Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Non-Deal Roadshow (October 2018)
31 slides from Pinnacle West Capital's roadshow presentation, Oct 3, 2018
Slide 1: Powering Growth, Delivering Value
POWERING GROWTH DELIVERING VALUE Investor Meetings l October 3, 2018 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: 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 6%, subject to declaration at fundamentals r
Slide 4: Sustainability
APS’s vision is to create a SUSTAINABILITY sustainable energy future for Arizona Progress and Achievements Five critical areas of our sustainability efforts Carbon Management Nuclear and Operating Committee charter Plan to reduce carbon intensity by 23% over the next 15 years was amended in 2018
Slide 5: Clean Energy
Clean energy plays an important CLEAN ENERGY role in meeting Arizona’s energy needs today Looking ahead to Arizona’s growing population and expanding economic activity, APS continues supporting resources and technology to ensure our energy is clean, reliable and affordable for all Arizonans The Palo
Slide 6: Customer Programs
CUSTOMER Programs that benefit both the PROGRAMS Company and customers Smart Thermostats with Demand Response and Pre-Cooling Customer Benefits • Bill credit of $25/year in exchange for demand response APS Benefits • Partner with customers to reduce system load during peak periods Behind the Meter B
Slide 7: Demand Side Management (DSM)
DEMAND SIDE 2018 DSM Plan shifts the focus to align with APS’s changing MANAGEMENT (DSM) resource needs School Bus Electrification • Pilot program to electrify school buses that can charge in the middle of the day Managed EV Charging Program • Fleet, workplace and multifamily charging infrastructure
Slide 8: Arizona Proposition 127
ARIZONA Significant capital investment requirements would increase PROPOSITION 127 customer bills Ballot Initiative Proposal • Constitutional mandate for 50% renewable energy by 2030 • Excludes clean energy resources such as nuclear Potential Impacts if Implemented • Additional 5,500 MW of new resou
Slide 9: Renewable Resources
RENEWABLE APS has been supporting solar RESOURCES energy for more than 60 years APS Solar Portfolio* APS currently has 1,658 MW of renewable resources: Owned PPA 239 MW 310 MW • Solar* 1,339 MW • Wind 289 MW DG 790 MW • Biomass 14 MW • Geothermal 10 MW • Biogas 6 MW Owned solar includes 170 MW AZ Su
Slide 10: APS Solar
Providing more renewable energy APS SOLAR and technology to all customers APS Solar Partner Program (Installations Complete) • Installed 10 MW of APS-owned residential photovoltaic systems with advanced controllable inverters that can vary power output • 4 MWh of grid-tied battery storage on two of
Slide 11: Storage Projects
Energy storage is an important STORAGE PROJECTS part of our Integrated Resource Plan 2018 Battery Storage RFP • Up to 106 MW located on APS solar plant sites • Utility owned • Anticipated in service by June 2020 Punkin Center Battery Storage Project • 2 MW / 8 MWH lithium ion battery • Placed in ser
Slide 12: Resource Planning
RESOURCE PLANNING* 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
Slide 13: Appendix
APPENDIX Powering Growth, Delivering Value
Slide 14: Senior Management Team
SENIOR Our management team has more than 100 combined years of MANAGEMENT creating shareholder value in the TEAM energy industry Don Brandt Jim Hatfield Chairman of the Board, President and Executive Vice President and Chief Executive Officer, Pinnacle West & APS Chief Financial Officer, Pinnacle We
Slide 15: APS Capital Expenditures
APS CAPITAL Capital expenditures are funded primarily through internally EXPENDITURES generated cash flow ($ Millions) Other $1,341 $99 $1,211 $1,181 $1,153 Distribution $82 $117 $115 $419 Transmission $450 Renewable $519 $630 $174 Generation $3 $193 $148 Environmental1 $12 $83 $203 $176 $235 $120 $
Slide 16: Distribution Grid Investments
DISTRIBUTION GRID Grid Operations and Investment Projected $1.6 billion from 2018- INVESTMENTS 2020 Customer Growth Grid Modernization Run and Maintain Approximately 51% of distribution capex Approximately 9% of distribution capex Approximately 40% of distribution capex R T Reclosers – Supervisory A
Slide 17: Operations & Maintenance
OPERATIONS & Goal is to keep O&M per kWh flat, MAINTENANCE adjusted for planned outages ($ Millions) $905 - $925 $848 $858 75 - 85 72 63 830 - 840 776 795 1 1 2016 2017 2018E 2 PNW Consolidated ex RES/DSM Planned Fleet Outages 1 Reclassified to reflect the adoption of the new accounting requirements
Slide 18: Tax Reform
Tax Cuts and Jobs Act provides TAX REFORM benefits to both our customers and shareholders Regulatory Steps Timing Impacts • Received ACC approval of $119 million annual rate • The impact of the lower federal income tax rate is reduction reflecting lower corporate tax rate through based on our quarte
Slide 19: Economic Indicators
ECONOMIC Arizona and Metro Phoenix remain attractive places to INDICATORS live and do business Year over Year Employment Growth Maricopa County ranked #1 in U.S. for U.S. Phoenix population growth for second straight year - U.S. Census Bureau March 2018 5.0% 4.0% Arizona is a top 5 state in personal
Slide 20: Economic Development
ECONOMIC Arizona’s focus on economic development continues to support DEVELOPMENT growth in the state 2017 APS partnered with Greater Phoenix Economic Council and Arizona Commerce Authority to welcome 21 new companies to the state, adding an estimated: • 39.8 MW • 4,300 new jobs • $659.9M in capital
Slide 21: Rate Base
APS’s revenues come from a RATE BASE regulated retail rate base and meaningful transmission business APS Rate Base Growth Total Approved Rate Base Year-End ACC FERC Generation & Distribution Transmission Rate Base Guidance: 6-7% Average Annual Growth Rate 17% $1.8 83% $1.4 ACC FERC Rate Effective Da
Slide 22: Balance Sheet Strength
BALANCE SHEET STRENGTH Long-Term Debt Maturity Schedule Credit Ratings1 ($Millions) • APS Senior Unsecured: A- or equivalent ratings or better at S&P, Moody’s and Fitch $600 • PNW Senior Unsecured: BBB+ or $500 equivalent ratings or better at S&P, Moody’s and Fitch $400 $300 2018 Major Financing Act
Slide 23: Credit Ratings and Metrics
CREDIT RATINGS AND Credit metrics remain a key focus METRICS Pinnacle APS 2012 2013 2014 2015 2016 2017 West Corporate Credit Ratings1 APS Moody’s A2 A3 FFO / Debt 27.7% 31.5% 27.5% 29.7% 26.5% 26.9% S&P A- A- FFO / Interest 4.8x 5.6X 5.5x 5.8x 5.0x 5.2x Debt / Fitch A- A- 50.7% 47.7% 45.3% 45.8% 47
Slide 24: Ocotillo Modernization Project and Four Corners SCRs
OCOTILLO MODERNIZATION PROJECT AND FOUR CORNERS SCRs • Included in the 2017 Rate Review Order1, 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 wit
Slide 25: Four Corners SCR Step Increase
FOUR CORNERS SCR Hearing began on September 5, STEP INCREASE 2018 Key Components of APS’s Filed Request Financial Cost of Capital Bill Impact • Consistent with prior • 7.85% Return on Rate • Rate rider applied as a disclosed estimates Base1 percentage of base rates – Weighted Average Cost for all ap
Slide 26: Arizona Corporation Commission
ARIZONA CORPORATION COMMISSION Terms to January 2019 Terms to January 2021 Tom Justin Bob Boyd Andy Forese (R) Olson (R)** Burns (R)* Dunn (R) Tobin (R) Chairman Other State Officials ACC Interim Executive Director – Matthew Neubert RUCO Director – David Tenney * Term limited - elected to four-year
Slide 27: 2018 Key Dates
2018 KEY DATES ACC Key Dates / Docket # Q1 Q2 Q3 Q4 Lost Fixed Cost Recovery Filed Feb 15 E-01345A-11-0224 Transmission Cost Adjustor Filed May 15 E-01345A-11-0224 Implemented Jun 1 2019 DSM/EE Implementation Plan Dec: File 2019 Plan E-01345A-18-0105 Jun 12: 2018 RES Plan 2019 RES Implementation Pla
Slide 28: Residential PV Applications
Residential DG (MWdc) Annual Additions 150 RESIDENTIAL PV 133 89 74 APPLICATIONS1 51 57 44 18 22 10 2009 2012 2014 2016 2018 YTD 4,000 3718 3432 3,500 3,000 2464 2143 2427 2,500 1944 2033 2,000 1818 1561 1602 1426 1413 1453 1442 1434 1,500 1267 1291 1283 1153 1235 1364 1001 1002 954 1157 1349 1,000
Slide 29: The "Duck Curve"
Distributed generation is changing THE “DUCK CURVE” the load shape of the grid Current Spring Day Spring Day 2022 Excess renewables create 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 2,000
Slide 30: APS Transmission
Strategic transmission investment is essential to maintain reliability APS TRANSMISSION and deliver diversified resources to customers • 10-Year Transmission Plan filed January 2018 (115 kV and above) – 52 miles of new lines – 13 bulk transformer additions Flagstaff • Also includes: – Sun Valley-Mor
Slide 31: Investor Relations Contacts
INVESTOR RELATIONS CONTACTS Stefanie Layton Director, Investor Relations (602) 250-4541 stefanie.layton@pinnaclewest.com Michelle Clemente (602) 250-3752 michelle.clemente@pinnaclewest.com Pinnacle West Capital Corporation P.O. Box 53999, Mail Station 9998 Phoenix, Arizona 85072-3999 Visit us online
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