PINNACLE WEST CAPITAL CORP Q2 FY2025 earnings call

• Ted Geisler highlighted that the team delivered reliable service, setting a new peak energy demand record of over 8,500 megawatts on July 9. The state's growth in customer demand, population, and economy supports this. Palo Verde Generating Station celebrated 40 years with long-term investment plans. A natural gas pipeline project with Transwestern Pipeline was announced to enhance energy reliability, expected in service by 2030. Transmission investments are ongoing, with plans for FERC jurisdictional transmission. Clean energy goal updated to carbon neutral by 2050, focusing on reliability and affordability. A rate case was filed on June 13, seeking a $580 million annual revenue increase, with a procedural schedule set. H.B. 2201, a wildfire mitigation bill, was signed into law.
• Andrew Cooper discussed Q2 financial results, noting sales growth, O&M costs, $800 million bond issuance for financing, and capital investments in Agave and Ironwood projects on track for 2026.

In the second quarter, Pinnacle West Capital Corporation reported earnings of $1.58 per share, a decrease of $0.18 compared to the second quarter of 2024. Weather, O&M costs, share issuance, and pension/OPEB nonservice credits were primary negative drivers, partially offset by sales growth (weather-normalized sales increased 5.2%) and transmission revenue. Customer growth was 2.4%, with strong sales contributions from both residential and C&I customer classes, including 8% growth in C&I due to data centers and large manufacturing.

• Andrew reiterated other guidance aspects and stated that due to strong execution in the first half, the company expects to end the year in the top half of the full-year EPS range of $4.40 to $4.60 per share. They are closely monitoring sales growth and weather through the summer.

• Potential regulatory lag in rate case resolution. Uncertainty around uncommitted growth projects materializing. Weather impact on earnings and sales growth.

Q: Julien Dumoulin-Smith from Jefferies asked about the natural gas pipeline announcement and transmission opportunity.

A: Ted Geisler explained the pipeline is critical for securing natural gas supply and supports generation and transmission for growth. Andrew Cooper discussed transmission run rates and strategic projects.

Q: Nick Campanella from Barclays inquired about rate case lag and pipeline capacity.

A: Ted Geisler explained the rate case procedural schedule and pipeline's role in serving committed and uncommitted customers. Andrew Cooper discussed the El Dorado gain as a non-core, non-regular factor.

Q: Paul Patterson from Glenrock Associates asked about solar power plant performance.

A: Ted Geisler stated it's due to more solar installed reducing peak demand serving capacity, not curtailment.

Q: Travis Miller from Morningstar asked about distribution investment.

A: Ted Geisler discussed distribution investments tied to growth and resiliency.

Q: Sophie Karp from KeyBanc asked about rate base CAGR inflection.

A: Andrew Cooper talked about long-term customer and CapEx growth, formula rate potential for better visibility.

Q: Ryan Levine from Citi asked about uncommitted growth project risks.

A: Ted Geisler stated the pipeline is essential for existing and committed customers.

Q: Paul Fremont from Ladenburg asked about 2026 guidance.

A: Andrew Cooper said they expect to provide 2026 guidance on the third quarter call based on rate case procedural schedule.