Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Non-Deal Roadshow (March 2017)
28 slides from Pinnacle West Capital's roadshow presentation, Mar 1, 2017
Slide 1: Powering Growth, Delivering Value
POWERING GROWTH DELIVERING VALUE Investor Meetings l March 1, 2017 1 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: Rate Base
APS’s revenues come from a RATE BASE regulated retail rate base and meaningful transmission business APS Rate Base Growth Total Rate Base Year-End ACC FERC Generation & Distribution Transmission 17% $1.8 83% $1.4 Most Recent Rate Decisions ACC - Proposed FERC Rate Effective Date 7/1/2017 6/1/2016 $8
Slide 5: APS Capital Expenditures
APS CAPITAL Capital expenditures are funded primarily through internally EXPENDITURES generated cash flow ($ Millions) Other $1,337 $1,224 $74 Distribution $87 $1,124 $72 $402 $994 Transmission $388 $81 $406 Renewable $206 Generation $127 $480 $4 $102 $195 $137 $1 Environmental(1) $105 $220 $237 $11
Slide 6: 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 7: Economic Indicators
ECONOMIC Arizona and Metro Phoenix remain attractive places to live and do INDICATORS business Nonresidential Net Absorption – Metro Phoenix Millions Sq. Ft Office Retail Above-average job growth in 5 construction and financial services 4 3 Vacancy rates in office and retail space 2 have fallen to p
Slide 8: 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 9: 2016 APS Rate Case
2016 APS RATE CASE • 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 rate design) D
Slide 10: Appendix
APPENDIX 10 Powering Growth, Delivering Value
Slide 11: 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 12: 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 13: 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 14: Operations & Maintenance
OPERATIONS & Goal is to keep O&M per kWh flat, MAINTENANCE adjusted for planned outages ($ Millions) $137 $103 $83 $150 $124 $96 $805 $828 $761 $788 $772 $754 2011 2012 2013 2014 2015 2016 PNW Consolidated RES/DSM* *Renewable energy and demand side management expenses are offset by adjustment mechan
Slide 15: 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 $2.10 2011 2012 2013 2014 2015 2016 2017 2018 Projected Future dividends subject to declara
Slide 16: Balance Sheet Strength
BALANCE SHEET STRENGTH Debt Maturity Schedule Credit Ratings ($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 17: Financial Outlook
Key Factors & Assumptions as of FINANCIAL OUTLOOK February 24, 2017 Gross Margin – Customer Growth and Weather (2017-2019) Assumption Impact Retail customer growth • Projected to average in the range of about 2-3% • Modestly improving Arizona and U.S. economic conditions Weather-normalized retail el
Slide 18: APS Transmission
Strategic transmission investment is essential to maintain reliability APS TRANSMISSION and deliver diversified resources to customers • 10-Year Transmission Plan filed January 2017 (115 kV and above) – 52 miles of new lines – 5 bulk transformer additions • Also includes: Flagstaff – Morgan-Sun Vall
Slide 19: 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 20: 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 21: Residential PV Applications
Residential DG (MWdc) Annual Additions RESIDENTIAL PV 133 74 APPLICATIONS* 51 57 44 18 22 12 10 2009 2011 2013 2015 2017 2500 2250 2000 1750 1500 1250 1000 750 939 871 836 783 500 710 610 641 523 250 442 357 339 249 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2014 Applications 2015 Application
Slide 22: Renewable Resources
RENEWABLE APS is a leader in solar RESOURCES APS currently has 1,440 MW APS Solar Portfolio* of renewable resources: Owned PPA • Solar* 1,121 MW 214 MW 310 MW • Wind 289 MW DG • Biomass 14 MW 597 MW • Geothermal 10 MW • Biogas 6 MW Owned solar includes 170 MW AZ Sun Program, 4 MW of other APS owned
Slide 23: 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 24: 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 25: 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 26: 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 27: 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 28: 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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