Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Non-Deal Roadshow (January 2017)
34 slides from Pinnacle West Capital's roadshow presentation, Jan 12, 2017
Slide 1: Powering Growth, Delivering Value
POWERING GROWTH DELIVERING VALUE Investor Meetings l January 12-13, 2017 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: Value Proposition
VALUE PROPOSITION We are executing on our financial and operational objectives … Financial Strength • Consolidated earned ROE more than 9.5% (weather-normalized) through 2016 • Annual dividend growth target of 5%, subject to declaration at Board of Director’s discretion • Strong credit ratings and b
Slide 4: Capital Expenditures
CAPITAL Capital expenditures are funded primarily through internally EXPENDITURES generated cash flow ($ Millions) Other $1,337 $1,233 $75 Distribution $89 $1,124 $1,057 $399 $77 $85 Transmission $380 $411 Renewable $340 $211 Generation $136 $1 $104 $197 $136 $201 $1 Environmental(1) $103 $58 $224 $
Slide 5: Resource Planning
Future resources need projected RESOURCE PLANNING in excess of 3,500 MW by 2022 and over 5,400 MW by 2027 MW 2017-2032 Supply / Demand Gap Composition of Energy Mix by Resource* 14,000 2017 13% 12,000 Total Load Requirements 23% 11% 10,000 Gas 26% 27% Coal 8,000 Future Grid-Scale Generation Existing
Slide 6: Economic Indicators
ECONOMIC Arizona and Metro Phoenix remain attractive places to live and do INDICATORS business Nonresidential Building Vacancy – Metro Phoenix Vacancy Rate Above-average job growth in 25% construction, financial services and Office wholesale trade sectors 20% 15% Industrial Vacancy rates in office a
Slide 7: The Grid Is Evolving – Driving New Investments in Technology
THE GRID IS EVOLVING – DRIVING NEW INVESTMENTS IN TECHNOLOGY • Grid stability, power quality and reliability remain the core of a sustainable electrical system • APS is at the forefront of utilities designing and planning for the next generation electric grid • New technology advances and changing c
Slide 8: 2016 APS Rate Case
2016 APS RATE CASE Powering Growth, Delivering Value
Slide 9: 2016 APS Rate Case Application
2016 APS RATE CASE APPLICATION • Filed June 1, 2016 • Propose new rates go into effect on July 1, 2017 • Docket Number: E-01345A-16-0036 • Additional details, including filing, can be found at http://www.azenergyfuture.com/rate-review/ Procedural Schedule Staff and Intervenor Direct Testimony (ex ra
Slide 10: 2016 Rate Case Key Financials
2016 RATE CASE APS has requested a rate increase KEY FINANCIALS to become effective July 1, 2017 Test year ended December 31, 2015 Total Rate Base - Adjusted $8.01 Billion ACC Rate Base - Adjusted $6.77 Billion Allowed Return on Equity 10.5% Capital Structure Long-term debt 44.2% Common equity 55.8%
Slide 11: 2016 Rate Case Key Financials
2016 RATE CASE APS has requested a rate increase KEY FINANCIALS to become effective July 1, 2017 Overview of Rate Increase ($ in Millions) – Key Components Post-Test Year Plant Additions $ 98.1 Fair Value Increment 51.9 ROE Increase from 10.0% to 10.5% 29.3 Increase due to Changes in Depreciation Sc
Slide 12: 2016 Rate Case Summary
2016 RATE CASE SUMMARY Focus on Focus Focus Focus on Clean Energy on Customers on Innovation Sustainability Ocotillo Modernization Residential Rate Design Solar Partners Programs Power Supply Adjustment Project Modernization • Installing 10 MW of • Include environmental • Requesting cost deferral •
Slide 13: Rate Design Modernization
RATE DESIGN Rate design that better aligns pricing with cost to serve and MODERNIZATION leverages existing platform Focus Area Current State Rate Case Objective Time-of-Use • > 50% of residential customers are on a • Most residential customers on a TOU rate Rates (TOU) TOU rate • On-peak hours from
Slide 14: Rate Design Modernization
RATE DESIGN Key residential rate proposals designed to reduce cost shift MODERNIZATION among customers • Streamlined rate choices for residential Current Proposed customers including combinations of the Customer Bill Customer Bill following: – Reduced kWh charges for variable portion (energy rate) –
Slide 15: APS Cost of Service
Appropriate to place residential APS COST OF SERVICE solar customers into a unique sub-category of customers • Cost of service shows disparities in ratio Percent of Cost to Serve* of allocated costs to provide electric service, and what customer classes pay for the services received 108% • Solar cus
Slide 16: Rate Design: A Solid Foundation to Build On
RATE DESIGN: Over 50% of APS residential customers are already on A SOLID FOUNDATION time-of-use rates, including TO BUILD ON 11% on demand rates 100% 75% 50% 25% 0% Standard TOU - Energy TOU - Demand 16 Powering Growth, Delivering Value
Slide 17: Ocotillo Modernization Project and Four Corners SCRs
OCOTILLO MODERNIZATION PROJECT AND FOUR CORNERS SCRs • Included in the 2016 rate case application, APS is requesting Accounting Deferral Orders for two large generation-related capital investments – Ocotillo Modernization Project: Retiring two aging, steam-based, natural gas units, and replacing wit
Slide 18: Appendix
APPENDIX Powering Growth, Delivering Value
Slide 19: Operations & Maintenance Outlook
OPERATIONS & Goal is to keep O&M per kWh flat, MAINTENANCE adjusted for planned outages OUTLOOK ($ Millions) $83 $137 $103 $150 $124 $96 $825 - $805 $845 $761 $788 $772 $754 2011 2012 2013 2014 2015 2016E PNW Consolidated RES/DSM* *Renewable energy and demand side management expenses are offset by a
Slide 20: Dividend Growth
Pinnacle West’s indicated annual dividend is $2.62 per share; DIVIDEND GROWTH targeting ~5% annual dividend growth Dividend Growth Goal Indicated Annual Dividend Rate at Year-End $2.62 $2.50 $2.38 $2.27 $2.18 $2.10 2011 2012 2013 2014 2015 2016 2017 2018 Projected Future dividends subject to declara
Slide 21: Balance Sheet Strength
BALANCE SHEET STRENGTH Debt Maturity Schedule Credit Ratings ($Millions) • A- rating or better at S&P, Moody’s and Fitch $600 2016 Major Financing Activities $500 • $100 million 3-year term loan closed April 2016 • $350 million 30-year 3.75% APS senior unsecured $400 notes issued May 2016 • $250 mil
Slide 22: APS Transmission
Strategic transmission investment is essential to maintain reliability APS TRANSMISSION and deliver diversified resources to customers • 10-Year Transmission Plan filed January 2016 (115 kV and above) – 110 miles of new lines • Also includes: – Delaney-Palo Verde 500kV (2016) Flagstaff – Delaney-Sun
Slide 23: Arizona Corporation Commission
ARIZONA CORPORATION COMMISSION Terms to January 2019 Terms to January 2020 Tom Doug Bob Boyd Andy Forese (R) Little (R) Burns (R)* Dunn (R) Tobin (R) Chairman Other State Officials ACC Executive Director – Ted Vogt RUCO Director – David Tenney * Term limited - elected to four-year terms (limited to
Slide 24: 2017 Key Dates
2017 KEY DATES ACC Key Dates / Docket # Q1 Q2 Q3 Q4 Key Recurring Regulatory Filings Lost Fixed Cost Recovery Jan 15 E-01345A-11-0224 Transmission Cost Adjustor May 15 E-01345A-11-0224 2018 DSM/EE Implementation Plan Jun 1 2018 RES Implementation Plan for Reset Jul 1 of Renewable Energy Adjustor APS
Slide 25: Arizona Electric Utilities General Rate Cases
ARIZONA ELECTRIC UTILITIES GENERAL RATE CASES UNS Electric (93,000 customers) Tucson Electric Power Company (415,000 customers) Docket # E-04204A-15-0142 Docket # E-01933A-15-0322 Application Filed May 5, 2015 Application Filed Nov 5, 2015 Hearing (Mar 1 – 24, 2016) Non-unanimous Revenue Requirement
Slide 26: Residential vs. Utility-Scale Solar
RESIDENTIAL VS. Performance at system peak UTILITY-SCALE SOLAR On June 19th, APS customers hit “peak demand” for 2016 using more than 7,400 MW of electricity Residential Rooftop Solar AZ Sun Utility-Scale Solar 500 Residential Rooftop 7,445 8,000 500 AZ Sun 7445 8,000 System Load 6,908 System Load 6
Slide 27: Rooftop Solar Customers Use the Grid 24 Hours per Day
ROOFTOP SOLAR CUSTOMERS USE THE GRID 24 HOURS PER DAY TYPICAL GRID INTERACTION FOR ROOFTOP SOLAR • Customers with rooftop solar systems do not pay for all of the electric services they use • These unpaid costs are then paid by other customers (through higher rates) that can’t have or don’t want sola
Slide 28: Residential PV Applications
Residential DG (MWdc) Annual Additions RESIDENTIAL PV 74 120 APPLICATIONS* 51 57 44 18 22 10 2009 2011 2013 2015 2016 YTD 2500 2250 2142 2000 1700 1653 1750 1549 1434 1420 1500 1300 1271 1159 1250 1008 1349 1002 1000 764 1158 1158 1141 1189 1170 1080 750 939 832 871 836 783 500 680 715 710 610 641 4
Slide 29: Environmental Plan
ENVIRONMENTAL Regional Haze compliance is the biggest driver of environmental PLAN 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 Anno
Slide 30: 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 14% Percent of Portfolio MWh 23% Gas 36% Coal 27% 14% Nuclear 26% 18% 18% RE + DE 11% 13% 14% EE Emissions 2017 2032 • 820 MW of coal has been retired including 560 MW
Slide 31: 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: APS continues to strive for sustainable and cost-effective water supplies for energy production for APS customers. Mission: To execute a str
Slide 32: Generation Portfolio
GENERATION PORTFOLIO* Plant Location No. of Units Dispatch COD Ownership Interest1 Net Capacity (MW) NUCLEAR Palo Verde Wintersburg, AZ 3 Base 1986-1989 29.1% 1,146 1,146 MW Cholla Joseph City, AZ 2 Base 1962-1980 100 387 COAL Four Corners Farmington, NM 2 Base 1969-1970 63 970 1,672 MW Navajo Page,
Slide 33: Purchased Power Contracts
PURCHASED POWER CONTRACTS* 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 Sadd
Slide 34: Investor Relations Contacts
INVESTOR RELATIONS CONTACTS Paul J. Mountain, CFA General Manager, Investor Relations & Audit Services (602) 250-4952 paul.mountain@pinnaclewest.com Ted Geisler Director, Investor Relations (602) 250-3200 ted.geisler@pinnaclewest.com Chalese Haraldsen (602) 250-5643 chalese.haraldsen@pinnaclewest.co
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