Slide 1: 3rd Quarter 2012 Results
3rd Quarter 2012 Results Third Quarter 2012
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: Amounts Attributable to Common Shareholders and Non-GAAP Financial Measures
Amounts Attributable to Common Shareholders and Non-GAAP Financial Measures In this presentation, references to net income and earnings per share (EPS) refer to amounts attributable to common shareholders. We present “gross margin” per diluted share of common stock. Gross margin refers to operating
Slide 4: CEO Discussion Agenda
CEO Discussion Agenda Improving regulatory environment Selective capital investments Maintaining operational excellence Looking ahead Third Quarter 2012 4
Slide 5: CFO Agenda
CFO Agenda 3rd quarter results Arizona economic outlook Earnings guidance and financial outlook Third Quarter 2012 5
Slide 6: Consolidated EPS Comparisons
Consolidated EPS Comparisons 3rd Quarter 2012 vs. 3rd Quarter 2011 Net Income On-Going Earnings Per Share Per Share $3.00 $3.00 $2.50 $2.32 $2.50 $2.21 $2.21 $2.24 $2.00 $2.00 $1.50 $1.50 $1.00 $1.00 $0.50 $0.50 $0.00 $0.00 2012 2011 2012 2011 Third Quarter 2012 6
Slide 7: Non-GAAP EPS Reconciliation 3rd Quarter 2012 vs. 3rd Quarter 2011
Non-GAAP EPS Reconciliation 3rd Quarter 2012 vs. 3rd Quarter 2011 3rd Qtr 3rd Qtr 2012 2011 Change EPS as reported $ 2.21 $ 2.32 $ (0.11) Less income from discontinued operations - (0.08) 0.08 On-going EPS $ 2.21 $ 2.24 $ (0.03) Third Quarter 2012 7
Slide 8: On-Going EPS Variances
On-Going EPS Variances 3rd Quarter 2012 vs. 3rd Quarter 2011 Lower infrastructure- related costs Higher O&M* $0.04 $(0.10) Higher gross margin* $0.16 Lower prior-year effective tax rate $(0.09) Net Other, net Decrease $(0.04) $(0.03) = * Excludes costs, and offsetting operating revenues, associated
Slide 9: Gross Margin EPS Drivers
Gross Margin EPS Drivers 3rd Quarter 2012 vs. 3rd Quarter 2011 Weather Other, net effects Retail $0.05 $(0.17) transmission revenue increase $0.09 2012 regulatory settlement $0.21 Lower retail kWh sales Net $(0.02) Increase $0.16 = See non-GAAP reconciliation in appendix. Third Quarter 2012 9
Slide 10: Arizona Economic Indicators
Arizona Economic Indicators Employment & Excess Housing Non-Farm Job Growth Metro Phoenix Excess Housing Year-Over- APS Service Territory Year Change 10.0% 40,000 8.0% 35,000 6.0% 30,000 4.0% 2.0% 25,000 0.0% 20,000 (2.0)% 15,000 (4.0)% 10,000 (6.0)% (8.0)% 5,000 (10.0)% 0 '05 '06 '07 '08 '09 '10 '1
Slide 11: Arizona Economic Indicators
Arizona Economic Indicators Metro Phoenix Housing Prices & Nonresidential Vacancy Home Prices Nonresidential Building Vacancy Value Relative to Jan ‘05 Vacancy Rate 175 25% Office 150 20% Industrial 125 15% Retail 100 10% 75 5% 50 0% '05 '06 '07 '08 '09 '10 '11 '12 '05 '06 '07 '08 '09 '10 '11 '12 YT
Slide 12: Consolidated Financial Outlook
Consolidated Financial Outlook As of November 2, 2012 On-Going EPS Dividend Growth Indicated Annual Dividend Rate at Year-End $4.00 $4.00 $3.35 – $ 3.50 $3.50 $3.50 $2.99 $3.00 $3.00 $2.50 $2.50 $2.10 $2.18 $2.00 $2.00 $1.50 $1.50 $1.00 $1.00 $0.50 $0.50 $0.00 $0.00 2011 2012 2011 2012 Guidance See
Slide 13: Consolidated Financial Outlook
Consolidated Financial Outlook As of November 2, 2012 Consolidated Earned ROE Goal 10% 8.8% At Least 9.5% 8% 6% 4% 2% 0% 2011 2012 2013 2014 2015 Projected Third Quarter 2012 13
Slide 14: Appendix
oe PINNACLE WEST CAPITAL CORPORATION Appendix Third Quarter 2012
Slide 15: 2012 On-Going EPS Guidance
2012 On-Going EPS Guidance Key Factors & Assumptions as of November 2, 2012 Electricity gross margin* (operating revenues, net of fuel and purchased power expenses) about $2.13 billion to $2.18 billion • Retail customer growth about 1% • Weather-normalized retail electricity sales volume slightly
Slide 16: 2012-2015 Financial Outlook
2012-2015 Financial Outlook Key Drivers & Assumptions as of November 2, 2012 2012 retail rate settlement effective July 1, 2012 Revenue provisions Retail base rate changes effective July 1, 2012 Adjustment mechanisms Four Corners acquisition AZ Sun additions to flow through RES until nex
Slide 17: 2012-2015 Financial Outlook
2012-2015 Financial Outlook Key Drivers & Assumptions as of November 2, 2012 (cont.) Modestly improving Arizona and U.S. economic conditions Retail customer growth to average 2% annually Weather-normalized retail electricity sales volume growth: Relatively flat after customer conservation an
Slide 18: Non-GAAP EPS Reconciliation
Non-GAAP EPS Reconciliation Consolidated On-Going EPS Guidance Year 2011 Year 2012 Actual Guidance* Net income attributable to common shareholders $ 3.09 Less income (loss) from discontinued operations: Real estate (0.01) Energy services business 0.11 On-going EPS $ 2.99 $ 3.35 - $3.50 * As of Novem
Slide 19: 2012 Retail Rate Case Settlement
2012 Retail Rate Case Settlement Key Financial Provisions – Base Rate Changes The provisions of the settlement became effective July 1, 2012, as originally requested by APS. Annualized Base Rate Revenue Changes ($ millions) Non-fuel base rate increase $ 116.3 Fuel-related base rate decrease (153.1)
Slide 20: 2012 Retail Rate Case Settlement
2012 Retail Rate Case Settlement Key Proposals – Other than Base Rates Other key provisions provide customers rate stability while continuing constructive regulatory treatment and limiting regulatory lag. Post test-year plant additions – 15 months’ additions included in rate base Constructive ne
Slide 21: 2012 Retail Rate Case Settlement
2012 Retail Rate Case Settlement Key Financial Assumptions Updated rate base, cost of capital and fuel prices underpin settlement amounts. Rate base $5.7 billion Allowed return on equity 10% Capital structure Long-term debt 46.1% Common equity 53.9% Base fuel rate (¢/kWh) 3.21¢ Projected fuel-price
Slide 22: APS AZ Sun Program
APS AZ Sun Program Up to 200 MW utility-scale photovoltaic solar plants to be owned by APS In service 2011 through 2015 Constructive rate recovery through RES until included in base rates Commitments to date: 118 MW with $504 million estimated capital investment Project summary Name Net
Slide 23: Four Corners Power Plant Proposed Plan
Four Corners Power Plant Proposed Plan Acquire Southern California Edison’s 739 MW interest in Units 4 & 5 and shut down 560 MW Units 1 – 3 Purchase price: $294 million (subject to adjustments) Estimated environmental compliance investment: $300 million Arizona, California and other regulatory
Slide 24: Gross Margin Effects of Weather Variances Versus Normal
Gross Margin Effects of Weather Variances Versus Normal* Pretax Millions $25 22 $20 15 $15 9 8 $10 4 $5 2 $0 ($5) (4) (4) ($10) ($15) (10) ($20) ($25) ($30) (26) (27) ($35) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2010 2011 2012 *All periods recalculated to conform to current presentation. Third Quarter 201
Slide 25: Quarterly Mark-to-Market on Hedge Contracts
Quarterly Mark-to-Market on Hedge Contracts* Pretax Millions $10 5 $5 1 0 0 $0 (1) (1) (2) (2) (2) (2) (2) $(5) $(10) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2010 2011 2012 * Related to APS 10% share under Power Supply Adjustor (PSA), net of related deferrals. Third Quarter 2012 25
Slide 26: Renewable Energy, Demand Side Management and Similar Regulatory Expenses
Renewable Energy, Demand Side Management and Similar Regulatory Expenses* Pretax Millions $50 $45 $40 2 $35 23 2 $30 15 2 18 16 $25 12 13 24 8 11 19 $20 16 $15 21 23 $10 18 19 19 19 19 16 12 14 $5 10 $0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2010 2011 2012 Renewable Energy Demand Side Management Competiti
Slide 27: Non-GAAP Measure Reconciliation
Non-GAAP Measure Reconciliation Gross Margin Three Months Ended September 30, EPS $ millions pretax, except per share amounts 2012 2011 Change Operating revenues* $ 1,110 $ 1,125 Fuel and purchased power expenses* (303) (338) Gross margin 807 787 $ 0.11 Less: Renewable energy (excluding AZ Sun), ene