Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Non-Deal Roadshow (January 2019)
30 slides from Pinnacle West Capital's roadshow presentation, Jan 15, 2019
Slide 1: Powering Growth, Delivering Value
POWERING GROWTH DELIVERING VALUE Investor Meetings l January 16-18, 2019 Powering Growth, Delivering Value
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: Pinnacle West: Our Future
PINNACLE WEST: We are making clean energy and infrastructure investments to OUR FUTURE support Arizona’s growth Our future includes: • More clean energy • A healthier environment • Palo Verde Generating Station, the largest clean energy producer in the country • Infrastructure to power Arizona’s gro
Slide 4: Sustainability
APS’s vision is to create a SUSTAINABILITY sustainable energy future for Arizona Progress and Achievements Five critical areas of our sustainability efforts Board of Directors Nuclear and Operating Carbon Management Committee Charter was amended in 2018 • Plan to reduce carbon intensity by 23% ove
Slide 5: Clean Energy
Clean energy plays an important CLEAN ENERGY role in meeting Arizona’s energy needs today Looking ahead to Arizona’s growing population and expanding economic activity, APS continues supporting resources and technology to ensure our energy is clean, reliable and affordable for all Arizonans The Palo
Slide 6: Coal Exit Strategy
We have already retired 849 MWs COAL EXIT STRATEGY of coal-fired generation Navajo 315 MW By end of Cholla 2019 387 MW By 2025 Remaining 970 MW By 2038 2018 2019 2025 2038 • Pinnacle West has a long history of transitioning to clean energy resources that reduce carbon emissions. • Since 2005, baseli
Slide 7: Carbon Avoidance and Emission Reductions
CARBON AVOIDANCE APS has reduced carbon dioxide AND EMISSION emissions by 35% since 2005 REDUCTIONS Cumulative Carbon Avoidance Carbon Avoidance Metric • Metric used to measure our overall 15 carbon reduction, not just generation 13.6 but Company wide (Million Metric Tons) CO2 Emissions Carbon Avoid
Slide 8: Storage Projects
We are leading the solar-plus- battery-storage effort, STORAGE PROJECTS advancing innovation and conducting ground-breaking research 2018 Battery Storage RFP • Up to 106 MW located on APS solar plant sites • Utility owned • Anticipated in-service by June 2020 Punkin Center Battery Storage Project •
Slide 9: Renewable Resources
RENEWABLE RESOURCES APS Solar Portfolio* APS currently has 1,683 MW of renewable resources: Owned PPA 239 MW 310 MW • Solar* 1,364 MW • Wind 289 MW DG 815 MW • Biomass 14 MW • Geothermal 10 MW • Biogas 6 MW Owned solar includes 170 MW AZ Sun Program, 25 MW of APS owned Distributed Generation (DG), 4
Slide 10: Residential PV Applications
Residential DG (MWdc) Annual Additions 150 RESIDENTIAL PV 133 133 74 APPLICATIONS1 51 57 44 18 22 10 2009 2012 2014 2016 2018 YTD 4,000 3718 3432 3,500 3,000 2464 2,500 2143 2125 1944 2,000 1818 1561 2033 1602 1426 1413 1442 1434 1,500 1267 1364 1283 1291 1153 1342 1245 1189 1001 1195 1077 1168 1157
Slide 11: Economic Development
ECONOMIC Arizona’s focus on economic development continues to support DEVELOPMENT growth in the state Arizona is the 4th fastest-growing state in the U.S. according to new Census data.1 2018 – APS partnered with Greater Phoenix Economic Council and Arizona Commerce Authority to welcome 17 new compan
Slide 12: Appendix
APPENDIX Powering Growth, Delivering Value
Slide 13: Senior Management Team
SENIOR Our management team has more than 100 combined years MANAGEMENT of creating shareholder value in TEAM the energy industry Don Brandt Jim Hatfield Chairman of the Board, President and Executive Vice President and Chief Executive Officer, Pinnacle West and Chief Financial Officer, Pinnacle West
Slide 14: Dividend Growth
Pinnacle West’s indicated annual dividend is $2.95 per share; DIVIDEND GROWTH targeting ~6% annual dividend growth Dividend Growth Goal Indicated Annual Dividend Rate at Year-End $2.95 $2.78 $2.62 $2.50 $2.38 $2.27 $2.18 $2.10 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Targeted Future dividen
Slide 15: APS Capital Expenditures
APS CAPITAL Capital expenditures will support our growing customer base and EXPENDITURES utilization of advanced technology ($ Millions) Other $1,341 $99 $1,211 $1,206 $1,153 Distribution $74 $139 $125 $419 Transmission $467 Clean $518 $598 $174 Generation $137 $147 Environmental $193 $151 $201 $167
Slide 16: Distribution Grid Investments
DISTRIBUTION GRID Grid Operations and Investment Projected to be $1.6 billion from INVESTMENTS 2018-2020 Customer Growth Grid Modernization Run and Maintain Approximately 51% of distribution capex Approximately 9% of distribution capex Approximately 40% of distribution capex R T Reclosers – Supervis
Slide 17: Operations & Maintenance
OPERATIONS & Goal is to keep O&M per kWh flat, MAINTENANCE adjusted for planned outages ($ Millions) $905 - $925 $858 $865 - $885 $848 75 - 85 63 50 - 60 72 830 - 840 815 - 825 776 795 1 1 1 2016 2017 2018E 2019E 2 PNW Consolidated ex RES/DSM Planned Fleet Outages 1 Reclassified to reflect the adopt
Slide 18: 2019 Planned Outage Schedule
2019 PLANNED OUTAGE Coal, Nuclear and Large Gas and SCHEDULE Oil Planned Outages Q1 Q2 Q4 Estimated Estimated Estimated Plant Unit Duration Plant Unit Duration in Plant Unit Duration in Days Days in Days Four 4 12 Palo Verde 1 30 Palo Verde 3 44 Corners Four West 5 12 Cholla* 1 16 4 62 Corners Phoen
Slide 19: 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% $1.5 $1.4 ACC FERC Rate Effecti
Slide 20: Tax Reform
Tax Cuts and Jobs Act provides TAX REFORM benefits to both our customers and shareholders • TEAM PHASE I: The ACC approved $119 million annual EPS Impacts rate reduction reflecting the lower federal tax rate. • The impact of the lower federal income tax rate is Effective for the March 2018 billing c
Slide 21: Balance Sheet Strength
BALANCE SHEET STRENGTH Credit Ratings1 Long-Term Debt Maturity Schedule • APS Senior Unsecured: A- or equivalent ratings ($Millions) or better at S&P, Moody’s and Fitch $700 • PNW Senior Unsecured: BBB+ or equivalent ratings or better at S&P, Moody’s and Fitch $600 2018 Major Financing Activities $5
Slide 22: Credit Ratings and Metrics
CREDIT RATINGS AND METRICS Pinnacle APS 2015 2016 2017 West Corporate Credit Ratings1 APS Moody’s A2 A3 FFO / Debt 29.7% 26.5% 26.9% S&P A- A- FFO / Interest 5.8x 5.0x 5.2x Debt / Fitch A- A- 45.8% 47.7% 47.3% Capitalization Senior Unsecured1 Pinnacle West Moody’s A2 A3 FFO / Debt 28.9% 25.1% 24.7%
Slide 23: 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 24: Four Corners SCR Step Increase
FOUR CORNERS SCR The Administrative Law Judge issued a Recommended Opinion STEP INCREASE and Order on November 27, 20182 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 perc
Slide 25: Arizona Corporation Commission
ARIZONA CORPORATION COMMISSION Terms to January 2023 Terms to January 2021 Sandra Justin Bob Boyd Andy Kennedy (D) Olson (R) Burns (R)* Dunn (R) Tobin (R) Other State Officials ACC Executive Director – Matthew Neubert RUCO Director – David Tenney *Term limited - elected to four-year terms (limited t
Slide 26: 2019 Key Dates
2019 KEY DATES ACC Key Dates / Docket # Q1 Q2 Q3 Q4 Power Supply Adjustor (PSA) Implementation: Feb 1 E-01345A-16-0036 Lost Fixed Cost Recovery To be Filed: Feb 15 E-01345A-16-0036 Transmission Cost Adjustor To be Filed: May 1 E-01345A-16-0036 Implementation: Jun 1 2020 DSM/EE Implementation Plan 20
Slide 27: The "Duck Curve"
Distributed generation is changing THE “DUCK CURVE” the load shape of the grid Current Spring Day Spring Day 2022 Excess renewables create 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 2,000
Slide 28: APS Transmission
Strategic transmission investment is essential to maintain reliability APS TRANSMISSION and deliver diversified resources to customers • 10-Year Transmission Plan filed January 2018 (115 kV and above) – 52 miles of new lines – 13 bulk transformer additions Flagstaff • Also includes: – Sun Valley-Mor
Slide 29: Non-GAAP Measure Reconciliation
NON-GAAP MEASURE RECONCILIATION Three Months Ended September 30, Tax Benefit Four of Lower RES/ Corners Pre-Tax 2018 RES/ 2017 EPS $ millions pretax, except per share amounts 20181 DSM Deferral2 Income Adjusted 20171,3 DSM Adjusted Impact Operating revenues $ 1,268 $ (27) $ - $ - $ 1,241 $ 1,183 $ (
Slide 30: Investor Relations Contacts
INVESTOR RELATIONS CONTACTS Stefanie Layton Director, Investor Relations (602) 250-4541 stefanie.layton@pinnaclewest.com Michelle Clemente (602) 250-3752 michelle.clemente@pinnaclewest.com Pinnacle West Capital Corporation P.O. Box 53999, Mail Station 9998 Phoenix, Arizona 85072-3999 Visit us online
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