Long-Term Debt and Liquidity Matters

3 Months Ended

Mar. 31, 2022

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 December 21, 2021, Pinnacle West entered into a $450 million term loan facility that matures December 20, 2024. On December 21, 2021, $150 million of the proceeds were received and recognized as long-term debt on the Condensed Consolidated Balance Sheets. On January 6, 2022, the remaining $300 million of proceeds were received and recognized on that date as long-term debt on the Condensed Consolidated Balance Sheets. The proceeds were used for general corporate purposes.

On December 23, 2020, Pinnacle West entered into a $150 million term loan facility that would have matured June 30, 2022. The proceeds were received on January 4, 2021 and used for general corporate purposes. We recognized the term loan facility as long-term debt upon settlement on January 4, 2021. On January 6, 2022, Pinnacle West repaid this loan facility early.

At March 31, 2022, Pinnacle West had a $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 March 31, 2022, Pinnacle West had no outstanding borrowings under its revolving credit facility, no letters of credit outstanding under the credit facility and $13 million outstanding commercial paper borrowings.

APS

At March 31, 2022, APS had two $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 March 31, 2022, APS had no outstanding borrowings under its revolving credit facilities, no letters of credit outstanding under the credit facilities and $250 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. On April 6, 2022, APS filed an application with the ACC to increase the long-term debt limit under the terms required by APS from $7.5 billion to $8.0 billion and to continue its authorization of short-term debt granted in the 2020 financing order.

On January 6, 2022, Pinnacle West contributed $150 million into APS in the form of an equity

infusion. APS used this contribution to repay short-term indebtedness.

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 a 31 MW solar and battery storage project in Orange County, California that is under development by the subsidiary. The credit facilities consist of an approximately $33 million equity bridge loan facility, an approximately $42 million non-recourse construction to term loan facility, and an approximately $5 million letter of credit. In connection with the credit agreement, Pinnacle West has guaranteed the full amount of the equity bridge loan. As of March 31, 2022, $12 million has been drawn from the equity bridge loan. On April 25, 2022, BCE drew an additional $7 million from the bridge loan.

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, 2022				As of December 31, 2021
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Pinnacle West	$	947,343	$	924,200	$	797,042	$	792,735
APS	6,267,482		6,131,644		6,266,693		6,933,619
BCE	11,799		12,052		—		—
Total	$	7,226,624	$	7,067,896	$	7,063,735	$	7,726,354