Long-Term Debt and Liquidity Matters

3 Months Ended

Mar. 31, 2020

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, 2020, Pinnacle West had a $200 million revolving credit facility that matures in July 2023. 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. The facility is available to support Pinnacle West's $200 million commercial paper program, for bank borrowings or for issuances of letters of credits. At March 31, 2020, Pinnacle West had $100 million outstanding borrowings under its credit facility, no letters of credit outstanding and no commercial paper borrowings.

On May 5, 2020, Pinnacle West refinanced its 364-day $50 million term loan agreement that would have matured on May 7, 2020 with a new 364-day $31 million term loan agreement that matures on May 4, 2021. Borrowings under the agreement bear interest at London Inter-bank Offered Rate ("LIBOR") plus 1.40% per annum. At March 31, 2020, Pinnacle West had $33 million in outstanding borrowings under the prior agreement.

APS

On January 15, 2020, APS repaid at maturity the remaining $150 million of the $250 million aggregate principal amount of its 2.2% Senior Notes.

At March 31, 2020, APS had two revolving credit facilities totaling $1 billion, including a $500 million credit facility that matures in June 2022 and a $500 million facility that matures in July 2023. 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, 2020, APS had $430 million outstanding borrowings under its revolving credit facilities and no letters of credit outstanding or commercial paper borrowings.

On November 27, 2018, the ACC issued a financing order in which, subject to specified parameters and procedures, it approved APS’s short-term debt authorization equal to a 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 $5.9 billion. On March 27, 2020, APS filed an application with the ACC to increase the long-term debt limit from $5.9 billion to $7.5 billion and to continue its authorization of short-term debt granted in the 2018 financing order.

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 March 31, 2020				As of December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Pinnacle West	$	449,581	$	448,449	$	449,425	$	450,822
APS	5,033,743		5,634,265		5,183,133		5,743,570
Total	$	5,483,324	$	6,082,714	$	5,632,558	$	6,194,392