Financial Analysis

Financial Analysis of Pinnacle West Capital Corporation

Finance Principles

FIN504

Tom Rochford

August 26, 2013

Financial Analysis of Pinnacle West Capital Corporation

Analysis of Fundamentals

Pinnacle West Capital Corporation is a provider of electricity and energy-related products that serves retail and wholesale electric customers. Pinnacle West is the parent (holding) company of Arizona Public Service which is based in Phoenix, AZ and has about 6,700 employees. APS serves over 1 million customers and has a service territory of 11 counties mainly in Central and Northern Arizona ("Arizona_Public_Service_reference," 2012). They are ranked third nationally among 55 large investor-owned utilities in the J.D. Power and Associates survey of residential customer satisfaction (Momentum, 2012). Additionally, APS is regulated by multiple bodies including the Arizona Corporation Commission (ACC), US Environmental Protection Agency (EPA).Federal Energy Regulatory Commission (FERC), and the US Nuclear Regulatory Commission (NRC). They have received a BBB+ rating from Standard and Poor’s for the second time in two years.

APS is considered the solar power leader in the electric utility industry with approximately 148MW of solar energy added to their portfolio in 2012. With this addition, they have a total of 1,090MW of renewable energy capacity in operation or under construction (Momentum, 2012). They have been named to the Dow Jones North America Sustainability Index for all eight years that the index has been in existence. Additionally, they are on track to meet Arizona’s Renewable Energy Standard (RES) that mandates regulated electric utilities generate at least 15 percent of their electricity from renewable resources by 2025 (http://www.azcc.gov/divisions/utilities/electric/environmental.asp). This standard was approved by the ACC in 2006 and APS’s strategy to meet the RES requirements mandates that they incorporate resources such as solar, wind,...