Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Non-Deal Roadshow (January 2018)
33 slides from Pinnacle West Capital's roadshow presentation, Jan 23, 2018
Slide 1: Powering Growth, Delivering Value
POWERING GROWTH DELIVERING VALUE Investor Meetings l January 23, 2018 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: Pinnacle West: Who We Are
We are a vertically integrated, PINNACLE WEST: regulated electric utility in the WHO WE ARE growing southwest United States Pinnacle West (NYSE: PNW) - Market Capitalization*: $9.5 billion - Enterprise Value*: $14.5 billion - Consolidated Assets: $17.0 billion - Indicated Annual Dividend*: $2.78 - D
Slide 4: Value Proposition
VALUE PROPOSITION We are executing on our financial and operational objectives … Leverage Operational Excellence Financial Strength Economic Growth Top decile safety performance Annual dividend growth target of Arizona’s long-term growth among peers 6%, subject to declaration at fundamentals r
Slide 5: 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 custo
Slide 6: Grid Investments
Modernizing the distribution grid with advanced technology GRID INVESTMENTS investments – resulting in improved reliability for customers and more efficient operations Grid Operations & Investment $1.3 Billion from 2017-2019 Integrated Volt/VAR Control (IVVC) Advanced Distribution Management System
Slide 7: APS Microgrid Projects Completed
APS MICROGRID PROJECTS COMPLETED Data Center – North Phoenix • Phase 1=11MW Tier 4 diesel generation • In service December 2016 • 17 Autonomous Frequency Response events since April 2017; 1 ECC call for power event (7/19/2017) • 50% cost share • Customer has requested to begin Phase 2 planning • Add
Slide 8: Renewable Resources
RENEWABLE APS is a leader in solar RESOURCES APS Solar Portfolio* APS currently has 1,549 MW of renewable resources: Owned PPA 214 MW 310 MW • Solar* 1,230 MW DG • Wind 289 MW 706 MW • Biomass 14 MW • Geothermal 10 MW • Biogas 6 MW Owned solar includes 170 MW AZ Sun Program, 4 MW of other APS owned
Slide 9: Battery Storage
Energy storage is important but will only be cost effective in niche BATTERY STORAGE circumstances for the next several years APS Projects – Punkin Center, Arizona: 2 X 4MWh Li-ion battery storage systems in place of rebuilding 20 miles of transmission lines – Solar Innovation Study: Residential bat
Slide 10: Residential Solar vs. APS Customer Load
RESIDENTIAL SOLAR VS. APS CUSTOMER Performance at system peak LOAD On June 20th, APS customers hit “peak demand” for 2017 using more than 7,300 MW of electricity 500 7,367 8,000 6,918 6,136 400 6,000 304 300 Residential Rooftop MW 4,000 APS Customer Load 200 100 2,000 100 5 0 0 1 2 3 4 5 6 7 8 9 10
Slide 11: Residential PV Applications
Residential DG (MWdc) Annual Additions RESIDENTIAL PV 133 135 74 APPLICATIONS* 51 57 44 18 22 10 2009 2011 2013 2015 2017 YTD -Nov 4,500 3,865 4,000 3,749 3,500 3,000 2,522 2,254 2,500 1,988 2,033 1,860 2,000 1,591 1,605 1,468 1,413 1,364 1,447 1,440 1,500 1,267 1,291 1,287 1,154 1,141 1,002 1,002 1
Slide 12: The "Duck Curve"
Distributed generation is changing THE “DUCK CURVE” the load shape of the grid Current Spring Day Spring Day 2022 Excess renewables creates over-generation … and potentially for nuclear generation in challenges … 5,000 the future 5,000 4,500 4,500 4,000 4,000 3,500 3,500 3,000 3,000 2,500 2,500 2,00
Slide 13: Demand Side Management (DSM)
DEMAND SIDE 2018 DSM Plan shifts the focus to align with APS’s changing MANAGEMENT (DSM) resource needs School Bus Electrification – Pilot program to electrify school buses that can charge in the middle of the day Managed EV Charging Program – Fleet, workplace and multifamily charging infrastructure
Slide 14: APS Solar
Providing more renewable energy APS SOLAR and technology to all customers APS Solar Partner Program (Installations Complete) – Installed 10 MW of APS-owned residential PV systems with advanced controllable inverters that can vary power output – 4 MWh of grid-tied battery storage on 2 of the particip
Slide 15: Resource Planning
RESOURCE PLANNING* Peak** 8,405 MW 9,835 MW 11,410 MW Resource Reductions 2017-2022 2017-2027 2017-2032 (Retirements, Expirations) -487 MW -872 MW -872 MW Ocotillo steam unit retirements and Ocotillo steam unit retirements, Ocotillo steam unit retirements, Navajo contract expiration Navajo contract
Slide 16: APS Capital Expenditures
APS CAPITAL Capital expenditures are funded primarily through internally EXPENDITURES generated cash flow ($ Millions) Other $1,337 $1,224 $77 $1,181 Distribution $87 $82 $420 $1,009 Transmission $388 $124 $421 Renewable $182 Generation $127 $3 $437 $102 $178 $199 Environmental(1) $16 $220 $90 $245
Slide 17: Operations & Maintenance
OPERATIONS & Goal is to keep O&M per kWh flat, MAINTENANCE adjusted for planned outages ($ Millions) $860 - $880 $828 $830 - $850 $788 $805 75 - 85 $772 55 - 65 52 72 37 38 756 775 - 785 785 - 795 751 753 734 2013 2014 2015 2016 2017E 2018E* PNW Consolidated ex RES/DSM** Planned Fleet Outages * 2018
Slide 18: Planned Outage Cycles
PLANNED OUTAGE The length of time between CYCLES outages varies from plant to plant Palo Verde Generating Station − Palo Verde will continue to have two refueling outages each year (18 months cycles for each of the three units) − APS’s share of the annual planned outage expense at Palo Verde has bee
Slide 19: Sustainability
APS’s vision is to create a SUSTAINABILITY sustainable energy future for Arizona Pinnacle West and APS have adopted a strategic framework that Five critical areas of our sustainability efforts supports our operating foundation Carbon Management • 50% of our diverse energy mix is carbon-free • 4.9M m
Slide 20: Tax Reform
Tax Cuts and Jobs Act provides TAX REFORM benefits to both our customers and shareholders Excess Deferred Taxes − Approximately $1.1B in excess deferred taxes passed through to ratepayers over remaining life of plant Interest Deductibility Limitation − Majority of Pinnacle West and APS debt is likel
Slide 21: Appendix
APPENDIX Powering Growth, Delivering Value
Slide 22: Senior Management Team
SENIOR Our management team has more than 100 combined years of MANAGEMENT creating shareholder value in the TEAM energy industry Don Brandt Jim Hatfield We maintain a robust Chairman of the Board, President and Executive Vice President and Chief Executive Officer, Pinnacle West & APS Chief Financial
Slide 23: Economic Indicators
ECONOMIC Arizona and Metro Phoenix remain attractive places to live and do INDICATORS business Nonresidential Building Vacancy – Metro Phoenix Vacancy Rate Maricopa County ranked #1 in U.S. for 25% population growth in 2016 Office - U.S. Census Bureau March 2017 20% 15% Industrial Above-average job
Slide 24: Rate Base
APS’s revenues come from a RATE BASE regulated retail rate base and meaningful transmission business APS Rate Base Growth Total Approved Rate Base Year-End ACC FERC Generation & Distribution Transmission 17% $1.8 83% $1.4 $1.4 ACC FERC Rate Effective Date 8/19/2017 6/1/2017 $8.2 $6.5 $6.8 Test Year
Slide 25: Balance Sheet Strength
BALANCE SHEET STRENGTH Credit Ratings Debt Maturity Schedule • A- or equivalent ratings or better at S&P, Moody’s ($Millions) and Fitch $600 2017 Major Financing Activities $500 • $300 million 10-year 2.95% APS senior unsecured notes issued September 2017 $400 • $250 million re-opening in March of A
Slide 26: 2017 Rate Review Order
2017 RATE REVIEW ORDER* EFFECTIVE AUGUST 19, 2017 Key Financial Proposals – Base Rate Changes Annualized Base Rate Revenue Changes ($ millions) Non-fuel, Non-depreciation Base Rate Increase $ 87.2 Decrease fuel and Purchased Power over Base Rates (53.6) Increase due to Changes in Depreciation Schedu
Slide 27: 2017 Rate Review Order
2017 RATE REVIEW ORDER* EFFECTIVE AUGUST 19, 2017 Key Proposals – Revenue Requirement • Cost deferral order from in-service dates to incorporation of SCRs in rates using a step-increase no Four Corners later than January 1, 2019 Ocotillo Modernization • Cost deferral order from in-service dates to e
Slide 28: Ocotillo Modernization Project and Four Corners SCRs
OCOTILLO MODERNIZATION PROJECT AND FOUR CORNERS SCRs • Included in the 2017 Rate Review Order, APS has been granted Accounting Deferral Orders for two large generation-related capital investments – Ocotillo Modernization Project: Retiring two aging, steam-based, natural gas units, and replacing with
Slide 29: Arizona Corporation Commission
ARIZONA CORPORATION COMMISSION Term to January 2019 Terms to January 2020 Tom Justin Bob Boyd Andy Forese (R) Olson (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 t
Slide 30: 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 Flagstaff • Also includes: – Sun Valley-Morg
Slide 31: 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 32: 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 33: Investor Relations Contacts
INVESTOR RELATIONS CONTACTS Stefanie Layton Director, Investor Relations (602) 250-4541 stefanie.layton@pinnaclewest.com Chalese Haraldsen (602) 250-5643 chalese.haraldsen@pinnaclewest.com Michelle Clemente (602) 250-3752 michelle.clemente@pinnaclewest.com Pinnacle West Capital Corporation P.O. Box
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