Long-Term Debt and Liquidity Matters

6 Months Ended

Jun. 30, 2021

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

On May 5, 2020, Pinnacle West refinanced its 364-day $50 million term loan agreement with a new 364-day $31 million term loan agreement that would have matured May 4, 2021. Borrowings under the agreement bore interest at Eurodollar Rate plus 1.40% per annum. Pinnacle West repaid this agreement on April 27, 2021.

On December 23, 2020, Pinnacle West entered into a $150 million term loan facility that matures June 30, 2022. The proceeds were received on January 4, 2021 and used for general corporate purposes.

On May 28, 2021, Pinnacle West replaced its $200 million revolving credit facility that would have matured on July 11, 2023, with a new $200 million revolving credit facility that matures on May 28, 2026. 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. Interest rates are based on Pinnacle West’s senior unsecured debt credit ratings and the agreement includes a sustainability-linked pricing metric which permits an interest rate reduction or increase by meeting or missing targets related to specific environmental and employee health and safety sustainability objectives. The facility is available to support Pinnacle West’s general corporate purposes, including support for Pinnacle West's $200 million commercial paper program, for bank borrowings or for issuances of letters of credits. At June 30, 2021, Pinnacle West had no outstanding borrowings under its credit facility, no letters of credit outstanding under the credit facility and $9.7 million of outstanding commercial paper borrowings.

APS

On May 28, 2021, APS replaced its two $500 million revolving credit facilities that would have matured in June 2022 and July 2023, with two new $500 million revolving credit facilities that total $1 billion and that mature on May 28, 2026. 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 and the agreements include a sustainability-linked pricing metric which permits an interest rate reduction or increase by meeting or missing targets related to specific environmental and employee health and safety sustainability objectives. These facilities are available to support APS’s general corporate purposes, including support for APS's $750 million commercial paper program, for bank borrowings or for issuances of letters of credit. At June 30, 2021, APS had no outstanding borrowings under its revolving credit facilities, no letters of credit outstanding under the credit facilities and $495 million of outstanding commercial paper borrowings.

On December 17, 2020, the ACC issued a financing order in which, subject to specified parameters and procedures, it approved APS’s short-term debt authorization equal to the sum of (i) 7% of APS’s capitalization, and (ii) $500 million (which is required to be used for costs relating to purchases of natural gas and power) and a long-term debt authorization of $7.5 billion.

See “Financial Assurances” in Note 8 for a discussion of 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 June 30, 2021				As of December 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Pinnacle West	$	646,729	$	654,095	$	496,321	$	509,050
APS	5,819,198		6,746,984		5,817,945		7,103,791
Total	$	6,465,927	$	7,401,079	$	6,314,266	$	7,612,841