Pinnacle West Capital Corporation · NYSE:PNW

Pinnacle West Capital — Bank of America Energy & Power Conference 2004

39 slides from Pinnacle West Capital's conference presentation, Nov 16, 2004

  1. Slide 1: Bank of America Energy & Power Conference

    Bank of America Energy & Power Conference November 16, 2004

  2. Slide 2: Forward-Looking Statements

    Forward-Looking Statements This This document document may may contain contain forward-looking forward-looking statements statements within within thethe meaning meaning of of the the safe safe harbor harbor of of the the Private Private Securities Securities Litigation Litigation Reform Act of 1995

  3. Slide 3: Pinnacle West Corporate Focus

    Pinnacle West Corporate Focus • Capturing benefits of exceptional market growth • Sustaining solid customer service and operational performance • Managing commodity price risk • Pursuing constructive regulatory outcomes • Creating long-term shareholder value

  4. Slide 4: Exceptional Market Growth

    Exceptional Market Growth

  5. Slide 5: APS Extraordinary Customer Growth

    APS Extraordinary Customer Growth APS 2nd nd Fastest Growing U.S. Electric Utility 5% 5% APS 3.7% 4% 4% 3% 3% 2% 2% 1% 1% 0% 0% 1999 – 2003 average annual growth

  6. Slide 6: Metropolitan Phoenix

    Metropolitan Phoenix Single-Family Building Permits 2004 Annualized Growth 28% 1999 – 2003 Average Annual Growth 3.2% 50,000 50,000 40,000 40,000 30,000 30,000 20,000 20,000 10,000 10,000 0 0 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 TME TME August August 2004 2004

  7. Slide 7: Population of Phoenix metropolitan area expected to increase by 1 million each decade

    Population of Phoenix metropolitan area expected to increase by 1 million each decade Source: Source: Maricopa Maricopa Association Association of of Governments Governments

  8. Slide 8: APS Peak Load Growth

    APS Peak Load Growth 2000 - 2008 Average Annual Growth 4.7% MW MW 8,000 8,000 6,000 6,000 4,000 4,000 2,000 2,000 0 0 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 Forecast Forecast

  9. Slide 9: APS Growing Generation Needs

    APS Growing Generation Needs MW MW 10,000 10,000 8,000 8,000 6,000 6,000 4,000 4,000 2,000 2,000 00 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 Existing Existing Resources Resources Sundance Sundance Purchase Purchase Peaking Peaking Shortfall Shortfall Assuming proposed settlement

  10. Slide 10: Sundance Power Plant Acquisition

    Sundance Power Plant Acquisition Terms • 450 MW peaking capacity southeast of Phoenix • $190 million purchase price Schedule • ACC hearing concluded October 5 • ACC decision target – end of 2004 • FERC decision target – first quarter 2005 • Transaction closing – end of first quarter 2005

  11. Slide 11: Solid Operational Performance

    Solid Operational Performance Generation • Palo Verde – top U.S. power producer past 12 years • Top-tier baseload performance • 2,218 MW of new gas generation since 2001 Customer Service & Delivery • Outstanding APS customer satisfaction rankings by J.D. Power & Associates – # 6 among IOU’s in the U

  12. Slide 12: Regulatory Update

    Regulatory Update

  13. Slide 13: APS Regulatory Strategy

    APS Regulatory Strategy • Relationships built on consistency, accountability, performance and trust • Focus on customer service • Manage growth and reliability

  14. Slide 14: Proposed Retail Rate Settlement

    Proposed Retail Rate Settlement Key Financial Provisions • Unifies generation assets built to serve APS customers through transfer of PWEC Arizona power plants to APS • Mitigates risk of commodity price volatility with purchased power and fuel adjustor • Positions APS to meet customer growth reliabl

  15. Slide 15: Proposed Retail Rate Settlement

    Proposed Retail Rate Settlement Key Financial Provisions (continued) • Maintains benefit for APS customers of favorable PWEC-APS contract pricing • Provides bridge purchased power agreement between APS and PWEC pending FERC approval • Resolves significant issues associated with reversal of Arizona c

  16. Slide 16: APS Prices Low Relative to Consumer Price Index

    APS Prices Low Relative to Consumer Price Index Cumulative Cumulative Change Change CPI 38% 40 40 30 30 20 20 10 10 00 (10) APS 11%* (10) (20) (20) '91 '91 '92 '92 '93 '93 '94 '94 '95 '95 '96 '96 '97 '97 '98 '98 '99 '99 '00 '00 '01 '01 '02 '02 '03 '03 '04 '04 ** Assuming Assuming proposed proposed s

  17. Slide 17: Proposed Retail Rate Settlement

    Proposed Retail Rate Settlement Target Procedural Schedule • Hearing began November 8 • ACC approval around year-end 2004 or early 2005 • Rate increase effective following ACC approval • FERC application for PWEC asset transfer to be filed after ACC approval

  18. Slide 18: Financial Overview

    Financial Overview

  19. Slide 19: Financial Objectives

    Financial Objectives • Sustain financial strength with constructive conclusion of rate case • Improve investment grade credit ratings • Maintain ample liquidity and capital market access • Build long-term shareholder value

  20. Slide 20: Strong EBITDA Interest Coverage

    Strong EBITDA Interest Coverage Times Times 8 6 4 2 0 2003 1999 1999 2000 2000 2001 2001 2002 2002 2003 TME TME Sept Sept 2004** 2004** Pinnacle West** Pinnacle West S&P S&P Electrics Electrics ** Pinnacle Pinnacle West West excluding excluding non-recurring non-recurring items items ** ** S&P Elect

  21. Slide 21: Pinnacle West Capital Expenditures

    Pinnacle West Capital Expenditures To Serve Growing Customer Needs $$ Millions Millions 1,000 1,000 750 750 500 500 250 250 0 0 2003 2003 2004 2004 2005 2005 2006 2006 Forecast Forecast APS APS Delivery Delivery APS APS Generation Generation Pinnacle Pinnacle West West Energy Energy Other Other Excl

  22. Slide 22: Pinnacle West Consistent Dividend Growth Track Record

    Pinnacle West Consistent Dividend Growth Track Record $1.90 $1.90 1993 1993 1994 1994 1995 1995 1996 1996 1997 1997 1998 1998 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004

  23. Slide 23: Creating Long-Term Shareholder Value

    Creating Long-Term Shareholder Value 5 -Year Total Return Percent Percent 60 60 40 40 20 20 00 (20) (20) (40) (40) Sept Sept Sept Sept Sept Sept Sept Sept Sept Sept Sept Sept 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 PNW PNW S&P S&P 500 500 Electric Electric Utility Utility Index I

  24. Slide 24: Maintaining Strategic Focus

    Maintaining Strategic Focus • A vertically integrated utility in a high-growth market area • Focusing on solid operational and financial performance • Pursuing constructive regulatory outcomes • Creating long-term value for shareholders

  25. Slide 25: Appendix

    Appendix

  26. Slide 26: Current Credit Ratings

    Current Credit Ratings S&P Moody’s Arizona Public Service Co. Senior Unsecured Debt BBB Baa1 Secured Lease Obligation Bonds BBB Baa2 Commercial Paper A2 P2 Outlook Negative Negative Pinnacle West Capital Corp. Senior Unsecured Debt BBB- Baa2 Commercial Paper A2 P2 Outlook Negative Negative

  27. Slide 27: Ample Liquidity Resources

    Ample Liquidity Resources APS • $325 million revolver through May 2007 – Support for $250 million commercial paper facility • Unused long-term debt shelf capability of $200 million Pinnacle West (parent) • $300 million revolver through 2007 – Support for $250 million commercial paper facility • Unus

  28. Slide 28: Pinnacle West EBITDA Interest Coverage

    Pinnacle West EBITDA Interest Coverage Reconciliation To Income From Continuing Operations ($ ($ millions) millions) TME TME 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 9/2004 9/2004 Income Income from from continuing continuing operations operations $$ 270 270 $$ 302 302 $$ 327 327 $$ 206 206

  29. Slide 29: Arizona Corporation Commissioners

    Arizona Corporation Commissioners Party Commissioner Term Commissioner Affiliation Since Expires Marc Spitzer, Chairman Republican Jan. 2001 Jan. 2007 Michael Gleason Republican Jan. 2003 Jan. 2009 Jeff Hatch-Miller Republican Jan. 2003 Jan. 2009 Kristin Mayes Republican Oct. 2003 Jan. 2007 William

  30. Slide 30: Proposed Retail Rate Settlement

    Proposed Retail Rate Settlement Major Changes in Revenue Requirements ($ ($ Millions) Millions) Original APS request $175 ROE to 10.25% versus 11.50% (36) No recovery of $234 million write-off (32) Lengthen asset depreciable lives (26) $148 million rate base disallowance (22) Miscellaneous - net 17

  31. Slide 31: APS Track B Procurement Contracts

    APS Track B Procurement Contracts Awarded May 2003 MW MW 2,000 2,000 1,500 1,500 1,000 1,000 500 500 00 2003 2003 2004 2004 2005 2005 2006 2006 PWEC PWEC PPL PPL EnergyPlus, EnergyPlus, LLC LLC Panda Panda Gila Gila River, River, LP LP

  32. Slide 32: 2003 Average Residential Retail Price Ranking Southwestern U.S.

    2003 Average Residential Retail Price Ranking Southwestern U.S. ¢/kWh ¢/kWh 15 15 12 12 99 Average Average 66 33 00 PacifiCorp PacifiCorp Salt Salt PNM PNM APS APS Nevada Nevada Tucson Tucson SD SD El El Paso Paso PG&E PG&E SCE SCE Utah Utah River River Power Power Electric Electric G&E G&E Electric

  33. Slide 33: 2003 Average Commercial Retail Price Ranking Southwestern U.S.

    2003 Average Commercial Retail Price Ranking Southwestern U.S. ¢/kWh ¢/kWh 15 15 12 12 99 Average Average 66 33 00 PacifiCorp PacifiCorp Salt Salt APS APS PNM PNM El El Paso Paso Nevada Nevada Tucson Tucson SD SD SCE SCE PG&E PG&E Utah Utah River River Electric Electric Power Power Electric Electric

  34. Slide 34: 2003 Average Industrial Retail Price Ranking Southwestern U.S.

    2003 Average Industrial Retail Price Ranking Southwestern U.S. ¢/kWh ¢/kWh 15 15 12 12 99 66 Average Average 33 00 PacifiCorp PacifiCorp Salt Salt PNM PNM El El Paso Paso APS APS Tucson Tucson SD SD Nevada Nevada PG&E PG&E SCE SCE Utah Utah River River Electric Electric Electric Electric G&E G&E Pow

  35. Slide 35: Pinnacle West Fuel Mix

    Pinnacle West Fuel Mix Nuclear Coal 32% 44% Gas 24% 2003 Based Based on on MWh MWh of of generation generation

  36. Slide 36: Pinnacle West Energy Power Plants

    Pinnacle West Energy Power Plants Commercial Operation New Facilities MWs MWs Location Location June 2001 West Phoenix 4 120 Phoenix, AZ July 2002 Saguaro CT 3 80 Red Rock, AZ July 2002 Redhawk 1 and 2 1,060 Arlington, AZ July 2003 West Phoenix 5 530 Phoenix, AZ Arizona Total 1,790 May 2004 Silverha

  37. Slide 37: Solid Operational Performance

    Solid Operational Performance Generation Palo Verde Site Average Coal Average 100% 100% 100% 100% 90% 90% 90% 90% 80% 80% 80% 80% 70% 70% 70% 70% 60% 60% 60% 60% ‘99 ‘99 ‘00 ‘00 ‘01 ‘01 ‘02 ‘02 ‘03 YTD ‘03 YTD ‘99 ‘99 ‘00 ‘00 ‘01 ‘01 ‘02 ‘02 ‘03 ‘03 YTD YTD 9/04 9/04 9/04 9/04 Palo Palo Verde Verde

  38. Slide 38: Arizona Transmission System

    Arizona Transmission System UTAH UTAH UTAH COLORADO NAVAJO SHIPROCK MEAD/ GLEN SAN JUAN MARKETPLACE/ CANYON LAS VEGAS TRIBAL FOUR LAND CORNERS MOENKOPI FLAGSTAFF MCKINLEY CHOLLA CALIFORNIA CORONADO SPRINGER- VILLE BOUSE PINNACLE PEAK CALIFORNIA WEST WING PERKINS PALO VERDE LIBERTY GREENLEE KYRENE (A

  39. Slide 39: WECC Available Transmission Capability

    WECC Available Transmission Capability 3,007 4,119 2,368 340 301 1,672 3,913 Summer Summer 2006 2006 estimate estimate (MW) (MW)

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