8-K: Pinnacle West Reports Strong 2024 Results Driven by Customer Growth and Hot Summer

Pinnacle West announces increased full-year earnings for 2024, driven by new customer rates, retail sales growth, and favorable weather conditions.

Summary

• Pinnacle West reported consolidated net income attributable to common shareholders of $608.8 million, or $5.24 per diluted share, for full-year 2024, compared to $501.6 million, or $4.41 per diluted share, in 2023.
• For the fourth quarter ended December 31, 2024, the company reported a consolidated net loss attributable to common shareholders of $6.8 million, or a loss of $0.06 per diluted share, compared with a net loss of $23,000, or $0.00 per diluted share, for the same period in 2023.
• The increase in full-year results is attributed to new customer rates, increased customer usage and growth, the effects of weather, and higher revenue from APS's LFCR adjustor mechanism and a surcharge from the 2019 Rate Case appeal.
• These positive factors were partially offset by higher operations and maintenance expense, higher depreciation and amortization expense, higher interest charges, higher income taxes and lower transmission revenues.
• APS experienced customer growth of 2.1% in 2024 and anticipates projected average annual growth in the range of 1.5% to 2.5% through 2027.
• Weather-normalized, year-over-year retail electricity sales growth was 5.7% in 2024, with future sales expected to increase between 4% and 6% annually over the next three years.
• APS expects to add 9,805 MW of renewable power, battery storage, and natural gas to the grid between 2025 and 2028, with over 90% being carbon-free.
• For 2025, the Company continues to estimate its consolidated earnings will be within a range of $4.40 to $4.60 per diluted share on a weather-normalized basis.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, customer growth, and investments in renewable energy. While there are some challenges and risks, the overall tone is optimistic and forward-looking.

Positives

• Strong full-year earnings driven by customer growth, new rates, and favorable weather.
• Significant investment in renewable energy and battery storage to meet growing demand and clean energy goals.
• High reliability and performance of the Palo Verde Generating Station.
• Improved customer satisfaction as measured by J.D. Power.
• Constructive regulatory environment with a 9.55% ROE and .25% FVI.
• Increased dividend for the 13th consecutive year.

Negatives

• Net loss of $6.8 million, or $0.06 per diluted share, for the fourth quarter of 2024, compared to a net loss of $23,000, or $0.00 per diluted share, for the same period in 2023.
• Higher operations and maintenance expense, depreciation and amortization expense, and interest charges partially offset positive factors.
• Lower transmission revenues impacted full-year results.

Risks

• Uncertainties associated with the current and future economic environment, including economic growth, labor market conditions, and inflation.
• Potential effects of climate change on the electric system, including prolonged drought and high temperature variations.
• Risks inherent in the operation of nuclear facilities, including spent fuel disposal uncertainty.
• The development of new technologies which may affect electric sales or delivery.
• Volatile fuel and purchased power costs.
• Our ability to meet the anticipated future need for additional generation and associated transmission facilities in our region.

Future Outlook

The company estimates its consolidated earnings for 2025 will be within a range of $4.40 to $4.60 per diluted share on a weather-normalized basis. Future sales are expected to increase between 4% and 6% annually over the next three years.

Management Comments

• Our employees once again did an excellent job running and maintaining the electric grid and ensuring that our 1.4 million customers received the reliable electrical service they expect from us, said Pinnacle West Chairman, President and CEO Jeff Guldner.
• Our strong year-end earnings not only reflect this outstanding operational performance, but the results are consistent with a fast-growing service territory and us making the substantial infrastructure investments needed to meet the energy requirements of all our customers, now and in the future.
• Our customer base, which for decades leaned heavily residential, is now more diversified than ever before, APS President Ted Geisler said.
• A dramatic increase in commercial and industrial customers in our service territory including new semiconductor manufacturing plants and expanding data center operations is leading to incredible economic growth and triggering a historic wave of demand for electricity in our state.
• Our employees remain focused on creating value for customers and shareholders, including consistently working to minimize our costs, while maintaining reliable electric service and improving customer satisfaction.
• As a result, we are well-positioned to have a solid 2025, Geisler concluded.

Industry Context

The announcement reflects the broader trend of increasing electricity demand driven by economic growth, particularly in the commercial and industrial sectors, including data centers and semiconductor manufacturing. The company's focus on renewable energy and battery storage aligns with the industry's shift towards cleaner energy sources and grid modernization.

Comparison to Industry Standards

• The company's customer growth of 2.1% is strong compared to the national average residential customer growth of 1.5% reported by Itron Annual Energy Survey Report.
• The Palo Verde Generating Station's capacity factor of 93.7% is a high level of performance compared to other nuclear power plants globally.
• The company's plan to add 9,805 MW of renewable power, battery storage, and natural gas to the grid between 2025 and 2028 is a significant investment in clean energy compared to other utilities in the region.

Stakeholder Impact

• Shareholders: Positive impact due to increased earnings and dividend.
• Customers: Focus on reliability, customer satisfaction, and affordable rates.
• Employees: Emphasis on operational performance and creating value.
• Communities: Investment in clean energy and economic development.

Next Steps

• Continue to invest in renewable energy and battery storage to meet growing demand and clean energy goals.
• Focus on cost control and customer affordability.
• Monitor and manage risks associated with economic conditions, climate change, and regulatory changes.
• File 2025 PSA rate effective March 1.
• File Transmission Cost Adjustor May 15; effective June 1.
• File 2025 LFCR July 31, 2025 LFCR effective Nov. 1 (if approved).
• File Updated RCP calculation May 1, RCP Update effective Sep. 1.
• 2025 Summer Preparedness Workshop to be held Apr. 24.
• 2026 RES Plan due July 1.
• 2026 DSM Plan due May 30.

Key Dates