APS 2012 Annual Report Download - page 135

PINNACLE WEST CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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APS
On January 13, 2012, APS issued $325 million of 4.50% unsecured senior notes that mature on
April 1, 2042. The net proceeds from the sale were used along with other funds to repay at maturity
APS’s $375 million aggregate principal amount of 6.50% senior notes on March 1, 2012.
On May 1, 2012, pursuant to the mandatory tender provision, APS purchased all $32 million of
the Maricopa County, Arizona Pollution Control Corporation Pollution Control Revenue Refunding
Bonds (Arizona Public Service Company Palo Verde Project), 2009 Series B, due 2029. On June 1,
2012 these bonds were remarketed. Currently, the interest rate on these bonds is reset daily by a
remarketing agent. The daily rate at December 31, 2012 was 0.13% per annum. Additionally, the
bonds are supported by a letter of credit. These bonds are classified as long-term debt on our
Consolidated Balance Sheets at December 31, 2012 and were classified as current maturities of long-
term debt on our Consolidated Balance Sheets at December 31, 2011.
On June 1, 2012, pursuant to the mandatory tender provision, APS changed the interest rate
mode for the approximately $38 million of Navajo County, Arizona Pollution Control Corporation
Pollution Control Revenue Refunding Bonds (Arizona Public Service Company Cholla Project), 2009
Series A. The new term rate period for these bonds commenced on June 1, 2012, and ends, subject to a
mandatory tender, on May 29, 2014. During this time, the bonds will bear interest at a rate of 1.25% per
annum. These bonds are classified as long-term debt on our Consolidated Balance Sheets at
December 31, 2012 and were classified as current maturities of long-term debt on our Consolidated
Balance Sheets at December 31, 2011.
On November 1, 2012 APS redeemed at par all $90 million of the Maricopa County, Arizona
Pollution Control Corporation Pollution Control Revenue Refunding Bonds (Arizona Public Service
Company Palo Verde Project) 2002 Series A, due 2029.
See Lines of Credit and Short-Term Borrowings in Note 5 and “Financial Assurances” in
Note 11 for discussion of APS’s other letters of credit.
Debt Provisions
Pinnacle West’s and APS’s debt covenants related to their respective bank financing
arrangements include maximum debt to capitalization ratios. Pinnacle West and APS comply with this
covenant. For both Pinnacle West and APS, this covenant requires that the ratio of consolidated debt to
total consolidated capitalization not exceed 65%. At December 31, 2012, the ratio was approximately
46% for Pinnacle West and 45% for APS. Failure to comply with such covenant levels would result in
an event of default which, generally speaking, would require the immediate repayment of the debt
subject to the covenants and could cross-default other debt. See further discussion of “cross-default”
provisions below.
Neither Pinnacle West’s nor APS’s financing agreements contain “rating triggers” that would
result in an acceleration of the required interest and principal payments in the event of a rating
downgrade. However, our bank credit agreements contain a pricing grid in which the interest rates we
pay for borrowings thereunder are determined by our current credit ratings.