Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Q1 2009 Earnings Presentation
27 slides from Pinnacle West Capital's earnings presentation, May 5, 2009
Slide 1: 1st Quarter 2009 Results
1st Quarter 2009 Results May 5, 2009 1
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements based on current expectations, and neither Pinnacle West nor APS assumes any obligation to update these statements or make any further statements on any of these issues, except as required by applicable law. These forwa
Slide 3: CEO Agenda
CEO Agenda ¾ APS Retail Rate Settlement ¾ SunCor Restructuring Plan ¾ Palo Verde Return to NRC Column 1 ¾ Summary Comments First Quarter 2009 3
Slide 4: Proposed APS Retail Rate Settlement: Primary Benefits
Proposed APS Retail Rate Settlement Rate and Financial Stability Plan Primary Benefits ¾ Strengthens APS’ financial condition and supports common dividend ¾ Provides greater level of cost recovery and return on investment ¾ Provides rate stability for APS customers ¾ Allows opportunity to help shape
Slide 5: Key Financial Provisions – Base Rates
Proposed APS Retail Rate Settlement Rate and Financial Stability Plan Key Financial Provisions – Base Rates Proposed APS Settlement Request Annualized base rate revenue increase ($ millions): Non-fuel rate increase $ 196 $ 264 Net fuel-related rate increase 11 14 Net base rate increase $ 207 $ 278 A
Slide 6: Key Financial Provisions – Other Than Base Rates
Proposed APS Retail Rate Settlement Rate and Financial Stability Plan Key Financial Provisions – Other Than Base Rates ¾ Line Extension Fees – 2010-2012 payments received to be recorded as revenues instead of contributions in aid of construction (pretax estimates): 2010 $23 million 2011 $25 mill
Slide 7: Key Financial Provisions – Other Than Base Rates (continued)
Proposed APS Retail Rate Settlement Rate and Financial Stability Plan Key Financial Provisions – Other Than Base Rates (continued) ¾ Expense Reduction Commitment Beginning in 2010, identify additional $10 million pretax expense reductions above $20 million identified March 2009 $30 million avera
Slide 8: Future General Base Rate Cases
Proposed APS Retail Rate Settlement Rate and Financial Stability Plan Future General Base Rate Cases ¾ APS may file general base rate cases on or after June 1, 2011 and June 1, 2013 ¾ A base rate increase resulting from APS’ next rate case may not become effective before July 1, 2012 ¾ Settling part
Slide 9: Proposed Procedural Schedule
Proposed APS Retail Rate Settlement Rate and Financial Stability Plan Proposed Procedural Schedule Definitive settlement agreement filing June 12, 2009 Supporting parties’ testimony due July 1, 2009 Opposing parties’ testimony due July 22, 2009 Supporting parties’ reply testimony due August 6, 2009
Slide 10: CEO Agenda
CEO Agenda ¾ APS Retail Rate Settlement ¾ SunCor Restructuring Plan ¾ Palo Verde Return to NRC Column 1 First Quarter 2009 10
Slide 11: CFO Agenda
CFO Agenda ¾ 1st Quarter Results ¾ Impacts of SunCor Restructuring Plan ¾ Earnings Guidance ¾ Liquidity ¾ Dividends First Quarter 2009 11
Slide 12: Consolidated EPS Summary
Consolidated EPS Summary 1st Quarter 2009 vs. 1st Quarter 2008 Reported On-Going Per Share Per Share $(1.55) $(0.04) ($0.29) ($0.04) $0.00 $0.00 ($0.25) ($0.25) ($0.50) ($0.50) ($0.75) ($0.75) ($1.00) ($1.00) ($1.25) ($1.25) ($1.50) ($1.50) ($1.75) ($1.75) 2009 2008 2009 2008 On-going loss of $(0.29
Slide 13: Non-GAAP EPS Reconciliation
Non-GAAP EPS Reconciliation 1st Quarter 2009 vs. 1st Quarter 2008 1st Qtr 1st Qtr 2009 2008 Change EPS per diluted share as reported: $ (1.55) $ (0.04) $ (1.51) Adjustments: Real estate impairment charge 1.22 - 1.22 Real estate severance and other costs 0.04 - 0.04 On-going earnings per share $ (0.2
Slide 14: Summary of On-Going EPS Variances
Summary of On-Going EPS Variances 1st Quarter 2009 vs. 1st Quarter 2008 $(0.25) $(0.09) Regulated electricity gross margin $(0.04) Marketing and trading contributions $0.01 O&M expense $(0.07) Expenses primarily related to capital expenditures Other expense, net of other income, $(0.04) including in
Slide 15: Regulated Electricity Gross Margin Drivers
Regulated Electricity Gross Margin Drivers* 1st Quarter 2009 vs. 1st Quarter 2008 $0.08 $0.04 $0.01 ($0.02) ($0.08) ($0.12) Interim retail Transmission Lower hedge Milder Lower Other rate increase rate increases mark-to-market weather customer usage items, net *Excluding effects of Renewable Energy
Slide 16: Milder Weather Impacts Quarterly Comparison
Milder Weather Impacts Quarterly Comparison 1st Qtr Heating Degree Days (HDDs) 800 10-Year Weather 600 Normal HDDs 571 400 200 0 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 1st quarter 2009 was second mildest on record with 383 HDDs compared with a normal level of 571 HDDs. First Quarter 2009 16
Slide 17: Regulated Electricity Gross Margin Drivers
Regulated Electricity Gross Margin Drivers* 1st Quarter 2009 vs. 1st Quarter 2008 $0.08 $0.04 $0.01 ($0.02) ($0.08) ($0.12) Interim retail Transmission Lower hedge Milder Lower Other rate increase rate increases mark-to-market weather customer usage items, net *Excluding effects of Renewable Energy
Slide 18: Financial Impacts of SunCor Restructuring
Financial Impacts of SunCor Restructuring ¾ 1st quarter 2009 real estate impairment, severance and related costs $1.26 per share ¾ Eliminate SunCor’s debt ¾ Produce $80 million of cash tax benefits (estimated to be received late 2010) ¾ Reduce pretax G&A burn from $44 million in 2008 to negligible a
Slide 19: 2009 - 2010 Earnings Guidance Affirmed
2009 - 2010 Earnings Guidance Affirmed As of May 5, 2009 Guidance Estimates* Key Assumptions 2009 2010 2009 APS $ 2.35 $ 3.00 ¾ Full-year interim base rates Parent and all ¾ No additional other, net (0.05) - base rate increases Estimated EPS $ 2.30 $ 3.00 ¾ Includes identified cost savings and mild
Slide 20: Adequate Liquidity Resources
Adequate Liquidity Resources Available Liquidity Credit Facilities March 31, 2009 Capacity $ Millions Borrower ($ Millions) Matures 1,400 PNW $ 283 Dec. ’10 Cash 1,200 APS 377 Dec. ’10 1,000 APS 489 Sep. ’11 Available Liquidity $1,149 800 $760 Credit 600 Facilities 400 Short Term 200 Debt 0 We have
Slide 21: Pinnacle West vs. Industry Dividend Yield
Pinnacle West vs. Industry Dividend Yield 10% 8% 7.7% 5% 5.7% 3% 0% Mar. 31, Jun. 30, Sep. 30, Dec. 31, Apr. 30, 2008 2008 2008 2008 2009 PNW Electric Industry Average Pinnacle West’s annual dividend is $2.10 per share. First Quarter 2009 21
Slide 22: Going Forward
Going Forward ¾ Intense focus on operational excellence and improving earnings and financial metrics ¾ Positive movement in Arizona regulatory environment demonstrated by proposed settlement ¾ SunCor restructuring plan optimizes assets and financial results ¾ Current common dividend supported First
Slide 23: Appendix
Appendix 23
Slide 24: Comparison of Retail Rate Case Positions
Comparison of Retail Rate Case Positions APS ACC Request Staff RUCO AECC Annual revenue increases ($ millions): Non-fuel rate increase $ 264 $ 155 $ (14) $ 206 Net fuel-related rate increase 14 11 14 10 Net rate increase $ 278 $ 166 $ - $ 216 Rate base ($ billions) $ 5.4 $ 5.3 $ 4.9 $ 5.4 Common equ
Slide 25: Costs Related to SunCor Restructuring
Costs Related to SunCor Restructuring 1st Quarter 2009 $ Millions EPS Pretax After Tax Real estate impairment charges: Homebuilding and master-planned communities $ 141 Land parcels and commercial assets 53 Golf courses 17 Subtotal in continuing operations 211 Discontinued operations 5 Less non-cont
Slide 26: Non-GAAP Measure Reconciliation – Operating Income to Gross Margin
Non-GAAP Measure Reconciliation – Operating Income (Loss) (GAAP Measure) To Regulated Electricity Segment Gross Margin (Non-GAAP Measure) $ Millions, except per share amounts Three Months Ended March 31, 2009 2008 Reconciliation of Regulated Electricity Segment Gross Margin Operating income (loss) –
Slide 27: Non-GAAP Measure Reconciliation – Operating Income to Gross Margin
Non-GAAP Measure Reconciliation – Operating Income (Loss) (GAAP Measure) To Regulated Electricity Segment Gross Margin (Non-GAAP Measure) In this presentation, we present “regulated electricity gross margin” per diluted share of common stock. Regulated electricity gross margin refers to regulated el
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