Pinnacle West Reports Lower Third Quarter Earnings


PHOENIX- Pinnacle West Capital Corp. (NYSE: PNW) today reported consolidated net income for the quarter ended September 30, 2002, of $100.9 million or $1.19 per diluted share of common stock. This result compares with consolidated net income of $150.1 million or $1.77 per diluted share for the same period in 2001.

Chairman Bill Post said the decline in quarter-to-quarter earnings was expected, and was primarily due to the collapse of the western wholesale electricity market over the past year. Despite this collapse, and a resulting 59 percent decline in the Company’s power marketing margins compared with the 2001 period, the Company’s power marketing division still produced positive performance for the quarter. "The market has diminished to a point where opportunities are few and far between," he said. "Wholesale prices have shrunken, and many participants have chosen to exit the market."

Results for the 2002 third quarter include a $25 million pretax charge for a previously announced voluntary workforce reduction, with additional charges anticipated later this year. Third-quarter earnings also were negatively impacted by higher purchased power and natural gas costs, milder weather, and a 1.5 percent retail electricity price reduction that took effect July 1, 2002. These negative factors were partially offset by customer growth, higher usage per customer, and lower generation reliability and replacement power costs.

The retail price decrease, the Company’s eighth in nine years, is part of APS’ commitment to reduce residential and small commercial customers’ rates a total of 16 percent from 1994 to 2004.

SunCor Development Co., Pinnacle West’s real estate subsidiary, reported a loss of $1.1 million, compared to net income of $2.3 million for the prior year period. This decrease is due primarily to the timing of parcel sales.

El Dorado Investment Co., the Company’s investment subsidiary, reported a loss of $15.3 million, compared with a loss of $0.1 million for last year’s third quarter. The increased loss was related primarily to its investment in NAC, a nuclear services company specializing in spent fuel management.

For the nine-month period ended September 30, 2002, Pinnacle West’s consolidated net income was $230 million, or $2.71 per diluted share of common stock. This compares with consolidated net income of $276.4 million, or $3.25 per diluted share, in last year’s corresponding period.

Pinnacle West is a Phoenix-based company with consolidated assets of approximately $8.5 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.

For more information on Pinnacle West’s operating statistics and earnings, please visit

Webcast and Conference Call

The Company will hold a conference call and live webcast at 10 a.m. (ET) today, Monday, October 28 to discuss its earnings. The live webcast can be accessed at and will be available for replay on the website for 30 days. To access the conference call by telephone, dial (212) 346-6479 and enter reservation number 20942020. A replay of the call also will be available until noon (ET), Monday, November 4, 2002, by calling (800) 633-8284 and entering the same reservation number.

Consolidated Income Statements


Alan Bunnell, (602) 250-3376

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.

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