- Record-setting summer heat drives quarter-over-quarter earnings
improvement
- Operating performance, reliability remain strong for
customers
- APS recognized for distributed energy, safety and economic
development innovation
Pinnacle West Capital Corp. (NYSE: PNW) today reported
consolidated net income attributable to common shareholders for the
2023 third quarter of $398.2 million, or $3.50 per diluted share.
This result compares with net income of $326.3 million, or $2.88
per share, for the same period a year ago.
Record-setting summer weather was the primary driver in the
quarter-over-quarter improvement, increasing revenues, net of fuel
and purchased power costs, by $57.4 million (after-tax), or $0.38
per share. Additionally, higher revenue during the quarter also
resulted from Arizona Public Service’s (APS) Lost Fixed Cost
Recovery (LFCR) adjustor mechanism and a new surcharge resulting
from the outcome of the 2019 Rate Case appeal. These factors were
partially offset by higher interest expense, lower pension and
other postretirement non-service credits, and higher depreciation
and amortization expense, mostly due to increased plant assets.
“It was an all-around solid quarter propelled by the
record-breaking heat and superior operational performance by our
employees,” said Pinnacle West Chairman, President and Chief
Executive Officer Jeff Guldner. “As a result of the historically
hot weather, our customers used more energy to cool their homes and
businesses than under normal weather conditions. This increase –
and continued robust customer growth of 2% in the quarter – led to
stronger financial results.”
Summer 2023: Extreme, Record-Breaking Heat
According to the National Weather Service, the average high
temperature in the third quarter was 108.9 degrees – an increase of
4.6% over 2022’s similar quarter and 8.9% over 10-year historical
averages. The number of residential cooling degree-days (a
utility’s measure of the effects of weather) increased a massive
28.1% over the same period a year ago and was 32% higher than
historical 10-year averages. Moreover, residential cooling
degree-days for the month of July were the highest of any year
since data tracking began in 1974. August experienced the
second-highest cooling-degree days ever in the month, behind only
2020.
In addition to being the hottest summer on record, daily
temperatures in the Phoenix metropolitan area set a number of
records, including;
- 22 days at or above 115 degrees, besting the old record of 14
days set in 2020;
- 55 days at or above 110 degrees, which beat 2020’s prior record
of 53 days; and
- 36 days of overnight low temperatures of 90 degrees or higher.
This streak broke the prior record of 28 days set in 2020.
APS customers also set a record peak demand of 8,162 megawatts
on July 15, shattering the previous record set in 2020 by more than
500 megawatts. (A preliminary number and date were previously
shared in the company’s second-quarter financial results news
release.) Customer peak load on 17 other days in July and August
2023 also surpassed 2020’s previous record peak.
“We prepared years in advance for this increased energy demand,
so it did not come as a surprise,” Guldner said. “Our diverse mix
of power plants including renewables, nuclear and natural gas,
operated exceptionally well. And, our employees did what they do
best: maintain reliable electric service for our 1.4 million
customers during the time of year when we have the greatest demand
on our electrical system. That execution was especially critical
with this summer’s record heat.”
“That said, we also recognize that the hot summer months can be
an especially hard time for our customers financially,” Guldner
added. “That’s one reason we remain committed to providing energy
support and crisis bill assistance programs for those who are
experiencing financial hardships.”
In the face of extreme temperatures and prolonged heat, APS
increased crisis bill assistance funding for those struggling with
higher energy bills; maintained a summer moratorium on disconnects
for past-due bills; assisted customers with payment arrangements;
and partnered with more than 100 local non-profit and community
agencies to connect the state’s most vulnerable populations with
helpful resources.
These partnerships include support for The Salvation Army’s
network of 18 cooling and hydration stations across Arizona; an
emergency shelter and homeless prevention program in partnership
with St. Vincent de Paul; and a new partnership with Solari/211 and
Lyft to provide eligible Arizonans free rides to cooling shelters.
The company’s collective efforts led The Phoenix Business Journal
to recognize APS with its Innovative Corporate Philanthropy
Award.
Innovation in Distributed Energy, Safety and Economic
Development
Guldner additionally emphasized that, “Our careful long-term
planning, resource adequacy, flexibility and innovative programs
proved beneficial to our customers throughout the summer.” For
example, APS’s Cool Rewards demand response (DR) program helped the
company reduce its 2023 summer capacity by about 135 megawatts –
the equivalent of a small power plant (or 15,000 homes). This
initiative and other DR programs were acknowledged by Public
Utilities Fortnightly, which last month recognized APS with its
Maria Telkes Top Innovator Award for Distributed Energy.
The APS Cool Rewards program aggregates residential
customer-owned thermostats into a growing and strategically crucial
resource during the extreme Arizona summers, providing incentives
at enrollment and an annual bill credit to participating customers.
Starting in 2018, Cool Rewards enrollment was just 6,000 devices
(or about 5,000 customers). The program has scaled significantly
over the years to nearly 80,000 devices (and approximately 56,000
customers). This energy avoidance saves customers money, benefits
the environment, and builds a smarter electrical grid.
Public Utilities Fortnightly also honored APS with the Nancy
Fitzroy Top Innovator Award for Environment and Safety for the
company’s predictive maintenance practices that include the use of
robotics, infrared cameras and drones to ensure highly effective
and safe non-contact inspections. And, Site Selection Magazine
recognized APS as one of the Top Utilities in Economic
Development.
Financial Outlook
For 2023, the company continues to project its consolidated
earnings guidance will be in the range of $4.10 to $4.30 per
diluted share on a weather-normalized basis. Key factors and
assumptions underlying the 2023 outlook can be found in the
third-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 long-term financial outlook, at noon ET (9 a.m.
Arizona time) today, Nov. 2. 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 608450. A replay of the
call also will be available at pinnaclewest.com/presentations or by
telephone until 11:59 p.m. ET, Thursday, Nov. 9, 2023, by calling
(877) 481-4010 in the U.S. and Canada or (919) 882-2331
internationally and entering replay passcode 49143.
General Information
Pinnacle West Capital Corp., an energy holding company based in
Phoenix, has consolidated assets of approximately $24 billion,
about 6,500 megawatts of generating capacity and nearly 5,900
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:
- the current economic environment and its effects, such as lower
economic growth, a tight labor market, 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 and 10-Q 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 CONDENSED CONSOLIDATED
STATEMENTS OF INCOME (unaudited) (dollars and shares in
thousands, except per share amounts)
THREE MONTHS ENDED
NINE MONTHS ENDED
SEPTEMBER 30,
SEPTEMBER 30,
2023
2022
2023
2022
Operating Revenues
$
1,637,759
$
1,469,871
$
3,704,417
$
3,315,071
Operating Expenses Fuel and purchased power
614,520
556,571
1,416,778
1,174,027
Operations and maintenance
250,019
251,663
777,337
715,392
Depreciation and amortization
203,438
190,389
590,445
563,491
Taxes other than income taxes
53,169
53,475
167,949
165,591
Other expenses
350
200
1,648
1,410
Total
1,121,496
1,052,298
2,954,157
2,619,911
Operating Income
516,263
417,573
750,260
695,160
Other Income (Deductions) Allowance for equity funds
used during construction
11,976
9,133
40,071
30,966
Pension and other postretirement non-service credits - net
10,174
24,673
30,513
73,739
Other income
15,941
2,219
28,424
5,605
Other expense
(6,972
)
(6,745
)
(15,916
)
(14,751
)
Total
31,119
29,280
83,092
95,559
Interest Expense Interest charges
96,909
72,185
278,860
205,677
Allowance for borrowed funds used during construction
(9,092
)
(8,692
)
(34,131
)
(19,047
)
Total
87,817
63,493
244,729
186,630
Income Before Income Taxes
459,565
383,360
588,623
604,089
Income Taxes
57,045
52,728
74,125
83,577
Net Income
402,520
330,632
514,498
520,512
Less: Net income attributable to noncontrolling interests
4,306
4,306
12,918
12,918
Net Income Attributable To Common Shareholders
$
398,214
$
326,326
$
501,580
$
507,594
Weighted-Average Common Shares Outstanding -
Basic
113,464
113,211
113,411
113,162
Weighted-Average Common Shares Outstanding - Diluted
113,838
113,463
113,718
113,376
Earnings Per Weighted-Average Common Share
Outstanding Net income attributable to common shareholders -
basic
$
3.51
$
2.88
$
4.42
$
4.49
Net income attributable to common shareholders - diluted
$
3.50
$
2.88
$
4.41
$
4.48
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231102889731/en/
Media Contact: Alan Bunnell (602) 250-3376 Analyst Contact:
Amanda Ho (602) 250-3334 Website: pinnaclewest.com
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