Slide 1: Second Quarter 2016 Results
SECOND QUARTER 2016 RESULTS August 2, 2016 Second Quarter 2016
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: Consolidated EPS Comparison 2016 vs. 2015
CONSOLIDATED EPS COMPARISON 2016 VS. 2015 2nd Quarter Year-to-Date On-Going Earnings On-Going Earnings $1.25 $1.08 $1.10 $1.12 2016 2015 2016 2015 2nd Quarter Year-to-Date GAAP Net Income GAAP Net Income $1.08 $1.10 $1.12 $1.25 3 Second Quarter 2016
Slide 4: On-Going EPS Variances
ON-GOING EPS VARIANCES 2ND QUARTER 2016 VS. 2ND QUARTER 2015 Gross Margin(1),(2) O&M(1) $0.21 $(0.19) Interest, net D&A(2) of AFUDC Other, net $1.10 $(0.02) $(0.01) $(0.01) $1.08 Gross Margin Weather $0.09 Sales $0.04 Transmission Line Sale $0.03 Transmission $0.02 LFCR $0.01 AZ Sun $0.01 Other, net
Slide 5: Economic Indicators
ECONOMIC Arizona and Metro Phoenix remain attractive places to live and do INDICATORS business Job Growth (Total Nonfarm) – Metro Phoenix YoY Change Construction, business services, 5.0% financial services and healthcare adding jobs at a rate above 4% 2.5% Housing construction on pace to have its be
Slide 6: 2016 On-Going EPS Guidance
2016 ON-GOING Key Factors & Assumptions as of EPS GUIDANCE August 2, 2016 2016 Electricity gross margin* (operating revenues, net of fuel and $2.34 – $2.39 billion purchased power expenses) • Retail customer growth about 1.5-2.5% • Weather-normalized retail electricity sales volume about 0-1.0% to p
Slide 7: Appendix
APPENDIX Second Quarter 2016
Slide 8: 2016 Key Dates
2016 KEY DATES ACC Key Dates Docket # Q1 Q2 Q3 Q4 Key Recurring Regulatory Filings E-01345A- Lost Fixed Cost Recovery Jan 15 11-0224 E-01345A- Transmission Cost Adjustor May 15 11-0224 E-01345A- Renewable Energy Adjustor Jul 1 16-0238 Dec 21: E-01345A- Jan 29: Notice of APS Rate Case Jun 1: Initial
Slide 9: Arizona Electric Utilities General Rate Cases
ARIZONA ELECTRIC UTILITIES GENERAL RATE CASES UNS Electric (93,000 customers) Tucson Electric Power Company (415,000 customers) Docket # E-04204A-15-0142 Docket # E-01933A-15-0322 Application filed May 5, 2015 Application filed Nov 5, 2015 Direct testimony - ex rate design, cost of service (Nov 6, 2
Slide 10: 2016 APS Rate Case Application
2016 APS RATE CASE APPLICATION • Filed June 1, 2016 • Propose new rates go into effect on July 1, 2017 • Docket Number: E-01345A-16-0036 • Additional details, including filing, can be found at http://www.azenergyfuture.com/rate-review/ Procedural Schedule Staff and Intervenor Direct Testimony (ex ra
Slide 11: 2016 Rate Case Key Financials
APS has requested a rate 2016 RATE CASE increase to become effective KEY FINANCIALS July 1, 2017 Test year ended December 31, 2015 Total Rate Base - Adjusted $8.01 Billion ACC Rate Base - Adjusted $6.77 Billion Allowed Return on Equity 10.5% Capital Structure Long-term debt 44.2% Common equity 55.8%
Slide 12: 2016 Rate Case Key Financials
APS has requested a rate 2016 RATE CASE increase to become effective KEY FINANCIALS July 1, 2017 Overview of Rate Increase ($ in Millions) – Key Components Post-Test Year Plant Additions $ 98.1 Fair Value Increment 51.9 ROE Increase from 10.0% to 10.5% 29.3 Increase due to Changes in Depreciation Sc
Slide 13: Rate Design Modernization
Rate design that better aligns RATE DESIGN pricing with cost to serve and MODERNIZATION leverages existing platform Focus Area Current State Rate Case Objective Time-of-Use • > 50% of residential customers are on a • Most residential customers on a TOU rate Rates (TOU) TOU rate • On-peak hours from
Slide 14: Rate Design Modernization
Key residential rate proposals RATE DESIGN designed to reduce cost shift MODERNIZATION among customers • Streamlined rate choices for residential Current Proposed customers including combinations of the Customer Bill Customer Bill following: – Reduced kWh charges for variable portion (energy rate) –
Slide 15: Ocotillo Modernization Project and Four Corners SCRs
OCOTILLO MODERNIZATION PROJECT AND FOUR CORNERS SCRs • Included in the 2016 rate case application, APS is requesting Accounting Deferral Orders for two large generation-related capital investments – Ocotillo Modernization Project: Retiring two aging, steam-based, natural gas units, and replacing wit
Slide 16: Financial Outlook
Key Factors & Assumptions as of FINANCIAL OUTLOOK August 2, 2016 Gross Margin – Customer Growth and Weather (2016-2018) Assumption Impact Retail customer growth • Expected to average about 2-3% annually • Modestly improving Arizona and U.S. economic conditions Weather-normalized retail electricity •
Slide 17: Balance Sheet Strength
BALANCE SHEET STRENGTH Debt Maturity Schedule Credit Ratings ($Millions) • A- rating or better at S&P, Moody’s and Fitch $600 2016 Major Financing Activities $500 • Repaid, at maturity, $250 million of 6.25% senior unsecured notes due August 1 $400 • $350 million 30-year 3.75% APS senior unsecured n
Slide 18: Operations & Maintenance Outlook
OPERATIONS & Goal is to keep O&M per kWh flat, MAINTENANCE adjusted for planned outages OUTLOOK ($ Millions) $82 $137 $103 $150 $124 $96 $825 - $805 $845 $761 $788 $772 $754 2011 2012 2013 2014 2015 2016E PNW Consolidated RES/DSM* *Renewable energy and demand side management expenses are offset by a
Slide 19: Capital Expenditures
CAPITAL Capital expenditures are funded primarily through internally EXPENDITURES generated cash flow $1,307 ($ Millions) $1,205 $83 Other $93 $1,124 $1,057 $81 Distribution $346 $85 $359 Transmission $398 $340 $217 $122 Renewable $1 Generation $107 $201 $139 $201 $1 $103 Environmental(1) $58 $227 $
Slide 20: Residential PV Applications
Residential DG (MW) Annual Additions RESIDENTIAL PV 44 51 57 74 APPLICATIONS* 15 19 23 2009 2011 2013 2015 1750 1680 1460 1500 1358 1315 1187 1163 1163 1201 1184 1250 1150 1055 1093 1011 939 1000 782 835 871 837 785 721 710 750 610 641 489 688 523 442 500 357 339 249 250 0 Jan Feb Mar Apr May Jun Ju
Slide 21: Gross Margin Effects of Weather
GROSS MARGIN EFFECTS OF WEATHER VARIANCES VS. NORMAL Pretax Millions $15 $10 13 $5 5 2 $0 (4) (5) (8) $(5) $(10) Q1 Q2 Q3 Q4 Q1 Q2 2015 2016 $(5) Million $8 Million All periods recalculated to current 10-year rolling average (2005-2014) 21 Second Quarter 2016
Slide 22: Renewable Energy and Demand Side Management Expenses
RENEWABLE ENERGY AND DEMAND SIDE MANAGEMENT EXPENSES* Pretax Millions Renewable Energy Demand Side Management $40 $30 $20 18 11 12 14 12 15 $10 12 11 11 7 8 4 $0 Q1 Q2 Q3 Q4 Q1 Q2 2015 2016 $96 Million $39 Million * O&M expenses related to renewable energy and demand side management programs are par
Slide 23: Non-GAAP Measure Reconciliation
NON-GAAP MEASURE RECONCILIATION Three Months Ended June 30, EPS $ millions pretax, except per share amounts 2016 2015 Impact Operating revenues* $ 915 $ 891 Fuel and purchased power expenses* (275) (282) Gross margin 640 609 $ 0.17 Adjustments: Renewable energy (excluding AZ Sun) and demand side man