Pinnacle West Reports 2002 Earnings: Anticipated Lower Financial Results Contrast With High Operational Performance


PHOENIX - Pinnacle West Capital Corporation (NYSE: PNW) today reported consolidated income before accounting change for the year 2002 of $215.2 million or $2.53 per diluted share of common stock, compared with $327.4 million or $3.85 per share for the prior year. The results were in line with previous disclosures by the Company.

Consolidated net income for 2002 was $149.4 million, or $1.76 per diluted share, compared with $312.2 million, or $3.68 per share, in 2001. Results for 2002 included a $65.7 million charge due to the adoption of a new accounting standard for trading activities.

"The Company’s fundamental operational performance in 2002 was strong," said Chairman Bill Post. "And, while this past year’s earnings were down from the record results of 2001, the decrease was not unexpected in light of significant changes in our industry and markets."

Post said there were two main drivers in the 2002 results: the effect of previously disclosed one-time charges, and the impact of lower market prices and margins resulting from the collapse of the western wholesale electricity market over the past two years.

Other factors affecting year-to-year earnings included: higher purchased power and natural gas costs; the effects of milder weather; and a 1.5 percent retail electricity price reduction that took effect July 1, 2002. These factors were partially offset by lower replacement power costs for plant outages; the absence of costs for temporary generating units used to ensure reliability in the 2001 summer; and 3.1 percent retail customer growth, which is about three times the national average.

"We serve a vibrant, growing market and have demonstrated operational excellence in all aspects of our core business, from running one of the nation’s safest and most efficient nuclear power plants to ranking in the top quartile nationally for customer satisfaction," Post said.

For the year, the previously reported non-recurring charges totaled $87.0 million, or $1.03 per diluted share. They include: $21.8 million, or $0.26 per share for a voluntary workforce reduction; $29.7 million, or $0.35 per share, resulting from the cancellation of Redhawk Units 3 and 4; and $35.5 million, or $0.42 per share, related to an investment in NAC International.

For the 2002 fourth quarter, the Company reported a net loss of $80.6 million, or $0.95 per diluted share, compared with net income of $35.8 million, or $0.42 per share, in the comparable 2001 period. The loss before accounting change was $14.9 million, or $0.17 per share, in 2002.

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.

All dollar amounts included in this release are reported after income tax effects. 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, Tuesday, Feb. 4 to discuss its earnings and recent developments. The live webcast can be accessed at and will be available for replay on the website for 30 days. To access the live conference call by telephone, dial (877) 356-3961 and enter reservation number 7575985. A replay of the call also will be available until noon (ET), Tuesday, Feb. 11, 2003, by calling (800) 642-1687 and entering reservation number 7575985.

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, including the introduction of retail electric competition in Arizona and decisions impacting wholesale competition; the outcome of regulatory and legislative proceedings relating to the restructuring; state and federal regulatory and legislative decisions and actions, including price caps and other market constraints imposed by the FERC; regional economic and market conditions, including the California energy situation and completion of generation construction in the region, which could affect customer growth and the cost of power supplies; the cost of debt and equity capital and access to the capital markets; weather variations affecting local and regional customer energy usage; the effect of conservation programs on energy usage; power plant performance; the successful completion of our generation expansion program; regulatory issues associated with generation expansion, such as permitting and licensing; our ability to compete successfully outside traditional regulated markets (including the wholesale market); our ability to manage our marketing and trading activities and the use of derivative contracts in our business; technological developments in the electric industry; the performance of the stock market, which affects the amount of our required contributions to our pension plan and nuclear decommissioning trust funds; the strength of the real estate market in the market areas of SunCor Development Company, our real estate subsidiary, which include Arizona, New Mexico and Utah; and other uncertainties, all of which are difficult to predict and many of which are beyond our control.

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