Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Credit Suisse First Boston Energy Summit 2005
42 slides from Pinnacle West Capital's conference presentation, Feb 2, 2005
Slide 1: Pinnacle West Capital Corporation
Pinnacle West Capital Corporation Credit Suisse First Boston Energy Summit February 2, 2005
Slide 2: Forward-Looking Statements
Forward-Looking Statements This This presentation presentation contains contains forward-looking forward-looking statements statements based based on on current current expectations, expectations, and and we we assume assume no no obligation obligation to update these statements or make any further
Slide 3: Consistent Corporate Strategy
Consistent Corporate Strategy Focus on vertically integrated utility business Maximize benefits of exceptional customer growth Maintain solid operations and reliability track record Achieve constructive regulatory outcomes Create long-term shareholder value
Slide 4: Proposed Retail Rate Settlement
Proposed Retail Rate Settlement Key Provisions Unifies generation assets built to serve APS customers through transfer of PWEC Arizona power plants to APS Mitigates risk of commodity price volatility with purchased power and fuel adjustor Positions APS to meet customer growth reliably at reaso
Slide 5: Maintaining APS Price Competitiveness
Maintaining APS Price Competitiveness APS Price Change versus CPI Cumulative Cumulative Change Change CPI 38% 40 40 30 30 20 20 10 10 00 APS 11%* (10) (10) (20) (20) '91 '91 '92 '92 '93 '93 '94 '94 '95 '95 '96 '96 '97 '97 '98 '98 '99 '99 '00 '00 '01 '01 '02 '02 '03 '03 '04 '04 ** Assuming Assuming p
Slide 6: Retail Rate Settlement Status
Retail Rate Settlement Status Hearing completed in 8 days without adverse public comment Post-hearing briefs filed January 14, 2005 ALJ recommended order expected February 2005 ACC decision expected March 2005 Retail rates to be effective after ACC decision Appropriate FERC approval to b
Slide 7: Extraordinary Population Growth
Extraordinary Population Growth 3% Arizona 2nd in U.S. in population growth 2005 growth to be 2% stronger than 2004 Vibrant single-family 1% housing market 0% 2002 2003 2004 2005 Projected Arizona U.S.
Slide 8: Accelerating Job Growth
Accelerating Job Growth Arizona 5th best in 4.0% U.S. in job growth 65,000 new jobs 2.0% created in Arizona in 2004 0.0% 2005 job growth to strengthen (2.0)% 2000 2001 2002 2003 2004 2005 Projected Arizona US
Slide 9: Translating Economic Growth into Utility Business Growth
Translating Economic Growth into Utility Business Growth 8% 6% 4% 2% 0% 2000 2001 2002 2003 2004 2005 2006 Projected Arizona Population APS Customers APS Retail Sales* * Weather normalized
Slide 10: Maintaining Top-Tier Customer Service
Maintaining Top-Tier Customer Service Excellent JD Power customer satisfaction ratings Customer service initiatives • New transmission and distribution facilities • Reliability focus • Call center and website efficiencies • Key account relationships
Slide 11: APS Delivery Capital Expenditures for Growth and Reliability
APS Delivery Capital Expenditures for Growth and Reliability $ Millions 500 400 300 200 100 0 2000 2001 2002 2003 2004 2005 2006 Projected Growth Reliability General Plant
Slide 12: Solid Generation Operating Performance
Solid Generation Operating Performance Equivalent Capacity Factors Availability Factors 100% 75% 50% 25% 0% Nuclear Coal Gas Peaking 2002 2003 2004
Slide 13: 2004 Generation Highlights
2004 Generation Highlights Palo Verde received industry award for 10 years of operational excellence Record-setting coal capacity factors Best safety record Silverhawk placed in commercial operation
Slide 14: Meeting Challenges of Peak Load Growth
Meeting Challenges of Peak Load Growth MW MW 10,000 10,000 8,000 8,000 6,000 6,000 4,000 4,000 2,000 2,000 00 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 Existing Existing Resources Resources Sundance Sundance Purchase Purchase Peaking Peaking Shortfall Shortfall Assuming proposed settlement
Slide 15: Generation Capital Expenditures for Growth and Reliability
Generation Capital Expenditures for Growth and Reliability $ Millions 700 700 600 600 500 500 400 400 300 300 200 200 100 100 00 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 Projected APS APS Generation Generation Pinnacle Pinnacle West West Energy Energy
Slide 16: Long-Term Resource Acquisition
Long-Term Resource Acquisition Sundance Power Plant 450 MW peaking capacity Pending FERC approval Target closing – Spring 2005 2005 Requests for Proposals Based on proposed retail rate settlement At least 1,000 MW of capacity for delivery beginning in 2007 100 MW renewable capacity for d
Slide 17: Operations Summary
Operations Summary Focusing on vertically integrated utility business Managing challenges of high-growth market area Maintaining solid operations and reliability Pursuing constructive regulatory treatment
Slide 18: Creating Value for Shareholders
Creating Value for Shareholders Financial Goals Positive long-term earnings and cash flow trends Cost management • Fuel and purchased power price risks • Operating and capital costs Favorable access to capital • Investment-grade credit ratings • Attractive dividend profile
Slide 19: Earnings Per Share Summary
Earnings Per Share Summary 2004 2003 Diluted Diluted EPS EPS Change Net income as reported $ 2.66 $ 2.63 $ 0.03 Unusual items: Phoenix Suns sale (0.23) - (0.23) NAC discontinued operations (0.04) (0.05) 0.01 Tax credits related to prior years - (0.19) 0.19 On-going earnings $ 2.39 $ 2.39 $ -
Slide 20: Reconciliation of Guidance to 2004 On-Going Earnings
Reconciliation of Guidance to 2004 On-Going Earnings 2004 guidance excluding Phoenix Suns gain $ 2.50 Lower than expected sales growth (0.09) Milder than normal weather (0.06) NAC discontinued operations (0.04) SunCor results 0.05 Other 0.03 On-going earnings results $ 2.39
Slide 21: Significant Factors Affecting 2004 On-Going Earnings Variances
Significant Factors Affecting 2004 On-Going Earnings Variances + Customer growth and usage + Regulatory asset amortization + Improved wholesale power marketing – New plant costs (net of gross margin) – Higher O&M costs – Higher depreciation – Milder weather – 2003 mid-year rate decrease – Contributi
Slide 22: 2005 Earnings Outlook
2005 Earnings Outlook Reasonable range around $3.00 per share Key assumptions: • Retail rate settlement approved as proposed effective March 31, 2005 • Does not reflect regulatory disallowance in proposed settlement • SunCor net income of approximately $50 million Supersedes all previous earni
Slide 23: Future Earnings Factors
Future Earnings Factors Customer growth and usage Pending ACC settlement Power supply adjustor Future regulatory decisions Western gas and power markets O&M, fuel and capital cost controls Real estate operations Other factors: • Weather • Economy
Slide 24: Consolidated Capital Expenditures
Consolidated Capital Expenditures* $$ Millions Millions 800 600 400 200 0 2004 2005 2006 Projected APS Delivery APS Generation Other Pinnacle West Energy * Excluding SunCor ** Including $190 million for Sundance acquisition
Slide 25: Achieving Long-Term Value for Investors
Achieving Long-Term Value for Investors Dividend Growth 5 -Year Total Return $1.90 $1.90 Percent Percent 100 80 60 40 20 0 (20) (40) (60) Dec Dec Dec Dec Dec Dec '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 ‘04 ‘99 ‘00 ‘01 ‘02 ‘03 PNW S&P Electrics S&P 500
Slide 26: Appendix
Appendix
Slide 27: Current Credit Ratings
Current Credit Ratings S&P Moody’s Arizona Public Service Co. Senior Unsecured Debt BBB Baa1 Secured Lease Obligation Bonds BBB Baa2 Commercial Paper A2 P2 Outlook Negative Negative Pinnacle West Capital Corp. Senior Unsecured Debt BBB- Baa2 Commercial Paper A2 P2 Outlook Negative Negative
Slide 28: Ample Liquidity Resources
Ample Liquidity Resources APS $325 million revolver through May 2007 • Support for $250 million commercial paper facility Unused long-term debt shelf capability of $600 million Pinnacle West (parent) $300 million revolver through 2007 • Support for $250 million commercial paper facility Unus
Slide 29: Required Debt Redemptions
Required Debt Redemptions $ $ Millions Millions 2004 2005 2006 APS Unsecured notes due 2/04 $ 125 $ - $ - First mortgage bonds due 3/04 80 - - Senior notes due 1/05 - 100 - Senior notes due 8/05 - 300 - Senior notes due 11/06 - - 84 Parent Company Senior notes due 2/04 215 - - Floating rate notes du
Slide 30: Arizona Corporation Commissioners
Arizona Corporation Commissioners Party Commissioner Term Commissioner Affiliation Since Expires Jeff Hatch-Miller, Chairman Republican Jan. 2003 Jan. 2009 Michael Gleason Republican Jan. 2003 Jan. 2009 Kristin Mayes Republican Oct. 2003 Jan. 2007 William Mundell Republican June 1999 Jan. 2009 Marc
Slide 31: Proposed Retail Rate Settlement
Proposed Retail Rate Settlement Major Changes in Revenue Requirements $ $ Millions Millions Original APS request $175 ROE to 10.25% versus 11.50% (36) No recovery of $234 million write-off (32) Lengthen asset depreciable lives (26) $148 million rate base disallowance (22) Miscellaneous - net 17 Prop
Slide 32: APS Track B Procurement Contracts
APS Track B Procurement Contracts Awarded May 2003 MW MW 2,000 2,000 1,500 1,500 1,000 1,000 500 500 00 2003 2003 2004 2004 2005 2005 2006 2006 PWEC PWEC PPL PPL EnergyPlus, EnergyPlus, LLC LLC Panda Panda Gila Gila River, River, LP LP
Slide 33: Average Residential Retail Price Ranking
Average Residential Retail Price Ranking Southwestern U.S. ¢/kWh ¢/kWh 15 12 Average Average 9 6 3 0 PacifiCorp PacifiCorp Salt Salt PNM PNM APS APS Nevada Nevada Tucson Tucson SD SD El El Paso Paso PG&E PG&E SCE SCE Utah Utah River River Power Power Electric Electric G&E G&E Electric Electric Proje
Slide 34: Average Commercial Retail Price Ranking
Average Commercial Retail Price Ranking Southwestern U.S. ¢/kWh ¢/kWh 15 12 9 Average Average 6 3 0 PacifiCorp PacifiCorp Salt Salt APS APS PNM PNM El El Paso Paso Nevada Nevada Tucson Tucson SD SD SCE SCE PG&E PG&E Utah Utah River River Electric Electric Power Power Electric Electric G&E G&E Projec
Slide 35: Average Industrial Retail Price Ranking
Average Industrial Retail Price Ranking Southwestern U.S. ¢/kWh ¢/kWh 15 12 9 Average Average 6 3 0 PacifiCorp PacifiCorp Salt Salt PNM PNM El El Paso Paso APS APS Tucson Tucson SD SD Nevada Nevada PG&E PG&E SCE SCE Utah Utah River River Electric Electric Electric Electric G&E G&E Power Power Projec
Slide 36: 2004 Energy Fuel Mix
2004 Energy Fuel Mix Consolidated Native Load Coal Coal Nuclear 21% Gas 44% 21% 44% 14% 14% 9% 9% Nuclear 29% 29% Gas Purchased 11% 11% Power Purchased 56% 56% Power 16% 16%
Slide 37: Pinnacle West Energy Power Plants
Pinnacle West Energy Power Plants Commercial Operation New Facilities MWs MWs Location Location June 2001 West Phoenix 4 120 Phoenix, AZ July 2002 Saguaro CT 3 80 Red Rock, AZ July 2002 Redhawk 1 and 2 1,060 Arlington, AZ July 2003 West Phoenix 5 530 Phoenix, AZ Arizona Total* 1,790 May 2004 Silverh
Slide 38: Sundance Acquisition Status
Sundance Acquisition Status 450 MW peaking capacity ACC decision January 11, 2005 •• Rate Rate base base treatment treatment toto be be considered considered in in next next rate rate case case •• Certain Certain operating operating and and capital capital costs costs may may be be deferred defe
Slide 39: Generation Capacity Factors
Generation Capacity Factors Palo Verde Site Average Coal Average 100% 100% 100% 100% 90% 90% 90% 90% 80% 80% 80% 80% 70% 70% 70% 70% 60% 60% 60% 60% ‘99 ‘99 ‘00 ‘00 ‘01 ‘01 ‘02 ‘02 ‘03 ‘03 ‘04 ‘04 ‘99 ‘99 ‘00 ‘00 ‘01 ‘01 ‘02 ‘02 ‘03 ‘03 ‘04 ‘04 Palo Palo Verde Verde Industry Industry Coal Coal Indus
Slide 40: Arizona Transmission System
Arizona Transmission System UTAH UTAH UTAH COLORADO NAVAJO SHIPROCK MEAD/ GLEN SAN JUAN MARKETPLACE/ CANYON LAS VEGAS TRIBAL FOUR LAND CORNERS MOENKOPI FLAGSTAFF MCKINLEY CHOLLA CALIFORNIA CORONADO SPRINGER- VILLE BOUSE PINNACLE PEAK CALIFORNIA WEST WING PERKINS PALO VERDE LIBERTY GREENLEE KYRENE (A
Slide 41: WECC Available Transmission Capability
WECC Available Transmission Capability 3,007 4,119 2,368 1,672 301 340 3,913 Summer 2006 estimate (MW)
Slide 42: Non-Energy Subsidiaries Overview
Non-Energy Subsidiaries Overview Objectives Assets •• Cash Cash flow flow and and profit profit potential potential to to parent parent $479 Million $35M Recent activities $35M El El Dorado Dorado •• SunCor SunCor accelerated accelerated asset asset sales sales program program •• El El Dorado Do
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