Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Non-Deal Roadshow (May 2015)
29 slides from Pinnacle West Capital's roadshow presentation, May 27, 2015
Slide 1: Powering Growth, Delivering Value
POWERING GROWTH DELIVERING VALUE Investor Meetings | May 27-28, 2015 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: Arizona Economic Indicators
ARIZONA ECONOMIC INDICATORS Home Prices – Metro Phoenix Nonresidential Building Vacancy – Metro Phoenix Value Relative to Jan ‘05 Vacancy Rate 175 25% Office 150 20% Industrial 125 15% 100 10% Retail 75 5% 50 0% '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 Jan '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
Slide 4: Retail Sales Growth (Weather-Normalized)
RETAIL SALES GROWTH (WEATHER-NORMALIZED) • Weather-normalized retail sales growth on average about 0.5-1.5% for 2015- 2017 after impacts of energy efficiency, customer conservation and distributed renewable generation initiatives (excluding Lost Fixed Cost Recovery) Distributed Generation (DG) Impac
Slide 5: Key Dates for Rate Design
KEY DATES FOR RATE DESIGN • Residential demand rates started • Time of Use rates initiated - due to central air conditioning load Early Nearly half of our residential (currently about 10% of customers 1980’s customers are on TOU rates have a rate with a demand charge) • Spring: Conducted series of •
Slide 6: Grid Access Charge Request Is Next Step in Modernizing Rate Design
GRID ACCESS CHARGE REQUEST IS NEXT STEP IN MODERNIZING RATE DESIGN Rate design changes needed to align Rate Design Principles fixed costs and revenue 1. Customer-focused 2. Forward-Thinking Costs – APS Revenue – APS Residential Classes Residential Classes 3. Affordable & Fair (2010) (2010) Fixed Cha
Slide 7: Resource Planning
RESOURCE PLANNING* MW Composition of Energy Mix by Resource* 14,000 Load Requirement Including Reserves 2014 12,000 27.7% 9.5% 17.0% 10,000 35.3% Gas Resource Planning 7.5% Requirement 20.1% Coal 8,000 Existing Contracts Nuclear 6,000 RE + DE 2029 15.3% EE 35.0% 4,000 14.7% Existing Owned Resources
Slide 8: Capital Expenditures
70% of capital expenditures are CAPITAL recovered through rate adjustors EXPENDITURES (30%) and depreciation cash flow (40%) $1,332 ($ Millions) $70 Other $1,056 $1,064 $68 $439 $82 Distribution $883 $73 $316 $323 Transmission $191 $242 $101 $2 $1 Renewable $207 $173 Generation $192 $181 $87 $63 $35
Slide 9: Rate Base
APS’s revenues come from a RATE BASE regulated retail rate base and meaningful transmission business APS Rate Base Growth $7.0 Billion Total Approved Rate Base Year-End ACC FERC Generation & Distribution Transmission 17% 83% $2.0 $1.4 Most Recent Rate Decisions ACC FERC Rate Effective Date 7/1/2012
Slide 10: Bright Canyon Energy – Transmission Growth
BRIGHT CANYON ENERGY – TRANSMISSION GROWTH BRIGHT CANYON ENERGY Pinnacle West subsidiary formed to pursue new growth opportunities TRANSCANYON A 50/50 Joint Venture formed with BHE U.S. Transmission, subsidiary of Berkshire Hathaway Energy, to pursue transmission WECC opportunities in the western Un
Slide 11: Sustainable Cost Management Ingrained in Business Planning Framework
SUSTAINABLE COST MANAGEMENT INGRAINED IN BUSINESS PLANNING FRAMEWORK Enterprise Process Improvement is current phase of Sustainable Cost Management -- a standardized, systematic approach to determining how to do our work better including documentation, driven by retiring workforce and need to contro
Slide 12: Operations & Maintenance Outlook
OPERATIONS & Targeting to be top quartile in MAINTENANCE peer benchmarking for staffing OUTLOOK ($ Millions) 2015+ Outlook $137 $103 $115 $150 $124 • Goal is to keep O&M per $121 kWh flat • Complete documentation of over 1,800 policies, processes and procedures, including $795 - more than 275 proces
Slide 13: Dividend Growth
Pinnacle West’s annual dividend is DIVIDEND GROWTH $2.38 per share; targeting ~5% annual dividend growth Dividend Growth Goal Indicated Annual Dividend Rate at Year-End Dividend Yield 6% PNW 5% 4% $2.38 $2.27 3% Industry Averages $2.18 2% $2.10 1% 0% 30% 50% 70% 90% Dividend Payout 2011 2012 2013 20
Slide 14: 2015 Key Dates
2015 KEY DATES ACC Key Dates Docket # Q1 Q2 Q3 Q4 Key Recurring Regulatory Filings Lost Fixed Cost Recovery E-01345A-11-0224 Jan 15 Net Metering – Quarterly Installation Filings E-01345A-13-0248 Jan 15 Apr 15 Jul 15 Oct 15 Transmission Cost Adjustor E-01345A-11-0224 May 15 Renewable Energy Surcharge
Slide 15: Appendix
APPENDIX Powering Growth, Delivering Value
Slide 16: Arizona Corporation Commission
ARIZONA CORPORATION COMMISSION Terms to January 2017 Terms to January 2019 Susan Bob Bob Tom Doug Bitter Smith (R) Burns (R) Stump (R)* Forese (R) Little (R) Chairman * Term limited - elected to four-year terms (limited to two consecutive) 16 Powering Growth, Delivering Value
Slide 17: Ocotillo Power Plant (Tempe, AZ)
Ocotillo modernization project OCOTILLO POWER will maintain valley grid PLANT (TEMPE, AZ) reliability and increase APS’s generating capacity by 290 MW • Benefits: – Maintains system reliability through retirement of aging steam units – Replacement units meet need for increased portfolio responsivene
Slide 18: Four Corners Power Plant
FOUR CORNERS POWER PLANT • APS owns 970 MW (63% of Four Corners generating capacity) and is the plant’s sole operator – Four Corners-specific revenue requirement ($57.1 million) rates effective January 1, 2015 (docket 11-0224) • APS notified EPA that the Four Corners participants selected the BART a
Slide 19: APS Transmission
Strategic transmission investment is essential to maintain reliability APS TRANSMISSION and deliver diversified resources to customers • 10-Year Transmission Plan filed January 2015 (115 kV and above) – 275 miles of new lines – Includes Hassayampa-North Gila (HANG2) • ~110 miles; 500kV Flagstaff • C
Slide 20: Residential PV Applications
RESIDENTIAL PV APPLICATIONS 2014 Applications* 2014 Canceled Apps 2015 Applications* 2015 Canceled Apps 1,200 92 1,000 28 61 67 82 800 60 61 882 64 44 745 600 96 33 39 971 531 880 865 400 33 83 805 729 638 654 28 546 452 200 364 346 250 0 Jan 14-Jan 15-Jan2 Feb 14-Feb 15-Feb Mar 14-Mar2 15-Mar Apr 1
Slide 21: APS Solar Partners Program
• TBD APS SOLAR PARTNERS PROGRAM • APS to implement 10 MW of APS-owned residential rooftop solar − On December 19, 2014, ACC voted that it had no objection to APS implementing the program − Equates to approximately 1,500 customers − Will be filed for recovery in next general rate case − 2 MW (of the
Slide 22: Net Metering
Rooftop solar customers still NET METERING use the grid 24 hours a day TYPICAL GRID INTERACTION FOR ROOFTOP SOLAR • Customers with rooftop solar systems do not pay for all of the electric services they use (i.e. rooftop customers still need support from the grid 24 hours a day) • These unpaid costs
Slide 23: Emerging Technologies Rely on the Grid
EMERGING All of these technologies are part TECHNOLOGIES of an integrated grid RELY ON THE GRID Rooftop Solar Home Energy Management Battery Storage Electrical System Fuel Cells Electric Vehicles Microgrids 23 Powering Growth, Delivering Value
Slide 24: Arizona's Renewable Resource and Energy Efficiency Standards
ARIZONA’S RENEWABLE RESOURCE AND ENERGY EFFICIENCY STANDARDS Renewable Energy (RES) Requirements Energy Efficiency Requirements • Portion of retail sales to be supplied by • Cumulative savings from energy renewable resources efficiency programs must be equivalent – 5% by 2015* to 22% of annual retai
Slide 25: Regulatory Mechanisms
We have achieved a more REGULATORY supportive regulatory structure MECHANISMS and improvements in cost recovery timing Adopted / Mechanism Description Last Adjusted Power Supply Adjustor April 2005 / • Recovers variance between actual fuel and purchased power costs and (“PSA”) February 2015 base fue
Slide 26: Credit Ratings
CREDIT RATINGS Investment Grade Credit Ratings APS Parent Corporate Credit Ratings Moody’s A3 Baa1 S&P A- A- Fitch BBB+ BBB+ Senior Unsecured Moody’s A3 - S&P A- - Fitch A- - Outlook Moody’s Positive Positive S&P Stable Stable Fitch Positive Positive We are disclosing credit ratings to enhance under
Slide 27: S&P Credit Metrics
S&P CREDIT METRICS Key credit metrics remain strong 2010 2011 2012 2013 2014 APS FFO / Debt 23.7% 23.6% 27.7% 31.5% 26.6% FFO / Interest 3.3x 4.2x 4.8x 5.6X 5.8x Debt / 52.6% 52.9% 50.7% 47.7% 46.3% Capitalization Pinnacle West FFO / Debt 22.3% 23.0% 26.7% 29.8% 23.6% FFO / Interest 3.1x 3.8x 4.4x 4
Slide 28: Financing
FINANCING Debt Maturity Schedule 2015 Major Financing Activities ($Millions) • $250 million 5-year 2.20% APS senior unsecured notes issued in January $600 2015 • Currently expect up to an additional $500 $325 million of new long-term debt, in addition to refinancing maturing debt – Refinanced $300 m
Slide 29: Investor Relations Contacts
INVESTOR RELATIONS CONTACTS Paul J. Mountain, CFA Director, Investor Relations Telephone: (602) 250-4952 E-mail: paul.mountain@pinnaclewest.com Chalese Haraldsen Telephone: (602) 250-5643 E-mail: chalese.haraldsen@pinnaclewest.com Pinnacle West Capital Corporation P.O. Box 53999, Mail Station 9998 P