PHOENIX - Pinnacle West Capital Corporation (NYSE: PNW) today reported consolidated net income for the quarter ended June 30, 2001, of $66.9 million or $0.79 per diluted share of common stock. The result compares with net income of $89.9 million or $1.06 per share for the same quarter a year ago.

“We were in line with our expectations despite being affected by a number of events in the second quarter,” Chairman Bill Post said. “We remain confident in our financial and operational outlook.”

Strong power marketing results, which improved over the year-ago second quarter, were offset by a number of items, including: increased fuel and purchased power costs; an outage extension at the Palo Verde Nuclear Generating Station to replace fuel control element assemblies; generation reliability measures; a new accounting standard; continuing retail electricity price decreases; and increased pension costs.

“Most of these items reflect our commitment to ensure a reliable supply of electricity during the demanding summer months and lower prices for our retail customers,” said Post.

Since 1994, the Company’s principal subsidiary, Arizona Public Service Co. (APS), has reduced retail prices more than $605 million – the largest cumulative price decrease among investor-owned utilities in the nation. These decreases are part of APS’ commitment to reduce residential and small commercial rates a total of 16 percent from 1994 to 2004. On July 1, 2001, APS lowered prices by 1.5 percent, the seventh decrease in eight years.

The Company also expanded its resources this past quarter by adding more than 500 megawatts of generation capability. The expansion includes a new 120-megawatt unit at the Company’s West Phoenix Power Station, refurbishment of several existing units, and adding about 200 megawatts of temporary generation.

The Company’s electricity operations earned $70.0 million for the quarter ended June 30, 2001, compared with $95.2 million for the year-ago period, the best second quarter in the Company’s history. These operations include the Company’s wholesale marketing and generation functions and APS’ regulated retail business.

Second quarter wholesale power sales were 5.0 billion kilowatt-hours (kWh), up about 32 percent from the comparable period in 2000. APS’ retail service territory continued to experience strong customer growth of 3.9 percent, about three times the national average. Retail energy sales also increased from the same quarter last year, climbing 2.9 percent to 5.9 billion kWh.

The Company’s baseload generation, including nuclear and coal-fired units, operated at combined capacity factors of 86 percent in both the 2001 and 2000 second quarters, and produced about 6.5 billion kWh in the current period.

SunCor Development Co., the Company’s real estate subsidiary, and El Dorado Investment Co., its investment subsidiary, reported a combined loss of $0.2 million for the quarter, compared with a loss of $2.5 million in the same period last year.

For the six-month period ended June 30, 2001, Pinnacle West reported consolidated income from continuing operations of  $129.1 million, or $1.52 per diluted share of common stock, compared with $144.0 million, or $1.70 per share for the corresponding period last year. The Company’s electricity operations earned $136.6 million for the current six-month period compared with $127.8 million for the comparable period. SunCor and El Dorado reported combined net income of $0.8 million for the six months, compared with earnings of $21.9 million in the 2000 period.

Also, today, the Pinnacle West board of directors declared a quarterly dividend of $0.375 per share of common stock, which is unchanged from the prior quarter. Dividends on common stock are payable on September 1, 2001, to shareholders of record on August 1, 2001.

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 electricity and 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 based on current expectations, and the Company assumes no obligation to update these statements. Because actual results may differ materially from expectations, the Company cautions readers not to place undue reliance on these statements. A number of factors could cause future results to differ materially from historical results, or from results or outcomes currently expected or sought by the Company. These factors include 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 and wholesale market prices; the cost of debt and equity capital; weather variations affecting customer usage; the successful completion of a generation expansion program; regulatory issues associated with generation expansion, such as permitting and licensing; our ability to compete successfully outside traditional regulated markets; technological developments in the electric industry; and the strength of the real estate market.