Exhibit 99.1
IN OUR ELEMENT
[PHOTO]
Pinnacle West
Capital Corporation
Analyst Presentations
May 2003
Forward-Looking Statements
This presentation contains forward-looking statements based on current
expectations, and the Company assumes no obligation to update these statements
or make any further statements on any of these issues, except as required by
applicable law. Because actual results may differ materially from expectations,
the Company cautions readers not to place undue reliance on these statements. A
number of factors could cause future results to differ materially from
historical results, or from results or outcomes currently expected or sought by
the Company. These factors include the ongoing restructuring of the electric
industry; including the introduction of retail electric competition in Arizona
and decisions impacting wholesale competition; the outcome of regulatory and
legislative proceedings relating to the restructuring; state and federal
regulatory and legislative decisions and actions, including price caps and other
market constraints imposed by the FERC; regional economic and market conditions,
including the California energy situation and completion of generation and
transmission construction in the region, which could affect customer growth and
the cost of power supplies; the cost of debt and equity capital and access to
capital markets; energy usage; weather variations affecting local and regional
customer energy usage; conservation programs; power plant performance; the
successful completion of our generation construction program; regulatory issues
associated with generation construction , such as permitting and licensing; our
ability to compete successfully outside traditional regulated markets (including
the wholesale market);our ability to manage our marketing and trading activities
and the use of derivative contracts in our business; technological developments
in the electric industry; the performance of the stock market, which affects the
amount of our required contributions to our pension plan and nuclear
decommissioning trust funds; the strength of the real estate market in SunCor's
market areas, which include Arizona, New Mexico and Utah; and other
uncertainties, all of which are difficult to predict and many of which are
beyond our control.
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In Our Element
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Capturing the benefits of superior growth...
Maintaining operational excellence...
Managing market risks and commodity exposure...
Navigating the regulatory landscape...
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CAPTURING THE BENEFITS OF SUPERIOR GROWTH
LEADING 2002 POPULATION GROWTH STATES
[MAP]
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CAPTURING THE BENEFITS OF SUPERIOR GROWTH
LEADING 2002 POPULATION GROWTH STATES
[MAP]
APS
2ND IN
CUSTOMER
GROWTH
NATIONALLY
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Maintaining Operational Excellence
IMPROVING CUSTOMER EFFICIENCY
CUMULATIVE CHANGE
---------------------------------
1999 2000 2001 2002
------ ------ ------ ------
Average Customers 0.00% 4.10% 7.90% 11.30%
Employees 0.00% 1.80% 5.30% 1.80%
APS
1ST IN
CUSTOMER
SERVICE
IN THE WEST
* Source: JD Powers, March 2003
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Maintaining Operational Excellence
Generation Delivery
* Palo Verde remains the * High customer growth
top power producer in the
United States * Strong reliability
* Fossil availability at * Transmission and
record levels distribution expansion to
meet growth and sustain
* New plant construction on reliability
time and under budget
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MANAGING MARKET RISK & COMMODITY EXPOSURE
WESTERN POWER MARKETS SPARK SPREADS
$/MWh
--------------------------------------------------------------
Date On-Peak Actual On-Peak Forwards Date
---- -------------- ---------------- ----
Jan-01 159.76
Feb-01 178.44
Mar-01 187.80
Apr-01 182.97
May-01 230.80
Jun-01 61.28
Jul-01 43.65
Aug-01 30.09
Sep-01 15.85
Oct-01 12.56
Nov-01 9.64
Dec-01 13.13
Jan-02 8.80
Feb-02 8.78
Mar-02 14.99
Apr-02 8.86
May-02 7.25
Jun-02 15.20
Jul-02 23.58
Aug-02 11.39
Sep-02 13.80
Oct-02 7.93
Nov-02 12.37
Dec-02 10.51
Jan-03 8.97
Feb-03 11.64
Mar-03 14.43
Apr-03 9.90
9.31 May-03
18.69 Jun-03
29.21 Jul-03
31.24 Aug-03
18.36 Sep-03
12.20 Oct-03
12.46 Nov-03
13.32 Dec-03
12.51 Jan-04
12.40 Feb-04
10.61 Mar-04
10.29 Apr-04
13.30 May-04
17.49 Jun-04
25.94 Jul-04
30.76 Aug-04
17.71 Sep-04
12.05 Oct-04
11.30 Nov-04
11.39 Dec-04
11.70 Jan-05
11.32 Feb-05
9.86 Mar-05
9.35 Apr-05
11.86 May-05
15.56 Jun-05
20.14 Jul-05
24.48 Aug-05
13.18 Sep-05
10.29 Oct-05
9.50 Nov-05
9.62 Dec-05
ASSUMPTIONS: PALO VERDE ELECTRICITY, PERMIAN BASIS NATURAL GAS,
7000 BTU/MWH HEAT RATE
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MANAGING MARKET RISK & COMMODITY EXPOSURE
LONG-TERM SOUTHWEST REGIONAL ENERGY PROFILE
MWs
---------------------------------
2003 2004 2005 2006
------ ------ ------ ------
Existing Generation 51,000 52,000 51,000 50,000
New Generation 13,000 16,000 18,000 19,000
Peak Load 64,000 67,000 69,000 71,000
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MANAGING MARKET RISK & COMMODITY EXPOSURE
APS RESOURCES FOR RETAIL LOAD
MW
---------------------------------
2003 2004 2005 2006
------ ------ ------ ------
APS Existing Resources 5,000 5,000 5,000 5,000
Track B Resources 1,800 1,800 1,800 1,700
Peak Load 6,500 7,000 7,000 7,500
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MANAGING MARKET RISK & COMMODITY EXPOSURE
APS NATURAL GAS DEMAND FOR RETAIL LOAD
Millions
mmbtu
---------------------------------
Projected
---------------------------------
2003 2004 2005 2006
------ ------ ------ ------
Hedge 25-30 25-30 0 0
Gas Requirements 30-35 30-35 30-35 30-35
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Navigating the Regulatory Landscape
Beginning Ending
--------- ------
Track A Decision January 2002 September 10, 2002
$125MM Financing Application November 8, 2002 November 22, 2002
Track B Decision January 2002 March 14, 2003
$500MM Financing Application September 16, 2002 March 27, 2003
Track B Procurement February 27, 2003 July 1, 2003
Adjustment Mechanisms Docket February 2002 August 2003, estimated completion
General Rate Case June 2003 December 2004, estimated completion
Federal Issues On Going On Going
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Navigating the Regulatory Landscape
Beginning Ending
--------- ------
Track A Decision January 2002 September 10, 2002
$125MM Financing Application November 8, 2002 November 22, 2002
Track B Decision January 2002 March 14, 2003
$500MM Financing Application September 16, 2002 March 27, 2003
Track B Procurement February 27, 2003 July 1, 2003
Adjustment Mechanisms Docket February 2002 August 2003, estimated completion
General Rate Case June 2003 December 2004, estimated completion
Federal Issues On Going On Going
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Navigating the Regulatory Landscape
Track B Procurement Needs
APS Retail Energy Requirement
GWHs
---------------------------------------------
2003 2004 2005 2006
------ ------ ------ ------
APS Existing Resources 22,000 23,000 23,000 24,000
Track B Results 1,900 3,000 2,900 2,700
Remaining 2,000 1,200 3,000 3,400
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NAVIGATING THE REGULATORY LANDSCAPE
TRACK B PROCUREMENT CONTRACTS
MWHs
----------------------------------------------------------------------------------
2003
----------------------------------------------------------------------------------
Jul Aug Sept Oct Nov Dec
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
PWEC 1,700 1,700 1,700
PPL 112 112 112
Panda 450 225 225
MWHs
----------------------------------------------------------------------------------
2004
----------------------------------------------------------------------------------
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
PWEC 1,700 1,700 1,700 1,700
PPL 150 150 150 150
Panda 225 225 225 225 450 450 225 225
MWHs
----------------------------------------------------------------------------------
2005
----------------------------------------------------------------------------------
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
PWEC 1,700 1,700 1,700 1,700
PPL 150 150 150 150
Panda 225 225 225 225 450
MWHs
----------------------------------------------------------------------------------
2006
----------------------------------------------------------------------------------
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
PWEC 1,700 1,700 1,700 1,700
PPL
Panda
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NAVIGATING THE REGULATORY LANDSCAPE
PROPOSED ADJUSTMENT MECHANISMS
Returning Customers
Power Supply
Competitive Rules Compliance
System Benefit
* To allow timely recovery of certain costs
* To be implemented through rate case decision
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NAVIGATING THE REGULATORY LANDSCAPE
2003 GENERAL RATE CASE OBJECTIVES & TIMING
* Rate recognition of Pinnacle West Energy Arizona assets
* "Recovery" issues
- $234M write off in 1999
- Costs for restructuring
* Adjustment mechanisms implementation
* Cost of service, cost allocation, and rate design issues
* Required to file by June 30, 2003
* Expect decision in 2004
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NAVIGATING THE REGULATORY LANDSCAPE
FERC ISSUES
* Gas pipeline contracts
* California refund process
* California and the Pacific Northwest bilateral power contracts
* California "market manipulation" investigation+ and implications
----------
+ PNW/APS not named
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WE ARE & Will Be...
A vertically integrated utility in a high growth market area...
Sustaining exceptional operational performance...
Successfully managing risk in varying market conditions...
While remaining adept and agile in a dynamic regulatory environment.
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Focusing on the core business...
Maximizing the value of non-utility operations...
Maintaining financial strength and agility during regulatory transition...
Building long-term value for shareholders and customers...
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FOCUSING ON THE CORE BUSINESS
CONSOLIDATED EARNINGS DRIVERS 2003 VS. 2002
* Retail customer sales growth (RNF) $40 - 45M
* SunCor 20M
* Cost reductions 18M
* Regulatory asset amortization 17M
* EITF 02-3 accrual effects 10M
* Higher gas and power costs (50 - 60M)
* Pension & other related costs (17M)
* Rate decrease (16M)
* Depreciation on regulated assets (8M)
* Estimated (after-tax effects)
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FOCUSING ON THE CORE BUSINESS
CONSOLIDATED EARNINGS DRIVERS 2003 VS. 2002
* Surplus generation +
* New generation plant fixed costs -
* APS Energy Services -
* Marketing & trading +/-
* Weather, inflation, and all other +/-
2002 Non-recurring items
* Accounting change 65M
* NAC 35M
* Cancellation of Redhawk 3 & 4 30M
* Voluntary severance 22M
* Estimated (after-tax effects)
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MAINTAINING FINANCIAL STRENGTH & AGILITY
PARENT COMPANY DEBT REPAYMENT PLANS
Sources
2003
* $500M inter-company loan to APS
* $80-$100M SunCor asset sales
2004
* $80 - $100M SunCor asset sales
* $100M Southern Nevada Water Authority
* Short-term borrowings and $390M shelf capacity, as needed
Uses
2003
* $225M bridge debt, 7/30
* $250M floating rate notes, 8/1
* $25M private placement, 12/17
2004
* $215M senior notes, 2/9
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BALANCING FINANCIAL STRENGTH & GROWTH
CONSOLIDATED DEBT RATIO*
2005 Target of 50%
2001 2002 2005
---- ---- ----
59% 57.7% 50%
* Includes Palo Verde sale/leaseback
CAPITAL EXPENDITURES
$ millions
2001 2002 2003 2004 2005
---- ---- ---- ---- ----
Delivery 354 369 273 275 329
APS Generation 117 132 123 99 164
PWEC Generation 533 374 268 31 20
Other 45 109 86 41 39
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MAINTAINING CASH FLOW STRENGTH
CASH INTEREST COVERAGE
PINNACLE WEST
1999 2000 2001 2002
---- ---- ---- ----
5.01 5.16 5.02 5.31
APS
1999 2000 2001 2002
---- ---- ---- ----
5.23 5.68 5.96 6.92
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CREATING LONG-TERM SHAREHOLDER VALUE
TOP DIVIDEND GROWTH 1998 - 2002
5 yr CAGR
---------
Pinnacle West Capital 7.20%
Energy East Corporation 6.50%
PP&L Resources, Inc. 5.30%
Vectren Corporation 4.40%
FPL Group, Inc. 3.90%
NiSource Inc. 3.90%
TECO Energy, Inc. 3.80%
Pub. Svc. Enterprise Group 2.90%
NSTAR 2.80%
Cleco Corporation 2.60%
WPS Resources Corp. 2.00%
Allete 1.50%
Consolidated Edison Co of NY 1.10%
Southern Company 1.10%
DPL Incorporated 0.70%
Great Plains Energy 0.50%
Hawaiian Electric Indus 0.30%
CH Energy Group 0.20%
Ameren Corporation 0.00%
American Electric Power 0.00%
Cinergy Corporation 0.00%
Dominion Resources 0.00%
DTE Energy 0.00%
Duke Energy 0.00%
FirstEnergy Corporation 0.00%
Idacorp 0.00%
KeySpan Energy 0.00%
OGE Energy 0.00%
Public Svc. Of New Mexico 0.00%
Unisource 0.00%
Exelon Corp. -0.40%
Progress Energy, Inc. -2.90%
SCANA Corporation -3.00%
Entergy Corporation -4.90%
DQE Incorporated -7.00%
Sempra Energy -8.50%
Pepco Holdings, Inc. -9.60%
CMS Energy -9.70%
Constellation Energy Group -10.20%
Westar Energy -10.60%
Puget Sound Power & Light -11.50%
Xcel Energy -11.90%
Wisconsin Energy Corp. -12.30%
Alliant Energy -12.90%
Centerpoint Energy -16.00%
Avista Corporation -17.30%
TXU Corp. -25.60%
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CREATING LONG-TERM SHAREHOLDER VALUE
TOP QUARTILE EPS AND DIVIDEND GROWTH 1998 - 2002
Dividend Growth EPS Growth
--------------- ----------
7.20% 6.10% Pinnacle West Capital
1.50% -7.40% Allete
-12.90% -7.60% Alliant Energy
0.00% 1.30% Ameren Corporation
0.00% -1.60% American Electric Power
-17.30% -14.50% Avista Corporation
-16.00% -6.80% Centerpoint Energy
0.20% -2.60% CH Energy Group
0.00% 3.10% Cinergy Corporation
2.60% -8.10% Cleco Corporation
1.10% 1.20% Consolidated Edison Co of NY
-10.20% 2.00% Constellation Energy Group
0.00% 10.00% Dominion Resources
0.70% -9.70% DPL Incorporated
-7.00% -13.10% DQE Incorporated
0.00% 6.40% DTE Energy
0.00% -7.60% Duke Energy
6.50% -9.10% Energy East Corporation
-4.90% 11.50% Entergy Corporation
-0.40% 21.60% Exelon Corp.
0.00% 6.40% FirstEnergy Corporation
3.90% 6.10% FPL Group, Inc.
0.50% 4.60% Great Plains Energy
0.30% 1.50% Hawaiian Electric Indus.
0.00% -6.80% Idacorp
0.00% 3.50% KeySpan Energy
3.90% 5.90% NiSource Inc.
2.80% 4.00% NSTAR
0.00% -0.90% OGE Energy
-9.60% 0.90% Pepco Holdings, Inc.
5.30% 12.10% PP&L Resources, Inc.
-2.90% 7.60% Progress Energy, Inc.
2.90% 7.00% Pub. Svc. Enterprise Group
0.00% -3.00% Public Svc. Of New Mexico
-11.50% -4.40% Puget Sound Power & Light
-3.00% 4.60% SCANA Corporation
-8.50% 7.90% Sempra Energy
1.10% 2.30% Southern Company
3.80% 3.30% TECO Energy, Inc.
-25.60% -6.50% TXU Corp.
0.00% -0.10% UIL Holdings
4.40% -2.80% Vectren Corporation
-12.30% 17.60% Wisconsin Energy Corp.
2.00% 5.90% WPS Resources Corp.
-11.90% -4.10% Xcel Energy
Source: Regulatory Research Associates
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SHAPING ISSUES AFFECTING OUR INDUSTRY
* Industry risk
* Cyclical nature of the industry
* Public power
* Distinct, independent markets
* Customer responsibility and community relations
* Arizona regulatory and political perspectives
* Federal legislative and regulatory issues
* Governance and investor confidence
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"We'll continue to concentrate primarily on our core business in an area our
employees know well -- Arizona and the western U.S. power markets -- with a
combination of customer focus, exceptional operational performance and financial
strength."
-- Pinnacle West 2002 Annual Report
Letter to Shareholders
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