Greetings, and welcome to the Pinnacle West Capital Corporation’s 2012 second 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). It is now my please to introduce your host, Ms. Rebecca Hickman, Director of Investor Relations. Thank you, Ms. Hickman, you may begin.

Thank you, LaTonya. I’d like to thank everyone for participating in this conference call and webcast to review our second quarter 2012 earnings, recent developments operating performance. Our speakers today will be our Chairman and CEO, Don Brandt and our CFO Jim Hatfield. Jeff Guldner, who is our APS Senior Vice President of Customers and Regulations 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 to which we refer are available on our Investor Relations website along with our earnings release and related information. Please note that the slides contain reconciliations of certain non-GAAP financial information. Also, all of our references to per-share amounts will be after income taxes and based on diluted shares outstanding. It is my responsibility to advice you that this call and our slides contains forward-looking statements based on current expectations and the company assumes no obligation to update these statements. Because actual results may differ materially from expectations, we caution you not to place undue reliance on these statements. Our second quarter 2012 Form 10-Q was filed this morning. Please refer to that document’s forward-looking statements cautionary language as well as the MDNA 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 website for the next 30 days. It is also available by telephone through August 9th. At this point, I’ll turn the call over to Don.

Thank you, Becky, and thank you all for joining us today. Since our last conference call we’ve made progress in a number of key areas as we focus on our core electric utility business. This progress includes demonstrating improvement in the regulatory environment in Arizona, maintaining operational excellence, strengthening our financial profile and positioning ourselves to benefit from economic recovery. Jim and I will provide more information on each of these areas through our remarks today. The regulatory environment in Arizona took another step forward when APS’s retail rate settlement was approved on May 15th by the Arizona Corporation Commission. The decision came 11 ½ months after the case was filed, the quickest resolution of a major Arizona utility rate case in recent memory. Supported by 22 of the 24 active parties to the case, the settlement shows significant collaboration and cooperation among APS, the Arizona Corporation Commission and other parties as well as a comprehensive commitment to an expedited process. The settlement contains a number of benefits for our customers, the communities we serve and our shareholders. Details of the agreement, as well as key underlying assumptions are outlined in the appendix to our slides today. The settlement prevents base rates from increasing for four years, but it is not a rate freeze. Under the agreement, APS may file it’s next general rate case on or after May 31st of 2015 for new base rates to become effective on or after July 1st of 2016. That said, we believe a number of factors will allow us to achieve competitive financial performance during the stay-out period. Aspects related to that settlement include first APS’s rate adjustment mechanisms. All of APS’s rate adjustment mechanisms will continue to function throughout the stay-out period. These mechanism include, among others, first the preferred formula…

Thank you, Don. As Don said, we continue making progress strengthening our financial profile. Today I will discuss the following topics. First, I will discuss our second quarter results, including earnings and the primary variances from last year’s corresponding quarter. Second, I will review recent upgrades of our credit ratings and our financing plans. Third, I’ll provide an update on the status outlook for the Arizona economy. Fourth, I will describe our cost management initiatives to which Don referred. And finally, I will discuss our guidance for 2012 earnings and our financials during the stay-out. Slide 6 summarizes our reported and ongoing earnings for the quarter. On a GAAP basis for this year’s second quarter, we reported consolidated net income attributable to common shareholders of 122 million, or $1.11 per share compared with net income of 87 million or $0.79 per share for last year’s second quarter. Our ongoing earnings increased $0.34 per share. For this year’s second quarter, we had consolidated ongoing earnings of 123 million or $1.12 per share versus ongoing earnings of 86 million or $0.78 per share for the comparable quarter a year ago. Slide 7 contains a reconciliation of our second quarter GAAP earnings per share to our ongoing earnings per share. The amount for both quarters exclude results related to our discontinued real estate and our energy services businesses. My remaining comments on the quarter will focus on ongoing results. Slide 8, this displays the variances that grow the change in quarterly ongoing earnings per share. First, an increase in our gross margin added $0.35 per share compared with the prior year’s second quarter earnings. Several pluses and minuses comprise of positive net variance and I will cover those items in more detail on the next slide. Second, lower infrastructure-related costs improved earnings by…

Thank you. (Operator instructions). Our first question comes from Greg Gordon with ISI Group, please proceed with your question.

Hi, good morning, it’s actually Bill Episelli.

Hey, Bill.

Hey, just a question on the, you know, the outlook going out to ’15, I know you guys have given the guidance here of rate base growth, from about 6% and off of an 11 base, and you know, you’re targeting the average ROE of 9.5% - I mean, thinking not earning is how they relate to those metrics, and I know that you’re good about talking about, you know, issuing equity in ’14, so, there will it be some impact from that, but I was just wondering if you could give additional thoughts on how the key pieces of earnings as it relates to base rate growth, and then the – you know, other pieces that you – you mentioned there at the end about the acceleration in the economy, all the things that could drive the 9.5% higher off of the targeted base.

Well, you know, again, and that 6% rate base [inaudible] – you do have equity in ’14, you do have a little bit of regulatory lag, all though a lot of that has been mitigated, and we’re assuming, you know, cost control. If all those things come true, and the economy recovers, about a 1% customer increase equals 10 million in after tax earnings on average. Since we’re assuming no sales growth over the 2015, we don’t think there is a lot of downside in the growth number, and so that sort of gives you a [inaudible] of [inaudible] what may happen if we do see some acceleration.

Okay, great, and then on the sales growth outlook, you know, could you maybe desegregate the 2.5% in terms of how it’s getting offset through just to regeneration in energy efficiency?

No, but since they break down we do – we assume compliance on energy efficiency which goes up every year, and then – and then we have the renewable energy standard by ’15 and we do know that from a deployment perspective, we’re slightly ahead of target – we can track those pretty good. And so, we feel that we have those two, and we do have just some customer conservation in there due to continued lack of direction of the long term economy.

Okay, and then just lastly – so, if we think about growth, if it were to say they hit 3% or 3.5% at some point over the life of the deal, is that – so, that’s netting out the 2.5% that you’re targeting, so that’s how you get your sort of 1% of additional growth, is that how we think about it?

No, my one percent of additional growth is just the same as additional 1% - customers came out of the system, normally you see to have gained about 10 million after tax earning.

Oh, okay. Thank you.

Our next question comes from Neil Mehta with Goldman and Sachs, please proceed with your question. Neil Mehta – Goldman Sachs: Hi, thank you – so, now that we’re through the rate case here, as you said Jim, cost control is so key, so, do you believe that you can keep going them flat throughout the stay out period assuming that retail sales are flat, or is that more of an aspirational target?

It’s both aspirational, but I have highly great confidence in our ability to do that. We – you know, the good news for me from a cost perspective, is – you know, what we’re trying to accomplish from the cost side is not just coming from the CFO – I have a good partner and [inaudible] loaning from the off side, and together we are pretty aligned, and pretty much seeing the same path going forward. So, I’m pretty confident now. Neil Mehta – Goldman Sachs: Got it, [inaudible], and also with a rate base – your rate base behind us, dividend growth comes into focus, you had that dividend around $2.10 for a long time, how are you think about the potential for dividend growth now?

You know, Neil, now that I think we have a runway out through ’15, I would expect, you know, the board will look at the dividend policy later this year. Neil Mehta – Goldman Sachs: Got it, and guidance…

Let me add to that, traditionally, our board’s a little bit the dividend level – the annualize dividend level at their October meeting, and I think this year would be consistent with that, the board will take a look at it, and we’ve accomplished a lot in the last few years in rebuilding our balance sheet, and getting our earnings up to a competitive level, and I think those are all positive aspects going into the fall, and the dividend decision. Neil Mehta – Goldman Sachs: Okay, and then when do you intend to issue 2013 guidance?

Right now we’re attentatively planning to do it on our analyst day, November 9th. Neil Mehta – Goldman Sachs: Perfect, thank you, thank you very much.

You’re welcome, thanks.

Your next question comes from Shar Pourreza with Citigroup, please proceed with your question. Shar Pourreza – Citigroup: Good morning everyone.

Good morning, Shar. har Pourreza – Citigroup: Can you just remind us with the current regional haze rules that’s coming about if your cap x outlook includes a state plan, or a federal implemented plan?

Currently, in terms of us, the regional haze rule advise to all [inaudible] four corners, Navaho, and [inaudible] three and four. The state proposed [inaudible] would be to install low nox burners in over fired air. All thought the EPA recently rejected that, and calling for more stringent, expensive FCRs, and what [inaudible] determined schedule for November of this year. The EPA proposed to burn it for [inaudible] be the insulation on FCRs on units four and five, it’s been in the transaction close and we don’t have a bared ruling from the EPA on Navaho at this time. Shar Pourreza – Citigroup: Is there a status on how much your cap x can increase assuming that the federal implemented plan gets inacted?

Excuse me? Shar Pourreza – Citigroup: Is there a status on how much you cap x could increase assuming a federal implemented plan gets inacted?

Yes, really it effects [inaudible] at this point, and we don’t have – we have the state plan in there, I think, it’s about 182 million if we had to implement the rest of the EPA.

Yes, FCRs on units two and three at [inaudible] would cost us about 182 million in additional CapEx. Shar Pourreza – Citigroup: Okay, perfect, thank you.

Our next question comes from Ali Agha with SunTrust, please proceed with your question. Ali Agha – SunTrust: Thank you, good morning.

Hey, Ali. Ali Agha – SunTrust: To be clear, to be guidance that you have for 2012 range, the 9.5% [inaudible], should we assume that associate with the midpoint of that guidance, or do you think about [inaudible] for 2012?

I think that the 9.5 really relates to ’13 through ’15, if you think about how we have that rate increase in the second half of the year, and we have the mechanisms from the nine settlement in the first half of the year, but – so, I would suspect slightly to exceed the 9.5 in 2012 with a sort of a hybrid year. Ali Agha – SunTrust: I see, okay. And secondly, also, to be clear, if I had [inaudible] the cap x that you have planned to have right now, if I use [inaudible] does that translate into a 5% annual rate based growth? Is it 5 or 6?

Well, [inaudible] is from 2011. Ali Agha – SunTrust: Right, so, it would be…

I have – I even calculated from ’12. Ali Agha – SunTrust: Okay, I thought in one of your slides that I may have seen 5%, and I may be wrong there.

It would decelerate because you have four corners in 2012, which is a large piece of that component in ’12. Ali Agha – SunTrust: Right, right. Okay, and thirdly on the equity issue that said that you don’t see before 2014, should we think of it really, you know, timing issue you needed for your next rate case, or should we think of end of ’14, or maybe not there, and from a size perspective for the last couple of [inaudible] actions, be a good proxy of the size that we should be thinking about?

No proxy for size at this point, and you know, it wouldn’t be until ’14 at the earliest and we would have to get to ’14 to make a decision as to what we are going to do at that point. Ali Agha – SunTrust: Understood, thank you.

Our next question comes from Brian Russo – Ladenburg Thalmann. Please proceed with your questions. Brian Russo – Ladenburg Thalmann: You mentioned the ongoing coal contract at Four Corners as the acquisition will be contingent on that. Could you just update us on the timeline there and what are the major items of discussion?

We expect to get the transaction closed by the end of the year, say around the first of December, and we’re in active negotiations on the coal supply contract. Like with most contracts it involves price. Brian Russo – Ladenburg Thalmann: Okay, and then just to clarify on the 9.5% target ROE. Is that utility earned ROE, or is that the consolidated ROE, which would include the $0.05 of parent track.

Consolidated. Brian Russo – Ladenburg Thalmann: Okay, thank you.

Our next question comes from Kevin Cole – Credit Suisse. Please proceed with your question. Kevin Cole – Credit Suisse: Hi, Good Morning guys. Congratulations on the very constructive rate outcome and change in (inaudible)

Thank you. Kevin Cole – Credit Suisse: I guess I have a little bit more, just kind of I guess on the (inaudible) drivers. So I guess the base approach that I should use is that, given that you expect 6% annual rate based growth, and a flat 9.5% earned ROE, that your base EPS growth should be 6%, and then that will likely be a little bit bigger in 2012, ‘13’ and ’14 due to the rate increase in the four quarters, and that it could be, it could start to taper off towards the backend a little bit due to the equity delusion in 2014 sometime?

Brian, with 6% rate based growth, it would be hard for me to see a path of 6% range growth, whether normalized. Because you do have the delusion at some point assumed throughout to stay out, and you do, and we’ll continue to have some regulatory lag. So, I would say it’s going to be south of that. Kevin Cole – Credit Suisse: Okay, should it follow the path of it being EPS growth being a little bit stronger in ’12, ’13 and ’14? And then kind of I guess taper off towards the backend due to that equity delusion?

If you assume equity delusion in the backend, yes that would be the case due to the delusion. Kevin Cole – Credit Suisse: Okay. And then Jim, does your 2014 equity comment preclude you from doing like a forward sale or something like that on the back of the project (inaudible) later this year?

We would not be precluded from doing anything at this point, so. Kevin Cole – Credit Suisse: Okay. Lastly I guess, can you put some collar around your dividend policy going forward during the four year rate sale?

Well, Kevin I think where we’re at now is pretty close to the conclusion of rebuilding (1) the company’s balance sheet. Significantly adding some consistency, to the Arizona Regulatory Environment, both consistency and creditability with the expeditious resolution of the last settlement and the settlement before that, that laid really the ground work going forward. You just talked to Jim about earnings growth, and earning at a minimum 9.5% ROE going forward, and that kind of lays the groundwork. (2) The next step is we have had the dividend frozen for a number of years at the current level. That’s something again that the board is going to address at our October board meeting in all likelihood. And I think you’ll see a dividend path forward coming out this fall. Kevin Cole – Credit Suisse: Great, thank you. That’s very helpful. Again, congrats.

Thank you.

Our next question comes from Jim (von Reesman) – UBS. Please proceed with your question. Jim (von Reesman) – UBS : Good Morning Arizona.

Hey, Jim how are you? Jim (von Reesman) – UBS : Good, yourself

Great. Jim (von Reesman) – UBS : Hey, a couple of questions. You know this transportation highway bill, whatever you want to call it, that Congress passed. Does that have any cash flow impact for you guys?

Well it could. Our minimum funding requirements would drop under the highway bill, as we understand the perimeters right now. The result of dropping our funding, Jim going forward, is it drives our expense up. And so at this point with the liquidity we have, and a plan in place, we’re still planning on funding at pre-highway bill levels, which is somewhere in the $150 -$160 area ’13 through ’15. Jim (von Reesman) – UBS : Okay, just kind of keeping along this whole cash flow things for a second. Can you talk a little bit about, or broadly speaking ’13 to’15, what your coverage metrics, what you want them to look like, or your capital structure targets. And then maybe what the impacts of the absence of bonus depreciation starting next year is going to have cash flow?

Well a couple of thing on the Jim, obviously are, when we try to reach that at test year we’re very happy with our 53 -54 equity ratio, for making purposes that obviously will fluctuate throughout the time frame, just based on the fact that we’re not in a test year. Our coverage metrics are fine. We will realize that a lot of the bonus depreciation for tax purposes next year as well, because we have a tax law set, you know, we have to carry forward. So, we’re very pleased with cash flow, liquidity, and our balance sheet at this point. And it’s not going to deteriorate throughout the sale period. Jim (von Reesman) – UBS : Okay, no worries, thanks.

Once again ladies and gentleman, to ask a question please press Star 1 on your telephone keypad. Our next question comes from Charles Fishman – Morningstar. Please proceed with your question. Charles Fishman – Morningstar: All right, thank you. Assuming the Four Corners acquisition is consummated, would the FCR installation for those two units come under the EIS, or do you have to wait till the next rate case?

They would come under the EIS once we started putting them into on the units, and of course you’d like to try a time load, so you can maximize that. I’ll just point out that that EIS is capped about a roughly a $5 million revenue requirement on an annual basis. So, it won’t be one for one recovery, but of course every little bit helps. Charles Fishman – Morningstar: Okay, that was it, thank you.

Our next question comes from Paul Patterson – Glenrock Associates. Please proceed with your question. Paul Patterson – Glenrock Associates: Good morning and congratulations on the continuance improvements.

Good Morning Paul. Paul Patterson – Glenrock Associates: Just to revisit customer growth, and I apologize if I missed this. One percent customer growth in 2012 projected to double through the 2015 timeframe. I’m just wondering what actually draws that? Is it the economy, and if it is, what sort of the economic forecast that you guys have in that?

Yes, you’re right, it sort of accelerates throughout through ’15. What really drives that Paul, is we don’t see the absorption of available homes are getting to a level until around the end of next year, early ’14 where you’ll see the construction side will start again. And of course, when construction cycles starts, that leads to retail sales which leads to other jobs, which you know has a sort of snowballing affect. So, it’s just the natural digging out of the inventory that we have in Phoenix. Paul Patterson – Glenrock Associates: So, there’s still a lot of migration into Arizona, it’s just right now absorbing the home building is being delayed as a result. Is that how we should think about it?

Yes. I mean we had at the peak somewhere around 35,000 available homes and apartments, and we’ve absorbed about 10,000 roughly of those. And until you get the construction cycle moving, that will be the driver, and it’s going to take some time. Paul Patterson – Glenrock Associates: Okay. And then just in terms of that growth rate which seems to accelerate, looks like you guys still, you know, the APS energy efficiency advantage here, I mean, you guys are still, you know, projection that you are going to be able to keep it flat throughout that period. Or should we think that that’s going to be accelerating as well, that growth rate. I mean, it’s impressive how you guys have been able to keep sales growth flat with the energy efficiency efforts. I’m just wondering how we should think about that over time?

I think Paul, we have increasing standards each year going forward, so you’re going to see acceleration of those programs. And we believe it’s going to offset the increase in customer growth through that timeframe. Paul Patterson – Glenrock Associates: Very impressive, thank you.

Our next question comes from Eli (inaudible) - Please proceed with your question. Chris Shelton –: Good Morning guys, it’s Chris Shelton, how are you?

Hey, Chris. Chris Shelton –: Quick clarification, I just want to see the, so the 6% rate base growth is off of 2011. I know the rate base that you filed for has put some tax as far… The question would be, what’s the best for 2011 rate is?

2011 rate base was, let see, it was ACCE total was 5.7 at the end of ’11. Chris Shelton –: Okay, and that excludes any of the construction work in progress, or any of the…

Yes, it would be your normal rate base for rate making purposes. Chris Shelton –: Okay, great. And then I know you used to have a slide – prior to this you had a slide that had rate base growth of 5% through ’14? Is that slide still approximately right for the (inaudible) or is the extra growth kind of coming from the ’15 timeframe.

The slide that we have had previously is still pretty much intact from a rate based perspective, and obviously as we move to ’15, we’re starting to get into some environmental and some more growth type of projections. Chris Shelton –: Got it, great. Final question. I know the equity layer at the utility will king of vary as we go through the years and (inaudible) you know, in time for the next case. What equity layer rage I guess do you see over the period?

You know Chris, it stays above 50% throughout that timeframe. It gets down to, you know, maybe 51 ½% but we have healthy credit metrics throughout the stale period. Chris Shelton –: Okay great. Thanks a lot guys.

There are no further questions in queue at this time. I would like to turn the call back over to management for closing comments.