Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Q1 2015 Earnings Presentation
19 slides from Pinnacle West Capital's earnings presentation, May 1, 2015
Slide 1: First Quarter 2015 Results
FIRST QUARTER 2015 RESULTS May 1, 2015 First Quarter 2015
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: Agenda
AGENDA CEO CFO • Regulatory Update • 1st Quarter 2015 Results • Solar Investments • Arizona Economic Outlook • Ocotillo Modernization • Financial Outlook Project • Transmission Investments 3 First Quarter 2015
Slide 4: On-Going EPS Variances
ON-GOING EPS VARIANCES(1) 1ST QUARTER 2015 VS. 1ST QUARTER 2014 Gross Margin(2) O&M(2) $0.07 $(0.03) D&A(3) Interest, Net $(0.06) of AFUDC Other, net Effective $0.04 $(0.01) Tax Rate $(0.02) Other $0.14 Taxes $0.14 $0.01 1Q 2014 1Q 2015 (1) GAAP net-income for 1Q 2014 and 1Q 2015 = $0.14 per share (
Slide 5: Gross Margin EPS Drivers
GROSS MARGIN EPS DRIVERS 1ST QUARTER 2015 VS. 1ST QUARTER 2014 Four Corners Lower Retail Rate Change kWh Sales Wholesale $0.06 $(0.01) Contract $(0.02) Other, Net $(0.02) Net Increase $0.07 Weather $0.04 = Retail Transmission Lost Fixed Revenue Cost Recovery $0.01 Mechanism $0.01 See non-GAAP reconc
Slide 6: Arizona Economic Indicators
ARIZONA ECONOMIC INDICATORS Home Prices – Metro Phoenix Nonresidential Building Vacancy – Metro Phoenix Value Relative to Jan ‘05 Vacancy Rate 175 25% Office 150 20% Industrial 125 15% 100 10% Retail 75 5% 50 0% '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 Jan '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
Slide 7: 2015 On-Going EPS Guidance
2015 ON-GOING Key Factors & Assumptions as of EPS GUIDANCE May 1, 2015 2015 Electricity gross margin* (operating revenues, net of fuel and $2.30 – $2.35 billion purchased power expenses) • Retail customer growth about 1.5-2.5% • Weather-normalized retail electricity sales volume about 0-1.0% to prio
Slide 8: Financing
FINANCING Debt Maturity Schedule 2015 Major Financing Activities ($Millions) • $250 million 5-year 2.20% APS senior unsecured notes issued in January 2015 $600 • Currently expect up to an additional $325 million of new long-term debt, in addition to $500 refinancing maturing debt – $300 million (4.6
Slide 9: Appendix
APPENDIX First Quarter 2015
Slide 10: 2015 Key Dates
2015 KEY DATES ACC Key Dates Docket # Q1 Q2 Q3 Q4 Key Recurring Regulatory Filings Lost Fixed Cost Recovery E-01345A-11-0224 Jan 15 Net Metering – Quarterly Installation Filings E-01345A-13-0248 Jan 15 Apr 15 Jul 15 Oct 15 Transmission Cost Adjustor E-01345A-11-0224 May 15 Renewable Energy Surcharge
Slide 11: Residential PV Applications
RESIDENTIAL PV APPLICATIONS 2014 Applications* 2014 Canceled Apps 2015 Applications* 2015 Canceled Apps 1,200 92 1,000 28 61 67 82 800 60 61 64 44 600 96 33 39 971 882 880 865 400 33 745 83 805 729 638 654 28 531 546 452 200 364 346 250 0 Jan 14-Jan 15-Jan2 14-Feb Feb 15-Feb Mar 14-Mar2 15-Mar Apr 1
Slide 12: Financial Outlook
Key Factors & Assumptions as of FINANCIAL OUTLOOK May 1, 2015 Gross Margin – Customer Growth and Weather (2015-2017) Assumption Impact Retail customer growth • Expected to average about 2-3% annually • Modestly improving Arizona and U.S. economic conditions Weather-normalized retail electricity • Ab
Slide 13: Operations & Maintenance Outlook
OPERATIONS & Targeting to be top quartile in MAINTENANCE peer benchmarking for staffing OUTLOOK ($ Millions) 2015+ Outlook $137 $103 $115 $150 $124 • Goal is to keep O&M per $121 kWh flat • Complete documentation of over 1,800 policies, processes and procedures, including $795 - more than 275 proces
Slide 14: Capital Expenditures
70% of capital expenditures are CAPITAL recovered through rate adjustors EXPENDITURES (30%) and depreciation cash flow (40%) $1,332 ($ Millions) $70 Other $1,056 $1,064 $68 $439 $82 Distribution $883 $73 $316 $323 Transmission $191 $242 $101 $2 $1 Renewable $207 $173 Generation $192 $181 $87 $63 $35
Slide 15: Rate Base
APS’s revenues come from a RATE BASE regulated retail rate base and meaningful transmission business APS Rate Base Growth $7.0 Billion Total Approved Rate Base Year-End ACC FERC Generation & Distribution Transmission 17% 83% $2.0 $1.4 Most Recent Rate Decisions ACC FERC Rate Effective Date 7/1/2012
Slide 16: Gross Margin Effects of Weather
GROSS MARGIN EFFECTS OF WEATHER VARIANCES VS. NORMAL Pretax Millions $20 $10 6 $0 (4) (7) (10) (17) $(10) $(20) Q1 Q2 Q3 Q4 Q1 2014 2015 $(22) Million $(10) Million All periods recalculated to current 10-year rolling average (2004-2013). 16 First Quarter 2015
Slide 17: Renewable Energy and Demand Side Management Expenses
RENEWABLE ENERGY AND DEMAND SIDE MANAGEMENT EXPENSES* Pretax Millions Renewable Energy Demand Side Management $50 $40 $30 17 $20 16 12 11 14 $10 15 10 11 12 8 $0 Q1 Q2 Q3 Q4 Q1 2014 2015 $103 Million $23 Million * O&M expenses related to renewable energy, demand side management and similar regulator
Slide 18: Non-GAAP Measure Reconciliation
NON-GAAP MEASURE RECONCILIATION GROSS MARGIN Three Months Ended March 31, EPS $ millions pretax, except per share amounts 2015 2014 Impact Operating revenues* $ 671 $ 686 Fuel and purchased power expenses* (223) (250) Gross margin 448 436 $ 0.06 Adjustments: Renewable energy (excluding AZ Sun), dema
Slide 19: Non-GAAP Measure Reconciliation
NON-GAAP MEASURE RECONCILIATION OTHER NON-GAAP Three Months Ended March 31, Palo Verde Lease 2015 EPS 2 $ millions pretax, except per share amounts 2015 Extensions Adjusted 2014 Impact Depreciation and amortization1 121 (5) 116 102 $ (0.06) Net income attributable to noncontrolling interests1 4 5 9
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