Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Evercore ISI Utility Conference 2021
37 slides from Pinnacle West Capital's conference presentation, Jan 14, 2021
Slide 1: Investor Presentation
Investor Presentation January 2021 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: A Refocused Company. Long Growth Runway.
THE PINNACLE WEST STORY A Refocused Company. Long Growth Runway. 1 2 3 4 5 A refocused Favorable Shift to Strong Clear strategic company market dynamics clean financial profile priorities 3
Slide 4: Arizona's Largest Electric Company
AT A G L A N C E Arizona’s Largest Electric Company Service Territory1 Key Facts as of Dec. 31, 2019 Utah Colorado Nevada Arizona FARMINGTON FOUR Consolidated assets $18B LAS VEGAS CORNERS Revenues $3.5B KINGMAN FLAGSTAFF WINSLOW HOLBROOK Market cap ~$9B CHOLLA Generating capacity owned BAGDAD Calif
Slide 5: Attractive Customer Mix and Shifting Generation Profile
Attractive Customer Mix and Shifting Generation Profile Energy Mix Retail Sales Mix – Will Shift Going Forward Demand Side Other Management 6% 17% Gas 28% Purchased 6% Residential 51% Renewable 12% Commercial & Industrial 43% Coal 14% Nuclear 23% 5
Slide 6: Building on a Strong Performance Track Record
Building on a Strong Performance Track Record Reducing Safety Affordable Customer Operating Residential Reliability Profile Energy Growth Costs Bills Last 25 Years 75% 34% CPI* APS Top Quartile 25 years 7.3% Top Quartile 1.8%+ Flat consistent residential rates decline in invest >$1B average operatin
Slide 7: Solid Underlying Financial Performance – Goal is More Consistent Growth
Solid Underlying Financial Performance – Goal is More Consistent Growth Net Income Adjusted EPS Rate Base ($M) ($) ($B) $4.77 $538M $4.54 $511M $4.35 $10.3B $489M $9.3B $8.6B 2017 2018 2019 2017 2018 2019 2017 2018 2019 7
Slide 8: Entering a New Era
Entering a New Era Prior to 2019 2019-2020 2021+ Build Transformation New Focus • Built Arizona’s leading power • New culture and clean • Investing in clean energy, utility with strong performance energy goals stakeholder alignment and track record – Lean principles supporting innovation customer af
Slide 9: Building the New Pinnacle West
Building the New Pinnacle West Focus Past Future Customer Experience Average Best in Class Priority / Clean Energy Moderate accelerating Regulatory Challenging Aligned Relations Earnings Strong / Strong / Performance Inconsistent More consistent 9
Slide 10: Leading ESG Practices Guide Our Approach – Snapshot
Leading ESG Practices Guide Our Approach – Snapshot Environmental Social Governance Only North American electric Top quartile employee safety 40% of independent directors utility on CDP A List for gender or ethnically diverse Water and Climate¹ 82% employee satisfaction vs. 76% for industry ESG exec
Slide 11: Recent Positive Results Show Evidence of Repositioning
Recent Positive Results Show Evidence of Repositioning Improved regulatory transparency − delivered on customer issues Improving J.D. Power customer rankings − #1 most improved large utility residential customer rating − business customer rating rises to second quartile Improved customer experience
Slide 12: A Refocused Company. Long Growth Runway.
THE PINNACLE WEST STORY A Refocused Company. Long Growth Runway. 1 2 3 4 5 A refocused Favorable Shift to Strong Clear strategic company market dynamics clean financial profile priorities 12
Slide 13: Fast Growing Service Territory
Fast Growing Service Territory Annual Employment Growth Last Three Years¹ Steady Housing Growth2 Single Family & Multifamily Housing Permits Maricopa County 3% 32,000 17% 2% CAGR 6,582 National Arizona '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20E Arizona – Third fastest growing state ¹ 2017-2019 13
Slide 14: System Supports High Tech Growth in Economy
System Supports High Tech Growth in Economy Our Approach: Supports Influx of Tech Focus on Four Main Areas and Data Centers – Examples • Microsoft – constructing 3 new mega • Business attraction and expansion data centers • Taiwan Semiconductor – plans to build $12B • Community development factory •
Slide 15: A Refocused Company. Long Growth Runway.
THE PINNACLE WEST STORY A Refocused Company. Long Growth Runway. 1 2 3 4 5 A refocused Favorable Shift to Strong Clear strategic company market dynamics clean financial profile priorities 15
Slide 16: Our Clean Energy Plan
Our Clean Energy Plan Commitments 1 100% clean, carbon-free electricity by 2050 2 65% clean energy by 2030 with 45% renewable energy 3 End APS’s use of coal-fired generation by end of 2031 Pathway 2005 2019 2030 2050 24% 50% 65% 100% 16
Slide 17: Coal Exit Strategy – 7 Years Earlier than Originally Projected
Coal Exit Strategy – 7 Years Earlier than Originally Projected Navajo 315 MW (now retired) Cholla 387 MW 2025 Remaining Four Corners 970 MW 2031 2018 2019 2025 2031 2038 Coal Free 17
Slide 18: Coal Exit and Expiring Purchase Contracts Will Create a 6,000 MW Supply-Demand Gap by 2035
Coal Exit and Expiring Purchase Contracts Will Create a 6,000 MW Supply-Demand Gap by 2035 Peak Capacity (MW) 12,000 10,000 6,000 MW¹ 8,000 Closing the gap Existing / Signed - opportunity Contracts 6,000 4,000 Existing Owned 2,000 Resources 0 2020 2023 2026 2029 2032 2035 ¹ Will need more additions
Slide 19: Key New Energy Sources to Achieve Goals
Key New Energy Sources to Achieve Goals Initiatives Resource Mix Change Today 2035 • Solar generation Coal 14% 0% • Wind generation Gas 28% 6%-17% • Gas as a bridge fuel • Demand-side management Nuclear 23% 16% • Energy storage solutions Purchased 6% 11% • Innovation Renewable/ 29% 56%-67% DSM 19
Slide 20: Energy Storage A Key Element of Our Renewal Energy Plan
Energy Storage A Key Element of Our Renewal Energy Plan Daily Energy Usage Storage Advantages MW 9,000 Absorbs negative priced excess energy at noon 8,000 Provide opportunity Store solar to save customers Discharge more through the energy at stored energy 7,000 midday Energy Imbalance during evening
Slide 21: Advancing On Path to 100% Clean Energy – Three Year Capital Plan of $4.64B
Advancing On Path to 100% Clean Energy – Three Year Capital Plan of $4.64B1 $1.73B $1.65B Clean Generation Traditional Generation $1.23B $1.26B $613 $794 Environmental $141 Transmission $168 $152 Distribution $199 $39 $154 $27 $173 $53 $121 Other $44 $179 $201 $205 $588 $521 $444 $446 $137 $170 $185
Slide 22: Shift to Clean Energy is a Win, Win, Win, Win
Shift to Clean Energy is a Win, Win, Win, Win WIN for WIN for WIN for WIN for EPS relations with clean air customers growth regulators • Lower carbon • Maintain • Aligned goals • Expanded affordability capital base 22
Slide 23: A Refocused Company. Long Growth Runway.
THE PINNACLE WEST STORY A Refocused Company. Long Growth Runway. 1 2 3 4 5 A refocused Favorable Shift to Strong Clear strategic company market dynamics clean financial profile priorities 23
Slide 24: Strong Balance Sheet – Pinnacle West
Strong Balance Sheet – Pinnacle West Debt to Capitalization Corporate Credit Ratings1 (2019) (2019) Moody’s A3 52.1% S&P A- Debt/Cap Fitch A- 1 We are disclosing credit ratings to enhance understanding of our sources of liquidity and the effects of our ratings on our costs of funds. FFO/Debt: 19.5%
Slide 25: Well-Balanced Long-Term Debt Maturity Profile
Well-Balanced Long-Term Debt Maturity Profile $M $1,200 $1,000 $800 $600 $400 $200 $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 As of December 31, 2020 25
Slide 26: Increased Dividend, 9 Year History of Increases
Increased Dividend, 9 Year History of Increases1 Indicated Annual Dividend – Year End $3.32 $3.13 $2.95 $2.78 $2.62 2016 2017 2018 2019 2020 1 Future dividends are subject to declaration at Board of Directors’ discretion. 26
Slide 27: A Refocused Company. Long Growth Runway.
THE PINNACLE WEST STORY A Refocused Company. Long Growth Runway. 1 2 3 4 5 A refocused Favorable Shift to Strong Clear strategic company market dynamics clean financial profile priorities 27
Slide 28: Clear Strategy Going Forward
Clear Strategy Going Forward 1 2 Deliver Ensure superior exceptional customer reliability and operating service performance 4 3 Make intelligent Maintain strong investments to support Customer Focused credit ratings and a growing Arizona financial health 28
Slide 29: Bringing the Residential Customer into the Advanced Economy
E X A M P L E O F I N N O VAT I O N I N N I T I AT I V E Bringing the Residential Customer into the Advanced Economy Initiatives Potential Impact Demand Savings During • Award-winning program to promote installation Peak Afternoon Window of advanced smart thermostats – reduces demand during 3-8 pm p
Slide 30: Customer Driven Initiatives Underway – A Few Examples
Customer Driven Initiatives Underway – A Few Examples Take Charge AZ Customer Advisory Board Energy Efficiency • Pilot program to encourage • Gathers direct insight from • Demand response programs electric vehicle adoption by residential customers to reward shift of energy installing charging statio
Slide 31: Pilot Project Exploring Hydrogen as Potential Solution for Long Duration Storage
E X A M P L E O F I N N O VAT I O N I N N I T I AT I V E Pilot Project Exploring Hydrogen as Potential Solution for Long Duration Storage Profile of Project Possible Scenario for Palo Verde Nuclear Plant Collaborators • Palo Verde nuclear plant and Idaho National Power from Laboratory storage to gri
Slide 32: Key Value Drivers Going Forward
Key Value Drivers Going Forward Longer Term Next 3-5 Years • Investment in utility-owned clean Next 6-12 months energy resources • Concurrent recovery for those • 2019 Rate Case resources (decision expected mid-2021) – Seek regulatory approval for an • Financing needs to support adjustor mechanism t
Slide 33: Outlook: Steady Growth in Rate Base
Outlook: Steady Growth in Rate Base APS Rate Base Growth (Year End) 6-7% Long-Term CAGR Plan to $13.0B continue dividend $10.3B growth1 $9.3B 1 Future dividends are subject to declaration 2018 2019 2022 at Board of Directors’ discretion. Expect annual renewable additions of 300-500MW 2022-2030 33
Slide 34: A Refocused Company. Long Growth Runway.
IN SUMMARY A Refocused Company. Long Growth Runway. 1 2 3 4 5 A refocused Favorable Shift to Strong Clear strategic company market dynamics clean financial profile priorities 34
Slide 35: Appendix
PINNACLE WEST CAPITAL CORPORATION Appendix
Slide 36: Effective COVID-19 Response for Customers and Employees
Effective COVID-19 Response for Customers and Employees Customer and Community Relief Fund Provided more than $15M in pandemic aid Customer Support Initiatives Suspended disconnects, waived late fees Employee Safety New procedures, physical distancing 36
Slide 37: ESG Leadership – Recognition
ESG Leadership – Recognition OUTSTANDING NAACP Environmental ACHIEVEMENT Maricopa County Branch Sustainability CLIMATE WATER and Governance Emerging Tools Corporation “A” rating¹ & Technologies of the Year 2019 HIRE Platinum Medallion Named to the annual ranking of the world’s Award 2018-2020 Top 10
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