Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Credit Suisse Energy Summit 2014
27 slides from Pinnacle West Capital's conference presentation, Feb 10, 2014
Slide 1: Delivering Superior Shareholder Value
DELIVERING SUPERIOR SHAREHOLDER VALUE Credit Suisse Energy Summit | February 10-12, 2014
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 U.S. NYSE Ticker PNW Market Cap* ~$6 Billion Enterprise Value* ~$9 Billion Dividend Yield* 4.3% Consolidated Assets Over $13 Billion Principal Subsidiary Arizona’s largest and longest-servin
Slide 4: Value Proposition
VALUE PROPOSITION Experienced Management Team Driving Focused Strategy Leverage to Arizona Economic Recovery Executing on Operational Excellence Delivering on Achievable Long-Term Targets through Stay Out PINNACLEWEST ———— OM 4 Delivering Superior Shareholder Value
Slide 5: Four Corners Power Plant
On December 30, 2013, APS and Southern California Edison (“SCE”) completed previously announced transaction whereby APS agreed to purchase SCE’s 48% interest in Units 4 and 5 of Four Corners Final purchase price: $182 million Estimated environmental compliance: $350 million, primarily in 2016-2017 A
Slide 6: Sustainable Cost Management Initiative
Motivation for Change SUSTAINABLE COST MANAGEMENT INITIATIVE (“SCMI”) Capitalize on changes driven by aging workforce Improve organizational efficiencies Strengthen governance and clarify accountability Refine understanding of cost structure to better identify opportunities Manage costs during regul
Slide 7: Arizona Economic Indicators
ARIZONA ECONOMIC INDICATORS Nonresidential Building Vacancy – Metro Phoenix New Home Sales & Single Family Permits Home Prices – Metro Phoenix Job Growth (Total Nonfarm) - Arizona Value Relative to Jan ‘05 YTD-Nov Vacancy Rate Office Retail YoY Change YTD-Nov
Slide 8: Operational Excellence
OPERATIONAL EXCELLENCE Palo Verde Palo Verde has exceeded 30 million megawatt-hours annual production 8 times – the only U.S. plant to ever do so. Safety 2012 lowest number of recordable injuries in company history. Customer Satisfaction Ranked 5th highest nationally among 54 large investor-owned el
Slide 9: Dividend Growth
DIVIDEND GROWTH Pinnacle West’s annual dividend is $2.27 per share; targeting ~4% annual dividend growth Projected Annual Dividend Growth Approx. 4% Yield as of January 31, 2014 Payout 12 Months Ended September 30, 2013 Dividend Yield Dividend Payout PNW Industry Averages Future dividends subject to
Slide 10: Credit Ratings and Financing
Major Financing Activities $250 million 30-year 4.70% APS senior unsecured notes issued in January 2014 Currently expect about $550 million additional long-term debt issuance in 2014, including issuance to refinance $300 million of maturing debt In addition, there will be several tax-exempt series s
Slide 11: Resource Planning
RESOURCE PLANNING Existing Owned Resources Includes retirement of Four Corners 1-3 Existing Contracts Four Corners 4-5 Resource Planning Requirement Load Requirement Including Reserves MW Coal Nuclear RE + DE EE Composition of Energy Mix by Resource Note: RE = Renewable Energy; DE = Distributed Ener
Slide 12: Ocotillo Power Plant
OCOTILLO POWER PLANT Current Future State (2) Westinghouse 110 MW steam units (constructed 1960) Retire (2) Westinghouse 55 MW combustion turbines (constructed 1972/73) Maintain Install (5) GE 102 MW combustion turbines Net Capacity: 330 MW Net Capacity: 620 MW Net site capacity increased by 290 MW
Slide 13: Regulatory Calendar
REGULATORY CALENDAR LIST OF SELECTED DOCKETS Description Docket # 2012 Retail Rate Settlement (including Four Corners rate recovery and LFCR) E-01345A-11-0224 Energy Efficiency and Integrated Resource Planning* E-00000XX-13-0214 2014 Renewable Energy Standard Implementation Plan E-01345A-13-0140 Net
Slide 14: Appendix
APPENDIX OMe PINACLEWEST
Slide 15: Cost Management
COST MANAGEMENT A variety of initiatives have been helping control operating and capital costs Ongoing effort to instill culture of cost management and efficiency Fleet operating model to streamline workforce and reduce costs Reduced production costs per kWh from 2.2¢ to 2.0¢ $30 million annual savi
Slide 16: Arizona Corporation Commission
ARIZONA CORPORATION COMMISSION Three seats of four-year terms through January 2017 were addressed in the November 2012 election Bob Stump (R)* Chairman Brenda Burns (R) Gary Pierce (R)* Terms To January 2015 Terms To January 2017 Susan Bitter Smith (R) Bob Burns (R) Incumbents New Commissioners * Te
Slide 17: Renewable Energy Rises with the Sun
Germany and Japan are among countries with highest installed solar capacity, yet have solar conditions far inferior to Arizona Arizona ranks 1st in the U.S. for solar energy development* RENEWABLE ENERGY RISES WITH THE SUN We are helping Arizona become the “Solar Capital of America” Arizona * Enviro
Slide 18: AZ Sun Program
Utility-scale photovoltaic solar plants to be owned by APS Constructive rate recovery through RES until included in base rates 118 MW in commercial operation to date; 150 MW by end of 2014 Commitments to date: 170 MW; $695 million estimated capital investment AZ SUN PROGRAM Owning solar resources ma
Slide 19: Net Metering
Customers with rooftop solar systems do not pay for all of the electric services they use (i.e. rooftop customers still need support from the grid 24 hours a day) These unpaid costs are then paid, through higher rates, by non-rooftop solar customers The issue will get bigger over time as application
Slide 20: Arizona's Renewable Resource and Energy Efficiency Standards
Cumulative savings from energy efficiency programs must be equivalent to 22% of annual retail sales by 2020 Annual milestones in place to measure progress toward cumulative 2020 goal 3% by 2012 9.5% by 2015 22% by 2020 ARIZONA’S RENEWABLE RESOURCE AND ENERGY EFFICIENCY STANDARDS Portion of retail sa
Slide 21: Retail Sales Growth (Weather-Normalized)
RETAIL SALES GROWTH (WEATHER-NORMALIZED) YoY Retail Sales Before Customer Programs Energy Efficiency & Customer Conservation Distributed Energy Weather-normalized retail sales growth less than 1% for 2013-2015 after impacts of energy efficiency, customer conservation and distributed renewable genera
Slide 22: Transmission
10-Year Transmission Plan filed January 2014 (115 kV and above) $496 million of transmission investment 275 miles of new lines Includes Hassayampa-North Gila (HANG2) ~110 miles; 500 kV Construction started March 2013 Estimated in-service mid 2015 Projects to deliver renewable energy approved by ACC
Slide 23: Transmission Formula Rates
FERC Formula Rates adopted in 2008 Adjusted annually with 10.75% allowed ROE Based on FERC Form 1 and certain projections Retail portion flows through ACC Transmission Cost Adjustor TRANSMISSION We have achieved constructive transmission rate treatment with annual adjustments Annual Revenue Rate Eff
Slide 24: Regulatory Mechanisms
Mechanism Adopted / Last Adjusted Description Power Supply Adjustor (“PSA”) April 2005 / February 2014 Recovers variance between actual fuel and purchased power costs and base fuel rate Includes forward-looking, historical and transition components Renewable Energy Surcharge (“RES”) May 2008 / Janua
Slide 25: Lost Fixed Cost Recovery
Lost Fixed Cost Recovery (LFCR) was implemented as part of the July 2012 settlement Estimated to offset 30-40% of revenues lost due to ACC-mandated energy efficiency (EE) and distributed renewable generation (DG) initiatives Annual filing by January 15th each year with new rates in effect March 1st,
Slide 26: Generation Portfolio
GENERATION PORTFOLIO Fuel/Plant Location Units Dispatch COD Ownership Interest1 Net Capacity (MW) NUCLEAR 1,146 MW Palo Verde Wintersburg, AZ 1-3 Base 1986-1989 29.1% 1,146 COAL 1,932 MW Cholla Joseph City, AZ 1-3 Base 1962-1980 100 647 Four Corners Farmington, NM 4, 5 Base 1969-1970 63 970 Navajo P
Slide 27: Purchased Power Contracts
PURCHASED POWER CONTRACTS Fuel/Contract Location Owner/Developer Status1 PPA Signed COD Term (Years) Net Capacity (MW) SOLAR 310 MW Solana Gila Bend, AZ Abengoa IO Feb-2008 2013 30 250 RE Ajo Ajo, AZ Duke Energy Gen Svcs IO Jan-2010 2011 25 5 Sun E AZ 1 Prescott, AZ SunEdison IO Feb-2010 2011 30 10
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