Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Investor Presentation (June 2017)
33 slides from Pinnacle West Capital's investor presentation, Jun 28, 2017
Slide 1: Powering Growth, Delivering Value
POWERING GROWTH DELIVERING VALUE Investor Meetings l June 28-29, 2017 1 Powering Growth, Delivering Value
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS 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 “estimate,” “predict,” “may,” “
Slide 3: Value Proposition
VALUE PROPOSITION We are executing on our financial and operational objectives … Financial Strength • Annual dividend growth target of 5%, subject to declaration at Board of Director’s discretion • Strong credit ratings and balance sheet • Rate base growth of 6-7% (2015-2019); investing in a portfol
Slide 4: The Grid Is Evolving – Driving New Investments in Technology
THE GRID IS EVOLVING – DRIVING NEW INVESTMENTS IN TECHNOLOGY • Grid stability, power quality and reliability remain the core of a sustainable electrical system • APS is at the forefront of utilities designing and planning for the next generation electric grid • New technology advances and changing c
Slide 5: The "Duck Curve"
Distributed generation is changing THE “DUCK CURVE” the load shape of the grid Current Spring Day Spring Day 2022 Excess renewables creates over-generation … and potentially for nuclear generation in challenges … 5,000 the future. 5,000 4,500 4,500 4,000 4,000 3,500 3,500 3,000 3,000 2,500 2,500 2,0
Slide 6: Distribution Grid Investments
Modernizing the distribution grid DISTRIBUTION GRID with advanced technology investments – resulting in INVESTMENTS improved reliability for customers and more efficient operations Utility-Scale Technology Customer Facing Technology Integrated Volt/VAR Substation Health Rooftop Solar Battery Storage
Slide 7: Battery Storage
Energy storage is important but will only be cost effective in niche BATTERY STORAGE circumstances for the next several years • APS Projects – Solar Innovation Study: Residential battery installations for purpose of studying ability of solar-coupled systems to lower peak energy demand – Solar Partne
Slide 8: Residential vs. Utility-Scale Solar
RESIDENTIAL VS. Performance at system peak UTILITY-SCALE SOLAR On June 19th, APS customers hit “peak demand” for 2016 using more than 7,400 MW of electricity Residential Rooftop Solar AZ Sun Utility-Scale Solar 500 Residential Rooftop 7,445 8,000 500 AZ Sun 7445 8,000 System Load 6,908 System Load 6
Slide 9: APS Rate Case
APS RATE CASE • Filed June 1, 2016 • Docket Number: E-01345A-16-0036 • Additional details, including filing, can be found at http://www.azenergyfuture.com/rate-review/ Procedural Schedule File Settlement Agreement March 27, 2017 Direct Testimony in Support of/in Opposition to the April 3, 2017 Settl
Slide 10: 2017 Proposed Rate Case Settlement
2017 PROPOSED RATE CASE SETTLEMENT Key Financial Proposals – Base Rate Changes Annualized Base Rate Revenue Changes ($ millions) Non-fuel, Non-depreciation Base Rate Increase $ 87.2 Decrease fuel and Purchased Power over Base Rates (53.6) Increase due to Changes in Depreciation Schedules 61.0 Total
Slide 11: 2017 Proposed Rate Case Settlement
2017 PROPOSED RATE CASE SETTLEMENT Key Proposals – Revenue Requirement • Cost deferral order from in-service dates to incorporation of SCRs in rates using a step-increase no Four Corners later than January 1, 2019 Ocotillo Modernization • Cost deferral order from in-service dates to effective date i
Slide 12: 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 13: Rate Base
APS’s revenues come from a RATE BASE regulated retail rate base and meaningful transmission business APS Rate Base Growth Total Rate Base Year-End ACC FERC Generation & Distribution Transmission 17% $1.8 83% $1.4 Most Recent Rate Decisions ACC FERC As Filed 6/1/2016 $8.3 Rate Effective Date 7/1/2017
Slide 14: APS Capital Expenditures
APS CAPITAL Capital expenditures are funded primarily through internally EXPENDITURES generated cash flow ($ Millions) Other $1,337 $1,224 $71 Distribution $87 $1,139 $71 $1,009 $398 Transmission $388 $84 $415 Renewable $207 Generation $127 $4 $491 $102 $197 $136 $17 Environmental(1) $100 $220 $237
Slide 15: Resource Planning
Over 1.3 gigawatts of new quick RESOURCE PLANNING start, combustion turbine capacity needed by 2025 MW 2017-2032 Supply / Demand Gap Composition of Energy Mix by Resource* 14,000 3% 2017 13% Total Load Requirements 25% Nuclear 12,000 12% Coal 10,000 21% 26% Gas Future Grid-Scale 8,000 Generation RE
Slide 16: Economic Indicators
ECONOMIC Arizona and Metro Phoenix remain attractive places to live and do INDICATORS business Nonresidential Building Vacancy – Metro Phoenix Vacancy Rate Maricopa County (where Phoenix is 25% located) ranked #1 in U.S. for Office population growth in 2016 20% - U.S. Census Bureau March 2017 15% In
Slide 17: Appendix
APPENDIX 17 Powering Growth, Delivering Value
Slide 18: Leadership Team
Our top executives have more than 100 combined years of LEADERSHIP TEAM creating shareholder value in the energy industry Don Brandt Chairman & Chief Executive Officer Jeff Guldner Jim Hatfield Mark Schiavoni Bob Bement EVP EVP & Chief EVP & Chief EVP & Chief Public Policy & Financial Operating Nucl
Slide 19: Operations & Maintenance
OPERATIONS & Goal is to keep O&M per kWh flat, MAINTENANCE adjusted for planned outages ($ Millions) $137 $103 $83 $150 $124 $96 $805 $828 $761 $788 $772 $754 2011 2012 2013 2014 2015 2016 PNW Consolidated RES/DSM* *Renewable energy and demand side management expenses are offset by adjustment mechan
Slide 20: Dividend Growth
Pinnacle West’s indicated annual dividend is $2.62 per share; DIVIDEND GROWTH targeting ~5% annual dividend growth Dividend Growth Goal Indicated Annual Dividend Rate at Year-End $2.62 $2.50 $2.38 $2.27 $2.18 $2.10 2011 2012 2013 2014 2015 2016 2017 2018 Projected Future dividends subject to declara
Slide 21: Balance Sheet Strength
BALANCE SHEET STRENGTH Debt Maturity Schedule Credit Ratings ($Millions) • A- or equivalent ratings or better at S&P, Moody’s and Fitch $600 2017 Major Financing Activities $500 • $250 million re-opening in March of APS’s outstanding 4.35% senior unsecured notes due $400 November 2045 • Currently ex
Slide 22: Credit Ratings and Metrics
CREDIT RATINGS AND Key credit metrics remain strong METRICS APS Parent 2011 2012 2013 2014 2015 2016 Corporate Credit Ratings APS Moody’s A2 A3 FFO / Debt 23.6% 27.7% 31.5% 27.5% 29.7% 26.5% S&P A- A- FFO / Interest 4.2x 4.8x 5.6X 5.5x 5.8x 5.0x Fitch A- A- Debt / 52.9% 50.7% 47.7% 45.3% 45.8% 47.8%
Slide 23: APS Transmission
Strategic transmission investment is essential to maintain reliability APS TRANSMISSION and deliver diversified resources to customers • 10-Year Transmission Plan filed January 2017 (115 kV and above) – 52 miles of new lines – 5 bulk transformer additions • Also includes: Flagstaff – Sun Valley-Morg
Slide 24: Residential PV Applications
Residential DG (MWdc) Annual Additions RESIDENTIAL PV 133 74 59 APPLICATIONS* 51 57 44 18 22 10 2009 2011 2013 2015 2017 YTD 2,983 3,000 2,750 2,500 2,208 2,250 2,110 2,047 2,000 1,608 1,642 1,750 1,483 1,481 1,486 1,415 1,372 1,500 1,291 1,340 1,267 1,154 1,250 1,003 1,002 1,349 1,000 760 1,157 1,1
Slide 25: Renewable Resources
RENEWABLE APS is a leader in solar RESOURCES APS currently has 1,475 MW APS Solar Portfolio* of renewable resources: Owned PPA • Solar* 1,156 MW 214 MW 310 MW • Wind 289 MW DG • Biomass 14 MW 632 MW • Geothermal 10 MW • Biogas 6 MW Owned solar includes 170 MW AZ Sun Program, 4 MW of other APS owned
Slide 26: Environmental Plan
Regional Haze compliance is the ENVIRONMENTAL biggest driver of environmental PLAN spend over the next few years Mercury and Other Hazardous Regional Haze / BART Air Pollutants Coal Combustion Residuals (SCR) (ACI + Baghouse) MATS compliance by April 2015, Announced in 1999, with site-specific Annou
Slide 27: Coal Fleet Strategy
APS’s proactive approach to reducing emissions leads to coal’s COAL FLEET STRATEGY expected share of the energy mix being reduced to 11% (970 MW) Nuclear Percent of Portfolio MWh 17% 25% 11% Coal 21% 33% Gas 26% RE + DE 18% 12% 13% 13% EE 3% 8% Short-Term 2017 2032 Market Emissions Purchase • 820 MW
Slide 28: Water Strategy
APS, and Palo Verde in particular, has provided national and WATER STRATEGY international leadership on the use of reclaimed water for power generation Vision: APS continues to strive for sustainable and cost-effective water supplies for energy production for APS customers. Mission: To execute a str
Slide 29: Arizona Corporation Commission
ARIZONA CORPORATION COMMISSION Terms to January 2019 Terms to January 2020 Tom Doug Bob Boyd Andy Forese (R) Little (R) Burns (R)* Dunn (R) Tobin (R) Chairman Other State Officials ACC Executive Director – Ted Vogt RUCO Director – David Tenney * Term limited - elected to four-year terms (limited to
Slide 30: 2017 Key Dates
2017 KEY DATES ACC Key Dates / Docket # Q1 Q2 Q3 Q4 Key Recurring Regulatory Filings Lost Fixed Cost Recovery Jan 15 E-01345A-11-0224 Transmission Cost Adjustor May 15 E-01345A-11-0224 2018 DSM/EE Implementation Plan Jun 1 2018 RES Implementation Plan for Reset Jul 1 of Renewable Energy Adjustor APS
Slide 31: Generation Portfolio
GENERATION PORTFOLIO* Plant Location No. of Units Dispatch COD Ownership Interest1 Net Capacity (MW) NUCLEAR Palo Verde Wintersburg, AZ 3 Base 1986-1989 29.1% 1,146 1,146 MW Cholla Joseph City, AZ 2 Base 1962-1980 100 387 COAL Four Corners Farmington, NM 2 Base 1969-1970 63 970 1,672 MW Navajo Page,
Slide 32: Purchased Power Contracts
PURCHASED POWER CONTRACTS* Contract Location Owner/Developer Status1 PPA Signed COD Term (Years) Net Capacity (MW) Solana Gila Bend, AZ Abengoa IO Feb-2008 2013 30 250 RE Ajo Ajo, AZ Duke Energy Gen Svcs IO Jan-2010 2011 25 5 Sun E AZ 1 Prescott, AZ SunEdison IO Feb-2010 2011 30 10 SOLAR 310 MW Sadd
Slide 33: Investor Relations Contacts
INVESTOR RELATIONS CONTACTS Paul J. Mountain, CFA General Manager, Investor Relations & Audit Services (602) 250-4952 paul.mountain@pinnaclewest.com Stefanie Layton Director, Investor Relations (602) 250-4541 stefanie.layton@pinnaclewest.com Chalese Haraldsen (602) 250-5643 chalese.haraldsen@pinnacl
Pinnacle West Capital — Investor Presentation (June 2017) on 6ix