8-K: Pinnacle West Reports Improved First-Quarter 2024 Results Driven by Customer Growth and New Rates

Pinnacle West Capital Corp. reported a net income of $16.9 million for the first quarter of 2024, a significant improvement compared to a net loss in the same period last year, driven by customer growth, increased sales, and new rates.

Summary

• Pinnacle West Capital Corp. announced a consolidated net income attributable to common shareholders of $16.9 million, or $0.15 per diluted share, for the quarter ended March 31, 2024.
• This is a significant improvement from the same period in 2023, which saw a net loss of $3.3 million, or a loss of $0.03 per diluted share.
• The improved results are attributed to new retail base rates effective March 8, 2024, increased customer growth and usage, higher revenue from the Lost Fixed Cost Recovery (LFCR) mechanism, and a surcharge from the 2019 Rate Case appeal.
• These positive factors were partially offset by higher depreciation and amortization expenses, increased interest charges, the effects of weather, and higher operations and maintenance expenses.
• The company reaffirmed its full-year 2024 earnings guidance of $4.60 to $4.80 per diluted share on a weather-normalized basis.
• Customer growth was 1.8% year-over-year, and weather-normalized sales growth was 5.9%.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with improved financial results, strong customer growth, and a focus on future growth and reliability. The company is also taking steps to mitigate risks and invest in clean energy. The sentiment is very positive.

Positives

• The company experienced a significant increase in net income compared to the same quarter last year.
• New retail base rates positively impacted revenue.
• Customer growth and increased sales contributed to higher revenue.
• The company is focused on summer preparedness and reliability.
• Arizona's growing population and economy are driving customer growth.
• The company is investing in wildfire mitigation and grid resilience.
• The company has a strong focus on customer experience enhancements.
• The company has a long-term EPS growth target of 5%-7% off 2024 midpoint.

Negatives

• Higher depreciation and amortization expenses partially offset the positive gains.
• Increased interest charges impacted profitability.
• Weather conditions had a negative effect on results.
• Higher operations and maintenance expenses also reduced profitability.

Risks

• The company faces uncertainties associated with the current and future economic environment, including inflation and supply chain delays.
• Variations in demand for electricity due to weather, seasonality, and economic conditions could impact results.
• Climate change and extreme weather events pose risks to the electric system.
• Regulatory and judicial decisions could affect the company's operations.
• The company faces risks inherent in the operation of nuclear facilities.
• Cybersecurity threats and other catastrophic events could impact the business.
• The company is exposed to volatile fuel and purchased power costs.
• The company is exposed to potential shortfalls in insurance coverage.

Future Outlook

The company continues to estimate its consolidated earnings guidance will be in the range of $4.60 to $4.80 per diluted share on a weather-normalized basis for 2024. The company also has a long-term EPS growth target of 5%-7% off 2024 midpoint.

Management Comments

• Jeff Guldner, Pinnacle West Chairman, President and Chief Executive Officer, stated that the first quarter was a strong start to the year, building on the momentum of a growing and diverse customer base.
• Guldner highlighted the 1.8% year-over-year customer growth and 5.9% weather-normalized sales growth.
• Guldner noted that employees are focused on critical preparations to deliver safe and reliable power over the peak summer season.
• Guldner emphasized the company's commitment to wildfire mitigation and community safety.

Industry Context

The announcement reflects the ongoing growth in the Arizona energy market, driven by population increases and economic development. The company's focus on renewable energy and grid reliability aligns with broader industry trends towards clean energy and resilient infrastructure. The company is also benefiting from the growth in the manufacturing sector in the Phoenix area.

Comparison to Industry Standards

• Pinnacle West's customer growth of 1.8% is above the national average for residential customer growth of 1.5% to 2.5%.
• The company's focus on renewable energy and demand-side management programs is consistent with industry trends towards clean energy.
• The company's capital expenditure plan of $6 billion from 2024-2026 is significant and reflects the need for infrastructure upgrades to support growth.
• The company's target of 100% clean, carbon-free electricity by 2050 is in line with other utilities' long-term sustainability goals.
• The company's planned outages at power plants are typical for the industry and are necessary for maintenance and reliability.

Stakeholder Impact

• Shareholders will benefit from the improved financial performance and positive outlook.
• Customers will benefit from the company's focus on reliability and customer experience.
• Employees will be involved in the company's efforts to ensure summer preparedness and grid resilience.
• The community will benefit from the company's wildfire mitigation efforts and commitment to safety.

Next Steps

• The company will continue to focus on summer preparedness and reliability.
• The company will continue to implement its enhanced CapEx plan.
• The company will continue to monitor and manage its financial performance.
• The company will continue to work towards its clean energy goals.
• The company will file a transmission cost adjustor on May 15.
• The company will file a 2024 LFCR on July 31.
• The company will file a 2025 RES Implementation Plan on July 1.
• The company will file an updated Resource Comparison Proxy on May 1.

Key Dates

Keywords

Pinnacle West, Arizona Public Service, APS, Utilities, Earnings, Financial Results, Net Income, Customer Growth, Rate Increase, Renewable Energy, Power Generation, Energy, Electricity, Grid Reliability, Wildfire Mitigation