PHOENIX, ARIZ. - Pinnacle West Energy and Houston-based Reliant Energy Power Generation, Inc. have reached an agreement to develop more than 2,500 megawatts of electrical generation in Arizona and Nevada, Pinnacle West Energy announced today.

The shared projects include the previously announced 1,060-megawatt Units 1 and 2 of the Redhawk Power Plant in Arizona and more than 1,500 megawatts in two power projects near Las Vegas and in northern Nevada. The agreement represents Pinnacle West Energy's first generating assets under development outside of Arizona.

"These projects will allow us to meet increasing demands for power across the Southwest and at the same time promote a competitive market that will ultimately benefit consumers," said Bill Post, president of Pinnacle West Capital Corporation (NYSE:PNW), parent company of Pinnacle West Energy. "We intend to create a robust generation business that helps ensure a reliable supply of electricity in the West."

Under the agreement, the two companies each will own half interest in the projects, a total of five generating units each capable of producing more than 500 megawatts. In exchange for a 50 percent share of its first two Redhawk units, Pinnacle West Energy will receive half shares Reliant's three Nevada units.

The two Redhawk units are expected to begin commercial operations in summer 2002. Pinnacle West Energy is continuing with development of Redhawk Units 3 and 4 and the previously announced West Phoenix Units 4 and 5.

"We intend to offer competitively priced electricity in growing Southwest markets by producing low-cost energy that is accessible to key transmission hubs," Pinnacle West Energy President Bill Stewart said. "These projects are part of our overall growth strategy that will keep us near the top of western power producers.

"This partnership is a demonstration of our often-stated goal of being a broad-based supplier for power markets in the West, where we have extensive business experience and market knowledge."

A definitive development agreement on plant construction and operation is to be signed within 120 days. It will give Pinnacle West Capital Corporation subsidiaries Arizona Public Service and Pinnacle West Energy about 7,000 megawatts of generating capacity in Arizona, Nevada and New Mexico upon completion of the projects.

Stewart said the agreement between Reliant and Pinnacle West Energy is the result of "common strategic interests in the generation business in the Southwest."

Pinnacle West Capital Corporation is a Phoenix-based company with consolidated assets of approximately $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.

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This press release contains forward-looking statements that involve risks and uncertainties, which include, but are not limited to, the ongoing restructuring of the electric industry; the outcome of the regulatory proceedings relating to the restructuring; regional economic and market conditions, which could affect customer growth and the cost of power supplies; the cost of debt and equity capital; weather variations affecting customer usage; and the strength of the real estate market. These factors and the other matters discussed above may cause future results to differ materially from historical results, or from results or outcomes currently expected or sought by the Company.