Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Q3 2011 Earnings Presentation
25 slides from Pinnacle West Capital's earnings presentation, Nov 1, 2011
Slide 1: 3rd Quarter 2011 Results
PK PINNACLE \WVEST CAPITAL CORPORATION 34 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 (EPS) refer to amounts attributable to common shareholders. We present “regulated electricity gross margin” per diluted share of common stock. Regulated e
Slide 4: CFO Agenda
CFO Agenda 3rd Quarter Results Arizona Economic Outlook 2011 Earnings Guidance Liquidity and Financing Activities Third Quarter 2011 4
Slide 5: Consolidated EPS Comparisons
Consolidated EPS Comparisons 3rd Quarter 2011 vs. 3rd Quarter 2010 Net Income On-Going Earnings Per Share Per Share $2.50 $2.32 $2.50 $2.24 $2.14 $2.06 $2.00 $2.00 $1.50 $1.50 $1.00 $1.00 $0.50 $0.50 $0.00 $0.00 2011 2010 2011 2010 Third Quarter 2011 5
Slide 6: Non-GAAP EPS Reconciliation
Non-GAAP EPS Reconciliation 3rd Quarter 2011 vs. 3rd Quarter 2010 3rd Qtr 3rd Qtr 2011 2010 Change EPS as reported $ 2.32 $ 2.14 $ 0.18 Less adjustments: Discontinued real estate operations '0.01 (0.07) '0.08 Discontinued energy services business (0.09) (0.01) (0.08) On-going EPS $ 2.24 $ 2.06 $ 0.1
Slide 7: On-Going EPS Variances
On-Going EPS Variances 3rd Quarter 2011 vs. 3rd Quarter 2010 Lower taxes other than income taxes Other, net $0.02 $(0.04) Lower O&M* Net $0.10 Increase $0.18 = Higher regulated electricity gross margin* $0.10 * Excludes costs, and offsetting operating revenues, associated with renewable energy and e
Slide 8: Regulated Electricity Gross Margin Drivers
Regulated Electricity Gross Margin Drivers 3rd Quarter 2011 vs. 3rd Quarter 2010 Higher fuel Retail transmission costs, net of charge increase PSA deferrals $0.04 $(0.02) Other, net $(0.02) Net Weather Increase effects $0.10 $0.10 = See non-GAAP reconciliation in appendix. Third Quarter 2011 8
Slide 9: 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% (5)% (0.5)% (10)% (1.0)% (15)% (1.5)% (20)% (2.0)% (25)% ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘
Slide 10: Consolidated On-Going EPS Outlook
Consolidated On-Going EPS Outlook As of November 1, 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. ** Guidance near top of range. See key factors and assumptio
Slide 11: CEO Discussion Agenda
CEO Discussion Agenda Arizona Regulatory Developments Renewables and Generation Investments Utility Operations Update Sale of APS Energy Services Looking Ahead Third Quarter 2011 11
Slide 12: Appendix
Appendix Third Quarter 2011
Slide 13: 2011 On-Going EPS Guidance
2011 On-Going EPS Guidance Key Factors and Assumptions as of November 1, 2011 Electricity gross margin (operating revenues,* net of fuel and purchased power expenses) about $2.03 billion to $2.08 billion, which was previously expected to be $2.01 billion to $2.06 billion Retail customer growth a
Slide 14: 2011 Retail Rate Case Proposal Benefits
2011 Retail Rate Case Proposal Benefits The rate case proposal contains 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 efficien
Slide 15: 2011 Retail Rate Case Filing: Key Financial Components
2011 Retail Rate Case Filing 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
Slide 16: 2011 Retail Rate Case Filing: Key Financial Assumptions
2011 Retail Rate Case Filing 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 fo
Slide 17: 2011 Retail Rate Case Filing: Details of Request
2011 Retail Rate Case Filing Details of Request Other key proposals 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 mechani
Slide 18: 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 $379 million capital investment Project summary Name Net Capacity In Service or Targe
Slide 19: 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 20: 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 21: Gross Margin Effects of Weather Variances Versus Normal
Gross Margin Effects of Weather Variances Versus Normal* Pretax Millions $25 22 $20 $15 $10 5 5 $5 3 $0 ($5) (3) ($10) ($15) ($20) ($25) ($30) (27) ($35) (30) Q1 Q2 Q3 Q4 Q1 Q2 Q3 2010 2011 *All periods recalculated to conform to current presentation. Third Quarter 2011 21
Slide 22: 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) (2) $(10) (5) $(20) $(30) $(40) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2009 2010 2011 * Related to APS 10% share under Power Supply Adjustor (PSA), net of related deferrals. Third Quarter 2011 22
Slide 23: Renewable Energy, Demand-Side Management and Similar Regulatory Expenses
Renewable Energy, Demand-Side Management and Similar Regulatory Expenses* Pretax Millions $50 $45 $40 2 $35 23 2 $30 2 15 2 18 $25 2 12 13 8 2 2 7 8 11 $20 2 6 $15 $10 20 21 19 19 23 18 18 17 18 19 16 $5 $0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2009 2010 2011 Renewable Energy Demand-Side Management Compe
Slide 24: Non-GAAP Measure Reconciliation
Non-GAAP Measure Reconciliation Regulated Electricity Gross Margin Three Months Ended September 30, EPS $ millions, except per share amounts 2011 2010 Change Regulated electricity revenue* $ 1,124 $ 1,116 Regulated electricity fuel and purchased power expenses* (338) (354) Regulated electricity gros
Slide 25: Non-GAAP EPS Reconciliation
Non-GAAP EPS Reconciliation Years 2010 and 2011 2010 2011 Actual Guidance Net income attributable $ 3.27 to common shareholders Adjustments - discontinued operations Real estate activities 0.05 APS Energy Services (0.29) On-going EPS $ 3.03 $ 2.75 - $ 2.90 Near top of range Third Quarter 2011 25
Pinnacle West Capital — Q3 2011 Earnings Presentation on 6ix