Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Investor Presentation (August 2005)
49 slides from Pinnacle West Capital's investor presentation, Aug 31, 2005
Slide 1: Driven by Growth ...
PINNACLE WEST CAPITAL CORPORATION Driven by Growth ... Boston – New York Analyst Meetings August 30 – September 1, 2005
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements based on current expectations, and neither Pinnacle West nor APS assumes any obligation to update these statements or make any further statements on any of these issues, except as required by applicable law. These forwa
Slide 3: Focused on Our Core Business
Focused on Our Core Business ● Vertically integrated utility ● Capitalizing on benefits of exceptional growth Phoenix ● Strong operating performance ● Solid regulatory track record ● Demonstrated long-term value creation APS Retail Service Territory
Slide 4: Driven by Strong Economic Growth
Driven by Strong Economic Growth Arizona vs U.S. Metro Phoenix Population Growth Single-Family Building Permits 4% 50,000 40,000 3% 30,000 2% 20,000 1% 10,000 0% 0 2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 Projected Projected Arizona U.S.
Slide 5: Economic Growth Translates into Utility Business Growth
Economic Growth Translates into Utility Business Growth Annual Growth 6% 4% 2% 0% 2000 2001 2002 2003 2004 2005 2006 2007 Projected Arizona Population APS Customers APS Retail Sales* * Weather normalized
Slide 6: APS Extraordinary Customer Growth
APS Extraordinary Customer Growth 2nd Fastest Growing U.S. Electric Utility 5% APS 4% 3.7% 3% 2% 1% 0% 1999 – 2004 average annual growth
Slide 7: Meeting Challenges of APS Peak Requirements
Meeting Challenges of APS Peak Requirements 2004 - 2008 Average Annual Growth 4.0% MW 10,000 8,000 6,000 4,000 2,000 0 2004 2005 2006 2007 2008 Projected Existing Resources Peaking Shortfall Including 15% reserve margin
Slide 8: APS Resource Acquisition Activities
APS Resource Acquisition Activities ● Pinnacle West Energy Arizona plants rate based at APS ► 1,790 MW capacity transferred July 2005 ● Sundance Power Plant ► 450 MW peaking capacity acquired May 2005 ► Will request rate base treatment in next ACC rate case ● 2005 requests for proposals underway ► A
Slide 9: Outstanding Customer Service and Delivery
Outstanding Customer Service and Delivery ● APS ranked 3rd nationally among IOU’s in customer satisfaction by J.D Power & Associates ● Capital investment and technology ► Improve customer service and efficiency ► Enhance operational performance ► Preserve reliability
Slide 10: APS 3rd Nationally in Customer Satisfaction
APS 3rd Nationally in Customer Satisfaction J.D. Power Rating 125 APS 100 75 50 2005 Residential Customer Satisfaction Survey (64 Investor-Owned Electric Utilities)
Slide 11: Improving APS Customer Efficiency
Improving APS Customer Efficiency Average Annual Growth Customers 3.6% Employees 0.7% Cumulative Change 20% 15% 10% 5% 0% 1999 2000 2001 2002 2003 2004 Average Customers Employees
Slide 12: Strong Generation Performance
Strong Generation Performance ● Diverse, low-cost Coal generation 44% 44% ● Top-tier operating Nuclear performance 29% 29% Gas 11% 11% ● Palo Verde – top Purchased U.S. power producer Power 16% 16% past 13 years ● Coal plants 2004 capacity factors 2004 Native Load Energy Fuel Mix set record
Slide 13: Solid Generation Track Record
Solid Generation Track Record Nuclear and Coal Combined Gas Equivalent Availability Factors Capacity Factors 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 2000 2001 2002 2003 2004 2005 2000 2001 2002 2003 2004 2005 Est. Est. APS Industry Average* APS Gas Industry Average* * Latest available
Slide 14: Operations Summary
Operations Summary ● Focused on our vertically integrated utility business ● Capitalizing on benefits of high-growth market area ● Maintaining solid operations and reliability
Slide 15: APS Regulatory Fundamentals
APS Regulatory Fundamentals Objectives ● Support growth and reliability ● Provide fair return for shareholders Strategies ● Focus on customer service ● Build positive relationships
Slide 16: Major Retail Rate Issues
Major Retail Rate Issues Power supply adjustor ● Surcharge application pending ● First annual adjustment - Spring 2006 2005 general rate case filing
Slide 17: 2005 PSA Surcharge Application
2005 PSA Surcharge Application Components ● Recovery of $100 million of purchased power and fuel costs deferred since April 1, 2005 ● 2.2% temporary rate increase for 24 months Timing ● Application filed July 2005 ● Requested effective November 2005 ● ACC process and timing to be established
Slide 18: Key Components of 2005 Rate Filing
Key Components of 2005 Rate Filing Components ● Fuel and other cost of service updates ● Rate base additions ► Sundance ► Other capital additions since 2002 ● Cost of capital Timing ● Filing by end of 2005 ● Decision target end of 2006
Slide 19: Creating Value for Shareholders
Creating Value for Shareholders ● Positive long-term earnings and cash flow trends ● Pro-active cost management ► Fuel and purchased power ► Operating and capital costs ● Maintain financial strength and ample liquidity ● Optimize unregulated assets ● Favorable access to capital ► Commitment to inves
Slide 20: 2005 Earnings Outlook
2005 Earnings Outlook ● Reasonable range around $3.00 per share ● Does not reflect: ► Regulatory disallowance ► Effects of Silverhawk sale
Slide 21: Strengthening Equity Ratio
Strengthening Equity Ratio Consolidated APS 60% 60% 55% 52% 50% 50% 40% 40% 30% 30% 2002 2003 2004 2005 2002 2003 2004 2005 Projected Projected Year-end ratios
Slide 22: Capital Expenditures Support Growth & Reliability
Capital Expenditures Support Growth & Reliability $ Millions 800 APS Delivery 600 Sundance Acquisition APS Other Generation 400 Other 200 Pinnacle West Energy 0 2004 2005 2006 2007 Projected Excluding SunCor
Slide 23: Optimize Unregulated Assets: Silverhawk Sale
Optimize Unregulated Assets Silverhawk Sale ● Company’s only merchant power plant ● Eliminates annualized operating loss $0.20 to $0.25 per share in near term ● Sale terms ► $208 million net proceeds ► Expected closing fall 2005 ► Proceeds to be invested in APS equity
Slide 24: SunCor Year-End Assets ROI-Driven Business Strategy
SunCor Year-End Assets ROI-Driven Business Strategy $ Millions Estimated 2002 2005 Change Legacy Properties $ 305 $ 123 $ (182) Post-1990 Properties 158 244 86 Total Properties 463 367 (96) Consolidated Land Not Owned - 34 34 Other 72 39 (33) Total Assets $ 535 $ 440 $ (95)
Slide 25: SunCor Book Values ROI-Driven Business Strategy
SunCor Book Values ROI-Driven Business Strategy Legacy Properties Post-1990 Properties $ Millions $ Millions 350 350 300 300 250 250 200 200 150 150 100 100 50 50 0 0 2000 2001 2002 2003 2004 2005 2000 2001 2002 2003 2004 2005 Est. Est. Master Planned Master Planned Owned Ventures with Landowners Co
Slide 26: SunCor Development Company Improved Cash Realization
SunCor Development Company Improved Cash Realization 12/31/05 Average Remaining Book Value Years to Project Life ($ Millions) Realize (Years) Post-1990 Properties Condos $ 31 2 5 Homebuilding 34 1 1 Commercial 62 6 1-12 Master Planned 117 5 1-40 Total $ 244 4 Estimates
Slide 27: Pinnacle West #1 in Dividend Growth
Pinnacle West #1 in Dividend Growth 1995 – 2004 Compound Annual Growth Rates For U.S. Electric Utilities 10% PNW 7.8% 5% Industry 0% Average (1.4)% (5)% (10)% (15)%
Slide 28: Chairman's Comments
Chairman’s Comments
Slide 29: Pinnacle West Capital Corporation
PINNACLE WEST CAPITAL CORPORATION
Slide 30: Appendix
Appendix
Slide 31: Investment Grade Credit Profile
Investment Grade Credit Profile S&P Moody’s Pinnacle West Capital Corporation Senior Unsecured Debt BBB- Baa2 Commercial Paper A2 P2 Outlook Stable Stable Business Position 5* NA Arizona Public Service Company Senior Unsecured Debt BBB Baa1 Commercial Paper A2 P2 Outlook Stable Stable Business Posit
Slide 32: Liquidity Resources
Liquidity Resources APS ● $500 million cash on hand* ● $325 million revolver through May 2007 Pinnacle West (parent) ● $150 million cash on hand* ● $300 million revolver through October 2007 * As of June 30, 2005
Slide 33: Required Debt Redemptions
Required Debt Redemptions $ Millions 2005 2006 2007 APS* Senior notes due 1/05 $ 100 $ - $ - Senior notes due 8/05 300 - - Senior notes due 11/06 - 84 - Pinnacle West Energy Senior notes due 4/07 - - 500 Parent Company Floating rate notes due 11/05** 165 - - Senior notes due 4/06 - 300 - Total $ 565
Slide 34: APS 2004 Retail Customer and Sales Mix
APS 2004 Retail Customer and Sales Mix Customers Sales 89% 45% 45% 11% 9% Residential Commercial Industrial Other Industrial and other customers <1%
Slide 35: 2004 Energy Fuel Mix
2004 Energy Fuel Mix Consolidated Native Load Coal Coal Nuclear 21% 21% Gas 44% 44% 14% 14% 9% 9% Nuclear 29% 29% Gas Purchased 11% 11% Power Purchased 56% 56% Power 16% 16%
Slide 36: 2005 RFP for Long-Term Capacity
2005 RFP for Long-Term Capacity Terms ● At least 1,000 MW of summer capacity ● Beginning 2007 ● 5-year minimum contract length ● 25 MW minimum amount of capacity per proposal Schedule ● RFP issued May 31, 2005 ● Responses due July 18, 2005 ● Shortlist notification August 30, 2005 ● Selection complet
Slide 37: 2005 RFP for Renewable Resources
2005 RFP for Renewable Resources Terms ● At least 100 MW ● Beginning 2006 ● 5-year minimum contract length ● Costs limited to 125% of market price of conventional resource alternative Schedule ● RFP issued May 11, 2005 ● Responses due June 14, 2005 ● Shortlist notification July 14, 2005 ● Selection
Slide 38: 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 39: Arizona Regulation in a Changing Environment
Arizona Regulation in a Changing Environment ACC Competition Approved September 1999 Rules Proceedings APS Settlement Approved September 1999 Proceedings Track A Order (Competition Reversal) Issued September 2002 Track B Order (Competitive Procurement) Issued March 2003 PWEC Arizona Plants Transferr
Slide 40: Retail Rate Settlement Key Provisions
Retail Rate Settlement Key Provisions ● Approved by Arizona commission March 28, 2005 ● Effective April 1, 2005 ● 4.2% base rate increase (pretax revenues: $71 million in 2005, $93 million in 2006) ● Power supply adjustor mitigates risk of commodity price volatility ● Pinnacle West Energy Arizona pl
Slide 41: Power Supply Adjustor Major Provisions
Power Supply Adjustor Major Provisions ● Changes in fuel and purchased power costs versus base level ($0.020743 per kWh) ● 90% of differential passed through to customers ● Adjustor rate limited to +/- $0.004 per kWh ● Surcharge possible if accumulated deferrals between $50 million and $100 million
Slide 42: Average Residential Retail Price Ranking
Average Residential Retail Price Ranking Southwestern U.S. ¢/kWh 15 12 Regional Average 9 10.10 6 3 0 PacifiCorp Salt PNM APS Tucson Nevada El Paso SCE PG&E SDG&E Utah River Electric Power Electric Project As of December 31, 2004
Slide 43: Average Commercial Retail Price Ranking
Average Commercial Retail Price Ranking Southwestern U.S. ¢/kWh 15 12 Regional Average 9 9.47 6 3 0 PacifiCorp Salt PNM APS Nevada El Paso Tucson SCE PG&E SDG&E Utah River Power Electric Electric Project As of December 31, 2004
Slide 44: Average Industrial Retail Price Ranking
Average Industrial Retail Price Ranking Southwestern U.S. ¢/kWh 15 12 9 Regional Average 6 6.61 3 0 PacifiCorp Salt PNM APS El Paso Tucson SCE Nevada PG&E SDG&E Utah River Electric Electric Power Project As of December 31, 2004
Slide 45: 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 46: WECC Available Transmission Capability
WECC Available Transmission Capability 3,007 3,989 2,478 5,263 290 301 Summer 2006 estimate (MW)
Slide 47: SunCor Project Summaries Master Planned Communities
SunCor Project Summaries Master Planned Communities Year Original 12/31/04 Acquired Acreage Acreage Legacy Properties Palm Valley (Phoenix, AZ) 1987 11,630 3,330 Tatum Ranch (Phoenix, AZ) 1987 1,400 0 Post-1990 Properties Scottsdale Mountain (Scottsdale, AZ) 1991 1,400 0 SunRidge Canyon (Scottsdale,
Slide 48: SunCor Project Summaries Commercial Properties
SunCor Project Summaries Commercial Properties Year Original 12/31/04 Acquired Acreage Acreage Legacy Properties (Phoenix, AZ) Tempe Market Place/Autoplex 1987 420 0 Talavi 1987 140 7 Post-1990 Properties (Phoenix, AZ) Black Canyon Commerce Park 1998 16 0 Hayden Ferry Lakeside Office & Condos 2000 1
Slide 49: Pinnacle West Capital Corporation
PINNACLE WEST CAPITAL CORPORATION
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