Long-Term Debt and Liquidity Matters

9 Months Ended

Sep. 30, 2023

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 April 10, 2023, Pinnacle West replaced its $200 million revolving credit facility that would have matured on May 28, 2026, with a new $200 million revolving credit facility that matures on April 10, 2028. Pinnacle West has the option to increase the amount of the facility up to a total 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 credit. At September 30, 2023, Pinnacle West had no outstanding borrowings under its revolving credit facility, no letters of credit outstanding under the credit facility, and $111 million of outstanding commercial paper borrowings. The weighted-average interest rate for the outstanding borrowings on September 30, 2023, was 5.45%

On December 16, 2022, Pinnacle West entered into a $175 million term loan facility that matures December 16, 2024. The proceeds were received on January 6, 2023 and used for general corporate purposes. We recognized the term loan facility as long-term debt upon settlement on January 6, 2023.

APS

On April 10, 2023, APS replaced its two $500 million revolving credit facilities that would have matured on May 28, 2026, with a new $1.25 billion revolving credit facility that matures on April 10, 2028. APS has the option to increase the amount of the facility up to a maximum of $400 million, for a total of $1.65 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 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. This facility is available to support APS’s general corporate purposes, including support for APS’s commercial paper program, which was increased from $750 million to $1 billion on April 10, 2023, for bank borrowings or for issuances of letters of credit. At September 30, 2023, APS had no outstanding borrowings under its revolving credit facility, no letters of credit outstanding under the credit facility, and $313 million of outstanding commercial paper borrowings. The weighted-average interest rate for the outstanding borrowings on September 30, 2023, was 5.44%.

On January 6, 2023, Pinnacle West contributed $150 million into APS in the form of an equity infusion. APS used this contribution to repay short-term indebtedness.

On June 30, 2023, APS issued $500 million of 5.55% unsecured senior notes that mature August 1, 2033. The net proceeds from the sale were used to repay short-term indebtedness consisting of commercial paper and for general corporate purposes.

See “Financial Assurances” in Note 8 for a discussion of other outstanding letters of credit.

BCE

On February 11, 2022, a special purpose subsidiary of BCE entered into a credit agreement to finance capital expenditures and related costs for the development of a 31 megawatt (“MW”) solar and 20 megawatt hour (“MWh”) battery storage project in Los Alamitos, California (“Los Alamitos”). The credit agreement consisted of an equity bridge loan facility, a non-recourse construction facility, a letter of credit facility, and a related interest rate swap. On August 4, 2023, Pinnacle West entered into a purchase and sale agreement with Ameresco, Inc. (“Ameresco”), pursuant to which we agreed to sell all our equity interest in BCE to Ameresco (the “BCE Sale”). See Note 16. As a part of the BCE Sale closing, the $36 million construction facility, the letter of credit facility, and the interest rate swap were transferred to Ameresco. On August 4, 2023, concurrent with the BCE Sale, PNW paid in full the outstanding $31 million equity bridge loan balance. As of September 30, 2023, there is no outstanding balance on our Condensed Consolidated Balance Sheets relating to this credit agreement.

On April 18, 2023, Pinnacle West issued performance guarantees in connection with BCE’s Kūpono Solar investment project financing. BCE holds an equity method investment relating to the Kūpono Solar project. BCE’s investment in the Kūpono Solar project is included in the BCE Sale relating to the stages that have not closed as of September 30, 2023. See Note 8.

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 September 30, 2023				As of December 31, 2022
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Pinnacle West	$	1,123,521	$	1,087,405	$	947,892	$	905,525
APS	7,290,851		5,969,892		6,793,529		5,629,491
BCE	—		—		50,550		50,685
Total	$	8,414,372	$	7,057,297	$	7,791,971	$	6,585,701