PHOENIX - Pinnacle West Capital Corporation (NYSE: PNW) today reported net income for the quarter ended March 31, 2001, of $59.5 million, or $0.70 per diluted share of common stock. This result compares with net income of $54.1 million, or $0.64 per diluted share, for the corresponding quarter a year ago.

The Company’s electricity operations earned $64.0 million for the quarter ended March 31, 2001, compared with $32.8 million for the year-ago quarter. These operations include the Company’s wholesale marketing functions and Arizona Public Service’s (APS) regulated retail business.

The increase in net income over last year’s comparable period was largely due to wholesale sales to western power markets. The effect of these sales more than offset last year’s one-time market gain in a technology-related investment at El Dorado, the Company’s investment subsidiary. El Dorado reported net income of $0.5 million for the 2001 first quarter, compared with $19.1 million for the corresponding period a year ago.

"We had a very strong quarter," said Chairman and Chief Executive Officer Bill Post. "We continue to reduce retail prices for our local customers and increase earnings by offsetting higher fuel and purchased power costs with our wholesale sales activities."

First quarter wholesale power sales were 4.4 billion kilowatt-hours (kWh), up nearly 51 percent from the 2.9 billion kWh sold in the comparable period in 2000. APS’ retail service territory continued to experience strong customer growth of 3.8 percent, about three times the national average. As a result, retail energy sales also increased from the same period last year, climbing 7.2 percent to 4.9 billion kWh.

APS plans to decrease its retail prices 1.5 percent this July, bringing the total reduction for residential and small commercial customers to approximately 13 percent since 1994. Compared with the double-digit price increases currently pending in neighboring states, APS plans to reduce prices a total of 16 percent for the 10 years ending 2004.

SunCor Development Company, the Company’s real estate subsidiary, reported lower net income of $0.5 million, compared with $5.3 million for the prior-year quarter. The difference is due primarily to the timing of large parcel sales in the prior year.

"Looking ahead, the Company has the opportunity to continue the level of earnings growth we experienced over the last five years," Post said. "Volatility in power prices, however, will not disappear any time soon, as unpredictable energy markets and any associated restructuring in the West could impact future revenues and energy costs.

"We believe a combination of outstanding operational performance and our understanding of western wholesale electricity markets will enable us to protect our customers and reward our shareholders."

Pinnacle West continues to closely monitor developments in the California energy markets and evaluate any potential impact on the Company and its subsidiaries. Based on its current evaluations, the Company has reserved $10 million before income taxes for its credit exposure related to the California situation.

Pinnacle West 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.

Contacts

Media:
Alan Bunnell, (602) 250-3376

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

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.