Fitch upgrades Pinnacle

Fitch Ratings said it upgraded Pinnacle West Capital Corp.'s long-term issuer default rating to BBB from BBB- and affirmed its short-term issuer default rating and commercial paper at F3.

The agency also upgraded Arizona Public Service Co.'s long-term issuer default rating to BBB from BBB-, upgraded its senior debt to BBB+ from BBB and affirmed its short-term issuer default rating and commercial paper at F3.

Finally, PVNGS II Funding Corp.'s secured lease obligation bonds were upgraded to BBB+ from BBB.

The outlook is stable.

The agency said the upgrades reflect strong performance in 2011 and the constructive outcome of Arizona Public Service's recently settled 2010 general rate case, which will provide a tailwind for improved earnings and credit ratios in 2012 and 2013.

The ratings also consider Arizona Public Service's solid liquidity position, manageable debt maturities, low leverage and the financial support from its corporate parent, Pinnacle, including anticipated equity infusions agreed to in Arizona Public Service's settlement of its 2008 general rate case, Fitch said.

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