form 8-k - sec.gov | home phone: 602 250 1000 mail address: street 1: 400 north fifth street street...

-----BEGIN PRIVACY-ENHANCED MESSAGE-----Proc-Type: 2001,MIC-CLEAROriginator-Name: [email protected]: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQABMIC-Info: RSA-MD5,RSA, V1P2STLfwLzP/yIWIIgMaoWzKNPDTbUD9RxmU3WSbLtFZNwjha3A6MckfPzWQiHV YMZ+SMjSgCxM4D4ffhX/+w==

0000950123-10-014364.txt : 201002190000950123-10-014364.hdr.sgml : 2010021920100219080113ACCESSION NUMBER:0000950123-10-014364CONFORMED SUBMISSION TYPE:8-KPUBLIC DOCUMENT COUNT:30CONFORMED PERIOD OF REPORT:20091231ITEM INFORMATION:Entry into a Material Definitive AgreementITEM INFORMATION:Termination of a Material Definitive AgreementITEM INFORMATION:Results of Operations and Financial ConditionITEM INFORMATION:Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a RegistrantITEM INFORMATION:Regulation FD DisclosureITEM INFORMATION:Financial Statements and ExhibitsFILED AS OF DATE:20100219DATE AS OF CHANGE:20100219

FILER:

COMPANY DATA:COMPANY CONFORMED NAME:ARIZONA PUBLIC SERVICE COCENTRAL INDEX KEY:0000007286STANDARD INDUSTRIAL CLASSIFICATION:ELECTRIC & OTHER SERVICES COMBINED [4931]IRS NUMBER:860011170STATE OF INCORPORATION:AZFISCAL YEAR END:1231

FILING VALUES:FORM TYPE:8-KSEC ACT:1934 ActSEC FILE NUMBER:001-04473FILM NUMBER:10618073

BUSINESS ADDRESS:STREET 1:400 N FIFTH STSTREET 2:P O BOX 53999CITY:PHOENIXSTATE:AZZIP:85004BUSINESS PHONE:6022501000

FILER:

COMPANY DATA:COMPANY CONFORMED NAME:PINNACLE WEST CAPITAL CORPCENTRAL INDEX KEY:0000764622STANDARD INDUSTRIAL CLASSIFICATION:ELECTRIC SERVICES [4911]IRS NUMBER:860512431STATE OF INCORPORATION:AZFISCAL YEAR END:1231

FILING VALUES:FORM TYPE:8-KSEC ACT:1934 ActSEC FILE NUMBER:001-08962FILM NUMBER:10618072

BUSINESS ADDRESS:STREET 1:400 NORTH FIFTH STREETSTREET 2:MS8695CITY:PHOENIXSTATE:AZZIP:85004BUSINESS PHONE:602 250 1000

MAIL ADDRESS:STREET 1:400 NORTH FIFTH STREETSTREET 2:MS8695CITY:PHOENIXSTATE:AZZIP:85004

FORMER COMPANY:FORMER CONFORMED NAME:AZP GROUP INCDATE OF NAME CHANGE:19870506

8-K1c96464e8vk.htmFORM 8-K

Form 8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December31, 2009

Exact Name of Registrant as Specified

in Charter; State of Incorporation; IRS Employer

Commission File Number Address and Telephone Number Identification Number

1-8962

Pinnacle West Capital Corporation
(an Arizona corporation)
400 North Fifth Street, P.O. Box 53999
Phoenix, AZ 85072-3999
(602)250-1000

86-0512431

1-4473

Arizona Public Service Company
(an Arizona corporation)
400 North Fifth Street, P.O. Box 53999
Phoenix, AZ 85072-3999
(602)250-1000

86-0011170

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfythe filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule14d-2(b) under the Exchange Act (17 CFR240.14d-2(b))

o Pre-commencement communications pursuant to Rule13e-4(c) under the Exchange Act (17 CFR240.13e-4(c))

This combined Form 8-K is separately filed by Pinnacle West Capital Corporation and ArizonaPublic Service Company. Each registrant is filing on its own behalf all of the informationcontained in this Form 8-K that relates to such registrant and, where required, its subsidiaries.Except as stated in the preceding sentence, neither registrant is filing any information that doesnot relate to such registrant, and therefore makes no representation as to any such information.

Item1.01.

Entry into a Material Definitive Agreement.

Item1.02.

Termination of a Material Definitive Agreement.

Item2.03.

Creation of a Direct Financial Obligation or an Obligation under an Off-Balance SheetArrangement of a Registrant.

Pinnacle West Facility

On February12, 2010, Pinnacle West Capital Corporation (Pinnacle West or the Company)entered into an unsecured revolving credit facility with Bank of America, N.A., as Agent andIssuing Bank, Wells Fargo Bank, National Association, as Co-Syndication Agent and Issuing Bank,Barclays Capital and Credit Suisse, Cayman Islands Branch, as Co-Syndication Agents, the lenderparties thereto, and certain other parties, allowing Pinnacle West to borrow, repay and reborrow,from time to time, up to $200million on or prior to February12, 2013. The facility replaces Pinnacle Wests prior $283million revolver withJPMorgan Chase Bank, N.A., as administrative agent, which would have expired on December9,2010. Pinnacle West will use the facility for general corporatepurposes, including as a standby facility to supportcommercial paper issuances. The facility can also be used for letters of credit.

Borrowingsunder the facility will bear interest basedon Pinnacle Wests then-current senior unsecured debt credit ratings.

Borrowings under the facility are conditioned on Pinnacle Wests ability to make certainrepresentations at the time each borrowing is made, except for representations concerning no material adverse effect and certainlitigation matters, which were made only at the time the facility wasentered into. The facility includes customary covenants, including requirements thatPinnacle West maintain ownership of a specified percentage of the outstanding capital stock ofArizona Public Service Company (APS), maintain a maximum consolidated debt-to-capitalizationratio and comply with a negative lien provision. The facility also includes customary events ofdefault, including a cross default provision and a change of control provision. If an event ofdefault occurs, lenders holding a specified percentage of the commitments, or the administrativeagent with such lenders consent, may terminate the obligations of the lenders to make loans underthe facility and the obligations of the issuing banks to issue letters of credit and may declarethe obligations outstanding under the facility to be due and payable.

Pinnacle West and its affiliates maintain normal banking and other relationships with theagents and other lenders in the facility.

APS Facility

Alsoon February12, 2010, APS entered into an unsecuredrevolving credit facility with Wells Fargo Bank, National Association, as Agent and Issuing Bank,Bank of America, N.A., as Co-Syndication Agent and Issuing Bank, Barclays Capital and CreditSuisse, Cayman Islands Branch, as Co-Syndication Agents, the lender parties thereto, and certainother parties, allowing APS to borrow, repay and reborrow, from time to time, up to $500million onor prior to February12, 2013. The facility replaces APSprior $377million revolver with Citibank, N.A., as administrative agent, which would have expiredon December9, 2010. APS will use the facility for generalcorporate purposes, including as a standby facility to supportcommercial paper issuances. The facility can also be used for letters of credit.

2

Borrowingsunder the facility will bear interest based on APSthen-current senior unsecured debt credit ratings.

Borrowings under the facility are conditioned on APS ability to make certain representationsexcept for representations, at the time each borrowing is made, concerning no material adverse effect andcertain litigation matters, which were made only at the time thefacility was entered into.The facility includes customary covenants, including that APS maintain a maximum consolidateddebt-to-capitalization ratio and comply with a negative lien provision. The facility also includescustomary events of default, including a cross default provision and a change of control provisionrelating to Pinnacle West. If an event of default occurs, lenders holding a specified percentageof the commitments, or the administrative agent with such lenders consent, may terminate theobligations of the lenders to make loans under the facility and the obligations of the issuingbanks to issue letters of credit and may declare the obligations outstanding under the facility tobe due and payable.

APS and its affiliates maintain normal banking and other relationships with the agents andother lenders in the facility.

Item2.02.

Results of Operations and Financial Condition

On February19, 2010, Pinnacle West issued a press release regarding its financial results forthe fiscal quarter ended December31, 2009 and its earnings outlook for 2010 and 2011. A copy ofthe press release is attached hereto as Exhibit99.1.

The information referenced in Item7.01 below contains Company operating results for thefiscal quarter ended December31, 2009. This information is attached hereto as Exhibits 99.2, 99.3and 99.4.

Item7.01.

RegulationFD Disclosure

The Company is providing a quarterly consolidated statistical summary, quarterly earningsvariance explanations and a copy of the slide presentation made in connection with its quarterlyearnings conference call on February19, 2010 (see Exhibits 99.2, 99.3 and 99.4). This informationis concurrently being posted to the Companys website at www.pinnaclewest.com, which alsocontains a glossary of relevant terms.

3

Item9.01.

Financial Statements and Exhibits

(d)Exhibits.

Exhibit

No. Registrant(s) Description

99.1 Pinnacle West
APS

Earnings News Release issued on February19, 2010.

99.2 Pinnacle West
APS

Pinnacle West Capital Corporation quarterlyconsolidated statistical summary for thethree-month and twelve-month periods endedDecember31, 2009 and 2008.

99.3 Pinnacle West
APS

Pinnacle West Capital Corporation Fourth Quarter2009 slide presentation accompanying February19,2010 conference call.

99.4 Pinnacle West
APS

Pinnacle West Capital Corporation earningsvariance explanations for the three and twelvemonths ended December31, 2009 and 2008 andConsolidated Statements ofIncome for the three and twelve months endedDecember31, 2009 and 2008.

4

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has dulycaused this report to be signed on its behalf by the undersigned hereunto duly authorized.

PINNACLE WEST CAPITAL CORPORATION
(Registrant)

Dated: February 19, 2010 By: /s/ James R. Hatfield

James R. Hatfield
Senior Vice President, Chief Financial Officer

and Treasurer

ARIZONA PUBLIC SERVICE COMPANY
(Registrant)

Dated: February 19, 2010 By: /s/ James R. Hatfield

James R. Hatfield

Senior Vice President, ChiefFinancial Officer
and Treasurer

5

ExhibitIndex

Exhibit

No. Registrant(s) Description

99.1 Pinnacle West
APS

Earnings News Release issued on February19, 2010.

99.2 Pinnacle West
APS

Pinnacle West Capital Corporation quarterlyconsolidated statistical summary for thethree-month and twelve-month periods endedDecember31, 2009 and 2008.

99.3 Pinnacle West
APS

Pinnacle West Capital Corporation Fourth Quarter2009 slide presentation accompanying February19,2010 conference call.

99.4 Pinnacle West
APS

Pinnacle West Capital Corporation earningsvariance explanations for the three and twelvemonths ended December31, 2009 and 2008 andConsolidated Statements ofIncome for the three and twelve months endedDecember31, 2009 and 2008.

6

EX-99.12c96464exv99w1.htmEXHIBIT 99.1

Exhibit 99.1

Exhibit99.1

FOR IMMEDIATE RELEASE

February19, 2010

Media Contact:

Alan Bunnell, (602)250-3376

Page 1 of 6

Analyst Contact:

Rebecca Hickman, (602)250-5668

Web site:

www.pinnaclewest.com

PINNACLE WEST REPORTS 2009 FOURTH-QUARTER
AND FULL-YEAR RESULTS

APS full-year on-going results improve

Favorable regulatory settlement positions utility well for future

Company achieves 2009 earnings guidance, shares2010 and 2011 outlook

PHOENIX Pinnacle West Capital Corporation (NYSE: PNW) today reported a consolidated net lossattributable to common shareholders of $30.2million, or $0.30 per diluted share of common stock,for the quarter ended December31, 2009. This result compares with a consolidated net loss of$38.9million, or $0.39 per diluted share, for the same quarter a year ago. From an on-goingearnings perspective, the Company reported a consolidated net loss in the 2009 fourth quarter of$15.9million, or $0.16 per share, compared with a net loss of $8.7million, or $0.08 per share, inthe same 2008 period.

For the year 2009 as a whole, Pinnacle West reported consolidated net income of $68.3million, or$0.67 per diluted share, compared with 2008 net income of $242.1million, or $2.40 per dilutedshare. On-going consolidated earnings for 2009 were $235.5million, or $2.33 per share as comparedto $238.1million, or $2.36 per share, a year ago.

On-going earnings for both fourth quarters exclude results for the Companys real estate segment,which is being restructured through the sale of a substantial majority of its properties. The 2008fourth quarter also excludes severance costs and income from the resolution of tax issues relatedto a 2005 power plant sale. In addition, the full-year on-going earnings exclude income tax creditsrelated to prior years recorded in 2008. Reconciliations of our reported earnings to on-goingearnings are provided at the end of this release.

The 2009 fourth-quarter on-going results were positively impacted by the following major factors:

Increased revenues resulting from retail rate increases implemented in 2009improved earnings by $0.10 per share. Of this amount, $0.07 is related to interimretail rates implemented in January2009. The balance is attributable to a retailtransmission rate increase implemented in early August.

PINNACLE WEST REPORTS 2009 EARNINGS


Page 2 of 6

Improved mark-to-market valuations of fuel contracts as a result of favorablechanges in commodity market prices contributed $0.05 per share to the quarterlyearnings comparison.

These positive factors were more than offset by the following items:

Higher operations and maintenance expenses of $0.10 per share, primarilydue to the timing of seasonal power plant and system maintenance at various APSgenerating facilities. The higher fourth-quarter expenses exclude costs associatedwith renewable energy and demand-side management programs, which are offset bycomparable operating revenues.

The absence of a marketing and trading contribution, $0.05 per share,primarily because of planned reductions of the Companys marketing and tradingactivities.

A net decrease in kilowatt-hour sales reduced earnings by $0.05 pershare. The decrease was primarily related to lower electricity consumption bycommercial and industrial customers as a result of the current economic slowdown andAPSs energy efficiency programs. Total retail electricity sales, excluding theeffects of weather, decreased 3.4percent in the fourth quarter of 2009 compared tothe 2008 period.

The net effect of other miscellaneous factors decreased earnings $0.03 per share.

Earnings for the year were in line with our expectations, and the Companys operationalperformance in 2009 was solid, said Pinnacle West Chairman, President and Chief Executive OfficerDon Brandt. Even under the current difficult economic conditions, we are experiencing modestcustomer growth and are focused on excellence in our core business, including controlling costs andranking in the top quartile nationally for customer satisfaction.

Brandt said strong performance at the Palo Verde Nuclear Generating Station continues to benefitcustomers and our bottom line. The Plant generated more than 30million megawatt-hours (MWh) forthe fifth time, generating 30.7million MWh in 2009, the second-best production year in itshistory. Palo Verde is the only generating facility of any type in the U.S. to ever exceed 30million MWh in a single year. The Plants three units achieved a combined year-end capacity factorof 89percent.

Brandt added that the positive resolution of APSs retail regulatory settlement better positionsus to focus on ensuring a bright energy future for Arizona. A major part of that focus is achievingthe benefits of the settlement for all parties and effective cost management.



Page 3 of 6

Arizona Public Service Co. (APS), the Companys principal subsidiary, recorded 2009 net income of$251.2million compared with net income of $262.3million in 2008. APS on-going earnings for thefull year were $251.2million compared with $241.0million in 2008. For the 2009 fourth quarter,APS reported a net loss of $8.9million, compared with a net loss of $16.4million for the sameperiod in 2008. From an on-going earnings perspective, APS lost $8.9million in the 2009 fourthquarter versus a loss of $11.9million in the 2008 like quarter.

Real Estate Segment

Pinnacle Wests real estate segment reported a net loss of $14.3million for the fourth quarter of2009, compared with a net loss of $33.9million in the prior-year period. The Companydecided in early 2009 to restructure its real estate subsidiary, SunCor Development Co., by sellingthe substantial majority of its assets. This effort is well underway and additional sales areexpected.

2010 and 2011 On-going Earnings Outlook

Pinnacle Wests 2010 on-going consolidated earnings are expected to be in the range of $2.95 to$3.10 per diluted share. Key factors and assumptions are detailedbelow:

APS earnings to comprise nearly all of the on-going consolidated earnings;

Normal weather patterns for the year;

Implementation of the Companys retail regulatory settlement effectiveJanuary1, 2010;

Retail customer growth of about 1percent;

Weather-normalized retail electricity sales volumes comparable with the prioryear, in part due to the Companys energy efficiency initiatives;

Total electricity gross margin (operating revenues, net of fuel and purchasedpower expenses, excluding Renewable Energy Surcharge and similar rate adjustors) of about$2.04billion to $2.09billion;

Operating expenses (operations and maintenance, excluding costs for RenewableEnergy Standard and similar regulatory programs; depreciation and amortization; and taxesother than income taxes) of about $1.30billion to $1.33billion;

Interest expense, net of capitalized interest and allowance for equity fundsused for construction, of about $210million to $220million; and

An effective tax rate of about 38percent.

TheCompany estimates its 2011 on-going consolidated earningswill be within the guidance range provided for 2010 on-goingconsolidated earnings, with some opportunity for modestly exceedingthat range.



Page 4 of 6

Conference Call and Web Cast

Pinnacle West invites interested parties to listen to the live web cast of managements conferencecall to discuss the Companys 2009 fourth-quarter and year-end results, as well as recentdevelopments at 11 a.m. (ET)today, February19. The web cast can be accessed atwww.pinnaclewest.com/presentations and will be available for replay on the web site for 30days. To access the live conference call by telephone, dial (877)356-3961 and enter Conference ID49140974. A replay of the call also will be available until 11:55p.m. (ET), Friday, February26, 2010, by calling (800)642-1687 in the U.S. and Canada or (706)645-9291 internationally and entering the same Conference ID number as above.

General Information

Pinnacle West is a Phoenix-based company with consolidated assets of about $12billion. Through itssubsidiaries, the Company generates, sells and delivers electricity and sells energy-relatedproducts and services to retail and wholesale customers in the western United States.

Dollar amounts in this news release are after income taxes. Earnings per share amounts are basedon average diluted common shares outstanding. For more information on Pinnacle Westsoperating statistics and earnings, please visit www.pinnaclewest.com/investors.

PINNACLE WEST CAPITAL CORPORATION
ARIZONA PUBLIC SERVICE COMPANY

NON-GAAP FINANCIAL MEASURE RECONCILIATION
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS
(GAAP MEASURE) TO ON-GOING EARNINGS (NON-GAAP FINANCIAL MEASURE)

Three Months Ended Three Months Ended

December 31, 2009 December 31, 2008

$ in Diluted $ in Diluted

Millions EPS Millions EPS

PINNACLE WEST CAPITAL CORPORATION

Net Income attributable to common shareholders

$ (30.2 ) $ (0.30 ) $ (38.9 ) $ (0.39 )

Adjustments:

Real estate segment

14.3 0.14 33.9 0.34

Severance costs

4.5 0.05

Power plant sale tax resolution

(8.2 ) (0.08 )

On-going Earnings

$ (15.9 ) $ (0.16 ) $ (8.7 ) $ (0.08 )

ARIZONA PUBLIC SERVICE COMPANY

Net Income

$ (8.9 ) $ (16.4 )

Adjustment:

Severance costs

4.5

On-going Earnings

$ (8.9 ) $ (11.9 )



Page 5 of 6

Twelve Months Ended Twelve Months Ended

December 31, 2009 December 31, 2008

$ in Diluted $ in Diluted

Millions EPS Millions EPS


Net Income attributable to common shareholders

$ 68.3 $ 0.67 $ 242.1 $ 2.40

Adjustments:

Real estate segment

167.2 1.66 26.2 0.26

Income tax credits related to prior years

(30.0 ) (0.30 )

Severance costs

8.0 0.08

Power plant sale tax resolution

(8.2 ) (0.08 )

On-going Earnings

$ 235.5 $ 2.33 $ 238.1 $ 2.36

ARIZONA PUBLIC SERVICE COMPANY

Net Income

$ 251.2 $ 262.3

Adjustment:

Income tax credits related to prior years

(29.3 )

Severance costs

8.0

On-going Earnings

$ 251.2 $ 241.0

NON-GAAP FINANCIAL INFORMATION

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

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements regarding our 2010 and 2011 earningsoutlook. These forward-looking statements are often identified by words such as estimate,predict, may, believe, plan, expect, require, intend, assume and similar words.Because actual results may differ materially from expectations, we caution you not to place unduereliance on these statements. A number of factors could cause future results to differ materiallyfrom historical results, or from outcomes currently expected or sought by Pinnacle West or APS.These factors include:

regulatory and judicial decisions, developments and proceedings;

our ability to achieve timely and adequate rate recovery of our costs;

our ability to reduce capital expenditures and other costs while maintainingreliability and customer service levels;

variations in demand for electricity, including those due to weather, the generaleconomy, customer and sales growth (or decline), and the effects of energy conservationmeasures;

power plant performance and outages;

volatile fuel and purchased power costs;

fuel and water supply availability;

new legislation or regulation relating to greenhouse gas emissions, renewable energymandates and energy efficiency standards;



Page 6 of 6

our ability to meet renewable energy requirements and recover related costs;

risks inherent in the operation of nuclear facilities, including spent fuel disposaluncertainty;

competition in retail and wholesale power markets;

the duration and severity of the economic decline in Arizona and current credit,financial and real estate market conditions;

the cost of debt and equity capital and the ability to access capital markets whenrequired;

restrictions on dividends or other burdensome provisions in our credit agreements andACC orders;

our ability, or the ability of our subsidiaries, to meet debt service obligations;

changes to our credit ratings;

the investment performance of the assets of our nuclear decommissioning trust, pension,and other postretirement benefit plans and the resulting impact on future fundingrequirements;

liquidity of wholesale power markets and the use of derivative contracts in ourbusiness;

potential shortfalls in insurance coverage;

new accounting requirements or new interpretations of existing requirements;

transmission and distribution system conditions and operating costs;

the ability to meet the anticipated future need for additional baseload generation andassociated transmission facilities in our region;

the ability of our counterparties and power plant participants to meet contractual orother obligations;

technological developments in the electric industry; and

economic and other conditions affecting the real estate market in SunCors market areas.

These and other factors are discussed in Risk Factors described in Item1A of the Pinnacle West/APSAnnual Report on Form 10-K for the fiscal year ended December31, 2009, which you should reviewcarefully before placing any reliance on our financial statements or our earnings outlook. NeitherPinnacle West nor APS assumes any obligation to update any forward-looking statements, even if ourinternal estimates change, except as may be required by applicable law.

# # #


CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)
( dollars and shares in thousands, except per share amounts)

THREE MONTHS ENDED TWELVE MONTHS ENDED

DECEMBER 31, DECEMBER 31,

2009 2008 2009 2008

Operating Revenues

Regulated electricity segment

$ 650,349 $ 634,756 $ 3,149,187 $ 3,127,383

Real estate segment

28,030 19,460 103,152 74,549

Marketing and trading

9,274 66,897

Other revenues

14,678 14,905 44,762 41,729

Total

693,057 678,395 3,297,101 3,310,558

Operating Expenses

Regulated electricity segment fuel and purchased power

257,990 267,198 1,178,620 1,284,116

Real estate segment operations

30,968 22,509 102,381 100,102

Real estate impairment charge

16,984 18,108 258,453 18,108

Marketing and trading fuel and purchased power

1,443 45,572

Operations and maintenance

232,812 209,797 875,357 807,852

Depreciation and amortization

102,165 98,374 404,331 390,093

Taxes other than income taxes

22,537 30,510 123,663 125,336

Other expenses

10,309 13,090 32,523 34,171

Total

673,765 661,029 2,975,328 2,805,350

Operating Income

19,292 17,366 321,773 505,208

Other

Allowance for equity funds used during construction

3,080 2,425 14,999 18,636

Other income

849 2,325 5,669 12,797

Other expense

(5,382 ) (9,523 ) (14,269 ) (31,576 )

Total

(1,453 ) (4,773 ) 6,399 (143 )

Interest Expense

Interest charges

59,139 58,570 233,859 215,684

Capitalized interest

(2,177 ) (4,227 ) (10,745 ) (18,820 )

Total

56,962 54,343 223,114 196,864

Income (Loss) From Continuing Operations Before Income Taxes

(39,123 ) (41,750 ) 105,058 308,201

Income Taxes

(10,255 ) (14,489 ) 37,827 76,897

Income (Loss) From Continuing Operations

(28,868 ) (27,261 ) 67,231 231,304

Loss From Discontinued Operations

Net of Income Taxes

(1,122 ) (11,589 ) (13,676 ) 10,821

Net Income (Loss)

(29,990 ) (38,850 ) 53,555 242,125

Less: Net income (loss)attributable to noncontrolling interests

169 (14,775 )

Net Income (Loss)Attributable To Common Shareholders

$ (30,159 ) $ (38,850 ) $ 68,330 $ 242,125

Weighted-Average Common Shares Outstanding Basic

101,320 100,836 101,161 100,691

Weighted-Average Common Shares Outstanding Diluted

101,320 100,836 101,264 100,965

Earnings Per Weighted-Average Common Share Outstanding

Income (loss)from continuing operations attributable to common shareholders basic

$ (0.29 ) $ (0.27 ) $ 0.81 $ 2.30

Net income (loss)attributable to common shareholders basic

$ (0.30 ) $ (0.39 ) $ 0.68 $ 2.40

Income (loss)from continuing operations attributable to common shareholders -diluted

$ (0.29 ) $ (0.27 ) $ 0.81 $ 2.29

Net income (loss)attributable to common shareholders diluted

$ (0.30 ) $ (0.39 ) $ 0.67 $ 2.40

Amounts Attributable To Common Shareholders

Income (loss)from continuing operations, net of tax

$ (29,037 ) $ (27,261 ) $ 82,006 $ 231,304

Discontinued operations, net of tax

(1,122 ) (11,589 ) (13,676 ) 10,821

Net income (loss)attributable to common shareholders

$ (30,159 ) $ (38,850 ) $ 68,330 $ 242,125


Exhibit 99.2

Exhibit99.2

Last Updated 2/19/2010

Pinnacle West Capital Corporation

Quarterly Consolidated Statistical Summary
Periods Ended December31, 2009 and 2008

3 Months Ended December 12 Months Ended December

Line 2009 2008 Incr (Decr) 2009 2008 Incr (Decr)

EARNINGS CONTRIBUTIONBY SUBSIDIARY ($ Millions)

1

Arizona Public Service

$ (9 ) $ (16 ) $ 7 $ 251 $ 262 $ (11 )

2

APS Energy Services

(1 ) 1 (2 ) (2 ) 2 (4 )

3

SunCor

(24 ) (15 ) (9 ) (272 ) (31 ) (241 )

4

El Dorado

(1 ) (2 ) 1 (7 ) (10 ) 3

5

Parent Company

6 5 1 97 8 89

6

Income From Continuing Operations

(29 ) (27 ) (2 ) 67 231 (164 )

Income (Loss) From DiscontinuedOperations Net of Tax

7

SunCor

(2 ) (19 ) 17 (23 ) 5 (28 )

8

Other

1 7 (6 ) 9 6 3

9

Total

(1 ) (12 ) 11 (14 ) 11 (25 )

10

Net Income

(30 ) (39 ) 9 53 242 (189 )

11

Less: Net Income (Loss) Attributableto Noncontrolling Interests

(15 ) (15 )

12

Net Income Attributableto Common Shareholders

$ (30 ) $ (39 ) $ 9 $ 68 $ 242 $ (174 )

EARNINGS PER SHAREBY SUBSIDIARY DILUTED

13

Arizona Public Service

$ (0.09 ) $ (0.16 ) $ 0.07 $ 2.48 $ 2.61 $ (0.13 )

14

APS Energy Services

(0.01 ) 0.02 (0.03 ) (0.02 ) 0.02 (0.04 )

15

SunCor

(0.24 ) (0.15 ) (0.09 ) (2.68 ) (0.31 ) (2.37 )

16

El Dorado

(0.01 ) (0.02 ) 0.01 (0.07 ) (0.10 ) 0.03

17

Parent Company

0.06 0.04 0.02 0.95 0.07 0.88

18

Income From Continuing Operations

(0.29 ) (0.27 ) (0.02 ) 0.66 2.29 (1.63 )

Income (Loss) From DiscontinuedOperations Net of Tax

19

SunCor

(0.02 ) (0.19 ) 0.17 (0.23 ) 0.05 (0.28 )

20

Other

0.01 0.07 (0.06 ) 0.09 0.06 0.03

21

Total

(0.01 ) (0.12 ) 0.11 (0.14 ) 0.11 (0.25 )

22

Net Income

(0.30 ) (0.39 ) 0.09 0.52 2.40 (1.88 )

23

Less: Net Income (Loss) Attributableto Noncontrolling Interests

(0.15 ) (0.15 )

24

Net Income Attributableto Common Shareholders

$ (0.30 ) $ (0.39 ) $ 0.09 $ 0.67 $ 2.40 $ (1.73 )

25

BOOK VALUE PER SHARE

$ 32.69 $ 34.16 $ (1.47 ) $ 32.69 $ 34.16 $ (1.47 )

COMMON SHARES OUTSTANDING(Thousands)

26

Average Diluted

101,320 100,836 484 101,264 100,965 299

27

End of Period

101,435 100,889 546 101,435 100,889 546

See Glossary of Terms.

Page 1 of 4






ELECTRIC OPERATINGREVENUES (Dollars in Millions)

REGULATED ELECTRICITYSEGMENT

Retail

28

Residential

$ 275 $ 263 $ 12 $ 1,496 $ 1,454 $ 42

29

Business

334 321 13 1,467 1,444 23

30

Total retail

609 584 25 2,963 2,898 65

Wholesale revenue on deliveredelectricity

31

Traditional contracts

10 13 (3 ) 59 70 (11 )

32

Off-system sales

16 20 (4 ) 58 88 (30 )

33

Transmission for others

8 9 (1 ) 33 34 (1 )

34

Other miscellaneous services

7 9 (2 ) 36 37 (1 )

35

Total regulated operatingelectricity revenues

650 635 15 3,149 3,127 22

MARKETING AND TRADING

36

Electricity and othercommodity sales

9 (9 ) 67 (67 )

37

Total operating electric revenues

$ 650 $ 644 $ 6 $ 3,149 $ 3,194 $ (45 )

ELECTRIC SALES (GWH)

REGULATED ELECTRICITYSEGMENT

Retail sales

38

Residential

2,587 2,606 (19 ) 13,214 13,368 (154 )

39

Business

3,484 3,650 (166 ) 14,959 15,425 (466 )

40

Total retail

6,071 6,256 (185 ) 28,173 28,793 (620 )

Wholesale electricity delivered

41

Traditional contracts

137 198 (61 ) 829 1,074 (245 )

42

Off-system sales

437 457 (20 ) 2,228 2,008 220

43

Retail load hedge management

137 267 (130 ) 1,055 1,074 (19 )

44

Total regulated electricity

6,782 7,178 (396 ) 32,285 32,949 (664 )

MARKETING AND TRADING

45

Wholesale sales of electricity

245 (245 ) 2,434 (2,434 )

46

Total electric sales

6,782 7,423 (641 ) 32,285 35,383 (3,098 )

POWER SUPPLY ADJUSTOR (PSA) REGULATED ELECTRICITYSEGMENT (Dollars in Millions)

47

Deferred fuel and purchased powerregulatory asset beginning balance

$ (60 ) $ 58 $ (118 ) $ 8 $ 111 $ (103 )

48

Deferred fuel and purchased powercosts current period

5 (25 ) 30 52 78 (26 )

49

Interest on deferred fuel

2 (2 )

50

Amounts recovered through revenues

(32 ) (25 ) (7 ) (147 ) (183 ) 36

51

Deferred fuel and purchased powerregulatory asset ending balance

$ (87 ) $ 8 $ (95 ) $ (87 ) $ 8 $ (95 )


Page 2 of 4






AVERAGE ELECTRIC CUSTOMERS

Retail customers

52

Residential

985,077 980,268 4,809 983,539 977,944 5,595

53

Business

125,320 124,878 442 125,242 123,961 1,281

54

Total

1,110,397 1,105,146 5,251 1,108,781 1,101,905 6,876

55

Wholesale customers

51 49 2 48 51 (3 )

56

Total customers

1,110,448 1,105,195 5,253 1,108,829 1,101,956 6,873

57

Customer growth (% over prior year)

0.5 % 1.0 % (0.5 )% 0.6 % 1.4 % (0.8 )%

RETAIL SALES (GWH) WEATHER NORMALIZED

58

Residential

2,504 2,666 (162 ) 13,254 13,500 (246 )

59

Business

3,509 3,652 (143 ) 14,982 15,434 (452 )

60

Total

6,103 6,318 (305 ) 28,236 28,934 (698 )

RETAIL USAGE(KWh/Average Customer)

61

Residential

2,627 3,658 (1,031 ) 13,435 13,669 (234 )

62

Business

27,798 29,222 (1,424 ) 119,441 124,435 (4,994 )

RETAIL USAGE WEATHER NORMALIZED(KWh/Average Customer)

63

Residential

2,633 2,720 (87 ) 13,476 13,804 (328 )

64

Business

27,999 29,246 (1,247 ) 119,623 124,506 (4,883 )

ELECTRICITY DEMAND (MW)

65

Native load peak demand

4,873 5,443 (570 ) 7,218 7,026 192

WEATHER INDICATORS

Actual

66

Cooling degree-days

438 504 (66 ) 4,846 4,682 164

67

Heating degree-days

399 321 78 806 904 (98 )

68

Average humidity

31 % 36 % (5 )% 28 % 32 % (4 )%

10-Year Averages

69

Cooling degree-days

469 441 28 4,676 4,635 41

70

Heating degree-days

367 394 (27 ) 963 939 24

71

Average humidity

41 % 38 % 3 % 34 % 33 % 1 %


Page 3 of 4






ENERGY SOURCES (GWH)

Generation production

72

Nuclear

1,872 1,886 (14 ) 8,923 8,512 411

73

Coal

3,311 3,422 (111 ) 12,507 13,166 (659 )

74

Gas, oil and other

1,347 1,334 13 5,941 6,356 (415 )

75

Total generation production

6,530 6,642 (112 ) 27,371 28,034 (663 )

Purchased power

76

Firm load

472 638 (166 ) 5,100 5,028 72

77

Marketing and trading

251 639 (388 ) 1,990 4,558 (2,568 )

78

Total purchased power

723 1,277 (554 ) 7,090 9,586 (2,496 )

79

Total energy sources

7,253 7,919 (666 ) 34,461 37,620 (3,159 )

POWER PLANT PERFORMANCE

Capacity Factors

80

Nuclear

74 % 74 % 0 % 89 % 84 % 5 %

81

Coal

86 % 89 % (3 )% 82 % 86 % (4 )%

82

Gas, oil and other

18 % 18 % 0 % 20 % 22 % (2 )%

83

System average

47 % 48 % (1 )% 50 % 51 % (1 )%

ECONOMIC INDICATORS

Building Permits Metro Phoenix (a)

84

Single-family

1,624 1,124 500 6,340 10,350 (4,010 )

85

Multi-family

181 1,173 (992 ) 1,198 7,453 (6,255 )

86

Total

1,805 2,297 (492 ) 7,538 17,803 (10,265 )

Arizona Job Growth (b)

87

Payroll job growth (% over prior year)

(5.7 )% (3.6 )% (2.1 )% (6.7 )% (1.6 )% (5.1 )%

88

Unemployment rate(%, seasonally adjusted)

9.1 % 6.4 % 2.7 % 8.5 % 5.1 % 3.4 %

Sources:

(a) Arizona Real Estate Center, Arizona State University W.P. Carey College of Business

(b) Arizona Department of Economic Security


Page 4 of 4


Exhibit 99.3

Exhibit 99.3

4th Quarter 2009 Results

Forward-Looking Statements

This presentation contains forward-looking statements based on current expectations. These forward-looking statementsare often identified by words such as "estimate," "predict," "may," "believe," "plan," "expect," "require," "intend,""assume" and similar words. Because actual results may differ materially from expectations, we caution you not to placeundue reliance on these statements. A number of factors could cause future results to differ materially from historicalresults, or from outcomes currently expected or sought by Pinnacle West or APS. These factors include: regulatory andjudicial decisions, developments and proceedings; our ability to achieve timely and adequate rate recovery of our costs;our ability to reduce capital expenditures and other costs while maintaining reliability and customer service levels;variations in demand for electricity, including those due to weather, the general economy, customer and sales growth (ordecline), and the effects of energy conservation measures; power plant performance and outages; volatile fuel andpurchased power costs; fuel and water supply availability; new legislation or regulation relating to greenhouse gasemissions, renewable energy mandates and energy efficiency standards; our ability to meet renewable energyrequirements and recover related costs; risks inherent in the operation of nuclear facilities, including spent fuel disposaluncertainty; competition in retail and wholesale power markets; the duration and severity of the economic decline inArizona and current credit, financial and real estate market conditions; the cost of debt and equity capital and the ability toaccess capital markets when required; restrictions on dividends or other burdensome provisions in our creditagreements and ACC orders; our ability, or the ability of our subsidiaries, to meet debt service obligations; changes to ourcredit ratings; the investment performance of the assets of our nuclear decommissioning trust, pension, and otherpostretirement benefit plans and the resulting impact on future funding requirements; liquidity of wholesale powermarkets and the use of derivative contracts in our business; potential shortfalls in insurance coverage; new accountingrequirements or new interpretations of existing requirements; transmission and distribution system conditions andoperating costs; the ability to meet the anticipated future need for additional baseload generation and associatedtransmission facilities in our region; the ability of our counterparties and power plant participants to meet contractual orother obligations; technological developments in the electric industry; and economic and other conditions affecting thereal estate and credit markets in SunCor's market areas, which include Arizona, Idaho, New Mexico and Utah. These andother factors are discussed in Risk Factors described in Item 1A of the Pinnacle West/APS Annual Report on Form 10-Kfor the fiscal year ended December 31, 2009, which you should review carefully before placing any reliance on ourfinancial statements or disclosures. Neither Pinnacle West nor APS assumes any obligation to update any forward-looking statements, even if our internal estimates change, except as may be required by applicable law.

In this presentation, we present "regulated electricity segment gross margin" per diluted share of commonstock. Regulated electricity segment gross margin refers to regulated electricity segment revenues lessregulated electricity segment fuel and purchased power expenses. Regulated electricity segment gross marginis a "non-GAAP financial measure," as defined in accordance with SEC rules. Slide 24 reconciles this non-GAAP financial measure to the referenced revenue and expense line items on our Condensed ConsolidatedStatements of Income, which are the most directly comparable financial measures calculated and presented inaccordance with GAAP. We view regulated electricity segment gross margin as an important performancemeasure of the core profitability of our operations.

We refer to "on-going earnings" in this presentation, which is also a non-GAAP financial measure. We believeon-going earnings provide investors with a useful indicator of our results that is comparable among periodsbecause it excludes the effects of unusual items that may occur on an irregular basis. Slides 6 and 8 provide areconciliation of on-going earnings to our reported earnings.

Investors should note that these non-GAAP financial measures may involve judgments by management,including whether an item is classified as an unusual item. These measures are key components of our internalfinancial reporting and are used by our management in analyzing the operations of our business. We believethat investors benefit from having access to the same financial measures that management uses.

Non-GAAP Financial Measures

CFO Agenda

Full-Year and 4th Quarter Results

Arizona Economic Outlook

Earnings Guidance

Liquidity Update

Consolidated EPS Summary

Year 2009 vs. Year 2008

Per Share EPS 2009 2008 Reported 0.67 2.4

Reported

Per Share

On-Going EPS 2009 2008 On-Going 2.33 2.36

Non-GAAP EPS Reconciliation

Year 2009 vs. Year 2008

EPS per diluted share as reported $ 0.67 $ 2.40 $ (1.73)

Adjustments:

Real estate segment 1.66 0.26 1.40

Income tax credits

related to prior years - (0.30) 0.30

Severance costs - 0.08 (0.08)

Plant sale tax resolution - (0.08) 0.08

On-going earnings per share $ 2.33 $ 2.36 $ (0.03)

2009

Change

2008

Consolidated EPS Summary

4th Quarter 2009 vs. 4th Quarter 2008

Per Share EPS 2009 2008 Reported -0.3 -0.39

Reported

Per Share

On-Going EPS 2009 2008 On-Going -0.16 -0.08

Non-GAAP EPS Reconciliation


EPS per diluted share as reported $ (0.30) $ (0.39) $ 0.09

Adjustments:

Real estate segment 0.14 0.34 (0.20)

Severance costs - 0.05 (0.05)

Plant sale tax resolution - (0.08) 0.08

On-going earnings per share $ (0.16) $ (0.08) $ (0.08)

4th Qtr

2009

Change

4th Qtr

2008

Summary of On-Going EPS Variances


Regulated

electricity

gross

margin*

$0.06

Infrastructure-

related costs

$0.02

O&M*

$(0.10)

Other items,

net

$(0.01)

M&T

$(0.05)

* Excluding renewable energy and demand-side management revenue increases and offsetting O&M increases, respectively.

See non-GAAP reconciliation for regulated electricity gross margin in the Appendix.

Net

Decrease

$(0.08)

=

Regulated Electricity Gross Margin Drivers*

4th Quarter 2009 vs. 4th Quarter 2008 Interim rates Transmission Rates weather customer usage MTM Other items, net 0.07 0.07 0.1 0.06 0.06 0.06 0.03 0.01 0.05 0.05 0.05 0.06

Transmission

rate increase

$0.03

Lower

kWh sales

$(0.05)

Weather

effects

$0.01

Improved

hedge

mark-to-market

$0.05

Interim retail

rate increase

$0.07

Other items,

net

$(0.05)

* See non-GAAP reconciliation in the Appendix.

Net

Increase

$0.06

=

2010 $2.95 - $3.10

2011 Expected to meet or exceed 2010 guidance

Consolidated On-Going EPS Guidance

2010 - 2011

Cost Savings To Support Future Results

Enterprise-wide emphasis

Better leverage technology

Optimize assets and resources

Effective, efficient execution

Engaged, motivated workforce

Cost

Savings

Adequate Liquidity and Financing Access

Capacity

Borrower ($ Millions) Matures

APS $ 489 Sep. '11

APS 500 Feb. '13

PNW 200 Feb. '13

$1,189

Solid bank group

No MAC clauses or

"clean down" provisions

Credit

Facilities

Cash

ST Debt

Available

Liquidity

$1,179

Liquidity

FFO

CapEx

Dividend

Cushion

$848

Dec. 31, 2009*

Available Liquidity

Est. 2010 Cash

Sources & Uses

$ Millions

Credit Facilities*

* Pro forma for February 2010 APS $500 million and PNW $200 million revolver

CEO Discussion

Constructive Regulatory Framework

Renewable Resources

Operations Update

SunCor Restructuring Status

Looking Ahead

APS Major Renewables Projects

Retail regulatory settlement provisions

1.7 million MWh additional generation in service by end of 2015

Photovoltaic solar projects

Arizona wind projects

Rate recovery through Renewable Energy Surcharge adjustor,

Power Supply Adjustor or Transmission Cost Adjustor until

reflected in base rates

AZ Sun Program (proposed)

$500 million capital investment

Estimated 100 MW photovoltaic solar plants to be owned by APS

To be placed into service in 2011 through 2014

Rate recovery through Renewable Energy Surcharge adjustor

Two requests for proposals issued January 2010

Photovoltaic solar - projects to be 15-50 MW each

Arizona wind projects - projects to be 15-100 MW each

Proposals due April 2010

CEO Discussion

Constructive Regulatory Framework

Renewable Resources

Operations Update

SunCor Restructuring Status

Looking Ahead

Appendix

APS earnings to comprise nearly all of on-going consolidated earnings

Normal weather patterns for year

Implementation of APS' retail regulatory settlement effective January 1, 2010

Retail customer growth of about 1%

Weather-normalized retail electricity sales volumes comparable with prior year,

in part due to Company energy efficiency initiatives

Total electricity gross margin (operating revenues, net of fuel and purchasedpower expenses, excluding Renewable Energy Surcharge and similar rateadjustors*) of $2.04 billion to $2.09 billion

Operating expenses (operations and maintenance, excluding costs forRenewable Energy Standard and similar regulatory programs*; depreciation andamortization; and taxes other than income taxes) of $1.30 billion to $1.33 billion

Interest expense, net of capitalized interest and allowance for equity funds usedfor construction, of $210 million to $220 million

An effective tax rate of about 38%

Consolidated On-Going EPS Guidance

2010 Key Factors and Assumptions

* Revenues and operating costs related to Renewable Energy Standard and similar regulatory programs estimated to be $137 million.

Renewable Energy and

Demand-Side Management Surcharges*

Q1 2 Q2 2 Q3 4 Q4 3 Q1 2 Q2 7 Q3 8 Q4 7 Q1 18 Q2 23 Q3 25 Q4 22

* Revenues associated with these surcharges were offset by comparable amounts of O&M expense.

2007

2008

2009

Pretax

$ Millions

Q1 7 Q2 -3 Q3 -1 Q4 3 Q1 14 Q2 14 Q3 -29 Q4 -9 Q1 -5 Q2 5 Q3 8 Q4 0

Quarterly Mark-to-Market on Hedge Contracts*

Pretax

$ Millions

* APS 10% share under Power Supply Adjustor (PSA), net of related deferrals.

2007

2008

2009

Rates effective January 1, 2010

Annualized base rate revenue increases ($ millions):

Non-fuel $ 196

Net fuel-related 11

Net increase $ 207

Allowed ROE (%) 11

Equity ratio (%) 54

Rate base ($ billions) $5.6

Base fuel rate ( per kWh) 3.76

Effective date 1/1/2010

Line Extension Fees - 2010-2012 payments received to be recorded as revenues

instead of contributions in aid of construction (CIAC) (pretax estimates):

2010 $23 million

2011 $25 million

2012 $49 million

Progressive 2009 Regulatory Settlement

Key Revenue Provisions


Key Non-Revenue Provisions

Value for APS and diverse stakeholders

Non-revenue financial provisions:

$30 million annual cost reduction in 2010

to be sustained through 2014

Pension and OPEB cost increases to be deferred in

2011 and 2012

Annual nuclear plant depreciation to decrease $34 million pretax,

assuming plant license extension approved

$700 million equity to be infused into APS through 2014

Other provisions:

Provides rate stability for APS customers

Significantly increases energy efficiency programs

Expands renewable energy requirements and programs


Expedited Future Rate Cases

Future cases to be processed within 12 months

APS to file general base rate cases

June 1, 2011 and June 1, 2013

Future base rate changes may become effective

July 1, 2012 and July 1, 2014

Reconciliation of Regulated Electricity

Segment Gross Margin

Regulated electricity segment revenue* $ 650 $ 634

Regulated electricity segment fuel and

purchased power expenses* (258) (267)

Regulated electricity segment gross margin

including RES and DSM revenues** 392 367

Less:

RES and DSM revenues (22) (7)

Regulated electricity segment gross margin

excluding RES and DSM revenues $ 370 $ 360

Three Months Ended

December 31,

EPS

Change

2009

2008

$ millions, except per share amounts

$ 0.15

0.09

$ 0.06

Non-GAAP Measure Reconciliation -

Regulated Electricity Segment Gross Margin

* Line items from Consolidated Statements of Income

** RES, Renewable Energy Standard; DSM, Demand-Side Management


Exhibit 99.4

Exhibit99.4

Last Updated
2/19/10

Pinnacle West Capital Corporation
Earnings Variance Explanations
For the Three-Month and Twelve-Month Periods Ended December31, 2009 and 2008

The following discussion includes the earnings variance explanations for Pinnacle West CapitalCorporation (Pinnacle West) for the three months and twelve months ended December31, 2009 and2008. We suggest that this discussion be read in connection with the Pinnacle West/APS AnnualReport on Form 10-K for the fiscal year ended December31, 2009. Additional operating andfinancial statistics and a glossary of terms are available on our website (www.pinnaclewest.com).

RESULTS OF OPERATIONS

Our results of operations, provided below, are based upon our two reportable businesssegments:

our regulated electricity segment, which consists of traditional regulated retailand wholesale electricity businesses (primarily electric service to Native Loadcustomers) and related activities and includes electricity generation, transmissionand distribution; and

our real estate segment, which consists of SunCors real estate development andinvestment activities.

Operating Results Three-month period ended December31, 2009 compared with three-month periodended December31, 2008

Our consolidated net loss attributable to common shareholders for the three months endedDecember31, 2009 was $30million, compared with a net loss of $39million for the comparableprior-year period. The improved results were primarily due to lower real estate impairmentcharges recorded in 2009 compared with the prior-year period by SunCor, the Companys real estatesubsidiary.

Last Updated
2/19/10

The following table presents net loss attributable to common shareholders by business segmentcompared with the prior-year period:

Increase

(Decrease)

in Net Income

Three Months Ended Attributable

December 31, to Common

2009 2008 Shareholders

(dollars in millions)

Regulated Electricity Segment:

Operating revenues less fuel and purchasedpower expenses

$ 392 $ 367 $ 25


(229 ) (207 ) (22 )


(101 ) (96 ) (5 )


(22 ) (30 ) 8

Other income (expenses), net

(3 ) (9 ) 6

Interest charges, net of capitalizedfinancing costs

(52 ) (50 ) (2 )

Income taxes

1 8 (7 )

Regulated electricity segment net loss

(14 ) (17 ) 3

Real Estate Segment:

Real estate impairment charges

(20 ) (53 ) 33

Other real estate operations

(4 ) (2 ) (2 )

Income taxes

10 21 (11 )

Real estate segment net loss

(14 ) (34 ) 20

All other (a)

(2 ) 12 (14 )

Net Loss Attributable to CommonShareholders

$ (30 ) $ (39 ) $ 9

(a) Includes activities related to marketing and trading, APSES and El Dorado.Income for 2008 includes income from discontinued operations of $8million related tothe resolution of certain tax issues associated with the sale of Silverhawk in 2005.None of these segments is a reportable segment.

Regulated electricity segment

This section includes a discussion of major variances in income and expense amounts for theregulated electricity segment.

2

Last Updated
2/19/10

Operating revenues less fuel and purchased power expenses

Regulated electricity segment operating revenues less fuel and purchased power expenses were$25million higher for the three months ended December31, 2009 compared with the prior-yearperiod. The following table describes the major components of this change:

Increase (Decrease)

Purchased

Operating power and fuel

revenues expenses Net change


Higher renewable energy and demand-sidemanagement surcharges (substantiallyoffset in operations and maintenance expense)

$ 14 $ $ 14

Interim retail rate increases effectiveJanuary1, 2009

11 11

Increased mark-to-market valuations of fuel andpurchased power contracts related tofavorable changes in market prices, net ofrelated PSA deferrals

(9 ) 9

Transmission rate increases

5 5

Lower retail sales primarily due to lowerusage per customer, including the effects ofthe Companys energy efficiency programs,but excluding the effects of weather

(17 ) (8 ) (9 )

Higher retail revenues related to recovery of PSAdeferrals, offset by amortization of the sameamount recorded as fuel and purchased powerexpense

7 7

Miscellaneous items, net

(4 ) 1 (5 )

Total

$ 16 $ (9 ) $ 25

Operations and maintenance Operations and maintenance expenses increased $22million for thethree months ended December31, 2009 compared with the prior-year period primarily because of:

An increase of $14million related to renewable energy and demand-side managementprograms, which are offset in operating revenues;

An increase of $13million in generation costs, including more planned maintenance;and

A decrease of $5million associated with cost saving measures and other factors,including decreased severance costs in 2009.

Depreciation and amortization Depreciation and amortization expenses increased $5million forthe three months ended December31, 2009 compared with the prior-year period primarily because ofincreases in utility plant in service. The increases in utility plant in service are the result ofvarious improvements to APS existing fossil and nuclear generating plants and distribution andtransmission infrastructure additions and upgrades.

3

Last Updated
2/19/10

Taxes other than income taxes Taxes other than income taxes decreased $8million for thethree months ended December31, 2009 compared with the prior-year period primarily because of thetiming of property tax rate adjustments.

Other income (expenses), net Other income (expenses), net improved $6million for the threemonths ended December31, 2009 compared with the prior-year period primarily because of improvedinvestment gains. Other income (expenses), net is comprised of theregulated electricity segment portions of the line items other income andother expense from the Consolidated Statements of Income.

Income taxes Income tax benefits were $7million lower for the three months ended December31, 2009 compared with the prior-year period primarily because of lower pretax losses.

Real estate segment

Thereal estate segment net loss attributable to common shareholders was$20million lowerfor the three months ended December31, 2009 compared with the prior-year period primarily becauseof:

A decrease in real estate impairment charges of $33million; and

A decrease in income tax benefits of $11million primarily because of a lower netloss for the 2009 period.

All Other

All other earnings were $14million lower for the three months ended December31, 2009compared to the prior-year period primarily because of planned reductions of marketing and tradingactivities and the absence of the 2008 resolution of certain tax issues associated with the sale ofSilverhawk in 2005.

Operating Results 2009 Compared with 2008

Our consolidated net income attributable to common shareholders for 2009 was $68million,compared with net income of $242million for the prior year. The decrease in net income wasprimarily due to 2009 real estate impairment charges recorded by SunCor.

In addition, regulated electricity segment net income decreased approximately $13million fromthe prior year primarily due to lower retail sales resulting from lower usage per customer; higherinterest charges, net of capitalized financing costs; higher depreciation and amortizationexpenses; and the absence of income tax benefits related to prior years recorded in 2008. Thesenegative factors were partially offset by increased revenues due to the interim rate increaseeffective January1, 2009 and transmission rate increases.

4

Last Updated
2/19/10

The following table presents net income attributable to common shareholders by businesssegment compared with the prior year:

Increase

(Decrease)

in Net Income

Year Ended Attributable

December 31, to Common

2009 2008 Shareholders


Regulated Electricity Segment:

Operating revenues less fuel andpurchased power expenses

$ 1,970 $ 1,843 $ 127


(862 ) (796 ) (66 )


(400 ) (383 ) (17 )


(123 ) (125 ) 2

Other income (expenses), net

(1 ) (20 ) 19

Interest charges, net of capitalizedfinancing costs

(199 ) (171 ) (28 )

Income taxes

(142 ) (92 ) (50 )

Regulated electricity segment netincome

243 256 (13 )

Real Estate Segment:

Real estate impairment charges

(266 ) (53 ) (213 )

Other real estate operations

(10 ) 10 (20 )

Income taxes

109 17 92

Real estate segment net loss

(167 ) (26 ) (141 )

All Other(a)

(8 ) 12 (20 )

Net Income Attributable to CommonShareholders

$ 68 $ 242 $ (174 )

(a) Includes activities related to marketing and trading, APSES and El Dorado.Income for 2008 includes income from discontinued operations of $8million related tothe resolution of certain tax issues associated with the sale of Silverhawk in 2005.None of these segments is a reportable segment.

Regulated electricity segment

This section includes a discussion of major variances in income and expense amounts for theregulated electricity segment.

5

Last Updated
2/19/10

Operating revenues less fuel and purchased power expenses

Regulated electricity segment operating revenues less fuel and purchased power expenses were$127million higher for the year ended 2009 compared with the prior year. The following tabledescribes the major components of this change:

Increase (Decrease)

Purchased

Operating power and fuel

revenues expenses Net change


Higher renewable energy and demand-sidemanagement surcharges (substantiallyoffset in operations and maintenance expense)

$ 63 $ $ 63

Interim retail rate increases effectiveJanuary1, 2009

61 61

Transmission rate increases

21 21

Increased mark-to-market valuations of fuel andpurchased power contracts related tofavorable changes in market prices,net of related PSA deferrals

(18 ) 18

Effects of weather on retail sales, primarilydue to hotter weather in the thirdquarter of 2009

12 3 9

Lower retail sales primarily due to lowerusage per customer, including the effects ofthe Companys energy efficiency programs,but excluding the effects of weather

(58 ) (26 ) (32 )

Higher fuel and purchased power costs includingthe effects of lower off-system sales, netof related PSA deferrals

(30 ) (19 ) (11 )

Lower retail revenues related to recovery of PSAdeferrals, offset by lower amortization of thesame amount recorded as fuel and purchasedpower expense

(36 ) (36 )

Miscellaneous items, net

(11 ) (9 ) (2 )

Total

$ 22 $ (105 ) $ 127

Operations and maintenance Operations and maintenance expenses increased $66million for theyear ended 2009 compared with the prior year primarily because of:

An increase of $62million related to renewable energy and demand-side managementprograms, which are offset in operating revenues;

An increase of $29million in generation costs, including more planned maintenance,partially offset by lower costs at Palo Verde due to cost efficiency measures; and

A decrease of $25million associated with cost saving measures and other factors,including the absence of employee severance costs in 2009.

6

Last Updated
2/19/10

Depreciationand amortization Depreciation and amortization expenses increased $17millionfor the year ended 2009 compared with the prior year primarily because of increases in utilityplant in service. The increases in utility plant in service are the result of various improvementsto APS existing fossil and nuclear generating plants and distribution and transmissioninfrastructure additions and upgrades.

Interest charges, net of capitalized financing costs Interest charges, net of capitalizedfinancing costs increased $28million for the year ended 2009 compared with the prior yearprimarily because of higher debt balances, partially offset by the effects of lower interest rates.Interest charges, net of capitalized financing costs are comprised ofthe regulated electricity segment portions ofthe line items interest expense, capitalized interest and allowance for equity funds used duringconstruction from the Consolidated Statements of Income.

Other income (expenses), netOther income (expenses), net improved $19million for the yearended 2009 compared with the prior year primarily because of improved investment gains. Otherincome (expenses), net is comprised of the regulated electricitysegment portions of the line items other income and other expense from theConsolidated Statements of Income.

Income taxes Income taxes were $50million higher for the year ended 2009 compared with theprior year primarily because of $30million of income tax benefits related to prior years recordedin 2008 and higher pretax income.

Real estate segment

During the first quarter of 2009, we decided to restructure SunCor through the sale ofsubstantially all of its assets. The real estate segment net loss attributable to commonshareholders was $141million higher for the year ended 2009 compared with the prior year primarilybecause of:

An increase in real estate impairment charges of $213million;

A decrease of $20million in income from other real estate operations primarily dueto 2008 income from a commercial property sale; and

An increase in income tax benefits of $92million primarily because of a higher netloss.

All Other

All other earnings were $20million lower for the year ended 200

form 8-k - sec.gov | home phone: 602 250 1000 mail address: street 1: 400 north fifth street street...

Documents