Business Context and Reporting Period
This Form 8-K is a current report filed by Pinnacle West Capital Corporation and its subsidiary, Arizona Public Service Company (APS), on May 15, 2013. The filing covers corporate governance events, including officer appointments and shareholder voting results from the Annual Meeting held on the same date. It also discloses recent accounting standard adoptions and regulatory developments regarding potential retail electric market deregulation in Arizona.
Key Financial Metrics
This filing does not report operational financial metrics such as revenue, profit, cash flow, margins, debt, or liquidity for the current period. The only financial data provided relates to the retrospective application of new accounting standards regarding derivative instruments as of December 31, 2011:
- Total Gross Recognized Derivatives (Assets): $145,526,000
- Total Gross Recognized Derivatives (Liabilities): $367,240,000
- Net Recognized Derivatives (Assets): $76,371,000
- Net Recognized Derivatives (Liabilities): $125,089,000
- Amounts Offset: $172,996,000 (includes cash collateral and margin)
The adoption of ASU No. 2011-11 and ASU No. 2013-01 resulted in expanded disclosures but did not otherwise impact the financial statements.
Material Changes
Executive Appointment: Donald E. Brandt, Chairman of the Board and CEO of both Pinnacle West and APS, was appointed to the additional position of President of APS on May 15, 2013.
Accounting Standards: The company adopted new guidance on disclosures about offsetting assets and liabilities on a retrospective basis effective January 1, 2013. This changed the presentation of derivative instruments on the balance sheet but did not alter the underlying financial results.
Outlook, Risks, and Management Commentary
Regulatory Risk: The Arizona Corporation Commission (ACC) voted on May 9, 2013, to initiate a two-step process to discuss the potential deregulation of the retail electric market in Arizona. The ACC will first solicit comments on the pros and cons of deregulation. If the Commission proceeds to a second phase, it will request proposals for market structures and rules. Management states that the outcome of these proceedings cannot be predicted.
Shareholder Votes:
- Director Elections: All ten nominees were elected. Donald E. Brandt received 78,403,650 votes for, while Michael L. Gallagher received the highest number of withheld votes (8,486,872).
- Executive Compensation: The advisory resolution to approve executive compensation was approved with 75,118,621 votes for and 5,480,082 votes against.
- Independent Accountants: The appointment of Deloitte & Touche LLP was ratified with 91,738,776 votes for and 925,177 votes against.
Investor Verification Checklist
- Verify the implications of the Arizona Corporation Commission's potential move toward retail electric deregulation on APS's long-term revenue model.
- Review the 2013 Proxy Statement for detailed information regarding Donald E. Brandt's compensation and the specific reasons for the withheld votes on Michael L. Gallagher's director election.
- Confirm the impact of the new derivative offsetting disclosures (ASU 2011-11) on the company's reported liquidity and leverage ratios in subsequent filings.
- Monitor future ACC meetings for the decision on whether to proceed to the second phase of the deregulation study.