Pinnacle West Reports First Quarter Results Declares Quarterly Dividend


HOENIX, ARIZ. -- Pinnacle West Capital Corporation (NYSE:PNW) today reported net income for the quarter ended March 31, 1997 of $25.4 million or $0.29 per share of common stock, compared with $31.3 million or $0.36 per share for the same period in 1996. (Results for the first quarter a year ago included an extraordinary charge of $3.6 million, or 4 cents per share, for a debt prepayment penalty.)

Chairman Richard Snell said results were in line with the company's expectations and that the earnings decline was attributable to the effects of a 1996 regulatory agreement which became effective July 1 of last year.

That agreement includes a 3.4 percent rate reduction and accelerated amortization of regulatory assets, which together reduced after tax income in the quarter by approximately $25 million or $0.29 per share.

These effects were partially offset by customer growth of 4.3 percent; reduced interest expense; contributions from SunCor and El Dorado, the company's real estate and venture capital subsidiaries; and lower taxes. Customer growth remains a unique advantage for the company, said Snell.

At mid-year, we will have absorbed 12 months of effects on earnings from the 1996 regulatory agreement, and it should be apparent by year-end that customer growth, cost management and strong cash flow will allow us the opportunity for earnings growth even as we reduce electricity prices and improve our balance sheet through accelerated amortization.

Snell said other positive effects on earnings going forward include about $17 million of annual pretax savings from the 1996 voluntary severance program (for which the company took a $31.7 million pretax charge in the fourth quarter of 1996), lower interest expense due to debt reduction and refinancing at the parent company and APS, and the effects on earnings per share of a stock buyback program which the company began in April and which authorizes up to $80 million for stock repurchases in 1997.

On the other hand, calculations made by the Company pursuant to the 1996 regulatory settlement and filed with the Arizona Corporation Commission would indicate a 1.2 percent or $18 million reduction in electricity prices ($11 million after taxes) to be effective July 1, 1997 assuming approval by the ACC. A return to normal weather in 1997 following a warmer than normal 1996 would also adversely affect the earnings comparison.

In the quarter-to-quarter comparison, the company's stepped-up activity in competitive bulk power markets resulted in notable increases in electric revenues and fuel expenses.

For the quarter ended March 31, 1997 APS earned $25.0 million compared with $41.1 million for the prior-year quarter, and SunCor and El Dorado reported combined earnings of $4.4 million compared with a combined loss of $1.3 million for the corresponding 1996 period.

Also today the Pinnacle West board of directors declared a dividend of 27.5 cents per share of common stock payable on June 1, 1997 to shareholders of record on May 2, 1997.

Pinnacle West is a Phoenix-based holding company with consolidated assets of approximately $7 billion. Its major subsidiary is Arizona Public Service, the state's largest electric utility.


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.

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