Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Investor Presentation (September 2017)
32 slides from Pinnacle West Capital's investor presentation, Sep 26, 2017
Slide 1: Powering Growth, Delivering Value
POWERING GROWTH DELIVERING VALUE Investor Meetings l September 26, 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: Pinnacle West: Who We Are
We are a vertically integrated, PINNACLE WEST: regulated electric utility in the WHO WE ARE growing southwest United States Pinnacle West (NYSE: PNW) - Market Capitalization*: $10.0 billion - Enterprise Value*: $15.0 billion - Consolidated Assets: $16.7 billion - Indicated Annual Dividend*: $2.62 -
Slide 4: Value Proposition
VALUE PROPOSITION We are executing on our financial and operational objectives … Leverage Operational Excellence Financial Strength Economic Growth Top decile safety performance Annual dividend growth target of Arizona’s long-term growth among peers 5%, subject to declaration at fundamentals r
Slide 5: Renewable Resources
RENEWABLE APS is a leader in solar RESOURCES APS currently has 1,516 MW APS Solar Portfolio* of renewable resources: Owned PPA • Solar* 1,197 MW 214 MW 310 MW • Wind 289 MW DG • Biomass 14 MW 673 MW • Geothermal 10 MW • Biogas 6 MW Owned solar includes 170 MW AZ Sun Program, 4 MW of other APS owned
Slide 6: Battery Storage
Energy storage is important but will only be cost effective in niche BATTERY STORAGE circumstances for the next several years APS Projects – Punkin Center, Arizona: 2 X 4MWh Li-ion battery storage systems to be installed in fall 2017 in place of rebuilding 20 miles of distribution lines – Solar Inno
Slide 7: The Grid Is Evolving
THE GRID IS EVOLVING Economics Distributed Energy Resources Public Policy Technology 7 Powering Growth, Delivering Value
Slide 8: Summary
SUMMARY • Long-term vision • Enabling customer choice • Commitment to strategy • Evolution in employee training and capabilities Visibility Control Mobility Human Investment Device Deployment/ Benefits Training Solving problems by improving Visibility, Control, Mobility and Human capabilities 8 Powe
Slide 9: Appendix
APPENDIX 9 Powering Growth, Delivering Value
Slide 10: Leadership Team
Our top executives have more than 100 combined years of LEADERSHIP TEAM creating shareholder value in the energy industry Don Brandt Chairman & Chief Executive Officer Jeff Guldner Jim Hatfield Mark Schiavoni Bob Bement EVP EVP & Chief EVP & Chief EVP & Chief Public Policy & Financial Operating Nucl
Slide 11: APS Capital Expenditures
APS CAPITAL Capital expenditures are funded primarily through internally EXPENDITURES generated cash flow ($ Millions) Other $1,337 $1,224 $77 Distribution $87 $1,139 $72 $1,009 $402 Transmission $388 $102 $409 Renewable $203 Generation $127 $412 $3 $102 $198 $170 Environmental(1) $17 $220 $106 $190
Slide 12: 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 13: Distribution Grid Investments
Modernizing the distribution grid DISTRIBUTION GRID with advanced technology investments – resulting in INVESTMENTS improved reliability for customers and more efficient operations Grid Operations & Investment $1.2 Billion over next 3 years Integrated Volt/VAR Control (IVVC) Advanced Distribution Ma
Slide 14: Resource Planning
RESOURCE PLANNING1 Peak* 8,405 MW 9,835 MW 11,410 MW Resource Reductions 2017-2022 2017-2027 2017-2032 (Retirements, Expirations) -487 MW -872 MW -872 MW Ocotillo steam unit retirements and Ocotillo steam unit retirements, Ocotillo steam unit retirements, Navajo contract expiration Navajo contract e
Slide 15: 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 Flagstaff • Also includes: – Sun Valley-Morg
Slide 16: Residential PV Applications
Residential DG (MWdc) Annual Additions RESIDENTIAL PV 133 97 74 APPLICATIONS* 51 57 44 18 22 10 2009 2011 2013 2015 2017 YTD -Aug 4,500 4,045 3,910 4,000 3,500 3,000 2,535 2,412 2,500 1,996 2,043 1,865 2,000 1,632 1,593 1,469 1,414 1,474 1,472 1,267 1,291 1,369 1,325 1,500 1,141 1,154 1,003 1,002 1,
Slide 17: 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 2,00
Slide 18: Economic Indicators
ECONOMIC Arizona and Metro Phoenix remain attractive places to live and do INDICATORS business Year Over Year Employment Growth U.S. Phoenix Maricopa County ranked #1 in U.S. for 4.0% population growth in 2016 3.5% - U.S. Census Bureau March 2017 3.0% 2.5% 2.0% Above-average job growth in financial
Slide 19: Residential Solar vs. APS Customer Load
RESIDENTIAL SOLAR VS. APS CUSTOMER Performance at system peak LOAD On June 20th, APS customers hit “peak demand” for 2017 using more than 7,300 MW of electricity 500 7,367 8,000 6,918 6,136 400 6,000 304 300 Residential Rooftop MW 4,000 APS Customer Load 200 100 2,000 100 5 0 0 1 2 3 4 5 6 7 8 9 10
Slide 20: Operations & Maintenance
OPERATIONS & Goal is to keep O&M per kWh flat, MAINTENANCE adjusted for planned outages ($ Millions) $83 $80 $137 $103 $124 $96 $830 - $805 $828 $850 $761 $788 $772 2012 2013 2014 2015 2016 2017E PNW Consolidated RES/DSM* *Renewable energy and demand side management expenses are offset by adjustment
Slide 21: 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 $2.10 2011 2012 2013 2014 2015 2016 2017 2018 Projected Future dividends subject to declara
Slide 22: Arizona Corporation Commission
ARIZONA CORPORATION COMMISSION Terms to January 2019 Terms to January 2020 Tom Doug Bob Boyd Andy Forese (R) Little (R)* Burns (R)** Dunn (R) Tobin (R) Chairman Other State Officials ACC Executive Director – Ted Vogt RUCO Director – David Tenney * Resigned from the ACC to work for the U.S. Departmen
Slide 23: 2017 Rate Case Order
2017 RATE CASE ORDER* EFFECTIVE AUGUST 19, 2017 Key Financial Proposals – Base Rate Changes Annualized Base Rate Revenue Changes ($ 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 Schedule
Slide 24: 2017 Rate Case Order
2017 RATE CASE ORDER* EFFECTIVE AUGUST 19, 2017 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 eff
Slide 25: Ocotillo Modernization Project and Four Corners SCRs
OCOTILLO MODERNIZATION PROJECT AND FOUR CORNERS SCRs • Included in the 2017 rate case Order*, 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 with
Slide 26: 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 Sep 1 E-01345A-17-0134 2018 RES Implementation Plan Decision expected by Jul 1 E-01
Slide 27: 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 28: 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 29: 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 30: 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 31: 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 32: 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
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