Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Lehman Brothers Energy/Power Conference 2003
32 slides from Pinnacle West Capital's conference presentation, Sep 3, 2003
Slide 1: Lehman Brothers Energy/Power Conference
Lehman Brothers Energy/Power Conference Donald E. Brandt Pinnacle West Capital Corporation September 3, 2003
Slide 2: Forward-Looking Statements
Forward -Looking Statements Forward-Looking This presentation contains forward-looking statements based on current expectations and we assume no obligation to update these statements or make any further statements on any of these issues, except as required by applicable law. These forward-looking st
Slide 3: Pinnacle West Capital Corporation
Pinnacle West Capital Corporation Largest electric utility in Arizona Headquartered in Phoenix, Arizona, 6th largest U.S. city Assets of $9 billion
Slide 4: Core Objectives
Core Objectives Capitalizing on superior growth Maintaining operational excellence Pursuing constructive regulatory outcomes Maintaining financial strength and liquidity Managing for long -term shareholder value long-term
Slide 5: Core Objectives
Core Objectives Capitalizing on superior growth Maintaining operational excellence Pursuing constructive regulatory outcomes Maintaining financial strength and liquidity Managing for long -term shareholder value long-term
Slide 6: Solid Customer Growth Foundation
Solid Customer Growth Foundation Leading 2002 Population Growth States 10 8 1 7 6 9 2 5 4 3
Slide 7: Capitalizing on Superior Customer Growth
Capitalizing on Superior Customer Growth Leading 2002 Population Growth States APS 2nd in customer growth nationally
Slide 8: APS Service Territory Has Fastest Growing Cities in U.S.
APS Service Territory Has Fastest Growing Cities in U.S. “Of the top 10 largest cities in the country, Phoenix and San Antonio grew the fastest between 2000 and 2002, at nearly 4%.” “In addition to being among the five fastest growing cities from 2000 to 2002, Gilbert, Chandler and Peoria, all citie
Slide 9: Superior APS Retail Customer Growth
Superior APS Retail Customer Growth Percent 5 4 3 2 1 0 1998 1999 2000 2001 2002 2003 2004 2005 Projected APS Industry Average
Slide 10: Core Objectives
Core Objectives Capitalizing on superior growth Maintaining operational excellence Pursuing constructive regulatory outcomes Maintaining financial strength and liquidity Managing for long -term shareholder value long-term
Slide 11: Maintaining Operational Excellence
Maintaining Operational Excellence Generation Palo Verde – top U.S. power producer Strong fossil availability New plant construction on target Delivery High customer growth and satisfaction Superior reliability Transmission and distribution expansion to meet growth and sustain reliability
Slide 12: Focusing on Operational Efficiency
Focusing on Operational Efficiency Average Customers per Employee 150 11% Efficiency Improvement 145 140 135 130 1998 1999 2000 2001 2002
Slide 13: Excelling in Customer Satisfaction
Excelling in Customer Satisfaction APS 3rd rd best among 56 electric utilities 120 110 100 90 80 70 60 Source: J.D. Power & Associates 2003 Electric Utility Residential Customer Satisfaction Survey (56 Companies)
Slide 14: Managing Market Risks
Managing Market Risks Optimize the economic use of APS’ generation and transmission assets Effectively manage load, generation, fuel, and purchased power risks Maintain disciplined credit risk management approach
Slide 15: Core Objectives
Core Objectives Capitalizing on superior growth Maintaining operational excellence Pursuing constructive regulatory outcomes Maintaining financial strength and liquidity Managing for long -term shareholder value long-term
Slide 16: APS Regulatory Strategy
APS Regulatory Strategy Relationships built on consistency, accountability, performance and trust Strong presentation of APS position Focus on reliability issue Settlement opportunities
Slide 17: General Rate Case
General Rate Case Key Provisions 9.8% ($175 million) annual rate increase Rate base treatment of 1,800 MW of PWEC Arizona assets Recovery of previous $234 million write-off
Slide 18: Changes in Consumer Price Index and APS Prices Since 1991
Changes in Consumer Price Index and APS Prices Since 1991 Percent 40 CPI 38% 30 20 10 0 APS 6% (10) (20) '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04
Slide 19: Average Southwestern U.S. Residential Price Ranking
Average Southwestern U.S. Residential Price Ranking* ¢/kWh 16 14 12 10 8 6 4 2 0 PPW SRP PNM APS T EP NPC EE PG&E SCE SDG&E * As of December 31, 2002
Slide 20: General Rate Case
General Rate Case Key Provisions 9.8% ($175 million) annual rate increase Rate base treatment of 1,800 MW of PWEC Arizona assets Recovery of previous $234 million write-off
Slide 21: Planning for Growth and Reliability
Planning for Growth and Reliability APS System Load and Resources MW 12,000 Peak System Requirement + 10,000 15% Reserves 8,000 Resource Deficit 6,000 PWEC Assets & Track B 4,000 2,000 Existing APS Capacity 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Slide 22: General Rate Case Milestones
General Rate Case Milestones Filing June 2003 Discovery August 2003 – April 2004 Testimony January - March 2004 Hearing Begins April 7, 2004 Briefing Proposed Order Final Order
Slide 23: Core Objectives
Core Objectives Capitalizing on superior growth Maintaining operational excellence Pursuing constructive regulatory outcomes Maintaining financial strength and liquidity Managing for long -term shareholder value long-term
Slide 24: Maintaining Financial Strength & Liquidity
Maintaining Financial Strength & Liquidity Parent Company Debt Repayment Plans 2003 2004 Sources* Sources* 9$500M intercompany $80 - $100M SunCor loan to APS asset sales $80-$100M SunCor $100M Southern Nevada asset sales Water Authority Uses Uses 9$225M bridge debt $215M senior notes 9$250M floating
Slide 25: 2003 Consolidated Cash Flow
2003 Consolidated Cash Flow** Sources Requirements Cash From Long-term Long-term Capital Debt Debt Operations Financing Financing Expenditures Repayments Repayments Common Common Dividends Dividends Approximately $ 1.2 Billion * Projected
Slide 26: 2004 Consolidated Cash Flow
2004 Consolidated Cash Flow** Sources Requirements Cash From Long-term Long-term Capital Debt Debt Operations Financing Financing Expenditures Repayments Repayments Common Common Dividends Dividends Approximately $ 1.1 Billion * Projected
Slide 27: Balancing Financial Strength & Growth
Balancing Financial Strength & Growth Consolidated Debt Ratio* Capital Expenditures Percent $ Millions 60 2005 Target of 50% 1,200 900 50 600 40 300 30 0 2001 2002 2005 2001 2002 2003 2004 2005 Projected * Includes Palo Verde sale/leaseback Other PW EC Generation APS Generation Deliv ery
Slide 28: Core Objectives
Core Objectives Capitalizing on superior growth Maintaining operational excellence Pursuing constructive regulatory outcomes Maintaining financial strength and liquidity Managing for long-term shareholder value long-term
Slide 29: Consolidated Earnings Drivers
Consolidated Earnings Drivers 2003 and 2004 2003 2004 vs. 2002 vs. 2003 Retail growth + + Regulatory asset amortization + + SunCor + +/- EITF 02-03 + flat Cost reduction initiatives + + Higher gas and purchased power costs - - Pension and other O&M costs - - Marketing and trading - flat Unregulated
Slide 30: Creating Long-Term Shareholder Value
Creating Long-Term Shareholder Value Top Dividend Growth 1998 - 2002 Percent 10 PNW 0 (10) (20) (30)
Slide 31: Pinnacle West Managing for the Future
Pinnacle West Managing for the Future A vertically integrated utility in a high-growth market area Sustaining exceptional operational performance Managing risk in changing energy markets While remaining adept and agile in a dynamic regulatory environment
Slide 32: PINNACLEWEST
PINNACLEWEST ee aA i *
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