Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Q2 2022 Earnings Presentation
26 slides from Pinnacle West Capital's earnings presentation, Aug 3, 2022
Slide 1: Powering Growth, Delivering Value: Second Quarter 2022 Results
POWERING GROWTH DELIVERING VALUE Second Quarter 2022 Results August 3, 2022 1
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: 2nd Quarter results negatively impacted by rate case outcome
2nd Quarter results negatively impacted by rate case outcome 2nd Quarter 2022 vs. 2nd Quarter 2021 Operating Revenue O&M1 & 2 less Fuel $(0.10) and D&A2 Pension Other Taxes2 All other, net2,4 Purchased $(0.18) & OPEB Non- $0.04 $(0.06) $1.91 Power1 service $1.45 $(0.14) Credits, net $(0.02) Operatin
Slide 4: Key drivers for EPS guidance
Key drivers for EPS guidance1 1 2022 key drivers • Retail customer growth 1.5%-2.5% • Property Tax • Weather-normalized retail electricity • Interest expense sales growth of 1.5%-2.5% • AFUDC • Transmission revenues • Pension and OPEB • Operations and maintenance • Depreciation and amortization Long
Slide 5: Managed capital plan to support customer growth, reliability, and clean transition
Managed capital plan to support customer growth, reliability, and clean transition $1.65B $1.50B $1.53B $1.53B $190 $214 $250 $270 Other Generation $260 $560 $340 $330 Clean Generation $263 $250 $210 $210 Transmission $595 Distribution $510 $530 $500 Other $170 $175 $185 $190 2021 2022E 2023E 2024E
Slide 6: Steady rate base growth
Steady rate base growth APS Rate Base Growth Guidance Total Approved Rate Base Year-End 5-6% ACC FERC Annual $13.6 Rate Effective 12/01/2021 6/1/2022 $2.4 FERC Date $10.9 $1.8 Test Year 06/30/20191 12/31/2021 Ended $11.2 ACC Rate Base $8.6B $1.9B $9.1 Equity Layer 54.7% 51.3% Allowed ROE 8.7% 10.75%
Slide 7: Our goal is flat total O&M and declining O&M per MWh
Our goal is flat total O&M and declining O&M per MWh O&M per MWh $29/MWh Total O&M1 2021: $865M 2022: $820M-$840M 2021 2022 2023 2024 1 Total O&M amounts exclude RES/DSM, and include planned outage amounts of $54M in 2021 and $40M-$50M in 2022. 7 Second Quarter 2022
Slide 8: No plans to issue equity before end of next rate case
No plans to issue equity before end of next rate case Forecasted sources of capital to fund investments through 2024 $400-$500 $200-$300 million $4.7 billion Approx. million $1 billion PNW Equity/ PNW Debt2 Alternatives Approx. $3 billion APS Debt2 Cash from Total Capital Operations1 Investment 1 Ca
Slide 9: Strong balance sheet with attractive long-term debt maturity profile
Strong balance sheet with attractive long-term debt maturity profile1 $M APS Long-Term Debt PNW Long-Term Debt $1,200 $1,000 $800 $600 $400 $200 $0 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050 As of June 30, 2022 1 Does not include debt at Bright Canyon Energy. 9 Second
Slide 10: Pension & Other Post Retirement Benefits (OPEB)
Pension & Other Post Retirement Benefits (“OPEB”) ($ in millions) Pension Funded Status1 Contributions 2021A 2022E 2023E 2024E 107% Pension $100 $0 $0 $0 104% OPEB $0 $0 $0 $0 Benefit Expense Notes • Using the corridor accounting approach, gains and losses outside of 97% the established corridor are
Slide 11: We continue to make progress towards key deliverables
We continue to make progress towards key deliverables ➢ File appeal of last rate case ✓ Filed notice of appeal on December 17 ✓ Filed opening brief on April 27 ✓ Filed reply brief on July 27 ➢ Make progress on financing plan ✓ Deferring equity issuance until after next rate case ➢ File new rate case
Slide 12: Appendix
PINNACLE WEST APPENDIX
Slide 13: 2022 EPS guidance
2022 EPS guidance Key Factors and Assumptions as of August 3, 2022 2022 Adjusted gross margin (operating revenues, net of fuel and $2.52 – $2.55 billion purchased power expenses, x/RES,DSM,CCT) • Retail customer growth about 1.5-2.5% • Weather-normalized retail electricity sales volume 1.5-2.5% high
Slide 14: Arizona remains among the fastest growing states in the U.S.
Arizona remains among the fastest growing states in the U.S. Annual Employment Growth Last Three Years1 Steady Housing Growth2 Single Family & Multifamily Housing Permits Maricopa County 43,378 1% 18% (1)% CAGR 8,425 National Arizona '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 1 2019-2021 2 Maricopa
Slide 15: Best-in-class service territory supports high tech growth and economic development
Best-in-class service territory supports high tech growth and economic development Our Approach: Supports Influx of Manufacturing Focus on Four Main Areas and Data Centers – Examples • Taiwan • Nestle USA • Business attraction and expansion Semiconductor Building 625k sq ft Began building $12B facil
Slide 16: A clear plan for clean energy transition
A clear plan for clean energy transition Progress Towards Meeting Clean Energy Commitment1 Contracted for nearly 1,600 MW of clean energy and storage to be in service for APS customers by end of 2024 Issued All-Source RFP which seeks 1,000 – 1,500 MWs of resources, including up to 600 – 800 MWs of r
Slide 17: Clean Energy Commitment – ~1,600MW in development since 2020
Clean Energy Commitment – ~1,600MW in development since 2020 Robust, Diverse Procurement Activity Energy Storage • 201 MW APS-owned resources to retrofit entire fleet of AZ Sun facilities • 300 MW under two long-term PPAs • All resources to be in service between 2022 and 2024 Solar • 150 MW owned by
Slide 18: 2022 Planned Outage schedule
2022 Planned Outage schedule Coal, Nuclear and Large Gas Planned Outages Q1 Q2 Q4 Estimated Duration Plant Unit Plant Unit Duration in Days Plant Unit Duration in in Days Days N/A N/A N/A Palo Verde 1 35 Palo Verde 3 30 18 Second Quarter 2022
Slide 19: Gross margin effects of weather
Gross margin effects of weather $ in millions pretax Variances vs. Normal $26 $1 Q1 Q2 Q3 Q4 2022 $26 Million All periods recalculated to current 10-year rolling average (2011 – 2020). Numbers may not foot due to rounding. 19 Second Quarter 2022
Slide 20: Renewable Energy & Demand Side Management expenses
Renewable Energy & Demand Side Management expenses1 Demand Side Management Renewable Energy $18 $13 $13 $11 $12 $16 $13 $10 $10 $7 $6 $4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2021 2022 $89 Million $43 Million 1 Renewable energy and demand side management expenses are offset by adjustment mechanisms. 20 Second Qua
Slide 21: Residential PV applications
Residential PV applications1 Residential DG (MWdc) Annual Additions 169 139 5,000 122 101 4,500 2019 2020 2021 2022 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2019 Applications 2020 Applications 2021 Applications 2022 Applications 1Monthly data eq
Slide 22: Our credit ratings support growth opportunities
Our credit ratings support growth opportunities Senior Corporate Unsecured Short-Term Ratings Ratings Ratings Outlook APS1 Balance Sheet Targets Moody’s A3 A3 P-2 Negative • Strong investment grade credit ratings S&P BBB+ BBB+ A-2 Negative • APS equity layer >50% Fitch BBB+ A- F2 Negative • FFO/Debt
Slide 23: Regulatory 2022 key dates
Regulatory 2022 key dates ACC Key Dates / Docket # Q1 Q2 Q3 Q4 Power Supply Adjustor (PSA): E-01345A-19-0236 Effective Feb 1 Approved May 18 Lost Fixed Cost Recovery: E-01345A-22-0042 Filed Feb 15 and effective Jun 1 Transmission Cost Adjustor: E-01345A-19-0236 Effective Jun 1 2022 DSM/EE Implementa
Slide 24: Components and Key Drivers of Benefit Costs
Components and Key Drivers of Benefit Costs1 Service Cost (a cost that increases Benefit Cost): • When discount rates decrease Service Cost increases and Benefit Cost increases (and vice versa) • Not impacted by asset assumptions Interest Cost (a cost that increases Benefit Cost): • When discount ra
Slide 25: Consolidated statistics
Consolidated statistics1 3 Months Ended June 30, 6 Months Ended June 30, 2022 2021 Incr (Decr) 2022 2021 Incr (Decr) ELECTRIC OPERATING REVENUES (Dollars in Millions) Retail Residential $ 538 $ 532 $ 6 $ 905 $ 873 $ 32 Business 463 421 42 822 736 86 Total Retail 1,000 953 48 1,727 1,608 119 Sales fo
Slide 26: Consolidated statistics
Consolidated statistics 3 Months Ended June 30, 6 Months Ended June 30, 2022 2021 Incr (Decr) 2022 2021 Incr (Decr) ENERGY SOURCES (GWH) 3 Months Ended June 30 Generation Production Nuclear 2,192 2,079 113 4,589 4,538 51 Coal 1,832 1,201 630 3,661 2,535 1,126 Gas, Oil and Other 2,098 2,661 (563) 3,6
Pinnacle West Capital — Q2 2022 Earnings Presentation on 6ix