Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Q1 2018 Earnings Presentation
23 slides from Pinnacle West Capital's earnings presentation, May 2, 2018
Slide 1: First Quarter 2018 Results
FIRST QUARTER 2018 RESULTS May 2, 2018 First Quarter 2018
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: 1st Quarter 2018 vs. 1st Quarter 2017
EPS VARIANCES 1ST QUARTER 2018 VS. 1ST QUARTER 2017 Adjusted Adjusted Gross Margin1 O&M1,2,3 $0.13 $(0.18) $0.21 D&A2,3 $(0.12) Gross Margin Pension & OPEB Rate Increase $ 0.20 Other Non-service Transmission $ 0.09 Taxes2,3 Credits, net Other, net2 $(0.07) $0.05 $(0.01) Sales / Usage $ 0.08 Interest
Slide 4: Economic Indicators
ECONOMIC Arizona and Metro Phoenix remain attractive places to INDICATORS live and do business Nonresidential Building Vacancy – Metro Phoenix Maricopa County ranked #1 in U.S. for Vacancy Rate population growth for second straight year 25% - U.S. Census Bureau March 2018 20% Office 15% Industrial A
Slide 5: Appendix
APPENDIX First Quarter 2018
Slide 6: 2018 EPS Guidance
Key Factors & Assumptions as of 2018 EPS GUIDANCE May 2, 2018 2018 Adjusted gross margin1 (operating revenues, net of fuel and $2.47 – $2.52 billion purchased power expenses) • Retail customer growth about 1.5–2.5% • Weather-normalized retail electricity sales volume about 0.5-1.5% higher compared t
Slide 7: Financial Outlook
Key Factors & Assumptions as of FINANCIAL OUTLOOK May 2, 2018 Gross Margin – Customer and Sales Growth (2018-2020) Assumption Impact Retail customer growth • Expected to average about 2-3% annually • Modestly improving Arizona and U.S. economic conditions Weather-normalized retail electricity sales
Slide 8: Tax Reform
Tax Cuts and Jobs Act provides TAX REFORM benefits to both our customers and shareholders Regulatory Steps Timing Impacts − Received ACC approval of $119 million annual rate − The impact of the lower federal income tax rate is reduction reflecting lower corporate tax rate through based on our quarte
Slide 9: APS Capital Expenditures
APS CAPITAL Capital expenditures are funded primarily through internally EXPENDITURES generated cash flow ($ Millions) Other $1,341 $99 $1,211 $1,181 $1,153 Distribution $81 $152 $115 $419 Transmission $442 Renewable $174 $545 $612 Generation $3 $152 $193 Environmental1 $16 $85 $191 $235 $120 $188 $
Slide 10: Rate Base
APS’s revenues come from a RATE BASE regulated retail rate base and meaningful transmission business APS Rate Base Growth Total Approved Rate Base Year-End ACC FERC Generation & Distribution Transmission Rate Base Guidance: 6-7% Average Annual Growth Rate 17% $1.8 83% $1.4 ACC FERC Rate Effective Da
Slide 11: Operations & Maintenance
OPERATIONS & Goal is to keep O&M per kWh flat, MAINTENANCE adjusted for planned outages ($ Millions) $905 - $925 $848 $858 75 - 85 72 63 830 - 840 776 795 1 1 2016 2017 2018E 2 PNW Consolidated ex RES/DSM Planned Fleet Outages 1 Reclassified to reflect the adoption of the new accounting requirements
Slide 12: Balance Sheet Strength
BALANCE SHEET STRENGTH Credit Ratings1 Long-Term Debt Maturity Schedule • A- or equivalent ratings or better at S&P, Moody’s ($Millions) and Fitch $600 2018 Major Financing Activities $500 • Currently expect up to $600 million of long-term debt issuance at APS 1 We are disclosing credit ratings to e
Slide 13: Ocotillo Modernization Project and Four Corners SCRs
OCOTILLO MODERNIZATION PROJECT AND FOUR CORNERS SCRs • Included in the 2017 Rate Review Order1, APS has been granted 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 14: Four Corners SCR Step Increase
FOUR CORNERS SCR APS filed for a rate increase STEP INCREASE on April 27, 2018 Key Components of APS’s Filed Request Financial Cost of Capital Bill Impact • Consistent with prior • 7.85% Return on Rate • Rate rider applied as a disclosed estimates Base1 percentage of base rates – Weighted Average Co
Slide 15: Gross Margin Effects of Weather
GROSS MARGIN EFFECTS OF WEATHER VARIANCES VS. NORMAL Pretax Millions $15 $10 $5 12 $0 - (2) $(5) (10) (13) $(10) $(15) $(20) Q1 Q2 Q3 Q4 Q1 2017 2018 $ - Million $(13) Million All periods recalculated to current 10-year rolling average (2006 – 2015) 15 First Quarter 2018
Slide 16: Renewable Energy and Demand Side Management Expenses
RENEWABLE ENERGY AND DEMAND SIDE MANAGEMENT EXPENSES1 Pretax Millions Renewable Energy Demand Side Management $40 $30 10 10 $20 16 12 21 $10 15 19 12 5 $0 2 Q1 Q2 Q3 Q4 Q1 2017 2018 $91 Million $31 Million 1 Renewable energy and demand side management expenses are offset by adjustment mechanisms. 16
Slide 17: Residential PV Applications
Residential DG (MWdc) Annual Additions 150 RESIDENTIAL PV 133 74 APPLICATIONS1 51 57 45 44 18 22 10 2009 2012 2014 2016 2018 YTD 4,000 3808 3568 3,500 3,000 2490 2204 2,500 1968 2033 2,000 1841 1575 1602 1460 1413 1442 1434 1291 1364 1,500 1267 1283 1153 1009 1001 1002 1349 1,000 1145 1157 1158 1189
Slide 18: 2018 Key Dates
2018 KEY DATES ACC Key Dates / Docket # Q1 Q2 Q3 Q4 Key Recurring Regulatory Filings Lost Fixed Cost Recovery Implement File Feb 15 E-01345A-11-0224 May 1 Transmission Cost Adjustor File May 15 E-01345A-11-0224 Implement Jun 1 Jun 1: File 2019 Plan 2019 DSM/EE Implementation Plan TBD 2018 DSM Decisi
Slide 19: Non-GAAP Measure Reconciliation: Gross Margin
NON-GAAP MEASURE RECONCILIATION GROSS MARGIN Three Months Ended March 31, EPS $ millions pretax, except per share amounts 2018 2017 Impact Operating revenues1 $ 693 $ 678 Fuel and purchased power expenses1 (197) (212) Gross margin 496 466 $ 0.20 Adjustments: Renewable energy and demand side manageme
Slide 20: Non-GAAP Measure Reconciliation: Other Non-GAAP
NON-GAAP MEASURE RECONCILIATION OTHER NON-GAAP Three Months Ended March 31, Four Corners 2018 EPS 3 $ millions pretax, except per share amounts 2018 Deferral Adjusted 2017 Impact Operations and maintenance1, 2 $ 266 $ - $ 266 $ 226 Renewable energy (excluding AZ Sun), demand side management and simi
Slide 21: Non-GAAP Measure Reconciliation: Guidance
NON-GAAP MEASURE RECONCILIATION GUIDANCE 2018 Guidance $ millions pretax Operating revenues1 $ 3,665 - $ 3,725 Fuel and purchased power expenses1 (1,090) - (1,100) Gross margin 2,575 - 2,625 Adjustments: Renewable energy and demand side management programs (105) - (105) Adjusted gross margin $ 2,470
Slide 22: Consolidated Statistics
CONSOLIDATED STATISTICS 3 Months Ended March 31, 3 Months Ended March 31, 2018 2017 Incr (Decr) 2018 2017 Incr (Decr) ELECTRIC OPERATING REVENUES (Dollars in Millions) ENERGY SOURCES (GWH) Retail Generation Produc tion Residential $ 317 $ 302 $ 15 Nuclear 2,479 2,512 (33) Business 343 337 6 Coal 1,0
Slide 23: Consolidated Statistics
CONSOLIDATED STATISTICS 23 First Quarter 2018 Numbers may not foot due to rounding.
Pinnacle West Capital — Q1 2018 Earnings Presentation on 6ix