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Pinnacle West Reports 2013 Second-Quarter Results

Pinnacle West Capital Corp. (NYSE: PNW) today reported consolidated on-going earnings of $131.2 million, or $1.18 per diluted share of common stock, for the quarter ended June 30, 2013. This result compares with on-going earnings of $123.1 million or $1.12 per share, in the same 2012 period.

The Company’s net income attributable to common shareholders for the 2013 second quarter was $131.2 million, or $1.18 per diluted share, compared with net income of $122.3 million, or $1.11 per share, for the same quarter a year ago. On-going earnings exclude results of discontinued operations. A reconciliation of reported earnings to on-going earnings is provided at the end of this release.

“Beneficial weather variations compared with normal patterns were positive contributors to our second-quarter and year-to-date results,” said Pinnacle West Chairman, President and Chief Executive Officer Don Brandt. “As a result, we have revised our earnings guidance upward to reflect the weather’s impact on our full-year financial projections.

“By executing our strategy, we are continuing to create value for customers and shareholders through operational excellence, disciplined cost management and sound capital investments that produce a reliable, sustainable energy future for Arizona.”

The 2013 second-quarter on-going results comparison was positively impacted by the following factors:

  The Company’s 2012 regulatory settlement, which included a retail non-fuel base rate increase, improved earnings by $0.18 per share. The settlement became effective July 1, 2012.

Higher transmission revenues augmented results by $0.06 per share, primarily because of transmission rate changes implemented in 2012 and June 2013. These increases were largely due to increased investment in transmission infrastructure and related costs.

The positive quarter-over-quarter factors were partially offset by:

  Higher fuel and purchased power costs, net of lower mark-to-market valuations, reduced earnings by $0.07 per share as a result of changes in regulatory treatment.


The effects of weather – a combination of year-over-year variations in heating and cooling degree days (a measure of the effects of weather) and relative humidity – decreased the Company’s results by $0.05 per share compared with the same period a year ago. Even though 2013’s second-quarter weather was hotter than normal, it was not nearly as hot as the same period last year. Weather positively impacted 2013 second-quarter results by $0.09 per share, while weather positively impacted 2012’s second-quarter earnings by $0.14 per share compared with historically normal conditions.


Higher operations and maintenance expenses impacted the bottom line by $0.04 per share compared with the prior-year quarter. The higher expense primarily related to amortization of certain retirement benefits in 2013, compared with the regulatory deferral of such costs in 2012.


The O&M variance excludes costs associated with renewable energy, energy efficiency and similar regulatory programs, which are largely offset by comparable amounts of operating revenues.

Arizona Public Service Co. (APS), the Company’s principal subsidiary, reported 2013 second-quarter net income attributable to common shareholder of $133.9 million versus earnings of $124.9 million in the similar 2012 period.

Financial Outlook

Pinnacle West expects its 2013 consolidated on-going earnings will be in the range of $3.55 to $3.70 per diluted share. Key factors and assumptions underlying this outlook are:

  Normal weather patterns for the remainder of the year;

Weather-normalized retail electricity sales volumes about the same as the prior year, in part due to the effects of customer conservation and initiatives associated with energy efficiency and distributed renewable generation;

Retail customer growth of about 1.5 percent;

Total electricity gross margin (operating revenues, net of fuel and purchased power expenses, excluding retail rate adjustment mechanisms associated with renewable energy and energy efficiency programs) is expected to be in a range of about $2.21 billion to $2.26 billion, an increase from the previous range of about $2.17 billion to $2.22 billion;

Anticipated operating expenses (operations and maintenance, excluding costs for Renewable Energy Standard and similar regulatory programs; depreciation and amortization; and taxes other than income taxes) of about $1.37 billion to $1.40 billion, which was previously estimated to be about $1.34 billion to $1.37 billion;

Anticipated interest expense, net of allowances for borrowed and equity funds used for construction, has been reduced to a range of about $160 million to $170 million, down from the previous estimated range of about $175 million to $185 million; and

An effective income tax rate of about 35 percent.

Longer term, the Company’s goal is to achieve a consolidated earned return on average common equity of at least 9.5 percent annually in 2013 through 2015. Key factors and assumptions underlying the outlook can be found in the earnings presentation slides for the second-quarter 2013 on the Company’s website at

Conference Call and Webcast

Pinnacle West invites interested parties to listen to the live webcast of management’s conference call to discuss the Company’s 2013 second-quarter results, as well as recent developments, at 12 noon (ET) today, Aug. 2. The 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) 407-8035 or (201) 689-8035 for international callers. A replay of the call also will be available until 11:59 p.m. (ET), Friday, Aug. 9, 2013, by calling (877) 660-6853 in the U.S. and Canada or (201) 612-7415 internationally and entering conference ID number 417155.

General Information

Pinnacle West Capital, an energy holding company based in Phoenix, has consolidated assets of about $13.6 billion, more than 6,300 megawatts of generating capacity and about 6,600 employees in Arizona and New Mexico. Through its principal subsidiary, Arizona Public Service, the Company provides retail electricity service to more than 1.1 million Arizona homes and businesses. For more information about Pinnacle West, visit the Company’s website at

Dollar amounts in this news release are after income taxes. Earnings per share amounts are based on average diluted common shares outstanding. For more information on Pinnacle West’s operating statistics and earnings, please visit







Three Months EndedJune 30, 2013

Three Months EndedJune 30, 2012

Dollars inMillions


Dollars inMillions

Net Income Attributable to Common Shareholders $ 131.2 $ 1.18 $ 122.3 $ 1.11
Less: Income (loss) from discontinued operations   ----   ----   (0.8 )   (0.01 )
On-going Earnings $ 131.2 $ 1.18 $ 123.1   $ 1.12  


In this press release, we refer to “on-going earnings.” On-going earnings is a “non-GAAP financial measure,” as defined in accordance with SEC rules. We believe on-going earnings provide investors with a useful indicator of our results that is comparable among periods because it excludes the effects of unusual items that may occur on an irregular basis. Investors should note that these non-GAAP financial measures involve judgments by management, including whether an item is classified as an unusual item. We use on-going earnings, or similar concepts, to measure our performance internally in reports for management.

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