- Full-year financial results positively impacted by the effects
of weather, robust customer growth and strong operational
performance
- Constructive regulatory outcome achieved in 2022 rate case
- Company files Transmission System Plan to ensure reliability
and meet Arizona’s substantial growth
Pinnacle West Capital Corp. (NYSE: PNW) today reported
consolidated net income attributable to common shareholders of
$501.6 million, or $4.41 per diluted share, for full-year 2023.
This result compares with net income of $483.6 million, or $4.26
per diluted share, in 2022.
For the quarter ended Dec. 31, 2023, Pinnacle West reported a
consolidated net loss attributable to common shareholders of
$23,000, or $0.00 per diluted share, compared with a net loss of
$24.0 million, or a loss of $0.21 per share, for the same period in
2022.
The higher 2023 full-year results reflect an increase of
approximately $18 million, primarily as a result of the effects of
weather; higher revenue resulting from Arizona Public Service Co.’s
(APS) Lost Fixed Cost Recovery (LFCR) adjustor mechanism and a
surcharge resulting from the outcome of the utility’s 2019 Rate
Case appeal; higher transmission revenue; and increased sales and
usage. These positive factors were partially offset by higher
interest charges, net of AFUDC; higher operations and maintenance
expense; lower pension and other postretirement non-service
credits; and higher depreciation and amortization expense mostly
due to increased plant assets.
“Two years ago, we outlined a plan following an unfavorable rate
case decision that created financial hurdles and moved us to reset
our financial outlook. We made significant progress on that plan,
adapting and reaching our revised targets,” said Pinnacle West
Chairman, President and CEO Jeff Guldner. “That progress is
reflected in our solid 2023 financial results and a constructive
outcome in our 2022 rate case that was decided late last week.
“The Arizona Corporation Commission’s (ACC) decision affirms
important aspects of our rate filing and supports investments in
our energy infrastructure to increase grid resilience, while also
ensuring customers receive the reliability they count on – without
compromising affordability.”
Guldner also lauded the efforts of employees who worked
tenaciously to keep the lights on and air conditioners running
throughout the year, but especially during the hottest U.S. summer
on record. “Our diverse generation fleet delivered high-level
performance when our customers were in critical need of reliable
and resilient power. Palo Verde attained its 32nd consecutive year
as the nation’s largest power producer, all of it carbon-free, and
our combination of solar generation plus utility-scale battery
storage provided record levels of renewable power for our
customers.
“By executing on comprehensive operational and financial
strategies, we enter 2024 in a solid position to provide top-level
service for our customers and further energize Arizona’s economic
expansion.”
Arizona’s Economy: Planning for Growth
Arizona’s economy is more diverse than ever, and Arizona’s
population continues to grow. Maricopa County, home of the Phoenix
metropolitan area, has been the county with the highest annual
population gains in the United States since 2016. With this record
number of people, businesses and large industrial customers moving
to the state, APS’s service territory remains among the fastest
growing in the nation.
APS, the company’s principal subsidiary, experienced customer
growth of 2% in 2023 and anticipates projected average annual
growth in the range of 1.5% to 2.5% through 2026. Not surprisingly,
these changes are driving a significant increase in energy
consumption. APS experienced weather-normalized, year-over-year
retail electricity sales growth of 1.5% in 2023, and future sales
are expected to increase between 4% and 6% annually through 2026
due in large part to the expected additions of several large data
centers and new large manufacturing facilities.
To prioritize reliability and meet substantial growth in
residential and commercial energy needs, APS filed a future-focused
Transmission System Plan with the ACC late last month.
“This 10-year plan includes significant upgrades to APS’s
transmission system to support load growth, mitigate outage risks,
connect the APS grid to additional generation resources and procure
more cost-competitive energy for customers through the wholesale
power market,” Guldner said, adding that in 2023, APS spent $361
million on capital expenditures for transmission, up from $217
million in 2022. Capital spending on transmission projects is
projected to total nearly $1.2 billion from 2024 through 2026.
Staying Focused on Serving Customers
Employees remain committed to putting customers first and
achieving an industry-leading best-in-class customer experience.
Company-wide efforts to provide a more frictionless customer
experience continue to pay off, as measured by J.D. Power. For
2023, APS ranked in the second quartile of large investor-owned
utilities for both business and residential customers. This is a
meaningful accomplishment considering APS was fourth quartile as
recently as 2021. In fact, residential customers ranked APS second
in our peer set in 2023 for both “Perfect Power” (no brief or
lengthy outages) and “Phone Customer Care.”
Additionally, in 2023, APS continued to improve customers’
experience by:
- Improving the ease-of-use and increasing functionality of our
digital experience, including increasing use of text and email
notifications to keep customers informed about their service;
- Adding more than 1,100 in-person payment locations across the
state, as well as introducing new customer payment channels,
including Google and Apple Pay;
- Continuing to communicate with customers in their preferred
channels about topics that matter most to them, including
reliability, energy efficiency, financial assistance, the
environment, and programs that enable them to design their own
personalized energy experience; and
- Offering assistance and discount programs to qualified
limited-income customers, as well as other non-income-based
assistance programs for those struggling to pay their bills,
including several assistance programs through the State of Arizona.
Collectively, these programs provided funding and discounts
exceeding more than $69 million in 2023 alone.
Financial Outlook
Following the recent conclusion of APS’s rate case, the company
estimates its consolidated 2024 earnings guidance will be in the
range of $4.60 to $4.80 per diluted share on a weather-normalized
basis. Key factors and assumptions underlying the 2024 outlook can
be found in the year-end/fourth-quarter 2023 earnings presentation
slides at pinnaclewest.com/investors.
Conference Call and Webcast
Pinnacle West invites interested parties to listen to the live
webcast of management’s conference call to discuss the Company’s
financial results and recent developments, and to provide an update
on the company’s longer-term financial outlook, at 11 a.m. ET (9
a.m. Arizona time) today, Feb. 27. The webcast can be accessed at
pinnaclewest.com/presentations and will be available for replay on
the website for 30 days. To access the live conference call by
telephone, dial (888) 506-0062 or (973) 528-0011 for international
callers and enter participant access code 933756. A replay
of the call also will be available at
pinnaclewest.com/presentations or by telephone until 11:59 p.m. ET,
Tuesday, March 5, 2024, by calling (877) 481-4010 in the U.S. and
Canada or (919) 882-2331 internationally and entering replay
passcode 49749.
General Information
Pinnacle West Capital Corp., an energy holding company based in
Phoenix, has consolidated assets of nearly $25 billion, about 6,500
megawatts of generating capacity and approximately 6,100 employees
in Arizona and New Mexico. Through its principal subsidiary,
Arizona Public Service, the company provides retail electricity
service to approximately 1.4 million Arizona homes and businesses.
For more information about Pinnacle West, visit the company’s
website at pinnaclewest.com.
Dollar amounts in this news release are after income taxes.
Earnings per share amounts are based on average diluted common
shares outstanding. For more information on Pinnacle West’s
operating statistics and earnings, please visit
pinnaclewest.com/investors.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements based on
current expectations. These forward-looking statements are often
identified by words such as "estimate," "predict," "may,"
"believe," "plan," "expect," "require," "intend," "assume,"
"project," "anticipate," "goal," "seek," "strategy," "likely,"
"should," "will," "could," and similar words. Because actual
results may differ materially from expectations, we caution readers
not to place undue reliance on these statements. A number of
factors could cause future results to differ materially from
historical results, or from outcomes currently expected or sought
by Pinnacle West or APS. These factors include, but are not limited
to:
- uncertainties associated with the current and future economic
environment, including economic growth, labor market conditions,
inflation, supply chain delays, increased expenses, volatile
capital markets, or other unpredictable effects;
- our ability to manage capital expenditures and operations and
maintenance costs while maintaining reliability and customer
service levels;
- variations in demand for electricity, including those due to
weather, seasonality (including large increases in ambient
temperatures), the general economy or social conditions, customer,
and sales growth (or decline), the effects of energy conservation
measures and distributed generation, and technological
advancements;
- the potential effects of climate change on our electric system,
including as a result of weather extremes such as prolonged drought
and high temperature variations in the area where APS conducts its
business;
- power plant and transmission system performance and
outages;
- competition in retail and wholesale power markets;
- regulatory and judicial decisions, developments, and
proceedings;
- new legislation, ballot initiatives and regulation or
interpretations of existing legislation or regulations, including
those relating to environmental requirements, regulatory and energy
policy, nuclear plant operations and potential deregulation of
retail electric markets;
- fuel and water supply availability;
- our ability to achieve timely and adequate rate recovery of our
costs through our rates and adjustor recovery mechanisms, including
returns on and of debt and equity capital investment;
- our ability to meet renewable energy and energy efficiency
mandates and recover related costs;
- the ability of APS to achieve its clean energy goals (including
a goal by 2050 of 100% clean, carbon-free electricity) and, if
these goals are achieved, the impact of such achievement on APS,
its customers, and its business, financial condition, and results
of operations;
- risks inherent in the operation of nuclear facilities,
including spent fuel disposal uncertainty;
- current and future economic conditions in Arizona;
- the direct or indirect effect on our facilities or business
from cybersecurity threats or intrusions, data security breaches,
terrorist attack, physical attack, severe storms, or other
catastrophic events, such as fires, explosions, pandemic health
events or similar occurrences;
- the development of new technologies which may affect electric
sales or delivery, including as a result of delays in the
development and application of new technologies;
- the cost of debt, including increased cost as a result of
rising interest rates, and equity capital and the ability to access
capital markets when required;
- environmental, economic, and other concerns surrounding
coal-fired generation, including regulation of GHG emissions;
- volatile fuel and purchased power costs;
- the investment performance of the assets of our nuclear
decommissioning trust, pension, and other postretirement benefit
plans and the resulting impact on future funding requirements;
- the liquidity of wholesale power markets and the use of
derivative contracts in our business;
- potential shortfalls in insurance coverage;
- new accounting requirements or new interpretations of existing
requirements;
- generation, transmission and distribution facility and system
conditions and operating costs;
- the ability to meet the anticipated future need for additional
generation and associated transmission facilities in our
region;
- the willingness or ability of our counterparties, power plant
participants and power plant landowners to meet contractual or
other obligations or extend the rights for continued power plant
operations; and
- restrictions on dividends or other provisions in our credit
agreements and Arizona Corporation Commission orders.
These and other factors discussed in the most recent Pinnacle
West/APS Form 10-K along with other public filings with the
Securities and Exchange Commission, which readers should review
carefully before placing any reliance on our financial statements
or disclosures. Neither Pinnacle West nor APS assumes any
obligation to update these statements, even if our internal
estimates change, except as required by law.
PINNACLE WEST CAPITAL CORPORATION CONSOLIDATED STATEMENTS
OF INCOME (unaudited) (dollars and shares in thousands, except
per share amounts) THREE MONTHS ENDED TWELVE MONTHS
ENDED DECEMBER 31, DECEMBER 31,
2023
2022
2023
2022
Operating Revenues
$
991,574
$
1,009,314
$
4,695,991
$
4,324,385
Operating Expenses Fuel and purchased power
375,879
455,316
1,792,657
1,629,343
Operations and maintenance
281,388
271,680
1,058,725
987,072
Depreciation and amortization
203,598
189,704
794,043
753,195
Taxes other than income taxes
56,064
54,779
224,013
220,370
Other expenses
265
1,084
1,913
2,494
Total
917,194
972,563
3,871,351
3,592,474
Operating Income
74,380
36,751
824,640
731,911
Other Income (Deductions) Allowance for equity funds
used during construction
13,047
14,297
53,118
45,263
Pension and other postretirement non-service credits - net
10,135
24,748
40,648
98,487
Other income
5,242
2,311
33,666
7,916
Other expense
(9,140
)
(37,634
)
(25,056
)
(52,385
)
Total
19,284
3,722
102,376
99,281
Interest Expense Interest charges
96,027
77,892
374,887
283,569
Allowance for borrowed funds used during construction
(9,433
)
(8,983
)
(43,564
)
(28,030
)
Total
86,594
68,909
331,323
255,539
Income (loss) Before Income Taxes
7,070
(28,436
)
595,693
575,653
Income Taxes
2,787
(8,750
)
76,912
74,827
Net Income (loss)
4,283
(19,686
)
518,781
500,826
Less: Net income attributable to noncontrolling interests
4,306
4,306
17,224
17,224
Net Income (loss) Attributable To Common Shareholders
$
(23
)
$
(23,992
)
$
501,557
$
483,602
Weighted-Average Common Shares Outstanding -
Basic
113,534
113,298
113,442
113,196
Weighted-Average Common Shares Outstanding - Diluted
113,534
113,298
113,804
113,416
Earnings Per Weighted-Average Common Share
Outstanding Net income (loss) attributable to common
shareholders - basic
$
-
$
(0.21
)
$
4.42
$
4.27
Net income (loss) attributable to common shareholders - diluted
$
-
$
(0.21
)
$
4.41
$
4.26
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240227572305/en/
Media Contact: Alan Bunnell (602) 250-3376 Analyst
Contact: Amanda Ho (602) 250-3334
Website: pinnaclewest.com
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