Pinnacle West Capital Corporation (NYSE:PNW) Q4 2020 Earnings Conference Call February 24, 2021 11:00 AM ET Company Participants Stefanie Layton - Director, IR Jeff Guldner - Chairman and CEO Ted Geisler - CFO Jim Hatfield - CAO Daniel Froetscher - President and COO, Arizona Public Service Barbara Lockwood - SVP, Public Policy Conference Call Participants Dariusz Lozny - Bank of America Paul Patterson - Glenrock Associates Insoo Kim - Goldman Sachs Michael Weinstein - Credit Suisse Charles Fishman - Morning ...

[Glossary of Names and Technical Terms](index=4&type=section&id=GLOSSARY%20OF%20NAMES%20AND%20TECHNICAL%20TERMS) This section provides definitions for key names and technical terms used throughout the report [Forward-Looking Statements](index=5&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section identifies forward-looking statements and outlines key risk factors that could impact future performance - Forward-looking statements are identified by words such as "**estimate**," "**predict**," "**may**," "**believe**," "**plan**," "**expect**," "**require**," "**intend**," "**assume**," "**project**," "**anticipate**," "**goal**," "**seek**," "**strategy**," "**likely**," "**should**," "**will**," "**could**," and similar words[10](index=10&type=chunk) - Key risk factors include potential effects of the COVID-19 pandemic, managing capital expenditures and O&M costs, variations in electricity demand, power plant performance, regulatory and judicial decisions, new legislation, fuel and water supply, rate recovery, clean energy goals, nuclear facility risks, economic conditions, cybersecurity threats, new technologies, cost of capital, coal-fired generation concerns, volatile fuel costs, investment performance, insurance shortfalls, and new accounting requirements[11](index=11&type=chunk)[14](index=14&type=chunk) Part I [Item 1. Business](index=7&type=section&id=Item%201.%20Business) Pinnacle West Capital Corporation operates as a holding company, with its primary revenue and earnings derived from its wholly-owned subsidiary, Arizona Public Service Company (APS), a vertically-integrated electric utility serving most of Arizona - Pinnacle West is a holding company, with APS, a vertically-integrated electric utility, as its primary revenue and earnings source, serving approximately **1.3 million customers** in Arizona[16](index=16&type=chunk)[19](index=19&type=chunk)[252](index=252&type=chunk) - APS's Clean Energy Commitment includes a **2050 goal** for **100% clean, carbon-free electricity**, a **2030 target** of **65% clean energy** (**45% from renewables**), and a commitment to cease coal-fired generation by **2031**[25](index=25&type=chunk)[30](index=30&type=chunk)[268](index=268&type=chunk) APS Generation Capacity (as of 2020) | Type | Capacity (MW) | | :--- | :--- | | Nuclear (Palo Verde) | 1,146 | | Coal (Four Corners, Cholla) | 1,357 | | Combined Cycle (Gas) | 1,975 | | Combustion Turbine (Gas/Oil) | 1,598 | | Solar | 245 | | **Total Regulated Generation Capacity** | **6,321** | - APS plans to install at least **850 MW of energy storage by 2025**, including projects under PPAs and AZ Sun retrofits, with additional resources to be solicited through RFPs[63](index=63&type=chunk)[290](index=290&type=chunk) - Human capital strategy focuses on attracting and retaining talent, employee safety, diversity, equity, inclusion, succession planning, compensation, benefits, and engagement[125](index=125&type=chunk) - As of December 31, 2020, **36% of external hires** were ethnically diverse, **36% were female**, and **18% were veterans**; overall workforce diversity was **32% ethnically or racially diverse**, **24% female**, and **17% veterans**[129](index=129&type=chunk) - The company successfully transitioned most employees to remote work and implemented strict safety protocols in response to COVID-19, significantly limiting workplace transmission and maintaining essential services[126](index=126&type=chunk)[127](index=127&type=chunk)[254](index=254&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) This section details significant risks that could adversely affect Pinnacle West's and APS's financial condition and operations, covering regulatory, operational, and financial areas - **Regulatory risks** include dependence on timely cost recovery through regulated rates, compliance with federal/state/local statutes, significant oversight of nuclear power plants, and potential liabilities from environmental laws (e.g., Superfund, CCR, ozone NAAQS)[141](index=141&type=chunk)[143](index=143&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk) - **Operational risks** encompass adverse effects from weather conditions (demand, extreme heat, wildfires, water scarcity), energy conservation measures, distributed energy resources reducing demand, power generation/transmission failures, inability to develop/acquire generation resources, and cybersecurity threats[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk) - **Financial risks** include potential credit rating downgrades, decreased value of benefit plan assets/nuclear decommissioning trusts, increased funding requirements, dependence on APS's distributions, structural subordination of Pinnacle West's debt, and financial losses from derivative contracts[201](index=201&type=chunk)[203](index=203&type=chunk)[206](index=206&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk) - The **COVID-19 pandemic poses risks** such as decreased energy demand, economic slowdown, supply chain disruptions, increased costs, capital market volatility, and higher uncollectible accounts[198](index=198&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk) [Item 1B. Unresolved Staff Comments](index=50&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) Neither Pinnacle West nor APS has received unresolved written comments from the SEC staff regarding their periodic or current reports issued 180 days or more preceding the end of their 2020 fiscal year - No unresolved SEC staff comments were received by Pinnacle West or APS regarding periodic or current reports issued 180 days or more before the end of the 2020 fiscal year[222](index=222&type=chunk) [Item 2. Properties](index=51&type=section&id=Item%202.%20Properties) This section details APS's owned generating facilities, including nuclear, steam (coal), combined cycle (gas), combustion turbine (gas/oil), and solar plants, totaling 6,321 MW of regulated capacity as of December 31, 2020 APS Owned Generating Facilities (as of December 31, 2020) | Name | No. of Units | % Owned | Primary Fuel | Dispatch Type | Owned Capacity (MW) | | :--- | :--- | :--- | :--- | :--- | :--- | | Palo Verde | 3 | 29.1% | Uranium | Base Load | 1,146 | | Four Corners 4, 5 | 2 | 63% | Coal | Base Load | 970 | | Cholla 1, 3 | 2 | 100% | Coal | Base Load | 387 | | Redhawk | 2 | 100% | Gas | Load Following | 1,088 | | West Phoenix | 5 | 100% | Gas | Load Following | 887 | | Ocotillo | 7 | 100% | Gas | Peaking | 620 | | Saguaro | 3 | 100% | Gas | Peaking | 189 | | Douglas/Fairview | 1 | 100% | Oil | Peaking | 16 | | Sundance | 10 | 100% | Gas | Peaking | 420 | | West Phoenix | 2 | 100% | Gas | Peaking | 110 | | Yucca 1, 2, 3 | 3 | 100% | Gas | Peaking | 93 | | Yucca 4 | 1 | 100% | Oil | Peaking | 54 | | Yucca 5, 6 | 2 | 100% | Gas | Peaking | 96 | | Solar Facilities | Various | 100% | Solar | As Available | 245 | | **Total Capacity** | | | | | **6,321** | - APS's transmission facilities include approximately **5,728 pole miles** of overhead lines and **74 miles** of underground lines, along with **80 transmission substations**; distribution facilities comprise about **11,225 miles** of overhead lines and **22,453 miles** of underground primary cable, with **443 distribution substations**[228](index=228&type=chunk) - APS projects developing **26 miles** of new transmission lines over the next ten years, including the recently completed Palo Verde to Morgan project (over **100 miles** of new 500kV lines)[230](index=230&type=chunk)[231](index=231&type=chunk) - Four Corners and portions of APS transmission lines are located on Indian lands under leases, easements, or rights-of-way, with renewals subject to tribal and federal agency approvals[232](index=232&type=chunk)[233](index=233&type=chunk)[234](index=234&type=chunk) [Item 3. Legal Proceedings](index=54&type=section&id=Item%203.%20Legal%20Proceedings) This section refers to discussions in Item 1 ("Business of Arizona Public Service Company — Environmental Matters") and Note 4 ("Regulatory Matters") for details on pending or threatened litigation and other disputes - Legal proceedings information is cross-referenced to "Business of Arizona Public Service Company — Environmental Matters" in Item 1, Note 4 for ACC and FERC matters, and Note 11 for environmental and Superfund-related disputes[236](index=236&type=chunk) [Item 4. Mine Safety Disclosures](index=54&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item states that mine safety disclosures are not applicable to the registrants - Mine safety disclosures are not applicable[238](index=238&type=chunk) [Information about our Executive Officers](index=55&type=section&id=Information%20about%20our%20Executive%20Officers) This section lists the executive officers of Pinnacle West and their current positions and principal occupations for the past five years, along with their ages as of February 24, 2021 Pinnacle West Executive Officers (as of February 24, 2021) | Name | Age | Position | Period | | :--- | :--- | :--- | :--- | | Jeffrey B. Guldner | 55 | Chairman of the Board, President and CEO of Pinnacle West; Chairman of the Board and CEO of APS | 2019-Present | | Elizabeth A. Blankenship | 49 | VP, Controller and Chief Accounting Officer of Pinnacle West and APS | 2019-Present | | Andrew D. Cooper | 42 | VP and Treasurer of Pinnacle West and APS | 2020-Present | | Donna M. Easterly | 56 | SVP, Human Resources of APS | 2020-Present | | Daniel T. Froetscher | 59 | President and COO of APS | 2020-Present | | Theodore N. Geisler | 42 | SVP and Chief Financial Officer of Pinnacle West and APS | 2020-Present | | James R. Hatfield | 63 | Chief Administrative Officer of Pinnacle West and APS | 2020-Present | | Maria L. Lacal | 60 | EVP and Chief Nuclear Officer, PVGS, of APS | 2020-Present | | Barbara D. Lockwood | 54 | SVP, Public Policy of APS | 2020-Present | | Robert E. Smith | 51 | SVP and General Counsel of Pinnacle West and APS | 2018-Present | Part II [Item 5. Market for Registrants' Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=56&type=section&id=Item%205.%20Market%20for%20Registrants'%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Pinnacle West's common stock (PNW) is traded on the NYSE, with approximately 16,415 shareholders as of February 17, 2021, and APS's common stock is wholly-owned by Pinnacle West and not publicly traded - Pinnacle West's common stock (PNW) is traded on the **NYSE**, with **112,691,601 shares** outstanding as of February 17, 2021, held by approximately **16,415 shareholders**[3](index=3&type=chunk)[243](index=243&type=chunk) - APS's common stock is wholly-owned by Pinnacle West and not publicly traded[244](index=244&type=chunk) Cumulative Total Shareholder Return (Indexed to $100 on Dec 31, 2015) | Company/Index | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Pinnacle West Common Stock | $100 | $125 | $141 | $146 | $159 | $147 | | Edison Electric Institute Index | $100 | $117 | $131 | $136 | $171 | $169 | | S&P 500 Index | $100 | $112 | $136 | $130 | $171 | $203 | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=57&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a detailed analysis of Pinnacle West's financial performance, liquidity, and capital resources, focusing on the regulated electricity segment and strategic clean energy commitment - Pinnacle West's consolidated net income attributable to common shareholders increased by **$13 million** to **$551 million** in 2020, up from **$538 million** in 2019, primarily due to higher revenue from weather effects, lower Tax Act refunds, and customer growth, partially offset by higher income taxes and depreciation[328](index=328&type=chunk)[329](index=329&type=chunk) Pinnacle West Consolidated Net Income Attributable to Common Shareholders (2019 vs 2020) | Metric | 2020 (millions) | 2019 (millions) | Net Change (millions) | | :--- | :--- | :--- | :--- | | Operating revenues less fuel and purchased power expenses | $2,589 | $2,425 | $164 | | Operations and maintenance | $(953) | $(939) | $(14) | | Depreciation and amortization | $(614) | $(591) | $(23) | | Taxes other than income taxes | $(225) | $(219) | $(6) | | Pension and other postretirement non-service credits — net | $56 | $23 | $33 | | All other income and expenses, net | $26 | $61 | $(35) | | Interest charges, net of AFUDC | $(229) | $(217) | $(12) | | Income taxes | $(78) | $16 | $(94) | | Less income related to noncontrolling interests | $(19) | $(19) | $0 | | **Regulated electricity segment income** | **$553** | **$540** | **$13** | | All other | $(2) | $(2) | $0 | | **Net Income Attributable to Common Shareholders** | **$551** | **$538** | **$13** | - The COVID-19 pandemic led to a **$25 million** increase in O&M expenses in 2020 (PPE, health/safety costs) and a **$23 million** pre-tax negative impact on 2020 operating results due to increased bad debt from disconnection suspensions[256](index=256&type=chunk)[261](index=261&type=chunk) - Retail electricity sales (weather-normalized) increased **1.4%** in 2020, driven by a **5% increase** in residential sales (work-from-home) and a **4% decrease** in commercial/industrial sales[314](index=314&type=chunk) Estimated Capital Expenditures (2021-2023) | Category | 2021 (millions) | 2022 (millions) | 2023 (millions) | | :--- | :--- | :--- | :--- | | Nuclear Generation | $114 | $116 | $125 | | Renewables and Energy Storage Systems | $200 | $276 | $281 | | Other Generation | $203 | $190 | $187 | | Distribution | $577 | $556 | $549 | | Transmission | $185 | $181 | $179 | | Other | $221 | $181 | $179 | | **Total APS** | **$1,500** | **$1,500** | **$1,500** | - Pinnacle West's consolidated net cash provided by operating activities increased by **$10 million** to **$967 million** in 2020, primarily due to higher electric revenues and lower O&M payments, partially offset by higher fuel and purchased power costs[342](index=342&type=chunk) - APS's common equity ratio was **51%** at December 31, 2020, above the ACC-required minimum of **40%**[339](index=339&type=chunk) - APS filed a retail rate case in October 2019 seeking an annual increase of **$69 million**, with a proposed **10.15% return on equity** and a **5.6% average annual customer bill increase**[296](index=296&type=chunk)[298](index=298&type=chunk) - APS entered into a consent agreement with the Arizona Attorney General on February 22, 2021, to settle a matter related to its rate plan comparison tool, resulting in a **$24.75 million** payment, with **$24 million** returned to customers as restitution[305](index=305&type=chunk)[601](index=601&type=chunk)[702](index=702&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=82&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section provides quantitative and qualitative disclosures about market risks, specifically referencing the "Market and Credit Risks" discussion within Item 7, covering interest rates, commodity prices, and investments - Market risks include exposure to changing interest rates, commodity prices (electricity, natural gas), and investment performance of nuclear decommissioning trusts and benefit plan assets[386](index=386&type=chunk)[387](index=387&type=chunk)[391](index=391&type=chunk) Pinnacle West Consolidated Debt (as of December 31, 2020) | Type | Interest Rates | Amount (millions) | Fair Value (millions) | | :--- | :--- | :--- | :--- | | Short-Term Debt | 0.40% | $169 | $169 | | Variable-Rate Long-Term Debt | 0.18% | $36 | $36 | | Fixed-Rate Long-Term Debt | 1.99%-3.95% | $6,330 | $7,577 | | **Total** | | **$6,535** | **$7,782** | APS Consolidated Debt (as of December 31, 2020) | Type | Interest Rates | Amount (millions) | Fair Value (millions) | | :--- | :--- | :--- | :--- | | Variable-Rate Long-Term Debt | 0.18% | $36 | $36 | | Fixed-Rate Long-Term Debt | 2.55%-3.95% | $5,830 | $7,068 | | **Total** | | **$5,866** | **$7,104** | - The company uses various commodity derivatives (futures, forwards, options, swaps) to hedge purchases and sales of electricity and natural gas, with changes in market value highly correlated to hedged commodity prices[391](index=391&type=chunk) - Credit risk arises from potential non-performance or non-payment by counterparties, managed through a risk management process, collateral requirements, and master netting arrangements[393](index=393&type=chunk)[783](index=783&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=87&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This item presents the audited consolidated financial statements for Pinnacle West Capital Corporation and Arizona Public Service Company for the years ended December 31, 2020, 2019, and 2018, along with supplementary data and detailed notes [Pinnacle West Financial Statements](index=89&type=section&id=Pinnacle%20West%20Financial%20Statements) This sub-section provides the consolidated financial statements for Pinnacle West Capital Corporation, including the Statements of Income, Comprehensive Income, Balance Sheets, Statements of Cash Flows, and Statements of Changes in Equity for the fiscal years 2018-2020 Pinnacle West Consolidated Statements of Income (Selected Data) | Metric | 2020 (thousands) | 2019 (thousands) | 2018 (thousands) | | :--- | :--- | :--- | :--- | | Operating Revenues | $3,586,982 | $3,471,209 | $3,691,247 | | Operating Income | $788,152 | $671,960 | $773,687 | | Net Income Attributable to Common Shareholders | $550,559 | $538,320 | $511,047 | | Basic EPS | $4.89 | $4.79 | $4.56 | | Diluted EPS | $4.87 | $4.77 | $4.54 | Pinnacle West Consolidated Balance Sheets (Selected Data) | Metric | Dec 31, 2020 (thousands) | Dec 31, 2019 (thousands) | | :--- | :--- | :--- | | Total Current Assets | $1,198,319 | $1,030,030 | | Total Assets | $20,020,421 | $18,479,247 | | Total Current Liabilities | $1,360,433 | $2,078,365 | | Total Long-Term Debt less Current Maturities | $6,314,266 | $4,832,558 | | Total Equity | $5,752,793 | $5,553,188 | Pinnacle West Consolidated Statements of Cash Flows (Selected Data) | Metric | 2020 (thousands) | 2019 (thousands) | 2018 (thousands) | | :--- | :--- | :--- | :--- | | Net Cash Flow Provided by Operating Activities | $966,365 | $956,726 | $1,277,144 | | Net Cash Flow Used for Investing Activities | $(1,277,818) | $(1,130,977) | $(1,192,824) | | Net Cash Flow Provided by (Used for) Financing Activities | $361,138 | $178,768 | $(92,446) | | Net Increase (Decrease) in Cash and Cash Equivalents | $49,685 | $4,517 | $(8,126) | [APS Financial Statements](index=100&type=section&id=APS%20Financial%20Statements) This sub-section presents the consolidated financial statements for Arizona Public Service Company, including the Statements of Income, Comprehensive Income, Balance Sheets, Statements of Cash Flows, and Statements of Changes in Equity for the fiscal years 2018-2020 APS Consolidated Statements of Income (Selected Data) | Metric | 2020 (thousands) | 2019 (thousands) | 2018 (thousands) | | :--- | :--- | :--- | :--- | | Operating Revenues | $3,586,982 | $3,471,209 | $3,688,342 | | Operating Income | $802,011 | $686,984 | $829,768 | | Net Income Attributable to Common Shareholder | $568,028 | $565,271 | $570,265 | APS Consolidated Balance Sheets (Selected Data) | Metric | Dec 31, 2020 (thousands) | Dec 31, 2019 (thousands) | | :--- | :--- | :--- | | Total Property, Plant and Equipment | $15,158,846 | $14,522,156 | | Total Assets | $19,924,251 | $18,370,723 | | Total Capitalization | $12,163,130 | $10,831,936 | | Total Current Liabilities | $1,176,177 | $1,492,029 | | Total Equity | $6,345,185 | $5,998,803 | APS Consolidated Statements of Cash Flows (Selected Data) | Metric | 2020 (thousands) | 2019 (thousands) | 2018 (thousands) | | :--- | :--- | :--- | :--- | | Net Cash Flow Provided by Operating Activities | $929,067 | $1,007,411 | $1,254,801 | | Net Cash Flow Used for Investing Activities | $(1,286,255) | $(1,136,093) | $(1,187,446) | | Net Cash Flow Provided by (Used for) Financing Activities | $404,329 | $133,144 | $(75,499) | | Net Increase (Decrease) in Cash and Cash Equivalents | $47,141 | $4,462 | $(8,144) | [Combined Notes to Consolidated Financial Statements](index=106&type=section&id=Combined%20Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed notes to the consolidated financial statements of Pinnacle West and APS, covering significant accounting policies, regulatory matters, income taxes, debt, and other financial disclosures - APS is regulated by the ACC and FERC, applying specialized accounting rules for cost-based rate regulation, which allows capitalization of certain costs normally expensed by unregulated companies[468](index=468&type=chunk) - In 2020, the company adopted ASU 2016-13 (credit losses) and ASU 2018-14 (defined benefit plan disclosures), which changed processes and disclosures but did not materially impact financial statements[515](index=515&type=chunk)[516](index=516&type=chunk) - Due to COVID-19, APS suspended disconnections for nonpayment and waived late fees from March 13, 2020, to December 31, 2020, resulting in an estimated **$23 million** pre-tax negative impact on 2020 operating results due to increased bad debt[517](index=517&type=chunk)[598](index=598&type=chunk) - APS's 2019 Retail Rate Case filing seeks a **$69 million** annual retail base rate increase, a **10.15% return on equity**, and includes a Coal Community Transition (CCT) plan with **$25 million** in non-recoverable funds and a proposal for customer-funded remainder[521](index=521&type=chunk)[522](index=522&type=chunk)[525](index=525&type=chunk)[526](index=526&type=chunk) - The Tax Cuts and Jobs Act of 2017 reduced the corporate tax rate to **21%**, leading to a **$1.14 billion** reduction in net deferred income tax liabilities as of December 31, 2017, largely offset by a net regulatory liability[613](index=613&type=chunk) Pinnacle West Consolidated Contractual Obligations (as of December 31, 2020) | Obligation Type | 2021 (millions) | 2022-2023 (millions) | 2024-2025 (millions) | Thereafter (millions) | Total (millions) | | :--- | :--- | :--- | :--- | :--- | :--- | | Long-term debt payments, including interest | $234 | $466 | $1,495 | $8,796 | $10,991 | | Short-term debt payments, including interest | $169 | $0 | $0 | $0 | $169 | | Fuel and purchased power commitments | $657 | $1,243 | $1,134 | $5,264 | $8,298 | | Renewable energy credits | $35 | $61 | $53 | $105 | $254 | | Purchase obligations | $115 | $60 | $22 | $185 | $382 | | Coal reclamation | $16 | $35 | $39 | $69 | $159 | | Nuclear decommissioning funding requirements | $2 | $4 | $4 | $48 | $58 | | Noncontrolling interests | $23 | $46 | $32 | $127 | $228 | | Operating lease payments | $14 | $20 | $11 | $37 | $82 | | **Total contractual commitments** | **$1,265** | **$1,935** | **$2,790** | **$14,631** | **$20,621** | - APS's asset retirement obligations (AROs) increased by **$6 million** in 2020 due to revised cost estimates for Cholla and Four Corners, and by **$13 million** from an updated Four Corners decommissioning study[726](index=726&type=chunk) - Pinnacle West's pension plan was **124% funded** under ERISA and **104% funded** under GAAP as of January 1, 2021; voluntary contributions of up to **$100 million** are expected in 2021, with **zero minimum** required contributions for the next three years[343](index=343&type=chunk)[672](index=672&type=chunk) [Pinnacle West Schedule I](index=188&type=section&id=Pinnacle%20West%20Schedule%20I) This schedule provides condensed financial information for Pinnacle West Capital Corporation as a stand-alone holding company, including condensed statements of comprehensive income, balance sheets, and cash flows Pinnacle West Holding Company Condensed Statements of Comprehensive Income (Selected Data) | Metric | 2020 (thousands) | 2019 (thousands) | 2018 (thousands) | | :--- | :--- | :--- | :--- | | Operating expenses | $7,901 | $12,451 | $53,844 | | Equity in earnings of subsidiaries | $566,147 | $562,946 | $569,249 | | Net income attributable to common shareholders | $550,559 | $538,320 | $511,047 | | Total comprehensive income — attributable to common shareholders | $544,859 | $528,932 | $516,893 | Pinnacle West Holding Company Condensed Balance Sheets (Selected Data) | Metric | Dec 31, 2020 (thousands) | Dec 31, 2019 (thousands) | | :--- | :--- | :--- | | Total Assets | $6,599,539 | $6,279,818 | | Total Current Liabilities | $300,594 | $684,071 | | Total Long-Term Debt less Current Maturities | $496,321 | $(575) | | Total Pinnacle West Shareholders' equity | $5,633,503 | $5,430,648 | Pinnacle West Holding Company Condensed Statements of Cash Flows (Selected Data) | Metric | 2020 (thousands) | 2019 (thousands) | 2018 (thousands) | | :--- | :--- | :--- | :--- | | Net cash flow provided by operating activities | $394,901 | $289,072 | $319,767 | | Net cash flow provided by (used for) investing activities | $(144,210) | $1,582 | $(136,819) | | Net cash flow used for financing activities | $(250,691) | $(290,676) | $(182,948) | Part III [Item 10. Directors, Executive Officers and Corporate Governance of Pinnacle West](index=193&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance%20of%20Pinnacle%20West) This section incorporates by reference information from the 2021 Proxy Statement regarding the company's Board of Directors, executive officers, and corporate governance practices - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2021 Proxy Statement[828](index=828&type=chunk) - Pinnacle West has a Code of Ethics for Financial Executives, applicable to its CEO, CFO, CAO, Controller, Treasurer, General Counsel, and APS's President/COO, with amendments and waivers disclosed on its website[829](index=829&type=chunk) [Item 11. Executive Compensation](index=193&type=section&id=Item%2011.%20Executive%20Compensation) This section incorporates by reference details on director compensation, executive compensation, and human resources committee interlocks and insider participation from the 2021 Proxy Statement - Information on director compensation, executive compensation, and human resources committee interlocks and insider participation is incorporated by reference from the 2021 Proxy Statement[831](index=831&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=193&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section incorporates by reference information from the 2021 Proxy Statement concerning the ownership of Pinnacle West stock by certain beneficial owners and management, as well as details on existing equity compensation plans - Information on security ownership by beneficial owners and management, and existing equity compensation plans, is incorporated by reference from the 2021 Proxy Statement[833](index=833&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=193&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence) This section incorporates by reference information from the 2021 Proxy Statement regarding certain relationships, related party transactions, and director independence - Information on certain relationships, related party transactions, and director independence is incorporated by reference from the 2021 Proxy Statement[835](index=835&type=chunk) [Item 14. Principal Accountant Fees and Services](index=194&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) This section references the 2021 Proxy Statement for Pinnacle West's audit fees and pre-approval policies, and details APS's audit and audit-related fees paid to Deloitte & Touche LLP - Pinnacle West's audit fees and pre-approval policies are referenced from the 2021 Proxy Statement[837](index=837&type=chunk) APS Principal Accountant Fees (Deloitte & Touche LLP) | Type of Service | 2020 (USD) | 2019 (USD) | | :--- | :--- | :--- | | Audit Fees | $2,414,909 | $2,328,565 | | Audit-Related Fees | $323,067 | $322,917 | - All services provided by Deloitte & Touche LLP for APS in 2020 were pre-approved by Pinnacle West's Audit Committee or its Chair[840](index=840&type=chunk) Part IV [Item 15. Exhibits and Financial Statement Schedules](index=199&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section provides a comprehensive list of exhibits and financial statement schedules filed with the 10-K report, including corporate governance documents, debt instruments, and other contractual documents - The report includes financial statements and schedules as detailed in Item 8[843](index=843&type=chunk) - Exhibits filed include corporate governance documents (Articles of Incorporation, Bylaws), various indentures and supplemental indentures for debt securities, credit agreements, and agreements related to nuclear decommissioning trusts, deferred compensation plans, power plant participation, and leases[844](index=844&type=chunk)[845](index=845&type=chunk)[846](index=846&type=chunk)[847](index=847&type=chunk)[848](index=848&type=chunk)[849](index=849&type=chunk)[850](index=850&type=chunk)[851](index=851&type=chunk)[852](index=852&type=chunk)[853](index=853&type=chunk)[854](index=854&type=chunk)[855](index=855&type=chunk)[856](index=856&type=chunk)[857](index=857&type=chunk)[858](index=858&type=chunk)[859](index=859&type=chunk)[860](index=860&type=chunk)[861](index=861&type=chunk)[862](index=862&type=chunk)[863](index=863&type=chunk)[864](index=864&type=chunk)[865](index=865&type=chunk)[866](index=866&type=chunk)[867](index=867&type=chunk)[868](index=868&type=chunk)[869](index=869&type=chunk)[870](index=870&type=chunk)[871](index=871&type=chunk)[872](index=872&type=chunk) - XBRL Taxonomy Extension Schema, Calculation, Label, Presentation, and Definition Linkbase Documents are also filed as exhibits[870](index=870&type=chunk) [Signatures](index=215&type=section&id=SIGNATURES) This section contains the official signatures of the company's executive officers and directors, affirming the report's contents - The report is signed by Jeffrey B. Guldner (Chairman, President, and CEO), Theodore N. Geisler (SVP and CFO), and Elizabeth A. Blankenship (VP, Controller, and Chief Accounting Officer) for Pinnacle West and APS, along with other directors[875](index=875&type=chunk)[877](index=877&type=chunk)[881](index=881&type=chunk)[883](index=883&type=chunk) - A power of attorney is granted to Theodore N. Geisler and Robert E. Smith to sign any amendments to the Annual Report on Form 10-K[876](index=876&type=chunk)[882](index=882&type=chunk)

PINACLE WEST Powering the Future | 1 POWERING GROWTH DELIVERING VALUE Investor Meetings November 2020 FORWARD LOOKING STATEMENTS This presentation contains forward-looking statements based on current expectations, including statements regarding our earnings guidance and financial outlook and goals. These forward-looking statements are often identified by words such as "estimate," "predict," "may," "believe," "plan," "expect," "require," "intend," "assume," "project," "anticipate," "goal," "seek," "strategy, ...

Pinnacle West Capital Corp. (NYSE:PNW) Q3 2020 Earnings Conference Call October 30, 2020 1:00 PM ET Company Participants Stefanie Layton - Director, Investor Relations Jeff Guldner - Chairman, President & CEO Ted Geisler - SVP and CFO Barbara Lockwood - SVP, Public Policy, Arizona Public Service Company Daniel Froetscher - President & COO, Arizona Public Service Conference Call Participants Michael Weinstein - Credit Suisse Julien Dumoulin-Smith - Bank of America Stephen Byrd - Morgan Stanley Insoo Kim - Go ...