S&P: Pinnacle West, Arizona Public up to stable

Standard & Poor's said it revised the outlook to stable from negative and affirmed the ratings on Pinnacle West Capital Corp. and Arizona Public Service Co., the company's wholly owned electric utility, reflecting the long-awaited resolution of Arizona Public's general rate case.

S&P affirmed Pinnacle West's BBB corporate credit rating, BBB- senior unsecured debt rating and A-2 commercial paper rating and Arizona Public's BBB corporate credit and senior unsecured debt ratings and A-2 commercial paper rating.

The Arizona Corporation Commission voted 4 to 1 on March 28 to adopt with few changes the terms of a settlement agreement negotiated by 21 of 22 parties in August 2004 and thereby resolve many of the issues that have challenged the consolidated credit quality of both companies.

Among the most significant benefits of the settlement is the rate basing of 1,790 megawatts of generation that is currently owned by Pinnacle West Energy Corp. As a result, Pinnacle West's merchant plant ownership will drop from about 2,200 MW of nameplate capacity to about 425 MW, significantly lowering the business risk profile, S&P said.

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