Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Investor Presentation (June 2020)
33 slides from Pinnacle West Capital's investor presentation, Jun 23, 2020
Slide 1: Powering Growth, Delivering Value: Investor Meetings June 23-24 2020
POWERING GROWTH DELIVERING VALUE Investor Meetings June 23-24 2020
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
PINNACLE WEST: WHO WE ARE We are a vertically integrated, regulated electric utility in the growing Southwest United States Our Business Our Energy Resources Pinnacle West operates Arizona Public Service Company (“APS”), our principal subsidiary $18B Consolidated Arizona’s largest and longest -servi
Slide 4: Senior Management Team
SENIOR MANAGEMENT TEAM We maintain a robust pipeline of talent to serve our complex operations and facilitate effective succession planning in a highly competitive talent environment Jeff Guldner Jim Hatfield Chairman of the Board, President and Executive Vice President, Chief Administrative “We hav
Slide 5: Building a Sustainable Future
BUILDING A SUSTAINABLE FUTURE We are working to meet business needs with practices that balance a healthy environment, a vibrant economy and strong communities for future generations Clean Affordable Building a clean energy future with our goal to deliver Delivering affordable energy for the benefit
Slide 6: COVID-19 Response Highlights
COVID-19 RESPONSE HIGHLIGHTS ✓ Suspension of power disconnects and waiving of penalties, late fees and interest payments ✓ Offer additional bill credits to residential and small business customers ✓ Simplify access to existing customer support programs ✓ Donate more than $1.5M in aid to local nonpro
Slide 7: COVID-19 Events and Energy Update
COVID-19 EVENTS AND ENERGY UPDATE Our top priority is to provide reliable service to our customers while maintaining the health and safety of our employees Our Company has made preparations and is executing our plan to effectively manage the current environment and mitigate future impacts. Providing
Slide 8: Pinnacle West Profile
PINNACLE WEST PROFILE We are a financially healthy company well positioned to succeed in achieving our long-term goals ✓ Strong balance sheet ✓ Sufficient liquidity ✓ De-risked pension plan through liability driven investment strategy ✓ Sales weighted heavily in the Q3 hot summer months ✓ Large resi
Slide 9: Energy Usage and Sales
ENERGY USAGE AND SALES COVID impacts have diminished since businesses began to reopen in mid-May. C&I sales trend continues to improve, while residential growth continues to be strong. From March 13th through June 16th the cumulative reduction in weather-normalized usage was (3)% YoY Pre-COVID Main
Slide 10: Preliminary Weather-Normalized Energy Trend
PRELIMINARY WEATHER-NORMALIZED ENERGY TREND Daily Energy Normalized Actual: 2020 vs 2019 March 1 - June 16, 2020 Week of May 11th businesses began reopening and stay-at-home guidelines expired March 1 March 15 March 29 April 12 April 26 May 10 May 24 June 7 Normalized Actual 2020 Normalized Actual 2
Slide 11: Arizona Reopening Timeline
ARIZONA REOPENING TIMELINE • May 4th – Retail establishments permitted to reopen • May 8th – Hair salons permitted to reopen • May 11th – Dine-in restaurants permitted to reopen • May 13th – Pools, gyms and spas permitted to reopen • May 15th – Stay Home, Stay Healthy, Stay Connected guideline expir
Slide 12: Strong Balance Sheet and Healthy Liquidity
STRONG BALANCE SHEET AND HEALTHY LIQUIDITY Long-Term Debt Maturities Liquidity and Financing Activity $ in millions • $1.2 billion revolver capacity $1,000 ₋ No draws on revolvers as of June 16th $800 • $600 million 30-year 3.35% APS senior unsecured notes issued May 2020 $600 • $500 million 5-year
Slide 13: Credit Ratings and Metrics
CREDIT RATINGS AND METRICS APS Pinnacle West 2017 2018 2019 Corporate Credit Ratings1 APS FFO / Debt 29.4% 24.5% 22.5% Moody’s A2 A3 FFO / Interest 7.5x 6.5x 6.4x S&P A- A- Debt / 46.8% 47.0% 47.7% Fitch A- A- Capitalization Pinnacle West Senior Unsecured1 FFO / Debt 26.4% 22.1% 19.5% Moody’s A2 A3
Slide 14: Pension Plan
PENSION PLAN Well funded pension plan with investment strategy that mitigates funding status volatility Pension Funded Status • Liability driven investment 97% 97% strategy helps reduce funded status volatility 90% • Approximately 65% of the pension portfolio is in fixed income assets • Hedge 100% o
Slide 15: Appendix
APPENDIX Powering the Future | 15
Slide 16: Economic Indicators
ECONOMIC INDICATORS Year over Year Employment Growth U.S. Phoenix 5% Arizona’s job growth ranked second in the 4% nation in 20191 3% 2% Maricopa County ranked #1 in U.S. for 1% population growth for third straight year 2 0% Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Arizona is the 3rd fastest-
Slide 17: Economic Development
ECONOMIC DEVELOPMENT FUTURE EXPANSIONS OUR APPROACH FOCUSES ON FOUR MAIN AREAS • Stack Infrastructure plans to build a 1 million-square-foot data center on 79 acres in the West Valley less than half a Business Attraction & Expansion - constructive engagement mile from one of Microsoft’s data centers
Slide 18: Future Focus: Clean Energy Plan
FUTURE FOCUS: CLEAN ENERGY PLAN Clean energy commitments APS Clean • 100% clean, carbon-free electricity by 2050 Energy Commitment • 65% clean energy by 2030 with 45% renewable energy • End APS’s use of coal-fired generation by the end of 2031 A clean economic future • Meet our responsibility to pow
Slide 19: Pathways to 100% Clean
FUTURE FOCUS: CLEAN ENERGY PLAN Pathways to 100% Clean Renewable additions of 300-500 MW/year to meet a 45% target by 2030 Next Steps: Collaboration, alignment and innovation • Reliability and affordability are foundational • Collaborate with customers, stakeholders and regulators • Promote economy-
Slide 20: Energy Storage Contribution to Reliability
ENERGY STORAGE CONTRIBUTION TO RELIABILITY • System reliability can be maintained by installing Increasing storage longer duration energy storage duration required to maintain reliability • Energy storage helps minimize the need for additional gas resources and allows for higher renewable utilizatio
Slide 21: Cumulative Peak Capacity Needs Through 2028
CUMULATIVE PEAK CAPACITY NEEDS THROUGH 2028 Merchant CC Toll (570MW) expires 4,500 Merchant CC Toll Merchant CC Toll (465 MW) expires 4,000 (565MW) expires 3,500 PAC Exchange Large resource (480MW) 3,000 expires CH 1 & 3 needs resulting retirement 2,500 (387MW) from load growth, MW data centers and
Slide 22: System Operating Change: Spring 2025
SYSTEM OPERATING CHANGE Spring 2025 • Energy storage helps reduce the need for winter gas peaking resources and can be charged with zero or negatively priced energy Spring Day – High Renewables with Storage Spring Day – High Renewables, No Storage 6000 6000 5000 5000 4000 4000 3000 3000 2000 2000 10
Slide 23: System Operating Change: Summer 2025
SYSTEM OPERATING CHANGE Summer 2025 • Energy storage reduces the need for gas peaking resources and pipeline capacity Summer Peak Day – High Renewables with Storage Summer Peak Day – High Renewables, No Storage 10000 10000 9000 9000 8000 8000 7000 7000 6000 6000 MW MW 5000 5000 4000 4000 3000 3000 2
Slide 24: Rate Base
RATE BASE APS’s revenues come from a regulated retail rate base and meaningful transmission business APS Rate Base Growth Total Approved Rate Base Year-End Generation & Distribution Transmission ACC FERC Long-term Rate Base Guidance: 19% 6-7% Average Annual Growth $2.3 81% ACC FERC $1.6 Rate Effecti
Slide 25: Operations & Maintenance
OPERATIONS & MAINTENANCE Goal is to keep O&M per kWh flat, adjusted for planned outages $ in millions $933 $858 74 $856 $830 - $850 63 48 40 - 50 795 859 808 790 - 800 2017 2018 2019 2020E PNW Consolidated ex RES/DSM 1 Planned Fleet Outages 1 Excludes RES/DSM of $91 million in 2017, $104 million in
Slide 26: APS Capital Expenditures
APS CAPITAL EXPENDITURES Capital expenditures will support our growing customer base and utilization of advanced technology $ in millions PROJECTED $2,000 $1,800 $1,650 $1,725 $121 $1,600 $154 $44 $53 $1,400 $1,331 Traditional Generation $1,231 1 $141 Ocotillo $1,200 $45 $794 $185 $613 $14 Environme
Slide 27: 2020 Key Dates
2020 KEY DATES ACC Key Dates / Docket # Q1 Q2 Q3 Q4 Power Supply Adjustor (PSA): E-01345A-16-0036 Effective: Feb 1 Lost Fixed Cost Recovery: E-01345A-16-0036 Filed: Feb 14 Effective: May 1 Filed: May 15 Transmission Cost Adjustor: E-01345A-16-0036 Effective: Jun 1 Amended Plan Filed: 2020 DSM/EE Imp
Slide 28: 2019 APS Rate Case Application
2019 APS RATE CASE APPLICATION Filed October 31, 2019 Docket Number: E-01345A-19-0236 Additional details, including filing, can be found at http://www.pinnaclewest.com/investors Adjustor Changes and New Mechanisms Overview Formula Rate - Proposed as an alternative to existing adjustor mechanisms Def
Slide 29: 2019 Rate Case Key Financials
2019 RATE CASE KEY FINANCIALS APS has requested a rate increase to become effective December 1, 2020 Test year ended June 30, 2019 Total Rate Base - Adjusted $11.12 Billion ACC Rate Base - Adjusted $8.87 Billion Allowed Return on Equity 10.15% Capital Structure Long-term debt 45.3% Common equity 54.
Slide 30: 2019 Rate Case Key Financials
2019 RATE CASE KEY FINANCIALS APS has requested a rate increase to become effective December 1, 2020 Overview of Rate Increase ($ in Millions) - Key Components Four Corners SCRs $ 73 Ocotillo Modernization Project 100 Post-Test Year Plant Additions 66 Net Change in Other Items 64 Tax Expense Adjusto
Slide 31: APS Rate Case Procedural Schedule
APS RATE CASE PROCEDURAL SCHEDULE Arizona Public Service Company Docket # E-01345A-19-0236 Application Filed October 31, 2019 Staff/Intervenor Direct Testimony (August 3, 2020) Staff/Intervenor Direct Testimony (Rate Design) (August 10, 2020) APS Rebuttal Testimony (September 1, 2020) Staff/Interven
Slide 32: Arizona Utilities General Rate Cases
ARIZONA UTILITIES GENERAL RATE CASES Tucson Electric Power Company Southwest Gas Docket # E-01933A-19-0028 Docket # G-01551A-19-0055 Application Filed April 1, 2019 Application Filed May 1, 2019 Hearing Commences (Jan 16, 2020) Staff /Intervenor Direct Testimony (Revenue) (Feb 5, Staff’s late-filed
Slide 33: 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 SOLAR Sun E AZ 1 Prescott, AZ SunEdison IO Feb-2010 2011 30 10 310 MW Saddl
Pinnacle West Capital — Investor Presentation (June 2020) on 6ix