,836        (481    )
Less: Net income attributable to noncontrolling        8,392         7,776
Net Income (Loss) Attributable To Common             $ 24,444     $ (8,257  )
Weighted-Average Common Shares Outstanding - Basic     109,832       109,299
Weighted-Average Common Shares Outstanding -           110,835       109,299
Earnings Per Weighted-Average Common Share
Income (loss) from continuing operations             $ 0.22        $ (0.07   )
attributable to common shareholders - basic
Net income (loss) attributable to common             $ 0.22        $ (0.08   )
shareholders - basic
Income (loss) from continuing operations             $ 0.22        $ (0.07   )
attributable to common shareholders - diluted
Net income (loss) attributable to common             $ 0.22        $ (0.08   )
shareholders - diluted
Amounts Attributable To Common Shareholders
Income (loss) from continuing operations, net of     $ 24,444      $ (7,483  )
Discontinued operations, net of tax                   -           (774    )
Net income (loss) attributable to common             $ 24,444     $ (8,257  )


Pinnacle West Capital Corporation
Media Contact:
Alan Bunnell, 602-250-3376
Analyst Contact:
Rebecca Hickman, 602-250-5668
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