Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Non-Deal Roadshow (September 2015)
34 slides from Pinnacle West Capital's roadshow presentation, Sep 28, 2015
Slide 1: Powering Growth, Delivering Value
POWERING GROWTH DELIVERING VALUE Investor Meetings | September 28 - October 1, 2015 Powering Growth, Delivering Value
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS This presentation contains forward-looking statements based on current expectations, including statements regarding our earnings guidance and financial outlook and goals. These forward-looking statements are often identified by words such as “estimate,” “predict,” “may,” “
Slide 3: Pinnacle West: Who We Are
We are a vertically integrated, PINNACLE WEST: regulated electric utility in the WHO WE ARE growing southwest U.S. Pinnacle West (NYSE: PNW) - Market Capitalization*: $6.8 billion - Enterprise Value*: $10.8 billion - Consolidated Assets: $14.3 billion - Indicated Annual Dividend*: $2.38 - Dividend Y
Slide 4: Value Proposition
VALUE PROPOSITION • Top quartile ratings in Customer Satisfaction, Reliability and Safety Operational • APS operates the Palo Verde Nuclear Generating Station, the largest nuclear Excellence plant in the country, which continues record levels of electricity production • Disciplined cost management L
Slide 5: Arizona Economic Indicators
Business services, healthcare, ARIZONA ECONOMIC tourism, and consumer services INDICATORS leading job recovery – each growing 3-7% YoY Home Prices – Metro Phoenix Nonresidential Building Vacancy – Metro Phoenix Value Relative to Jan ‘05 Vacancy Rate 175 25% Office 150 20% Industrial 125 15% 100 10%
Slide 6: Resource Planning
ACC adopted revised IRP filing schedule; final IRP now due April 3, RESOURCE PLANNING* 2017, to allow time to consider the impacts of the Clean Power Plan MW Composition of Energy Mix by Resource* 14,000 Load Requirement Including Reserves 2014 12,000 27.7% 9.5% 17.0% 10,000 35.3% Gas Resource Plann
Slide 7: Palo Verde Nuclear Generating Station
PALO VERDE NUCLEAR Largest generating nuclear plant GENERATING STATION in the United States • Total Capacity: 4,000 MW (3 units) Low risk of natural events at Palo Verde o APS share: 1,146 MW; APS operated o Output: 32.3 million MWh in 2014 o Approximately 2,800 employees In Service License* Unit 1
Slide 8: Capital Expenditures
70% of capital expenditures are CAPITAL recovered through rate adjustors EXPENDITURES (30%) and depreciation cash flow (40%) $1,285 ($ Millions) $79 Other $1,111 $1,056 $92 $331 $100 Distribution $883 $73 $375 $325 $146 Transmission $2 $242 $180 $113 Renewable $192 $1 Generation $192 $178 $80 $63 $4
Slide 9: Rate Design Modernization
RATE DESIGN MODERNIZATION Rate design changes needed to align Rate Design Modernization Steps: fixed costs and revenue • Grid Access Charge filing on April 2, 2015 Costs – APS Revenue – APS Residential Classes Residential Classes – Interim solution (2010) (2010) – Seeking increase to $3.00/kw (or ab
Slide 10: Key Dates for Rate Design
KEY DATES FOR RATE DESIGN • Residential demand rates started • Time of Use rates initiated - due to central air conditioning load Early Nearly half of our residential (currently about 10% of customers 1980’s customers are on TOU rates have a rate with a demand charge) • Net metering Technical Worksh
Slide 11: APS Solar Innovation
APS SOLAR Partnering with Arizona installers INNOVATION APS Solar Partner Program Solar Innovation Study • Installing 10 MW of APS-owned residential • APS is conducting home rate study to rooftop solar implement and study various − Equates to approximately 1,500 customers technology configurations (
Slide 12: Environmental Plan
Regional Haze compliance is the ENVIRONMENTAL PLAN biggest driver of environmental spend over the next few years Cooling Water Mercury and Other Regional Haze / BART Coal Combustion Intake Hazardous Air Pollutants (SCR) Residuals Structures – (ACI + Baghouse) CWA 316(b) MATS compliance by April 2015
Slide 13: Coal Fleet Strategy
APS’s proactive approach to reducing emissions leads to coal’s COAL FLEET STRATEGY expected share of the energy mix being reduced to 17% 7% Percent of Portfolio MWh 15% 10% 15% 20% EE/DR Renewable Energy 35% 35% Natural Gas Coal 17% Nuclear 28% 18% 2014 2029 Emissions • Four Corners: 2013 transactio
Slide 14: Water Strategy
APS, and Palo Verde in particular, has provided national and WATER STRATEGY international leadership on the use of reclaimed water for power generation Vision: To secure and maintain a sustainable and cost-effective supply of water to enable reliable energy production for APS customers Mission: To d
Slide 15: 2015 Key Dates
2015 KEY DATES ACC Key Dates Docket # Q1 Q2 Q3 Q4 Key Recurring Regulatory Filings Lost Fixed Cost Recovery E-01345A-11-0224 Jan 15 Net Metering – Quarterly Installation Filings E-01345A-13-0248 Jan 15 Apr 15 Jul 15 Oct 15 Transmission Cost Adjustor E-01345A-11-0224 May 15 Renewable Energy Surcharge
Slide 16: Appendix
APPENDIX Powering Growth, Delivering Value
Slide 17: Leadership Team
Our top executives have more than 100 combined years of LEADERSHIP TEAM creating shareholder value in the energy industry Don Brandt Chairman & Chief Executive Officer Jim Mark Randy Jeff Hatfield Schiavoni Edington Guldner EVP & Chief EVP & Chief EVP & SVP Financial Operating Chief Nuclear Public P
Slide 18: Arizona Corporation Commission
ARIZONA CORPORATION COMMISSION Terms to January 2017 Terms to January 2019 Susan Bob Bob Tom Doug Bitter Smith (R) Burns (R) Stump (R)* Forese (R) Little (R) Chairman Other State Utility Officials ACC Staff Director - Thomas Broderick RUCO Director - David Tenney (R) * Term limited - elected to four
Slide 19: Regulatory Mechanisms
We have achieved a more REGULATORY supportive regulatory structure MECHANISMS and improvements in cost recovery timing Adopted / Mechanism Description Last Adjusted Power Supply Adjustor April 2005 / • Recovers variance between actual fuel and purchased power costs and (“PSA”) February 2015 base fue
Slide 20: Retail Sales Impact from Energy Efficiency and Distributed Generation
RETAIL SALES IMPACT FROM ENERGY EFFICIENCY AND DISTRIBUTED GENERATION The difference between customer growth and Annual Retail Sales Growth % weather-normalized retail sales, mostly driven by EE and DG, has ranged from (1)-(2)%, in line with guidance, despite some larger quarterly variances. • 2015
Slide 21: Arizona's Renewable Resource and Energy Efficiency Standards
ARIZONA’S RENEWABLE RESOURCE AND ENERGY EFFICIENCY STANDARDS Renewable Energy (RES) Requirements Energy Efficiency Requirements • Portion of retail sales to be supplied by • Cumulative savings from energy renewable resources efficiency programs must be equivalent – 5% by 2015* to 22% of annual retai
Slide 22: Residential PV Applications
RESIDENTIAL PV APPLICATIONS Residential DG (MW) Annual Additions 51 57 44 23 15 19 1,800 1,600 2009 2010 2011 2012 2013 2014 64 1,400 1,490 85 105 90 1,200 1,237 1276 1,203 1,000 94 62 63 969 69 84 800 108 862 97 62 878 863 803 757 45 64 719 728 600 112 637 654 34 517 41 545 400 33 83 450 28 364 346
Slide 23: Net Metering
Rooftop solar customers still NET METERING use the grid 24 hours a day TYPICAL GRID INTERACTION FOR ROOFTOP SOLAR • Customers with rooftop solar systems do not pay for all of the electric services they use (i.e. rooftop customers still need support from the grid 24 hours a day) • These unpaid costs
Slide 24: Operational Considerations with Increased Variable Generation
OPERATIONAL CONSIDERATIONS WITH INCREASED VARIABLE GENERATION The grid provides real-time voltage and • Steep ramp rate of backup generation power needed to start air conditioners and • Instant variability other motors loads (for typical AC unit) • Voltage control at distribution level 24 Powering G
Slide 25: AZ Sun Program
Owning solar resources makes sense for our customers and the AZ SUN PROGRAM environment and provides earnings growth potential • Utility-scale photovoltaic solar plants owned by APS • Constructive rate recovery through RES until included in base rates • Commitments to date: 170 MW, $675 million capi
Slide 26: Ocotillo Power Plant (Tempe, AZ)
Ocotillo modernization project OCOTILLO POWER will maintain valley grid PLANT (TEMPE, AZ) reliability and increase APS’s generating capacity by 290 MW Existing • Benefits: – Maintains system reliability through retirement of aging steam units – Replacement units meet need for increased portfolio res
Slide 27: APS Transmission
Strategic transmission investment is essential to maintain reliability APS TRANSMISSION and deliver diversified resources to customers • 10-Year Transmission Plan filed January 2015 (115 kV and above) – 275 miles of new lines – Includes Hassayampa-North Gila (HANG2) • ~110 miles; 500kV Flagstaff • C
Slide 28: Bright Canyon Energy – Transmission Growth
BRIGHT CANYON ENERGY – TRANSMISSION GROWTH BRIGHT CANYON ENERGY Pinnacle West subsidiary formed to pursue new growth opportunities WECC TRANSCANYON A 50/50 Joint Venture formed with BHE U.S. Transmission, subsidiary of Berkshire Hathaway Energy, to pursue transmission opportunities in the western Un
Slide 29: Operations & Maintenance Outlook
OPERATIONS & Targeting to be top quartile in MAINTENANCE peer benchmarking for staffing OUTLOOK ($ Millions) 2015+ Outlook $137 $103 $150 $124 $109 • Goal is to keep O&M per $121 kWh flat • Complete documentation of over 1,800 policies, processes and procedures, including $775 - more than 275 proces
Slide 30: Balance Sheet Strength
BALANCE SHEET STRENGTH Debt Maturity Schedule Credit Ratings ($Millions) • A- rating or better at S&P, Moody’s and Fitch $500 • Moody’s and Fitch upgraded APS and PNW in Q2 $400 2015 Major Financing Activities • $250 million 5-year 2.20% APS senior $300 unsecured notes issued in January 2015 $500 •
Slide 31: Credit Ratings and Metrics
CREDIT RATINGS AND Key credit metrics remain strong METRICS APS Parent 2010 2011 2012 2013 2014 Corporate Credit Ratings APS Moody’s A2 A3 FFO / Debt 23.7% 23.6% 27.7% 31.5% 26.6% S&P A- A- FFO / Interest 3.3x 4.2x 4.8x 5.6X 5.8x Fitch A- A- Debt / 52.6% 52.9% 50.7% 47.7% 46.3% Capitalization Senior
Slide 32: Generation Portfolio
GENERATION PORTFOLIO* Fuel/Plant Location Units Dispatch COD Ownership Interest1 Net Capacity (MW) NUCLEAR Palo Verde Wintersburg, AZ 1-3 Base 1986-1989 29.1% 1,146 1,146 MW Cholla Joseph City, AZ 1-3 Base 1962-1980 100 647 COAL Four Corners Farmington, NM 4, 5 Base 1969-1970 63 970 1,932 MW Navajo
Slide 33: Purchased Power Contracts
PURCHASED POWER CONTRACTS* Fuel/Contract Location Owner/Developer Status1 PPA Signed COD Term (Years) Net Capacity (MW) Solana Gila Bend, AZ Abengoa IO Feb-2008 2013 30 250 RE Ajo Ajo, AZ Duke Energy Gen Svcs IO Jan-2010 2011 25 5 Sun E AZ 1 Prescott, AZ SunEdison IO Feb-2010 2011 30 10 SOLAR 310 MW
Slide 34: Investor Relations Contacts
INVESTOR RELATIONS CONTACTS Paul J. Mountain, CFA Director, Investor Relations Telephone: (602) 250-4952 E-mail: paul.mountain@pinnaclewest.com Chalese Haraldsen Telephone: (602) 250-5643 E-mail: chalese.haraldsen@pinnaclewest.com Pinnacle West Capital Corporation P.O. Box 53999, Mail Station 9998 P
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