Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Investor Presentation (November 2020)
40 slides from Pinnacle West Capital's investor presentation, November 2020
Slide 1: Powering Growth, Delivering Value
POWERING GROWTH DELIVERING VALUE Investor Meetings November 2020 Powering the Future | 1
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: Pinnacle West: Who We Are
PINNACLE WEST: WHO WE ARE We are a vertically integrated, regulated electric utility in the growing Southwest United States. Our Business Our Energy Resources Pinnacle West operates Arizona Public Service Company (“APS”), our principle subsidiary Consolidated $20B Assets Arizona’s largest and longes
Slide 4: Senior Management Team
SENIOR MANAGEMENT TEAM We maintain a robust pipeline of talent to serve our complex operations and facilitate effective succession planning in a highly competitive talent environment Jeff Guldner Jim Hatfield Chairman of the Board, President and Executive Vice President, Chief Administrative “We hav
Slide 5: Building a Sustainable Future
BUILDING A SUSTAINABLE FUTURE We are working to meet business needs with practices that balance a healthy environment, a vibrant economy and strong communities for future generations Clean Affordable Building a clean energy future with our goal to deliver Delivering affordable energy for the benefit
Slide 6: Future Focus: Clean Energy Plan
FUTURE FOCUS: CLEAN ENERGY PLAN APS Clean Clean energy commitments Energy Commitment • 100% clean, carbon-free electricity by 2050 • 65% clean energy by 2030 with 45% renewable energy • End APS’s use of coal-fired generation by the end of 2031 A clean economic future • Meet our responsibility to pow
Slide 7: Coal Exit Strategy
COAL EXIT STRATEGY Navajo 315 MW Cholla 387 MW Plan to exit coal by 2025 7 years earlier Remaining 970 MW than originally by 2031 projected Coal Free 2018 2019 2025 2031 Four Corners Power Plant represented less than 8% of our total rate base as of December 31, 2019 Powering the Future | 7
Slide 8: Solar Leader
SOLAR LEADER 114,700 520 megawatts 1.6 gigawatts of interconnected utility-scale capacity total solar capacity DG systems Solar accounted for Innovative Solar, storage, up to 57% of our distributed energy EV, microgrids energy mix in 2019* projects Nationally recognized Solar R&D, Grid modernization
Slide 9: Hydrogen
HYDROGEN Palo Verde collaborates on a pilot project to explore the production of hydrogen at Palo Verde Generating Station Xcel Idaho Energy Palo Verde National Collaborators Include Energy Laboratory Harbor • The pilot program will examine the long-term cost-effectiveness of hydrogen production at
Slide 10: Customer Support
CUSTOMER SUPPORT Customer Outreach Payment Assistance Customer Advisory Board Crisis Bill Assistance • Gathers direct insight from residential • Provided to limited-income customers customers • Up to $800 per year to assist with bills • Identify customer concerns to shape • Requesting ACC approval f
Slide 11: Customer Support
CUSTOMER SUPPORT Pro-Forma Billing • On-bill rate plan analysis showing customers lowest cost plan, current month savings, and cumulative 12-month savings Payment Strategy • New payment options such as PayPal and Venmo APS Marketplace • Online tool informing customers about energy efficiency applian
Slide 12: Customer Programs
CUSTOMER PROGRAMS Demand Response (DR) Programs Energy Efficiency Program Offerings Cool Rewards Proposed programs: • 18,182 connected smart thermostats • Reduced peak demand up to 42 MW o Subscription rate pilot offering rate-optimized Storage Rewards smart thermostats to influence energy use • 33
Slide 13: Average Monthly APS Bill
AVERAGE MONTHLY APS BILL Since 2018, changes to adjustors have lowered the average residential customer’s bill $10.95 (7.31% lower) Powering the Future | 13
Slide 14: Cost Management
COST MANAGEMENT Over 15-year period, APS has experienced a steady level of customer growth while increasing operating efficiently. Powering the Future | 14
Slide 15: Economic Indicators
ECONOMIC INDICATORS Monthly Year-over-Year Employment Growth Ending August 2020 U.S. Phoenix Amazon announced 13 new sites and 3,000 5% new jobs coming to the Valley 1 0% -5% Maricopa housing permits increased over -10% 30% year-over-year for July-August 2 -15% Jan-18 Jan-19 Jan-20 Phoenix continues
Slide 16: Economic Development
ECONOMIC DEVELOPMENT FUTURE EXPANSIONS OUR APPROACH FOCUSES ON FOUR MAIN AREAS o Microsoft is constructing all three of its new mega data Business Attraction & Expansion - constructive engagement centers in the West Valley. These datacenters are with economic development community partners and timel
Slide 17: Appendix
APPENDIX Powering the Future | 17
Slide 18: Well-Funded Pension and Healthy Liquidity
WELL-FUNDED PENSION AND HEALTHY LIQUIDITY Pension Funded Status Liquidity and Financing Activity • $1.2 billion revolver capacity 102% • $600 million 30-year 3.35% APS senior unsecured notes issued May 2020 97% • $500 million 5-year 1.30% PNW senior unsecured notes issued June 2020 90% • $400 millio
Slide 19: Long-Term Debt Maturity Profile
LONG-TERM DEBT MATURITY PROFILE ($MM) 1,000 750 500 250 0 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050 APS Long-Term Debt PNW Long-Term Debt Powering the Future | 19
Slide 20: Credit Ratings and Metrics
CREDIT RATINGS AND METRICS APS Pinnacle West 2017 2018 2019 Corporate Credit Ratings1 APS FFO / Debt 29.4% 24.5% 22.5% Moody’s A2 A3 FFO / Interest 7.5x 6.5x 6.4x S&P A- A- Debt / 46.8% 47.0% 47.7% Fitch A- A- Capitalization Pinnacle West Senior Unsecured1 FFO / Debt 26.4% 22.1% 19.5% Moody’s A2 A3
Slide 21: Rate Base
RATE BASE APS’s revenues come from a regulated retail rate base and meaningful transmission business APS Rate Base Growth Total Approved Rate Base Year-End Generation & Distribution Transmission ACC FERC Long-term Rate Base Guidance: 6-7% Average Annual Growth 20% $2.3 80% $1.7 ACC FERC $1.6 Rate Ef
Slide 22: Operations & Maintenance
OPERATIONS & MAINTENANCE Goal is to keep O&M per kWh flat, adjusted for planned outages $ in millions $933 74 $870 - $890 $858 $856 40 - 50 63 48 795 859 808 830-840 2017 2018 2019 2020E PNW Consolidated ex RES/DSM 1 Planned Fleet Outages 1 Excludes RES/DSM of $91 million in 2017, $104 million in 20
Slide 23: APS Capital Expenditures
APS CAPITAL EXPENDITURES Capital expenditures will support our growing customer base and our transition to a cleaner generation mix $ in millions PROJECTED $2,000 $1,800 $1,725 $1,650 $121 $1,600 $154 $44 $53 $1,400 Traditional Generation $1,231 $1,263 $1,200 Ocotillo1 $152 $794 $185 $613 Environmen
Slide 24: Energy Storage Contribution to Reliability
ENERGY STORAGE CONTRIBUTION TO RELIABILITY • System reliability can be maintained by installing Increasing storage longer duration energy storage duration required to maintain reliability • Energy storage helps minimize the need for additional gas resources and allows for higher renewable utilizatio
Slide 25: Cumulative Peak Capacity Needs Through 2028
CUMULATIVE PEAK CAPACITY NEEDS THROUGH 2028 Merchant CC Toll (570MW) expires 4,500 Merchant CC Toll Merchant CC Toll (465 MW) expires 4,000 (565MW) expires 3,500 PAC Exchange Large resource (480MW) 3,000 expires CH 1 & 3 needs resulting retirement 2,500 (387MW) from load growth, MW data centers and
Slide 26: Residential PV Applications
RESIDENTIAL PV APPLICATIONS1 4,000 Residential DG (MWdc) Annual Additions 151 133 133 122 3,500 99 3,000 2016 2017 2018 2019 2020 2,500 2,000 1,500 1,000 500 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 Applications 2018 Applications 2019 Applications 2020 Applications 1 Monthly data equal
Slide 27: Arizona Corporation Commission
ARIZONA CORPORATION COMMISSION Terms to January 2023 Terms to January 2021 Sandra Justin Robert Boyd Lea Márquez Kennedy (D) Olson (R) “Bob” Dunn (R) Peterson Burns (R)* (R)** Chairman Other State Officials ACC Executive Director – Matthew Neubert RUCO Director – Jorge “Jordy” Fuentes *Term limited
Slide 28: 2020 Key Dates
2020 KEY DATES ACC Key Dates / Docket # Q1 Q2 Q3 Q4 Power Supply Adjustor (PSA): E-01345A-16-0036 Effective: Feb 1 Lost Fixed Cost Recovery: E-01345A-16-0036 Filed: Feb 14 Effective: May 1 Filed: May 15 Transmission Cost Adjustor: E-01345A-16-0036 Effective: Jun 1 2020 DSM/EE Implementation Plan: E-
Slide 29: Summary of Rate Case Intervenor Recommendations
SUMMARY OF RATE CASE INTERVENOR RECOMMENDATIONS APS (direct ACC Staff RUCO testimony) Total Revenue Increase $183.6 $89.7 ($20.8) (Base Rate and Adjustors) 5.6% 2.7% (0.63%) ($MM) Base Rate Increase ($MM) $68.6 ($25.3) ($135.8) ROE 10.15% 9.40% 8.74% Alt 1: 0.00% Return on Fair Value 1.00% Alt 2: 0.
Slide 30: 2019 Rate Case Rebuttal Testimony
2019 RATE CASE REBUTTAL TESTIMONY Filed November 6, 2020 Docket Number: E-01345A-19-0236 Additional details, including filing, can be found at http://www.pinnaclewest.com/investors Rebuttal Testimony Highlights Advanced Energy Mechanism - Recover clean energy investments (AEM) - Could replace the De
Slide 31: APS Rebuttal Testimony Key Financials
APS REBUTTAL TESTIMONY KEY FINANCIALS Test year ended June 30, 2019 Total Rate Base - Adjusted $11.2 Billion ACC Rate Base - Adjusted $8.9 Billion Allowed Return on Equity 10.0% Capital Structure Long-term debt 45.3% Common equity 54.7% Base Fuel Rate (¢/kWh) 3.1451 Post-test year plant period 12 mo
Slide 32: APS Rebuttal Testimony - Revenue Requirement
APS REBUTTAL TESTIMONY - REVENUE REQUIREMENT Dollars Customer Bill Impact = Net Base Rate Increase + Net Adjustor Changes Bill Impact (millions) Total Revenue Deficiency in APS’s Application $184 5.6% Base Rate Changes Net adjustments $(28) -0.9% TEAM $(119) -3.6% All other adjustor mechanisms $4 0.
Slide 33: APS Rate Case Procedural Schedule
APS RATE CASE PROCEDURAL SCHEDULE Arizona Public Service Company Docket # E-01345A-19-0236 Application Filed October 31, 2019 Staff/Intervenor Direct Testimony (October 2, 2020) Staff/Intervenor Direct Testimony (Rate Design) (October 9, 2020) APS Rebuttal Testimony (November 6, 2020) Staff/Interven
Slide 34: Arizona Utilities General Rate Cases
ARIZONA UTILITIES GENERAL RATE CASES Tucson Electric Power Company Southwest Gas Docket # E-01933A-19-0028 Docket # G-01551A-19-0055 Application Filed April 1, 2019 Application Filed May 1, 2019 Hearing Commenced (Jan 16, 2020) Staff /Intervenor Direct Testimony (Revenue) (Feb 5, 2020) Staff’s late-
Slide 35: Regulatory Mechanisms
REGULATORY MECHANISMS We have achieved a supportive regulatory structure and improvements in cost recovery timing Adopted / Mechanism Description Last Adjusted Power Supply Adjustor April 2005 / • Recovers variance between actual fuel and purchased power costs and (“PSA”) February 2020 base fuel rat
Slide 36: Regulatory Mechanisms (TCA)
REGULATORY MECHANISMS (TCA) We have achieved constructive transmission rate treatment with annual adjustments • FERC Formula Rates adopted in 2008 • Adjusted annually with 10.75% allowed ROE • Based on FERC Form 1 and projected closings • Update filed each May • Annual rate true-up compares projecte
Slide 37: Regulatory Mechanisms (TCA)
REGULATORY MECHANISMS (TCA) We have achieved constructive transmission rate treatment with annual adjustments 2019 2020 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 2018 Rates 2019 Rates (Including True-Up) (Including True-Up) 2019 Revenue 2020 Reve
Slide 38: Regulatory Mechanisms (LFCR)
REGULATORY MECHANISMS (LFCR) • Lost Fixed Cost Recovery (LFCR) was implemented as part of the July 2012 settlement • Estimated to offset 30-40% of revenues lost due to ACC-mandated energy efficiency (EE) and distributed renewable generation (DG) initiatives • Subject to an annual 1% year-over-year c
Slide 39: APS Transmission
APS TRANSMISSION Strategic transmission investment is essential to maintain reliability and deliver diversified resources to customers • 10-Year Transmission Plan filed January 2020 (115 kV and APS Transmission Plans above) • 26 miles of new 230kV transmission lines • 3 mile of new 115kV transmissio
Slide 40: Purchased Power Contracts
PURCHASED POWER CONTRACTS Contract Location Owner/Developer Status1 PPA Signed COD Term (Years) Net Capacity (MW) Solana Gila Bend, AZ Abengoa IO Feb-2008 2013 30 250 RE Ajo Ajo, AZ Duke Energy Gen Svcs IO Jan-2010 2011 25 5 SOLAR Sun E AZ 1 Prescott, AZ SunEdison IO Feb-2010 2011 30 10 310 MW Saddl
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