Greetings and welcome to the Pinnacle West Capital Corporation 2011 First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Becky Hickman, Director of Investor Relations. Thank you. Ms. Hickman, you may now begin.

Thank you, Melissa. Good morning. I'd like to thank everyone for participating in this conference call and webcast to review our first quarter earnings, recent developments and operating performance. Our speakers today will be our Chairman and CEO, Don Brandt; and our CFO, Jim Hatfield. Don Robinson, who is President and Chief Operating Officer of APS, is also here with us. Before I turn the call over to our speakers, I need to cover a few details with you. First, the slides we refer to today are available on our Investor Relations website along with our earnings release, supplemental information on our earnings variances and quarterly operating statistics, the webcast and the Form 8-K filed this morning. The slides contain reconciliations of certain non-GAAP financial information. Please note that all of our references to per share amounts today will be after income taxes and based on diluted shares outstanding. Also, it is my responsibility to advise you that this call and our slides contain forward-looking statements based on current expectations, and the company assumes no obligation to update these statements. Because the actual results may differ materially from expectations, we caution you not to place undue reliance on these statements. Please refer to the forward-looking statements contained in our 2010 Form 10-Q, which was filed this morning, as well as the MD&A section, which identifies risks and uncertainties that could cause actual results to differ materially from those contained in our forward-looking statements. A replay of this call will be available on our web site, www.pinnaclewest.com for the next 30 days. It will also be available by telephone through May 6. At this point, I'll turn the call over to Jim.

Thank you, Becky. The topics I will discuss today are outlined on slide four. First, I'll review the consolidated first quarter results and discuss the main variances from last year’s corresponding quarter. Second, I'll provide a brief update on the status and outlook for the Arizona economy. Third, I'll discuss our 2011 earnings guidance and lastly, I will close with brief comments on our financing activities in these. Slide five summarizes our reported and on-going earnings for the quarter. On a GAAP basis for this year’s first quarter, we reported a consolidated net loss attributable to common shareholders of $15 million or $0.14 per share compared with a net loss of $6 million or $0.06 per share for the prior year's first quarter. Our on-going earnings decreased $0.21 per share for the 2011 first quarter. We’ve consolidated on-going loss of $15 million or $0.14 per share versus on-going earnings of $7 million or $0.07 per share for the comparable quarter a year ago. Slide six contains a reconciliation of our first quarter GAAP EPS to our ongoing earnings. The amounts for both quarters exclude the results related to our discontinued operations substantially comprised of the operations of our real estate business on core. My remaining comments on the quarter will focus on on-going results. Moving to slide seven, you will see the variances that drove the change in quarterly on-going EPS. First, an increase in our regulated electricity segment gross margin added $0.04 per share compared with the prior year first quarter. Several pluses and minuses comprise this net variance and I will cover those items in more detail on the next slide. Second, higher operations on maintenance expenses decreased earnings by $0.10 per share. The increase largely reflects higher duration cost primarily due to the plan timing and scope…

Thanks, Jim. Since our last earnings call we made distinct progress in key areas and continued our track record of operation excellence. Today, I'll address four areas, one, our renewable and other generation investments; two, environmental compliance; three, rate regulation matters; and finally, four, recent operating performance. Beginning with renewable resources in our AZ Sun development activities, we are on track with plans to significantly increase the amount of renewable energy we provided our customers. Investing in these resources make sense for our customers, their communities, the environment and our shareholders. We have a strong emphasis on a solar power because Arizona has some of the best solar conditions in the world. Since the beginning of the year, our most noteworthy progress related to renewable energy has been on APS' AZ Sun Program. The company has planned to develop and own 100 megawatts of photovoltaic utility scale solar plants in Arizona. The appendix to our slides today contains a summary of the AZ Sun Program and the projects committed today. We have announced projects with a total deliverable capacity of 83 megawatts and an estimated capital investment of $384 million. Additional procurement initiatives are underway to fill out the remaining 17 megawatts of the program. Construction and other development activities are now under way and we expect to place the first 45 megawatts of the AZ Sun Program in service for customers later this year. Turning to the status of our Four Corners plan and other environmental compliance matters, last quarter, I discussed our multi-part plant to address several challenges facing over Four Corners coal-fired plant in northwestern New Mexico. The plan presents a creative solution to address new environment regulations and maintains our well-balanced resource portfolio. A summary of the plan is included in the appendix to our slides.…

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions) Our first question is from Dan Eggers with Credit Suisse. Please proceed with your question. Dan Eggers – Credit Suisse: On the Four Corners, upon approval when will the $294 million go into rate base, and then on the requisite compliance spending of $300 million, what is the timing of that and how will you see the recovery?

Hey, Kevin, this is Jim. How are you? Dan Eggers – Credit Suisse: Fine. Thanks.

On the first question, what we've ask for in or will ask for in this rate case is an infrastructure adjust of whatever the time once have been, assuming we are successful on getting that and a late third quarter close Fore Corners in 2012, it would be relatively short timeframe from a regulatory lag perspective, half of the year or less depending upon the timing. So that would be a fairly quick recovery of the cost. In terms of the $300 million an environmental, we would expect that we’ll begin spending that and planning for the 12, 13 timeframe and the spin would be sort of 14 to 16 timeframe. Dan Eggers – Credit Suisse: Okay. Will that be the same for Tyra as well for spending?

Well, the Tyra will be doing by, I think Don said 2015, so that would be in that. If 15, it’s complete you expect a couple of years of planning and few expenditure or so. Dan Eggers – Credit Suisse: Okay. Then how economic are these plans to Arizona? What is the net benefit for Pinnacle West, how important are these jobs to the Navajo tribe and how competitive are these plants versus lets say new gas plant?

We think the plants are very competitive and they are very critical from a job standpoint. Here in Arizona, the state as a whole and particularly to the Navajo Nation, the Four Corners plant and the coalmine adjacent to the plant generate about 60% of the revenues for the Navajo Nation's general fund.

To give you a relative value Kevin, I think Four Coroners 4 and 5 from a cost per megawatt hour basis about 15% less what the comparable capacity factor. So, that's the magnitude. Dan Eggers – Credit Suisse: Okay, thank you. I'm sorry, and then last question with regards to the timing of the rate case, stop me if I am being too curious here, but if I look forward to 2012 and the Arizona Commission reelection is somehow garners a ton of attention, do you see (inaudible) all going up for reelection. And second of all, do you see any benefit to the commission perhaps this rate case is still going in early May in next year when the election starts?

Well, Kevin, I can't speak for whether the commissioner’s are going to see for the election, that's going to be up to them. I think the general consensus thought as they will. And we've kind of give a lot of thought to the timing spent of this case and the accelerated nature of this compared to prior our cases, which we addressed as part of the settlement of the few years ago and I think that will be to our advantage going into this case. Dan Eggers – Credit Suisse: Okay. Thanks guys. Have a good day.

Thank you. Our next question is from Ali Agha with Suntrust. Please proceed with your question. Ali Agha – Suntrust Robinson Humphrey: Thank you. First question, I wanted to clarify Jim or Don, in some of your prior charts you've given us your rate-based growth numbers ’11 to ’13 I believe, but that 13 number include the purchase – the extra purchase of Four Corners in there?

Hi, Ali, this is Jim. Yes it does. Ali Agha – Suntrust Robinson Humphrey: It does. Okay.

Yeah. Ali Agha – Suntrust Robinson Humphrey: Okay. Second question, I recall 2010, your actual ROE was about 9.3% that about the numbers shows me right. Can you also remind us what is the embedded ROE in that ’11 guidance?

Well, Ali, you’re correct. It was 9.3% in 2010 and we're projecting at this point slightly under nine, high eight for 2011. Ali Agha – Suntrust Robinson Humphrey: Okay. And the 2013, it's going to call the average rate-base it's about – is it 7.6 billion?

I'm sorry, what year? Ali Agha – Suntrust Robinson Humphrey: 2013.

2013, it’s will going to be 5% annualized growth. So somewhere in the 7.35 billion range. Ali Agha – Suntrust Robinson Humphrey: Okay. That's the year-end or the average?

That's the year-end. Ali Agha – Suntrust Robinson Humphrey: That's the year-end.

Yeah. Ali Agha – Suntrust Robinson Humphrey: And my last question Jim, from an equity issuance perspective, you said before the key for this equity issuance is to time it for the equity ratio for the next round of rate case increase. As you said on the call, is there a contract – with the Four Corners investment and the other CapEx that that you’re going to spend on environmental, will that require a separate meaningful external capital money or is that factored in your balances versus getting the equity ratio up for the next rate case?

Well, I think you're exactly right Ali and that we – the purposes of our equity issuance are to calibrate the capital structure for ratemaking purposes. When we look at the Four Corners transaction, these are the other sort of requirements for capital, it’s just an incremental capital requirements. So we would not do two transactions to satisfy that, we'd look at, sort of just incremental on top of what was planned. Ali Agha – Suntrust Robinson Humphrey: I see, okay. Thank you.

Okay.

Thank you. Our next question comes from Stefka Gerova with JPMorgan. Please proceed with your question. Stefka Gerova – JPMorgan: Thank you. I have two unrelated questions for you today. First, have you had any feedback from various stakeholders on your pre-filing notice in the APS rate case and do you have a view on what may be the more challenging issues in the case?

Hey, Stefka, this is Jim. How are you? Stefka Gerova – JPMorgan: Good, how are you

Fine, thank. We've had ongoing dialogue with the stakeholders since probably middle of last year in terms of coming up to this case, filing this case is no secret. It was really contemplated by all the parties in my opinion from the last settlement. The feedback we've gotten has been consistent throughout the process, we've been talking about decoupling, we've been talking about some sort of mechanism, that recover cost in the years were not in a rate case. So, I think we've had very good dialogue with the stakeholders at this point. As I go into the case, I think you're probably, any time in go-forward rating, base rate increase, there is always some... [Technical Difficulty]

Miss. Hickman.

Yes, ma'am.

Your line is back in life.

Thank you. We apologize for the technical difficulty. Stefka? Stefka Gerova – JPMorgan: I guess I missed the part of answer, I'm not sure if everybody did. But I'll move on to my second question, which relates to slide nine, I was wondering if you could quantify the plants fossil fleet outage O&M that you expect for 2011?

On slide 9, so dollar magnitude, they are both in the – about $40 million range. Stefka Gerova – JPMorgan: And that's consistent with what you had seen in 2010?

Correct. It's really stepping just the timing of the plant outages and based on the plant life cycle. Stefka Gerova – JPMorgan: Sure. Completely understood. Thank you very much.

Thank you.

Thank you. Our next question is from Jim von Riesemann with UBS. Please proceed with your question. Jim von Riesemann – UBS Securities: Thank you. Hey, Don. Hey, Jim. How are you?

Good. How are you doing? Jim von Riesemann – UBS Securities: I am doing okay. Could you guys just help me out with bridging your earnings expectations for the balance of the year, I look at a 12 months earnings figure and if I take like the last three quarters of 2010 its 297 and then with this quarter its 283, but can you just refresh our memories with what the major drivers are to get to your 323 ’15 because I'm sitting at a trailing ’12 283 right now?

Sure, you have obviously the first quarter of this year significantly impacted by the fossil timing. So you really get the last three months of last year – half of this year has been in the first quarter. Obviously, the difference from last year and this year would be retail sales growth of about 1% net of the EE and DE impact we see a little bit more in terms of line extension revenue we saw that in the first quarter. And we also have a transmission rate increase later this year, expenses are fairly flat, we’ll see some increase and obviously depreciation on property tax. Those are really the major drivers on a year-to-year basis impacting 2011. Jim von Riesemann – UBS Securities: Do you care to give any guidance on a quarterly basis, I know that’s not your practice but?

We don't do that Jim and I'll tell you why and the first quarter was a great demonstration of that. In the first and fourth quarters of the year with timing of outages and things like and it materially skews these quarters. Jim von Riesemann – UBS Securities: Right.

So we just look at our annual basis. Jim von Riesemann – UBS Securities: I understand. And then just one modeling type question. What was the quarter end rate base? You guys are handy.

I haven't looked at that, but my guess would be that it’s about 6.5 billion roughly. Jim von Riesemann – UBS Securities: Thanks. That's all I have.

Jim. I might, its Don, I might add for the first quarter, we're dead on with our plan and I don't know if that will help you, but, Jim, when he referenced slide nine, you want to make sure your – for Q2 and Q3 particularly that differential between the fossil O&M in 2010 compared to the projected levels in 2011. Jim von Riesemann – UBS Securities: That I figured out, but appreciate the color.

Okay. Jim von Riesemann – UBS Securities: Okay. Thanks.

Thank you. Our next question comes from Brian Chin of Citigroup. Please proceed with your question. Brian Chin – Citigroup: Hi, good morning.

Good morning, Brian. Brian Chin – Citigroup: I think you Jim you cut out right as you're beginning to respond to the earlier question about, just sort of the interactions you had with interveners in the rate case in some of these proposed mechanisms, I think to ask you to sort of repeat what you said, I think that’s right when you start off the cut offs, if you could just sort of add a little more color one more time?

Brian, we’ve had ongoing dialogue as you know since middle of last year with the stakeholders and in fact filing on June 1 like we planned to do, its not a surprise to anybody and it was contemplated coming out in the settlement in 2009. Since middle of last year, we’ve been talking to the parties about the need of decoupling, and in fact we got our commission files in December 5. We’ve talked about our need to whether its infrastructure tracker whatever you want to call, the ability to collect additional revenue in the – when we are in for a rate case, I will say the significant infrastructure spend. We talked about line extension and the things we have to do there and change of policy and we had 18 months post issuer plan and I think everybody sort of assumed that model works for purposes of the settlement. So I think all along, the dialogue has been very constructive, very healthy, nothing new to anybody in this case. So all in all I would say the dialogue has been very positive. Brian Chin – Citigroup: Very good. Thank you. Operator: Thank you. (Operator Instructions) Our next question comes from Reza Hatefi with Decade Capital Management. Please proceed with your question. Reza Hatefi – Decade Capital Management: Thank you very much. Could you – I guess you mentioned earlier your customer gross guidance is 1.7% from ’11 to ’13, but load growth is kind of flattish. Could you talk about – I guess I just thinking about from a earnings driver how that's going to work along with the energy efficiency, I guess energy efficiency is rate based, so you get a return on that, but then you have customers gross but no-load gross, so does that mean that gross in essence doesn't at earnings because there is no load or somehow because I just seeing some clarification on that?

Sure. I would be glad to answer that. This is Jim. You have our assumptions correct and the driver is of course the energy-efficiency standard in distributed energy standard in Arizona as we see it is offsetting kilowatt-hour sales growth in inherent and the customer growth rate. We do not rate base energy efficiency cost those are a total pasture from an O&M perspective. And so yeah, I think sales growth is really flat going forward and that’s why and I think all the parties agree the decoupling policy is the right policy for Arizona.

And then when you say it's in your O&M do you sort of get one-to-one recovery on that and so excluding this extra O&M sort of speak that gets recovered. What should we assume is underlying O&M growth over this timeframe?

Well, we haven't talked about 2012 at this point and so I'm going to hold on from that. I'll will just point back to – we've been fairly flat from an operating cost perspective over the last couple of years and our goal is to continue to focus on cost efficiency.

Okay. Okay. Thank you very much.

Thank you. We have no further questions at this time. I’d like to turn the floor back over to management for closing comments.

Thank you, Melissa, and thank you everyone for joining us today. Meanwhile, if we have further detail or questions that you need answered about the company, please call me or Geoff Wendt. Thank you.

Thank you. This concludes today teleconference. You may disconnect your line at this time. Thank you for your participation.