PNW - Earnings call 4 2023 | Pinnacle West Capital Corporation

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Operator

Good day, everyone, and welcome to the Pinnacle West Capital Corporation 2023 Fourth Quarter Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Amanda Ho. Ma'am, the floor is yours.

Amanda Ho

Thank you, Matthew. I would like to thank everyone for participating in this conference call and webcast to review our fourth quarter and full year 2023 earnings, recent developments and operating performance.

be Andrew and Cooper. will and Jeff today CFO, our speakers our CEO, Chairman Guldner; Our are us. [ [ Executive Operations Jacob Geisler Telleo here Ted ], ], Vice APS' President President; and also with of

The First, I a website, on we cover information. need along available with be are Investor release slides and with using related few will our that details to you. Relations our earnings

expectations. may based Today's on forward-looking current differ our materially actual and and from comments statements results slides expectations, contain

Form filed as cautionary [indiscernible], was Please our factors that to XXXX to actual morning. annual statements, Our could MD&A forward-looking that XX-K results in uncertainties disclosures. differ language refer this which risks and document the and materially for cause contained identify from well as risk those

this will shortly telephone A call turn the also call website for It available I XX by over be Andrew. available will XXXX. our now be next X, on days. will the to March replay through of

Andrew Cooper

to with us Thank XXXX and for fourth it and will and before and case strategy. full growth discuss recent outcome, financial today. cover guidance up first Afterwards, rate to you, our handing our thanks finish I results who year will our outlook will XXXX quarter Amanda, everyone Jeff, long-term I joining outlook.

rate quarter and in XXXX and uplift sales higher transmission in This $X.XX as year-over-year XXXX. attributable the a In contributions case $X.XX largely compared quarter same appeal. by usage from LFCR increase margin of a and achieved fourth XXXX, we well to share improvement the the in revenue earnings as to per gross driven increased was

by year-over-year costs. XXXX on O&M prior a expense, and benefit period to other benefit interest These partially prior versus amortization, depreciation The lack the a increases income offset $X.XX and were contributed year and certain expense from higher to items QX expense basis. of

weather to weather XXXX, of our the For a guidance $X.XX summer we Overall, over share, $X.XX unprecedented to weather. earned contributed result $X.XX an A the was during compared in driven significant wave in year XXXX $X.XX per factor per $X.XX increase by surpassing this XXXX benefit year-over-year full normal quarter. heat third share. range $X.XX a

and mechanisms, the drivers positive transmission year. and Revenues also increased sales from usage were adjustor for

addition, expense $X.XX the lack and benefit and higher XXXX certain were costs. year-over-year, by depreciation quarter In the driven of from O&M higher Frank expense, other increases expense These and the of Canyon XXXX expense in income was offset items assets by sale of interest prior XXXX. and third partially amortization, versus

rate XXXX trajectory by driven X.X% guidance the customer ended X% expected strategy in growth growth talk long Jeff was our continue financial sales and the range maintaining with and growth in year's outlook. growth long-term our within segment. I upward I'll discussion in to XXXX about X.X% our at outcome, now outlook we territory. Overall, our to with of service before consistent growth Weather-normalized the C&I pass customer case guidance and XXXX

Jeffrey Guldner

all Great. for Andrew, thank us you Thank and joining today. you,

our balanced coming equity, and new return case. out I'm increase rider, case. an few main and on just approve reasonable I'll authorized rate revenue items. outlook generation rate decision ultimately know, strategy the that case days growth also a I'll was discuss of including of other voted outcomes, ago, constructive. commission our this to a pleased all approval improved to a you the XXXX among a the requirement of highlight future say few As this and

outlook. our and provide long-term Lastly, as Andrew guidance our XXXX financial he'll mentioned,

we've by set the we improvements on strategy on value years seen that a After our to goals the we in survey executed XXXX case, centered Power rate we customer out pleased unconstructive creating of that have and value, and comprehensive our designed a strategy plan, ago. I'm outcome shareholder results. significant X and J.D. accomplished We share creating

outstanding the be in priority, XXXX to full care summer Not to put year successful we quartile top moving we're This and and second once our utilities milestone heat in yet at this broke continued phone quartile large second again have of XXXX in finished customers. investor-owned in been performance Reliability a amongst for records fourth of during all and XX numerous our XX. reliability Arizona of the perfect customers. was both team customer the the when business end power. quartile years out our XXXX from top on meeting last delivered for We only display our residential has

to with both process, regulatory includes the decisions, Another we our most of was set important XXXX goal implementation collaborative relationships rate the case. in we appeal regulatory well succeeded adding that efficient and and successful build more case as rate the recent as that stakeholders in supportive

any we deferring issuances our period. by finally, And on value focused dividend to challenging equity shareholder and during this continuing grow

the of the ROE net rate serve the case. growing rapidly service million. a improving to focused highlights the The increase authorized $XXX.X major adopted commission Now beginning, of the From did recognize our and that. the very risk rate needed revenue I'll investment through on case of territory some to we and commission walk this the

combination of equity. a a return national customers. attract line and the increment to we're equivalent voted in value fund of return authorized nation X.XX% those serve commission the to the an and states adopted with investments on commission that's the that is in order to to return one The averages decision, need fastest-growing X.XX% more it to adopt necessary with we capital this authorized and our of recognizes two in has reliably X.XX% an equity With a on fair

to generation voted that surcharge. serve lag. important benefit will in and request is approve while us reducing commission customers much system regulatory the This reliability for an our surcharge invest addition, resources our to a continue In to to allow affordably reliably needed

and owned Later our promote Andrew healthier will SRB cost-effective provides will PPAs utility growth. the of resources Importantly, future opportunities generation how balance SRB the a the discuss customers the to for for on, built for CapEx assets. of be benefit allow most to and

that and at order the and revised also achieve highlights positive lag. items would ability our open regulatory made This environment outcomes. net to It's the to opinion the requirement noteworthy meeting additional increased that revenue some regulatory improved amendments commissioners addressed constructive created and have that the recommended the

future XX well even lagging have However, regulatory revenue these at future as outcome lagging underscores the both the lag in final net forward costs. from look rate on docket, the through the requirement, challenge which commission working continued as a March on filings. the We with the addressing case historical workshop near will through costs to

and these as execution to look We're future. remain future strategies we continue I'll optimistic to reasons, share more our focused solid the many in on detail. discuss I'll step for reasons of Now next each and and our about

benefiting little about states to nation I'm in experiencing retail First, have few X.X% in we've attractive X.X% been growth, steady service where last optimistic negative that Arizona among territory continue customer the years consistent for and project range XXXX. the consistent customer been from X% of growth our other growth. and and customer fastest-growing growth of the to in states the or remains

competitive will and local environment We economy. believe cost constructive market business desirable Phoenix the the continue with grow that climate living job of the a benefit growth, ample and Metro the to

sectors, service more skilled availability our helping with than large and state's natural potential local from increasing territory propensity continue on demand and which policies fixed positive a our to and commercial sales multiplier our regulations, is coupled we make for and will workforce of economy that tremendous communities. customers development a we variety growth. our has to see disasters clean The Focusing impact help our spread over energy The jobs surrounding ever. of and specifically, development for diversify situated a us business-friendly see low in from uniquely industrial for costs

focus businesses approach job attract economic to helping on our continue and to We'll and creators. development expand

Authority from growth and As the graphic in exciting you Arizona see Commerce can diversity the the from commercial this industrial opportunities. of presents Arizona

Our industry potential state driven to reduce economy economy reshoring, by digital clean growth infrastructure any range and needs, risk grow our seeing sectors, the a stable. of will downturns in manufacturing, in which keep the and help a particular is wide of

to environment. constructive to has of The to a this Corporation off kick Turning docket case. need a decisions, And meaningful most forward. address rate and review recognized opened issue. recent those improvement the important regulatory on years. to established has Arizona the regulatory will of and our beyond forward lag addressing also holistic various record has commission a through commission manner the including and We seen discuss going couple I importantly, look the working with mentioned, solutions balanced in next decisions, as And last We've Commission month.

a new yields through interest state constructive itself broad and more reaffirmed beneficial policy on In of Historically, We its range nature results have that diverse other the future. benefit of addition, programs commission mutually in settlement believe customer process and results. and settlement delivered innovative outcomes the the and our energy informed stakeholder achieved settlements.

least of next including energy XXXX. reason and energy X,XXX nearly proud exit clean of of We another our an early XXX we've our third progress. that coal commitment all-source confident retiring Since megawatts and RFP is renewable clean megawatts in [ completely energy. with issued on remaining our ] to energy the we're year significant X,XXX by that Choa The for clean in we transition to by energy. procured path commitment, are came storage and megawatts clear we've We capacity, units and additional that plan our out at XXXX, I'm additional reliable clean made on

in benefit. in of approval rate to the this ownership our clean establish new With for even the assets SRB we're energy case, customers' better mechanism positioned these

to for FERC I'm for and diversity recently system have filed X increased the needs growth the FERC XX-year have showing reason amount opportunities transmission the fourth with expect projects optimistic because are support tremendous our We greater transmission spend much to across that future next need to access our is needed five greater for resiliency transmission to we and resources customers our of Commission next a growing We've energy jurisdictional transmission decade. Corporation of business. critical the of transmission spend and allow over The in about capital region. years the in the strengthen our the plan markets of

service provide infrastructure The over exceptional and management strategy executing reliable the optimistic XX customer-centric to next to look years. And APS' customers. total deliver over safe critical necessary of entire that $X developing I'm to this committed been total these finally, team about to future because is us We will billion have the to forward for service. and allow our I customer to continue estimated investment a portion that's to my projects

provide to moved at quartile focused the the As second energy made in end our and we've the I delivering affordable Power below have XXXX. rate on Increase our our on from XXXX goal Additionally, most [indiscernible] results fourth mentioned manner. survey to well of in rates reliable we're progress significant J.D. of to turn rate earlier, coupled over We We future. management call and to in customers inflation, affordability quartile growth. customer I'll even it long-term headroom on and to financial plans That continued now to creates decision. remain Andrew provide the to with our rate the share our latest keeping focus, long-term focused provide central outlook. sustainable cost for case back with the guidance remain

Andrew Cooper

Thanks, our Jeff. guidance outlook. XXXX now future and discuss financial I'll

expenses $X.XX our with our increased For share, is X. March by year. case EPS guidance of partially from outcome, offset establishing continued rate effective test reflecting we our to in revenue revenues recent rates the not outlook, additional an $X.XX XXXX This historical per drag are from captured new range

this balanced solid we and foundation Jeff will this from rate grow. a was will decision create which mentioned, and constructive As case

base contribution historical However, ended June year, to XX, it that to due outages. is continue test credits significant to from nonservice mainly lag pension regulatory to highlight to on capital, is timing we lower the higher increased higher due rate O&M to XXXX. due rates interest which planned lag borrowed increased This our expense depreciation generation of and face important due growth,

are by the holistically addressing docket. created We encouraged the newly regulatory through lag on commission's regulatory lag focus

these find to to working costs current in addressing to and committed reduce next are stop. impacts with comp case the on We our current our solutions commission these rate

lag mitigating to aiming Our a regulatory is and rate commitment build shareholder our value to preserve financial priority, between stability cases.

drivers and sales are XXXX The driver expected amortization O&M positive from higher planned we expense, due driver a will expected LFCR appeal most and weather. largest impact be case expected Other weather XXXX to outages. full significant new be and depreciation include we be to heat positive plan rate case due negative costs is drivers implementation are the the decision. year-over-year the saw our to Other from of higher revenues outcome. revenues the negative increased Diving wave bit to increased for XXXX. in normal as guidance deeper year to of primarily the growth, into The record-breaking the of financing rate

growth. customer to Turning

to service territory migration. Jeff once range which to we our the again continues expect of attractiveness As X.X%, the X.X% state of and highlight be to mentioned, for customer growth customer in our within

sales growth, sales leverage load expect is These headroom factor, XXXX to X.X% For growth, X% extra customers. which rate X.X% operating high driven by all we for create and of X% C&I cutters. ultimately to

C&I to have customers. seen to weather-normalized this the to of of a X% X% we to steady X% driven term, expect growth range these ramp We of it Longer our X% anticipate sales by continue through and through ramping XXXX. be customers large with growth will XXXX our within

I will our financial goals. what forward, to and to discuss Turning strive now outlook provide investors going we

EPS guidance share. to guidance $X.XX to long-term of X% of midpoint our and of rebasing XXXX X% $X.XX per are growth our the range We off

While our growth long our cost and financial rate plan for recovery is work goal a supports more to timely towards the profile. this term, consistent

have reliability surcharge. benefit toward progress lag regulatory made We reducing with the the solid approving commission system already

will generation, cycle mechanism we to through this cost this recovering and first begins strong service. these future. projects the before but enable first must in we get develop recovery value the must potential mechanism for the Therefore, in development the While natural create more costs. projects utility-owned work has mechanism timely

case streamline its even In filings settlements, addition, parties. collaboration reiterated future on more the between has which commission creating while policy rate may

cases address recovering material through newly lag the holistically to rate our ensure cadence commit and regulators regulatory with engage our docket future created will to we we of Finally, are costs.

allocating capital mechanism. for are SRB generation capital qualify XXXX, will time for in billion contributing new XX% in investment compared our to additional $X investment year. incorporates We through investment to this a This profile last increase the that plan

double is capital as addition, towards was X more an years In is as recently plan FERC our of what jurisdictional spend our now directed infrastructure. than annual increasing transmission portion bolstering Average ago. it

receive We allocation to that strategy investments our have designed timely well-balanced rapidly a service territory. service recovery ability growing reliable providing for capital our across optimizes while

Projects the Importantly, expand perspective lag. generation the SRB. and needs recovery while our meet reducing the capacity that self-build customer a through of and the RFP reliability would to will compete SRB outsource meet for cost to from requirements qualify

XXX time weighted at included be while an significantly will compared in-service expect XXX This assets points case. future with recovery lag. a approved reducing be provide rate We between the on customers rates benefit will of prevailing and investment rate an average and cost of until case. to immediate traditional discount less gradualism to those approximately projects in basis days shortening the capital, rate a achieving Recovery

with potential opportunities dependent highlighted recovery near-term five the outcomes procurement ongoing on final to have project SRB secure processes. We cost through

are mechanism. future with opportunities and Additional arise expected on this also projects aligning based to RFP outcomes

rate are growth. Expansion growth CAGR capital of an of our revising X% substantial base we our to is plan base rate to drive X%. annual to investment poised Consequently, guidance

the investment the for the expect recovered rate to of spend which SRB, adoption our amount will By ability and SRB, reduce recovery amount in reduce cases. timely which to receive the the we will future be cost tracked double of expect that we increase our tracked in future. capital, to in increasing and now addition, improve an the lag transmission qualifies capital, In regulatory with generation

capital plan, a securities our fortify debt support capital XXXX the XXXX To through robust planning equity to and expenditure structure of our period. and mix issue over are we

with capital to structure is have the a than Our equity. utility less no principal XX% at healthy goal

to $XXX have million equity balanced utility of capital up a the for to since support XXXX, We noted structure. need

years regulatory past to work required the improve up sought as $XXX shareholders to we that X-plus over capital we as in equity $XXX deferred was our the an Arizona. this The million by will be ratio. and additional environment time grown insulate to recall over structure to has million You'll need true

almost XX%, profile CapEx window. grown has a $X time, over same billion our the by At X-year nearly

a million securities West equity issuances, potentially of over $XXX to to include alternatives and our solutions may While of to equity. to incremental of pursue this additional incremental capital The investment XX% to CapEx. options up of financing though evaluate blend incremental at-the-market approximately across financing equity-like APS objectives, or size we Pinnacle include will may sources the we will common this for period, continue CapEx address

per supports with marking Phoenix in Corners, Four planned specifically these outage As outages, we Corners declining XXXX, for continues O&M at into efficiency practices at our of outages X, the [indiscernible] Core reduced cost outage last at our The Notably, last X the megawatt advance our are to spring Palo management Unit Red hour. scheduled major continued intact before for our the inflation, dedication our Verde, goal Four unit to of Hawk its strategy. which Unit lean operations. the phase and term. planned is guide maintenance West with is for refueling long a remains major planned Unit outages Despite planned despite critical year-over-year O&M to scheduled commitment and X retirement major operational XXXX. long-term necessary

Our goal our rapid and per of is territory. established O&M management effective declining with our in strongly cost growth underscores service hour megawatt

specifically, this across fostering highlights inflation culture of maintaining both outperforming increases efficiency, and since the on in XXXX optimizing a a The trends Phoenix. testament This on success to our cost below focus unwavering is and second our local CPI national rate achievement inflation O&M and organization. in more our rates of chart slide operations

our the understand track to the dividend in a annual to of shareholder provide growth, and payout a to XX% returning We of investors. future. With solid we value as sustained into importance ratio maintain range of our an of total record our return managing part continue of XX% attractive a dividend goal yield

dividend ensure to competitive. committed diligently our remains to are working We

our to credit ratings. Turning

our rate financial rating in our ratings benefiting pivotal Following customers they and through conditions. with other working are resolution to favorable Arizona the credit. borrowing contribute we investment-grade our Healthy costs, regulatory agencies profile directly recent as case thereby more climate, credit developments evaluate as financial the they to are reducing our

We balance credit our are properly the and target adjusting FFO of to XX% debt company range needs to metrics. the solid financing to to XX%

as investment reinforcing and strong, navigate flexibility environment rate ongoing remains This balance our foundation. sheet and well provides and sheet future balance maturities to Our us financial the interest as current near-term address strength strategically needs. our

Looking back future commission case, are and potential goal and to the our stakeholders and private set the we've setbacks the we've closely aligned rate the the about of at the case. Overcoming the this the few of secure during in last strides we enthusiastic made, years company. we the constructive forth with preceding years, X a and achieved outcome

such challenges While commitment ACC staff our lag the to stakeholders, collaborative as firm. seek solutions with persist, commission and regulatory remains

to focus seeking dedication Our customers a is operator over O&M we affordability, evident With clear service through rates and approaching forward efficient investors. environment regulatory costs growth and back the customer to vision I'll remarks. practices, now to and that during constructive stay costs ensure to and our future this of period our the optimism a for more turn territory. keeping below our inflation for questions. the our unprecedented continued on affordable a call with in prepared look This concludes

Operator

from at Partners. coming from time, Your session. conducting is Pourreza Everyone question Instructions] we'll Certainly. Guggenheim a this [Operator Shahr first be question-and-answer

Jamieson Ward

Shahr. Ward Jamieson for It's here

equity what last waiting beyond to couple come expect going typical like? up been back you issuance, situation a obviously, years, couple special funding quick forward ROE just to presumably the over but upcoming a in that, would look next of questions here. case. your it's cadence your this for rate So 'XX of And kind of the After

SRB especially as to sense, is have now up. want the just that picking we get rate a growth base So and you

a out How implementing You'd mentioned characterize both and hybrids. space would your regular annual and issuances. ATM ATM, you ATM preference continuing between to then equity

Andrew Cooper

sure good up that you time, market is have about of make have in trued that an equity to rate to financing need identified, ratio solid, you at long $XXX question. the utility that for ratio million. Fundamentally, the to million the is strong. a consistent the is for which that equity with case that a equity we example a now Thanks $XXX type And additional up the XX.X% we've that the need million equity approved ratio. if think most $XXX was we've about And recent plan, talked to the we

And need. earlier to mentioned on that think focused so I for million support And that's you're kind I up the future that is cadence of the of what CapEx. some that to what is -- $XXX

And option incurred. an issuance million, meet up proceeds to have it relatively that really, of the period. with the to years type structure X future the the clear one of And consistent want you just match our to ATM needs we is equity about it's as capital would would CapEx that is the our capital. is allow is periodically what think work way to of And certainly, I The program up through is allow that or across as that us next that us plan. draw that and capital $XXX be spending

And in of of about equity or the to so options available security. flexible very we're whether an are thinking like sort us. some what ATM terms

preference. all have strong We'll We options. look don't at those a

our needs structure, -- CapEx they the about include our capital be there make clear I could think we that as external we wanted that plan, think and financing CapEx to type will about that and company think products. has for we support to something equity

from few best matches product years. increases what be market then eligible transmission and on both to we'll what we for available SRB. side the spend think of is it next But the evaluate longer an do match the for the allows the in over ATM FERC would generation spend example as us. way against to cite which what up CapEx, continue that because ultimately to that most and we're I solving periodicity over is term, I expect the

Jamieson Ward

of sense. lot That Got a it. makes

just of XX% This How Slide high-level for win an or projects is out potentially second on you question. of be about one the could if you question, last in The SRB. think probability a figure in you SRB which that RFP are to were is just plan? turning projects XX? your eligible these up sort any we the had all-source Is them call ending should to I expressing

Andrew Cooper

Yes.

think we've listed -- that projects our examples in the for where the we're out about you RFP we XXXX of When currently are So outsourced opportunities. resources. ask

so time. And of that there will the negotiating third-party existing future span that window the still five still span developers early match future in listed development. that potential that for of PPAs. projects projects And very There in the stage we're of cover around are with These RFPs time RFP. up. within examples have the that they we and we're be are

we emphasize uncertainty bringing wanted But one because long we've time, forward things around feeling recovery. the competitive been for capital projects of hamstrong of a talking here and about limitations is to

much that the of XX% upside With to a based historically, megawatts a of into has opportunities looking you kind own to that XX% that, pipeline. range that have been list we of SRB at was our we've that that to potential XX% on developing that demonstrate closer XX% thought

opportunities. talking the So to to of take within a potential That's as you perspective the and the megawatts available XX% existing there. RFP built and what you are from that see utility megawatts over need be period we the us that window the window time expect we're scale about,

opportunity potential that profile investment on SRB the we're to capital termination breaking capital that along. But generation CapEx is we prior side. we includes related to believe X-year XX% view that upside the is -- these as we're in all go out built, granularly. but We'll projects relative that projects, representative time of probable The generation our still that be Will plan make of not those our development line. in our

Jeffrey Guldner

James, this is Jeff. And

As standpoint, these the projects. you and we to capture on would -- better there's know, the be you things a at is hearing, in trying the when specific come to did And second, that really the mentioned we'll benefit One negotiations SRB from be just build PPA. as the of long-term benefit still it's than reliability with projects, then on two very a individual was the time. projects, customers if they

analysis summer critical So PPA been for suboptimal, getting somebody you when more project, when have sometimes and but the you'll good go. have it's slide a a pretty we can a and project-specific you that developing at to a and in that the risk we've need makes timely have in-service date have we're and those it

I think representative across was to but get trying up in and these we those projects what the showing negotiations will just matter, details here, were come projects. the So will with

Jamieson Ward

that's we set to exactly looked a we're inbounds It terms opportunity of us, an an Perfect. No, for answer. looking like in to people had but us what few clarify. asking and were

have. And Thank did. you . so we much. so we That's it. all Appreciate

Operator

from question Nick Campanella Barclays. next Your coming is from

Nicholas Campanella

and under-earning working the lag. could rate especially So be kind rate filing [indiscernible]. investments capital what much you're of the year maybe in guess kind that on good upcoming it's do I acknowledging And versus -- earned ROE how in you addressed just percentage this ACC get of can back characterize would just see to ACC the right in direction here, putting how on I is you kind heading basis? case base that guess in -- from the as you a think of the

Jeffrey Guldner

Let me into we this that it we -- -- haven't challenge inflationary I'll case start, environment was very a that Nick and before. seen with the particular in with came

of So lot necessarily see of as don't kind pronounced. lag environment we had the that you flat rate interest a

[indiscernible] interest lowering because costs the but was in interest that biggest the cost mentioned I our [ Coop the just cited, interest one ] was the think we're embedded cost actually are case narrative probably significantly that in higher. this

lag picked get hopefully that will things docket. the so And the are those up in regulatory

with a of is when so on. again, I of now like ] some , next now regulatory a in then right they significant gradualism to higher you've issue, can then your as other pick not in really get actually trackers want seeing things on historical like the particularly a when case inflationary that up. actually [ some open your you're getting in And to you're with and they're you structurally, focused pick It's [indiscernible], you a to higher we're for jurisdiction it's it bake got real kind into the case, if what ask good, out have test that think which come focus of that you as up come or don't [indiscernible] Arizona you rate an pressures, you environment means because

[ do you some have we to and the to maybe or you structures you that subsequent There's on can ], have -- and mitigated. structural talk then hopefully, some we to lag Coop what so mechanisms it. use And do can -- stuff just come regulatory docket mediate can't you to you that want with gives do us visibility case this that in

Andrew Cooper

Nick, haven't of quantified certainly mid-X% to that's done mentioned range. in interest are the But one case But the one year-to-year. that in should X% and the about, since context we we've two the in expense, it debt you drivers we as Yes. varies cost range have think the X.XX% issuances case. debt a lag Jeff embedded the of the this low

structure. had ROE case, back to So a on knew we wanted the it, focus good right really capital up going getting to the we equity level. substantially We above into the

we still recoup other to as like O&M the And financing you to think forward were a the one test of the create it but as we the period mid-XXXX about that Fed was a our deemphasized WACC, representative in to is cost that test do about the where environment, elements was during one that I'd costs. time mid-XXXX was here, talking in terms year. case, we this more inflation say transitory. would -- be need it's where so if revenue of of in of of lower to it

in you're O&M X% talking O&M. you plant O&M range. -- on less good the guidance, of incremental a are at look But story, with we some of And given to business our you're talking at outage, it really of having our guidance down if $XXX ever a Corners a increase on neighborhood wages O&M units where about higher million of even the a our basis. year-over-year of bringing amount year still midpoint despite and outages the higher perspective that's full somewhere than about the Four that's of O&M what from And core

good lot the Fortunately, catch it's Pension, on. talked a which in story. So O&M of but to not store, historical a past, up about a we've

as guidance the asset the so impacts XXXX. nonservice market at recoup it's substantial credit change XXXX pension as walk carrying and that our look pension in to we to but positive rates effect, the us as a to Impacts well further discount from year-over-year, with No are $X.XX you well. If need on impact. we'll the side,

depreciation XX-month one, got one final in you'll see case, this walk from to the that's we plant then a that area to year, increases again the related where story rate XXXX XX fell this that And months in that of service. great our and major project depreciation going life outside projects plant, one post and test some window. which that year a further contribute But IT investments, plus our will include have lag. shorter

with these dialogue well. address of a opportunity issues. the of into get to have And course, excited we're to -- to about them the and continue to as the stakeholders look cases rate future commission cadence at we'll we've So

Nicholas Campanella

laying on base start mid-XX. of the kind that Can get for I past have to thinking this been out rate, kind give Andrew, of SRB a to think flavor just to us of off it? about cadence. you how that extrapolate the the just X% all it's you rate past, there. then you X% of capital Really in you're But you just new rates tough guess I Thanks as growth linearly ramp that, year filing potentially. in guess, I of it. appreciate because this

You some you FERC transmission have highlighted. opportunities

do Or think kind do you you of and about to XXXX beyond? of grow how in that? linearly kind So start

Andrew Cooper

the It's because great really investment we question, a profile. have Yes. Nick,

regulatory have, The to the We has lag really to fortunately, much that profile long of embedded have here X% X% TBD. IRA where test we've we the kind a But [indiscernible] headroom. been We'll grow goes. that term. here. is having a in about the historical conversation of been And a over see the

more And cost to stable and create we the into address have go so if we price could certainly environment, more a recovery. that opportunity smooth

track basically term, have is that, are some that of through a contributor form mechanisms. that you Over going significant to because adjustor the double of capital the medium amount SRB the you

SRB a where then growth your needs and supporting generation pace having of spend your is is distribution the and eligible spend transmission tracked. O&M supporting of -- between customer your system sales the you're generation transmission So recovery spend, much increases any smoother and growing and

growth, X% So lagging the profile near-term of [indiscernible] way. past of historical in where place recovery we some years to is out inflation that to to pinch view be we X% the but few addressing cost can that on these points smooth. either a of our come ability, once it these last we've caught and really to ensuring that up cost need of we get growth only sales sales. those as mentioned side you SRB operating look it us address the other the sales the because out leverage some at top line, to it's providing increased of O&M not blunting but also, create Between earlier, some as is the of and long-term that to that. I

Operator

question from Evercore next ISI. is Lonegan from coming Your Michael

Michael Lonegan

equity about and your the your Obviously, So than you balance of at greater your plan, XX%. to issuance capital you've your XX% balancing target to debt to EPS structure talked capital FFO level. equity XX% to lowered intended

plan? high equity this as ideally, if, case to where metric target specifically, And match XX% to landing year looking APS FFO you over wondering and on outcome. if Just structure you're debt rate at more anticipate the then your as to

Andrew Cooper

case. example, structure rate and far an has equity pieces that too Yes, rate case cycles, with Michael, ratio capital the Because XXXX story. never this been two recent most then the fall in XX% nearly is to for the to been two want behind. equity think It's nearly in last I One XX% we there's issue through one capital utility more national been that's lot consistent appropriate structure that is that averages. structure not XX% debate with think one. It's capital issue an the balanced of to past than is largely actual a we historical been a little end at of the subject a an And bit year. equity the of has the at

my As in last are any not is XX%, we WACC rate we're any look while situation. got capital the the a remarks, going look make right where like, to XX.X% and the at that time affordable overall the we in year, period, want the solid It I question structure. one catch-up what's WACC so case rate above is we're overall mentioned is trying that's customers. to rate sure what to make from given a are averages in want does that consistent stay to going country. And into that we around case earlier with the to in a

higher. So equity really which earlier, a it's we bit that a balance. be talked XXX, the That now about up little to up needs to trued

and you If you calculate XX%. ratio it's XX-K at look equity below APS the our

the years in expect with XX% investment-grade rating in rate continue case X need mentioned the environment to going solid having And watching to they're balance regulatory been out that us is balanced you they've the credit coming work where all This agencies company and conversations to investment still ratings. We're right with of an to them last clarify to is the so get to capital is now needs this and as complete. the opportunity with metrics. the is to over forward. we spot XX% believe our plan for we credit the The

Michael Lonegan

for regarding X% you're to growth X% customers this to your secondly versus expecting to Great. guiding large to through C&I me, come 'XX X% And X% sales through period then online. that forecast Obviously, XXXX year.

think consistent or and when should and about in spike those sales is we how it 'XX we X wondering years? in see also specifically growth Just in the

Andrew Cooper

our we of ramp year the factor advanced And between last the rate of terms growth. and think larger been manufacturing we as few on years, Because the over I high sales forecast conservatively load learned the and both centers. these lot side data Yes. a haven't granular some we've two. And seen customers, the we in last of

so data And over variability there keep a it That you time. an got we there you've and some can intra-year and be got as and as anchor conservatively box out. you've building can far forecast happens center in

Taiwan first And a so large one their between the larger first which companies to and 'XX. ramp-up growth not Semiconductor, of would sales that committed that And 'XX They're is sharing XXXX. for have say customers full of in rate. is granular the half view surrounds we're fab of these I of we that new other part customers, ecosystem in. that of coming the them

there fundamentally to range. to your an answer to reaching growth on that the rate full so impact and kind year production of doesn't that And gets timing, in give you then XXXX their full having each and has year of terminal It question a the and 'XX close you the our versus customers pretty each regular rates the pulse exactly. watch we that of having is are of these 'XX But trends on ramp like. what them looks team with of ramp the conversations a

Operator

Your coming Paul Patterson is question from from next Glenrock.

Paul Patterson

Good morning.

do guys of bookkeeping Just really I I apologize missed file? rate if of this. When to timing your expect sort case the quick questions. -- you next is What

Jeffrey Guldner

we picked lag the not March haven't Paul, starting on for that. The -- is XX. Yes, timing have docket regulatory

I there's most think workshop. expect year first that the kind shared of with be is of if how I going conversations evolving. dock would different until lag, commission that out. probably EEI, regulatory see in you the to to a is sure that have around And make in to had a to going that plays that to going terms want what that's so consistent better you And how picks engage structure of want process I this they're to wait And see docket we at -- docket. expect opportunities we up

Andrew talked about with to have just So that with progress we on the lag that that regulatory watch has than balance earlier. to continuing the

Paul Patterson

Okay.

think really least might be -- early, think you that they're expect conclusion that resolved. know just be -- a curious, when up idea on it this Always you You which anticipated my we a question, like you that, when I'm that? But do it's might hard them with but might I would you follow to you better do docket or they any engaged have predict when next to sort -- get do sense? at be headed have a idea where said on to you about of year. any

Jeffrey Guldner

Yes.

to surprised rate initial until start utilities through some dockets, guessing timing I the the be would they're their dock that. watch around look the because were all I'm particularly the you probably for think conversation if probably they of waited I I cases. think that have going the not

had if to indicated has our just when surprised waiting And see So docket the opening pretty begin idea I dealing around terms a or of process just on I with for tep up I case think generic commission XXXX you a in the regulatory to that. docket. there's year. and seeing be cleared But a UNS the looking in progress you've lag. focus before that and not would [ beyond, comes case this then of think recommendations would this approach get to That's develop. got or we And start utilities. watch ] a the an given case, begins they're so at utilities adapt take good to if got you that clarity how be to it throughout and the and the whatever early out

Paul Patterson

rate then case. so see when make filing actual a Does for is correctly? I sense we Okay. think first answer an sort would guess I the it that of And XXXX, until to probably not about the question new

Jeffrey Guldner

Yes.

then have got in evolves you used want at up the year has that in Arizona. move That's versus to I to you think I you've March, been decide docket If split start -- half calendar mean, in lining But you like to we watch years. process in rates put effect. rates effect. want been in we typically put a, rates said, if and -- effect least the how want forward. obviously, And we how you

that the continuing moving sides. both to able you benefits pretty on don't outcomes. that, thing, the this -- just benefits settlement prior is work and flagged a got with the to things of where driver, settlements. and saw had long the don't benefit of real couple you there's settlements think, it had that of we is important see reach stakeholders we've There's with see to history case you We I constructive other where complexity value last binary to cases to -- were an into a typically, of The

And crafting when like so actually in in can programs, of a customer-related settlement the you're get you good particular, things results pretty that. some

up the than that hope set same would working at regulatory whatever see a environment that continue we to case work through I moving of so out settlement the where lag again, of docket structure the a of maybe an advantage and the could comes but commission we case. as stakeholders time in, is with And next fully that litigated docket, moving taking into more to

tell to both be focused on So those too early still two counts, but are we'd on. areas

Operator

is from Upcheli Your next ] [ Bill question UBS. from coming

Unknown Analyst

question. a Just

the of coming that speaking, on service? deployed see So practically would into that be assets are first these when deployed? we some when Or in will XXXX

Andrew Cooper

Short answer, yes.

about could RFP, around assets XXXX. the filing which projects time a service, think going X-month you the of the that be something in remarks, in are we'll in at services the the assuming through but into range, If you that earliest time. mentioned summer the advance that's is I our in clear the process earlier have work There through the RFP,

over have that projects first The ensuring kind slug 'XX. of of we is reliability summer

group pretty And you'll diverse a list of types of that of types. are see in opportunities. [indiscernible] potential that the projects

commitment. our as was we're clean the the that from And that that as thing, summer as well set would I I some reliability shifts peak so in really think, other highlight it addresses needs the that for opportunity making of energy

lag a period doing regulatory medium-term want timely a the some we're XXXX now that is to solution is recovering share I talked statement So track that capital, of about income of -- with nicely that on right that increasing costs we this way. will we're around earlier, those is and the sure work in make pair of the the part and

Unknown Analyst

'XX? the keep Okay. of advantage year-over-year? declining inflationary into weather And how O&M I did guys forward on the side, you core Or from these guess O&M the are combating pressures then take to that some maybe of you of some I of guess, the around cost pull some and 'XX

Andrew Cooper

Yes.

opportunities out be of at we through XXXX. weather O&M the benefit look a year, positive did as the the So continued of to to some take

the are fleet meeting 'XX really spots to that making As the of sure keeping we through just we and we triaging within summer, we're allocating O&M to our were were that the during summer. needs right generation sure that make reliability

forward. take year at and that something there look So look to opportunity modest some the pull that's out. And was costs every at we

the on is organization. overall What's the our on driver. culture that fundamental That's a and ingrained lean long-term we've really focus that driving trend in customer affordability

of the Choya ]. year last [ have also You is operations. This

from some so the as fuel, away the of And we into the assets. ] of Choya assets move lighter of heavier heavier some O&M O&M [ some off. from rolls O&M

really it's combination. a So

the year the there's operator that IBW ability system and a pressure pride of we've underlying of our full to contracted is on a internally we're offset manage some seen. O&M and with All it. that of by -- wage a But lean lot reliable impact mentality other of

Unknown Analyst

that think to then And that discussed the on then $XXX the All There's to I through you year, the And then expect right? just 'XX. though that block right. equity, that Okay. growing good secondly, $XXX million this sort right, Is to two should the it? to that still million you're midpoint, upfront clarify the $XXX that's repeat. of million, ratable sale, $X.XX even is want going way lastly, is earlier. on equity not we be should options more the obviously about quick BCE just guidance in of ones for but a the off all And just that the sale, the

Andrew Cooper

Yes.

first the gain the growth of to that our yes, And on level, year. Bright $X.XX. to rebased we're available very this back your that going X% year-over-year -- X% including earnings Canyon the us range expected sale that, to Just on guidance includes question, confident is that

earlier was continue And true with going goes which also monitor. want our thinking million. which way, to the specifically Going it the have you're capital I about to structure to on a million that But the capital to that of to the $XXX timing need up we case, asked around equity the that wouldn't right $XXX comment rate fundamentally, need our is structure. timing question that we're of to

flexibility of need. to ratio when plan common default that perspective equity our our larger do equity is of the fortunate financing for that plan capital we the true-up we're from and kind option case as base So need our

optimal We The terms timing. of external we're a from monitor mix that the and continue our make the $XXX periodic million for of the the need really over that are execute to comes right in time supporting flexible later period to We'll sure sources. CapEx us. financing is longer-term market

Unknown Analyst

congrats getting successful through Right. a Great. rate case. on And

Operator

coming is . from Crowdell question next Your Anthony from Mizuho.

Anthony Crowdell

negative question Just two discussions on a you quick balanced FFO the case sheet, rating recent to to end you APS just the the second, if on outcome the ones. agencies. at remove enough West? I'm at balance And the talked is earlier you with curious Pinnacle outlook Where XXXX about debt Mike's of lot did an basis think the to agencies? in

Andrew Cooper

of XX% we that to Yes. -- if XXs range kind provided had have We trailing of in year-end Thanks, before The that, number, their from think about XXs debt but the had on of look old the I that. said We we trailing below don't XX%, on at if haven't had -- the that. the kind Anthony. the QX a fallen were periods in agencies it's calculations basis before so agencies, any at yet. official a to FFO you you

a realistic pretty we things course, one and so in sense is one XX% ratings, downgrade their credit with our range that's capital XX%. rate one why of believe to allows investment-grade middle the of clear threshold And to target that and XX% that's that a outcome constructive the made was range to wanted in the And S&P setting the be needs of that to meet the we that lower. notch they're, year solid preserve reset case we do about of is us

manage And feel us so we to confident continue ranch to allows that around our that.

we're our range term higher have agencies, be rating, we where your to longer the comfortable from and other XX% the moving question, at this which needs a ratings up The where target credit. match point a capital to to we how over we'd second felt okay waiting perspective. notch still see to XX% they But to a we're thought one evaluate

spent quite seen. of bit conversation outcomes the highlighting we've constructive agencies couple question, They they're over So to years. lot the of second regulatory with have had certainly mindful a we've a we've that of them, your -- the with and last time of

is going continue so they're act, with to rate these case can't actively really we engage to now to And the but we to them going predict factors. when are complete, highlight that

qualitatively said them they to period the regulatory here construct, dialogue that over outcome for we agencies and time. the we'll are can not complete their last have and resolved typically we of for the we've with course in along, over forecasts of focused so As -- the the as which resolve rate they to X of waiting They certainly, this years. and numbers that clearly this don't be much improvements were outlooks order outlook. on case all proceedings derisking But seen sharing believe the

And so act. I when again, how while can't they'll anticipate and

them, that evaluation the information of that can they front would now ratings. expectation make the in be an Our have all of they

Operator

concludes this That our you. Q&A Thank event. Ladies today's gentlemen, session. and completes

for a disconnect your Thank time, participation. may have and at this wonderful You day. you

Pinnacle West Capital (PNW) 27 Feb 242023 Q4 Earnings call transcript