Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Deutsche Bank Securities 2002 Electric Power Conference
28 slides from Pinnacle West Capital's conference presentation, Jun 11, 2002
Slide 1: Pinnacle West Capital Corporation – Deutsche Bank 2002 Electric Power Conference
PINNACLE WEST CAPITAL CORPORATION Deutsche Bank Securities, Inc. 2002 Electric Power Conference SS “Michael V. Palmeri | June 13, 2002
Slide 2: Forward-looking statements
This presentation contains forward-looking statements based on currentexpeotations and the company assumes no obligation to update these statements. Becaus® @etilal results may differ materially fram expectations, the company readers not to place u an these statements. A number of factars could caus
Slide 3: Managing and Succeeding in Today's Changing Industry
Managing and Succeeding ... in Today’s Changing Industry
Slide 4: Discussion Topics
Discussion Topics > Business overview > Major forces impacting our industry — Regulatory — Marketplace and illiquidity — Headline risks - credibility | > Financial performance 4 «=
Slide 5: Pinnacle West
Pinnacle West sells and delivers electricity and energy related products and services to retail and wholesale customers in the western United States Twelve Months Ended March 31, 2002 Assets $8.2 billion Revenues $4.2 billion Retail customers 900,402 Peak load 7 MW Generation capacity* * Reflects 20
Slide 6: Pinnacle West's Sustainable Business Model
Pinnacle West’s Sustainable Business Model Deliver superior combined earnings and dividend growth Provide retail electricity customers reliable energy at stable prices Capture retail electric growth opportunities and capitalize on opportunities in Western markets Build our generation portfolio consi
Slide 7: Pinnacle West Competitive Strengths
@ 2002 Pinnach Pinnacle West Competitive Strengths Consistent strategic direction Integrated platform Disciplined generation growth plan High growth western markets Solid core customer growth Strong financial performance Je West Capital Corpolsenanm
Slide 8: Superior Retail Customer Growth
Superior Retail Customer Gro Percent mam APS — Industry Average 1997 1998 1999 2000 2001 2002 2003 2004 Estimates
Slide 9: Slide 9
Slide 10: APS Regulatory Plan
APS Regulatory Plan > APS filed request with Arizona Corporation Commission in October 2001 - Variance from competitive bidding requirements - Approval of purchase power agreement > Generation assets to be transferred to | Pinnacle West Energy by end of 2002 @ 2002 Pinnacle West Capital Corporation
Slide 11: Arizona Corporation Commission
Arizona Corporation Commission > Generic docket on electric competition rules opened February 2002 > Staff report - areas for consideration - Market power and monitoring Competitive bid process Asset transfer Transmission Adjustor mechanisms Shopping credits @ 2002 Pinnacle West Capital Corporation
Slide 12: Arizona Corporation Commission
Arizona Corporation Commission > APS hearing stayed pending generic proceedings > Generic proceedings - "Track A” issues - asset transfer, market and affiliate issues - "Track B” issues - competitive bidding > Generic procedural schedule - "Track A” issues « Hearing to begin June 17% \ * Target deci
Slide 13: FERC Activity
FERC Activity California/ Northwest Market Issues Market ENRON - Manipulation "smoking Gun”) Investigation @ 2002 Pinnacle West Capital Corporation
Slide 14: Focus & Agility in Changing Energy Marketplace
Focus & Agility in Changing Energy Marketplace
Slide 15: Major Trading Hubs in the West
Major Trading Hubs in the West
Slide 16: Southwest Electricity Supply and Demand
| < Southwest Electricity Supply and Demand 45,000 30,000 + 2002 2003 2004 2005 2006 mmm ExistingGeneration mm New Generation —Peak Load with Reserves a @ 2002 Pinnacle West Capital Corporation
Slide 17: Measured Generation Growth Plan
| < Pinnacle West | Measured Generation Growth Plan Commercial Operation New Facilities MWs 2001 West Phoenix 4 120 2002 Redhawk 1 and 2 1,060 2002 Saguaro CT 3 80 2003 West Phoenix 5 530 2004 Silverhawk 570 2006/2007 Redhawk 3 and 4 1,060 @ 2002 Pinnacle West Capital Corporation
Slide 18: Power Marketing and Trading Objectives
Pinnacle West |Power Marketing and Trading Objectives > Provide sufficient capacity, energy and ancillary services to meet native load obligations > Procure fuel for generation plants to maximize value >» Manage commodity price risk to | ensure financial performance of the enterprise > Contribute pr
Slide 19: Continuing Challenges
| > Continuing Challenges >» Market Liquidity » Regulatory Developments é >» Development of RTOs » Accounting Issues
Slide 20: Slide 20
Slide 21: Compound Annual Growth Rate 1997-2001
1997-2001 Compound Annual Growth Rate 40% 30% 20% 10% 0% I Pinnacle West ed their dividends during the period
Slide 22: Earnings Drivers 2002 - 2003
Pinnacle West Earnings Drivers 2002 - 2003 > Strong retail customer growth > Reversal of 2001 reliability O&M costs >» Reduced purchased power costs for outages > Regulatory asset amortization > Retail price reductions > Economic conditions, weather, and - regulatory & legislative developments Power
Slide 23: Power Marketing and Trading Results
| . Pinnacle West | Power Marketing and Trading Results Estimated Gross Margin Realized MTM Gains* $62M $24m 26M S27 98 ‘99 ‘00 ‘01 TME 2 03 «04 O58 313102 thereafter Get change in mark-to-market gased on accumulated mark-to- ealized gain 7 market gains as of 3/31/02 @ 2002Pi fast Capital Carporeeea
Slide 24: Limited capital devoted to Power Marketing and Trading business
\ | \ Limited capital devoted to Power Marketing and Trading business
Slide 25: Gross Margin Analysis Tools
Gross Margin Analysis Tools Total Realized Margin Prior-period mark-to-market Future period mark-to-market Total Gross Margin Margin by | Commodity
Slide 26: Managing Growth with Financial Strength
Pinnacle West Managing Growth with Financial Strength Capital Expenditures $ Millions 1,200 900 2001 2002 2003 2004 mOther ™ Generation Expansion Existing Generation Delivery @ 2002 Pinnacle West Capital Corporation Consolidated Debt Ratio* $ Millions 60% 2004 Target of < 55% 50% 40% 30% 2000 2001 2
Slide 27: Pinnacle West versus Industry: Cash Flow Per Share
| Pinnacle West versus Industry | Cash Flow Per Share $ per Share 10.00 8.64 8.89 8.00 6.00 | 4.00 2.00 1997 1998 1999 2000 2001 ‘m= Pinnacle West im S&P Electric Utility Average =~ @ 2002 Pinnacle West Capital Corporation
Slide 28: Pinnacle West Financial Focus
| Pinnacle West Financial Focus >» Manage business strategies for superior shareholder value creation >» Continue superior combined earnings and dividend growth » Maintain balance sheet strength @ 2002 Pinnacle West Capital Cor
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