UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): December 31,
2008
| |
|
|
|
|
| |
|
Exact Name of Registrant as Specified in |
|
|
| |
|
Charter; State of Incorporation; |
|
IRS Employer |
| Commission File Number |
|
Address and Telephone Number |
|
Identification Number |
| 1-8962
|
|
Pinnacle West Capital Corporation
(an Arizona corporation)
400 North Fifth Street, P.O. Box 53999
Phoenix, AZ 85072-3999
(602) 250-1000
|
|
86-0512431 |
| |
|
|
|
|
| 1-4473
|
|
Arizona Public Service Company
(an Arizona corporation)
400 North Fifth Street, P.O. Box 53999
Phoenix, AZ 85072-3999
(602) 250-1000
|
|
86-0011170 |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions:
| |
o |
|
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| |
| |
o |
|
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| |
| |
o |
|
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b)) |
| |
| |
o |
|
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c)) |
This combined Form 8-K is separately filed by Pinnacle West Capital Corporation and Arizona
Public Service Company. Each registrant is filing on its own behalf all of the information
contained in this Form 8-K that relates to such registrant and, where required, its subsidiaries.
Except as stated in the preceding sentence, neither registrant is filing any information that does
not relate to such registrant, and therefore makes no representation as to any such information.
Item 2.02. Results of Operations and Financial Condition
On February 20, 2009, Pinnacle West Capital Corporation (the “Company” or “Pinnacle West”)
issued a press release regarding its financial results for its fiscal quarter ended December 31,
2008. A copy of the press release is attached hereto as Exhibit 99.8.
Certain of the Information referenced in Item 7.01 below relates to the Company’s results of
operations for its fiscal quarter ended December 31, 2008. This Information is attached hereto as
Exhibits 99.2, 99.3, 99.6 and 99.8.
Item 7.01. Regulation FD Disclosure
Financial and Business Information
The Company is providing quarterly consolidated statistical summaries and a glossary of
relevant terms (collectively, “Information”) to help interested parties better understand its
business (see Exhibits 99.1, 99.2, 99.3, 99.4, 99.5, 99.6 and 99.7). This Information is
concurrently being posted to the Company’s website at www.pinnaclewest.com. The
Information may not represent all of the factors that could affect the Company’s operating or
financial results for various periods. Some of the Information is preliminary in nature and could
be subject to significant adjustment. Some of the Information is based on information received
from third parties and may contain inaccuracies. The Company is not responsible for any such
inaccuracies. Although the Company may update or correct the Information if it is aware that such
Information has been revised or is inaccurate, the Company assumes no obligation to update or
correct the Information and reserves the right to discontinue the provision of all or any portion
of the Information at any time or to change the type of Information provided.
2009 Earnings Outlook
In this discussion, earnings per share amounts are after income taxes and are based on diluted common shares outstanding.
The earnings guidance in this Form 8-K supersedes all previous earnings guidance provided by Pinnacle West.
Our earnings forecasts are subject to numerous risks, including those described under “Forward-Looking Statements” below and under “Risk Factors” in
Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (the “2008 Form 10-K”).
Our estimates as to how several of these risks and other factors may affect future earnings follow:
|
|
|
|
| |
| |
• |
|
Arizona Public Service Company (“APS”) has a general retail rate case pending before the Arizona Corporation Commission (the “ACC”).
The rate request includes, among other things, a net overall increase of $278.2 million in annual pretax retail electricity revenues
to be effective no later than October 1, 2009. The requested net increase consists of an increase of $264.3 million in
non-fuel base rates and a net increase of $13.9 million for fuel and purchased power costs reflected in base rates. On
January 30, 2009, APS began settlement discussions with the parties to the general retail rate case. We are not able to predict the
ultimate outcome of the rate case, when the ACC will make a decision in this case, or the specific date when a rate increase will become effective.
(For detailed information regarding the rate case, see “2008 General Rate Case”
in Note 3 of Notes to Consolidated Financial Statements in Part II,
Item 8 of the 2008 Form 10-K.) |
| |
| |
• |
|
On December 18, 2008, the ACC voted to approve an emergency interim base rate surcharge for APS (the “Interim Rate Decision”).
This surcharge became effective for retail customer bills issued after December 31, 2008 and will continue in effect until a decision under the
pending general retail rate case becomes effective. This surcharge is expected to increase annual pretax retail revenues approximately $65.2
million, and is subject to refund with interest pending the final outcome of APS’ general retail rate case. |
| |
| |
• |
|
The Interim Rate Decision requires, among other things, that APS examine its operations and expenses, targeting additional cuts of
at least $20 million, and reinvest the savings and surcharge revenues in infrastructure and technology necessary to serve APS
customers and reduce the need for external debt financing. Since the study is still underway, no adjustments have been made to our estimates
for potential additional cost reductions. |
| |
| |
• |
|
Our current outlook for our real estate subsidiary, SunCor Development Company (“SunCor”), reflects
the weak status of the real estate market in the United States and the limited availability of
financing. SunCor’s net loss in 2008 included a $53 million pretax impairment charge. If
conditions in the broader economy or the real estate market worsen, or as a result of a change in
SunCor’s strategy, we may be required to record additional impairment charges. |
We estimate that our consolidated earnings for 2009 will be within a reasonable range around $2.30
per share, excluding the impact of SunCor (including any potential future real estate impairment
charges) and before considering any potential earnings benefit during the year derived from a net
base rate increase at the conclusion of the pending general retail rate case. We estimate that
APS’ earnings contribution included in such consolidated earnings will be within a reasonable range
around $2.35 per share (equivalent to a return on APS’ average common equity of about 7%). This
estimate assumes that the interim base rate surcharge will remain in effect throughout 2009. Our
earnings estimates will increase to the extent the ultimate outcome of the general retail rate case
includes a net base rate increase in 2009 that exceeds the amount of the interim base rate
surcharge. We currently estimate that holding company expenses and other items, net, will be a net
loss within a reasonable range around $0.05 per share. For additional details regarding the major
factors affecting our consolidated earnings outlook for 2009, see Exhibit 99.9 attached hereto.
2010 Earnings Outlook
Assuming APS’ general retail rate request is granted in full and
is effective for the entire year,
we estimate that our consolidated earnings for 2010, excluding the
impact of SunCor (including any potential real estate impairment
charges) will be within a reasonable range around $3.00 per share.
We estimate that APS’ earnings contribution included in such
2010 consolidated earnings will be within a reasonable range around
$3.00 per
share (equivalent to a return on APS’ average common equity of
about 9%). We currently estimate that holding company expenses and
other items, net, will not have any meaningful impact on our 2010
consolidated financial results. For additional details regarding
major factors affecting our consolidated earnings outlook for 2010,
see Exhibit 99.10 attached hereto.
Forward-Looking Statements
This Form 8-K contains forward-looking statements regarding our 2009 and 2010 earnings
outlook. Neither Pinnacle West nor APS assumes any obligation to update these statements or make
any further statements on any of these issues, except as required by applicable law. These
forward-looking statements are often identified by words such as “estimate,” “predict,” “hope,”
“may,” “believe,” “anticipate,” “plan,” “expect,” “require,” “intend,” “assume” and similar words.
Because actual results
2
may differ materially from expectations, we caution 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 Pinnacle West or APS. In addition to
the Risk Factors described in Item 1A of the Pinnacle West/APS Annual Report on Form 10-K for the
fiscal year ended December 31, 2008, these factors include, but are not limited to, state and
federal regulatory and legislative decisions and actions, including the outcome or timing of the
pending rate case of APS; increases in our capital expenditures and operating costs and our ability
to achieve timely and adequate rate recovery of these increased costs; our ability to reduce
capital expenditures and other costs while maintaining reliability and customer service levels, and
unexpected developments that would limit us from achieving all or some of our planned capital
expenditure reductions; volatile fuel and purchased power costs, including fluctuations in market
prices for natural gas, coal, uranium and other fuels used in our generating facilities,
availability of supplies of such commodities, and our ability to recover the costs of such
commodities; the outcome and resulting costs of regulatory, legislative and judicial proceedings,
both current and future, including those related to environmental matters and climate change; the
availability of sufficient water supplies to operate our generation facilities, including as the
result of drought conditions; the potential for additional restructuring of the electric industry,
including decisions impacting wholesale competition and the introduction of retail electric
competition in Arizona; regional, national and international economic and market conditions,
including the strength of the housing, credit and financial markets; the potential adverse impact
of current economic conditions on our results of operations; the cost of debt and equity capital
and access to capital markets; changes in the market price of our common stock; restrictions on
dividends or other burdensome provisions in new or existing credit agreements; our ability, or the
ability of our subsidiaries, to meet debt service obligations; current credit ratings remaining in
effect for any given period of time; the performance of the stock market and the changing interest
rate environment, which affect the value of our nuclear decommissioning trust, pension, and other
postretirement benefit plan assets, the amount of required contributions to Pinnacle West’s pension
plan and contributions to APS’ nuclear decommissioning trust funds, as well as the reported costs
of providing pension and other postretirement benefits and our ability to recover such costs;
volatile market liquidity, any deteriorating counterparty credit and the use of derivative
contracts in our business (including the interpretation of the subjective and complex accounting
rules related to these contracts); changes in accounting principles generally accepted in the
United States of America, the interpretation of those principles and the impact of the adoption
of new accounting standards; customer growth and energy usage; weather variations affecting local
and regional customer energy usage; power plant performance and outages; transmission outages and
constraints; the completion of generation and transmission construction in the region, which could
affect customer growth and the cost of power supplies; risks inherent in the operation of nuclear
facilities, such as environmental, regulatory, health and financial risks, risk of terrorist
attack, planned and unplanned outages, and unfunded decommissioning costs; the ability of our power plant
participants to meet contractual or other obligations; technological developments in the electric
industry; the results of litigation and other proceedings resulting from the California and Pacific
Northwest energy situations; the performance of Pinnacle West’s subsidiaries and any resulting
effects on its cash flow; the strength of the real estate market and economic and other conditions
affecting the real estate market in SunCor’s market areas, which include Arizona, Idaho, New Mexico
and Utah; and other uncertainties, all of which are difficult to predict and many of which are
beyond the control of Pinnacle West and APS.
3