Pinnacle West reports

Pinnacle West Reports Positive 2011 Fourth-quarter & Full-year Results

 ’Disciplined cost management’ and strong operational performance benefit bottom line

Pinnacle West Capital Corporation reported consolidated on-going earnings of $12.1 million, or $0.11 per diluted share of common stock, for the quarter ended December 31, 2011. This result compares with on-going earnings of $5.2 million, or $0.05 per share, in the same 2010 period. The Company’s net income attributable to common shareholders for the 2011 fourth quarter was $12.6 million, or $0.11 per diluted share, compared with net income of $7.4 million, or $0.07 per share, for the same quarter a year ago.

For full-year 2011, Pinnacle West reported consolidated on-going earnings of $328.1 million, or $2.99 per share, as compared to $324.7 million, or $3.03 per share, a year ago. Consolidated net income attributable to common shareholders for 2011 was $339.5 million, or $3.09 per diluted share, compared with 2010 net income of $350.1 million, or $3.27 per diluted share.

On-going earnings exclude results of discontinued operations primarily related to the Company’s real estate activities and former energy services business. A reconciliation of reported earnings to on-going earnings is provided at the end of this release.

“Disciplined cost management, concentration on our core electricity business and superior operational performance by our dedicated employees – particularly in the areas of customer service, reliability and safety – produced sound financial results,” said Pinnacle West Chairman, President and Chief Executive Officer Don Brandt.

Brandt added that the Company’s 2011 results exceeded its earnings guidance. The Company had projected that on-going earnings would be near the top of its guidance range of $2.75 to $2.90 per share. The actual results were due, in part, to lower than expected operating and maintenance costs, and cooler than normal weather that increased retail sales in the fourth quarter by a similar amount as the year-ago period.

“We achieved a significant milestone with the proposed settlement of APS’s pending retail rate case,” said Brandt. “The agreement has broad support and contains provisions important to customers, shareholders and other stakeholders.” The settlement is pending approval by the Arizona Corporation Commission. APS and the other parties have requested the agreement take effect July 1, 2012.

Brandt cited additional examples of the Company’s recent achievements:

  • In 2011, APS continued its top-tier customer satisfaction rating, maintained superior power plant performance, and provided its 1.1 million customers with record levels of service reliability.
  • Standard & Poor’s Corporation (S&P) raised credit ratings in June for Pinnacle West and APS to BBB, up from BBB-, thus reducing borrowing costs and improving access to debt markets. S&P cited the companies’ stronger credit metrics, reduction in debt, improving regulatory environment and prudent financial management as contributing factors.
  • APS also celebrated several renewable energy milestones as the AZ Sun Program (APS-owned solar energy) added 50 megawatts of new solar capacity, enough to serve more than 12,000 APS customers. With these plants, APS’s renewable energy portfolio now includes 423 megawatts with an additional 523 megawatts in development. New solar and wind plants to serve APS customers have created more than 2,400 design, engineering and construction jobs for Arizona.

The fourth-quarter on-going results comparison was positively impacted by the following major factors:

  • A decrease in operations and maintenance expenses improved earnings by $0.06 per share, due largely to lower power plant maintenance costs as a result of more work being completed earlier in the year than in 2010; and to lower employee benefit costs, partially offset by higher customer service and energy delivery expenses. The variance excludes costs associated with renewable energy and energy efficiency programs, which are offset by comparable amounts of operating revenues.
  • Higher transmission revenues improved earnings by $0.03 per share, primarily because of a retail transmission rate increase implemented in July 2011.

These positive factors were partially offset by the absence of tax benefits of $0.06 per share that were recorded in the 2010 fourth quarter, but were related to prior years.

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APS, the Company’s principal subsidiary, recorded 2011 fourth-quarter net income attributable to common shareholder of $14.3 million versus net income of $7.8 million for the comparable 2010 quarter. For 2011 as a whole, APS net income attributable to common shareholder was $336.2 million compared with $335.7 million for 2010.

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