Pinnacle West Capital Corporation · NYSE:PNW

Pinnacle West Capital — West Coast Utilities Seminar 2007

51 slides from Pinnacle West Capital's conference presentation, Dec 13, 2007

  1. Slide 1: West Coast Utilities Seminar

    West Coast Utilities Seminar December 13, 2007

  2. Slide 2: Forward Looking Statements

    Forward Looking Statements This presentation contains forward-looking statements based on current expectations, and neither Pinnacle West Capital Corporation (“Pinnacle West”) nor Arizona Public Service (“APS”) assumes any obligation to update these statements or make any further statements on any o

  3. Slide 3: Strategic Objectives

    Strategic Objectives ƒ Focus on customer service excellence ƒ Maintain solid operating performance ƒ Manage costs and business risks ƒ Foster positive regulatory relations and achieve constructive outcomes ƒ Optimize real estate assets ƒ Create long-term shareholder value

  4. Slide 4: Regulatory Overview

    Regulatory Overview

  5. Slide 5: 2007 ACC Rate Case Decision Key Components

    2007 ACC Rate Case Decision Key Components ƒ Updated base fuel rate to 2007 levels ƒ Improved timely recovery of fuel and purchased power costs ƒ Validated APS’ fuel hedging and procurement programs ƒ Reflected APS’ requested capital structure ƒ Implemented environmental improvement surcharge ƒ Bega

  6. Slide 6: Power Supply Adjustor Revisions

    Power Supply Adjustor Revisions Effective July 1, 2007 Annual adjustor components ƒ Forward-looking estimate of fuel and purchased power costs ƒ True up to reconcile prior-year actual and estimated costs 4 mill/kWh annual cap on PSA rate changes ƒ Previously 4 mill/kWh lifetime cap

  7. Slide 7: PSA Annual Adjustors & Surcharge

    PSA Annual Adjustors & Surcharge Mills/kWh 12 10 8 6 4 2 0 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2007 2008 2008 annual adjustor (estimate) Surcharge for Palo Verde 2005 deferrals 2007 annual adjustor

  8. Slide 8: Who Should Pay for Growth?

    Who Should Pay for Growth? October 22, 2007 Fees for Service “Arizona Corporation Commission “This freebie was costing regulators are exploring ways ratepayers,” Commissioner to require property owners to pay Mayes said. “We are going for services traditionally provided to require growth to pay for

  9. Slide 9: APS Proposed Amendments to Line Extension Schedule

    APS Proposed Amendments to Line Extension Schedule ƒ ACC 2007 rate order required APS to file amendments to eliminate certain allowances for new or expanded service ƒ Shift burden of rising distribution infrastructure costs away from current customer base to growth

  10. Slide 10: APS Proposed Amendments to Line Extension Schedule

    APS Proposed Amendments to Line Extension Schedule ƒ APS proposed amendments • Allow APS to collect costs related to line extensions on a current basis ♦ Pretax costs estimated to be ♦ $3,500 - $5,000 per new meter set • Account for amounts collected as revenue • Grandfather certain line extension a

  11. Slide 11: APS Proposed Amendments to Line Extension Schedule

    APS Proposed Amendments to Line Extension Schedule Key Dates October 24 APS proposed line extension schedule amendments filed November 2 ACC Staff recommended order issued November 16 ACC Staff recommended order updated to address “grandfathering” November 16 APS exceptions to recommended order file

  12. Slide 12: FERC Rate Case Summary

    FERC Rate Case Summary ƒ $37 million wholesale rate increase requested for transmission and ancillary services • $30 million to be collected through retail rates ƒ Proposed formula-based rates with annual adjustment ƒ Rate base: $847 million ƒ Capital structure: 47% debt, 53% equity ƒ Return on equi

  13. Slide 13: FERC Rate Case Time Line

    FERC Rate Case Time Line ƒ Test year ended December 31, 2006 ƒ Request filed July 10, 2007 ƒ FERC rates to become effective March 1, 2008 (subject to refund) ƒ Retail adjustor implementation

  14. Slide 14: Regulatory Initiatives

    Regulatory Initiatives ƒ Promote interactive and cooperative regulatory process ƒ Respond to ACC request to have “growth pay for itself” ƒ Address resource planning and acquisition needs ƒ Expand renewable energy resources ƒ Enhance renewables and energy efficiency programs and encourage customer pa

  15. Slide 15: Market & Operations Update

    Market & Operations Update

  16. Slide 16: Solid Fundamental Growth

    Solid Fundamental Growth Arizona Arizona vs vs U.S. U.S. Metro Metro Phoenix Phoenix Population Population Growth Growth Single-Family Single-Family Building Building Permits Permits 4% 4% 50,000 50,000 3% 40,000 40,000 3% 30,000 30,000 2% 2% 20,000 20,000 1% 1% 10,000 10,000 0% 0% 00 2001 2001 2002

  17. Slide 17: Arizona Leads U.S. in Population Growth

    Arizona Leads U.S. in Population Growth 3 2 6 8 7 10 1 4 5 9 Annual percent change 2005 – 2006, U.S. Census Bureau

  18. Slide 18: Resources to Serve Market Growth

    Resources to Serve Market Growth ƒ Existing resources ƒ New resources ƒ Potential inter-regional transmission ƒ Integrated resource planning • System reliability • Cost to customers • Environmental impacts • Renewables and energy efficiency • Risks

  19. Slide 19: APS Resource Requirements for Native Load

    APS Resource Requirements for Native Load 2006 - 2010 Average Annual Growth 3.5% MW 10,000 10,000 Peak Load & Reserves 8,000 8,000 6,000 6,000 4,000 4,000 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 Projected Long-term Resources Market Purchases Peaking Shortfall

  20. Slide 20: New Gas Resources

    New Gas Resources ƒ 96 MW gas peaking asset • Yuma CTs • Under construction • In service summer 2008 ƒ 560 MW gas purchase power agreement • 10-year term beginning June 2010 • Summer product, expanding to 6 months as needed

  21. Slide 21: Renewable Resource Requirements

    Renewable Resource Requirements ƒ Arizona Renewable Energy Standard (RES) ƒ Sets minimum renewable energy amounts • 5% of energy for retail sales by 2015 • 15% of energy for retail sales by 2025 ƒ Includes distributed energy component • 30% of total by 2011

  22. Slide 22: Potential Inter-Regional Transmission

    Potential Inter-Regional Transmission ƒ Expand resources to meet rapid load growth Wyoming ƒ Enhance resource portfolio reliability and Nevada Utah economics ƒ Increase system California import capability ƒ Improve fuel diversity Arizona New Mexico ƒ Access renewable TransWest TransWestExpress Expre

  23. Slide 23: APS 2nd in Customer Satisfaction Among Western Electric IOU's

    APS 2nd in Customer Satisfaction Among Western Electric IOU’s Residential Commercial J.D. J.D. Power Power J.D. J.D. Power Power Rating Rating Rating Rating 800 800 APS 800 800 APS 750 750 750 750 700 700 700 700 650 650 650 650 600 600 600 600 550 550 550 550 500 500 500 500 2007 J.D. Power Custome

  24. Slide 24: Top-Tier Coal Performance

    Top-Tier Coal Performance Capacity Capacity Factors Factors 2006 2006 Highlights Highlights 100% 100% ƒƒ Site Site record record coal coal capacity capacity factors factors for for third third straight straight year year 75% 75% ƒƒ Four Four Corners Corners •• Set Set new new production production r

  25. Slide 25: Nuclear Challenges & Opportunities

    Nuclear Challenges & Opportunities Capacity Capacity Factors Factors 100% 100% ƒƒ Top Top U.S. U.S. power power producer producer past past 14 14 years years 75% 75% •• Unit Unit 11 vibration vibration issue issue resolved resolved inin 2006 2006 50% ƒƒ Goal Goal to to achieve achieve site site 50%

  26. Slide 26: SunCor Overview

    SunCor Overview ƒ Commercial and residential real estate developer in IDAHO Western U.S. Boise ƒ Total assets $686 million ƒ Stockholder’s equity $291 million ƒ Diverse geographic and UTAH business mix St. George • 8 master-planned communities Sedona Prescott Santa Fe Albuquerque • 6 major commercia

  27. Slide 27: SunCor Gross Margin Contribution by Business Line

    SunCor Gross Margin Contribution by Business Line $$ Millions Millions Pretax Pretax 175 175 Home Home Sales Sales 150 150 Condo Condo Sales Sales 125 125 100 100 Land Land Sales Sales 75 75 Commercial Commercial Property Property & & Management Management 50 50 Sale Sale of of Assets* Assets* 25 25

  28. Slide 28: Financial Overview

    Financial Overview

  29. Slide 29: 2007 Earnings Guidance

    2007 Earnings Guidance As of October 25, 2007 ƒ Consolidated earnings expected to be within reasonable range around $2.90 per share • APS earnings approximately $2.70 per share (8.25% ROE) • SunCor earnings approximately $20 million ƒ Major EPS differences from July 2007 guidance • Hotter than norma

  30. Slide 30: Significant Capital Investment to Support Growth

    Significant Capital Investment to Support Growth $$ Millions Millions 1,200 1,200 1,000 1,000 APS APS Distribution Distribution 800 800 APS APS Transmission Transmission 600 600 400 400 APS APS Generation Generation 200 200 Other Other 00 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 P

  31. Slide 31: Controlling O&M Costs

    Controlling O&M Costs $/Customer $/Customer $400 $400 $300 $300 $200 $200 $100 $100 $0 $0 1997 1997 1998 1998 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 APS APS Similar-Size Similar-Size Utilities Utilities Excluding generation costs

  32. Slide 32: Solid Equity Ratios to Support Growth

    Solid Equity Ratios to Support Growth Consolidated Consolidated APS APS 60% 60% 60% 60% 53% 53% 50% 50% 50% 50% 50% 50% 40% 40% 40% 40% 30% 30% 30% 30% 2002 2002 2003 2003 2004 2004 2005 2006 Sept 2005 2006 Sept 2002 2002 2003 2003 2004 2004 2005 2006 Sept 2005 2006 Sept 2007 2007 2007 2007 Excludin

  33. Slide 33: U.S. Electric Utilities Dividend Yields

    U.S. Electric Utilities Dividend Yields Pinnacle Pinnacle West West Annual Annual Dividend Dividend PNW PNW $2.10 $2.10 Per Per Share Share 6% 6% 5.2% 5.2% 5% 5% Industry Industry Average Average 4% 4% 3.5% 3.5% 3% 3% 2% 2% 1% 1% 0% 0% Pinnacle Pinnacle West West Electric Electric Utilities Utilitie

  34. Slide 34: Summary

    Summary ƒ Focus on customer service excellence ƒ Maintain solid operating performance ƒ Manage costs and business risks ƒ Foster positive regulatory relations and achieve constructive outcomes ƒ Optimize real estate assets ƒ Create long-term shareholder value

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  36. Slide 36: Appendix

    Appendix

  37. Slide 37: Current Credit Ratings Profile

    Current Credit Ratings Profile S&P S&P Moody’s Moody’s Fitch Fitch Pinnacle Pinnacle West West (Parent) (Parent) Senior Senior Unsecured Unsecured Debt* Debt* BB+ BB+ Baa3 Baa3 N/A N/A Commercial Commercial Paper Paper A3 A3 P3 P3 F3 F3 Outlook Outlook Stable Stable Negative Negative Stable Stable A

  38. Slide 38: Liquidity Resources

    Liquidity Resources APS ƒ $400 million revolver through December 2010 ƒ $500 million revolver through September 2011 ƒ Short-term borrowing $150 million as of September 30, 2007 ƒ Next long-term debt maturity 2011 Pinnacle West (parent) ƒ $300 million revolver through December 2010 ƒ Short-term borr

  39. Slide 39: Arizona Corporation Commissioners

    Arizona Corporation Commissioners Party Party Commissioner Commissioner Term Term Commissioner Commissioner Affiliation Affiliation Since Since Expires Expires Mike Mike Gleason, Gleason, Chairman Chairman Republican Republican Jan. Jan. 2003 2003 Jan. Jan. 2009 2009 Jeff Jeff Hatch-Miller Hatch-Mil

  40. Slide 40: APS Retail Rate Case Summary of Request and Final Order

    APS Retail Rate Case Summary of Request and Final Order APS Rate ACC Final Request Order Annual Annual base base rate rate increase increase (decrease) (decrease) Fuel-related Fuel-related $$ 315M 315M $$ 315M 315M Non-fuel Non-fuel 120M 120M 7M 7M Total Total $$ 435M 435M $$ 322M 322M Percent Perce

  41. Slide 41: APS Retail Service Territory

    APS Retail Service Territory Phoenix APS Retail Service Territory

  42. Slide 42: Economic Growth Underpins Retail Sales Growth

    Economic Growth Underpins Retail Sales Growth Annual Growth 6% 6% 4% 4% 2% 2% 0% 0% 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 Arizona Population APS Customers APS Retail Sales* * Weather normalized

  43. Slide 43: APS 2006 Retail Customer and Sales Mix

    APS 2006 Retail Customer and Sales Mix 1.1 Million Customers 27,970 GWh Sales 89% 47% 44% 9% 11% Residential Commercial Industrial

  44. Slide 44: 2006 Energy Fuel Mix

    2006 Energy Fuel Mix Consolidated Native Load Coal Coal 26% 26% 42% 42% Nuclear 14% Gas 14% 14% 14% Gas Nuclear 22% 22% Purchased Power 22% 22% 14% 14% 46% 46% Purchased Power

  45. Slide 45: Arizona Transmission System

    Arizona Transmission System UTAH UTAH UTAH COLORADO NAVAJO SHIPROCK SAN MEAD/ GLEN CANYON JUAN MARKETPLACE/ LAS VEGAS TRIBAL FOUR FOUR LAND CORNERS CORNERS MOENKOPI FLAGSTAFF MCKINLEY CHOLLA CORONADO CALIFORNIA SPRINGER- VILLE BOUSE PINNACLE PEAK CALIFORNIA WEST WING PERKINS PALO VERDE LIBERTY GREEN

  46. Slide 46: WECC Available Transmission Capability

    WECC Available Transmission Capability 3,007 4,038 2,678 6,453 440 225 Summer 2007 estimates (MW)

  47. Slide 47: SunCor Project Diversity by Type

    SunCor Project Diversity by Type Legacy Properties Post-1990 Properties $ Millions $ Millions 400 400 300 300 200 200 100 100 0 0 2001 2002 2003 2004 2005 2006 2001 2002 2003 2004 2005 2006 Master Planned Master Planned Owned Ventures with Landowners Commercial & Other

  48. Slide 48: SunCor Geographic Project Diversity

    SunCor Geographic Project Diversity Legacy Properties Post-1990 Properties $ Millions $ Millions 400 400 300 300 200 200 100 100 0 0 2001 2002 2003 2004 2005 2006 2001 2002 2003 2004 2005 2006 Metro Phoenix Northern Arizona Utah New Mexico Idaho

  49. Slide 49: SunCor Project Summaries Master-Planned Communities

    SunCor Project Summaries Master-Planned Communities Year Original 12/31/06 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 Avimor (Boise

  50. Slide 50: SunCor Project Summaries Major Commercial Communities

    SunCor Project Summaries Major Commercial Communities Year Original 12/31/06 Acquired Acreage Acreage Talavi 1987 140 7 Alameda Crossing (Palm Valley) 1987 21 17 Palm Valley Office Park Phase 3 1987 4 4 Centrepoint 1989 80 3 Hayden Ferry Lakeside 2000 17 15 Office & Condos Rio West Business Park 200

  51. Slide 51: Social Responsibility Awards

    Social Responsibility Awards ƒƒ Innovest’s Innovest’s highest highest rating rating (AAA) (AAA) and and ranked ranked #2 #2 electric electric utility utility ƒƒ Dow Dow Jones Jones Sustainability Sustainability Index Index ƒƒ Global Global 100 100 Most Most Sustainable Sustainable Corporations Corpo

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