Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Q2 2020 Earnings Presentation
32 slides from Pinnacle West Capital's earnings presentation, Aug 6, 2020
Slide 1: Powering Growth, Delivering Value: Second Quarter 2020 Results
POWERING GROWTH DELIVERING VALUE Second Quarter 2020 Results August 6, 2020 Second Quarter 2020 | 0
Slide 2: Forward Looking Statements and Non-GAAP Financial Measures
FORWARD LOOKING STATEMENTS AND NON-GAAP FINANCIAL MEASURES 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
Slide 3: EPS Variances: 2nd Quarter 2020 vs. 2nd Quarter 2019
EPS VARIANCES 2nd Quarter 2020 vs. 2nd Quarter 2019 Adjusted Adjusted Pension & Adjusted Adjusted Adjusted Adjusted O&M1 D&A2 OPEB Interest, Income Other Other, net2 $0.03 $(0.03) Non-service net of Taxes Taxes2 $0.01 Credits, net AFUDC2 $(0.05) $(0.01) Adjusted $0.05 $(0.02) Gross Margin1 $0.45 Gro
Slide 4: 2020 EPS Guidance
2020 EPS GUIDANCE Key Factors & Assumptions as of August 6, 2020 2020 Adjusted gross margin1,2 (operating revenues, net of fuel and purchased power expenses) $2.41 – $2.47 billion • Retail customer growth about 1.5-2.5% • Weather-normalized retail electricity sales volume flat to negative 1% compare
Slide 5: Financial Outlook
FINANCIAL OUTLOOK Key Factors & Assumptions as of August 6, 2020 Gross Margin – Customer and Sales Growth (2020-2022) Assumption Impact Retail customer growth • Expected to average about 1.5-2.5% annually • Strength in Arizona and U.S. economic conditions Weather-normalized retail electricity sales
Slide 6: COVID-19 Response Highlights
COVID-19 RESPONSE HIGHLIGHTS ✓ Suspending power disconnects and waiving penalties, late fees and interest payments ✓ Simplifying access to existing customer support programs ✓ Committing to provide our communities with support by contributing $8 million to assist customers and non-profits affected b
Slide 7: Energy Usage and Sales
ENERGY USAGE AND SALES COVID impacts on sales have diminished since businesses began to reopen in mid-May. From March 13th through July 28th the cumulative year over year reduction in weather-normalized usage was (1)% YoY Approximate Pre-COVID Main COVID Impacts Recovery Sales Growth1 January 1 – Ma
Slide 8: Preliminary Weather-Normalized Energy Trend
PRELIMINARY WEATHER-NORMALIZED ENERGY TREND Daily Energy Normalized Actual: 2020 vs 2019 March 1 - July 28, 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 June 21 July 5 July 19 Normalized Actual 2
Slide 9: Arizona COVID-19 Response Timeline
ARIZONA COVID-19 RESPONSE 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 guideli
Slide 10: Well Funded Pension and Healthy Liquidity
WELL FUNDED PENSION AND HEALTHY LIQUIDITY Pension Funded Status Liquidity and Financing Activity 97% 97% • $1.2 billion revolver capacity • $600 million 30-year 3.35% APS senior 90% unsecured notes issued May 2020 • $500 million 5-year 1.30% PNW senior unsecured notes issued June 2020 • Expect up to
Slide 11: Economic Indicators
ECONOMIC INDICATORS Monthly Year-over-Year Employment Growth Ending May 2020 U.S. Phoenix Taylor Morrison reports June 2020 as best 5% month in Scottsdale homebuilder’s history 1 0% -5% Custom home lot sales going strong in metro -10% Phoenix despite COVID-19 2 -15% Jan-18 Jan-19 Jan-20 Valley high-
Slide 12: Economic Development
ECONOMIC DEVELOPMENT FUTURE EXPANSIONS OUR APPROACH FOCUSES ON FOUR MAIN AREAS o Stack Infrastructure plans to build a 1 million-square-foot Business Attraction & Expansion - constructive engagement data center on 79 acres in the West Valley less than half a with economic development community partn
Slide 13: 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 14: Operations & Maintenance
OPERATIONS & MAINTENANCE Goal is to keep O&M per kWh flat, adjusted for planned outages $ in millions $933 $858 74 $856 $820 - $840 63 48 40 - 50 795 859 808 780 - 790 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 15: 2020 Planned Outage Schedule
2020 PLANNED OUTAGE SCHEDULE Coal, Nuclear, and Large Gas Planned Outages Q1 Q2 Q4 Estimated Estimated Estimated Plant Unit Duration Plant Unit Duration in Plant Unit Duration in Days Days in Days Four Four Corners* 5 46 Corners* 5 36 Palo Verde 1 44 Palo Verde 2 30 *Outage duration spans Q1-Q2. Num
Slide 16: 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 $1,725 $1,650 $121 $1,600 $154 $44 $53 $1,400 $1,331 Traditional Generation $1,231 $1,200 $141 Ocotillo1 $185 $45 $613 $794 $14 Environmen
Slide 17: Integrated Resource Plan
INTEGRATED RESOURCE PLAN A plan to power our customers’ future needs with clean energy 2020-2024 Additions Megawatts • Approximately 2,500 megawatts of renewable energy, demand response, energy efficiency and Demand Side Management 575 energy storage needed between 2020 and 2024. Demand Response 193
Slide 18: Appendix
APPENDIX Second Quarter 2020 | 17
Slide 19: 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 20: Gross Margin Effects of Weather
GROSS MARGIN EFFECTS OF WEATHER $ in millions pretax Variances vs. Normal $25 $20 $15 37 $10 $5 12 7 $0 $(5) (13) (1) $(10) $(15) (35) $(20) $(25) $(30) $(35) Q1 Q2 Q3 Q4 Q1 Q2 2019 2020 $(28) Million $36 Million All periods recalculated to current 10-year rolling average (2008 – 2017). Numbers may
Slide 21: Renewable Energy and Demand Side Management Expenses
RENEWABLE ENERGY AND DEMAND SIDE MANAGEMENT EXPENSES1 Renewable Energy Demand Side Management $40 $ in millions pretax $30 $20 $11 $14 $11 $11 $11 $10 $12 $13 $10 $9 $7 $7 $3 $0 Q1 Q2 Q3 Q4 Q1 Q2 2019 2020 $86 Million $33 Million 1 Renewable energy and demand side management expenses are offset by a
Slide 22: Residential PV Applications
RESIDENTIAL PV APPLICATIONS1 4,000 Residential DG (MWdc) Annual Additions 151 133 133 122 3,500 64 3,000 2016 2017 2018 2019 2020 2,500 2,000 1,500 1,000 500 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 Applications 2018 Applications 2019 Applications 2020 Applications 1 Monthly data equal
Slide 23: 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 24: 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 25: 2019 Rate Case Key Financials
2019 RATE CASE KEY FINANCIALS Test year ended June 30, 2019 Total Rate Base - Adjusted $11.12 Billion ACC Rate Base - Adjusted $8.87 Billion Allowed Return on Equity 10.15% Capital Structure Long-term debt 45.3% Common equity 54.7% Base Fuel Rate (¢/kWh) 3.0168 Post-test year plant period 12 months
Slide 26: 2019 Rate Case Key Financials
2019 RATE CASE KEY FINANCIALS Overview of Rate Increase ($ 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 Adjustor Termination (119) Total Revenue Request $ 184 Second Quarter 2020 | 2
Slide 27: 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) Staff/Interven
Slide 28: 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 Commenced (Jan 16, 2020) Staff /Intervenor Direct Testimony (Revenue) (Feb 5, Staff’s late-filed
Slide 29: Non-GAAP Measure Reconciliation
NON-GAAP MEASURE RECONCILIATION Second Quarter 2020 | 28 Numbers may not foot due to rounding.
Slide 30: Non-GAAP Measure Reconciliation
NON-GAAP MEASURE RECONCILIATION 2020 Guidance $ in millions pretax Operating revenues 1 $ 3,455 - $ 3,525 Fuel and purchased power expenses 1 (975) - (985) Gross margin 2,480 - 2,540 Adjustments: Renewable energy and demand side management programs (70) - (70) Adjusted gross margin $ 2,410 - $ 2,470
Slide 31: Consolidated Statistics
CONSOLIDATED STATISTICS 3 Months Ended June 30, 6 Months Ended June 30, 2020 2019 Incr (Decr) 2020 2019 Incr (Decr) ELECTRIC OPERATING REVENUES (Dollars in Millions) Retail Residential $ 515 $ 433 83 $ 840 $ 784 $ 56 Business 381 396 (15) 684 729 (44) Total Retail 896 828 68 1,525 1,513 12 Sales for
Slide 32: Consolidated Statistics
CONSOLIDATED STATISTICS 3 Months Ended June 30, 6 Months Ended June 30, 2020 2019 Incr (Decr) 2020 2019 Incr (Decr) ENERGY SOURCES (GWH) Generation Production Nuclear 2,217 2,200 18 4,622 4,712 (89) Coal 1,250 1,965 (715) 2,657 3,738 (1,082) Gas, Oil and Other 2,722 1,626 1,096 4,804 3,474 1,330 Ren
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