Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — EEI Financial Conference 2009
46 slides from Pinnacle West Capital's conference presentation, Nov 1, 2009
Slide 1: A Powerful Tomorrow Starts Today
A Powerful Tomorrow Starts Today EEI Financial Conference November 1-4, 2009
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements based on current expectations, and neither Pinnacle West Capital Corporation (“Pinnacle West”) nor Arizona Public Service Company (“APS”) assumes any obligation to update these statements, even if our internal estimates
Slide 3: Corporate Overview
Corporate Overview 1
Slide 4: PNW: Our Value Proposition
PNW: Our Value Proposition We Are A Capitalizing on Green Company Attractive Fundamentals • Abundant solar conditions • Vertically integrated in Arizona electric utility • Other renewables • High growth service territory • Nuclear expansion option • Diversified energy mix • Transmission expansion De
Slide 5: Who We Are
Who We Are At our core, we are an electric utility. NYSE Ticker: PNW Market Cap: $3 Billion Enterprise Value: $7 Billion Assets September 30, 2009 Vertically Integrated Electric Utility $11.4 Billion $12 Billion Real Estate Developer $214 Million Competitive Energy Services Provider $75 Million Vent
Slide 6: A Leadership Team of Industry Veterans
A Leadership Team of Industry Veterans Our top executives have more than 160 combined years of creating shareholder value in the energy industry. Donald E. Brandt Chairman & CEO James R. Donald G. Randall K. Mark A. Steven M. David P. Hatfield Robinson Edington Schiavoni Wheeler Falck SVP & APS EVP
Slide 7: Regulatory Overview
Regulatory Overview 5
Slide 8: Arizona Corporation Commissioners
Arizona Corporation Commissioners Terms Through January 2011 Kristin Mayes Gary Pierce (Rep) Chairman (Rep) Elected November 2008, Terms Through January 2013 Sandra Kennedy (Dem) Paul Newman (Dem) Bob Stump (Rep) 6
Slide 9: Retail Rate and Financial Stability Plan Proposed Settlement
Retail Rate and Financial Stability Plan Proposed Settlement The proposed settlement has a number of benefits from investors’ perspective. • Strengthens APS’ financial condition and supports common dividend • Provides greater level of cost recovery and return on investment • Demonstrates cooperation
Slide 10: Retail Rate and Financial Stability Plan Proposed Settlement
Retail Rate and Financial Stability Plan Proposed Settlement The proposed revenue increases total $230 million in 2010 and will improve APS’ financial condition. Proposed APS Settlement Request Base Retail Rates – Annualized revenue increases ($ millions): Non-fuel $ 196 $ 264 Net fuel-related 11 14
Slide 11: Retail Rate and Financial Stability Plan Proposed Settlement
Retail Rate and Financial Stability Plan Proposed Settlement Other key provisions add financial value for APS and benefits for other stakeholders. Key non-revenue financial provisions: • $30 million expense reduction each year in 2010 through through 2014 ($150 million cumulatively) • Pension and OP
Slide 12: Retail Rate and Financial Stability Plan Proposed Settlement
Retail Rate and Financial Stability Plan Proposed Settlement The current schedule should allow new rates to become effective on January 1, 2010. An expedited process has been agreed upon for future rate cases. Settlement procedural schedule to allow new rates effective January 1, 2010: • Definitive
Slide 13: ACC Approved Interim Rates
ACC Approved Interim Rates The interim rate decision supports APS’ financial strength while providing customers rate stability. Approved by ACC December 18, 2008 Base rate surcharge effective until general rate case decision $65.2 million annual pretax retail revenues Effective for customer
Slide 14: Our Regulatory Mix
Our Regulatory Mix The bulk of APS’ revenues come from our regulated retail rate base; we also have a meaningful transmission business. Most Recent Rate Decisions ACC FERC Transmission Transmission Effective Date 7/1/2007 6/1/2009 20% 20% Test Year Ending 9/30/2005 12/31/2008 Generation & Distributi
Slide 15: APS Revenues by Recovery Mechanisms
APS Revenues by Recovery Mechanisms We have received supportive regulatory decisions providing more timely recovery. Regulated Electricity Revenue Test Year by Recovery Mechanism Historical Forecasted $ Millions 3,500 3,000 PSA 2,500 TCA RES 2,000 DSM* 1,500 EIS* 1,000 Base Rates 500 Other** 0 2004
Slide 16: Progressive Federal Rate Regulation
Progressive Federal Rate Regulation We have achieved constructive transmission rate treatment. • FERC Formula Rates adopted in 2008 • Based on FERC Form 1 and certain projections • Retail portion flows through ACC Transmission Cost Adjustor (TCA) • Adjusted annually with 10.75% allowed ROE • Transmi
Slide 17: Operations Overview
Operations Overview 15
Slide 18: Positive Long-Term Demographics
Positive Long-Term Demographics Arizona has ranked in the top five for population growth over the last 20 years. In spite of economic slowdown, APS expects 55% customer growth by 2025. Superior Historical Growth APS Customer Growth Annual Growth Millions 6% 2.0 1.7 5% 55% 1.5 4% 1.1 3% 1.0 2% 0.5 1%
Slide 19: 2008 Retail Customer, Sales And Revenue Mixes
2008 Retail Customer, Sales And Revenue Mixes Customers Retail Operating Year-End Sales Revenues 1.1 Million 28,794 GWh $2.9 Billion 89% 46% 46% 45% 50% 50% 42% 11% 8% 7% Residential Commercial Industrial Other 17
Slide 20: APS Continually Ranks in Top Quartile in Residential Customer Satisfaction
APS Continually Ranks in Top Quartile in Residential Customer Satisfaction Our employees take pride in providing top-tier customer service. Lowering Average Annual Outage Time Outstanding Residential Per Customer Customer Satisfaction Rating Outage Rating Minutes/Year 700 125 675 APS Industry 100 65
Slide 21: Palo Verde: Energy Cornerstone of the Southwest
Palo Verde: Energy Cornerstone of the Southwest The envy of the nuclear industry for more than a decade, Palo Verde is back on track toward top performance. Capacity Factors Accomplishments & Goals 100% • March 2009 NRC returned plant to routine inspection and oversight Industry 88% • December 2008
Slide 22: Superior Fossil Generation Performance
Superior Fossil Generation Performance Our coal plants are consistently strong performers. Capacity Factors 100% • Solid capacity factors (12 months ended APS September 30, 2009) 83% Four Corners: 88% Cholla: 79% 75% Industry 73% • Performance Drivers: Conservative operating practices Rigoro
Slide 23: Resource Planning, Renewables, Energy Efficiency
Resource Planning Renewables Energy Efficiency 21
Slide 24: A Balanced and Strategic Resource Plan
A Balanced and Strategic Resource Plan We have competitive advantages to capitalize on renewable and nuclear resources to provide a diversified energy mix. Energy Mix (MWh) 100% Renewables & EE Renewables Abundant solar resources in Arizona & Energy High customer interest and incentives Natural
Slide 25: Renewable Resource Obligations
Renewable Resource Obligations APS is committed to renewable energy well in excess of the State’s requirements. Arizona Renewable Energy Standard (RES) • Sets minimum renewable energy amounts 5% of energy for retail sales by 2015 15% of energy for retail sales by 2025 • Includes distributed ener
Slide 26: Renewable Energy Rises With the Sun
Renewable Energy Rises With the Sun Arizona’s solar conditions are among the best in the world. Solar Insolation Comparison (kWh/kW year) Germany - one of countries with highest installed capacities despite Seattle-like weather conditions Japan’s solar insolation is Germany comparable to Florida, ra
Slide 27: Solana: A "Sunny Place"
Solana: A “Sunny Place” Solana will generate enough clean, renewable electricity to meet the needs of about 70,000 Arizona homes. • 280-MW concentrating solar trough • 30-year PPA for all output (~900 GWh/year) • Planned commercial operation in 2013 • Near existing transmission lines • 70 miles sout
Slide 28: Community Power Project – Flagstaff, Arizona
Community Power Project – Flagstaff, Arizona APS’ innovative pilot project encourages distributed renewable resources, integrated with smart grid technology. • 200 to 300 rooftop solar photovoltaic systems on single feeder • 1.5 to 2 MW of distributed generation APS-owned • 1 MW central storage roof
Slide 29: Transmission Investment is Key
Transmission Investment is Key Strategic investment is needed to maintain reliability and bring diversified resources to our customers. NAVAJO NORTH 100 100 MW MW FOUR CORNERS • 10-Year Transmission Plan: $1 billion of new 970 MW transmission investment Over 280 miles of new lines Increases im
Slide 30: Potential Transmission To Support Renewable Resources
Potential Transmission To Support Renewable Resources New transmission would allow delivery of more renewable energy to Phoenix and California. Palo Verde to North Gila 2 Phoenix 1 28
Slide 31: Potential Transmission To Support Renewable Resources
Potential Transmission To Support Renewable Resources New transmission would allow delivery of more renewable energy to Phoenix and California. Delaney to Palo Verde Phoenix 2 29
Slide 32: APS' Increasing Commitment to Energy Efficiency
APS’ Increasing Commitment to Energy Efficiency APS will double customers’ energy efficiency savings over the next three years. Cumulative Annual Energy Savings Associated with EE/DSM Programs • Energy efficiency and demand- side management (DSM) benefit GWh 2,000 customers and APS by: Reducing en
Slide 33: Potential Climate Change Legislation
Potential Climate Change Legislation We are managing our exposure to evolving climate change policy. • Climate change legislation still developing • APS risk mitigation: New resources emphasize renewables No new coal generation planned Actively monitoring and addressing developments 31
Slide 34: American Recovery and Reinvestment Act Opportunities for APS
American Recovery and Reinvestment Act Opportunities for APS APS is seeking stimulus funding opportunities to provide reliable, sustainable and affordable energy for our customers. Projects Funding Greenhouse Gas Reduction Project: $70.5 million Conversion of coal into substitute natural gas Granted
Slide 35: Recognized as One of America's Greenest Companies
Recognized as One of America’s Greenest Companies Newsweek ranked Pinnacle West 13th best among U.S. utilities. 33
Slide 36: Environmental, Sustainability and Technology Leadership
Environmental, Sustainability and Technology Leadership We have been recognized internationally for our achievements. Edison Electric Institute’s Dow Jones Global 100 Most Sustainable 2008 Top Industry Award Sustainability Index Corporations in World (Technical Innovation) Social Responsibility Repo
Slide 37: Employee Innovation Supports Customer Reliability
Employee Innovation Supports Customer Reliability We’re not just an energy company, we embrace technological innovation in our industry. Recipient of 2008 EEI Award 27 U.S. patents issued since 1997 State-of-the-art solar technology advancements Underground piping system inspections & maintena
Slide 38: Renewable Contracts Provide Bridge
Renewable Contracts Provide Bridge COD/ Developer/ Expected Term Capacity * Fuel / Contract Location Operator Status PPA Signed COD (years) (MW) Solar Solana (CSP Trough) Gila Bend, AZ Abengoa AD Feb-2008 2013 30 280 Total Solar 280 Wind Aragonne Mesa Santa Rosa, NM Bluearc Mgmt. Group IO Dec-2005 D
Slide 39: Financial Overview
Financial Overview 37
Slide 40: Multi-Pronged Approach to ROE Improvement
Multi-Pronged Approach to ROE Improvement We are actively working to improve our return on equity. Electricity Electricity Rate Rate Increases Increases Regulatory Regulatory Framework Framework Improvements Improvements ROE Goal Improvement Cost Cost Savings Savings Initiatives Initiatives Efficien
Slide 41: Cost Savings Initiatives Underway
Cost Savings Initiatives Underway Engaged and highly motivated workforce Supply Chain Transformation Process Effective and • Collaborative, enterprise- efficient execution wide process • New technology platform Better leverage • Common performance metrics technology • Significant annual savings expe
Slide 42: 2009 - 2010 On-Going Earnings Guidance
2009 - 2010 On-Going Earnings Guidance* As of October 29, 2009 2009 2010 Consolidated on-going EPS $ 2.30 $ 3.00 • Excluding any SunCor impact * Within a reasonable range around specified amount 40
Slide 43: Top-Tier Dividend Yield
Top-Tier Dividend Yield Pinnacle West’s annual dividend is $2.10 per share. 10% 8% 6.4% 5% 4.9% 3% 2.4% 0% Sep. 30, Dec. 31, Mar. 31, Jun. 30, Sep. 30, 2008 2008 2009 2009 2009 PNW Electric Utility Average S&P 500 Index 41
Slide 44: APS CapEx Drives Strong Rate Base Growth
APS CapEx Drives Strong Rate Base Growth We have reduced capex based on current slowed growth – yet still expect strong rate base growth. APS Capital Expenditures APS Rate Base $ Millions $ Billions 1,200 10 th Rate 1,000 l G row nua 8 n d An Generation om po u 800 5% C Transmission 6 600 Distributi
Slide 45: Adequate Liquidity and Financing Access
Adequate Liquidity and Financing Access We have sufficient liquidity and access to credit. Sep. 30, 2009 Est. 2009 Cash Credit Facilities Available Liquidity Sources & Uses $ Millions Capacity 2,000 Borrower ($ Millions) Matures PNW $ 283 Dec. ’10 1,750 APS 377 Dec. ’10 Cushion APS 489 Sep. ’11 1,50
Slide 46: Investment-Grade Credit Ratings
Investment-Grade Credit Ratings Ratings Pinnacle West APS Senior Unsecured Debt Moody’s Baa3 Baa2 S&P BB+ BBB- Fitch - BBB Outlook Moody’s Stable Stable S&P Stable Stable Fitch Negative Stable Commercial Paper Moody’s P3 P2 S&P A3 A3 Fitch F3 F3 44
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