Pinnacle West Capital : 2nd Quarter 2022 Presentation

POWERING GROWTH

DELIVERING VALUE

Second Quarter 2022 Results

August 3, 2022

1

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," "likely," "should," "will," "could," and similar words. Because actual results may differ materially from expectations, we caution you not to place undue reliance on these statements. A number of factors could cause future results to differ materially from historical results, or from outcomes currently expected or sought by Pinnacle West or APS. These factors include, but are not limited to: the potential effects of the continued COVID-19 pandemic, including, but not limited to, demand for energy, economic growth, our employees and contractors, vaccine mandates, supply chain, expenses, inflation, capital markets, capital projects, operations and maintenance activities, uncollectable accounts, liquidity, cash flows, or other unpredictable events; our ability to manage capital expenditures and operations and maintenance costs while maintaining reliability and customer service levels; variations in demand for electricity, including those due to weather, seasonality (including large increases in ambient temperatures), the general economy or social conditions, customer and sales growth (or decline), the effects of energy conservation measures and distributed generation, and technological advancements; the potential effects of climate change on our electric system, including as a result of weather extremes such as prolonged drought and high temperature variations in the area where APS conducts its business; power plant and transmission system performance and outages; competition in retail and wholesale power markets; regulatory and judicial decisions, developments and proceedings; new legislation, ballot initiatives and regulation or interpretations of existing legislation or regulations, including those relating to environmental requirements, regulatory and energy policy, nuclear plant operations and potential deregulation of retail electric markets; fuel and water supply availability; our ability to achieve timely and adequate rate recovery of our costs through our rates and adjustor recovery mechanisms, including returns on and of debt and equity capital investments; our ability to meet renewable energy and energy efficiency mandates and recover related costs; the ability of APS to achieve its clean energy goals (including a goal by 2050 of 100% clean, carbon-free electricity) and, if these goals are achieved, the impact of such achievement on APS, its customers, and its business, financial condition and results of operations; risks inherent in the operation of nuclear facilities, including spent fuel disposal uncertainty; current and future economic conditions in Arizona, including in real estate markets; the direct or indirect effect on our facilities or business from cybersecurity threats or intrusions, data security breaches, war, acts of war, international sanctions, terrorist attack, physical attack, severe storms, or other catastrophic events, such as fires, explosions, pandemic health events, or similar occurrences; the development of new technologies which may affect electric sales or delivery; the cost of debt and equity capital and the ability to access capital markets when required; general economic conditions, including inflation rates, monetary fluctuations and supply chain constraints; environmental, economic and other concerns surrounding coal-fired generation, including regulation of greenhouse gas emissions; volatile fuel and purchased power costs; the investment performance of the assets of our nuclear decommissioning trust, pension, and other postretirement benefit plans and the resulting impact on future funding requirements; the liquidity of wholesale power markets and the use of derivative contracts in our business; potential shortfalls in insurance coverage; new accounting requirements or new interpretations of existing requirements; generation, transmission and distribution facility and system conditions and operating costs; the ability to meet the anticipated future need for additional generation and associated transmission facilities in our region; the willingness or ability of our counterparties, power plant participants and power plant land-owners to meet contractual or other obligations or extend the rights for continued power plant operations; and restrictions on dividends or other provisions in our credit agreements and ACC orders. These and other factors are discussed in Risk Factors described in Part I, Item 1A of the Pinnacle West/APS Annual Report on Form 10-K for the fiscal year ended December 31, 2021, Part II, Item 1A of the Pinnacle West/APS Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, and Part II, Item 1A of the Pinnacle West/APS Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, which you should review carefully before placing any reliance on our financial statements, disclosures or earnings outlook. Neither Pinnacle West nor APS assumes any obligation to update these statements, even if our internal estimates change, except as required by law.

In this presentation, references to net income and earnings per share (EPS) refer to amounts attributable to common shareholders.

2 Second Quarter 2022

2nd Quarter results negatively impacted by rate case outcome

2nd Quarter 2022 vs. 2nd Quarter 2021

Operating

Revenue less Fuel and Purchased

$1.91 Power1

$(0.14)

2Q 2021

O&M1 & 2
$(0.10)
D&A2	Other Taxes2
$(0.18)	$0.04

Operating Revenue less Fuel and

Purchased Power

Federal Tax Reform3	$	0.25
Sales/Usage	$	0.03
Weather	$	(0.02)
Other	$	(0.02)
Transmission	$	(0.03)
LFCR	$	(0.11)
GRC Base Rate Impact	$	(0.24)

Pension	All other, net2,4
& OPEB Non-
$(0.06)
service	$1.45
Credits, net
$(0.02)

2Q 2022

1. Includes costs and offsetting operating revenues associated with renewable energy and demand side management programs, see slide 20 for more information.
2. Includes the impacts from the absence of the Four Corners Selective Catalytic Reduction (SCR) equipment and Ocotillo Modernization Project (OMP) deferrals, and the elimination of State Equalization Tax Rate (SETR).
3. TEAM adjuster was transferred into Base Rates upon the conclusion of APS's most recent rate case.
4. The Q2 2022 effective tax rate is impacted by a change in the timing of recognition for excess deferred taxes related to the 2017 Tax Cuts and Jobs Act. This timing difference is expected to resolve by year end.

3 Second Quarter 2022

Key drivers for EPS guidance1 1

		2022 key drivers
•	Retail customer growth 1.5%-2.5%	•	Property Tax
•	Weather-normalized retail electricity	•	Interest expense
	sales growth of 1.5%-2.5%	•	AFUDC
•	Transmission revenues
•	Pension and OPEB
•	Operations and maintenance
•	Depreciation and amortization

Long-term guidance and key drivers

• 2022 EPS guidance $3.90-$4.10
• Long-termEPS growth target of 5-7%2
• Retail customer growth 1.5%-2.5%3
• Weather-normalizedretail electricity sales growth of 3.5-4.5%3

1. As of August 3, 2022.
2. Long-termEPS growth rate based on the Company's current 5-year compound annual growth rate projections from 2022-2026
3. Forecasted guidance range from 2022-2024

4 Second Quarter 2022

Managed capital plan to support customer growth, reliability, and clean transition

$1.50B	$1.53B	$1.53B	$1.65B
$190
$214	$250	$270
$260	$340	$330	$560
$263	$250	$210	$210
$595	$510	$530	$500
$170	$175	$185	$190
2021	2022E	2023E	2024E
		Total 2022-2024	$4.7B

2022-2024 as disclosed in the Second Quarter 2022 Form 10-Q.

5 Second Quarter 2022

Other Generation

Clean Generation

Transmission

Distribution

Other