Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — EEI Financial Conference 2024
42 slides from Pinnacle West Capital's conference presentation, Nov 8, 2024
Slide 1: Renewed, Reliable and Resilient
Renewed, Reliable and Resilient November Investor Meetings
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: Table of Contents
Table of Contents 1. Company Profile 2. Accomplished Previous Goals & 2022 Rate Case Outcome 3. Growth Outlook & Energy Future 4. Financial Outlook
Slide 4: Company Profile
PINNACLE \WEST CAPITAL CORPORATION
Slide 5: Arizona’s Largest Electric Company
Arizona’s Largest Electric Company Service Territory Key Facts as of Dec. 31, 2023 Consolidated assets $25B Market cap $8.15B Generating capacity owned or leased 6.5GW (year end) Customers 1.4M Current % from clean energy 51% Total Revenue Mix 51%/49% (Non-Residential & Other/Residential) 5
Slide 6: Accomplished Previous Goals & 2022 Rate Case Outcome
Accomplished Previous Goals & 2022 Rate Case Outcome
Slide 7: Accomplished previous goals set during the financial reset
Accomplished previous goals set during the financial reset ✓ Improved customer experience ➢ From 4th quartile in 2021 to 2nd quartile in 2023 J.D. Power Residential and Business Survey ✓ Top quartile reliability for 10 of the last 11 years ✓ Successfully appealed 2019 rate case ✓ Improved relationsh
Slide 8: The 2022 rate case outcome was reasonable and constructive
The 2022 rate case outcome was reasonable and constructive Key Components of Final Decision Return on Equity 9.55% Fair Value Increment 0.25% Equity Ratio 51.93% 12 months + Four Corners Post Test-Year Plant ELG New Capital Tracking System Reliability Benefit Mechanism surcharge approved • Partial t
Slide 9: Growth Outlook & Energy Future
Growth Outlook & Energy Future
Slide 10: We are focused on solid execution and are optimistic for the future
We are focused on solid execution and are optimistic for the future KEY REASONS 1. Rapidly growing service territory with a diverse customer base 2. An improved regulatory environment 3. Making progress toward our clean energy commitment 4. Tremendous opportunities in transmission growth 5. Continue
Slide 11: Arizona continues to be an attractive service territory with strong customer growth
REASON #1 Arizona continues to be an attractive service territory with strong customer growth Arizona economy continues to New APS Customer Meter Sets be robust and attractive 40,000 • Maricopa County ranked #1 for 30,000 economic development by Site Selection 20,000 magazine 10,000 • In 2023, Maric
Slide 12: Best-in-class service territory supports high tech growth and economic development
REASON #1 Best-in-class service territory supports high tech growth and economic development Arizona is an attractive location for business growth • Infrastructure ─ close proximity to major markets in the West with accessibility by rail or truck • Weather predictability ─ low propensity for natural
Slide 13: Arizona’s commercial and industrial growth is diverse
REASON #1 Arizona’s commercial and industrial growth is diverse Source: Arizona Commerce Authority 13
Slide 14: We have an improved regulatory environment
REASON #2 We have an improved regulatory environment Improvements at the Arizona Corporation Commission • Balanced, constructive and more consistent outcomes, including improved ROE to APS • Establishment of Regulatory Lag docket • Reaffirmation of Rate Case Settlement Policy • Continued support of
Slide 15: We are making progress towards our Clean Energy Commitment
REASON #3 We are making progress towards our Clean Energy Commitment Progress Since 2020, have contracted over 8,500 MW of clean energy and storage expected to be in service for APS customers by end of 2028 Preparing 2024 All-Source RFP as load demand continues to increase in APS service territory S
Slide 16: Transmission expansion will drive increased capital investment
REASON #4 Transmission expansion will drive increased capital investment Support Increase customer Access to resiliency growth markets Making progress on multiple strategic transmission opportunities as part of 2025-2027 capital expenditure plan Length Est. In- Line Voltage Status (miles) Service Su
Slide 17: We are focused on maintaining customer affordability and increasing customer satisfaction
REASON #5 We are focused on maintaining customer affordability and increasing customer satisfaction APS rates have remained well below Key Areas of Focus the rate of inflation • Process improvements and preventative maintenance to reduce operating costs Average annual % change 2018-20241 • Innovativ
Slide 18: Future Financial Outlook
PINNACLE \WEST CAPITAL CORPORATION
Slide 19: 2025 EPS guidance
2025 EPS guidance Key Factors and Assumptions (as of Nov 6, 2024) 2025 Adjusted gross margin (operating revenues, net of fuel and $3.13 – $3.19 billion purchased power expenses, x/RES,DSM,CCT)1 • Retail customer growth of 1.5%-2.5% • Weather-normalized retail electricity sales growth of 4.0%-6.0% •
Slide 20: Key drivers & assumptions for 2025 EPS guidance
Key drivers & assumptions for 2025 EPS guidance 2025 EPS guidance of $4.40-$4.60 key drivers1 Long-term guidance and key drivers1,2 Retail customer growth of Depreciation, amortization and • Long-term EPS growth target of 5%-7% off 1.5%-2.5% property taxes due to higher original 2024 midpoint pl
Slide 21: Our investor goals going forward
Our investor goals going forward 1. Long-term EPS growth of 5%-7% off 2024 base, supporting competitive total shareholder return 2. Optimized capital plan to reliably serve growing service territory, driving strong rate base growth and supported by SRB 3. Managing a healthy capital structure with ac
Slide 22: Long-term outlook potential remains solid
GOAL #1 Long-term outlook potential remains solid EPS Growth off 20241 Potential drivers for more consistent and timely cost recovery • Reduction of regulatory lag including exploration of alternative rate-making structures • Rate case cadence and potential settlement of future rate cases 5%-7% CAGR
Slide 23: Capital plan to support reliability and continued growth within our service territory
GOAL #2 Capital plan to support reliability and continued growth within our service territory APS Total 2024-2027 $9.65B CapEx Profile Today $2.65B $2.55B $2.40B $2.05B $870 $950 Q4 2023 $905 $790 Generation Transmission $675 $750 $9.65B $450 Distribution $320 Other $7.80B $665 $670 $620 $675 $320 $
Slide 24: SRB will expand our capacity to self-build generation
GOAL #2 SRB will expand our capacity to self-build generation to meet customer need with reduced lag System Reliability Benefit Surcharge Key Features • Projects that compete on cost and reliability from All-Source Request for Proposals • Determines prudency of new generation between general rate ca
Slide 25: Rate Base growing within our service territory
GOAL #2 Rate Base growing within our service territory Current Approved Rate Base and Test Year Detail End-of-Year Rate Base and Growth Guidance ACC FERC ACC FERC Rate Effective Date 03/08/2024 06/01/2024 $3.2 Test Year Ended 6/30/20221 12/31/2023 $2.11 Equity Layer 51.93% 49.64% Allowed ROE 9.55% 1
Slide 26: Optimized financing plan to support balanced capital structure
GOAL #3 Optimized financing plan to support balanced capital structure 2025-2027 Financing Plan Funding Strategy • External equity to support balanced Approx. $7.6B APS capital structure and expanded, accretive capital investment $700-900M • Equity needs < prior targeted 40% $500M-700M PNW Equity of
Slide 27: We are focused on cost control and customer affordability
GOAL #4 We are focused on cost control and customer affordability Operations & Maintenance Guidance O&M Guidance (millions) • Reduced year-over-year core O&M excluding planned outages • Final planned major outage in Q4 2024 at Four $65 - $75 Corners Unit 5 Planned $55 - $65 • Unit 4 final planned ma
Slide 28: Long term goal remains declining O&M per MWh
GOAL #4 Long term goal remains declining O&M per MWh PNW O&M (as adjusted) per MWh1 Average annual % change 2017-20241 O&M per MWh Weather Normalized Sales (MWh) CPI CPI (PHX) PNW O&M 4.94% 3.50% $30 1.86% 2017 2018 2019 2020 2021 2022 2023 2024E 2023 1 O&M amounts, as adjusted, exclude RES/DSM of $
Slide 29: We have a proven dividend growth track record
GOAL #5 1 We have a proven dividend growth track record Annualized Dividends per Share Dividend Targets • Long-term dividend growth • Attractive dividend yield • Managing long-term $3.52 dividend payout ratio into sustained 65-75% $2.38 ~4.5% DPS CAGR 2014 2015 2016 2017 2018 2019 2020 2021 2022 202
Slide 30: We are focused on maintaining healthy credit ratings to support affordable growth
GOAL #6 We are focused on maintaining healthy credit ratings to support affordable growth1 Balance Sheet Senior Targets Corporate Unsecured Short-Term • Solid investment-grade Ratings Ratings Ratings Outlook credit ratings APS • APS equity layer >50% • PNW FFO/Debt range Moody’s Baa1 Baa1 P-2 Stable
Slide 31: Debt maturity profile shows well managed and stable financing plan
GOAL #6 Debt maturity profile shows well managed and stable financing plan ($millions) APS Fixed APS Floating PNW Fixed PNW Floating $1,200 $1,000 $800 $600 $400 $200 $0 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050 As of September 30, 2024 31
Slide 32: We have a stable foundation with solid execution going forward
IN SUMMARY We have a stable foundation with solid execution going forward • Service territory is one of the fastest growing in the nation with a diverse customer base • Improved regulatory environment with focus on reducing regulatory lag • Strong customer centric strategy with improving J.D. Power
Slide 33: Appendix
PINNACLE \WEST CAPITAL CORPORATION
Slide 34: 2024 Key Regulatory Dates
2024 Key Regulatory Dates Case/Docket # Q1 Q2 Q3 Q4 Rate Case Limited Rehearing Rate Case Limited Rehearing Direct Testimony Filed Sep. Rebuttal Testimony Filed Oct. 18 2022 Rate Case E-01345A-22-0144: Rates effective March 8 Rate Case Limited Rehearing 24 Began Oct. 28 Power Supply Adjustor (PSA) E
Slide 35: Residential PV Applications
Residential PV Applications 5,000 Residential DG (MWdc) Annual Additions 4,500 216 169 200 81 4,000 3,500 2021 2022 2023 2024 3,000 2,500 2,000 1,500 1,000 500 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2021 Applications 2022 Applications 2023 Applications 2024 Applications 1 Monthly data equ
Slide 36: Renewable Energy & Demand Side Management expenses
Renewable Energy & Demand Side Management expenses1 ($ in millions pretax) Renewable Energy Demand Side Management $50 $45 $40 $35 $30 $26 $25 $20 $16 $18 $19 $20 $12 $21 $15 $10 $17 $18 $15 $16 $15 $14 $5 $9 $0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 1Renewable Energy and Demand Side Management expenses are substa
Slide 37: 2024 gross margin effects of weather
2024 gross margin effects of weather Variances vs. Normal ($ in millions pretax) $95 $35 ($1) Q1 Q2 Q3 Q4 2024 Total Weather Impact: $128 Million All periods recalculated to current 10-year rolling average (2013 – 2022). Numbers may not foot due to rounding. 37
Slide 38: We are stewards of a more sustainable Arizona
We are stewards of a more sustainable Arizona Climate Resiliency • Wildfire preparedness and prevention • Reduction of carbon and retirement of over 1,000 MW of coal • Focus on reliability and affordability through All-Source RFPs Company Actions • 42% of new hires in 2023 were racially or ethnicall
Slide 39: Wildfire Mitigation
Wildfire Mitigation Our wildfire preparedness and mitigation strategy is comprehensive and multi-faceted: Vegetation Grid hardening Asset Monitoring and Operational management investments inspection awareness mitigations • Comprehensive right- • Ongoing distribution • Enhanced line • Dedicated team
Slide 40: 2024 Planned Outage Schedule
2024 Planned Outage Schedule Coal, Nuclear and Large Gas Planned Outages Q1 Q2 Q4 Actual Duration in Actual Duration in Estimated Duration Plant Unit Plant Unit Plant Unit Days Days in Days Redhawk CC1 66 West Phoenix CC5 47 Palo Verde 2 36 West Phoenix CC5 71 Palo Verde 3 37 Four Corners 5 66 40
Slide 41: 2025 Planned Outage Schedule
2025 Planned Outage Schedule Coal, Nuclear and Large Gas Planned Outages Q1 Q2 Q4 Estimated Duration Estimated Duration Estimated Duration Plant Unit Plant Unit Plant Unit in Days in Days in Days Redhawk CC2 61 Palo Verde1 1 36 Palo Verde 3 36 Four Corners 4 65 1Outage scheduled to begin at end of Q
Slide 42: Non-GAAP Measure Reconciliation
Non-GAAP Measure Reconciliation 2024 Guidance3 2025 Guidance3 Operating revenues1 $5.06 - $5.15 billion $5.20 - $5.30 billion Fuel and purchased power expenses1 $1.83 - $1.86 billion $1.93 - $1.97 billion Gross Margin $3.23 - 3.29 billion $3.27 - $3.33 billion Adjustments: Renewable energy and deman
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