Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Q2 2021 Earnings Presentation
27 slides from Pinnacle West Capital's earnings presentation, Aug 5, 2021
Slide 1: Powering Growth, Delivering Value: Second Quarter 2021 Results
POWERING GROWTH DELIVERING VALUE Second Quarter 2021 Results August 5, 2021 1
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: EPS Variances
EPS Variances 2nd Quarter 2021 vs. 2nd Quarter 2020 $1.91 $1.71 O&M1 & 2 D&A2 Other, Effective Other Interest, Pension $(0.07) $(0.04) net2 Tax Rate3 Operating Taxes2 net of & OPEB Non- $(0.04) $0.01 Revenue $(0.02) AFUDC less Fuel $0.01 service and Credits, net Purchased $0.09 Power1 $0.26 Operatin
Slide 4: Key Drivers & Guidance
Key Drivers & Guidance As of August 5, 2021 2021 Key Drivers • Operations and maintenance • EPS guidance pending APS rate case conclusion • Depreciation and amortization • Retail customer growth about 1.5-2.5% • Interest rates • Weather-normalized retail electricity • AFUDC sales growth of 1.0%-2.0%
Slide 5: Long-Term Debt Maturity Profile
Long-Term Debt Maturity Profile ($MM) APS Long-Term Debt PNW Long-Term Debt 1,250 1,000 750 500 250 0 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045 2047 2049 As of June 30, 2021 5 Second Quarter 2021
Slide 6: Economic Development
Economic Development Future Expansions Arizona expected to add nearly 550,000 jobs between 2019 and 20291 Taiwan Semiconductor broke ground in 2021 and is expected to be operational by 2024. Phoenix #1 among U.S. metros for new residents added in 20202 MLily selected Goodyear for their second U.S. f
Slide 7: Economic Indicators
Economic Indicators Annual Employment Growth Last Three Years1 Steady Housing Growth2 Single Family & Multifamily Housing Permits Maricopa County 39,693 1% (1)% 20% CAGR 6,582 National Arizona '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 12018-2020 2Maricopa County population 4.5M, 62% of state popul
Slide 8: APS Capital Expenditures
APS Capital Expenditures Capital expenditures will support our growing customer base and our transition to a cleaner generation mix. $ in millions $2,000 PROJECTED $1,800 $1,600 $1,500 $1,500 $1,500 $1,400 $203 $190 $187 $1,262 Traditional Generation $1,200 $199 $314 $392 $406 Clean Generation $1,00
Slide 9: 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 Long-term Rate Base Guidance: ~6% Average Annual Growth Generation & Distribution 21% Transmission $2.3 79% $1.7 ACC FERC Rate Effective Date 8
Slide 10: Operations & Maintenance
Operations & Maintenance Goal is to keep O&M per kWh flat, adjusted for planned outages. $ in millions $933 $886 $858 74 $856 45 63 48 795 859 808 841 2017 2018 2019 2020 2 PNW Consolidated ex RES/DSM 1 Planned Fleet Outages 1 Excludes RES/DSM of $91 million in 2017, $104 million in 2018, $86 millio
Slide 11: 2021 Planned Outage Schedule
2021 Planned Outage Schedule Coal, Nuclear and Large Gas Planned Outages Q1 Q2 Q4 Estimated Estimated Estimated Plant Unit Duration Plant Unit Plant Unit Duration in Duration in Days in Days Days Four Four 4 47 4 56 Palo Verde 2 30 Corners* Corners* Palo Verde 3 38 *Outage duration spans Q1-Q2. Numb
Slide 12: Appendix
PINNACLE WEST
Slide 13: Future Focus: Clean Energy Plan
Future Focus: Clean Energy Plan APS Clean Energy Commitment | Clean Energy Pathway Clean Energy Commitments A Clean Economic Future • 100% clean, carbon-free • Meet our responsibility to power Arizona and move toward electricity by 2050 a low-carbon economy • 65% clean energy by 2030 • Guided by sou
Slide 14: Resource Planning
Resource Planning Procurement Activities Storage Contracted All-Source RFP • 201 MW located on eight APS • 600-800 MW renewable energy solar plant sites • 400-600 MW peaking capacity • Utility owned • Accepting proposals for utility • Expected in service 2022 and 2023 ownership and PPA projects • To
Slide 15: Credit Ratings & Metrics
Credit Ratings & Metrics APS Pinnacle West S&P Credit Metrics TME 3/31/21 Corporate Credit Ratings1 APS Moody’s A2 A3 FFO/Debt 21.0% S&P A- A- Debt/EBITDA 4.0x Fitch A- A- Debt/Capitalization 50.5% Senior Unsecured1 Pinnacle West Moody’s A2 A3 FFO/Debt 19.4% S&P A- BBB+ Debt/EBITDA 4.4x Fitch A A- D
Slide 16: Gross Margin Effects of Weather
Gross Margin Effects of Weather $ in millions pretax Variances vs. Normal $55 $45 33 $35 $25 $15 4 $5 $(5) $(15) $(25) $(35) Q1 Q2 Q3 Q4 2021 $38 Million All periods recalculated to current 10-year rolling average (2009 – 2018). Numbers may not foot due to rounding. 16 Second Quarter 2021
Slide 17: Renewable Energy & Demand Side Management Expenses
Renewable Energy & Demand Side Management Expenses1 $20 Demand Side Management Renewable Energy $11 $14 $11 $11 $12 $10 $12 $9 $7 $7 $6 $6 $3 $0 Q1 Q2 Q3 Q4 Q1 Q2 2020 2021 $73 Million $36 Million 1 Renewable energy and demand side management expenses are offset by adjustment mechanisms. 17 Second Q
Slide 18: Residential PV Applications
Residential PV Applications 1 Residential DG (MWdc) Annual Additions 133 139 122 84 2,500 2018 2019 2020 2021 2,000 1,500 1,000 500 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2018 Applications 2019 Applications 2020 Applications 2021 Applications 1Monthly data equals applications received min
Slide 19: Regulatory 2021 Key Dates
Regulatory 2021 Key Dates ACC Key Dates / Docket # Q1 Q2 Q3 Q4 Approved 50% Effective Power Supply Adjustor (PSA): E-01345A-16-0036 50% Effective April 1 March 24 November 1 Increase denied Lost Fixed Cost Recovery: E-01345A-16-0036 Filed Feb 15 April 13 Filed May 15 Transmission Cost Adjustor: E-01
Slide 20: 2019 Rate Case Rebuttal Testimony
2019 Rate Case Rebuttal Testimony Filed November 6, 2020 | Docket Number: E-01345A-19-0236 Additional details, including filing, can be found at http://www.pinnaclewest.com/investors Rebuttal Testimony Highlights Advanced Energy • Recover clean energy investments Mechanism (AEM) • Could replace the
Slide 21: Key Financials
Key Financials Rebuttal Testimony SCR and Ocotillo Cost Deferrals $ in Millions Q2 2021 Q2 2020 Test year ended June 30, 2019 Operating Cost Deferral Impacts: Total Rate Base - Adjusted $11.2 Billion Depreciation and ACC Rate Base - Adjusted $8.9 Billion $6 $7 Amortization Allowed Return on Equity 1
Slide 22: APS Rebuttal Testimony | Revenue Requirement
APS Rebuttal Testimony | Revenue Requirement Dollars Customer Bill Impact = Net Base Rate (millions) Bill Impact $169M Increase + Net Adjustor Changes Total Revenue Deficiency in APS’s $184 5.6% Application New revenue Base Rate Changes Net adjustments $(28) (0.9)% TEAM $(119) (3.6)% $110M of All ot
Slide 23: Summary of Rate Case Recommendations
Summary of Rate Case Recommendations APS (Rebuttal) ACC Staff (Surrebuttal) RUCO (Surrebuttal) ALJ (ROO) Total Revenue Increase $169 $59.8 $(50.0) $3.6 (Base Rate and Adjustors) ($MM) 5.1% 1.8% (1.5)% 0.1% Base Rate Increase ($MM) $41 $(55.2) $(165.0) $(111.4) ROE 10.00% 9.40% 8.70% 9.16% Alt 1: 0.0
Slide 24: Recommended Opinion and Order Estimated Impacts
Recommended Opinion and Order Estimated Impacts Net Income • ROO, if approved, could decrease annual net income up to about $90 million Four Corners SCR Investment • As of June 30, 2021 SCR deferral balance was approximately $75 million1 • As of June 30, 2021 the SCR net book value was approximately
Slide 25: 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 (October 2, 2020) • Staff/Intervenor Direct Testimony (Rate Design) (October 9, 2020) • APS Rebuttal Testimony (November 6, 2020) • Sta
Slide 26: Consolidated Statistics
Consolidated Statistics 3 Months Ended June 30, 6 Months Ended June 30, 2021 2020 Incr (Decr) 2021 2020 Incr (Decr) ELECTRIC OPERATING REVENUES (Dollars in Millions) Retail Residential $ 532 $ 515 $ 17 $ 873 $ 840 $ 32 Business 421 381 40 736 684 51 Total Retail 3 Months Ended June 95330 896 56 1,60
Slide 27: Consolidated Statistics
Consolidated Statistics 3 Months Ended June 30, 6 Months Ended June 30, 2021 2020 Incr (Decr) 2021 2020 Incr (Decr) ENERGY SOURCES (GWH) 3 Months Ended June 30 Generation Produc tion Nuc lear 2,079 2,217 (139) 4,538 4,622 (84) Coal 1,205 1,250 (45) 2,545 2,657 (112) Gas, Oil and Other 2,661 2,722 (6
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