- Lower quarterly results in line with company’s
expectations
- Favorable weather, strong sales and customer growth help offset
higher operations and maintenance costs
- APS employees focus on summer preparedness, reliability and
resilience
- Company affirms full-year 2023 guidance
Pinnacle West Capital Corp. (NYSE: PNW) today reported a
consolidated net loss attributable to common shareholders of $3.3
million, or a loss of $0.03 per diluted share of common stock, for
the quarter ended March 31, 2023. This result compares with
consolidated net income of $17.0 million, or $0.15 per diluted
share, for the same period in 2022.
The lower first-quarter results reflect an increase in
operations and maintenance expense; lower pension and other
postretirement non-service credits; higher interest charges; and
higher depreciation and amortization expense primarily due to
increased plant assets. These negative factors were partially
offset by higher revenue driven by the effects of weather; customer
growth and usage; and lower income taxes.
“First-quarter results were in line with our expectations, and
we are well-positioned for a solid year as our service territory
experienced strong year-over-year retail electricity sales growth
of 3.6% and robust customer growth of 2%,” said Pinnacle West
Chairman, President and Chief Executive Officer Jeff Guldner,
citing 2022 census data that Maricopa County – home to Phoenix and
about 75% of the company’s retail electricity customers – remained
the nation's largest-growing county in the U.S.
“While our 2023 first-quarter O&M expense comparison was
higher due to lower-than-normal costs in last year’s first quarter
and the fact we are experiencing the impacts of inflation, we
project these costs will normalize throughout the balance of the
year. As a result, our O&M guidance range for the year remains
unchanged.”
Impacts of a colder winter
The 2023 first-quarter results benefited from a
colder-than-normal winter, helping offset the higher O&M
impacts. According to the National Weather Service, the first three
months of the year were the coolest start to a year in the Phoenix
metropolitan area since 1979, with March 2023 being the coldest
March on record in more than 30 years (1991). The resulting impact
was an increase in energy sales in the first quarter as residential
heating degree-days (a utility’s measure of the effects of weather)
increased about 51% compared to the same timeframe a year ago and
were 57% higher than historical 10-year averages.
Arizona Public Service Co. (APS), the company’s regulated
utility and principal subsidiary, serves an extremely diverse and
broad service territory in 11 of Arizona’s 15 counties. In addition
to the desert regions most people associate with the state, APS
also serves communities at much higher altitudes. This year,
Northern Arizona experienced one of the wettest winter seasons in
recent history. In fact, Flagstaff set a record for the
second-highest snowfall total through March 1 in more than 100
years. Despite slippery roads, hazardous conditions and freezing
temperatures, our crews were able to restore winter power
disruptions safely and quickly for our customers when they needed
it most.
Summer reliability and resiliency preparations
As Arizona’s hometown energy service provider, Guldner said
employees take immense pride – and responsibility – in delivering
reliable power to APS’s more than 1.3 million customers.
“That’s why our employees conduct long-term planning,
inspections and preventative maintenance of our substations, power
lines and generating plants. It’s work that doesn’t just happen for
high profile events like this past February’s Super Bowl or Waste
Management Open – it’s work that happens every single day,”
said Guldner. “That’s especially important as we get ready to meet
our customers’ energy needs during our peak summer season, which
regularly includes extreme triple-digit heat, damaging monsoon
storms and unpredictable wildfires.”
In addition to building new infrastructure to meet growth,
maintaining existing infrastructure to ensure reliability, and
procuring additional energy to meet summer demand, APS employees
are nearing completion of a scheduled maintenance and refueling
outage at Palo Verde Generating Station Unit 2. As the largest
source of carbon-free energy in the U.S., the three-unit nuclear
plant is critical to meeting summer demand across the desert
southwest.
APS employees also are enhancing customer outreach strategies,
conducting fire-mitigation line patrols and emergency operations
drills, and managing supply-chain constraints to acquire critical
spare equipment – all part of the company’s longstanding seasonal
preparation activities to help ensure grid resiliency, prevent
outages and minimize impact to customers.
Financial Outlook
For 2023, the company continues to project its consolidated
earnings guidance will be in the range of $3.95 to $4.15 per
diluted share on a weather-normalized basis. Key factors and
assumptions underlying the 2023 outlook can be found in the
first-quarter 2023 earnings presentation slides at
pinnaclewest.com/investors.
Conference Call and Webcast
Pinnacle West invites interested parties to listen to the live
webcast of management’s conference call to discuss the company’s
2023 first-quarter results, as well as recent developments, at noon
ET (9 a.m. Arizona time) today, May 4. Join the live webcast at
www.pinnaclewest.com/presentations for audio of the call and
slides, or dial (888) 506-0062 or (973) 528-0011 for international
callers and enter participant access code 797610. A replay of the
webcast can be accessed for 30 days at
pinnaclewest.com/presentations. A replay of the call also will be
available until 11:59 p.m. ET, Thursday, May 11, 2023, by calling
(877) 481-4010 in the U.S. and Canada or (919) 882-2331
internationally and entering replay passcode 48085.
General Information
Pinnacle West Capital Corp., an energy holding company based in
Phoenix, has consolidated assets of approximately $24 billion,
about 6,300 megawatts of generating capacity and nearly 5,900
employees in Arizona and New Mexico. Through its principal
subsidiary, Arizona Public Service, the company provides retail
electricity service to more than 1.3 million Arizona homes and
businesses. For more information about Pinnacle West, visit the
company’s website at pinnaclewest.com.
Dollar amounts in this news release are after income taxes.
Earnings per share amounts are based on average diluted common
shares outstanding. For more information on Pinnacle West’s
operating statistics and earnings, please visit
pinnaclewest.com/investors.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements based on
current expectations. These forward-looking statements are often
identified by words such as "estimate," "predict," "may,"
"believe," "plan," "expect," "require," "intend," "assume,"
"project," "anticipate," "goal," "seek," "strategy," "likely,"
"should," "will," "could," and similar words. Because actual
results may differ materially from expectations, we caution readers
not to place undue reliance on these statements. A number of
factors could cause future results to differ materially from
historical results, or from outcomes currently expected or sought
by Pinnacle West or APS. These factors include, but are not limited
to:
- the current economic environment and its effects, such as lower
economic growth, a tight labor market, inflation, supply chain
delays, increased expenses, volatile capital markets, or other
unpredictable effects;
- our ability to manage capital expenditures and operations and
maintenance costs while maintaining reliability and customer
service levels;
- variations in demand for electricity, including those due to
weather, seasonality (including large increases in ambient
temperatures), the general economy or social conditions, customer,
and sales growth (or decline), the effects of energy conservation
measures and distributed generation, and technological
advancements;
- the potential effects of climate change on our electric system,
including as a result of weather extremes such as prolonged drought
and high temperature variations in the area where APS conducts its
business;
- power plant and transmission system performance and
outages;
- competition in retail and wholesale power markets;
- regulatory and judicial decisions, developments, and
proceedings;
- new legislation, ballot initiatives and regulation or
interpretations of existing legislation or regulations, including
those relating to environmental requirements, regulatory and energy
policy, nuclear plant operations and potential deregulation of
retail electric markets;
- fuel and water supply availability;
- our ability to achieve timely and adequate rate recovery of our
costs through our rates and adjustor recovery mechanisms, including
returns on and of debt and equity capital investment;
- our ability to meet renewable energy and energy efficiency
mandates and recover related costs;
- the ability of APS to achieve its clean energy goals (including
a goal by 2050 of 100% clean, carbon-free electricity) and, if
these goals are achieved, the impact of such achievement on APS,
its customers, and its business, financial condition, and results
of operations;
- risks inherent in the operation of nuclear facilities,
including spent fuel disposal uncertainty;
- current and future economic conditions in Arizona;
- the direct or indirect effect on our facilities or business
from cybersecurity threats or intrusions, data security breaches,
terrorist attack, physical attack, severe storms, or other
catastrophic events, such as fires, explosions, pandemic health
events or similar occurrences;
- the development of new technologies which may affect electric
sales or delivery, including as a result of delays in the
development and application of new technologies;
- the cost of debt, including increased cost as a result of
rising interest rates, and equity capital and the ability to access
capital markets when required;
- environmental, economic, and other concerns surrounding
coal-fired generation, including regulation of GHG emissions;
- volatile fuel and purchased power costs;
- the investment performance of the assets of our nuclear
decommissioning trust, pension, and other postretirement benefit
plans and the resulting impact on future funding requirements;
- the liquidity of wholesale power markets and the use of
derivative contracts in our business;
- potential shortfalls in insurance coverage;
- new accounting requirements or new interpretations of existing
requirements;
- generation, transmission and distribution facility and system
conditions and operating costs;
- the ability to meet the anticipated future need for additional
generation and associated transmission facilities in our
region;
- the willingness or ability of our counterparties, power plant
participants and power plant landowners to meet contractual or
other obligations or extend the rights for continued power plant
operations; and
- restrictions on dividends or other provisions in our credit
agreements and Arizona Corporation Commission orders.
These and other factors are discussed in Risk Factors described
in Part 1, Item 1A of the Pinnacle West/APS Annual Report on Form
10-K for the fiscal year ended Dec. 31, 2022, and in Part II, Item
1A in of the Pinnacle West/APS Quarterly Report on Form 10-Q for
the quarter ended March 31, 2023, which readers should review
carefully before placing any reliance on our financial statements
or disclosures. Neither Pinnacle West nor APS assumes any
obligation to update these statements, even if our internal
estimates change, except as required by law.
PINNACLE WEST CAPITAL CORPORATION CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (unaudited) (dollars and
shares in thousands, except per share amounts) THREE MONTHS
ENDED MARCH 31,
2023
2022
Operating Revenues
$
944,955
$
783,531
Operating Expenses Fuel and purchased power
394,504
265,269
Operations and maintenance
250,080
218,342
Depreciation and amortization
191,906
186,605
Taxes other than income taxes
57,138
57,998
Other expenses
610
825
Total
894,238
729,039
Operating Income
50,717
54,492
Other Income (Deductions) Allowance for equity funds
used during construction
15,061
9,747
Pension and other postretirement non-service credits - net
9,865
23,809
Other income
6,077
1,704
Other expense
(4,131
)
(3,422
)
Total
26,872
31,838
Interest Expense Interest charges
88,119
65,389
Allowance for borrowed funds used during construction
(12,722
)
(4,482
)
Total
75,397
60,907
Income Before Income Taxes
2,192
25,423
Income Taxes
1,183
4,161
Net Income
1,009
21,262
Less: Net income attributable to noncontrolling interests
4,306
4,306
Net Income (Loss) Attributable To Common Shareholders
$
(3,297
)
$
16,956
Weighted-Average Common Shares Outstanding -
Basic
113,358
113,102
Weighted-Average Common Shares Outstanding - Diluted
113,358
113,295
Earnings Per Weighted-Average Common Share
Outstanding Net income (Loss) attributable to common
shareholders - basic
$
(0.03
)
$
0.15
Net income (Loss) attributable to common shareholders - diluted
$
(0.03
)
$
0.15
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230504005069/en/
Media Contact: Alan Bunnell (602) 250-3376 Analyst Contact:
Amanda Ho (602) 250-3334 Website: pinnaclewest.com
Pinnacle West Capital (NYSE:PNW)
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