PNW - Earnings call transcript Q4 2021 | Pinnacle West Capital Corporation

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Operator

Good day, ladies and gentlemen, and welcome to the Pinnacle West Capital Corporation 2021 Fourth Quarter Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Amanda Ho, Director of IR. Ma'am, the floor is yours.

Amanda Ho

Thank you, Kate. I would like to thank everyone for participating in this conference call and webcast to review our fourth quarter and full year 2021 earnings, recent developments and operating performance.

be Ted and Geisler. will and Jeff today CFO, our speakers our CEO, Chairman Guldner; Our here Barbara and Vice also Jacob Senior Tetlow, us. Lockwood, Vice Executive President, President, Operations Public Policy; with are

actual cover First, will forward-looking comments website, may and information. we are results along a I our using expectations, based need few with on release slides be Investor you. our on from contain Today's earnings materially our statements expectations. details current available with slides that The Relations and differ related to and

to Our morning. replay and telephone call annual It as disclosures. XXXX. document statements, March be the filed those will cause shortly identify website XXXX differ by well Form our days. XX-K I next results now uncertainties to sections on language the XX MD&A Please contained available for through materially in of be was this call our over this and from for cautionary factors turn that refer could risks Jeff. X, to will risk also which as the A will that forward-looking actual available

Jeff Guldner

notable financial know the operations earnings that making last discuss about then and in laid of I'll disappointing discuss XXXX, Great. are and update us begun today. Ted Coming employees of biggest tired quarter talking earnings setback XXXX on for will share that we're briefly the outcome some a our case Thank certainly was thank plan rate joining out accomplishments XXXX, that. we Amanda. call, looking comprehensive from our we've the but of outcome. and back out a Without you, all provide progress And also setbacks question, plan, the I And case you forward-looking challenges on was. rate towards number the positive successes successes. and there rate and already how expectations. all and an of third I'll case, our and also XXXX and

to case As challenging you rate know, more and the committed for time. decision everything costly that doing more we're makes a

cast which light to also that environment. our can in and our focused ways the it's Importantly, at it a improving our company when efforts regulatory on regulatory support comes state are environment, negative

our call, spoke we planned with take I taking, don't management don't litigating we During an actions of possibility pleasure of the in third I included and earnings something took decision. of not quarter we we the That's that appeal on commission. which lightly, filing that – the emphasize,

is collaboratively and goal which for prosperity commission relationship. includes people a and more Arizona, doing right Our what's the constructive number of working one with the building

with in action no with this appeal choice. special we we in the filed And parallel Supreme the notice Court. Appeals with case, Arizona other had a a Arizona really of of December, Court in However,

were seven take surprising briefs. was special Although February are support other on to in of This there friend declined Court the X, since of our not These action Supreme Supreme Court of amicus the each case. requests the be. We of filed particularly court’s year. the importantly, jurisdiction briefs the what know not decision pending don't decline the does only to And resolution jurisdiction with number case action Appeals. our of small Supreme a appeal special that Court final the will hears filings, of Court's impact

and opportunity commission the rate case erred look the the the believe its why share to in to arguments forward we However, with we reasons court, our decision.

followed customers start June And through team's season. operations third our it record, was the our on although the want over without challenging, by in execution We reliably field not wettest X.X recognizing hottest to to by I XXXX. was XXXX side, served Turning the monsoon exceptional extremely successes. million

imbalance call that to only we our and data EAF or misses, impressive West market customer our shareholder there fleet that and Our nonnuclear summertime in the broader is reliability in improving just a in is actions year, focused impressive, in an starts of benefits reliability were participation equivalent it's factor and with want customer hundred and our last creating linked of increasing availability also point the the customers. market Out important twenty-six inextricably to nine on fleet's performance. another that energy fifty-two Recognizing value recorded out and experience. XX.X%. remain on value, performance the non-nuclear I start-up

want fourth done, the residential be quarter the we to be in important quality overall progress. Although there's to utilities our customer making jumped payment employees, not work customer power are key Power quartile had our we're year several that center satisfaction still We U.S. score improvements and one J.D. our we're yet, to much investor-owned work compared Thanks to where hard performance. to positive including and the and billing areas reliability, prior year-over-year customers, call among in large of

perfect by for quartile In the XXXX customer APS customer top second also the put telephone in our for power fact, was named our a ratings nationally Business decile brand care. utilities Customer service and nationally the us top-performing product of for one trust, Champion in Escalent, nation as experience, business and customer satisfaction recognized company the customer electric effort. the which scores and

XX, energy we we In years XXX% reach announcing by to two ESG carbon-free XXXX. our clean make addition, On progress to celebrated on continue goal front. the since January

X,XXX entire finally, nearly we investments commitment our clean that are us with a Arizona's resources. they markets awards Over to substantial designed XXXX want across And the tremendous procured three energy highlight in space. future, clean only These capacity not to that and we've our past that are two ESG megawatts energy the into growth recognize received keep essential resources from away but transition years, pace same in at I vital the tightening time help coal of are the West. to

the excellence the with of customer for the Award EPA First, APS honored programs. Star Energy was by Year in Partner

both West one scores change only water West utility Pinnacle companies two significant Pinnacle in electric A- CDP, environmental to achieve areas. nonprofit, American these security. by recognized and sustainability North for Second, climate was corporate of in leadership scores is That's leadership with global the for because

Society Diversity Alliance diverse continues our employees. and our company for joint inclusive Leadership the Finally, and extremely create that Workplace Management, these and environment a from to XXXX recognition proud the Arizona congratulate Human efforts I'm make to Inclusive recognitions. progress important of our employees Award, Resources the acknowledging the a our on

customer execution outcome to rate shareholders. We look look to the XXXX, incredible I our were believe both include to to again relationships expansion. continued near-term and commitment. cost goals forward, our provide we once As continuing regulatory energy that for our it continuously improving want XXXX recognize case challenging the enhancing how and and clean we our backdrop executing all unfavorable headwinds but Arizona's engagement, economic proven customers value of will by efforts, and created make against long-term of plan forward management the and our our in ability our communication

all So to turn us and today, call again, I'll for you Ted. thank the joining over

Ted Geisler

Jeff. financial for our our for Thank for thanks reported full results joining XXXX fourth morning, and and everyone, you, And This updated year again, quarter us today. we outlook XXXX.

see, primarily quarter. the As XXXX fourth better in to sales stronger growth due can you than anticipated, was

recent a case not and solid financial the While in XXXX the rate mitigate this in that outcome. result for outlook of does remain we reset reality year, XXXX as a a our resulted

Slide from Before key are full quarter, I'll shown the the on of details which X. our I year results, fourth XXXX briefly review factors discuss some

last performance we repeat of that $X.XX to fourth in XXXX XXXX. a share items strong had $X.XX year. the in mind; we share Keep quarter Our earned quarter not as did per fourth per the was of compared in unique in loss two

usage, Our both came settlement largely quarter with the in due fourth growth higher and well sales offset Arizona expansion office Transition strong of and weather and our the but quarter booked the payment, factor were in the which benefit. to expectations, above Attorney Mild of resulting of again largely a customer portion this commercial XXXX, continued residential company-funded by Community was prior a segment. General's in Coal was the year-over-year

Turning to share we XXXX, to year for share full in $X.XX compared per now our XXXX. $X.XX earned results per

compared margin, the some unfavorable Looking results. of to X, review gross period. prior at factors Slide In was I'll by weather key $X.XX these

recall, may had XXXX whereas XXXX below in normal. the record, hottest on was slightly you As summer weather

and of our sales X.X%. on growth Continued $X.XX usage The established sales call quarter guidance a strong XXXX third was weather-normalized assumed benefit.

a quarter resulting year experienced sales with growth full of sales anticipated stronger we in X.X%, weather-normalized than X.X%. However, much of fourth weather-normalized growth

at Our year-over-year strong ended X.X%. growth customer retail

in an by other employment achieved states. Phoenix to levels, X.X%. of to Metro increased important milestone, X% also three XXXX, milestone a a average For recovered reached national only November, Arizona compared pre-pandemic employment In

the In third year. was the again once addition, last fastest-growing U.S. in Arizona state

growth, with result their just housing XXXX, population a County year XX,XXX permits. over of Maricopa robust permits finishing since had As strongest residential this

growth, which our heavily entire investing to are state. the support to We customers is level of and beneficial this

a in recovery level regulatory constructive, continue receive to support growth. manner able be to of this must we However, timely to

quarter the which changed, last I guidance outlook, The XXXX our we rate our share. now financial range, projected as quarter, will to slight discuss reset outcome we shared in to our turning from what case targets $X.XX majority a has recent be updates not of shared to last Now decision. XXXX result we as few per but materially increase to a $X.XX an

per XXXX share illustrate of Slide range. $X.XX the guidance results our full new X XXXX updated of compared have We to year to midpoint

plan In record reduce addition to our management O&M to we in to cost sales, disciplined of continue track increased XXXX.

challenging inflationary will years pressures than are more this past. However, not to immune we and recognize in be

targeting a in still meaningful we XXXX initiatives. cost remain Lean cost compared reduction you as Sigma management see, As we can our through laser-focused are to on

and of as the as to given and quarter, while we slower revised X.X% confident through sales range growth the in in to fourth have developments territory. quarter, projections the to third XXXX the X.X%, guided for stronger our shared we due service our X.X% remains remain Sales in in growth we residential the growth offset range growth industrial and has customer strong the growth our in in partially X.X% which long-term not is same commercial to Just higher, changed, segments anticipate XXXX, expansion we last the delays. by total quarter, continue we

debt we've higher aspects consistent interest financial are reset and outlook timing of AFUDC to we of to remain updated period. rates our expense The net Finally, last our through remaining this our quarter, interest updated guidance with and our reflect also provided plan of executing issuances. committed

through value turn over delivering remarks. prepared do balance our to That for the they on incoming showing benefit and outlooks now as solid our for and downgrades our we'll a despite move we look after customers forward our remain back closely the environment. regulatory call grid to case I'll continue negative focused existing questions. rating we're rate customers, as for agencies each the provide Arizona in we Meanwhile, decision. monitor said, all experience exceptional on progress sheet of continue recent area three concludes We from long-term We our strategy, This the to updates operator building an the rapidly shareholders. year. expanding for to the by

Operator

Instructions] at and Ladies coming that is today question open Shar is Partners. questions. you. Guggenheim gentlemen [Operator Our floor Thank from first Pourreza now

line you Your begin. is live, may

Shar Pourreza

Hey good guys. morning,

Jeff Guldner

Shar. Hey,

Ted Geisler

Good morning, Shar.

Shar Pourreza

light incremental think as this ones rate you're of generation expenses thoughts Can even for healthy and just quick all with couple the maybe in concerns clearly, about last a be as of So case. your just here. the the here stronger we than It a if in I we this with servicing upcoming safely. to all is we a you've integrating some kind the like the today? pace seems actually load and presenting great. case about customer disallowances think us guess of you're stronger-than-expected bad growth of that's here backdrop which is exists to got growth possibility growth get Jeff, underfunded that, of related thing demand

Jeff Guldner

the that rate need equity really means disconnect identified, Yes, the ever highest is those to the we're of the the highlights, I it between in of investing last think, growth basically lowest Shar. in just the done rate in help that's have territory return and we that case question they you the and again, mean, in technologies, prosecuting It's which a don't just one in in than than to understand work and that markets the regulators that utility – just service we've we're the if if of the And challenges to equity in a can the that next together. to maintain spending And the disconnect now credit for risk you profile highest suggested growths, the then invest history I to this don't on to capacity great work country. that poles that for and the the capital the filing we because received not markets, case We're yet that which positive it you our on growth. the gel we need we West say more need we've case, country, with – company. they two tightening more higher capital. make any the got be wires. sure challenges ratings critical able return And as is suggests meet as access to look with have, new us pipes and on that at just was doesn't

growth the in, And the negative. so capital a return which and structure least because recover got requires cost of need equity healthy at that those us to into and investment to that on environment be those and not we've recovery that investments financial driving and a we're is access by significant turn to regulatory support markets able cost

good So observation. I that's think a

Ted Geisler

the recognize investments is as through we that just and that territory. to good support that, cost I'll customer in our fundamentals only growth. is for needed that said as growth, the We've predicted. that coming to to that Ted. growth sales time, But add recover is fully this and the Shar, that are service long a recognize we our also ability tremendous growth Yes. as

a be And are Good effort, work focus rates us regulator. through our we XXXX. so key case. customers. recover lower the for bill able today outcome last was look stakeholders our than these management rates to to still is we've of since We forward and to base cost XXXX that on our think costs got fact, is continue raised in as today. haven't we for certainly that's in The lower ability focus And news and average rate it to affordability with the

Shar Pourreza

right? the bills we ACC which dealing in lastly is to mean, pieces be are establishing which enhanced is, interest with making? How in noticed thinking construct focused activity for And maybe like surprise maybe a at a it. oversight various improving you obviously welcome specific the seem about this we've of the on be increased around ways, some rate of few I effective any sort legislation and and the then us, obviously more legislatures should point? Got And of state, monitoring

Jeff Guldner

Shar. Yes,

you the is in think there's legislature to been I between know important the over a ratemaking that constitutional the tension authority. remember authority commission, it's and Arizona, some while for commission's

that lot could do, So if around anything making. there's not a legislature the rate

any the don't legislature really we so And on bills the that have with are a out now. position of

I test adopted been dialogue of rate regulatory is growth year can have to had As make and has financial year our can that drive markets connection historical growth the commission the that to ensuring We've supported Post that and said, have examples. good purely commission structure. to we investments grow and with the on there improve need test plant, and has That access between seeing outside we connection a of mechanisms, Arizona. really recovery that the the other focus that the case. ensure we that the investment with the support to the we're that continue stakeholders the to

really make the forward. stakeholders And the staff focus and is have, frankly, sure that going the need challenges with we're so commission of we explaining on the and the our we that engaging and commission the that have to

Shar Pourreza

Thank it. guys Appreciate Terrific. you much. so

Ted Geisler

Shar. Thanks

Jeff Guldner

Thanks Shar.

Operator

Thank you.

Goldman is coming Our today question Insoo at Sachs. from Kim next

Your is live. line

being. You may

Insoo Kim

Thank Yes. you.

about obviously, few the unchanged there. level I the think next we when conservatism question, some in of your years plan, First CapEx there's over think

level that needed welcome customer the increasing layer forward? could As the going of just growth service think potentially to around capital side, what color residential we on growth especially on level this about low that's any on on base this

Ted Geisler

said are at on relatively And lot below levels the capital effort you're set and we we to grid to target even maintain exceed that for continues reasonable maintain affordability We've in the customer very and that's on our of level robust, right, expansion. needed those future or budget. are conservative prioritizing growth be to challenging. as our and a that's into because of more And customer keep at with put certainly up Yes. it a Insoo, rate pressure we But growth and projects to as levels before, good puts inflation. got that both investments customers because question. reliability as continues increases, more expectations trying more the focused customer

So continue the resources focused to service budget growth serve we're still as that and the on that we to continue to capital needed just trying we'll to but balance expands monitor with the affordability, in territory the future. procure as

Insoo Kim

made a you've to engage as Okay. next Jeff, with I guess prepare case. point for stakeholders question, try a this months and rate the I'll you now few leave second various guess, it it passed have I to there.

Just how key items some some and happened have they color they've of items that far, been? working on focus how people those so are discussions are what the And if on?

Ted Geisler

think it's been Yes. Insoo, I constructive.

around here in And in Arizona, as frankly, growth, the current we moving amounts the entire and so we're the excess ex-parte the the storage also around been And is on significant CEO. with There's lot entire the important. the but forward going coming ex-parte given western that happening then dealing and we're putting the this transition, discussions region not to capacity, of battery challenges good also a of across right about have you the been, both in. think, market, west now decarbonization. West. since the very and have again, conversations are know, of I we There's time of tight engage been the essentially the of to is importance growth and And we have discussion been out the regulatory construct in good it's we've had phone, I've able been transition

system, of and markets, again, view all on changes invest the Western the been opportunities growth to lot well that are expand all the of to making the has that we point to stakeholders meet a sure just the need by work commission. by happening that be able of in so the this and is to understood the And our with

Insoo Kim

Got it.

we'll a So you Have how see going good that weekend. forward. much. very Thank translates

Ted Geisler

Thanks Yes. Insoo.

Operator

you. Thank

Associates. today at Glenrock question Paul next Our coming is Patterson from

Your live. line is

You may begin.

Paul Patterson

Hey, good morning guys.

Ted Geisler

Paul. Hey

Paul Patterson

your Just on with how out does timing expectations terms outcome Insoo's Is interact rate saying, goes? case the the on is focus associated looking what sort we there of I how appeal. on way questions, you. discussions, new issue any have the in me. outcome that are to there? for? case Or key people of rate And mean hey, you in case your should follow we the terms how for if any guess appeal gating rate dates of that want appeal in I any rate Are the of sort and – there the be case a see

Jeff Guldner

No, think issue. I don't a Yes. it's Paul, gating

of a Appeals they're that, of and I in milestone see typically case The think In now that there's happens. is terms then if We clock line time now. look days had to action you next responding right do the appeal, XX action. that on it than Appeals opening special would you that a have the cases, Court action. intervenors Appeals at other more briefs not of clarity And of about Court special year The when after Court briefs The due the or more. a quicker and is kind have April talking it, sense in that's of are it's XX.

this going will two continue neither as so And but gating overlap case they're and to to year, midyear certainly, other. progress, we not to file – those is is the that so

Paul Patterson

– least don't way a I of understanding would maybe? a if But something to an we probably the we'll terms get the to, final or get before that it decision, ALJ right correctly at know, Or outcome probably the think or of is we'll in I'm maybe it decision on Okay. it appeal, sound get on...

Jeff Guldner

that I a lot Yes. It's depends mean – possible. of the timing. it again, on

timing different You've got two variables there.

that going – Appeals up the with pending, pending is back they're the the commission interface. to you So then that's remand came Court if of a potential a case. to case say how if to to could there's it's pick rate most that in the difficult anyway, the if then But exactly likely ruling, the rate be going

progress. so is it And as lot fluid of both going those a just be cases to

Paul Patterson

maybe with we happen? they the might Okay. I interact arguments And an sense the any oral have there's sense possibly of judges argument with assume any with were that oral ask Do when when situation the – – litigants?

Jeff Guldner

in – I we don't No. really the people case. early the we'll keep this But as posted don't again, progresses. case

Paul Patterson

much. so I really Okay. Awesome. it. appreciate Thanks

Jeff Guldner

Yes. Okay.

Operator

Thank you.

from Crowdell today question next Our is Anthony Group. at Mizuho coming

Your live. line is

may You begin.

Anthony Crowdell

Good quarter. Jeff. on morning, morning, Good Ted. the Congrats

Jeff Guldner

Thanks, Anthony.

Anthony Crowdell

from that easy this questions, denied in with more planning, the associated able SCRs one operating were I recover guess, costs will filing later two you're that year, the rate housekeeping; the just you the be Hopefully to return pick just the the with up the last the for they to you file are rate you costs – investment, say operating of case. able associated recovery it? I limited on but

Ted Geisler

Well, We to Ted. we'll case those rate time, case. this but sure don't of this is once at be the Anthony, we the strategy file go details get into details through

Anthony Crowdell

you lastly, you talk one growth then And slides, to In Great. of X.X% XXXX. X.X% through about demand the about growth. talked

much all curious Just looking possible. for detail as we're as

and XXXX? as keeps bigger, stay Just do bigger slows think just large C&I is it's number. of case getting the up the post down X.X% X.X% the to to on of harder just Or build-out growth a numbers it you segment that

Ted Geisler

a granular be it our difficult purely of tourism. jobs any ago long dependent heavily we're seeing we within we've to say question, service if fair I the most service you always fundamentals XXXX. Yes, in really right history at and fundamentals that predict beyond diversification than construction suggests It here. are wasn't our to period the service continue look compared the territories economy that It's higher territory the But you're created, robust range that other time growth, now to for have Anthony. in And going to on long-term were that of had that will territories. whether more traditionally the growth long

outpacing actually manufacturing jobs the are As state. jobs construction of right now, within

even that to trends a that maybe But confident projects long-term growth because are between level that know X.X% we've can we feel suggest XXXX. on this point with that of certainty focused that we to customers to that could support here. at or good lot and range and locating we point, So And X.X% we're in higher. got XXXX

Anthony Crowdell

questions. Great. my Thanks so much for taking

Ted Geisler

you, Thank Anthony. Yes.

Operator

you. Thank

today Peters is at from Our Research. coming David next Wolfe question

Your line is live.

may begin. You

David Peters

Yes. Hey, good afternoon.

Jeff Guldner

Hey David.

David Peters

related issues. procurement just you gen to of Just seen the have renewable efforts, chunks chain-related clean year each your for I'm CapEx any have in plan. supply curious, decent you

an on any great. slip, Just that And you Anything you be schedules have would update your double there to check? have I enough guess might that to just on do sounds plate the like it extent wanted backfill. I delays, to

Ted Geisler

David. question, Good Yes.

delays areas, be capital of We the believe whether it any on that but the any projects are program. adjusting some it's certain an significant same another we really any from on don't timing impact to We one-month have We impact, experiencing don't year. or impact anticipate causing the procured. are materials in within

David Peters

the rate back to renewables, merits of the And specific then given stakeholders recovery the in chance you've next concurrent the had discussions just state. I'm had of the a just you've aspirations talk you have just more about to a if case. Great. with ahead mechanism for curious

traction any had you've on if that curious specifically? Just

Jeff Guldner

the conversations Again, focus one David, for certainly that's Yes, that's that, we're areas us. we're of the but in of early of that – that's part key having.

David Peters

you. Thank Okay.

Jeff Guldner

you. Thank Yes.

Ted Geisler

Thanks David.

Operator

you. Thank

event. further We concludes in no This at have this questions queue today's the time.

a for We you have wonderful your and disconnect, now participation. thank day. may You

Pinnacle West Capital (PNW) 25 Feb 222021 Q4 Earnings call transcript