Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Investor Presentation (May 2003)
30 slides from Pinnacle West Capital's investor presentation, May 13, 2003
Slide 1: In Our Element: Analyst Presentations May 2003
IN OUR ELEMENT [PHOTO] Pinnacle West Capital Corporation Analyst Presentations May 2003
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements based on current expectations, and the Company assumes no obligation to update these statements or make any further statements on any of these issues, except as required by applicable law. Because actual results may dif
Slide 3: In Our Element
In Our Element [PHOTO] Capturing the benefits of superior growth... Maintaining operational excellence... Managing market risks and commodity exposure... Navigating the regulatory landscape...
Slide 4: Capturing the Benefits of Superior Growth
CAPTURING THE BENEFITS OF SUPERIOR GROWTH LEADING 2002 POPULATION GROWTH STATES [MAP]
Slide 5: Capturing the Benefits of Superior Growth
CAPTURING THE BENEFITS OF SUPERIOR GROWTH LEADING 2002 POPULATION GROWTH STATES [MAP] APS 2ND IN CUSTOMER GROWTH NATIONALLY
Slide 6: Maintaining Operational Excellence
Maintaining Operational Excellence IMPROVING CUSTOMER EFFICIENCY CUMULATIVE CHANGE --------------------------------- 1999 2000 2001 2002 ------ ------ ------ ------ Average Customers 0.00% 4.10% 7.90% 11.30% Employees 0.00% 1.80% 5.30% 1.80% APS 1ST IN CUSTOMER SERVICE IN THE WEST * Source: JD Power
Slide 7: Maintaining Operational Excellence
Maintaining Operational Excellence Generation Delivery * Palo Verde remains the * High customer growth top power producer in the United States * Strong reliability * Fossil availability at * Transmission and record levels distribution expansion to meet growth and sustain * New plant construction on
Slide 8: Managing Market Risk & Commodity Exposure
MANAGING MARKET RISK & COMMODITY EXPOSURE WESTERN POWER MARKETS SPARK SPREADS $/MWh -------------------------------------------------------------- Date On-Peak Actual On-Peak Forwards Date ---- -------------- ---------------- ---- Jan-01 159.76 Feb-01 178.44 Mar-01 187.80 Apr-01 182.97 May-01 230.80
Slide 9: Managing Market Risk & Commodity Exposure
MANAGING MARKET RISK & COMMODITY EXPOSURE LONG-TERM SOUTHWEST REGIONAL ENERGY PROFILE MWs --------------------------------- 2003 2004 2005 2006 ------ ------ ------ ------ Existing Generation 51,000 52,000 51,000 50,000 New Generation 13,000 16,000 18,000 19,000 Peak Load 64,000 67,000 69,000 71,000
Slide 10: Managing Market Risk & Commodity Exposure
MANAGING MARKET RISK & COMMODITY EXPOSURE APS RESOURCES FOR RETAIL LOAD MW --------------------------------- 2003 2004 2005 2006 ------ ------ ------ ------ APS Existing Resources 5,000 5,000 5,000 5,000 Track B Resources 1,800 1,800 1,800 1,700 Peak Load 6,500 7,000 7,000 7,500
Slide 11: Managing Market Risk & Commodity Exposure
MANAGING MARKET RISK & COMMODITY EXPOSURE APS NATURAL GAS DEMAND FOR RETAIL LOAD Millions mmbtu --------------------------------- Projected --------------------------------- 2003 2004 2005 2006 ------ ------ ------ ------ Hedge 25-30 25-30 0 0 Gas Requirements 30-35 30-35 30-35 30-35
Slide 12: Navigating the Regulatory Landscape
Navigating the Regulatory Landscape Beginning Ending --------- ------ Track A Decision January 2002 September 10, 2002 $125MM Financing Application November 8, 2002 November 22, 2002 Track B Decision January 2002 March 14, 2003 $500MM Financing Application September 16, 2002 March 27, 2003 Track B P
Slide 13: Navigating the Regulatory Landscape
Navigating the Regulatory Landscape Beginning Ending --------- ------ Track A Decision January 2002 September 10, 2002 $125MM Financing Application November 8, 2002 November 22, 2002 Track B Decision January 2002 March 14, 2003 $500MM Financing Application September 16, 2002 March 27, 2003 Track B P
Slide 14: Navigating the Regulatory Landscape: Track B Procurement Needs
Navigating the Regulatory Landscape Track B Procurement Needs APS Retail Energy Requirement GWHs --------------------------------------------- 2003 2004 2005 2006 ------ ------ ------ ------ APS Existing Resources 22,000 23,000 23,000 24,000 Track B Results 1,900 3,000 2,900 2,700 Remaining 2,000 1,
Slide 15: Track B Procurement Contracts
NAVIGATING THE REGULATORY LANDSCAPE TRACK B PROCUREMENT CONTRACTS MWHs ---------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- Jul Aug Sept Oct Nov Dec ----- ----- ----- ----- ----- ----- --
Slide 16: Proposed Adjustment Mechanisms
NAVIGATING THE REGULATORY LANDSCAPE PROPOSED ADJUSTMENT MECHANISMS Returning Customers Power Supply Competitive Rules Compliance System Benefit * To allow timely recovery of certain costs * To be implemented through rate case decision
Slide 17: 2003 General Rate Case Objectives & Timing
NAVIGATING THE REGULATORY LANDSCAPE 2003 GENERAL RATE CASE OBJECTIVES & TIMING * Rate recognition of Pinnacle West Energy Arizona assets * "Recovery" issues - $234M write off in 1999 - Costs for restructuring * Adjustment mechanisms implementation * Cost of service, cost allocation, and rate design
Slide 18: FERC Issues
NAVIGATING THE REGULATORY LANDSCAPE FERC ISSUES * Gas pipeline contracts * California refund process * California and the Pacific Northwest bilateral power contracts * California "market manipulation" investigation+ and implications - ---------- + PNW/APS not named
Slide 19: We Are & Will Be...
WE ARE & Will Be... A vertically integrated utility in a high growth market area... Sustaining exceptional operational performance... Successfully managing risk in varying market conditions... While remaining adept and agile in a dynamic regulatory environment.
Slide 20: Focusing on the core business...
Focusing on the core business... Maximizing the value of non-utility operations... Maintaining financial strength and agility during regulatory transition... Building long-term value for shareholders and customers...
Slide 21: Consolidated Earnings Drivers 2003 vs. 2002
FOCUSING ON THE CORE BUSINESS CONSOLIDATED EARNINGS DRIVERS 2003 VS. 2002 * Retail customer sales growth (RNF) $40 - 45M * SunCor 20M * Cost reductions 18M * Regulatory asset amortization 17M * EITF 02-3 accrual effects 10M * Higher gas and power costs (50 - 60M) * Pension & other related costs (17M
Slide 22: Consolidated Earnings Drivers 2003 vs. 2002
FOCUSING ON THE CORE BUSINESS CONSOLIDATED EARNINGS DRIVERS 2003 VS. 2002 * Surplus generation + * New generation plant fixed costs - * APS Energy Services - * Marketing & trading +/- * Weather, inflation, and all other +/- 2002 Non-recurring items * Accounting change 65M * NAC 35M * Cancellation of
Slide 23: Parent Company Debt Repayment Plans
MAINTAINING FINANCIAL STRENGTH & AGILITY PARENT COMPANY DEBT REPAYMENT PLANS Sources * $500M inter-company loan to APS * $80-$100M SunCor asset sales * $80 - $100M SunCor asset sales * $100M Southern Nevada Water Authority * Short-term borrowings and $390M shelf capacity, as needed Uses * $225M brid
Slide 24: Balancing Financial Strength & Growth
BALANCING FINANCIAL STRENGTH & GROWTH CONSOLIDATED DEBT RATIO* 2005 Target of 50% 2001 2002 2005 ---- ---- ---- 59% 57.7% 50% * Includes Palo Verde sale/leaseback CAPITAL EXPENDITURES $ millions 2001 2002 2003 2004 2005 ---- ---- ---- ---- ---- Delivery 354 369 273 275 329 APS Generation 117 132 123
Slide 25: Maintaining Cash Flow Strength
MAINTAINING CASH FLOW STRENGTH CASH INTEREST COVERAGE PINNACLE WEST 1999 2000 2001 2002 ---- ---- ---- ---- 5.01 5.16 5.02 5.31 APS 1999 2000 2001 2002 ---- ---- ---- ---- 5.23 5.68 5.96 6.92
Slide 26: Creating Long-Term Shareholder Value
CREATING LONG-TERM SHAREHOLDER VALUE TOP DIVIDEND GROWTH 1998 - 2002 5 yr CAGR --------- Pinnacle West Capital 7.20% Energy East Corporation 6.50% PP&L Resources, Inc. 5.30% Vectren Corporation 4.40% FPL Group, Inc. 3.90% NiSource Inc. 3.90% TECO Energy, Inc. 3.80% Pub. Svc. Enterprise Group 2.90% N
Slide 27: Top Quartile EPS and Dividend Growth 1998-2002
CREATING LONG-TERM SHAREHOLDER VALUE TOP QUARTILE EPS AND DIVIDEND GROWTH 1998 - 2002 Dividend Growth EPS Growth - --------------- ---------- 7.20% 6.10% Pinnacle West Capital 1.50% -7.40% Allete -12.90% -7.60% Alliant Energy 0.00% 1.30% Ameren Corporation 0.00% -1.60% American Electric Power -17.30
Slide 28: Shaping Issues Affecting Our Industry
SHAPING ISSUES AFFECTING OUR INDUSTRY * Industry risk * Cyclical nature of the industry * Public power * Distinct, independent markets * Customer responsibility and community relations * Arizona regulatory and political perspectives * Federal legislative and regulatory issues * Governance and invest
Slide 29: Letter to Shareholders quote
"We'll continue to concentrate primarily on our core business in an area our employees know well -- Arizona and the western U.S. power markets -- with a combination of customer focus, exceptional operational performance and financial strength." -- Pinnacle West 2002 Annual Report Letter to Sharehold
Slide 30: [PHOTO]
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Pinnacle West Capital — Investor Presentation (May 2003) on 6ix