- Mild weather and higher operating costs impact earnings
- APS supports customers through the summer season
- Company seeks flexible energy resources to serve Arizona’s
growing energy needs
Pinnacle West Capital Corp. (NYSE: PNW) today reported
consolidated net income attributable to common shareholders of
$106.7 million, or $0.94 per diluted share of common stock, for the
quarter ended June 30, 2023. This result compares with consolidated
net income of $164.3 million, or $1.45 per diluted share, for the
same period in 2022.
Weather was a major driver in the lower second-quarter results,
with the Phoenix region experiencing the mildest June since 2009.
Other factors included higher operations and maintenance expenses
(including increases in non-nuclear generation operating costs and
higher transmission, distribution and customer service costs),
higher interest charges and lower pension and other postretirement
non-service credits. These were partially offset by higher
transmission revenue and higher revenue from the Lost Fixed Cost
Recovery (LFCR) mechanism.
“We saw cooler-than-usual temperatures in the second quarter
compared to a warmer-than-average second quarter in 2022. This June
was especially mild. Given how big an impact air conditioning has
on energy use in the low desert, it’s no surprise that our
financial results are lower this quarter,” said Pinnacle West
Chairman, President and Chief Executive Officer Jeff Guldner,
citing National Weather Service Phoenix data showing that the
average June 2023 temperature was almost five degrees cooler than
June 2022.
“While the heat was slow to get started, it certainly showed up
in time for the Fourth of July, and the Phoenix area set a new
record for consecutive days above 110 degrees in July. On July 20,
the company hit a new all-time peak of 8,193 megawatts,” said
Guldner. “Thanks to our employees’ impressive planning and
operating performance, customers continued to receive the reliable
service they count on. This performance – combined with robust
customer growth and a resolution to the 2019 rate case appeal in
June – puts us in a strong position entering the second half of the
year.”
Summer Is Our Season
June 21 may have been the first official day of summer, but
employees at Arizona Public Service Co. (APS), the company’s
regulated utility and principal subsidiary, work hard year-round to
prepare for the season’s heat, wildfire risks and potential
storms.
As temperatures rise, the company helps customers get ready too.
Practical tips and energy-saving strategies can aid in managing
monthly electricity bills, from installing a smart thermostat
through the Cool Rewards demand response program to using the rate
plan comparison tool to ensure customers are on the right plan for
their energy use. APS also works with communities at higher fire
risk to raise awareness about defensible space and having an
emergency plan in place.
The company joins forces with local nonprofits to provide heat
relief to vulnerable individuals throughout Arizona. In partnership
with St. Vincent de Paul, APS helps shelter families through
emergency community housing and eviction prevention assistance and
supports The Salvation Army’s cooling and hydration stations in
nine Arizona counties, among other initiatives.
Ensuring adequate energy supply is another important part of our
summer readiness, and several projects came online recently,
including 141 megawatts (MW) of battery energy storage at AZ Sun
solar sites, 150 MW at the Agave Solar Plant and 238 MW of wind
energy through a power purchase agreement.
Seeking Flexible, Innovative Energy Resources for the
Future
APS not only is focused on serving customers this summer; the
company is taking steps to secure energy supply for years to come.
In June, APS issued an all-source request for proposal (RFP)
seeking project proposals for flexible and innovative resources to
serve growing energy needs as more people and businesses continue
to move to Arizona.
The 2023 all-source RFP seeks approximately 1,000 MW to serve
customers with even more around-the-clock energy – enough to power
about 150,000 Arizona homes. This solicitation is designed to
procure a balanced and diverse portfolio that advances clean energy
while maintaining reliability and affordability for customers.
“We are seeking the best combination of technologies to serve
our customers and deliver value,” said Guldner. “Our resource
planning team welcomes a variety of proposals and technologies to
support a diverse and affordable energy mix for Arizona. That could
include new solar plants and battery energy storage, natural gas
resources that can transition to clean hydrogen fuel in the future,
and other resources that can ramp up quickly to serve customers
during triple-digit summer afternoons.”
This RFP is focused on projects to serve customers beginning
between 2026-2028. To learn more about the 2023 all-source RFP,
deadlines and instructions to apply, visit aps.com/rfp.
Financial Outlook
Given the positive impact of the 2019 rate case appeal
resolution in June and extremely hot weather to start the third
quarter – partially offset by higher than previously forecasted
operations and maintenance expenses and more moderate
weather-normalized sales growth – the company increased its 2023
consolidated earnings range to $4.10 to $4.30 per diluted share on
a weather-normalized basis from a previously disclosed range of
$3.95 to $4.15 per diluted share. Key factors and assumptions
underlying the 2023 outlook can be found in the second-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 second-quarter results, as well as recent developments, at
noon ET (9 a.m. Arizona time) today, August 3. 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 804430. 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, August 10, 2023, by
calling (877) 481-4010 in the U.S. and Canada or (919) 882-2331
internationally and entering replay passcode 48638.
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 approximately 1.4 million Arizona homes and
businesses. For more information about Pinnacle West, visit the
company’s website at pinnaclewest.com.
Dollar amounts in this news release are after income taxes.
Earnings per share amounts are based on average diluted common
shares outstanding. For more information on Pinnacle West’s
operating statistics and earnings, please visit
pinnaclewest.com/investors.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements based on
current expectations. These forward-looking statements are often
identified by words such as "estimate," "predict," "may,"
"believe," "plan," "expect," "require," "intend," "assume,"
"project," "anticipate," "goal," "seek," "strategy," "likely,"
"should," "will," "could," and similar words. Because actual
results may differ materially from expectations, we caution readers
not to place undue reliance on these statements. A number of
factors could cause future results to differ materially from
historical results, or from outcomes currently expected or sought
by Pinnacle West or APS. These factors include, but are not limited
to:
- the current economic environment and its effects, such as lower
economic growth, a tight labor market, inflation, supply chain
delays, increased expenses, volatile capital markets, or other
unpredictable effects;
- our ability to manage capital expenditures and operations and
maintenance costs while maintaining reliability and customer
service levels;
- variations in demand for electricity, including those due to
weather, seasonality (including large increases in ambient
temperatures), the general economy or social conditions, customer,
and sales growth (or decline), the effects of energy conservation
measures and distributed generation, and technological
advancements;
- the potential effects of climate change on our electric system,
including as a result of weather extremes such as prolonged drought
and high temperature variations in the area where APS conducts its
business;
- power plant and transmission system performance and
outages;
- competition in retail and wholesale power markets;
- regulatory and judicial decisions, developments, and
proceedings;
- new legislation, ballot initiatives and regulation or
interpretations of existing legislation or regulations, including
those relating to environmental requirements, regulatory and energy
policy, nuclear plant operations and potential deregulation of
retail electric markets;
- fuel and water supply availability;
- our ability to achieve timely and adequate rate recovery of our
costs through our rates and adjustor recovery mechanisms, including
returns on and of debt and equity capital investment;
- our ability to meet renewable energy and energy efficiency
mandates and recover related costs;
- the ability of APS to achieve its clean energy goals (including
a goal by 2050 of 100% clean, carbon-free electricity) and, if
these goals are achieved, the impact of such achievement on APS,
its customers, and its business, financial condition, and results
of operations;
- risks inherent in the operation of nuclear facilities,
including spent fuel disposal uncertainty;
- current and future economic conditions in Arizona;
- the direct or indirect effect on our facilities or business
from cybersecurity threats or intrusions, data security breaches,
terrorist attack, physical attack, severe storms, or other
catastrophic events, such as fires, explosions, pandemic health
events or similar occurrences;
- the development of new technologies which may affect electric
sales or delivery, including as a result of delays in the
development and application of new technologies;
- the cost of debt, including increased cost as a result of
rising interest rates, and equity capital and the ability to access
capital markets when required;
- environmental, economic, and other concerns surrounding
coal-fired generation, including regulation of GHG emissions;
- volatile fuel and purchased power costs;
- the investment performance of the assets of our nuclear
decommissioning trust, pension, and other postretirement benefit
plans and the resulting impact on future funding requirements;
- the liquidity of wholesale power markets and the use of
derivative contracts in our business;
- potential shortfalls in insurance coverage;
- new accounting requirements or new interpretations of existing
requirements;
- generation, transmission and distribution facility and system
conditions and operating costs;
- the ability to meet the anticipated future need for additional
generation and associated transmission facilities in our
region;
- the willingness or ability of our counterparties, power plant
participants and power plant landowners to meet contractual or
other obligations or extend the rights for continued power plant
operations; and
- restrictions on dividends or other provisions in our credit
agreements and Arizona Corporation Commission orders.
These and other factors 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, 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
SIX MONTHS ENDED
JUNE 30,
JUNE 30,
2023
2022
2023
2022
Operating Revenues
$
1,121,703
$
1,061,669
$
2,066,658
$
1,845,200
Operating Expenses Fuel and purchased power
407,754
352,187
802,258
617,456
Operations and maintenance
277,238
245,387
527,318
463,729
Depreciation and amortization
195,101
186,497
387,007
373,102
Taxes other than income taxes
57,642
54,118
114,780
112,116
Other expenses
688
385
1,298
1,210
Total
938,423
838,574
1,832,661
1,567,613
Operating Income
183,280
223,095
233,997
277,587
Other Income (Deductions) Allowance for equity funds
used during construction
13,034
12,086
28,095
21,833
Pension and other postretirement non-service credits - net
10,474
25,257
20,339
49,066
Other income
6,406
1,682
12,483
3,386
Other expense
(4,813
)
(4,584
)
(8,944
)
(8,006
)
Total
25,101
34,441
51,973
66,279
Interest Expense Interest charges
93,832
68,103
181,951
133,492
Allowance for borrowed funds used during construction
(12,317
)
(5,873
)
(25,039
)
(10,355
)
Total
81,515
62,230
156,912
123,137
Income Before Income Taxes
126,866
195,306
129,058
220,729
Income Taxes
15,897
26,688
17,080
30,849
Net Income
110,969
168,618
111,978
189,880
Less: Net income attributable to noncontrolling interests
4,306
4,306
8,612
8,612
Net Income Attributable To Common Shareholders
$
106,663
$
164,312
$
103,366
$
181,268
Weighted-Average Common Shares Outstanding -
Basic
113,411
113,172
113,385
113,137
Weighted-Average Common Shares Outstanding - Diluted
113,717
113,369
113,657
113,332
Earnings Per Weighted-Average Common Share
Outstanding Net income attributable to common shareholders -
basic
$
0.94
$
1.45
$
0.91
$
1.60
Net income attributable to common shareholders - diluted
$
0.94
$
1.45
$
0.91
$
1.60
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230803051603/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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