PHOENIX - Pinnacle West Capital Corporation (NYSE: PNW) today reported consolidated net income for the quarter ended June 30, 2005, of $27 million, or $0.28 per diluted share of common stock.   This result compares with net income of $73 million, or $0.79 per diluted share, for the same quarter a year ago.

On-going consolidated earnings in the second quarter of 2005 were $86 million, or $0.89 per share, compared with $54 million, or $0.59 per share in the comparable 2004 quarter. 

On-going earnings for the second quarter of 2005 exclude an after-tax loss of $59 million, or $0.61 per share, related to the pending sale of the Silverhawk Power Station. On-going earnings for the 2004 second quarter exclude income after income taxes of $19 million, or $0.20 per share, related to the sale of the Company’s interests in the Phoenix Suns, NAC International and Silverhawk.

“Customer growth continues to be one of the underlying fundamentals of our company’s success,” said Pinnacle West Chairman Bill Post, citing a service territory that is growing about 4 percent a year and three times the national average. “That growth, however, will require significant planning and investment on our part and continuing cooperation from our regulators.”  Post added that, looking forward, “the Company’s earnings outlook for the year remains unchanged and on target” excluding the effects of the Silverhawk sale.

The quarter-to-quarter results were favorably affected by higher retail electricity revenues resulting from the company’s first price increase in 14 years and higher retail sales volumes due to customer growth; lower depreciation expense; the absence of regulatory asset amortization; deferred fuel and purchased power costs; and improved results from the Company's real estate operations. These favorable factors were partially offset by an increase in operating costs primarily related to generation, customer service and benefits costs.

For more information on Pinnacle West’s operating statistics and earnings, please visit www.pinnaclewest.com/financials.


Conference Call

Pinnacle West invites interested parties to listen to the live webcast of management’s conference call to discuss the Company’s 2005 second quarter earnings and recent developments at 12 noon (ET) today, July 27, 2005. The webcast can be accessed at www.pinnaclewest.com/presentations and will be available for replay on the web site for 30 days. To access the live conference call by telephone, dial (877) 356-3961 and enter reservation number 7452307. A replay of the call also will be available until 12 midnight (ET), Wednesday, August 3, 2005, by calling (800) 642-1687 in the U.S. and Canada or (706) 645-9291 internationally and the same reservation number.

Pinnacle West is a Phoenix-based company with consolidated assets of about $10.7 billion. Through its subsidiaries, the Company generates, sells and delivers electricity and sells energy-related products and services to retail and wholesale customers in the western United States.  It also develops residential, commercial, and industrial real estate projects.

PINNACLE WEST CAPITAL CORPORATION
NON-GAAP MEASURE RECONCILIATION – NET INCOME (GAAP MEASURE)
TO ON-GOING EARNINGS (NON-GAAP MEASURE)

This press release contains a forward-looking statement about Pinnacle West’s 2005 earnings outlook.   Neither Pinnacle West nor APS assumes any obligation to update this statement or to make any further statements on this issue, except as required by applicable law.  Because actual results may differ materially from expectations, we caution readers not to place undue reliance on this statement. A number of factors could cause future results to differ materially from historical results, or from results or outcomes currently expected or sought by Pinnacle West or APS. In addition to the “Risk Factors” described in Exhibits 99.1 and 99.2 to Pinnacle West’s and APS’ Report on Form 10-Q for the fiscal quarter ended March 31, 2005, these factors include, but are not limited to:   state and federal regulatory and legislative decisions and actions, including by the Arizona Corporation Commission and the Federal Electric Regulatory Commission;  the ongoing restructuring of the electric industry, including the introduction of retail electric competition in Arizona and decisions impacting wholesale competition;  the outcome of regulatory, legislative and judicial proceedings relating to the restructuring;  market prices for electricity and natural gas;  power plant performance and outages;  transmission  outages and constraints;  weather variations affecting local and regional customer energy usage;  customer growth and energy usage;  regional economic and market conditions, including the results of litigation and other proceedings resulting from the California energy situation, volatile purchased power and fuel costs and the completion of generation and transmission construction in the region, which could affect customer growth and the cost of power supplies;  the cost of debt and equity capital and access to capital markets;  the uncertainty that current credit ratings will remain in effect for any given period of time;  our ability to compete successfully outside traditional regulated markets (including the wholesale market);  the performance of our marketing and trading activities due to volatile market liquidity and any deteriorating counterparty credit and the use of derivative contracts in our business (including the interpretation of the subjective and complex accounting rules related to these contracts);  changes in accounting principles generally accepted in the United States of America and the interpretation of those principles;  the performance of the stock market and the changing interest rate environment, which affect the amount of required contributions to Pinnacle West’s pension plan and APS’ nuclear decommissioning trust funds, as well as the reported costs of providing pension and other postretirement benefits;  technological developments in the electric industry;  the strength of the real estate market in SunCor’s market areas, which include Arizona, Idaho, New Mexico and Utah; and other uncertainties, all of which are difficult to predict and many of which are beyond the control of Pinnacle West and APS.

Media:
Alan Bunnell, (602) 250-3376

Analyst:
Rebecca Hickman, (602) 250-5668
Lisa Malagon, (602) 250-5671