Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Non-Deal Roadshow (February 2020)
30 slides from Pinnacle West Capital's roadshow presentation, Feb 28, 2020
Slide 1: Powering Growth, Delivering Value
POWERING GROWTH DELIVERING VALUE Investor Meetings March 2-3, 2020
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 principal subsidiary $18B Consolidated Arizona’s largest and longest -servi
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: A Strategy to Drive Value
A STRATEGY TO DRIVE VALUE The APS Strategic Business Plan is anchored by four themes The Core is the foundation for our that align with industry trends shaping our future and the strategic and business initiatives way we do business Clean Affordable 100% clean, carbon-free Deliver affordable ene
Slide 6: Future Focus: Clean Energy Plan
FUTURE FOCUS: CLEAN ENERGY PLAN Clean energy commitments APS Clean • 100% clean, carbon-free electricity by 2050 Energy Commitment • 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: Pathways to 100% Clean
FUTURE FOCUS: CLEAN ENERGY PLAN Pathways to 100% Clean Renewable additions of 300-500 MW/year to meet a 45% target by 2030 Next Steps: Collaboration, alignment and innovation • Reliability and affordability are foundational • Collaborate with customers, stakeholders and regulators • Promote economy-
Slide 8: 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 9: Coal Exit Strategy
COAL EXIT STRATEGY Plan to exit coal 7 years earlier than originally projected Navajo 315 MW Cholla 387 MW by 2025 Remaining 970 MW by 2031 Coal Free 2018 2019 2025 2031 Powering Growth, Delivering Value | 9
Slide 10: Renewable Resources
RENEWABLE RESOURCES APS Solar Portfolio* APS currently has 1,828 MW* of renewable resources: Owned PPA 240 MW 310 MW • Solar 1,512 MW DG • Wind 289 MW 962 MW • Biomass 14 MW • Geothermal 10 MW • Biogas 3 MW Owned solar includes 170 MW AZ Sun Program, 26 MW of APS owned Distributed Generation (DG), 4
Slide 11: Bright Canyon Energy
Bright Canyon Energy First acquisition of and ownership position in wind Clear Creek and Nobles 2 Wind Investments Opportunity • 9.9% stake in 242MW Clear Creek wind farm in Missouri • PPA to Associated Electric Cooperative • 5.1% stake in 250MW Nobles 2 wind farm in Minnesota • PPA to Allete subsid
Slide 12: Economic Development
ECONOMIC DEVELOPMENT Arizona’s focus on economic development continues to support growth in the state 2019 – New companies moving into APS’s service territory include: • Microsoft – constructing three world-class data centers • Nike – multimillion-dollar manufacturing facility employing at least 500
Slide 13: Appendix
APPENDIX
Slide 14: APS Capital Expenditures
APS CAPITAL EXPENDITURES Capital expenditures will support our growing customer base and utilization of advanced technology $ in millions PROJECTED $2,000 $1,800 $1,650 $1,725 $121 $1,600 $154 $44 $53 $1,400 $1,331 Traditional Generation $1,231 $1,200 $139 Ocotillo1 $185 $44 $613 $794 $14 Environmen
Slide 15: Operations & Maintenance
OPERATIONS & MAINTENANCE Goal is to keep O&M per kwh flat, adjusted for planned outages $ in millions $933 $858 74 $856 $830 - $850 63 48 40 - 50 795 859 808 790 - 800 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
Slide 16: 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: 19% 6-7% Average Annual Growth $2.3 81% ACC FERC $1.6 Rate Effecti
Slide 17: Near-Term Long-Term Debt Maturities and Financing Activities
Near-Term Long-Term Debt Maturities 2019 Major Financing Activities $ in millions • $200 million 18-month APS unsecured $1,000 term loan entered into in February 2019 • $300 million 30-year 4.25% APS senior $800 unsecured notes issued February 2019 • $300 million 10-year 2.6% APS senior $600 $450 un
Slide 18: 2019 APS Rate Case Application
2019 APS RATE CASE APPLICATION Filed October 31, 2019 Docket Number: E-01345A-19-0236 Additional details, including filing, can be found at http://www.pinnaclewest.com/investors Adjustor Changes and New Mechanisms Overview Formula Rate - Proposed as an alternative to existing adjustor mechanisms Def
Slide 19: 2019 Rate Case Key Financials
2019 RATE CASE KEY FINANCIALS APS has requested a rate increase to become effective December 1, 2020 Test year ended June 30, 2019 Total Rate Base - Adjusted $11.12 Billion ACC Rate Base - Adjusted $8.87 Billion Allowed Return on Equity 10.15% Capital Structure Long-term debt 45.3% Common equity 54.
Slide 20: 2019 Rate Case Key Financials
2019 RATE CASE KEY FINANCIALS APS has requested a rate increase to become effective December 1, 2020 Overview of Rate Increase ($ in Millions) - Key Components Four Corners SCRs $ 73 Ocotillo Modernization Project 100 Post-Test Year Plant Additions 66 Net Change in Other Items 64 Tax Expense Adjusto
Slide 21: 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 (May 20, 2020) Staff/Intervenor Direct Testimony (Rate Design) (May 27, 2020) APS Rebuttal Testimony (Jun 18, 2020) Staff/Intervenor Surrebu
Slide 22: 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 Commences (Jan 16, 2020) Staff /Intervenor Direct Testimony (Revenue) (Feb 5, Staff’s late-filed
Slide 23: Residential PV Applications
RESIDENTIAL PV APPLICATIONS1 Residential DG (MWdc) Annual Additions 151 133 122 4,000 3,500 10 2017 2018 2019 2020 3,000 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 equals applica
Slide 24: 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 25: System Operating Change: Spring 2025
SYSTEM OPERATING CHANGE Spring 2025 • Energy storage helps reduce the need for winter gas peaking resources and can be charged with zero or negatively priced energy Spring Day – High Renewables with Storage Spring Day – High Renewables, No Storage 6000 6000 5000 5000 4000 4000 3000 3000 2000 2000 10
Slide 26: System Operating Change: Summer 2025
SYSTEM OPERATING CHANGE Summer 2025 • Energy storage reduces the need for gas peaking resources and pipeline capacity Summer Peak Day – High Renewables with Storage Summer Peak Day – High Renewables, No Storage 10000 10000 9000 9000 8000 8000 7000 7000 6000 6000 MW MW 5000 5000 4000 4000 3000 3000 2
Slide 27: Tax Reform
TAX REFORM ACC – TAX EXPENSE ADJUSTOR MECHANISM: • PHASE I: The ACC approved $119 million annual rate reduction reflecting the lower federal tax rate. Effective for the March 2018 billing cycle. • PHASE II: The ACC approved an additional $86.5 million rate reduction to return the unprotected “excess
Slide 28: Credit Ratings and Metrics
CREDIT RATINGS AND METRICS APS Pinnacle West 2016 2017 2018 Corporate Credit Ratings1 APS FFO / Debt 27.4% 29.4% 24.5% Moody’s A2 A3 FFO / Interest 6.9x 7.5x 6.5x S&P A- A- Debt / 47.3% 46.8% 47.0% Fitch A- A- Capitalization Pinnacle West Senior Unsecured1 FFO / Debt 26.3% 26.4% 22.1% Moody’s A2 A3
Slide 29: 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 To be Filed: May 15 Transmission Cost Adjustor: E-01345A-16-0036 Effective: Jun 1 2020 DSM/EE Implementation Plan: E-01345A-19-0
Slide 30: Purchased Power Contracts
PURCHASED POWER CONTRACTS Contract Location Status1 PPA Signed COD Term (Years) Net Capacity (MW) Solana Gila Bend, AZ IO Feb-2008 2013 30 250 RE Ajo Ajo, AZ IO Jan-2010 2011 25 5 Sun E AZ 1 Prescott, AZ IO Feb-2010 2011 30 10 SOLAR 310 MW Saddle Mountain Tonopah, AZ IO Jan - 2011 2012 30 15 Badger
Pinnacle West Capital — Non-Deal Roadshow (February 2020) on 6ix