Pinnacle West Reports 1998 Results Declares Quarterly Dividend


PHOENIX, Ariz. ‚ Pinnacle West Capital Corporation (NYSE:PNW) today reported income from continuing operations for the calendar year 1998 of $242.9 million or $2.85 cents per diluted share of common stock, compared with $235.9 million or $2.74 per share for the prior year.

Chairman Richard Snell said that the performance and growth characteristics that have been at the foundation of the company were evident all year. However, he added that since late 1998, regulatory uncertainty related to the introduction of retail electricity competition in Arizona has negatively affected the company¼s stock price.

"We have had a good record of working with our regulators and we believe we will again achieve a constructive outcome in 1999," he said. 

Among highlights for the year, Snell included:

  • Customer growth at Arizona Public Service that was more than three times the national average;

  • A fourth reduction in electricity prices, dropping electricity prices by 8.4 percent during the last five years;

  • Strong performance from the company's power plants including Palo Verde which broke its own 1997 national power record by generating more than 30 billion kilowatt-hours of electricity in 1998. This was the first time a facility of any kind in the United States had crossed the 30-billion kilowatt-hour threshold in any year; and

  • Enhanced energy marketing and trading activities primarily in the western United States.

For the year, the benefits of higher sales related to 4.2 percent customer growth and increased usage per customer, expanded power marketing and trading activities and lower financing costs were partially offset by the effects of milder weather and two electricity price reductions. The price reductions were 1.1 percent effective July 1, 1998 and 1.2 percent effective July 1, 1997.

Operating expenses in 1998 were up primarily as a result of customer growth, competition initiatives and expansion of the company¼s power marketing and trading function.

Also negatively affecting the year-to-year comparison were two fuel-related settlements that contributed approximately $21 million before income taxes in 1997, primarily related to prior years.

APS earnings for 1998 were $245.5 million, compared with $238.7 million in 1997.

For the year, Pinnacle West's real estate subsidiary, SunCor Development, and its investment subsidiary, El Dorado, contributed a combined $12 million to consolidated results compared with $13.5 million for the prior year.

Also today, the Pinnacle West board of directors declared a quarterly dividend of 32.5 cents per share of common stock, payable on March 1, 1999 to shareholders of record on February 1, 1999. The company hiked its dividend eight percent (ten cents per share annually) in October, continuing a policy of dividend increases by relatively consistent amounts at a pace that is well above the electric utility industry.

Pinnacle West is a Phoenix-based holding company with consolidated assets of approximately $7 billion. Its major subsidiary is APS, Arizona's largest electric utility. SunCor, its real estate subsidiary, has some 13,000 acres under development.

Pinnacle West Capital Corporation Consolidated Income Statements
(In Thousands, Except Per Share Amounts)

Three Months Ended
December 31,

Twelve Months Ended
December 31,

1998 1997 1998 1997

Operating Revenues
  Electric $ 443,526 $ 407,960 $ 2,006,398 $ 1,878,553
  Real estate 42,835 35,835 124,188 116,473

    Total 486,361 443,795 2,130,586 1,995,026

Fuel Expenses
  Fuel for electric generation 57,093 46,214 231,967 201,341
  Purchased power 58,207 47,104 305,534 235,286

    Total 115,300 93,318 537,501 436,627

Operating Expenses
  Utility operations and maintenance 104,653 112,154 414,041 399,434
  Real estate operations 40,061 34,078 115,331 111,628
  Depreciation and amortization 98,283 92,280 379,679 368,285
  Taxes other than income taxes 26,216 30,408 116,906 121,546

    Total 269,213 268,920 1,025,957 1,000,893

Operating Income 101,848 81,557 567,128 557,506

Other Income (Deductions)
  Interest on long-term debt (37,721) (40,882) (153,736) (164,165)
  Other interest (4,015) (3,796) (15,409) (18,673)
  Capitalized interest 4,335 4,708 18,596 19,703
  Preferred stock dividend requirements of APS (2,043) (2,998) (9,703) (12,803)
  Other - net (2,431) (6,414) 609 4,569

    Total (41,875) (49,382) (159,643) (171,369)

Income Before Income Tax 59,973 32,175 407,485 386,137
Income Tax Expense 24,445 13,223 164,593 150,281

Net Income $ 35,528 $ 18,952 $ 242,892 $ 235,856

Average Common Shares Outstanding 84,732 84,727 84,774 85,503
Earnings Per Average
Common Share Outstanding

Net income - basic $ 0.42 $ 0.21 $ 2.87 $ 2.76

Net income - diluted $ 0.42 $ 0.21 $ 2.85 $ 2.74


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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