Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Investor Presentation (May 2021)
38 slides from Pinnacle West Capital's investor presentation, May 25, 2021
Slide 1: Investor Presentation June 2021
Investor Presentation June 2021 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: A Refocused Company. Long Growth Runway.
T H E P I N N A CL E W EST ST O RY A Refocused Company. Long Growth Runway. 1 2 3 4 5 A refocused Favorable Shift to Strong Clear strategic company market dynamics clean financial profile priorities 3
Slide 4: Arizona's Largest Electric Company
AT A GL A N CE Arizona’s Largest Electric Company Service Territory1 Key Facts as of Dec. 31, 2020 Consolidated assets $20B Arizona Revenues $3.6B Market cap ~$9B Generating capacity owned or leased – year end ~6.3 GW Customers 1.3M Current % from clean energy ~50% Nuclear plant in U.S. Largest 1 As
Slide 5: Attractive Customer Mix and Shifting Generation Profile
Attractive Customer Mix and Shifting Generation Profile Energy Mix Retail Sales Mix – Will Shift Going Forward Demand Side Other Management 1% 16% Gas 28% Residential Purchased 50% 8% Renewable Commercial 11% & Industrial 49% Coal 14% Nuclear 23% 5
Slide 6: Building on a Strong Performance Track Record
Building on a Strong Performance Track Record Reducing Safety Affordable Customer Operating Residential Reliability Profile Energy Growth Costs Bills Last 25 Years 70% 34% CPI* APS Top Quartile 25 years 6.2% Top Quartile 2% Flat Consistent Residential Decline in Invest >$1B Average APS core ranking
Slide 7: Solid Underlying Financial Performance – Goal is More Consistent Growth
Solid Underlying Financial Performance – Goal is More Consistent Growth Net Income Adjusted EPS Rate Base ($M) ($) ($B) $538M $551M $511M $4.77 $4.87 $10.3B $4.54 $9.3B $8.6B 2018 2019 2020 2018 2019 2020 2017 2018 2019 7
Slide 8: Entering a New Era
Entering a New Era Prior to 2019 2019-2020 2021+ Build Transformation New Focus • Built Arizona’s leading power • New culture and clean • Investing in clean energy, utility with strong performance energy goals stakeholder alignment and track record – Lean principles supporting innovation customer af
Slide 9: Building the New Pinnacle West
Building the New Pinnacle West Focus Past Future Customer Experience Average Best in Class Priority / Clean Energy Moderate accelerating Regulatory Challenging Aligned Relations Earnings Strong / Strong / Performance Inconsistent More consistent 9
Slide 10: Leading ESG Practices Guide Our Approach – Snapshot
Leading ESG Practices Guide Our Approach – Snapshot Environmental Social Governance Only North American electric Top quartile employee 36% of independent directors utility on CDP A List for safety gender or ethnically diverse Water and Climate¹ 36% of new hires ethnically ESG executive council MSCI
Slide 11: Recent Positive Results Show Evidence of Repositioning
Recent Positive Results Show Evidence of Repositioning Improved regulatory transparency − Delivered on customer issues Improving J.D. Power customer rankings1 − Most improved large utility residential customer rating (2020) − Business customer rating rises to second quartile (2020) Improved customer
Slide 12: A Refocused Company. Long Growth Runway.
T H E P I N N A CL E W EST ST O RY A Refocused Company. Long Growth Runway. 1 2 3 4 5 A refocused Favorable Shift to Strong Clear strategic company market dynamics clean financial profile priorities 12
Slide 13: Fast Growing Service Territory
Fast Growing Service Territory Annual Employment Growth Last Three Years¹ Steady Housing Growth2 Single Family & Multifamily Housing Permits Maricopa County 39,693 2% (1)% 1% 20% CAGR 6,582 National Arizona '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 Phoenix metro ranked second in the nation for exp
Slide 14: System Supports High Tech Growth in Economy
System Supports High Tech Growth in Economy Our Approach: Supports Influx of Tech Focus on Four Main Areas and Data Centers – Examples • Microsoft – constructing 3 new mega • Business attraction and expansion data centers • Taiwan Semiconductor – plans to build $12B • Community development factory •
Slide 15: A Refocused Company. Long Growth Runway.
T H E P I N N A CL E W EST ST O RY A Refocused Company. Long Growth Runway. 1 2 3 4 5 A refocused Favorable Shift to Strong Clear strategic company market dynamics clean financial profile priorities 15
Slide 16: Our Clean Energy Plan
Our Clean Energy Plan Commitments 1 100% clean, carbon-free electricity by 2050 2 65% clean energy by 2030 with 45% renewable energy 3 End APS’s use of coal-fired generation by end of 2031 Pathway 2005 2019 2030 2050 24% 50% 65% 100% 16
Slide 17: Coal Exit Strategy – Years Earlier than Originally Projected
Coal Exit Strategy – 7 Years Earlier than Originally Projected Navajo 315 MW (now retired) Cholla 387 MW 2025 Remaining Four Corners 970 MW 20311 2018 2019 2025 2031 2038 Coal Free 1Starting in 2023, Four Corners will move to a seasonal operating schedule that will further reduce annual carbon 17 em
Slide 18: Coal Exit and Expiring Purchase Contracts Will Create a 6,000 MW Supply-Demand Gap by 2035
Coal Exit and Expiring Purchase Contracts Will Create a 6,000 MW Supply-Demand Gap by 2035 Peak Capacity (MW) 12,000 10,000 6,000 MW¹ 8,000 Closing the gap Existing / Signed - opportunity Contracts 6,000 4,000 Existing Owned 2,000 Resources 0 2020 2023 2026 2029 2032 2035 ¹ Will need more additions
Slide 19: Key New Energy Sources to Achieve Goals
Key New Energy Sources to Achieve Goals Initiatives Resource Mix Change Today 2035 • Solar generation Coal 14% 0% • Wind generation Gas 28% 6%-17% • Gas as a bridge fuel • Demand-side management Nuclear 23% 16% • Energy storage solutions Purchased 8% 11% • Innovation Renewable/ 27% 56%-67% DSM 19
Slide 20: Energy Storage A Key Element of Our Renewal Energy Plan
Energy Storage A Key Element of Our Renewal Energy Plan Daily Energy Usage Storage Advantages MW 9,000 Absorbs negative priced excess energy at noon 8,000 Provide opportunity Store solar to save customers Discharge more through the energy at stored energy 7,000 midday Energy Imbalance during evening
Slide 21: Advancing On Path to 100% Clean Energy – Three Year Capital Plan of $4.5B
Advancing On Path to 100% Clean Energy – Three Year Capital Plan of $4.5B1 $2,000 $1,800 $1,600 $1,500 $1,500 $1,500 $1,400 Clean Generation $1,262 $314 $392 $406 $1,200 $136 Traditional Generation $203 $1,000 $199 $190 $187 $185 Transmission $800 $169 $181 $179 Distribution $600 $577 $612 $556 $549
Slide 22: Shift to Clean Energy is a Win, Win, Win, Win
Shift to Clean Energy is a Win, Win, Win, Win WIN for WIN for WIN for WIN for EPS relations with clean air customers growth regulators Lower carbon Maintain Aligned goals Expanded affordability capital base 22
Slide 23: A Refocused Company. Long Growth Runway.
T H E P I N N A CL E W EST ST O RY A Refocused Company. Long Growth Runway. 1 2 3 4 5 A refocused Favorable Shift to Strong Clear strategic company market dynamics clean financial profile priorities 23
Slide 24: Strong Balance Sheet – Pinnacle West
Strong Balance Sheet – Pinnacle West Debt to Capitalization Corporate Credit Ratings1 (TME 12/31/2020) Moody’s A3 54.6% S&P A- Debt/Cap Fitch A- 1 We are disclosing credit ratings to enhance understanding of our sources of liquidity and the effects of our ratings on our costs of funds. FFO/Debt: 20.
Slide 25: Well-Balanced Long-Term Debt Maturity Profile
Well-Balanced Long-Term Debt Maturity Profile $M $1,200 $1,000 $800 $600 $400 $200 $0 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045 2047 2049 APS Long-Term Debt PNW Long-Term Debt As of March 31, 2021 25
Slide 26: Increased Dividend, 9 Year History of Increases
Increased Dividend, 9 Year History of Increases1 Indicated Annual Dividend – Year End $3.32 $3.13 $2.95 $2.78 $2.62 2016 2017 2018 2019 2020 26 1 Future dividends are subject to declaration at Board of Directors’ discretion.
Slide 27: A Refocused Company. Long Growth Runway.
T H E P I N N A CL E W EST ST O RY A Refocused Company. Long Growth Runway. 1 2 3 4 5 A refocused Favorable Shift to Strong Clear strategic company market dynamics clean financial profile priorities 27
Slide 28: Clear Strategy Going Forward
Clear Strategy Going Forward 1 2 Deliver Ensure superior exceptional customer reliability and operating service performance 4 3 Make intelligent Maintain strong investments to support Customer Focused credit ratings and a growing Arizona financial health 28
Slide 29: Bringing the Residential Customer into the Advanced Economy
EX A MP L E O F I N N O V AT I O N I N N I T I AT I V E Bringing the Residential Customer into the Advanced Economy Initiatives Potential Impact Demand Savings During • Award-winning program to promote installation Peak Afternoon Window of advanced smart thermostats – reduces demand during 3-8 pm pe
Slide 30: Customer Driven Initiatives Underway – A Few Examples
Customer Driven Initiatives Underway – A Few Examples Take Charge AZ Customer Advisory Board Energy Efficiency • Pilot program to encourage • Gathers direct insight from • Demand response programs electric vehicle adoption by residential customers to reward shift of energy installing charging statio
Slide 31: Pilot Project Exploring Hydrogen as Potential Solution for Long Duration Storage
EX A MP L E O F I N N O V AT I O N I N N I T I AT I V E Pilot Project Exploring Hydrogen as Potential Solution for Long Duration Storage Profile of Project Possible Scenario for Palo Verde Nuclear Plant Collaborators • Palo Verde nuclear plant and Idaho National Power from Laboratory storage to grid
Slide 32: Key Value Drivers Going Forward
Key Value Drivers Going Forward Longer Term Next 3-5 Years • Investment in utility-owned clean Next 6-12 months energy resources • Concurrent recovery for those • 2019 Rate Case resources (decision expected 3Q 2021) – Seek regulatory approval for an • Financing needs to support adjustor mechanism to
Slide 33: APS Rebuttal Testimony | Revenue Requirement
APS Rebuttal Testimony | Revenue Requirement Dollars Customer Bill Impact = Net Base Rate (millions) Bill Impact $169M Increase + Net Adjustor Changes Total Revenue Deficiency in APS’s $184 5.6% Application New revenue Base Rate Changes Net adjustments $(28) (0.9)% TEAM $(119) (3.6)% $110M of All ot
Slide 34: Outlook: Steady Growth in Rate Base
Outlook: Steady Growth in Rate Base APS Rate Base Growth (Year End) ~6% Long-Term CAGR $12.9B $10.3B 2019 2020 2021 2022 2023 Expect annual renewable additions of 300-500MW 2022-2030 34
Slide 35: A Refocused Company. Long Growth Runway.
I N SU MMA RY A Refocused Company. Long Growth Runway. 1 2 3 4 5 A refocused Favorable Shift to Strong Clear strategic company market dynamics clean financial profile priorities 35
Slide 36: Appendix
PINNACLE WEST CAPITAL CORPORATION Appendix
Slide 37: Effective COVID-19 Response for Customers and Employees
Effective COVID-19 Response for Customers and Employees Customer and Community Relief Fund Provided more than $15M in pandemic aid Customer Support Initiatives Suspended disconnects, waived late fees Employee Safety New procedures, physical distancing 37
Slide 38: ESG Leadership – Recognition
ESG Leadership – Recognition Training Magazine OUTSTANDING Environmental ACHIEVEMENT Top 100 Sustainability Learning and CLIMATE WATER and Governance Emerging Tools Development “AA” rating¹ & Technologies Organization HIRE Platinum Medallion Award 2018-2020 Women in Nuclear National Award for Best U
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