Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Non-Deal Roadshow (March 2018)
32 slides from Pinnacle West Capital's roadshow presentation, Mar 21, 2018
Slide 1: Powering Growth, Delivering Value
POWERING GROWTH DELIVERING VALUE Investor Meetings l March 21 and 29, 2018 Powering Growth, Delivering Value
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: Value Proposition
VALUE PROPOSITION We are executing on our financial and operational objectives … Leverage Operational Excellence Financial Strength Economic Growth Top decile safety performance Annual dividend growth target of Arizona’s long-term growth among peers 6%, subject to declaration at fundamentals r
Slide 4: The Grid Is Evolving – Driving New Investments in Technology
THE GRID IS EVOLVING – DRIVING NEW INVESTMENTS IN TECHNOLOGY Grid stability, power quality and reliability remain the core of a sustainable electrical system. APS is at the forefront of utilities designing and planning for the next generation electric grid. New technology advances and changing custo
Slide 5: Grid Investments
Modernizing the distribution grid with advanced technology GRID INVESTMENTS investments – resulting in improved reliability for customers and more efficient operations Grid Operations & Investment $1.6 Billion from 2018-2020 Integrated Volt/VAR Control (IVVC) Advanced Distribution Management System
Slide 6: Storage Projects
Energy storage is an important STORAGE PROJECTS part of our Integrated Resource Plan Punkin Center Battery Storage Project • 2 MW / 8 MWH lithium ion battery • Anticipated in service April 2018 • Defers the rebuild of around 20 miles of 21 kV distribution line for approximately 5-10 years • Acts as
Slide 7: Renewable Resources
RENEWABLE APS is a leader in solar RESOURCES APS Solar Portfolio* APS currently has 1,583 MW of renewable resources: Owned PPA 214 MW 310 MW • Solar* 1,264 MW DG • Wind 289 MW 740 MW • Biomass 14 MW • Geothermal 10 MW • Biogas 6 MW Owned solar includes 170 MW AZ Sun Program, 4 MW of other APS owned
Slide 8: Residential Solar vs. APS Customer Load
RESIDENTIAL SOLAR VS. APS CUSTOMER Performance at system peak LOAD On June 20th, APS customers hit “peak demand” for 2017 using more than 7,300 MW of electricity 500 7,367 8,000 6,918 6,136 400 6,000 304 300 Residential Rooftop MW 4,000 APS Customer Load 200 100 2,000 100 5 0 0 1 2 3 4 5 6 7 8 9 10
Slide 9: Residential PV Applications
Residential DG (MWdc) Annual Additions 150 RESIDENTIAL PV 133 74 APPLICATIONS* 51 57 44 33 18 22 10 2009 2012 2014 2016 2018 YTD 4,000 3811 3576 3,500 3,000 2493 2207 2,500 1969 2033 2,000 1841 1577 1602 1462 1413 1442 1434 1291 1364 1,500 1267 1283 1153 1055 1001 1002 1349 1,000 1157 1158 1189 1168
Slide 10: The "Duck Curve"
Distributed generation is changing THE “DUCK CURVE” the load shape of the grid Current Spring Day Spring Day 2022 Excess renewables creates over-generation … and potentially for nuclear generation in challenges … 5,000 the future 5,000 4,500 4,500 4,000 4,000 3,500 3,500 3,000 3,000 2,500 2,500 2,00
Slide 11: Demand Side Management (DSM)
DEMAND SIDE 2018 DSM Plan shifts the focus to align with APS’s changing MANAGEMENT (DSM) resource needs School Bus Electrification – Pilot program to electrify school buses that can charge in the middle of the day Managed EV Charging Program – Fleet, workplace and multifamily charging infrastructure
Slide 12: APS Solar
Providing more renewable energy APS SOLAR and technology to all customers APS Solar Partner Program (Installations Complete) – Installed 10 MW of APS-owned residential PV systems with advanced controllable inverters that can vary power output – 4 MWh of grid-tied battery storage on 2 of the particip
Slide 13: Resource Planning
RESOURCE PLANNING* Peak** 8,405 MW 9,835 MW 11,410 MW Resource Reductions 2017-2022 2017-2027 2017-2032 (Retirements, Expirations) -487 MW -872 MW -872 MW Ocotillo steam unit retirements and Ocotillo steam unit retirements, Ocotillo steam unit retirements, Navajo contract expiration Navajo contract
Slide 14: Integrated Resource Plan
INTEGRATED The ACC can acknowledge the filing of an IRP, but they do not RESOURCE PLAN approve IRP’s 15-Year Plan IRP Cycle Acknowledgement Decision Impact Looking Ahead • An Integrated • Occurs every 2-3 years • ACC does not • A non- • The next IRP Resource Plan • Utility-and Commission- approve or
Slide 15: APS Capital Expenditures
APS CAPITAL Capital expenditures are funded primarily through internally EXPENDITURES generated cash flow ($ Millions) Other $1,341 $99 $1,211 $1,181 $1,153 Distribution $80 $153 $101 $419 Transmission $444 Renewable $541 $174 $617 Generation $3 $148 $193 Environmental(1) $16 $91 $215 $235 $120 $180
Slide 16: Operations & Maintenance
OPERATIONS & Goal is to keep O&M per kWh flat, MAINTENANCE adjusted for planned outages ($ Millions) $860 - $880 $828 $833 $788 $805 75 - 85 $772 72 63 37 52 38 756 770 785 - 795 751 753 734 2013 2014 2015 2016 2017 2018E* PNW Consolidated ex RES/DSM** Planned Fleet Outages * 2018 excludes impacts r
Slide 17: Planned Outage Cycles
PLANNED OUTAGE The length of time between CYCLES outages varies from plant to plant Palo Verde Generating Station − Palo Verde will continue to have two refueling outages each year (18 months cycles for each of the three units) − APS’s share of the annual planned outage expense at Palo Verde has bee
Slide 18: Sustainability
APS’s vision is to create a SUSTAINABILITY sustainable energy future for Arizona Pinnacle West and APS have adopted a strategic framework that Five critical areas of our sustainability efforts supports our operating foundation Carbon Management • 50% of our diverse energy mix is carbon-free • Plan t
Slide 19: Tax Reform
Tax Cuts and Jobs Act provides TAX REFORM benefits to both our customers and shareholders Regulatory Steps Key Impacts − Received ACC approval of $119M annual rate Income reduction reflecting lower corporate tax rate 2017 Tax Reform Impacts Regulatory Tax ($ millions) Liability through the Tax Expen
Slide 20: Appendix
APPENDIX Powering Growth, Delivering Value
Slide 21: Senior Management Team
SENIOR Our management team has more than 100 combined years of MANAGEMENT creating shareholder value in the TEAM energy industry Don Brandt Jim Hatfield We maintain a robust Chairman of the Board, President and Executive Vice President and Chief Executive Officer, Pinnacle West & APS Chief Financial
Slide 22: Economic Indicators
ECONOMIC Arizona and Metro Phoenix remain attractive places to INDICATORS live and do business Year over Year Employment Growth1 U.S. Phoenix Arizona population surpassed 7 million in 5.0% 2017 4.0% Arizona #1 state in the country in 2017 3.0% for in-bound moves - North American Moving Services Janu
Slide 23: Rate Base
APS’s revenues come from a RATE BASE regulated retail rate base and meaningful transmission business APS Rate Base Growth Total Approved Rate Base Year-End ACC FERC Generation & Distribution Transmission Rate Base Guidance: 6-7% Average Annual Growth Rate 17% $1.8 83% $1.4 ACC FERC Rate Effective Da
Slide 24: Balance Sheet Strength
BALANCE SHEET STRENGTH Credit Ratings (1) Long-Term Debt Maturity Schedule • A- or equivalent ratings or better at S&P, Moody’s ($Millions) and Fitch $600 2017 Major Financing Activities $500 • $250 million re-opening in March of APS’s outstanding 4.35% senior unsecured notes due November 2045 $400
Slide 25: Four Corners SCR Rate Rider
FOUR CORNERS SCR APS will file for a rate increase RATE RIDER in April 2018 Key Components of APS’s Anticipated Request Financial Cost of Capital Bill Impact • Consistent with prior • 7.85% Return on Rate • Rate rider applied as a disclosed estimates Base2 percentage of base rates – Weighted Average
Slide 26: Ocotillo Modernization Project and Four Corners SCRs
OCOTILLO MODERNIZATION PROJECT AND FOUR CORNERS SCRs • Included in the 2017 Rate Review Order*, APS has been granted Accounting Deferral Orders for two large generation-related capital investments – Ocotillo Modernization Project: Retiring two aging, steam-based, natural gas units, and replacing wit
Slide 27: Arizona Corporation Commission
ARIZONA CORPORATION COMMISSION Term to January 2019 Terms to January 2021 Tom Justin Bob Boyd Andy Forese (R) Olson (R)** Burns (R)* Dunn (R) Tobin (R) Chairman Other State Officials ACC Executive Director – Ted Vogt RUCO Director – David Tenney * Term limited - elected to four-year terms (limited t
Slide 28: 2018 Key Dates
2018 KEY DATES ACC Key Dates / Docket # Q1 Q2 Q3 Q4 Key Recurring Regulatory Filings Lost Fixed Cost Recovery Implement File Feb 15 E-01345A-11-0224 May 1 Transmission Cost Adjustor File May 15 E-01345A-11-0224 Implement Jun 1 Jun 1: File 2019 Plan 2019 DSM/EE Implementation Plan TBD 2018 DSM Decisi
Slide 29: APS Transmission
Strategic transmission investment is essential to maintain reliability APS TRANSMISSION and deliver diversified resources to customers • 10-Year Transmission Plan filed January 2018 (115 kV and above) – 52 miles of new lines – 13 bulk transformer additions Flagstaff • Also includes: – Sun Valley-Mor
Slide 30: Generation Portfolio
GENERATION PORTFOLIO* Plant Location No. of Units Dispatch COD Ownership Interest1 Net Capacity (MW) NUCLEAR Palo Verde Wintersburg, AZ 3 Base 1986-1989 29.1% 1,146 1,146 MW Cholla Joseph City, AZ 2 Base 1962-1980 100 387 COAL Four Corners Farmington, NM 2 Base 1969-1970 63 970 1,672 MW Navajo Page,
Slide 31: Purchased Power Contracts
PURCHASED POWER CONTRACTS* Contract Location Owner/Developer Status1 PPA Signed COD Term (Years) Net Capacity (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 SOLAR 310 MW Sadd
Slide 32: Investor Relations Contacts
INVESTOR RELATIONS CONTACTS Stefanie Layton Director, Investor Relations (602) 250-4541 stefanie.layton@pinnaclewest.com Chalese Haraldsen (602) 250-5643 chalese.haraldsen@pinnaclewest.com Michelle Clemente (602) 250-3752 michelle.clemente@pinnaclewest.com Pinnacle West Capital Corporation P.O. Box
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