Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — FY2010 Earnings Presentation
24 slides from Pinnacle West Capital's earnings presentation, Feb 18, 2011
Slide 1: 4th Quarter and Full-Year 2010 Results
4th Quarter and Full-Year Full Year 2010 Results
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements based on current expectations, including statements regarding our 2011 earnings outlook. These forward-looking statements are often identified by words such as “estimate,” “predict,” may, “believe,” “may,” believe, “pla
Slide 3: Amounts Attributable to Common Shareholders and Non-GAAP Financial Measures
Amounts Attributable to Common Shareholders and Non Non-GAAP GAAP Financial Measures In this presentation, references to net income and earnings per share refer to amounts attributable to common shareholders. We present “regulated electricity segment gross margin” per diluted share of common stock.
Slide 4: CFO Agenda
CFO Agenda 4th Q Quarter Results Arizona Economic Outlook 2011 Earnings Guidance Liquidity q y and Financing g Update p Fourth Quarter 2010 4
Slide 5: Consolidated EPS Comparisons: 4th Quarter 2010 vs. 4th Quarter 2009
Consolidated EPS Comparisons 4th Quarter 2010 vs vs. 4th Quarter 2009 Net Income (Loss) On-Going On Going Earnings (Loss) Per Share Per Share $0.10 $0.07 $0.10 $0.06 $0.00 $0.00 ($0.10) ($0.10) ($0.20) ($0.20) $(0.16) ($0 30) ($0.30) ($0 30) ($0.30) $(0.30) ($0.40) ($0.40) 2010 2009 2010 2009 Fourth
Slide 6: Non-GAAP EPS Reconciliation: 4th Quarter
Non-GAAP EPS Reconciliation 4th Quarter 2010 vs vs. 4th Quarter 2009 4th Qtr 4th Qtr 2010 2009 Change EPS as Reported R t d $ 0.07 $ (0.30) $ 0.37 Less Adjustments: Discontinued Real Estate Operations p ((0.01)) 0.14 ((0.15)) On-Going EPS $ 0.06 $ (0.16) $ 0.22 Fourth Quarter 2010 6
Slide 7: On-Going EPS Variances
On-Going EPS Variances 4th Quarter Q t 2010 vs. 4th Quarter Q t 2009 Other, net O&M* Non-regulated $0.04 $(0.04) Infrastructure- Low-income energy related assistance consulting costs Lower g funding $0.02 $(0.06) effective $0.03 Net tax rate Increase $0.06 Regulated electricity $0.22 gross margin* $
Slide 8: Regulated Electricity Gross Margin Drivers
Regulated Electricity Gross Margin Drivers 4th Quarter Q t 2010 vs. 4th Quarter Q t 2009 Weather Lower effects retail usage $0.03 $(0.04) Lower fuel costs Net Line $0.03 Other, net Increase extension $(0.01) revenues $0.17 Retail base $0.02 rate increase $0.14 = See non-GAAP reconciliation in Append
Slide 9: Arizona Economic Indicators
Arizona Economic Indicators E l Employment t & Payroll P ll Taxes T Non-Farm Job Growth Personal Income Tax Withholdings Month-to- Year-over- Month Change Year Change 2.0% 25% 20% 1.5% 15% 1.0% 10% 0.5% 5% 0% 0.0% (5)% (0.5)% ((10)% ) (1.0)% (15)% (1.5)% (20)% (25)% (2 0)% (2.0)% ‘05 ‘06 ‘07 ‘08 ‘09
Slide 10: Consolidated EPS Comparisons: Full-Year 2010 vs. 2009
Consolidated EPS Comparisons Full Year 2010 vs Full-Year vs. Full Full-Year Year 2009 Net Income On-Going On Going Earnings Per Share Per Share $3.50 $3.27 $3.50 $3.08 $2.95 - $3.10 $3 00 $3.00 $3 00 $3.00 $2.50 $2.50 $2.30 $2.00 $2.00 $1.50 $1.50 $1.00 $1.00 $0.67 $ $0.50 $0.50 $0.00 $0.00 2009 201
Slide 11: Consolidated On-Going EPS Outlook
Consolidated On-Going EPS Outlook Per Share $3.50 $3.08 $2.95 - $3.10 $3.00 - $3.15 $3.00 $2.50 $2.30 $2.00 $1.50 $1.00 $0.50 $0.00 2009 2010 2010 Guidance 2011 Guidance See key factors and assumptions in Appendix. Fourth Quarter 2010 11
Slide 12: Solid Liquidity and Capitalization, Ample Financing Access
Solid Liquidity and Capitalization Ample Financing Access C it li ti Capitalization & Liquidity Li idit 2011 - 2012 Major M j Financing Fi i Activities A ti iti December 31, 2010 $ Billions 2011 $500M APS revolver refinancing 8 2011 $175M PNW senior notes refinancing 7 6 2011 $400M APS senior notes
Slide 13: CEO Discussion Agenda
CEO Discussion Agenda Resource Acquisitions Arizona Regulatory Update Operations Update Looking Ahead Fourth Quarter 2010 13
Slide 14: Appendix
Appendix
Slide 15: APS AZ Sun Program
APS AZ Sun Program 100 MW photovoltaic solar plants to be owned by APS Up to $500 million capital investment In service 2011 through 2014 Constructive rate recovery Commitments to date: 83 MW with $377 million capital investment Project summary: Name Net Capacity Target Operation Date
Slide 16: Four Corners Power Plant Transactions
Four Corners Power Plant Transactions 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 i investment: t t $300 million illi Finance with mix o
Slide 17: Benefits of Proposed Four Corners Plan
Benefits of Proposed Four Corners Plan Best, most viable resource option (lowest cost and risk) Reduces carbon-related environmental exposure Low-cost L t generating ti resource Incremental rate base investment Well-known Well known asset and operating history Good for local economy Co
Slide 18: 2011 Retail Rate Case Prefiling Notice
2011 Retail Rate Case Prefiling Notice Notice filed February 1, 2011 Key y rate case p proposals p outlined in notice Revenue-per-customer decoupling mechanism Post test-year plant additions through rate effective date Infrastructure tracker G Generation ti plant l t capacity it additions dd
Slide 19: 2011 On-Going EPS Guidance: Key Factors and Assumptions
2011 On-Going EPS Guidance Ke Factors and Assumptions Key Ass mptions as of Febr February ar 18 18, 2011 Electricity gross margin (operating revenues, net of fuel and purchased power expenses expenses, excluding Renewable Energy Surcharge and similar rate adjustors) about $2.05 billion to $2.10 bi
Slide 20: Renewable Energy and Demand Side Management Expenses
Renewable Energy and Demand Side Management Expenses* Demand-Side Pretax Millions $ $40 $35 $30 15 $25 8 12 7 8 11 $20 2 6 $15 $10 2 20 19 21 2 2 18 18 17 18 16 $5 9 2 7 7 $0 2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2008 2009 2010 Renewable Energy Demand-Side Management * O&M expenses related to Renewa
Slide 21: Quarterly Mark-to-Market on Hedge Contracts
Quarterly Mark-to-Market on Hedge Contracts* Pretax Millions Milli $20 14 14 $10 8 5 0 1 $0 (2) (1) (1) $(10) (5) (9) $(20) $(30) (29) $(40) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2008 2009 2010 * Related to APS 10% share under Power Supply Adjustor (PSA), net of related deferrals. Fourth Quarter 2010
Slide 22: Gross Margin Effects of Weather Variances Versus Normal
Gross Margin Effects of Weather Variances Versus Normal Pretax Millions Milli $15 12 $10 8 4 5 $5 2 3 $0 ($5) ($10) ($15) (13) ($20) ($25) ($30) (27) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2009 2010 Fourth Quarter 2010 22
Slide 23: Non-GAAP Measure Reconciliation
Non-GAAP Measure Reconciliation Reg lated Electricity Regulated Electricit Segment Gross Margin Three Months Ended December 31 31, EPS $ millions, except per share amounts 2010 2009 Change Regulated electricity segment revenue* $ 654 $ 650 Regulated electricity segment fuel and purchased power expen
Slide 24: Non-GAAP EPS Reconciliation: Full Year 2010 vs. 2009
Non-GAAP EPS Reconciliation Full Year 2010 Versus Full Year 2009 Year Ended December 31, 2010 2009 Change EPS as Reported $ 3 3.27 27 $ 0 0.67 67 $ 2 2.60 60 Less Adjustments: Discontinued Real Estate Operations 0.05 1.65 (1.60) Discontinued District Cooling Business (0.24) (0.02) (0.22) On-Going EP