PNW - Earnings call transcript Q1 2024 | Pinnacle West Capital Corporation

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Operator

Good morning, everyone, and welcome to the Pinnacle West Capital Corporation 2024 First 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 first quarter earnings, recent developments and operating performance.

be Andrew and Cooper. will and Jeff today CFO, our speakers our CEO, Chairman Guldner; Our Ted EVP also of APF Operations Geisler, President; are here and with Jacob Tetlow, us.

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

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

will over the Jeff. call to turn I now

Jeffrey Guldner

Amanda, joining XXXX line our February. for few recent in before in off guidance quarter on the us the discusses on of our developments. fourth regulatory results, thank details quarter I'll and Andrew provide financial the started we with you that And today. call first updates provided Thanks, on all a operational and

heating focused increase margins, resource program. executing in a resource demand year with on planning, demands quickly we we're Southwest supplies comprehensive our to preparedness manage up, maintaining as preparedness, Arizona to peak round continuing adequacy operational the serve the fire in creating To be Titan partnerships our work customers reliability, mitigation program energy customer summer ]. procuring sufficient temperatures with reserve and the on extremely top-tier With and [ energy robust important

action wildfires. taking In customers company fact, risk to from the of wildfire head further into season, communities we is as our our the the and

categories key ensure to includes fire comprehensive X depth. defense Our strategy mitigation and

strong forest have around robust officials with the coordination around including management defensible infrastructure, vegetation a we program, creating management space First, and poles and state.

operating at third, that cameras, technology Second, And and lining modeling targeted risk apply software. search specific our areas, remote power we advanced several ] that's safety wildfire weather or in protocols in requirements deploy risk-informed as public we such work and such includes PSPS. devices protocols, safely how risk, to control, stations, power crews for addition managing [ safety fire-prone as new and shutoffs

communities been prevent our had we've that and protocol We've that on taking While and a PSPS we've ensure our this communities and experience what from know and to have developed state operating customers program, officials throughout ensure lot to a a serve partnered with is we to first new is in local wildfires working expect. to this customer steps the summer, informed for industry. committed to responders following last actively implementation We're process. invested continuing workshops safeguard and to while transparent communications are community learn our to that

for ready It's our ensure in period Turning maintenance that is of planned summer. summer the our the to system of thermal ahead our serve. ready our are our to for generation operational preparedness. stages important units final units to the extremely We're activities

Desert the Upon return clock all X, the the outage, refueling of early energy X outage Unit April In provide addition, on for around May. on the meet help a it's began in Palo units Southwest. summer the are and to Verde's is poised completion demand service clean successful to in planned to for refueling that entire to currently X schedule the latest

APS phone compared all quarter. with ] make customer to APS within made look digital to billing for place J.D. peers. starting company, customer every the both quartile that gains care, say satisfaction across I'm the survey improvements in also satisfaction including power this p in and investor-owned frictionless the power first to and reliability, customers first quality experience. and that of providing employees we're year scores corporate overall commitment to communications Results forward residential Power its category, large and the the for continuing like payment and we a citizenship, and our dedication this and more proud take

align rehearing case We've where The access charge. on limited Turning case distributed allocation rate to to that's generation is rate commission whether for design the a to the to charge in better participating with customers. implemented commission further think, be our issue successfully we'll I the X increased The the proceedings. is cost the just That our commission those to to charge hold recently March unreasonable rates excess intends, rate customers outcome voted solar their had on and revenue grid service. regulatory. narrow of a examine

has commission the Additionally, the lag turned docket. to its regulatory focus

address of We continuing voiced work with presenting holistically the The to has forward to lag be workshops interested XX written March of noticed and have commission look in lag on Arizona. a into first their on intent that how other regulatory in to having and variety will commission workshop addressing to with options docket parties further been held the the stakeholders future. the invited stakeholders was with and regulatory multiple file on comments

have our forward much is look to we a off still, the to continuing throughout to start, priorities know to year. and execute do XXXX we Although we solid on

turn the And Andrew. to over I'll call that, with

Andrew Cooper

on provide This thanks everyone quarter again and to additional sales review Thank morning, will financial Jeff, XXXX reported you, today. for we details results results. I first our us weather, joining and guidance. those and

XXXX, $X.XX and and L&M. milder And sale improvement in loss factors: new the customer the robust and offset a on weather increases and of revenue. of expense quarter March per $X.XX growth. achieved impacts first adjusted year-over-year per increases with quarter of depreciation along positive earnings was In in XXXX. Energy, partially the implementation share to These of several by rates were Canyon This compared sales interest in X, of finally, by key amortization we share Bright first driven of the

This The the Bright of the year. Canyon the Energy this of third phase onetime quarter share in follows quarter. initial per a completed of transaction last provided benefit sale $X.XX

In rates revenues. March addition, for mentioned, successfully benefit new in a new our from customers these are and Jeff as implemented we seeing

to Turning weather.

quarter XXXX, in attributed of the months the as came first X and Metro year cold the was decades. in we with Although growth. of year-over-year. this in [ X.X% of came and driven ] conditions and weather-normalized first the X consistent area the March at guidance for our robust C&I for our Customer the company, in guidance to which XXXX, range drag drag still year. share of one the March were is for to expected existing in X.X% quarter of since coldest the be X% in range being XXXX normal, growth weather-normalized quarter start smaller by for coldest historically Phoenix our Because quarter, exceptionally over per X.X% growth $X.XX sales we're can a at experienced This to our the within X.X% growth expecting X% to in a sales come

than Arizona, the prominent in is announced Arizona's vibrant $XX economy increase recently in previously Investment release to $XX announced Semiconductor economic Taiwan investment example hub. this of a a billion a which remains the activity announced billion which already A third diverse growth decade, to X,XXX. to billion. facilities employ the now has more workers, build $XX hired TSMC expected X,XXX of plans of TSMC are by a facility total of and over end the

and there to addition, In within center territory. interest sustained additional for our continues be data manufacturing service development

customers. for long-term our growth opportunities cost these guidance, Although earnings growth represent they X-year developments current all significant are our for enhanced for potential outside sales and the of efficiency

service our growth new has growing residents. over Maricopa the region underscores to the U.S. for residents This was by all for ensure our as Census recognized in in XXXX, nation investment County fourth ongoing largest influx XX,XXX Bureau infrastructure continuous our customers. need consistently Residential in in the strong. been welcoming the of county reliable

current financing meet effectively. are plans these Our expenditure and expanding demands designed capital to

plants. the slight timing are was which essential in ] to our expense. a O&M shift expanding is to guidance, delays to needed we core than associated a XXXX. due to remain [ at to our power expected, less maintenance primarily These base, QX supporting in compared planned Despite delays have from and expected customer We the for second inflationary costs reduction procuring first of XXXX O&M work quarter. committed pressures materials certain drag year-over-year costs with ongoing X our

Federal Interest higher rates of interest compared first was quarter and higher the the we continue expense quarter and Reserve. by this driven the to of last actions increased balances, to monitor debt year

make is systems we expect throughout and expenses addition, service accounted in serve the into reliably to for went shorter quarter. planned important depreciation schedule and create depreciation for expense of These projects, are extremely have information already to technology amortization meaningful customers. sure large the projects X tools and we higher Due necessary as In our annual products IT this our updated the to to our year guidance. have them drag X these

[ the wreck our stock of a and forward about we offering equity planned ] successfully sale. common case After completed outcome, $XXX million of

the sale a agreements determine We capital time and maintain to the utility into structure. forward sustainable funds and will the healthy opportune most settle invest the to

now notch Moody's our ratings to rating and the agencies rating outlook and downgraded by agencies. as similarly ratings by Pinnacle all with X West we agencies our have Fitch and have notch resolved ratings negative their rated reviews are completed addition, Moody's of well, importantly, APS In stable. from X X X all downgrading

We with credit our continue the customers. maintain and focus to cash our benefit solid flow targeted on adequate metrics ratings for lag to regulatory sustaining investment-grade of reducing

and the to our continuing we other all head call our as reaffirming summer are season. upcoming reliably we provided Finally, forward and on fourth into to look customers the quarter execute guidance serving strategy

to turn I prepared questions. the concludes back for This over will operator our remarks. call now the

Operator

Certainly. be Instructions]. conducting question-and-answer [Operator Everyone session. will a at time this

coming from Your from Nick first Campanella question Barclays. is

Unknown Analyst

Nick is This Steve for today.

Can capital back should on I February, dodge as coming rate have thoughts deeper latest last the of update. first, case deployment? we how the some since discuss time plan? And more on the the possibly it rate your timing, outcome as case in you So maybe SRB accelerate latest years, quarterly in guess to in

Andrew Cooper

Sure. question. Yes. Thanks for the

XXXX, through continue of that us basis RFP We are projects our RFP coming projects now. putting competitive negotiating SRB. out in and the we that's a to we're and right through had for process, So that work X,XXX-megawatt really the

fuels, of pipeline we're set looking a renewable healthy projects, at across would gas a there's so diverse qualify. that that And well as really of

of included include our illustrative [ deck for about the side. projects QX good need the megawatts years the plan, QX results. laid we for meet CapEx the determine generation will some the the the on them. the our projects represent being of to capital of part over percent And projects SMB And weighted does out see to related potentially on feel But those least some ]. up some IRP based RFPs could X we you projects. we the Ultimately, procure that that that probability years. criteria next next XX-plus the at we to those Our that certainly, few

So a substantial there's really there. opportunity

few SRB, that the with to our be to future opportunities there'll cost will and us this the shorter. course, course, reduce And years. for demand future RFPs, is for growth be RFPs meet given much the need investments RFP We're ultimately, participate. and #X recover becomes on on to substantially there next the customer Of between goal substantial beginning over confident customers. those to and reliability But opportunity lag then, of the

update as we them. will So forward, come certainly status have opportunities we projects of you that on the ahead

Unknown Analyst

million outlook that on a ATM does positive can I ], the and little you equity last remaining rate we confidence evolve clinical also maybe from the $XXX And and turn financing the just thinking as affect discuss helpful. financing overhang quarter, this credit bit equity on constructive changed Global as thinking post any the this all really with given revision [ and the even your your capital has the since deal in the just you've Can to outcome. of S&P on market? maybe That's remove deal hybrid thinking hybrid done S&P how latest Great.

Andrew Cooper

Sure.

discrete foundational really needed capital As earlier, able structure balanced we healthy that equity block utility. execute on to to mentioned to are we be I that a we're maintaining the pleased down

And from as so of of as got kind X-year go the out balanced pointed down go capital incremental unidentified and the you've years you as today you, of ensuring at capital the million utility, through capital have plan, a there financing external we the given plan the structure front that of need is, out, financing an an through we we parent. needs $XXX and in that

like The us next that then need. matches an case base markets proceeds be ATM couple up investing the Over the of continue into the to tends to the to years, utility. we'll because do well something capital available different to meet to and deploying that

But the sort maintaining where And over us as down structure few the parent would as next security are years, debt at there company point, continue we be of of balanced so opportunities we that in at being well. utility start. judicious debt. between your capital is motivating and look plan most common capital look would amount about the that all a the potential of sort what's we to And will as of to

range that comfortable We were managing all have, to that holding the to continue do across that right want metrics cash the X XX% agencies. to to amount it stable make XX% but really FFO targeted be agencies sure to we in that to to of with pleased company about be we're ratings feel flow the debt. so stay see returned judicious of we we and all debt The do

Operator

question next Pourreza from Shar from Guggenheim is Your Partners. coming

Jamieson Ward

It's James a I on for Shar. you for couple Ward got just here.

large load sales fortunate whether load diverse First, increase like then as have to to of remind how Could and decade. the contribution a seeing currently obviously through expecting in you annual you're fairly level the centers you're of well much centers that C&I us And mix then of on you're now from to forecast. industries and from is XXXX the sales your 'XX. retail growth, long-term growth data your rest the between driving data growth of

Andrew Cooper

I'll start. Sure, James, this Andrew. is

we've the growth customers. quarter, the So of was mix C&I suppliers years. ecosystem the of of couple of in load fundamentally really felt semiconductor some large vendors ramp-up that and for saw that that lot come term, factor X.X% of with, it did sales and them the represent of had center as customers data their we of as pleased the [ the existing we over online ] the it and a near well the downstream common high a ramp-up And last

because production near set diverse this their component the year upstream semiconductor they next ramp their as folks term, the said, of and until continues supply In a industrial that reach large kind having in. such then sales year. parallel. and our of downstream growth is full really in customers were Taiwan their of manufacturing chain come throughout you And in

more manufacturing the more from our of it's side. there the is So centers. a in term, to the forecast, a latter part bit lot weighted In the near little data

that time. for dealing for been market for remember data us, have to have center that data customers big a you And Finance been centers we've with been a market while. long a very has

TSMC's that we're the phase and production plan. that and in out asking full really that when So over 'XX near of some customers, the when years Fab the takes with of capacity It's comfortable for ramps really to into they're these the X first full then longer-term the manufacturing term. plan the growth goes Fab where production, of X

there from way decade, it's think over our at centers. to IRP on data good roughly can certainly infrastructure advanced both But represented in it. that roughly the probably build-out, half And and the the more serve it's There's out ultimately, of customers you IRP. a look is manufacturing in balance. the demand If of than pace about and terms we on sides half that's

Jamieson Ward

course, you the appreciate it. guys of lag which, on. docket, perfect. That's I touched And And on then, regulatory clear. second, Very already

of alternative lot you high-level use us yet line to [ following March scheduled I'm proceeding terms there which cases? stands are commission for? rate and also, Could ]. give So approach of ratemaking where the you actually a that's see sense by key and workshops time noting the of currently And your be workshop, be for sure an adopted us additional being to in the any should it. particularly do in the available we the we milestones expected until overall And watching to

Jeffrey Guldner

is Yes. Jamieson, this Jeff.

they're is discussion. going I open to likely think meeting further where watch one the for is June the to have next

some May on think go the might I open meeting. there was it thought

discuss what I the constructive now a will is not the terms only because was about structure can think is they interest experts were think think and worked for a process the of -- address of which additional time line. it's with more where think the I meeting. some think lot concepts from of more of I a color in likely an be intuitively going potential a kind see because commissioners on the of I and about who Obviously regulatory formula do into more That the that's potentially you'll June important forward like what example programs. give year, lag, what there that construct at it an in which the conversation on mean people it conversation around just I talking was test these rates, use but is we FERC. or also kind have rate as other forward

seems content promptly. to there's the developed, moving forward to move schedule continue direction. do The right I in so desire being to And is a think the be this

the And the or role there's at so they'll policy -- is of we'll conversation be statement. unfolds. how the I watching a know things whether for process some making have one on a point,

decoupling our to opposed If a ended a statement rule. ago, back in policy years you think as workshops to up that

implement that the policy out And without and then utilities statement so then goes rate just the can cases.

probably you'll process. that watch quarter, we'll talk to is watching next be open for that. but the bit little meeting milestone see the So more a a likely all they key where I in expect next June through

Operator

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

Michael Lonegan

the $XXX additional XX% plan, sized at equity of million incremental to the back Going CapEx. you of financing

that forward. to portion going that terms How any of finance of you equity? wondering, spending would beyond Just in incremental expect

Andrew Cooper

And the capital the Certainly, it's next Andrew. see, out, And as plan our Sure. to generation on CapEx that of of will the we for plan, in the And and net And continue example, [ how execution forecast. fundamentally, transmission few revisit to side come will RFP opportunities drivers there support Michael, that well, [ spot our numerator look want metrics what there projects we years. strategic flow earlier be debt where the the cash talked being talked just at ]. debt. to staying will We ] make to right the think make about sure our again, determine right? some a through company making I parent pace our is going perspective. about back, of I question judicious RFP [ we're we're But reducing as in on help lag sure that regulatory credit ], from Jeff sure to we're about want metrics. medicines those there's

incremental debt utility that XX% And incremental take would on structure plus is could would Pinnacle that is that that a at with capital modest CapEx of earnings going balanced the way we forward. retained so paired the West maintain way we that the ensure maintain whatever we

So of it's thumb probably a good to about. rule think

or CapEx financing date We have a the the plan. plan

So all markets from of until so do all that's markets we available debt available and the that everything to parent. to the at are look us,

to talked continue foundationally, equity Some we've do for that the giving modest over and any at be we're of for continuing that we of -- it. But about incremental in make to all cost look example, going $XXX those lend the to things program capital continue the it, to I the options one million access think ways where time to balanced both slides our we'll some customers. of is a sure And need markets. in like, structure to amount low-cost needed DOE, past our can financing the financing for at look

Michael Lonegan

in lag, the presumably, Great. And EPS formula 'XX, or in any the years through back terms for me, test guidance for isn't going of accounting regulatory rates. docket to forecast then secondly regulatory changes your

'XX the anything Just it wondering could presumably, earned the are ROE and over about base if course lumpy. and guidance rate will on ACC of there's this that then be in 'XX, year you share somewhat you assuming the

Andrew Cooper

make back We trying trying the the and that step investments time. for through when over trying solve under. the test more way lumpiness think to I the substantial historical case we're headroom the stream. the about relief to dependent that rate into we're as year But just pretty that find XXXX really kind lag address. test smoother, to challenge of rates recover effect need one to things create the living well. really and to great got raised construct given to we the able rate concluded that's predictable in of up, an here we've we're before them, we customer of be to inflation in openly go March, We've initiatives on a to believe starting increase on regulatory Yes. talked regulatory that make middle function And to and that starting we're was see to interest we're a And is to in pick costs those seeing the

so ability specific we right close to are now period there in that that earn to while disclosed number. we our drift where haven't is And around ROE, actual a our

and that through back As increases. look 'XX, definitely we at that to go time costs go 'XX,

competitive about building the to types smoothness and there's RFPs positive cost you forward ourselves. for projects that and the creating to about point in ] We SRB us have if back put reduce at opportunities what look we're [ that QX this nearly the said we can on projects, yearly of feel very impact

And will smoother, us so predictable more and have capital recovery. our generation now of between and trackers give transmission, XX%, much XX%

capital our So Besides that's not focus the then X focus focus lag the regulatory income distribution really management. initiatives, to be we cost picked next these And or O&M our docket operating the have. of it timing cetera. rate And levers of to need costs, comes really case. really the that's continued on those it growth we of are any statement those the regulatory sales up the costs, down And depreciation, by et on. that

strong the really percent XXXX O&M face and our still track lean And we last ] affordable plan a core there, within services. control. even lever of our we initiatives a goods [ pretty we substantial other that have as and operating expense over year, inflation customer for to record the for couple are culture by I think reduce Our demonstrated we've

Michael Lonegan

a then for me. final And X Great. quick

trickle installations, an Regarding in continued earnings sensitivity if wondering down solar and mechanism and LFCR decline residential growth to there. into sales rooftop are you them then have you the a expecting just

Jeffrey Guldner

bit on works. I of [ really structure see go obviously, Not sense an mean with sensitivity. process applications little you're you because credit And the resource that we steps ] -- cyclicalities adopted the the tend the work of down comparison how grandfathering has earnings before you see Arizona a as watching, to as off. continue up down, then to that steps better they of of level kind you where get a proxy

So in we've I that. information think got the

If Andrew. say anything, to you want

Andrew Cooper

at I Yes. plan. look just just to would trend and is even see the we it generation our lot growth you that of for growth. customer the around we into adoption. by A attributed Yes. continue say offset X.X% the sales quarter, continued baked And that secular No. if efficiency energy some

And electric as customer modest expect cetera, expect around to that out continue continue -- the monitor DG, to certainly, sales that. of around trends growth. able trends fairly fairly refinance vehicles, We et we growth residential modest to monitor

But to been trend ultimately increases residential that just sales effectively, and residential some customers really monitor. growth, an sales our back period, substantial we a break we'll that more were residential increase post-COVID forecast had the what ] in secular window modest increases [ diversification have a where of have something just goes to has short is in that And we residential center a declines. in in attraction those much where of of that continue how our continue DG a we'll see in service to offsets to economy to work-from-home the and

Operator

Alex from Mizuho. coming is from question next Your Mortimer

Alexander Mortimer

growth. steps seeing your become any retention seems and a skew expect territory. address to proceedings? point we're future Arizona And large regulatory cost in of service of Do obviously, industry-wide, has this? It load C&I, to service well more as So you taken

Jeffrey Guldner

more there's certainly being the topic [ something I regulators, That's to with lot ]. is a is think attention that a paid been and it conversation -- it

get margin One you if cost higher of customer, recognize typically a lower closer done customer, cost fixed costs system. the fixed which when load but tends you have actually things of spread to the can the the of factor customers those actual you the because to cost, recovery to of C&I is be of this the and service cost right, help a the get service, on

you just reflect a that is to got recognizing cost in careful that service the so way of be you that appropriately And that. in

so the customers And of in to the make you watch very high more a you then be concept, operate careful can got factor system just the accurately service. And how in general cost ]. [ load

So the incremental the costs those [ incurred are ]. to the that coming allocated to the serve cost customers causes customers gets appropriately side to on

balance see service more So right. I you're paid cost the going yes, make to to attention think got of just to sure we've that

Alexander Mortimer

try had you've as national mean, regulators just with country entire quickly, western conversations work part Understood. a to at state towards other touch solution. goals surrounding wildfire of the the with either we on the specific stakeholders, you there or these the conversations certainly either are And any or can the then I any and level see industry just issue.

Jeffrey Guldner

Yes. in a just the on extensive And U.S. that Western in fire of number conversations There's go it's all different situations not We've country. fronts. over come the seen really

significant work that's all to share out they're the they see work that's And a of the ] utilities what of remarkably a groups, lot through helping in solutions [ a technical technical a for utilities of EPRI work more Eastern in among for usually be amount so participating done on to see, true that the at are constructive PG&E really force There's are example, Western West. significant in some in these utilities. wildfire. conversation being I'll the just terms call the you There's amount sharing you conversations, task wildfire the of doing some of that and

California of solutions folks the what been front the lessons sharing and and for tip are technology about have available so this. in them working there. the for And obviously what's spear very those open They're

happening that's you really very not workshops certainly customers, it's with importantly, had most robust are particularly this. think, all I start in here get -- at So , looking then more and Arizona constructive to programs. attuned We've Regulators type levels. regulators there's PSPS as a the conversation much our with certainly at

the can there's you for of customers side there I'd to insurance. there's wildfire in that And support the trying out -- take federal that to understand insurance all far conversations as get of we're happening to can that work what's as are Is So for prepare are government say going to that on they that. play that? then a doing. role on there figure aligning you And streams measures the to a so how so work better be all want do try with you lot to and also in front

Operator

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

you your You a Thank may time. Have at wonderful disconnect this day. for participation.

Pinnacle West Capital (PNW) 2 May 242024 Q1 Earnings call transcript