Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Credit Suisse 2007 Energy Summit
51 slides from Pinnacle West Capital's conference presentation, Feb 5, 2007
Slide 1: Credit Suisse 2007 Energy Summit
Credit Suisse 2007 Energy Summit February 6, 2007
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements. Neither the Company nor APS assumes any obligation to update these statements or make any further statements on any of these issues, except as required by applicable law. These forward-looking statements are often iden
Slide 3: Strategic Objectives
Focus on vertically integrated utility Capitalize on strong intrinsic growth Maintain solid operating performance Attain constructive regulatory outcomes Optimize real estate assets Create long-term value Strategic Objectives
Slide 4: Arizona Leads U.S. in Population Growth
2 10 3 1 7 6 5 4 Arizona Leads U.S. in Population Growth 8 9 Annual percent change 2005 - 2006, U.S. Census Bureau
Slide 5: Solid Economic Foundation for Sales Growth
2002 2003 2004 2005 2006 Arizona Population 0.028 0.027 0.03 0.036 0.031 APS Customers 0.031 0.033 0.037 0.043 0.044 APS Retail Sales* 0.032 0.04 0.052 0.039 0.055 Solid Economic Foundation for Sales Growth * Weather normalized Annual Growth
Slide 6: APS Resource Requirements for Native Load 2005-2009
2005 2006 2007 2008 2009 MW APS Resource Requirements for Native Load 2005 - 2009 Average Annual Growth 4.3% Projected Peak Load & Reserves Long-term Resources Market Purchases Peaking Shortfall
Slide 7: Nuclear Overview
Nuclear Overview Capacity Factor Capacity Factors loss due to various maintenance issues Unit 1 '05 0.662 Unit 1 '06 0.423 0.471 Unit 2 '05 0.819 Unit 2 '06 0.852 Unit 3 '05 0.839 Unit 3 '06 0.855 Top U.S. power producer past 14 years Recent operating issues Unit 1 vibration Pressurizer replacements
Slide 8: 2006 Coal Generation Highlights
2006 Coal Generation Highlights 2002 2003 2004 2005 2006 APS 0.804 0.758 0.842 0.871 0.869 Industry Average* 0.679 0.685 0.706 0.719 Record-breaking coal capacity factor for third straight year Four Corners Set new production record 15.9+ million MWh Capacity factor 87% Cholla Set new production rec
Slide 9: Business and Residential Customer Satisfaction
Business Customers APS ranked #1 among IOUs in West Superior Customer Satisfaction vs. Western Investor-Owned Electrics J.D. Power 2006 survey results Residential Customers APS ranked #2 among IOUs in West
Slide 10: Regulatory Issues
Retail rate case 7-mill interim PSA adjustor extension 2007 annual adjustor reset Regulatory Issues
Slide 11: APS Retail Rate Request Components
APS Retail Rate Request Components Fuel and Purchased Power Capital Structure Update Sundance and Other Rate Base Items Pension Funding $315 98 46 41 20.4% Increase Other (65) 14.8% 4.6% 2.2% 1.9% (3.1)% $ 435 Million
Slide 12: Regulatory Calendar
Retail rate case Post-hearing briefs due January 22 and February 16 ALJ recommendation "Exception" comment period ACC decision target 2nd quarter 2007 7-mill interim PSA adjustor extension Until rates become effective under rate case Approved December 2006 2007 annual adjustor reset 3.99-mill adjust
Slide 13: SunCor Objectives
SunCor Objectives Capitalize on assets and expertise Deploy capital efficiently Maintain strong financial discipline
Slide 14: SunCor Gross Margin Contribution by Business Line
SunCor Gross Margin Contribution by Business Line Gross Margin Contribution ($ Millions) 2002 2003 2004 2005 2006 2007 Home sales 26 33 41 48 58 31 Condo sales 4 Land sales 21 35 66 54 57 49 Commercial property and management 12 29 13 7 15 19 Sale of assets 15 40 6 28 19 18 Total pretax gross margin
Slide 15: Financial Objectives
Financial Objectives Strong financial discipline Ample liquidity and access to capital markets Solid balance sheet strength Active management of costs and business risks Long-term value for shareholders
Slide 16: Consolidated EPS Summary 4th Quarter 2006 and 2005
Consolidated EPS Summary 4th Quarter 2006 and 2005 4Q 2005 4Q 2006 Reported 0.22 0.18 On-Going 0.22 0.14 Per Share
Slide 17: Consolidated On-Going EPS Summary of Major Variances Q4
$ 0.10 Retail sales growth $(0.04) Higher depreciation $(0.03) Higher interest costs $(0.07) Higher O&M costs Consolidated On-Going EPS Summary of Major Variances $(0.02) SunCor 4th Quarter 2006 vs 4th Quarter 2005 $(0.02) Weather
Slide 18: Consolidated EPS Summary Year 2006 and 2005
Consolidated EPS Summary Year 2006 and 2005 2005 2006 Reported 1.82 3.27 On-Going 3.35 3.13 Per Share
Slide 19: Consolidated On-Going EPS Summary of Major Variances Year
$ 0.53 Retail sales growth $(0.29) Increased fuel and purchased power costs net of PSA deferrals $(0.34) Higher O&M costs Consolidated On-Going EPS Summary of Major Variances $ 0.05 SunCor $(0.11) Lower marketing and trading gross margin Year 2006 vs Year 2005 $(0.07) Higher depreciation $ 0.01 Othe
Slide 20: 2007 Earnings Outlook
Base level of consolidated earnings expected to be within reasonable range around $2.45 per share Before effects of APS retail rate case decision SunCor earnings of $0.30 - $0.35 per share With rate relief, consolidated earnings expected to be within reasonable range around $3.00 per share Base-leve
Slide 21: Solid Equity Ratios to Support Growth
Solid Equity Ratios to Support Growth 2002 2003 2004 2005 2006 Consolidated Equity Ratio 0.452 0.454 0.474 0.532 0.51 2002 2003 2004 2005 2006 APS equity ratio 0.493 0.457 0.451 0.538 0.52 Consolidated APS Excludes off-balance sheet adjustments * Unaudited 2002 2003 2004 2005 51% 52% 2006* 2002 2003
Slide 22: Significant Capital Investment to Support Growth
($ Millions) 2004 2005 2006 2007 2008 2009 APS Distribution 275 325 357 361 414 459 APS Transmission 67 92 114 173 195 288 APS Generation 144 356 176 323 304 313 Other (a) 31 49 22 39 56 51 Total excluding SunCor 517 822 669 896 969 1111 SunCor (b) 81 106 201 101 130 100 Total 598 928 870 997 1099 1
Slide 23: Top Quartile Five-Year Dividend Growth
Top Quartile Five-Year Dividend Growth Top 20 Companies 5 yr div growth Average Constellation Energy 0.258 0.002 UniSource Energy 0.16 0.002 Exelon 0.158 0.002 PPL Corp 0.157 0.002 PNM Resources 0.105 0.002 Entergy 0.104 0.002 Northeast Utilities 0.084 0.002 TXU 0.076 0.002 Scana Corp 0.07 0.002 FPL
Slide 24: Strategic Summary
Focus on vertically integrated utility Capitalize on strong intrinsic growth Maintain solid operating performance Attain constructive regulatory outcomes Optimize real estate assets Create long-term value Strategic Summary
Slide 25: Pinnacle West Capital Corporation
rs POON PINNACLE WEST CAPITAL CORPORATION
Slide 26: Appendix
Appendix
Slide 27: Earnings Summary 4th Quarter 2006 vs 4th Quarter 2005
APS $ 12.9 $ 18.3 $ (5.4) SunCor (including disc ops) 11.4 13.5 (2.1) Other (5.8) (10.5) 4.7 Net income as reported $ 18.5 $ 21.3 $ (2.8) EPS as reported $ 0.18 $ 0.22 $ (0.04) On-going EPS $ 0.14 $ 0.22 $ (0.08) 2006 2005 Change Earnings Summary 4th Quarter 2006 vs 4th Quarter 2005 $ Millions, exce
Slide 28: On-Going Earnings Reconciliation 4th Quarter
Net income $ 18.5 $ 0.18 $ 21.3 $ 0.22 Adjustments: Regulatory disallowance - - (2.8) (0.03) Silverhawk disc ops - - 2.8 0.03 Income tax credits related to prior years (3.7) (0.04) - - On-going earnings $ 14.8 $ 0.14 $ 21.3 $ 0.22 On-Going Earnings Reconciliation 4th Quarter 2006 vs 4th Quarter 2005
Slide 29: Earnings Summary Year Ended December 31, 2006 vs 2005
APS $ 269.7 $ 170.5 $ 99.2 SunCor (including disc ops) 60.5 55.6 4.9 Other (2.9) (49.8) 46.9 Net income as reported $ 327.3 $ 176.3 $ 151.0 EPS as reported $ 3.27 $ 1.82 $ 1.45 On-going EPS $ 3.13 $ 3.35 $ (0.22) 2006 2005 Change Earnings Summary Year Ended December 31, 2006 vs 2005 $ Millions, exce
Slide 30: On-Going Earnings Reconciliation Year Ended December 31
Net income $ 327.3 $ 3.27 $ 176.3 $ 1.82 Adjustments: Income tax credits related to prior years (14.0) (0.14) Regulatory disallowance 84.5 0.87 Silverhawk sale 67.4 0.69 NAC sale (3.7) (0.03) On-going earnings $ 313.3 $ 3.13 $ 324.5 $ 3.35 On-Going Earnings Reconciliation Year Ended December 31, 200
Slide 31: Current Credit Ratings Profile
Current Credit Ratings Profile S&P Moody's Fitch Pinnacle West (Parent) Senior Unsecured Debt BB+ Baa3 BBB- Outlook Stable Negative Stable APS Senior Unsecured Debt BBB- Baa2 BBB Outlook Stable Negative Stable
Slide 32: Liquidity Resources
Liquidity Resources APS $400 million revolver through December 2010 $500 million revolver through September 2011 Next long-term debt maturity 2011 Year-end 2006 invested position of approximately $100 million Pinnacle West (parent) $300 million revolver through December 2010 Commercial paper balance
Slide 33: APS Retail Service Territory
Phoenix APS Retail Service Territory APS Retail Service Territory
Slide 34: Arizona Population Highlights
Arizona Population Highlights Arizona's population 6.2 million Arizona 16th largest state Arizona 16.3% population change since 2001 Arizona's population expected to reach 10.7 million by 2030 Phoenix 5th largest city in U.S.
Slide 35: APS 2006 Retail Customer and Sales Mix
APS 2006 Retail Customer and Sales Mix Customers 2006 Residential 936464 Commercial 110547 Industrial 3526 Other 1358 Total 1051895 2006 Customers 2006 Sales (MWh) Residential 936464 0.89 12993961 0.47 Commercial 110547 0.11 12348200 0.44 Industrial 3526 2475311 0.09 Other 1358 152925 Total 1051895
Slide 36: APS 2006 Native Load Energy Fuel Mix
APS 2006 Native Load Energy Fuel Mix % of Native Load Nuclear 0.22 Coal 0.42 Gas, oil and other 0.22 Firm Purchases 0.14 Coal Gas Purchased Power Nuclear
Slide 37: Generation Operating History
Generation Operating History '02 '03 '04 '05 '06 APS 0.858 0.803 0.84 0.833 0.805 Industry Average* 0.755 0.75 0.776 0.779 '02 '03 '04 '05 '06 APS 0.853 0.878 0.909 0.918 0.936 Industry Average* 0.832 0.841 0.843 0.871 Gas Equivalent Availability Factors Nuclear and Coal Combined Capacity Factors *
Slide 38: APS Baseload Capacity RFP Requirements
APS Baseload Capacity RFP Requirements Delivery as early as 2009 but no later than 2014 Equity ownership or purchase power agreement 100 - 500 MW of capacity per proposal Ability to operate at or above 85% capacity factor Schedule Proposals received July 2006 Shortlist notification October 2006 Comp
Slide 39: 2006 Social Responsibility Awards
2006 Social Responsibility Awards Innovest's highest rating (AAA) and ranked #2 electric utility Dow Jones Sustainability Index industry leader Global 100 Most Sustainable Corporations in World by Corporate Knights Storebrand's Social Responsibility Index "best in class" distinction EPA Climate Prot
Slide 40: Arizona Corporation Commissioners
Arizona Corporation Commissioners Party Commissioner Term Commissioner Affiliation Since Expires Jeff Hatch-Miller, Chairman Republican Jan. 2003 Jan. 2009 Michael Gleason Republican Jan. 2003 Jan. 2009 Kristin Mayes Republican Oct. 2003 Jan. 2011 William Mundell Republican June 1999 Jan. 2009 Gary
Slide 41: APS Retail Price Compared with Consumer Price Index
APS Retail Price Compared with Consumer Price Index * Reflects approval of pending general rate request Spring 2007 (20)% (10)% 0% 10% 20% 30% 40% 50% 60% 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 CPI APS Price 2007 Proposed *
Slide 42: APS Retail Rate Case ACC Staff and RUCO Recommendations
Fuel-related $ 194 $ 280 Non-fuel (1) (68) Total $ 193 $ 212 Percent increase 9.1% 10% Return on equity 10.25% 9.25% Capital structure Long-term debt 45% 50% Common equity 55% 50% APS Retail Rate Case ACC Staff and RUCO Recommendations Staff RUCO Annual Revenue Increases (Decreases) $ Millions
Slide 43: Potential Major Transmission Project Wyoming to Arizona
Potential Major Transmission Project Wyoming to Arizona Expand resources to meet rapid load growth Enhance resource portfolio reliability and economics Increase system import capability Improve fuel diversity Access renewable wind and clean coal resources TransWest Express Arizona Utah Nevada Wyomin
Slide 44: Arizona Transmission System
CALIFORNIA CALIFORNIA CALIFORNIA MOENKOPI MEAD/ MARKETPLACE/ LAS VEGAS NAVAJO SAN JUAN FOUR CORNERS GLEN CANYON UTAH UTAH COLORADO FLAGSTAFF CHOLLA MCKINLEY CORONADO SPRINGER- VILLE GREENLEE (AEPCO) (TEP) SILVERKING APACHE VAIL SOUTH BICKNELL N GILA PALO VERDE LIBERTY KYRENE PINNACLE PEAK WEST WING
Slide 45: WECC Available Transmission Capability
WECC Available Transmission Capability 3,007 301 290 5,263 2,478 3,989 Summer 2006 estimates (MW)
Slide 46: SunCor Overview
SunCor Overview IDAHO UTAH NEW MEXICO ARIZONA Boise St. George Santa Fe Albuquerque Sedona Prescott Phoenix As of September 30, 2006 Commercial and residential real estate developer in Western U.S. Total assets $608 million Stockholder's equity $274 million Projects under development 8 master-planne
Slide 47: SunCor Balance Sheet Summary
SunCor Balance Sheet Summary $ Millions Legacy Properties $ 183 Post-1990 Properties 357 Total Properties 540 Other 68 Total Assets $ 608 As of September 30, 2006 Liabilities $ 284 Minority Interest 50 Stockholder's Equity 274 Total Liabilities & Equity $ 608
Slide 48: SunCor Project Diversity by Type
Legacy Properties ($ Millions) 2001 2002 2003 2004 2005 2006 Master Planned Owned 269 301 173 148 170 172 Master Planned Developed for Others 0 0 0 0 0 0 Commercial, Golf and Other 8 5 2 1 1 1 Total Legacy Properties 277 306 175 149 171 173 POST-1990 PROPERTIES 2001 2002 2003 2004 2005 2006 Master P
Slide 49: SunCor Geographic Project Diversity
Legacy ($ Millions) 2001 2002 2003 2004 2005 2006 Metro Phoenix 277 306 175 149 171 173 Northern AZ Utah New Mexico Idaho Total Legacy 277 306 175 149 171 173 Legacy Properties Post-1990 Properties 2001 2002 2003 2004 2005 2006* Post-1990 ($ Millions) 2001 2002 2003 2004 2005 2006 Metro Phoenix 89 6
Slide 50: SunCor Project Summaries Master-Planned Communities
SunCor Project Summaries Master-Planned Communities Estimated Year Original 9/30/06 Acquired Acreage Acreage Palm Valley (Phoenix, AZ) 1987 11,300 2,700 Rancho Viejo Phase I (Santa Fe, NM)* 1996 2,500 1,500 Coral Canyon (St. George, UT)* 1998 2,500 750 StoneRidge (Northern AZ)* 2001 1,840 1,100 Avim
Slide 51: SunCor Project Summaries Major Commercial Projects
SunCor Project Summaries Major Commercial Projects Estimated Year Original 9/30/06 Acquired Acreage Acreage Talavi 1987 140 7 Centrepoint 1989 80 3 Hayden Ferry Lakeside Office & Condos 2000 17 15 Rio West Business Park 2004 25 25 Alameda Crossing (Palm Valley) 2006 21 17 Palm Valley Office Park Pha
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