Nov. 25, 2002 — Pinnacle West Capital Corp. announced Friday that it has received approval from the Arizona Corporation Commission (ACC) for a $125 million line of credit from Arizona Public Service (APS) to the parent company and that it has canceled plans to build Units 3 and 4 of the Redhawk Power Station.
The company still has pending before the ACC a $500 million application to ensure the availability of investment-grade financing for power plants built by its generation subsidiary Pinnacle West Energy to serve APS customers under the terms of the 1999 regulatory settlement agreement.
“Today’s decision by the ACC and the cancellation of these units strengthen our capital structure and provide added liquidity,” said Bill Post, Pinnacle West Chairman.
The line of credit for the parent company will maintain the parent company’s short-term borrowing resources by replacing a $125 million commercial paper back-up line of credit with a line of credit from APS to the parent for 364 days.
Jack Davis, President and Chief Executive Officer of APS, stated that approval of the requested line of credit does not impact costs or service to APS customers.
Pinnacle West Energy announced the decision to cancel Redhawk Units 3 and 4. The two 530-megawatt natural gas-fired generators were scheduled to begin producing electricity by early 2007.
As a result of the plant cancellation, the Company expects to record a charge of about $50 million before income taxes ($30 million after-tax or $0.35 per share) in the 2002 fourth quarter. The near-term cash benefits associated with the plant cancellation are expected to total approximately $60 million between now and the end of 2003. Over the next five years, the Company estimates that this decision will reduce its capital spending by more than $500 million.
Units 1 and 2 of the Redhawk Plant were completed in July of this year and are available for full-power operations. The units are also 530-megawatt natural gas-fired generators.
Pinnacle West is a Phoenix-based company with consolidated assets of approximately $8.5 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.