Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — FY2016 Earnings Presentation
24 slides from Pinnacle West Capital's earnings presentation, Feb 24, 2017
Slide 1: Fourth Quarter and Full-Year 2016 Results
FOURTH QUARTER AND FULL-YEAR 2016 RESULTS February 24, 2017 Fourth Quarter and Full-Year 2016
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: Consolidated EPS Comparison 2016 vs. 2015
CONSOLIDATED EPS COMPARISON 2016 VS. 2015 4th Quarter Full-Year On-Going Earnings On-Going Earnings $3.95 $3.92 $0.47 $0.37 2016 2015 2016 2015 4th Quarter Full-Year GAAP Net Income GAAP Net Income $0.47 $0.37 $3.95 $3.92 3 Fourth Quarter and Full-Year 2016
Slide 4: On-Going EPS Variances 4th Quarter 2016 vs. 4th Quarter 2015
ON-GOING EPS VARIANCES 4TH QUARTER 2016 VS. 4TH QUARTER 2015 Interest, net Other, net Other Taxes of AFUDC $0.03 $0.47 O&M(1) D&A(2) $0.06 $(0.01) $0.01 $0.01 $0.37 Gross Margin(1),(2) Sales $ (0.03) LFCR $ 0.03 Transmission $ (0.01) Other $ 0.01 4Q 2015 4Q 2016 (1) Excludes costs and offsetting ope
Slide 5: On-Going EPS Variances Full Year 2016 vs. 2015
ON-GOING EPS VARIANCES FULL YEAR 2016 VS. 2015 Gross Margin(1), (2) O&M(1) Gross Margin $0.33 $(0.30) Weather $ 0.02 Sales $ 0.05 LFCR $ 0.09 Transmission $ 0.08 Transmission Line Sale $ 0.03 AZ Sun $ 0.01 Other $ 0.05 Interest, net Other of AFUDC Other, net D&A(2) Taxes $0.02 $(0.02) $(0.03) $0.03
Slide 6: Economic Indicators
ECONOMIC Arizona and Metro Phoenix remain attractive places to live and do INDICATORS business Nonresidential Net Absorption – Metro Phoenix Millions Sq. Ft Office Retail Above-average job growth in 5 construction and financial services 4 3 Vacancy rates in office and retail space 2 have fallen to p
Slide 7: Appendix
APPENDIX Fourth Quarter and Full-Year 2016
Slide 8: 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 Jun 1 2018 RES Implementation Plan for Reset Jul 1 of Renewable Energy Adjustor APS
Slide 9: 2016 APS Rate Case
2016 APS RATE CASE • Filed June 1, 2016 • Propose new rates go into effect on July 1, 2017 • Docket Number: E-01345A-16-0036 • Additional details, including filing, can be found at http://www.azenergyfuture.com/rate-review/ Procedural Schedule Staff and Intervenor Direct Testimony (ex rate design) D
Slide 10: Arizona Electric Utilities General Rate Cases
ARIZONA ELECTRIC UTILITIES GENERAL RATE CASES UNS Electric (93,000 customers) Tucson Electric Power Company (415,000 customers) Docket # E-04204A-15-0142 Docket # E-01933A-15-0322 Application Filed May 5, 2015 Application Filed Nov 5, 2015 Hearing (Mar 1 – 24, 2016) Non-unanimous Revenue Requirement
Slide 11: 2017 On-Going Earnings Key Drivers
2017 ON-GOING EARNINGS KEY DRIVERS • EPS guidance issuance pending timing and outcome of APS rate case • Retail customer growth about 1.5-2.5% • Weather-normalized retail electricity sales volume growth about 0.0-1.0% after customer conservation and energy efficiency and distributed renewable genera
Slide 12: Financial Outlook
Key Factors & Assumptions as of FINANCIAL OUTLOOK February 24, 2017 Gross Margin – Customer Growth and Weather (2017-2019) Assumption Impact Retail customer growth • Projected to average in the range of about 2-3% • Modestly improving Arizona and U.S. economic conditions Weather-normalized retail el
Slide 13: Rate Base
APS’s revenues come from a RATE BASE regulated retail rate base and meaningful transmission business APS Rate Base Growth Total Rate Base Year-End ACC FERC Generation & Distribution Transmission 17% $1.8 83% $1.4 Most Recent Rate Decisions ACC - Proposed FERC Rate Effective Date 7/1/2017 6/1/2016 $8
Slide 14: APS Capital Expenditures
APS CAPITAL Capital expenditures are funded primarily through internally EXPENDITURES generated cash flow ($ Millions) Other $1,337 $1,224 $74 Distribution $87 $1,124 $72 $402 $994 Transmission $388 $81 $406 Renewable $206 Generation $127 $480 $4 $102 $195 $137 $1 Environmental(1) $105 $220 $237 $11
Slide 15: Operations & Maintenance
OPERATIONS & Goal is to keep O&M per kWh flat, MAINTENANCE adjusted for planned outages ($ Millions) $137 $103 $83 $150 $124 $96 $805 $828 $761 $788 $772 $754 2011 2012 2013 2014 2015 2016 PNW Consolidated RES/DSM* *Renewable energy and demand side management expenses are offset by adjustment mechan
Slide 16: Balance Sheet Strength
BALANCE SHEET STRENGTH Debt Maturity Schedule Credit Ratings ($Millions) • A- rating or better at S&P, Moody’s and Fitch $600 2016 Major Financing Activities $500 • $100 million 3-year term loan closed April 2016 • $350 million 30-year 3.75% APS senior unsecured $400 notes issued May 2016 • $250 mil
Slide 17: Pension & Other Post Retirement Benefits (OPEB)
PENSION & OTHER POST RETIREMENT BENEFITS (“OPEB”) Pension Funded Status(1) ($ in millions) 90% Expense(2) 2016A 2017E 88% 88% Pension(1) $19 $24 OPEB ($12) ($19) Contributions 2016A 2017E 2018E 2019E YE 2014 YE 2015 YE 2016 Up to Up to Pension $100 $100 • Funded status of the pension plan finished $
Slide 18: Residential PV Applications
Residential DG (MWdc) Annual Additions RESIDENTIAL PV 133 74 APPLICATIONS* 51 57 44 18 22 12 10 2009 2011 2013 2015 2017 2500 2250 2000 1750 1500 1250 1000 750 939 871 836 783 500 710 610 641 523 250 442 357 339 249 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2014 Applications 2015 Application
Slide 19: Gross Margin Effects of Weather
GROSS MARGIN EFFECTS OF WEATHER VARIANCES VS. NORMAL Pretax Millions $15 $10 13 $5 4 4 $0 (4) (1) (5) $(5) (8) (17) $(10) $(15) $(20) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 $(8) Million $(5) Million All periods recalculated to current 10-year rolling average (2005-2014) 19 Fourth Quarter and Full-Year 20
Slide 20: Renewable Energy and Demand Side Management Expenses
RENEWABLE ENERGY AND DEMAND SIDE MANAGEMENT EXPENSES* Pretax Millions Renewable Energy Demand Side Management $40 $30 $20 18 11 12 18 14 12 15 13 $10 12 11 11 7 8 7 6 4 $0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 $96 Million $83 Million * O&M expenses related to renewable energy and demand side management
Slide 21: Non-GAAP Measure Reconciliation
NON-GAAP MEASURE RECONCILIATION Three Months Ended December 31, EPS $ millions pretax, except per share amounts 2016 2015 Impact Operating revenues* $ 739 $ 734 Fuel and purchased power expenses* (243) (232) Gross margin 496 502 $ (0.03) Adjustments: Renewable energy (excluding AZ Sun) and demand si
Slide 22: Non-GAAP Measure Reconciliation
NON-GAAP MEASURE RECONCILIATION Twelve Months Ended December 31, EPS $ millions pretax, except per share amounts 2016 2015 Impact Operating revenues* $ 3,499 $ 3,495 Fuel and purchased power expenses* (1,076) (1,101) Gross margin 2,423 2,394 $ 0.16 Adjustments: Renewable energy (excluding AZ Sun) an
Slide 23: Consolidated Statistics
CONSOLIDATED STATISTICS 3 Months Ended December 31, 12 Months Ended December 31, 2016 2015 Incr (Decr) 2016 2015 Incr (Decr) ELECTRIC OPERATING REVENUES (Dollars in Millions) Retail Residential $ 332 $ 328 $ 4 $ 1,730 $ 1,702 $ 28 Business 362 349 13 1,605 1,584 21 Total Retail 694 677 17 3,335 3,28
Slide 24: Consolidated Statistics
CONSOLIDATED STATISTICS 3 Months Ended December 31, 12 Months Ended December 31, 2016 2015 Incr (Decr) 2016 2015 Incr (Decr) WEATHER INDICATORS - RESIDENTIAL Ac tual Cooling Degree-Days 57 73 (16) 1,720 1,822 (102) Heating Degree-Days 282 463 (181) 679 717 (38) Average Humidity 29% 41% (12)% 27% 31%