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Pinnacle West Capital Corporation’s (PNW - Analyst Report) key ancillary Arizona Public Service (“APS”) disclosed updates on the performance of its solar business in 2012 as well as revealed the 2013 solar plan.

Last year, the diversified utility operator added 148 megawatts ("MW") to its generation capacity. The increased production will help serve more than 35,000 consumers in the state of Arizona thereby cementing its position as one of the leading power service providers in the region.

The company expects the figure to increase twofold in 2013. Pinnacle West intends to supplement its generating capacity by adding 600 MW of solar power by the end of 2013 which will serve around 150,000 customers.

The company’s confidence is reflected in the various projects which are lined up this year. This includes the 250-MW Solana Generating station which will become operational in the latter part of 2013. APS will acquire 100% of the power for 30 years from Solana which is currently owned and operated by Abengoa Solar.

Meanwhile, in 2013, APS will also benefit from its distribution programs. It has plans to bring online two plants under its flagship AZ program – the 35 MW Foothills Solar Plant and the 14 MW Hyder II Solar Power Plant in Yuma County.

The incremental production in 2012 came on the back of the completed 19 MW Chino Valley Solar Plant as well as the final 5 MW Hyder I Solar Plant. Both these plants are part of APS’ AZ program. Moreover, the company inked a 15 MW power purchase deal with a facility of SunEdison, the Saddle Mountain Solar Power plant.

However, the largest growth incentive came from the residential customers installing systems on their houses and businesses. The number reached 7,500 in 2012 compared with less than 6,000 in 2011.

Arizona’s hot climate – especially in the southwestern part mostly comprising deserts – encourages the generation of solar energy. These multiple initiatives and climate advantage will well place the company to fulfill the Arizona Renewable Energy Standard. This dictates APS to produce 15% of the power from renewables by 2025.

With strict environmental policies coming into play and an expected 2.6% rise in consumption in the U.S. as per the Energy Information Administration (EIA) report, the renewable market will grow at a steady clip in the future. This will certainly bode well for the company’s growth trajectory.

Notwithstanding the rise in demand for clean energy, conventional utility sources like coal and natural gas will continue to dominate the U.S. energy market owing to their abundant availability. Presently, Pinnacle West retains a Zacks Rank #3 (Hold).

Other utility companies to look out for are Zacks Rank #1 (Strong Buy) Brookfield Infrastructures Partners L.P. (BIP - Snapshot Report), Pike Electric Corporation (PIKE - Snapshot Report) and Edison International (EIX - Analyst Report).

Based in Phoenix, Ariz., Pinnacle West along with its subsidiaries offers retail and wholesale electric services primarily in the State of Arizona.

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