Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Q4 2011 Earnings Presentation
25 slides from Pinnacle West Capital's earnings presentation, Feb 24, 2012
Slide 1: 4th Quarter and Full-Year 2011 Results
4th Quarter and Full-Year 2011 Results
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements based on current expectations, including statements regarding our 2012 earnings outlook. These forward-looking statements are often identified by words such as “estimate,” “predict,” “may,” “believe,” “plan,” “expect,”
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 “regulated electricity gross margin” per diluted share of common stock. Regulated e
Slide 4: CFO Agenda
CFO Agenda 4th Quarter Results Full-Year 2011 Results Arizona Economic Outlook Liquidity and Financing Activities Fourth Quarter 2011 4
Slide 5: Consolidated EPS Comparisons
Consolidated EPS Comparisons 4th Quarter 2011 vs. 4th Quarter 2010 Net Income On-Going Earnings Per Share Per Share $0.15 $0.15 $0.11 $0.11 $0.10 $0.10 $0.07 $0.05 $0.05 $0.05 $0.00 $0.00 2011 2010 2011 2010 Fourth Quarter 2011 5
Slide 6: Non-GAAP EPS Reconciliation
Non-GAAP EPS Reconciliation 4th Quarter 2011 vs. 4th Quarter 2010 4th Qtr 4th Qtr 2011 2010 Change EPS as reported $ 0.11 $ 0.07 $ 0.04 Less adjustments: Discontinued energy services business - (0.02) 0.02 On-going EPS $ 0.11 $ 0.05 $ 0.06 Fourth Quarter 2011 6
Slide 7: On-Going EPS Variances
On-Going EPS Variances 4th Quarter 2011 vs. 4th Quarter 2010 Prior-year favorable tax Other, net matter resolution $0.01 $(0.06) Lower O&M* $0.06 Higher Net regulated Increase electricity $0.06 gross margin* $0.05 = * Excludes costs, and offsetting operating revenues, associated with renewable energ
Slide 8: Regulated Electricity Gross Margin Drivers
Regulated Electricity Gross Margin Drivers 4th Quarter 2011 vs. 4th Quarter 2010 Lower hedge Other, net mark-to-market $0.02 $(0.02) Line Net extension Increase revenues $0.02 $0.05 = Retail transmission charge increase $0.03 See non-GAAP reconciliation in appendix. Fourth Quarter 2011 8
Slide 9: Consolidated EPS Comparisons
Consolidated EPS Comparisons Full-Year 2011 vs. Full-Year 2010 Net Income On-Going Earnings* Per Share Per Share $3.50 $3.27 $3.50 $3.09 $3.03 $2.99** $2.75 - $2.90*** $3.00 $3.00 $2.50 $2.50 $2.00 $2.00 $1.50 $1.50 $1.00 $1.00 $0.50 $0.50 $0.00 $0.00 2010 2011 2010 2011 2011 Guidance *See non-GAAP
Slide 10: Arizona Economic Indicators
Arizona Economic Indicators Employment & Consumer Spending Non-Farm Job Growth Consumer Spending Month-To- Year-Over- Month Change Year Change 10.0% 25% 8.0% 20% 6.0% 15% 4.0% 10% 2.0% 5% 0.0% 0% (2.0)% (5)% (4.0)% (10)% (15)% (6.0)% (20)% (8.0)% (25)% (10.0)% ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘05 ‘06 ‘07
Slide 11: CEO Discussion Agenda
CEO Discussion Agenda Arizona Regulatory Developments Renewables and Generation Investments Utility Operations Update Looking Ahead Fourth Quarter 2011 11
Slide 12: Appendix
Appendix Fourth Quarter 2011
Slide 13: 2012 On-Going Earnings Key Drivers
2012 On-Going Earnings Key Drivers Retail customer growth about 1% Weather-normalized retail electricity sales volume growth slightly negative taking into account effects of Company’s energy efficiency initiatives Weather 2009 regulatory settlement provisions, until 2012 retail rate decision
Slide 14: 2012 Proposed Retail Rate Case Settlement
2012 Proposed Retail Rate Case Settlement Key Benefits from Investor Perspective The proposed settlement contains a number of benefits for customers and shareholders. Provides financial support APS needs to achieve Arizona’s energy goals Encourages progress toward sustainable energy future Sup
Slide 15: 2012 Proposed Retail Rate Case Settlement: Base Rate Changes
2012 Proposed Retail Rate Case Settlement Key Financial Proposals – Base Rate Changes The proposed net base rate change would be zero, when implemented – an important benefit to customers. Annualized Base Rate Revenue Changes ($ millions) Non-fuel base rate increase $ 116.3 Fuel-related base rate de
Slide 16: 2012 Proposed Retail Rate Case Settlement: Other Proposals
2012 Proposed Retail Rate Case Settlement Key Proposals – Other than Base Rates Other key proposals 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 Constru
Slide 17: 2012 Proposed Retail Rate Case Settlement: Key Financial Assumptions
2012 Proposed Retail Rate Case Settlement Key Financial Assumptions Updated rate base, cost of capital and fuel prices underpin the proposed 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¢
Slide 18: Procedural Schedule Key Dates
2012 Proposed Retail Rate Case Settlement Procedural Schedule Key Dates The provisions of the settlement are targeted to become effective July 1, 2012, as originally requested by APS. Settlement agreement filed January 6 Hearing conducted January 26 – February 3 Post-hearing briefs due Februar
Slide 19: 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: 83 MW with $375 million estimated capital investment Project summary Actual or
Slide 20: 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 Acquisition target date: late 2012 Estimated environmental compliance investment: $300 million Finance with mix of debt and
Slide 21: Gross Margin Effects of Weather Variances Versus Normal
Gross Margin Effects of Weather Variances Versus Normal* Pretax Millions $25 22 $20 $15 $10 5 5 3 4 $5 $0 ($5) (3) ($10) ($15) ($20) ($25) ($30) (27) ($35) (30) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2010 2011 *All periods recalculated to conform to current presentation. Fourth Quarter 2011 21
Slide 22: Quarterly Mark-to-Market on Hedge Contracts
Quarterly Mark-to-Market on Hedge Contracts* Pretax Millions $10 8 5 $5 1 0 0 0 $0 (1) (1) (2) (2) (2) $(5) (5) $(10) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2009 2010 2011 * Related to APS 10% share under Power Supply Adjustor (PSA), net of related deferrals. Fourth Quarter 2011 22
Slide 23: 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 2 15 2 18 16 $25 2 12 13 8 2 2 7 8 11 $20 2 6 $15 $10 20 21 19 19 23 18 18 17 18 19 16 19 $5 $0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2009 2010 2011 Renewable Energy Demand-Side Managem
Slide 24: Non-GAAP Measure Reconciliation
Non-GAAP Measure Reconciliation Regulated Electricity Gross Margin Three Months Ended December 31, EPS $ millions, pretax, except per share amounts 2011 2010 Change Regulated electricity revenue* $ 667 $ 654 Regulated electricity fuel and purchased power expenses* (216) (226) Regulated electricity g
Slide 25: Non-GAAP EPS Reconciliation
Non-GAAP EPS Reconciliation Full Year 2011 Versus Full Year 2010 Year Ended December 31, 2011 2010 Change EPS as reported $ 3.09 $ 3.27 $ (0.18) Less adjustments: Discontinued real estate operations 0.01 0.05 (0.04) Discontinued energy services business (0.11) (0.29) 0.18 On-going EPS $ 2.99 $ 3.03
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