Slide 1: 2nd Quarter 2011 Results
PK PINNACLE \WVEST CAPITAL CORPORATION 24 Quarter 2011 Results
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements based on current expectations, including statements regarding our 2011 earnings outlook. These forward-looking statements are often identified by words such as “estimate,” “predict,” “may,” “believe,” “plan,” “expect,”
Slide 3: Amounts Attributable to Common Shareholders and Non-GAAP Financial Measures
Amounts Attributable to Common Shareholders and Non-GAAP Financial Measures In this presentation, references to net income and earnings per share refer to amounts attributable to common shareholders. We present “regulated electricity segment gross margin” per diluted share of common stock. Regulated
Slide 4: CFO Agenda
CFO Agenda 2nd Quarter Results Arizona Economic Outlook 2011 Earnings Guidance Credit Ratings, Liquidity and Financing Activities Second Quarter 2011 4
Slide 5: Consolidated EPS Comparisons
Consolidated EPS Comparisons 2nd Quarter 2011 vs. 2nd Quarter 2010 Net Income On-Going Earnings Per Share Per Share $1.20 $1.20 $1.07 $1.00 $1.00 $0.79 $0.82 $0.80 $0.78 $0.80 $0.60 $0.60 $0.40 $0.40 $0.20 $0.20 $0.00 $0.00 2011 2010 2011 2010 Second Quarter 2011 5
Slide 6: Non-GAAP EPS Reconciliation
Non-GAAP EPS Reconciliation 2nd Quarter 2011 vs. 2nd Quarter 2010 2nd Qtr 2nd Qtr 2011 2010 Change EPS as reported $ 0.79 $ 1.07 $ (0.28) Adjustment: Discontinued operations, primarily related to APS Energy Services (0.01) (0.25) 0.24 On-going EPS $ 0.78 $ 0.82 $ (0.04) Second Quarter 2011 6
Slide 7: On-Going EPS Variances
On-Going EPS Variances 2nd Quarter 2011 vs. 2nd Quarter 2010 Taxes other than O&M* income taxes $0.03 $(0.05) Regulated electricity gross margin* Net $0.01 Decrease Depreciation $(0.04) and amortization $(0.02) Other, net $(0.01) = * Excludes costs, and offsetting operating revenues, associated with
Slide 8: Regulated Electricity Gross Margin Drivers
Regulated Electricity Gross Margin Drivers 2nd Quarter 2011 vs. 2nd Quarter 2010 Weather Other, net effects $0.01 $(0.02) Line extension revenues $0.01 Higher retail Transmission usage rate decrease $0.02 $(0.01) Net Increase $0.01 = See non-GAAP reconciliation in Appendix. Second Quarter 2011 8
Slide 9: Weather Indicators
Weather Indicators 2nd Quarter 2011 vs. 2nd Quarter 2010 Actuals vs. 10-Year Average Residential Cooling Degree-Days* Average Humidity 600 20% 18% 512 500 16% 15% 14% 400 375 381 27% 300 below 10% normal 200 5% 100 0 0% 2Q 2011 2Q 2010 10-Year Average * 80° F. base Second Quarter 2011 9
Slide 10: Arizona Economic Indicators
Arizona Economic Indicators Employment & Consumer Spending Non-Farm Job Growth Consumer Spending Month-to- Year-over- Month Change Year Change 2.0% 25% 1.5% 20% 15% 1.0% 10% 0.5% 5% 0.0% 0% (0.5)% (5)% (10)% (1.0)% (15)% (1.5)% (20)% (2.0)% (25)% ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘
Slide 11: Consolidated On-Going EPS Outlook
Consolidated On-Going EPS Outlook As of August 2, 2011 Per Share $3.50 $3.03* $3.00 $2.75 – $2.90** $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 2010 2011 Guidance * Reflects 2011 reclassification of APS Energy Services as discontinued operation. **See key factors and assumptions in Appendix. Second Quarter
Slide 12: Credit Ratings
Credit Ratings APS Parent Corporate Credit Ratings Moody’s Baa2 Baa3 S&P BBB BBB Fitch BBB- BBB- Senior Unsecured Moody’s Baa2 - S&P BBB - Fitch BBB - Outlook Moody’s Stable Stable S&P Positive Positive Fitch Stable Stable We are disclosing these ratings to enhance understanding of our sources of li
Slide 13: CEO Discussion Agenda
CEO Discussion Agenda Arizona Regulatory Developments Renewables and Generation Investments Utility Operations Update Looking Ahead Second Quarter 2011 13
Slide 14: Appendix
Appendix Second Quarter 2011
Slide 15: 2011 Retail Rate Case Benefits
2011 Retail Rate Case Benefits The rate case provisions contain a number of benefits for customers and shareholders. Provides financial support APS needs to achieve Arizona’s energy goals Encourages progress toward sustainable energy future Supports renewable energy and energy efficiency Con
Slide 16: 2011 Retail Rate Case: Key Financial Components
2011 Retail Rate Case Key Financial Components APS has requested a base rate increase to become effective July 1, 2012. Annual Revenue Change Non-fuel base rate increase $ 194.1 6.6% Amounts transferring from adjustment mechanism revenues Renewable Energy Surcharge revenues related to AZ Sun and oth
Slide 17: 2011 Retail Rate Case: Key Financial Assumptions
2011 Retail Rate Case Key Financial Assumptions Updated rate base, cost of capital and fuel prices underpin the rate request amounts. Rate base $5.7 billion Return on equity 11% Capital structure Long-term debt 46.1% Common equity 53.9% Base fuel rate (¢/kWh) 3.24 Projected fuel-price year for base
Slide 18: 2011 Retail Rate Case: Details of Request
2011 Retail Rate Case Details of Request Other key provisions continue constructive regulatory treatment and limit regulatory lag. Post test-year plant additions through rate effective date $259 million AZ Sun projects $161 million other projects Revenue-per-customer decoupling mechanism I
Slide 19: APS AZ Sun Program – Phase I
APS AZ Sun Program – Phase I 100 MW solar photovoltaic plants to be owned by APS Up to $500 million capital investment In service 2011 - 2014 Constructive rate recovery Commitments to date: 83 MW with $384 million capital investment Project summary Name Net Capacity Target Operation Da
Slide 20: APS AZ Sun Program – Proposed Phase II
APS AZ Sun Program – Proposed Phase II Additional 100 MW solar photovoltaic plants to be owned by APS Up to $475 million capital investment In service 2013 through 2015 Rate recovery through RES until included in base rates To be balanced with purchases from third-party renewable resource
Slide 21: Four Corners Power Plant Transactions
Four Corners Power Plant Transactions Acquire Southern California Edison’s 739 MW interest in Units 4 & 5 and shut down 560 MW Units 1 – 3 Purchase price: $294 million Acquisition target date: late 2012 Estimated environmental compliance investment: $300 million Finance with mix of debt and
Slide 22: 2011 On-Going EPS Guidance
2011 On-Going EPS Guidance Key Factors and Assumptions as of August 2, 2011 Electricity gross margin (operating revenues,* net of fuel and purchased power expenses) about $2.01 billion to $2.06 billion, which was previously expected to be $2.05 billion to $2.10 billion Retail customer growth abo
Slide 23: Gross Margin Effects of Weather Variances Versus Normal
Gross Margin Effects of Weather Variances Versus Normal* Pretax Millions $10 5 5 $5 3 $0 ($5) (3) ($10) ($15) ($20) ($25) ($30) (27) (30) ($35) Q1 Q2 Q3 Q4 Q1 Q2 2010 2011 *All periods recalculated to conform to current presentation. Second Quarter 2011 23
Slide 24: Quarterly Mark-to-Market on Hedge Contracts
Quarterly Mark-to-Market on Hedge Contracts* Pretax Millions $20 $10 8 5 0 1 0 0 $0 (2) (1) (1) $(10) (5) $(20) $(30) $(40) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2009 2010 2011 * Related to APS 10% share under Power Supply Adjustor (PSA), net of related deferrals. Second Quarter 2011 24
Slide 25: Renewable Energy, Demand-Side Management and Similar Regulatory Expenses
Renewable Energy, Demand-Side Management and Similar Regulatory Expenses* Pretax Millions $40 2 $35 2 $30 2 15 18 2 2 $25 12 13 8 2 2 7 8 11 $20 2 6 $15 2 19 $10 2 2 2 20 19 21 19 2 2 18 18 17 18 16 $5 2 9 2 7 7 $0 2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2008 2009 2010 2011 Renewable Energy Dema
Slide 26: Non-GAAP Measure Reconciliation
Non-GAAP Measure Reconciliation Regulated Electricity Segment Gross Margin Three Months Ended June 30, EPS $ millions, except per share amounts 2011 2010 Change Regulated electricity segment revenue* $ 799 $ 800 Regulated electricity segment fuel and purchased power expenses* (244) (252) Regulated e
Slide 27: Non-GAAP EPS Reconciliation
Non-GAAP EPS Reconciliation Year Ended December 31, 2010 2010 Net income\\apsc.com\apsfiles\Finance\u1607\IR\ attributable to common shareholders $ 3.27 2011 IR Projects\Quarterly Adjustment - Discontinued Operations Earnings\2Q Real estate operations2011\Slides\NON GAAP 0.05 Ws link APS Energy to s