APS Files Request With ACC to Establish Credit Reserve to Meet Short-Term Cash Needs


Phoenix, AZ - Arizona Public Service (APS) today filed a request with the Arizona Corporation Commission (ACC) that would allow it to establish a $125 million credit reserve to assist the parent company, Pinnacle West Capital Corp. (NYSE: PNW), in meeting its short-term cash needs.

When Standard & Poor’s lowered the companies' credit ratings earlier this week, it further complicated the Company’s ability to raise funds, which had already been negatively impacted by an August regulatory decision that reversed a 1999 settlement agreement between the Company and the ACC. Under the 1999 settlement agreement, the Company would have financed all its combined generating assets with investment-grade securities, but the ACC reversal isolated a portion of the assets which were built to serve APS customers.

Jack Davis, CEO of APS and President of its parent, Pinnacle West, stressed that the request does not impact customers’ costs and serves only to preserve existing creditworthiness. He explained that the ACC’s recent decision took away the Company’s previous ability to finance the new generating assets.

"This request is made in the same spirit of fairness as our financing application, which is still pending at the commission," said Davis. "We are basically asking for an alternative way to finance generation built to serve APS customers.

"Anyone who has ever signed a contract and then made plans and spent their money under the terms of that contract should understand the basic fairness of our request," he said.

The immediate issue is related to the parent’s need to extend a bank facility, which was part of the overall financing structure based on the 1999 settlement agreement. That agreement prohibited APS from building new power plants that were needed to serve APS retail customers.

"We stepped up to keep the lights on, we lowered our customers’ prices, and we spent hundreds of millions of dollars abiding by the rules. The rules changed and we will live by those as well. But, we are asking the commission to remedy the loss of financial support resulting from their August decision," said Davis.

The Company’s $500 million financing application, which is pending, would if approved offset the $125 million being asked for today. Today’s request would allow the company to preserve its current liquidity until the outcome of the financing action is determined by the commission early next year.

APS asked the commission to consider the request filed today at its November 19, 2002, open meeting.

APS, Arizona's largest and longest-serving electric utility, serves more than 857,000 customers in 11 of the state's 15 counties. With headquarters in Phoenix, APS is the largest subsidiary of Pinnacle West Capital Corporation.


Paul Reynolds, (602) 250-5656

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