Pinnacle West Reports 1999 Earnings Declares Quarterly Dividend


PHOENIX, ARIZ. - Pinnacle West Capital Corporation (NYSE:PNW) today reported 11 percent higher income from continuing operations for the calendar year 1999 of $269.8 million or $3.17 per diluted share of common stock, compared with $242.9 million or $2.85 per share for the prior year.

Net income for 1999 of $167.9 million or $1.97 per share of common stock included an extraordinary charge for a regulatory disallowance and a tax benefit from discontinued operations, both recorded in the third quarter.

Chief Executive Officer Bill Post said the year-to-year comparison was positively affected by 3.8 percent electricity customer growth at Arizona Public Service, higher contributions from non-regulated operations and lower financing costs.

Partially offsetting these improvements were the effects of two electricity price decreases and increased utility operations and maintenance expense.

Post said cost management remained high on the agenda, and that the increase in utility operations and maintenance expense was comprised primarily of one-time costs totaling approximately $20 million ($12 million after tax) including certain environmental and other non-recurring items.

"Through continued strong operational performance, 1999 was another good year," said Post. "Earnings were strong; customer growth remained about three times the national average; we set new power plant performance records; we lowered electricity prices; we increased our dividend 7.7 percent; we reached a pivotal settlement agreement with Arizona regulators; retail electricity markets began to open to competition in Arizona; and we announced plans for new generation capacity that will supply competitive markets in Arizona and throughout the western United States."

" We have every reason to be very confident about our future, and we are," Post added.

Among specific highlights for the year, Post included:

  • APS  reduced its prices for customers for the fifth time in as many years, and committed to four more decreases that will bring total reductions for residential and small business customers to approximately 16 percent over a 10-year period;
  • Palo Verde Nuclear Generating Station generated more power than any other U.S. generating facility for the fifth consecutive year, and the Institute of Nuclear Power Operations awarded Palo Verde its third consecutive "INPO 1" rating as one of the nation's top nuclear plants;
  • Pinnacle West Energy, a non-regulated generation affiliate, was formed and announced plans to build new natural gas power plants with a total capacity of up to 2,770 megawatts at the West Phoenix Power Plant and a site near Palo Verde; and
  • APS Energy Services gained approval from the Arizona Corporation Commission to expand its offering of competitive electricity services into Arizona.

For the year, APS earnings before the extraordinary charge were $267.3 million, compared with $245.5 million in 1998.

Pinnacle West's real estate subsidiary, SunCor Development, and its investment subsidiary, El Dorado, reported combined contributions to consolidated results in 1999 of $18 million, compared with $12 million for the prior year. The improvement related primarily to the increased value of El Dorado's investment in a technology-related venture capital partnership. Management estimates that gains may also be recognized in 2000, assuming continued strength in that sector as well as the real estate market.

"The outlook in our non-regulated businesses, along with expected results from core operations, provide us the opportunity for earnings growth in 2000 despite our completion of the amortization of investment tax credits in 1999," Post said.

In 1999, the investment tax credit amortization totaled $24 million or $0.28 per share of common stock. The amortization was recorded in 1999 and prior years in accordance with a 1994 regulatory agreement.

Net income for 1999 included an extraordinary charge for a regulatory disallowance of $139.9 million after income taxes or $1.65 per share recorded in the third quarter as a part of a regulatory settlement for APS. Also in the third quarter, Pinnacle West recorded a tax benefit from discontinued operations of $38.0 million or $0.45 per share as a result of resolution of tax issues related to a former subsidiary, MeraBank.

Also today, the Pinnacle West board of directors declared a quarterly dividend of 35 cents per share of common stock, payable on March 1, 2000 to shareholders of record on February 1, 2000.

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.

Pinnacle West Capital Corporation Consolidated Statements of Income
(In Thousands, Except Per Share Amounts)


Three Months Ended
December 31,
Twelve Months Ended
December 31,
         1999        1998  1999        1998

Operating Revenues
  Electric $ 500,137 $ 443,526 $ 2,293,184 $ 2,006,398
  Real estate 46,299 42,835 130,169 124,188

    Total 546,436 486,361 2,423,353 2,130,586

Operating Expenses
  Fuel and purchased power 160,047 116,770 796,109 545,297
  Utility operations and maintenance 127,564 106,027 446,777 419,433
  Real estate operations 41,123 40,061 119,516 115,331
  Depreciation and amortization 96,207 98,283 385,568 379,679
  Taxes other than income taxes 23,579 23,372 96,606 103,718

    Total 448,520 384,513 1,844,576 1,563,458

Operating Income 97,916 101,848 578,777 567,128

Other Income (Expenses)
  Preferred stock dividend requirements of APS - (2,043) (1,016) (9,703)
  Net other income and expense 11,691 (2,431) 10,793 609

    Total 11,691 (4,474) 9,777 (9,094)

Income Before Interest and Income Taxes 109,607 97,374 588,554 558,034
Interest Expense
    Interest charges 40,893 41,736 162,381 169,145
    Capitalized interest (1,411) (4,335) (11,664) (18,596)

    Total 39,482 37,401 150,717 150,549
Income From Continuing Operations Before Income Taxes 70,125 59,973 437,837 407,485
Income Taxes 25,324 24,445 168,065 164,593
Income From Continuing Operations 44,801 35,528 269,772 242,892
Income Tax Benefit From Discontinued Operations - - 38,000 -
Extraordinary Charge - Net of Income Taxes of $94,115 - - (139,885) -

Net Income $ 44,801 $ 35,528 $ 167,887 $ 242,892
Average Common Shares Outstanding - Basic 84,723 84,732 84,717 84,774
Average Common Shares Outstanding - Diluted 84,894 85,305 85,009 85,346
Earnings Per Average
Common Share Outstanding
Continued Operations - Basic $ 0.53 $ 0.42 $ 3.18 $ 2.87
Net income - Basic $ 0.53 $ 0.42 $ 1.98 $ 2.87

Continued Operations - Diluted $ 0.53 $ 0.42 $ 3.17 $ 2.85
Net income - Diluted $ 0.53 $ 0.42 $ 1.97 $ 2.85


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.

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