Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Merrill Lynch Global Power & Gas Leaders Conference 2004
34 slides from Pinnacle West Capital's conference presentation, Sep 28, 2004
Slide 1: Managing the Challenges of Growth
Managing the Challenges of Growth Presentation to Merrill Lynch Global Power & Gas Leaders Conference September 28, 2004
Slide 2: Forward-Looking Statements
Forward-Looking Statements This This document document contains contains forward-looking forward-looking statements statements based based on on current current expectations, expectations, and and we we assume assume no obligation to update these statements or make any further statements on any of t
Slide 3: Pinnacle West Recent Activities
Pinnacle West Recent Activities
Slide 4: Proposed Retail Rate Settlement
Proposed Retail Rate Settlement ¾ Increase rates 4.21% ($75.5 million) to cover higher costs ¾ Unifies generation assets built to serve APS customers ¾ Purchased power and fuel adjustor mitigates price volatility risk ¾ Resolves significant issues associated with reversal of Arizona competitive stru
Slide 5: Sundance Power Plant Acquisition
Sundance Power Plant Acquisition ¾ 450 MW peaking capacity southeast of Phoenix ¾ $190 million purchase price ¾ ACC hearing begins October 4, 2004 ¾ Target closing end of 1stst quarter 2005
Slide 6: Resource Challenges in the West
Resource Challenges in the West
Slide 7: Distinctive Western Market Characteristics
Distinctive Western Market Characteristics ¾ Growth ¾ Distinct sub-regions ¾ Declining reserve margins ¾ Increasing reliance on natural gas
Slide 8: High Population Growth in the West
High Population Growth in the West 4% Arizona 3% 2.6% 2% West West Average Average 1% U.S. U.S. Average Average 0% Source: U.S. Census Bureau 2003 population growth
Slide 9: Distinct Western Sub-Regions
Distinct Western Sub-Regions Mountain Pacific WA NW ¾ Transmission constraints NW MT OR ¾ Limited transmission ID WY and pipeline development Rocky NV Mountain Northern CA UT WY ¾ Diverse load and resource profiles CO Southern NV ¾ Varying regulatory CA structures AZ NM TX Desert Southwest
Slide 10: Declining Reserve Margins
Declining Reserve Margins 35% 30% 25% 20% 15% 10% 5% 0% 2004 2005 2006 2007 2008 West Desert Southwest Based on plants in service and under construction
Slide 11: Generation Additions Needed Desert Southwest
Generation Additions Needed Desert Southwest MW 6,000 4,000 2,000 0 2004 2005 2006 2007 2008 Cumulative Projections Under construction Required for 15-18% reserve margins
Slide 12: Increasing Reliance on Gas Desert Southwest
Increasing Reliance on Gas Desert Southwest Generation Capacity Mix Energy Fuel Mix 80% 80% 60% 60% 40% 40% 20% 20% 0% 0% 2000 2004 2008 2000 2004 2008 Coal/Nuclear Gas Hydro
Slide 13: Western Electricity Infrastructure Observations
Western Electricity Infrastructure Observations ¾ ¾ Additional Additional infrastructure infrastructure ¾ ¾ Firm Firm power power needed needed to to serve serve growth growth ¾ ¾ Capacity Capacity factors factors ¾ ¾ Future Future prices prices ¾ ¾ Gas Gas on on the the margin margin ¾ ¾ Renewables
Slide 14: APS Strategies For Managing Growth
APS Strategies For Managing Growth
Slide 15: APS Peak Load Growth
APS Peak Load Growth 2000 - 2008 average annual growth 4.7% MW 8,000 6,000 4,000 2,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 Forecast
Slide 16: APS Growing Capacity Needs
APS Growing Capacity Needs* MW 10,000 8,000 6,000 4,000 2,000 0 2004 2005 2006 2007 2008 Existing Resources Sundance Purchase Peaking Shortfall * Assuming proposed settlement
Slide 17: APS Strategies
APS Strategies ¾ Growth ¾ Risk management ¾ Competition ¾ Reliability ¾ Regulatory ¾ Financial
Slide 18: Slide 18
Slide 19: Appendix
Appendix
Slide 20: Current Credit Ratings
Current Credit Ratings S&P Moody’s Arizona Public Service Co. Senior Unsecured Debt BBB Baa1 Secured Lease Obligation Bonds BBB Baa2 Commercial Paper A2 P2 Outlook Negative Negative Pinnacle West Capital Corp. Senior Unsecured Debt BBB- Baa2 Commercial Paper A2 P2 Outlook Negative Negative
Slide 21: Ample Liquidity Resources
Ample Liquidity Resources APS ¾ $325 million revolver through May 2007 – Support for $250 million commercial paper facility ¾ Unused long-term debt shelf capability of $200 million Pinnacle West (parent) ¾ $275 million revolver through 2004 – Support for $250 million commercial paper facility – Rene
Slide 22: Pinnacle West Capital Expenditures
Pinnacle West Capital Expenditures $ Millions 1,200 1,000 800 600 400 200 0 2001 2002 2003 2004 2005 2006 Forecast APS Delivery APS Generation Pinnacle West Energy Other Excludes SunCor
Slide 23: Pinnacle West Dividend Growth Track Record
Draft 9/2/04 Pinnacle West Dividend Growth Track Record 8.4% compound annual growth rate* $1.80 #1 among electric utilities $0.80 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 * Ten-year 1994 - 2003
Slide 24: Proposed Retail Rate Settlement
Proposed Retail Rate Settlement Major Changes in Revenue Requirements ($ ($ Millions) Millions) Original APS request $175 ROE to 10.25% versus 11.50% (36) No recovery of $234 million write-off (32) Lengthen asset depreciable lives (26) $148 million rate base disallowance (22) Miscellaneous - net 17
Slide 25: Proposed Retail Rate Settlement
Proposed Retail Rate Settlement Target Procedural Schedule ¾ Direct testimony due September 27 ¾ Responsive testimony due October 25 ¾ Hearing begins November 8 ¾ ACC approval around year-end 2004 ¾ Rate increase effective following ACC approval ¾ FERC application for PWEC asset transfer to be filed
Slide 26: Proposed Sundance Plant Acquisition
Proposed Sundance Plant Acquisition Target Procedural Schedule ¾ Announced and ACC application filed June 1 ¾ ACC Staff and intervenor testimony due September 21 ¾ Rebuttal testimony due September 29 ¾ ACC hearing begins October 4 ¾ ACC decision target – end of 2004 ¾ FERC decision decision target t
Slide 27: Arizona Corporation Commissioners
Arizona Corporation Commissioners Party Commissioner Current Term Commissioner Affiliation Since Expires Marc Spitzer, Chairman Republican Jan. 2001 Jan. 2007 Michael Gleason Republican Jan. 2003 Jan. 2005 Jeff Hatch-Miller Republican Jan. 2003 Jan. 2005 Kristin Mayes Republican Oct. 2003 Jan. 2005
Slide 28: APS Track B Procurement Contracts
APS Track B Procurement Contracts Awarded May 2003 MW 2,000 1,500 1,000 500 0 2003 2004 2005 2006 PWEC PPL EnergyPlus, LLC Panda Gila River, LP
Slide 29: Solid Operational Performance
Solid Operational Performance Integrated resource strategy Customer service & delivery ¾ ¾ J.D. J.D. Power Power & & Associates Associates ranks ranks APS APS customer customer satisfaction satisfaction in in top top 10% 10% nationally nationally among among IOU’s IOU’s ¾ ¾ Capital Capital investmen
Slide 30: Generation Capacity Factors
Generation Capacity Factors Palo Verde Site Average* Coal Average 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% ‘99 ‘00 ‘01 ‘02 ‘03 TME ‘99 ‘00 ‘01 ‘02 ‘03 TME 6/04 6/04 Palo Verde Industry Coal Industry * Reflects Unit 2 steam generator replacement outage in 2003
Slide 31: Average Residential Retail Price Ranking
Average Residential Retail Price Ranking* Southwestern U.S. ¢/kWh 15 12 Average Average 9 6 3 0 PacifiCorp Salt PNM APS Nevada Tucson SD El Paso PG&E SCE Utah River Power Electric G&E Electric Project * As of December 31, 2003
Slide 32: Average Commercial Retail Price Ranking
Average Commercial Retail Price Ranking* Southwestern U.S. ¢/kWh 15 12 9 Average Average 6 3 0 PacifiCorp Salt APS PNM El Paso Nevada Tucson SD SCE PG&E Utah River Electric Power Electric G&E Project * As of December 31, 2003
Slide 33: Average Industrial Retail Price Ranking
Average Industrial Retail Price Ranking* Southwestern U.S. ¢/kWh 15 12 9 Average Average 6 3 0 PacifiCorp Salt PNM El Paso APS Tucson SD Nevada PG&E SCE Utah River Electric Electric G&E Power Project * As of December 31, 2003
Slide 34: Non-Energy Subsidiaries Overview
Non-Energy Subsidiaries Overview ¾ Objectives Assets – Cash flow and profit potential to parent $486 Million ¾ Current activities – SunCor accelerated asset sales program $57M – Sale of Phoenix Suns Partnership El Dorado by El Dorado – Harvesting venture capital portfolio as it matures $429M SunCor
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