Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — FY2021 Earnings Presentation
29 slides from Pinnacle West Capital's earnings presentation, Feb 25, 2022
Slide 1: Fourth Quarter & Full Year 2021 Results
POWERING GROWTH DELIVERING VALUE Fourth Quarter & Full Year 2021 Results February 25, 2022 1
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: In 2021, Pinnacle West delivered value for customers and shareholders
In 2021, Pinnacle West delivered value for customers and shareholders against a challenging regulatory backdrop Operational and Customer Highlights • Summertime generation exceeded startup and availability targets • Palo Verde remains the nation’s top power producer for the 26th consecutive year • N
Slide 4: 4th Quarter 2021 results driven by higher usage
4th Quarter 2021 results driven by higher usage4 4th Quarter 2021 vs. 4th Quarter 2020 Operating Revenue less Fuel and Purchased Power AZ AG Settlement $ 0.16 Federal Tax Reform3 $ 0.09 Sales/Usage $ 0.08 Other $ 0.06 Transmission $ 0.03 LFCR $ 0.01 $0.24 Weather $ (0.34) Operating Revenue less Fuel
Slide 5: 2021 full-year EPS driven by robust sales and usage growth
2021 full-year EPS driven by robust sales and usage growth Full Year 2021 vs. Full Year 2020 $5.47 Effective $4.87 O&M1 & 2 Other, net2 Tax Rate3 D&A2 Pension $0.16 Operating $0.03 Other Interest, $(0.07) $(0.24) & OPEB Non- Revenue Taxes2 net of $(0.07) service less Fuel AFUDC Credits, net and $0.0
Slide 6: 2022 EPS driven by disappointing 2021 rate case outcome & other factors
2022 EPS driven by disappointing 2021 rate case outcome & other factors1 2022 EPS Guidance of $3.90-$4.10 per share $5.47 $(0.90) $0.14 $(0.29) $(0.24) Net effect of O&M/Other $(0.18) D&A $4.00 2019 Rate Case Decision Interest, net of Pension on Income & OPEB AFUDC Non-service Credits, net O&M/Other
Slide 7: Key drivers for EPS guidance
Key drivers for EPS guidance1 1 2022 key drivers • Retail customer growth ~1.5%-2.5% • Property Tax • Weather-normalized retail electricity • Interest on new debt sales growth of 1.5%-2.5% • AFUDC • Transmission revenues • Pension and OPEB • Operations and maintenance savings • Depreciation and amor
Slide 8: Managed capital plan to support customer growth, reliability, and clean transition
Managed capital plan to support customer growth, reliability, and clean transition $1.65B $1.5B $1.53B $1.53B $190 $214 $250 $270 Other Generation $260 $560 $340 $330 Clean Generation $263 $250 $210 $210 Transmission $595 Distribution $510 $530 $500 Other $170 $175 $185 $190 2021 2022E 2023E 2024E T
Slide 9: Steady rate base growth
Steady rate base growth APS Rate Base Growth Guidance Total Approved Rate Base Year-End ~5-6% ACC FERC Annual $13.6 Rate Effective 12/01/2021 6/1/2021 $2.4 FERC Date $10.9 $1.8 Test Year 06/30/20191 12/31/2020 Ended $11.2 ACC Rate Base $8.6B $1.8B $9.1 Equity Layer 54.7% 51.6% Allowed ROE 8.7% 10.75
Slide 10: Our goal is flat total O&M and declining O&M per MWh
Our goal is flat total O&M and declining O&M per MWh O&M per MWh $29/MWh Total O&M1 2021: $865M 2022: $820M-$840M 2021 2022 2023 2024 1 Total O&M amounts exclude RES/DSM, and include planned outage amounts of $54M in 2021 and $40M-$50M in 2022. 10 Fourth Quarter 2021
Slide 11: No plans to issue equity before end of next rate case
No plans to issue equity before end of next rate case Forecasted sources of capital to fund investments through 2024 $400-$500 $200-$300 million $4.7 billion Approx. million $1 billion PNW Equity/ PNW Debt2 Alternatives Approx. $3 billion APS Debt2 Cash from Total Capital Operations1 Investment 1 Ca
Slide 12: Strong balance sheet with attractive long-term debt maturity profile
Strong balance sheet with attractive long-term debt maturity profile $M APS Long-Term Debt PNW Long-Term Debt $1,200 $1,000 $800 $600 $400 $200 $0 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045 2047 2049 As of December 31, 2021 12 Fourth Quarter 2021
Slide 13: We continue to make progress towards key deliverables
We continue to make progress towards key deliverables ✓ File appeal of last rate case ✓ Filed notice of appeal on December 17 ✓ Make progress on financing plan ✓ Deferring equity issuance until after next rate case ❑ Work with stakeholders on common issues ❑ File new rate case to recover grid invest
Slide 14: Appendix
PINNACLE WEST APPENDIX
Slide 15: 2022 EPS Guidance
2022 EPS Guidance Key Factors and Assumptions as of February 25, 2022 2022 Adjusted gross margin (operating revenues, net of fuel and $2.52 – $2.55 billion purchased power expenses, x/RES,DSM,CCT) • Retail customer growth about 1.5-2.5% • Weather-normalized retail electricity sales volume ~1.5-2.5%
Slide 16: Arizona Remains Among the Fastest Growing States in the U.S.
Arizona Remains Among the Fastest Growing States in the U.S. Annual Employment Growth Last Three Years1 Steady Housing Growth2 Single Family & Multifamily Housing Permits Maricopa County 43,378 1% 18% (1)% CAGR 8,425 National Arizona '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 1 2019-2021 2 Maricopa
Slide 17: Best-in-Class Service Territory Supports High Tech Growth and Economic Development
Best-in-Class Service Territory Supports High Tech Growth and Economic Development Our Approach: Supports Influx of Manufacturing Focus on Four Main Areas and Data Centers – Examples • Microsoft Constructing 3 mega data centers • Business attraction and expansion • Taiwan Semiconductor • Community d
Slide 18: A Clear Plan for Clean Energy Transition
A Clear Plan for Clean Energy Transition Progress Towards Meeting Clean Energy Commitment1 Announced seasonal operations of Four Corners beginning 2023 Contracted for nearly 1400 MWs of clean energy and storage to be in service for APS customers by 2024 Charted course for healthy mix of APS-owned an
Slide 19: Clean Energy Commitment – 1,384MW in development since 2020
Clean Energy Commitment – 1,384MW in development since 2020 Robust, Diverse Procurement Activity Energy Storage • 201 MW APS-owned resources to retrofit entire fleet of AZ Sun facilities • 300 MW under two long-term PPAs • All resources to be in service between 2022 and 2024 Solar • 150 MW owned by
Slide 20: Ocotillo and Four Corners Deferral Impacts Summary
Ocotillo and Four Corners Deferral Impacts Summary Ocotillo and SCR Cost Deferrals $ in Millions Q4 2021 Q4 2020 Operating Cost Deferral Impacts: Depreciation and Amortization $4 $6 Operations and Maintenance $(1) $(2) Taxes Other Than Income Taxes $(2) $(3) Debt Return Deferral Impacts: Interest Ch
Slide 21: Ocotillo and Four Corners Deferral Impacts Summary
Ocotillo and Four Corners Deferral Impacts Summary Ocotillo and SCR Cost Deferrals $ in Millions 2021 2020 Operating Cost Deferral Impacts: Depreciation and Amortization $24 $26 Operations and Maintenance $(5) $(8) Taxes Other Than Income Taxes $(11) $(10) Debt Return Deferral Impacts: Interest Char
Slide 22: 2022 Planned Outage Schedule
2022 Planned Outage Schedule Coal, Nuclear and Large Gas Planned Outages Q1 Q2 Q4 Estimated Estimated Estimated Plant Unit Duration Plant Unit Plant Unit Duration in Duration in Days in Days Days N/A N/A N/A Palo Verde 1 30 Palo Verde 3 30 22 Fourth Quarter 2021
Slide 23: Gross Margin Effects of Weather
Gross Margin Effects of Weather $ in millions pretax Variances vs. Normal 33 4 (25) (24) Q1 Q2 Q3 Q4 2021 $(12) Million All periods recalculated to current 10-year rolling average (2009 – 2018). Numbers may not foot due to rounding. 23 Fourth Quarter 2021
Slide 24: Renewable Energy & Demand Side Management Expenses
Renewable Energy & Demand Side Management Expenses1 Demand Side Management Renewable Energy $18 $13 $11 $11 $14 $11 $12 $12 $13 $9 $10 $7 $6 $7 $6 $3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2020 2021 $73 Million $89 Million 1 Renewable energy and demand side management expenses are offset by adjustment mechanisms.
Slide 25: Residential PV Applications
Residential PV Applications1 Residential DG (MWdc) Annual Additions 169 133 139 122 5,000 4,500 2018 2019 2020 2021 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2018 Applications 2019 Applications 2020 Applications 2021 Applications 1Monthly data eq
Slide 26: Our Credit Ratings Support Growth Opportunities
Our Credit Ratings Support Growth Opportunities Senior Corporate Unsecured Short-Term Ratings Ratings Ratings Outlook APS1 Balance Sheet Targets Moody’s A3 A3 P-2 Negative • Strong investment grade credit ratings S&P BBB+ BBB+ A-2 Negative • APS equity layer >50% Fitch BBB+ A- F2 Negative • FFO/Debt
Slide 27: Regulatory 2022 Key Dates
Regulatory 2022 Key Dates ACC Key Dates / Docket # Q1 Q2 Q3 Q4 Power Supply Adjustor (PSA): E-01345A-19-0236 Effective Feb 1 Effective May 1 Lost Fixed Cost Recovery: E-01345A-19-0236 Filed Feb 15 with ACC approval To Be Filed: Transmission Cost Adjustor: E-01345A-19-0236 May 15; Effective Jun 1 202
Slide 28: Consolidated Statistics
Consolidated Statistics1 3 Months Ended December 31, 12 Months Ended December 31, 2021 2020 Incr (Decr) 2021 2020 Incr (Decr) ELECTRIC OPERATING REVENUES (Dollars in Millions) Retail Residential $ 359 $ 363 (4) $ 1,913 $ 1,929 $ (16) Business 370 340 30 1,587 1,486 101 Total Retail 729 703 26 3,500
Slide 29: Consolidated Statistics
Consolidated Statistics 3 Months Ended June 30 29 Fourth Quarter 2021 Numbers may not foot due to rounding.