Long-Term Debt and Liquidity Matters

Pinnacle West and APS maintain committed revolving credit facilities in order to enhance liquidity and provide credit support for their commercial paper programs, to refinance indebtedness, and for other general corporate purposes.

Pinnacle West

At March 31, 2018, Pinnacle West had a $200 million facility that matures in May 2021. Pinnacle West has the option to increase the amount of the facility up to a maximum of $300 million upon the satisfaction of certain conditions and with the consent of the lenders. At March 31, 2018, Pinnacle West had no outstanding borrowings under its credit facility, no letters of credit outstanding and $37.4 million of commercial paper borrowings.

At March 31, 2018, Pinnacle West had a $125 million 364-day unsecured revolving credit facility that matures on July 30, 2018. Borrowings under the facility bear interest at LIBOR plus 0.80% per annum. At March 31, 2018, Pinnacle West had $77 million outstanding under the facility.

APS

At March 31, 2018, APS had two revolving credit facilities totaling $1 billion, including a $500 million facility that matures in May 2021 and a $500 million credit facility that matures in June 2022. APS may increase the amount of each facility up to a maximum of $700 million, for a total of $1.4 billion, upon the satisfaction of certain conditions and with the consent of the lenders. Interest rates are based on APS’s senior unsecured debt credit ratings. These facilities are available to support APS’s $500 million commercial paper program, for bank borrowings or for issuances of letters of credit. At March 31, 2018, APS had $255.5 million of commercial paper outstanding and no outstanding borrowings or letters of credit under its revolving credit facilities.

See "Financial Assurances" in Note 8 for a discussion of APS’s other outstanding letters of credit.

Debt Fair Value

Our long-term debt fair value estimates are classified within Level 2 of the fair value hierarchy. The following table presents the estimated fair value of our long-term debt, including current maturities (dollars in thousands):



	As of March 31, 2018				As of December 31, 2017
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Pinnacle West	$	298,326	$	293,061	$	298,421	$	298,608
APS	4,574,207		4,845,665		4,573,292		5,006,348
Total	$	4,872,533	$	5,138,726	$	4,871,713	$	5,304,956

Debt Provisions

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. At March 31, 2018, APS was in compliance with this common equity ratio requirement. 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.