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Pinnacle West Capital Corp. (NYSE: PNW) today reported consolidated net income attributable to common shareholders for the 2013 third quarter of $226.2 million, or $2.04 per diluted share. This result compares with net income of $244.8 million, or $2.21 per share, for the same period a year ago.
“Our performance in the third quarter was solid, even with weather that, for the second year in a row, was less favorable than normal conditions,” said Pinnacle West Chairman, President and Chief Executive Officer
Don Brandt. “By focusing on operational excellence, our employees continued to deliver value to our customers and shareholders by providing top-tier customer service with fewer outages, and by ensuring our generation fleet operated reliably during Arizona’s hot summer months.”
Looking to the immediate future, Brandt said the Company remains focused on building a strong, sustainable energy future for Arizona that includes executing on several key initiatives during the balance of 2013. Top among these priorities include completing the acquisition of Southern California Edison’s interest in Units 4 and 5 of the Four Corners Power Plant, continuing to grow the Company’s renewable energy program, and achieving a fair solution to Arizona’s net metering policy for rooftop solar.
Comparison of 2013 third-quarter financial results to the 2012 period was negatively affected by the following factors:
A decrease in retail electricity sales – excluding the effects of weather variations – reduced results by $0.09 per share compared to the prior year. Total weather-normalized retail electricity sales were 1.3 percent lower in the 2013 third quarter compared to the same period in 2012. The drop in consumption reflects the effects of energy efficiency, customer conservation and distributed generation. APS’s customer base, however, grew 1.3 percent over the same timeframe, reflecting a steady improvement in Arizona’s economic conditions.
Higher infrastructure-related costs decreased earnings by $0.07 per share, primarily consisting of increased depreciation and amortization for additional plant in service partially related to the company’s AZ Sun program, as well as higher property taxes.
Increased operations and maintenance expenses impacted earnings by $0.04 per share compared with the prior-year period. In part, the expense increase included communication costs associated with net metering and deregulation, partially offset by lower fossil generation costs as a result of less planned maintenance being completed in the current-year quarter than in the same quarter a year ago.The O&M variance excludes costs associated with renewable energy, demand side management and similar regulatory programs, which are largely offset by comparable amounts of operating revenues.
These factors were partially offset by the following positive items:
The effects of weather variations improved the Company’s earnings by $0.02 per share. Although weather in the 2013 and 2012 third quarters were less favorable than normal conditions, this year’s quarter was slightly warmer than last year. The average high temperature in the 2013 third quarter was 103.5 degrees, while the average high temperature in the same period a year ago was 103.2 degrees. As a result, residential cooling degree-days (a proxy for the effects of weather) were 4 percent higher than last year’s third quarter, but still 3 percent below normal.
The net effect of other miscellaneous factors, including lower income taxes, positively impacted results by $0.01 per share.
Arizona Public Service Co., the Company’s principal subsidiary, reported 2013 third-quarter net income attributable to common shareholder of $235.0 million versus earnings of $247.8 million for the comparable 2012 quarter.
2013 and 2014 Financial Outlook
Pinnacle West continues to expect 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 the outlook remain unchanged, with the exception of weather assumptions, which have been updated to reflect actual weather through the 2013 third quarter and normal weather patterns for remainder of the year.