Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Investor Day (April 2002)
56 slides from Pinnacle West Capital's investor day presentation, Apr 22, 2002
Slide 1: April 23-24, 2002
April 23-24, 2002 dif-fereeneti-ate PINNACLE WEST CAPITAL CORPORATION
Slide 2: Forward-Looking Statements
Forward-Looking St: This presentation contains forward-looking statements based on current expectations and the company assumes no obligation to update these statements. Because actual results may differ materially from expectations, the company readers not to place undue reliance on these statement
Slide 3: Presentation Agenda
Presentation Agenda Strategic overview Western power market oven Power marketing and hedging Regulated delivery issues Generation operations and expansion Financial objectives and results ® 2002 Pinnacle Wes
Slide 4: Chairman's Strategic Overview
Slide 5: Western Power Market Overview, Marketing & Trading and Hedging
Western Power Market Overview Marketing & Trading and Hedging
Slide 6: Western power market prices
2002. iia May rege CIM e Ui eet oS fe NI
Slide 7: Natural gas prices
SIMMBTU 10 JFMAMJJASONDJFMAMJJASOND 2001 2002. @ =
Slide 8: Gas to power price ratio
MMBTUIMWh 80 40 JFMAMJJASONDJFMAMJJASOND 2001 2002. *Based on Pala Verde on-peak electri @ 2002 Pinnade West CoRMEOORHCT Ti
Slide 9: Western Power Market Influences
Western-Poy Influences e Regulatory pressures flatten spark spreads « FERC market interference California DWR contracts and issues ® 2002 Pinnacle Wes =
Slide 10: Enterprisewide hedge strategy
MWs 8,000 i ms Hedge 6,000 a a Sa mm West Phoenix 5 = Saguaro pa mm Redhawk 1 & 2 2,000 == Existing Resources — Retail Peak Load Enterprisewide fetes Strategy 2002 2003 2004 @ 2002 Pinnacle West CAPIESINGBHBoRStion™
Slide 11: Supply requirements
im Requirements = Current Supply 2002 2003 2004 (Remaining) @ 2002 Pinnacle West CAPIESINGBHBoRStion™
Slide 12: El Paso FERC Issues
ELPaso FERC Issues Arizona companies signed firm contracts California shippers contesting firm requirements contracts Staff recommendation would reduce Arizona rights Technical conference @ 2002 Pi
Slide 13: Regulatory Update
Slide 14: APS filed with ACC in October 2001
APS filed with ACC in October 2001 requests for: # — Variance from competitive k ing requirements — Approval of purchase power agreement Hearing to begin on April 29, 2002 Major issues — Competitive bidding amounts — Purchase power agreement pricing — Certain terms and conditions — Market power @ 20
Slide 15: Generation asset transfer
e Generation asset transfer — Still required by end of 2002 . — ACC Staff has recommended “stay” pending outcome of generic proceedings e« Related developments — ACC generic review proceedings on electric restructuring — Panda show-cause motion on bidding
Slide 16: Electric Competition Rules re-look
e All three commissioners desire to “re-look” at Electric Competition Rules a e Interested parties have responded to commissioners’ questions e« ACC Staff report recommends continued wholesale/retail competition, but also unspecified rule changes @ 2002 Pinnacle West CCSEsIRAINEIGG SCOT
Slide 17: ACC Generic Review of Electric Restructuring
ACC Generic-Re: Bee ‘pe Electric Restructuring e ACC staff urges commission review in six specific areas ¥ - ACC monitoring of market conditions and market power — Competitive bidding process guidance — Alternatives to generation asset transfers — Transmission constraints — Adjustor mechanisms for s
Slide 18: Related Regulatory Matters
Related toR Regula, Matters « 1999 APS Settlement Agreement — Affirmed by Arizona oun e Electric Competition Rules — Declared unconstitutional by Arizona Superior Court — Still in effect pending review by Arizona Court of Appeals @ 2002 Pi
Slide 19: Regulated Delivery Update
Slide 20: WestConnect RTO
West-Connect—R1TO weston Cheyenne Light, Power Admini Fuel & Power Co, Arizona Public Service Co. Arzona Elecbig Power Coop, ne. Tucson Elect Power Co ' © 2002 Pinnacle West Capital\corporation
Slide 21: WestConnect filing made October 15, 2001
Filing made October 15, 2001 No action by FERC to date Filing parties — Arizona Public Service — El Paso Electric — Public Service of New Mexico — Tucson Electric Power @ 2002 Pi
Slide 22: Entities supporting the filing
e Entities supporting the filing — Salt River Project ra — Washington Area Power Administration — Southwest Transmission Corporation e Discussions with Translink and Public Service of Colorado ® 2002 Pinnacle Wes
Slide 23: Capitalize on superior customer growth
e Capitalize on superior custom @ 2002 Pi
Slide 24: Superior Retail Customer Growth
Superior-Retail-Customer Groy iit Percent 4.0 2 4 ™=EAPS — Industry Average 1997 1998 1999 2000 2001 2002 2003 2004 Estimates © 2002 Pinnacle West Capital\corporation
Slide 25: @ 2002 Pi
@ 2002 Pi
Slide 26: Overall Customer Satisfaction
Overall Customer Satisfaction Index 103 , A 2 of 10 Power Quality & Reliability 103 97 3 of 10 Company Image Price & Value Billing & Payment Customer Service J.D. Power Performance ‘Compa I West APS _Region_ 105 93 2 of 10 104 93 2 of 10 107 97 1 of 10 @ 2002 Pinnade West COUREMENROOICT 0
Slide 27: Capitalize on superior customer growth
Capitalize on superior customer growth Maintain high customer si ction: Provide reliable service @ 2002 Pi
Slide 28: Retail Customer Strategy
Retail-Custem ¢ Capitalize on superior customer growth e Maintain high customer satisfaction e « Provide reliable service Achieve constructive regulatory plan @ 2002 Pi
Slide 29: Power Markets and Regulated Delivery Summary
Power Markets, and Regulated Delivery ‘Summary Superior retail customer growth continues Western market conditions provide challenges, yet opportunities, for marketing and trading results Hedging manages risks of power and fuel procurement Constructive regulatory outcomes being sought — @ 2002 Pinna
Slide 30: Generation Overview
Generation Overview
Slide 31: Pinnacle West Generation
Pinnacle West.G e Existing generation e Generation exaflfion e Market position
Slide 32: Pinnacle West generation capacity
14,000. Pinnacle West = Operated lanned der Construction isting
Slide 33: Production cost $/MWh vs national average
$IMWh 25 20 19 18 LJ 410 1995 2000 imi Pinnacle West _ —National Average @ 2002 Pinnacle West CAPIESINGBHBoRStion™
Slide 34: Plant capacity factors vs national average
50% National Average Oe 60% National Average 50% + ‘95 ‘98 ‘97 ‘98 ‘99 ‘00 ‘D1 ‘02 ‘95 96 '97 98 ‘99 ‘0D ‘D1 ‘02 > Year-to-date April 15, 2002
Slide 35: Plant performance
e Coal plant performance . — Surpassed generation records in 2001 — 2001 capacity factor of 84% e Gas units — High availability — West Phoenix CC4: 99.8% availability e Nuclear performance — Fourth consecutive INPO 1 — Met the challenges of two simultaneous outages
Slide 36: Palo Verde Refueling
Palo Verde-Refuelit e Unit 2 - Spring 2002 — Reactor vessel head inspection complete - no repairs required — Modifications made for steam generator replacement in Fall 2003 e Unit 1 - Fall 2002 — Reactor vessel head inspection — Steam generator chemical cleaning —_
Slide 37: Control element
trol Element ‘Mechanism || 3/8 inch stainless steel cladding
Slide 38: Steam Generator Replacement
Steam-Generator_ Replacement © 2002 Pinnacle West Capital\corporation
Slide 39: Copper Eagle
Copper Eagle Drilling, testing, analysis Negotiate bids for storage capaci d First Prepare permits Targeted Cavern Project in approval operation
Slide 40: Disciplined, flexible expansion
e Disciplined e Flexible to meet load gro @ 2002 Pi
Slide 41: Growing Generation Capability
Pinnack Growing Generation Capability Commercial Operation New Facilities MWs 2001 West Phoen 120 2002 Redhawk 1 & 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
Slide 42: Capacity vs peak load plus reserves
MWs 10,000 -Peak load plus reserves 7,500 Redhawk 3,4 aE silverhawk sone Redhawk Phoenixs West Saguaro Phoenix 4 2,500 0 2001 2002 + ©2003 :«=- 2004 «2005 += «2008 ©2007 = @ 2002 Pinnacle West CAB epeoretion
Slide 43: Generation vs peak load with reserves
MWs 75,000 60,000 Z i tl i 30,000 + 2002 2003 2004 2005 2006 ‘mm Existing Generation 1mm New Generation Peak Load with Reserves = ® 2002 Pinnacle West
Slide 44: Dependable, stable supply mix
e Dependable, stable supply mix e PNWwill benefit from the market during low hydro or high gas years Juclear Coal as Hydro @ 2002 Pinnacle West’
Slide 45: Total Generation Cost
Pinnacle-W. Total Generation Cost SIMWh 75 a Pinnacle Regional West Merchants 50 25
Slide 46: Generation Summary
Generation Summary e Favorable fuel mix « Competitive production ae e Top nuclear and coal production e High plant reliability Disciplined expansion plan @ 2002 Pi
Slide 47: Financial Objectives and Results
Financial Objectives and Results @ 2002 Pinnacle West Capea
Slide 48: Three Months Ended March
Three Months Ended March 31 $ per share 0.75 $0.73 0.50 0.25 0.00 2002 @ 2002 Pinnacle West CORINERIOOIUC 0
Slide 49: Earnings Drivers 2002 - 2003
Earnings Drivers 2002 - 2003 Strong retail customer growth Reversal of 2001 reliability program costs Regulatory asset amortization Retail price reductions Power marketing and trading results Regulatory and legislative developments SFAS No. 133 Weather effects Economic conditions @ 2002 Pinnacle Wes
Slide 50: Realized margin
$ Millions 250 200 450, "Realized margin $40M @ 2002 Pinnade West COUREMENROOICT 0
Slide 51: Pinnacle West versus S&P Electric Utilities
Pinnacle West-versus In $ per Share 10.00 Cash Flow Per Share 6.00 4.00. 2.00. 0.00. 1997 1998 1999 2000 2001 = Pinnacle West ‘a S&P Electric Utilities —_—_— © 2002 Pinnacle West Capital Corporation
Slide 52: Compound Annual Growth Rate
Compound Annual Growth Rate 15% 10% 5% 0% 5% I Pinnacle West 10% 15% 20% 25% Excludes companies that eliminated their dividends during the period
Slide 53: Consolidated Debt Ratio
Pinnacle-West Consolidated Debt Ratio* 2004 Target of < 55% 60%: yA | 50%. 40%. 30% | vA | Va 2000 2001 2004 * Adjusted for Palo Verde unit 2 saleleaseback © 2002 Pinnacle West Capital\corporation
Slide 54: Managing Growth with Financial Strength
Managing Growth with Financial Strengt) Capital Expenditures Financing Requirements $ Millions $ Millions 1,200 900 2001 = Other = Generation Expansion = Existing Generation = Delivery 2002 2003 2004 2001 2002 2003 2004 = Net New Financing = Redemptions ® 2002 Pinnacle West
Slide 55: Pinnacle West Strategy
Pinnacle-Westin: Manage business strategies for superior shareholder value gugaton Continue superior combined earnings and dividend growth Maintain balance sheet strength @ 2002 Pi
Slide 56: Closing quote from 2001 Annual Report
“As a company, we strive to remain flexible in the face of changing markets, yet unwavering ete commitments to increasing customer satisfaction and shareholder value.” — Pinnacle West 2001 Annual Report Letter to Shareholders dif-fereeneti-ate PINNACLE WEST CAPITAL CORPORATION — ® 2002 Pinnacle Wes