Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Investor Presentation (May 2003)
29 slides from Pinnacle West Capital's investor presentation, May 2003
Slide 1: In Our Element
Our Element In Our Element Pinnacle West Capital Corporation Analyst Presentations May 2003 1
Slide 2: Forward-Looking Statements
Forward-Looking Statements This This presentation presentation contains contains forward-looking forward-looking statements statements based based on on current current expectations, expectations, and and thethe Company Company assumes assumes no no obligation obligation to to update update these th
Slide 3: In Our Element
In Our Element Capturing the benefits of superior growth… Maintaining operational excellence... Managing market risks and commodity exposure... Navigating the regulatory landscape...
Slide 4: Capturing the Benefits of Superior Growth
Capturing the Benefits of Superior Growth Leading 2002 Population Growth States 9 APS 1 2nd in 7 10 customer 6 2 growth 5 nationally 4 8 3
Slide 5: Maintaining Operational Excellence
Maintaining Operational Excellence Improving Customer Efficiency Cumulative Cumulative Change Change 15% 15% 12% 12% APS 9% 9% 1st in 6% 6% customer 3% 3% service 0% 0% in the West 1999 1999 2000 2000 2001 2001 2002 2002 Average Average Customers Customers Employees Employees * JD Powers, March 2003
Slide 6: Maintaining Operational Excellence
Maintaining Operational Excellence Generation Delivery • Palo Verde remains • High customer growth the top power producer in the United States • Strong reliability • Fossil availability at • Transmission and record levels distribution expansion to meet growth and • New plant construction sustain rel
Slide 7: Managing Market Risk & Commodity Exposure
Managing Market Risk & Commodity Exposure Western Power Markets Spark Spreads $/MWh $/MWh 250 250 200 200 150 150 100 100 50 50 00 2001 2002 2003 2004 2005 On-Peak On-Peak Actual Actual On-Peak On-Peak Forwards Forwards Assumptions: Assumptions: Palo Palo Verde Verde electricity, electricity, Permia
Slide 8: Managing Market Risk & Commodity Exposure
Managing Market Risk & Commodity Exposure Long-Term Southwest Regional Energy Profile MWs MWs 80,000 80,000 60,000 60,000 40,000 40,000 20,000 20,000 00 2003 2003 2004 2004 2005 2005 2006 2006 Existing Existing Generation Generation New New Generation Generation Peak Peak Load Load with 16% reserves
Slide 9: Managing Market Risk & Commodity Exposure
Managing Market Risk & Commodity Exposure APS Resources for Retail Load MWs MWs 8,000 8,000 6,000 6,000 4,000 4,000 2,000 2,000 00 2003 2004 2005 2006 APS APS Existing Existing Resources Resources Track Track BB Resources Resources Peak Peak Load Load with 15% reserves
Slide 10: Managing Market Risk & Commodity Exposure
Managing Market Risk & Commodity Exposure APS Natural Gas Demand for Retail Load Millions Millions mmbtu mmbtu 40 40 30 30 20 20 10 10 00 2003 2003 2004 2004 2005 2005 2006 2006 Projected Projected Hedge Hedge Gas Gas Requirements Requirements
Slide 11: Navigating the Regulatory Landscape
Navigating the Regulatory Landscape Track Track A A Decision Decision $125MM $125MM Financing Financing Application Application Track Track B B Decision Decision $500MM $500MM Financing Financing Application Application Track Track B B Procurement Procurement Adjustment Adjustment Mechanisms Mechani
Slide 12: Navigating the Regulatory Landscape
Navigating the Regulatory Landscape Track Track A A Decision Decision $125MM $125MM Financing Financing Application Application Track Track B B Decision Decision $500MM $500MM Financing Financing Application Application Track Track B B Procurement Procurement Adjustment Adjustment Mechanisms Mechani
Slide 13: Navigating the Regulatory Landscape
Navigating the Regulatory Landscape Track B Procurement Needs GWHs APS Retail Energy Requirement 35,000 35,000 28,000 28,000 Remaining Track B Results 21,000 21,000 14,000 14,000 APS Existing Resources 7,000 7,000 00 2003 2003 2004 2004 2005 2005 2006 2006
Slide 14: Navigating the Regulatory Landscape
Navigating the Regulatory Landscape Track B Procurement Contracts MWs MWs 2,000 2,000 1,500 1,500 1,000 1,000 500 500 00 2003 2003 2004 2004 2005 2005 2006 2006 PW PWEC EC PPL PPL EnergyPlus, EnergyPlus, LLC LLC Panda Panda Gila Gila River, River, LP LP
Slide 15: Navigating the Regulatory Landscape
Navigating the Regulatory Landscape Proposed Adjustment Mechanisms Power • To allow timely Supply recovery of Returning certain costs Customers Competition Rules • To be implemented Compliance through rate System case decision Benefit
Slide 16: Navigating the Regulatory Landscape
Navigating the Regulatory Landscape 2003 General Rate Case Objectives & Timing • Rate recognition of Pinnacle West Energy Arizona assets • “Recovery” issues – $234M write off in 1999 – Costs of restructuring • Adjustment mechanisms implementation • Cost of service, cost allocation, and rate design i
Slide 17: Navigating the Regulatory Landscape
Navigating the Regulatory Landscape FERC Issues • Gas pipeline contracts • California refund process • California and the Pacific Northwest bilateral power contracts • California “market manipulation” investigation* and implications * PNW/APS not named
Slide 18: We Are & Will Be...
We Are & Will Be... A vertically integrated utility in a high growth market area... Sustaining exceptional operational performance... Successfully managing risk in varying market conditions... While remaining adept and agile in a dynamic regulatory environment.
Slide 19: In Our Element
In Our Element Focusing on the core business… Maximizing the value of non-utility operations… Maintaining financial strength and agility during regulatory transition… Building long-term value for shareholders and customers...
Slide 20: Focusing on the Core Business
Focusing on the Core Business Consolidated Earnings Drivers 2003 vs. 2002 • Retail customer sales growth $40 - 45M • SunCor 20M • Cost reductions 18M • Regulatory asset amortization 17M • EITF 02-3 accrual effects 10M • Higher gas and power costs (50 - 60M) • Pension & other related costs (17M) • Ra
Slide 21: Focusing on the Core Business
Focusing on the Core Business Consolidated Earnings Drivers 2003 vs. 2002 • Surplus generation + • New generation plant fixed costs - • APS Energy Services - • Marketing & trading +/- • Weather, inflation, and all other +/- 2002 Non-recurring items • Accounting change 65M • NAC 35M • Cancellation of
Slide 22: Maintaining Financial Strength & Agility
Maintaining Financial Strength & Agility Parent Company Debt Repayment Plans Sources Uses 2003 2003 • $500M inter-company • $225M bridge debt, 7/30 loan from APS • $250M floating rate notes, 8/1 • $80-$100M SunCor asset sales • $25M private placement, 12/17 2004 2004 • $80 - $100M SunCor • $215M sen
Slide 23: Balancing Financial Strength & Growth
Balancing Financial Strength & Growth Consolidated Debt Ratio* Capital Expenditures $$ Millions Millions 2005 2005 Target Target of of 50% 50% 60% 60% 1,200 1,200 900 900 50% 50% 600 600 40% 40% 300 300 30% 30% 00 2001 2001 2002 2002 2005 2005 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 Other
Slide 24: Maintaining Cash Flow Strength
Maintaining Cash Flow Strength Cash Interest Coverage Pinnacle West APS Times Times Times Times 77 77 66 66 55 55 44 44 33 33 22 22 11 11 00 00 1999 1999 2000 2000 2001 2001 2002 2002 1999 1999 2000 2000 2001 2001 2002 2002
Slide 25: Creating Long-term Shareholder Value
Creating Long-term Shareholder Value Top Dividend Growth 1998 - 2002 PNW PNW 10% 10% 0% 0% (10)% (10)% (20)% (20)% (30)% (30)%
Slide 26: Creating Long-term Shareholder Value
Creating Long-term Shareholder Value Top Quartile EPS and Dividend Growth 1998 - 2002 EPS EPS Growth Growth 25% 25% 20% 20% 15% 15% 10% 10% 5% 5% PNW 0% 0% -5% -5% -10% -10% -15% -15% -20% -20% -25% -25% -25% -25% -20% -20% -15% -15% -10% -10% -5% -5% 0% 0% 5% 5% 10% 10% 15% 15% 20% 20% 25% 25% Divi
Slide 27: Shaping Issues Affecting Our Industry
Shaping Issues Affecting Our Industry • Industry risk • Cyclical nature of the industry • Public power • Distinct, independent markets • Customer responsibility and community relations • Arizona regulatory and political perspectives • Federal legislative and regulatory issues • Governance and invest
Slide 28: In Our Element
In Our Element “ We’ll continue to concentrate primarily on our core business in an area our employees know well -- Arizona and the western U.S. power markets -- with a combination of customer focus, exceptional operational performance and financial strength.” -- Pinnacle West 2002 Annual Report Let
Slide 29: In Our Element
In Our Element
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