Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Non-Deal Roadshow (December 2015)
39 slides from Pinnacle West Capital's roadshow presentation, Dec 8, 2015
Slide 1: Powering Growth, Delivering Value: Investor Meetings December 9-10, 2015
Powering Growth, Delivering Value Investor Meetings| December 9 - 10, 2015 POWERING GROWTH DELIVERING VALUE
Slide 2: Forward Looking Statements
Powering Growth, Delivering Value 2 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 suc
Slide 3: Value Proposition
Powering Growth, Delivering Value 3 • Consolidated earned ROE more than 9.5% (weather-normalized) through 2016 • Annual dividend growth target of 5%, subject to declaration at Board of Director’s discretion • Strong credit ratings and balance sheet • Rate base growth of 6-7% (2014-2018); investing i
Slide 4: Rate Base
Powering Growth, Delivering Value 4 RATE BASE APS’s revenues come from a regulated retail rate base and meaningful transmission business $6.0 $6.2 $7.6 $1.3 $1.5 $1.8 2014 2015 2016 2017 2018 APS Rate Base Growth Year-End ACC FERC $7.0 Billion Total Rate Base Projected Most Recent Rate Decisions ACC
Slide 5: Capital Expenditures
Powering Growth, Delivering Value 5 $289 $259 $230 $250 $66 $77 $258 $24 $47 $234 $198 $63 $66 $13 $1 $192 $193 $125 $180 $242 $336 $347 $317 $73 $89 $85 $81 2014 2015 2016 2017 CAPITAL EXPENDITURES 70% of capital expenditures are recovered through rate adjustors (30%) and depreciation cash flow (40
Slide 6: Resource Planning
Powering Growth, Delivering Value 6 RESOURCE PLANNING ACC adopted revised IRP filing schedule; final IRP due April 2017 to allow time to consider impacts of Clean Power Plan 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 2015 2018 2021 2024 2027 Existing Owned Resources Existing Contracts Resource P
Slide 7: Economic Indicators
Powering Growth, Delivering Value 7 Construction, healthcare, tourism, financial activities, business services, and consumer services adding jobs at a rate above 3% ECONOMIC INDICATORS Arizona and Metro Phoenix remain attractive places to live and do business Phoenix ranked 1st in tech industry job
Slide 8: The Grid Is Evolving – Increasingly Dynamic and Complex
Powering Growth, Delivering Value 8 THE GRID IS EVOLVING – INCREASINGLY DYNAMIC AND COMPLEX Drivers for Change – Traditional grid built for one-way flow – Technology advancements (storage, home energy management) – Changing customer needs and demands – Proliferation of distributed solar energy, whic
Slide 9: Solar Partner Program
Powering Growth, Delivering Value 9 SOLAR PARTNER PROGRAM Learning how to efficiently enable the integration of rooftop solar and battery storage with our grid • Overview – Installing 10 MW of APS-owned residential PV systems on 1,500 homes – Advanced controllable inverters that can vary power outpu
Slide 10: Solar Innovation Study
Powering Growth, Delivering Value 10 SOLAR INNOVATION STUDY Examining the integration of behind the meter advanced technologies with demand-based rates • Overview – Installing APS-owned residential PV systems on 75 homes with various configurations of battery storage, energy efficiency, demand contr
Slide 11: Advanced Metering Infrastructure (AMI 2.0)
Powering Growth, Delivering Value 11 ADVANCED METERING INFRASTRUCTURE (AMI 2.0) • Overview – APS began deploying advanced “smart” meters in 2006, reaching full deployment with 1.2 million meters in 2014 – In 2015, APS started replacing 140,000 end-of-life meters with advanced meters • Benefits – Bui
Slide 12: Ocotillo Power Plant (Tempe, AZ)
Powering Growth, Delivering Value 12 OCOTILLO POWER PLANT (TEMPE, AZ) • Overview – Maintains system reliability through retirement of aging steam units – Replacement units more efficient and meet need for fast-ramping capability • Benefits – Aids integration of renewables • Estimated cost: $500M • E
Slide 13: Rate Design Modernization
Powering Growth, Delivering Value 13 RATE DESIGN MODERNIZATION Components of Modern Rates Rate Changes Needed to Align Fixed Costs and Revenues • Demand Rate – Charge for maximum kW draw in any hour of the month; appropriate for recovering fixed costs that vary with the customer’s max load (versus k
Slide 14: APS Cost of Service Analysis
Powering Growth, Delivering Value 14 APS COST OF SERVICE ANALYSIS Results show customers with solar do not pay entire cost to serve $118 How much it costs to serve a typical solar customer after solar cost savings $36 Costs Saved Due to Solar $51 Contributions to Costs by Average Solar Customer $67
Slide 15: APS Rate Design: A Solid Foundation to Build On
Powering Growth, Delivering Value 15 APS RATE DESIGN: A SOLID FOUNDATION TO BUILD ON Over 50% of APS residential customers are already on time-of-use rates, including 11% on demand rates 0% 25% 50% 75% 100% Standard TOU - Energy TOU - Demand APS residential customer base has grown from 400,000 in ea
Slide 16: Key Dates for Rate Design
Powering Growth, Delivering Value 16 KEY DATES FOR RATE DESIGN 2013 2014 2015 • Net metering Technical Workshops and July 2013 Renewable Energy Standard Annual filing, which laid the groundwork for the November decision • Nov. 2013: ACC decision on net metering; recognized cost shift and implemented
Slide 17: Environmental Regulations and Compliance
Powering Growth, Delivering Value 17 Regional Haze / BART (SCR) Mercury and Other Hazardous Air Pollutants (ACI + Baghouse) Coal Combustion Residuals Cooling Water Intake Structures – CWA 316(b) EPA Ruling Announced in 1999, with site-specific requirements announced more recently MATS compliance by
Slide 18: Coal Fleet Strategy and Emissions
Powering Growth, Delivering Value 18 Emissions • Four Corners: 2013 transaction to purchase Southern California Edison’s ownership in Units 4 and 5 and closure of units 1, 2 & 3 leads to expected reductions of emissions; particulates are expected to decline by 43%, NOx by 36%, CO2 by 30%, mercury by
Slide 19: Water Strategy
Powering Growth, Delivering Value 19 WATER STRATEGY APS, and Palo Verde in particular, has provided national and international leadership on the use of reclaimed water for power generation Vision: To secure and maintain a sustainable and cost-effective supply of water to enable reliable energy produ
Slide 20: Arizona Corporation Commission and RUCO
Powering Growth, Delivering Value 20 ARIZONA CORPORATION COMMISSION AND RESIDENTIAL UTILITY CONSUMER OFFICE * Term limited - elected to four-year terms (limited to two consecutive) Bob Stump (R)* Tom Forese (R) Doug Little (R) Terms to January 2019 Terms to January 2017 Susan Bitter Smith (R) Chairm
Slide 21: 2015 Key Dates
Powering Growth, Delivering Value 21 2015 KEY DATES ACC Key Dates Docket # Q1 Q2 Q3 Q4 Key Recurring Regulatory Filings Lost Fixed Cost Recovery E-01345A-11-0224 Jan 15 Net Metering – Quarterly Installation Filings E-01345A-13-0248 Jan 15 Apr 15 Jul 15 Oct 15 Transmission Cost Adjustor E-01345A-11-0
Slide 22: Arizona Electric Utility General Rate Cases
Powering Growth, Delivering Value 22 ARIZONA ELECTRIC UTILITY GENERAL RATE CASES Utility Company Docket # Key Dates UNS Electric E-04204A-15-0142 Application filed May 5, 2015 Direct testimony - ex rate design, cost of service (Nov 6, 2015) Direct testimony - rate design, cost of service (Dec 9, 201
Slide 23: Appendix
Powering Growth, Delivering Value APPENDIX
Slide 24: Operations & Maintenance Outlook
Powering Growth, Delivering Value 24 $754 $761 $788 $805 $150 $124 $137 $103 $104 $114 2011 2012 2013 2014 2015E 2016E PNW Consolidated RES/DSM* OPERATIONS & MAINTENANCE OUTLOOK Goal is to keep O&M per kWh flat, adjusted for planned outages *Renewable energy and demand side management expenses are o
Slide 25: Financial Outlook
Powering Growth, Delivering Value 25 Assumption Impact Retail customer growth • Expected to average about 2-3% annually • Modestly improving Arizona and U.S. economic conditions Weather-normalized retail electricity sales volume growth • About 0.5-1.5% after customer conservation and energy efficien
Slide 26: Dividend Growth
Powering Growth, Delivering Value 26 DIVIDEND GROWTH Pinnacle West’s annual dividend is $2.50 per share; targeting ~5% annual dividend growth $2.10 $2.18 $2.27 $2.38 $2.50 2011 2012 2013 2014 2015 2016 2017 Dividend Growth Goal Indicated Annual Dividend Rate at Year-End Projected Future dividends su
Slide 27: Balance Sheet Strength
Powering Growth, Delivering Value 27 Credit Ratings • A- rating or better at S&P, Moody’s and Fitch 2015 Major Financing Activities • $250 million 5-year 2.20% APS senior unsecured notes issued in January 2015 • $300 million 10-year 3.15% APS senior unsecured notes issued in May 2015 - refinanced $3
Slide 28: Four Corners
Powering Growth, Delivering Value 28 • 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 – APS will continue to operate Fo
Slide 29: APS Transmission
Powering Growth, Delivering Value 29 • 10-Year Transmission Plan filed January 2015 (115 kV and above) – 275 miles of new lines – Includes Hassayampa-North Gila (HANG2) • ~110 miles; 500kV • Construction started March 2013 • In-service May 2015 • Also includes: – Palm Valley-TS2-Trilby Wash 230kV. I
Slide 30: Bright Canyon Energy – Transmission Growth
Powering Growth, Delivering Value 30 BRIGHT CANYON ENERGY – TRANSMISSION GROWTH TRANSCANYON A 50/50 Joint Venture formed with BHE U.S. Transmission, subsidiary of Berkshire Hathaway Energy, to pursue transmission opportunities in the western United States BRIGHT CANYON ENERGY Pinnacle West subsidiar
Slide 31: Arizona's Renewable Resource and Energy Efficiency Standards
Powering Growth, Delivering Value 31 • 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 – 9.5% by 2015 – 22% by 2020 ARIZONA’S RENEWABLE RESOURCE AND ENERGY EFFICIE
Slide 32: Retail Sales Impact from Energy Efficiency and Distributed Generation
Powering Growth, Delivering Value 32 2015 2016 2017 RETAIL SALES IMPACT FROM ENERGY EFFICIENCY AND DISTRIBUTED GENERATION YoY Retail Sales Before Customer Programs Energy Efficiency & Customer Conservation Distributed Generation Distributed Generation (DG) Impact • DG makes up 0.5% or less of the ne
Slide 33: APS Is a Leader in Solar
Powering Growth, Delivering Value 33 APS IS A LEADER IN SOLAR AZ Sun Projects Capacity Developer Actual COD* Paloma 17 MW First Solar Sep 2011 Cotton Center 17 MW Solon Oct 2011 Hyder Phase 1 11 MW SunEdison Oct 2011 Hyder Phase 2 5 MW SunEdison Feb 2012 Chino Valley 19 MW SunEdison Nov 2012 Yuma Fo
Slide 34: Operational Considerations with Increased Variable Generation
Powering Growth, Delivering Value 34 OPERATIONAL CONSIDERATIONS WITH INCREASED VARIABLE GENERATION The grid provides real-time voltage and power needed to start air conditioners and other motors loads (for typical AC unit) • Steep ramp rate of backup generation • Instant variability • Voltage contro
Slide 35: Residential vs. Utility-Scale Solar
Powering Growth, Delivering Value 35 RESIDENTIAL VS. UTILITY-SCALE SOLAR Performance at system peak 0 2,000 4,000 6,000 8,000 0 100 200 300 400 500 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 M W Hour Ending On August 15th, APS customers hit “peak demand” for 2015 using more tha
Slide 36: Residential PV Applications
Powering Growth, Delivering Value 36 249 361 342 443 628 719 645 794 871 949 532 851 515 717 885 750 1,200 1,236 1,474 1,256 1,176 1,365 0 29 36 87 48 54 71 73 93 70 114 47 81 114 110 69 104 110 101 89 117 58 56 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 RESIDENTIAL PV APPLICATIONS As of Octobe
Slide 37: Generation Portfolio
Powering Growth, Delivering Value 37 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 6472 Four Corners Farmington,
Slide 38: Purchased Power Contracts
Powering Growth, Delivering Value 38 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
Slide 39: Investor Relations Contacts
Powering Growth, Delivering Value 39 INVESTOR RELATIONS CONTACTS Paul J. Mountain, CFA Director, Investor Relations Telephone: (602) 250-4952 E-mail: paul.mountain@pinnaclewest.com Chalese Haraldsen Telephone: (602) 250-5643 E-mail: chalese.haraldsen@pinnaclewest.com Pinnacle West Capital Corporatio
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