Pinnacle West On-Going Year-to-Date Earnings Flat

Pinnacle West Capital Corporation (NYSE: PNW) today reported consolidated net income of $133.9 million, or $1.33 per diluted share of common stock, for the quarter ended June 30, 2008. These results compare with net income of $79.0 million, or $0.78 per diluted share, for the same period a year ago. The higher results were due in large part to $30 million of credits attributable to the resolution of tax issues applicable to prior years at the Companys regulated utility and a $19 million gain from the sale of a large asset in its real estate business.

Pinnacle West Chairman Bill Post pointed out that Pinnacle Wests on-going earnings for the first six months of 2008 were the same as a year ago.

Although earnings for the second quarter are up, after adjusting for the tax impacts, on-going earnings are flat for the year with inflation offsetting our efficiency savings and revenue growth, said Post. Year-to-date, on-going earnings at Arizona Public Service are essentially flat, increasing only $4 million compared to last year.

SunCor Development Co., Pinnacle Wests real estate subsidiary, reported net income of $14.7 million for the second quarter of 2008, compared with $0.3 million in the 2007 second quarter. The increase was entirely related to the sale of a 12-story office building at SunCors Hayden Ferry Lakeside development in Tempe, Ariz.

For more information on Pinnacle Wests operating statistics and earnings, please visit www.pinnaclewest.com/financials.

Conference Call

Pinnacle West invites interested parties to listen to the live web cast of managements conference call to discuss the Companys 2008 second quarter earnings and recent developments at 1 p.m. (ET), today, Wednesday, July 30, 2008. The web cast can be accessed at www.pinnaclewest.com/presentations and will be available for replay on the web site for 30 days. To access the live conference call by telephone, dial (877) 356-3961 and enter Conference ID Number 52534276. A replay of the call also will be available until 11:55 p.m. (ET), Wednesday, August 6, 2008, by calling (800) 642-1687 in the U.S. and Canada or (706) 645-9291 internationally and entering the same ID number as above.

Pinnacle West is a Phoenix-based company with consolidated assets of about $11.5 billion. Through its subsidiaries, the Company generates, sells and delivers electricity and sells 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
NON-GAAP FINANCIAL MEASURE RECONCILIATION NET INCOME
(GAAP MEASURE) TO ON-GOING EARNINGS (NON-GAAP FINANCIAL MEASURE)

Three Months Ended
June 30, 2008

Three Months Ended

June 30, 2007

$ in
Millions

Diluted

EPS

$ in

Millions

Diluted

EPS

PINNACLE WEST CAPITAL CORPORATION

Net Income

$

133.9 $ 1.33 $ 79.0 $ 0.78

Adjustments:

Income tax credits related to prior years

(30.0

)

(0.30

)

(1.8 ) (0.02

)

Regulatory disallowance

--

--

8.0 0.08

On-going Earnings

$ 103.9 $

1.03

$ 85.2 $ 0.84

Six Months Ended
June 30, 2008

Six Months Ended

June 30, 2007

$ in
Millions

Diluted

EPS

$ in

Millions

Diluted

EPS

PINNACLE WEST CAPITAL CORPORATION

Net Income

$

129.4

$

1.28

$

95.5

$

0.95

Adjustments:

Income tax credits related to prior years

(30.0

)

(0.30

)

(3.3

)

(0.03

)

Regulatory disallowance

--

--

8.0

0.08

On-going Earnings

$

99.4

$

0.98

$

100.2

$

1.00

ARIZONA PUBLIC SERVICE

Net Income

$

119.0

$

79.4

Adjustments:

Income tax credits related to prior years

(29.3

)

(1.5

)

Regulatory disallowance

--

8.0

On-going Earnings

$

89.7

$

85.9

PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share amounts)

THREE MONTHS ENDED
JUNE 30,

SIX MONTHS ENDED
JUNE 30,
2008 2007 2008 2007
Operating Revenues
Regulated electricity segment $ 829,478 $ 711,293 $ 1,452,279 $ 1,247,344
Real estate segment 36,880 47,819 84,622 124,951
Marketing and trading 50,673 92,637 108,131 165,108
Other revenues 9,162 11,153 17,899 20,516
Total 926,193 862,902 1,662,931 1,557,919
Operating Expenses
Regulated electricity segment fuel and purchased power 327,561 270,337 596,939 473,690
Real estate segment operations 41,746 45,917 89,965 107,253
Marketing and trading fuel and purchased power 45,245 74,533 96,767 132,477
Operations and maintenance 194,909 177,310 389,033 348,888
Depreciation and amortization 97,784 92,476 193,391 181,854
Taxes other than income taxes 33,251 34,757 66,403 69,476
Other expenses 6,822 8,803 12,760 17,291
Total 747,318 704,133 1,445,258 1,330,929
Operating Income 178,875 158,769 217,673 226,990
Other
Allowance for equity funds used during construction 5,414 5,195 11,538 9,639
Other income 3,928 5,869 7,776 8,642
Other expense (10,063 ) (3,269 ) (14,971 ) (7,883 )
Total (721 ) 7,795 4,343 10,398
Interest Expense
Interest charges 51,583 51,827 106,349 101,953
Capitalized interest (4,938 ) (5,213 ) (10,617 ) (10,020 )
Total 46,645 46,614 95,732 91,933
Income From Continuing Operations Before Income Taxes 131,509 119,950 126,284

145,455

Income Taxes 17,076 40,713 16,519 49,754
Income From Continuing Operations 114,433 79,237 109,765 95,701
Income (Loss) From Discontinued Operations
Net of Income Taxes 19,429 (243 ) 19,624 (177 )
Net Income $ 133,862 $ 78,994 $ 129,389 $ 95,524
Weighted-Average Common Shares Outstanding - Basic 100,653 100,229 100,587 100,138
Weighted-Average Common Shares Outstanding - Diluted 100,917 100,779 100,856 100,718
Earnings Per Weighted-Average Common Share Outstanding
Income from continuing operations - basic $ 1.14 $ 0.79 $ 1.09 $ 0.96
Net income - basic $ 1.33 $ 0.79 $ 1.29 $ 0.95
Income from continuing operations - diluted $ 1.13 $ 0.79 $ 1.09 $ 0.95
Net income - diluted $ 1.33 $ 0.78 $ 1.28 $ 0.95

Contacts:

Pinnacle West Capital Corporation
Media:
Alan Bunnell, 602-250-3376
Analyst:
Rebecca Hickman, 602-250-5668
Lisa Malagon, 602-250-5671
Web site: www.pinnaclewest.com

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