Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Q3 2016 Earnings Presentation
24 slides from Pinnacle West Capital's earnings presentation, Nov 3, 2016
Slide 1: Third Quarter 2016 Results
THIRD QUARTER 2016 RESULTS November 3, 2016 Third Quarter 2016
Slide 2: Forward Looking Statements and Non-GAAP Financial Measures
FORWARD LOOKING STATEMENTS AND NON-GAAP FINANCIAL MEASURES 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
Slide 3: Consolidated EPS Comparison 2016 vs. 2015
CONSOLIDATED EPS COMPARISON 2016 VS. 2015 3rd Quarter Year-to-Date On-Going Earnings On-Going Earnings $3.47 $3.55 $2.35 $2.30 2016 2015 2016 2015 3rd Quarter Year-to-Date GAAP Net Income GAAP Net Income $2.35 $2.30 $3.47 $3.55 3 Third Quarter 2016
Slide 4: On-Going EPS Variances 3Q 2016 vs. 3Q 2015
ON-GOING EPS VARIANCES 3RD QUARTER 2016 VS. 3RD QUARTER 2015 Interest, net Other of AFUDC Other, net Gross Taxes $0.02 $(0.01) Margin(1),(2) D&A(2) $0.01 $2.35 $0.02 $0.01 $2.30 Gross Margin Weather $(0.09) Sales $0.02 LFCR $0.05 Transmission $0.04 3Q 2015 3Q 2016 (1) Excludes costs and offsetting o
Slide 5: Economic Indicators
ECONOMIC Arizona and Metro Phoenix remain attractive places to live and do INDICATORS business Nonresidential Building Vacancy – Metro Phoenix Vacancy Rate Above-average job growth in 25% construction, financial services and Office wholesale trade sectors 20% 15% Industrial Vacancy rates in office a
Slide 6: 2016 On-Going EPS Guidance
2016 ON-GOING Key Factors & Assumptions as of EPS GUIDANCE November 3, 2016 2016 Electricity gross margin* (operating revenues, net of fuel and $2.34 – $2.39 billion purchased power expenses) • Retail customer growth about 1.5-2.5% • Weather-normalized retail electricity sales volume about 0-1.0% to
Slide 7: Appendix
APPENDIX Third Quarter 2016
Slide 8: Dividend Growth
Pinnacle West’s indicated annual dividend is $2.62 per share; DIVIDEND GROWTH targeting ~5% annual dividend growth Dividend Growth Goal Indicated Annual Dividend Rate at Year-End $2.62 $2.50 $2.38 $2.27 $2.18 $2.10 2011 2012 2013 2014 2015 2016 2017 2018 Projected Future dividends subject to declara
Slide 9: Rate Base
APS’s revenues come from a RATE BASE regulated retail rate base and meaningful transmission business APS Rate Base Growth Total Rate Base Year-End ACC FERC Generation & Distribution Transmission 17% $1.8 83% $1.4 Most Recent Rate Decisions ACC - Proposed FERC Rate Effective Date 7/1/2017 6/1/2016 $8
Slide 10: Capital Expenditures
CAPITAL Capital expenditures are funded primarily through internally EXPENDITURES generated cash flow ($ Millions) Other $1,337 $1,233 $75 Distribution $89 $1,124 $1,057 $399 $77 $85 Transmission $380 $411 Renewable $340 $211 Generation $136 $1 $104 $197 $136 $201 $1 Environmental(1) $103 $58 $224 $
Slide 11: Operations & Maintenance Outlook
OPERATIONS & Goal is to keep O&M per kWh flat, MAINTENANCE adjusted for planned outages OUTLOOK ($ Millions) $83 $137 $103 $150 $124 $96 $825 - $805 $845 $761 $788 $772 $754 2011 2012 2013 2014 2015 2016E PNW Consolidated RES/DSM* *Renewable energy and demand side management expenses are offset by a
Slide 12: Balance Sheet Strength
BALANCE SHEET STRENGTH Debt Maturity Schedule Credit Ratings ($Millions) • A- rating or better at S&P, Moody’s and Fitch $600 2016 Major Financing Activities $500 • $250 million 10-year 2.55% APS senior unsecured notes issued September 2016 $400 • $350 million 30-year 3.75% APS senior unsecured note
Slide 13: Financial Outlook
Key Factors & Assumptions as of FINANCIAL OUTLOOK November 3, 2016 Gross Margin – Customer Growth and Weather (2016-2018) Assumption Impact Retail customer growth • Expected to average about 2-3% annually • Modestly improving Arizona and U.S. economic conditions Weather-normalized retail electricity
Slide 14: 2016 Key Dates
2016 KEY DATES ACC Key Dates / Docket # Q1 Q2 Q3 Q4 Key Recurring Regulatory Filings Lost Fixed Cost Recovery Jan 15 E-01345A-11-0224 Transmission Cost Adjustor May 15 E-01345A-11-0224 Renewable Energy Adjustor Jul 1 E-01345A-16-0238 Nov 18: Workshop 2017 DSM Implementation Plan Dec 1: File energy E
Slide 15: Arizona Electric Utilities General Rate Cases
ARIZONA ELECTRIC UTILITIES GENERAL RATE CASES UNS Electric (93,000 customers) Tucson Electric Power Company (415,000 customers) Docket # E-04204A-15-0142 Docket # E-01933A-15-0322 Application Filed May 5, 2015 Application Filed Nov 5, 2015 Hearing (Mar 1 – 24, 2016) Intervenor and Staff Direct Testi
Slide 16: 2016 APS Rate Case Application
2016 APS RATE CASE APPLICATION • Filed June 1, 2016 • Propose new rates go into effect on July 1, 2017 • Docket Number: E-01345A-16-0036 • Additional details, including filing, can be found at http://www.azenergyfuture.com/rate-review/ Procedural Schedule Staff and Intervenor Direct Testimony (ex ra
Slide 17: 2016 Rate Case Key Financials
2016 RATE CASE APS has requested a rate increase KEY FINANCIALS to become effective July 1, 2017 Test year ended December 31, 2015 Total Rate Base - Adjusted $8.01 Billion ACC Rate Base - Adjusted $6.77 Billion Allowed Return on Equity 10.5% Capital Structure Long-term debt 44.2% Common equity 55.8%
Slide 18: 2016 Rate Case Key Financials
2016 RATE CASE APS has requested a rate increase KEY FINANCIALS to become effective July 1, 2017 Overview of Rate Increase ($ in Millions) – Key Components Post-Test Year Plant Additions $ 98.1 Fair Value Increment 51.9 ROE Increase from 10.0% to 10.5% 29.3 Increase due to Changes in Depreciation Sc
Slide 19: Residential PV Applications
Residential DG (MWdc) Annual Additions RESIDENTIAL PV 74 99 APPLICATIONS* 51 57 44 18 22 10 2009 2011 2013 2015 2016 YTD 2500 2315 2250 2000 1888 1750 1547 1520 1500 1357 1290 1170 1250 1031 1353 1005 1000 777 1159 1162 1146 1196 1178 1087 750 939 833 871 836 783 500 681 717 710 610 641 487 523 250
Slide 20: Gross Margin Effects of Weather
GROSS MARGIN EFFECTS OF WEATHER VARIANCES VS. NORMAL Pretax Millions $15 $10 13 $5 5 $0 (4) (1) (5) $(5) (8) (17) $(10) $(15) $(20) Q1 Q2 Q3 Q4 Q1 Q2 Q3 2015 2016 $(8) Million $(9) Million All periods recalculated to current 10-year rolling average (2005-2014) 20 Third Quarter 2016
Slide 21: Renewable Energy and Demand Side Management Expenses
RENEWABLE ENERGY AND DEMAND SIDE MANAGEMENT EXPENSES* Pretax Millions Renewable Energy Demand Side Management $40 $30 $20 18 11 12 18 14 12 15 $10 12 11 11 7 8 7 4 $0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2015 2016 $96 Million $64 Million * O&M expenses related to renewable energy and demand side management programs
Slide 22: Non-GAAP Measure Reconciliation
NON-GAAP MEASURE RECONCILIATION Three Months Ended September 30, EPS $ millions pretax, except per share amounts 2016 2015 Impact Operating revenues* $ 1,167 $ 1,199 Fuel and purchased power expenses* (336) (364) Gross margin 831 835 $ (0.02) Adjustments: Renewable energy (excluding AZ Sun) and dema
Slide 23: Quarterly Consolidated Statistics
QUARTERLY CONSOLIDATED STATISTICS 3 Months Ended September 30, 9 Months Ended September 30, 2016 2015 Incr (Decr) 2016 2015 Incr (Decr) ELECTRIC OPERATING REVENUES (Dollars in Millions) Retail Residential $ 647 $ 657 $ (10) $ 1,398 $ 1,375 $ 23 Business 480 486 (6) 1,244 1,235 9 Total Retail 1,127 1
Slide 24: Quarterly Consolidated Statistics
QUARTERLY CONSOLIDATED STATISTICS 3 Months Ended September 30, 9 Months Ended September 30, 2016 2015 Incr (Decr) 2016 2015 Incr (Decr) WEATHER INDICATORS - RESIDENTIAL Ac tual Cooling Degree-Days 1,160 1,265 (105) 1,663 1,749 (86) Heating Degree-Days - - - 397 254 143 Average Humidity 31% 33% (2)%
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