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Long-Term Debt and Liquidity Matters | 12 Months Ended
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Dec. 31, 2017
Debt Disclosure [Abstract] |
Long-Term Debt and Liquidity Matters | Long-Term Debt and Liquidity Matters All of Pinnacle West’s and APS’s debt is unsecured. The following table presents the components of long-term debt on the Consolidated Balance Sheets outstanding at December 31, 2017 and 2016 (dollars in thousands):
| Maturity |  | Interest |  | December 31,
| Dates (a) |  | Rates |  | 2017 |  | 2016
APS |  |  |  |  |  |  |  |  |
Pollution control bonds: |  |  |  |  |  |  |  |  |
Variable | 2029 |  | (b) |  | $ | 35,975 |  |  | $ | 35,975 |
Fixed | 2024-2029 |  | 1.75%-4.70% |  | 147,150 |  |  | 147,150 |
Total pollution control bonds |  |  |  |  | 183,125 |  |  | 183,125 |
Senior unsecured notes | 2019-2046 |  | 2.20%-8.75% |  | 4,275,000 |  |  | 3,725,000 |
Term loans | 2018-2019 |  | (c) |  | 150,000 |  |  | 150,000 |
Unamortized discount |  |  |  |  | (11,288 | ) |  | (11,816 | )
Unamortized premium |  |  |  |  | 8,049 |  |  | 4,506 |
Unamortized debt issuance cost |  |  |  |  | (31,594 | ) |  | (29,030 | )
Total APS long-term debt |  |  |  |  | 4,573,292 |  |  | 4,021,785 |
Less current maturities |  |  |  |  | 82,000 |  |  | — |
Total APS long-term debt less current maturities |  |  |  |  | 4,491,292 |  |  | 4,021,785 |
Pinnacle West |  |  |  |  |  |  |  |  |
Term loan | 2017 |  | (d) |  | — |  |  | 125,000 |
Senior unsecured notes | 2020 |  | 2.25% |  | 300,000 |  |  | — |
Unamortized discount |  |  |  |  | (184 | ) |  | — |
Unamortized debt issuance cost |  |  |  |  | (1,395 | ) |  | — |
Total PNW long-term debt |  |  |  |  | 298,421 |  |  | 125,000 |
Less current maturities |  |  |  |  | — |  |  | 125,000 |
Total PNW long-term debt less current maturities |  |  |  |  | 298,421 |  |  | — |
TOTAL LONG-TERM DEBT LESS CURRENT MATURITIES |  |  |  |  | $ | 4,789,713 |  |  | $ | 4,021,785 |
(a) | This schedule does not reflect the timing of redemptions that may occur prior to maturities.
(b) | The weighted-average rate for the variable rate pollution control bonds was 1.77% at December 31, 2017 and 0.81% at December 31, 2016.
(c) | The weighted-average interest rate was 2.236% at December 31, 2017, and 1.427% at December 31, 2016.
(d) | The interest rate was 1.520% at December 31, 2016.
The following table shows principal payments due on Pinnacle West’s and APS’s total long-term debt (dollars in thousands):
Year |  | Consolidated Pinnacle West |  | Consolidated APS
2018 |  | $ | 82,000 |  |  | $ | 82,000 |
2019 |  | 600,000 |  |  | 600,000 |
2020 |  | 550,000 |  |  | 250,000 |
2021 |  | — |  |  | — |
2022 |  | — |  |  | — |
Thereafter |  | 3,676,125 |  |  | 3,676,125 |
Total |  | $ | 4,908,125 |  |  | $ | 4,608,125 |
Debt Fair Value Our long-term debt fair value estimates are based on quoted market prices for the same or similar issues, and are classified within Level 2 of the fair value hierarchy. Certain of our debt instruments contain third-party credit enhancements and, in accordance with GAAP, we do not consider the effect of these credit enhancements when determining fair value. The following table represents the estimated fair value of our long-term debt, including current maturities (dollars in thousands):
| As of December 31, 2017 |  | As of December 31, 2016
| Carrying Amount |  | Fair Value |  | Carrying Amount |  | Fair Value
Pinnacle West | $ | 298,421 |  |  | $ | 298,608 |  |  | $ | 125,000 |  |  | $ | 125,000 |
APS | 4,573,292 |  |  | 5,006,348 |  |  | 4,021,785 |  |  | 4,300,789 |
Total | $ | 4,871,713 |  |  | $ | 5,304,956 |  |  | $ | 4,146,785 |  |  | $ | 4,425,789 |
Credit Facilities and Debt Issuances Pinnacle West On November 30, 2017, Pinnacle West issued $300 million of 2.25% unsecured senior notes that mature on November 30, 2020. The net proceeds from the sale were used to repay our $125 million term loan and for general corporate purposes. APS On March 21, 2017, APS issued an additional $250 million par amount of its outstanding 4.35% senior unsecured notes that mature on November 15, 2045. The net proceeds from the sale were used to refinance commercial paper borrowings and to replenish cash temporarily used to fund capital expenditures. On September 11, 2017, APS issued $300 million of 2.95% senior unsecured notes that mature on September 15, 2027. The net proceeds from the sale were used to refinance commercial paper and other indebtedness and to replenish cash used to fund capital expenditures. On November 30, 2017, PNW contributed $150 million into APS in the form of an equity infusion. APS used this contribution to repay short-term indebtedness, to finance capital expenditures and for other general corporate purposes. See “Lines of Credit and Short-Term Borrowings” in Note 5 and “Financial Assurances” in Note 10 for discussion of APS’s separate outstanding letters of credit. Debt Provisions Pinnacle West’s and APS’s debt covenants related to their respective bank financing arrangements include maximum debt to capitalization ratios. Pinnacle West and APS comply with this covenant. For both Pinnacle West and APS, this covenant requires that the ratio of consolidated debt to total consolidated capitalization not exceed 65%. At December 31, 2017, the ratio was approximately 50% for Pinnacle West and 47% for APS. Failure to comply with such covenant levels would result in an event of default, which, generally speaking, would require the immediate repayment of the debt subject to the covenants and could cross-default other debt. See further discussion of “cross-default” provisions below. Neither Pinnacle West’s nor APS’s financing agreements contain “rating triggers” that would result in an acceleration of the required interest and principal payments in the event of a rating downgrade. However, our bank credit agreements contain a pricing grid in which the interest rates we pay for borrowings thereunder are determined by our current credit ratings. All of Pinnacle West’s loan agreements contain "cross-default" provisions that would result in defaults and the potential acceleration of payment under these loan agreements if Pinnacle West or APS were to default under certain other material agreements. All of APS’s bank agreements contain "cross-default" provisions that would result in defaults and the potential acceleration of payment under these bank agreements if APS were to default under certain other material agreements. Pinnacle West and APS do not have a material adverse change restriction for credit facility borrowings. An existing ACC order requires APS to maintain a common equity ratio of at least 40%. As defined in the ACC order, the common equity ratio is total shareholder equity divided by the sum of total shareholder equity and long-term debt, including current maturities of long-term debt. Its total shareholder equity was approximately $5.3 billion, and total capitalization was approximately $10.0 billion. APS would be prohibited from paying dividends if the payment would reduce its total shareholder equity below approximately $4.0 billion, assuming APS’s total capitalization remains the same. APS was in compliance with this common equity ratio requirement as of December 31, 2017. Although provisions in APS’s articles of incorporation and ACC financing orders establish maximum amounts of preferred stock and debt that APS may issue, APS does not expect any of these provisions to limit its ability to meet its capital requirements. On February 6, 2013, the ACC issued a financing order in which, subject to specified parameters and procedures, it approved an increase in APS’s long-term debt authorization from $4.2 billion to $5.1 billion in light of the projected growth of APS and its customer base and the resulting projected financing needs, and authorized APS to enter into derivative financial instruments for the purpose of managing interest rate risk associated with its long- and short-term debt. This financing order was set to expire on December 31, 2017; however, on December 15, 2016, APS filed a financing application with the ACC requesting continuation of its authorization of (i) Continuing Long-Term Debt of $5.1 billion and (ii) Continuing Short-Term Debt. The financing application is currently pending with the ACC. The authorizations approved in the 2013 order continue until further order of the ACC with respect to the pending application. See Note 5 for additional short-term debt provisions.

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