PINNACLE WEST CAPITAL CORP Q4 FY2025 earnings call

• 2025 was a strong year with strong results and progress on strategic objectives, serving record demand, top quartile reliability and customer experience, and managing grid expansion plans. • Safety was a top priority with outstanding execution, especially through the third hottest summer. • Customer experience improvements included an AI-powered high bill analyzer. • Commercial and industrial growth, including TSMC's expansion, drove economic activity. • Residential growth was strong with new meter installations. • Grid expansion projects like new gas units, battery storage, and solar were ahead of schedule. • Rate case remained on track with staff and intervener testimony expected next month and hearings in May.

In 2025, APS set a new system peak of 8,648 megawatts on August 7, more than 400 megawatts higher than the prior year. Palo Verde operated at 100% summertime capacity factor. Customer experience was a key focus with progress toward industry-leading satisfaction. Residential growth was strong with over 34,000 new meters installed for the second consecutive year. Commercial and industrial growth, including chip manufacturing and data centers, continued to drive strong economic activity. Fourth quarter earnings were $0.13 per share compared with a $0.06 loss in the fourth quarter of 2024. Full year earnings were $5.05 per share, landing in the upper half of the updated guidance range. Weather-normalized sales growth was 6.8% in the fourth quarter and 5% for the full year, with 2% residential growth and 7.5% commercial and industrial growth for the year. Total customer growth was 2.4% in 2025.

• Reiterating 2026 guidance from third quarter call, including annual earnings range of $4.55 to $4.75 per share. • Weather-normalized sales growth guidance for 2026 remains 4% to 6% with C&I customers contributing 3% to 5% of that growth. • Longer-term sales growth guidance remains 5% to 7% through 2030. • Reaffirming capital and financing plans with rate base growth guidance of 7% to 9% through 2028.

Q: Update on IRP planning, including timing this year and incremental transmission and gas generation opportunities?

A: Midyear, expect to file an updated 15-year integrated resource plan. Near term action plan will be more specific. Growth beyond 2028 period needs to be indicated in resource plan.

Q: Credit metric update and HoldCo debt percentage of total debt?

A: Year-end HoldCo debt was at 17%, within target range. 2026 financing plan intends to keep HoldCo debt modest.

Q: Future sales growth of 5% to 7% annually over next 5 years, stickiness and assumptions?

A: Load forecast based on existing and under-development projects. Upside possible from uncommitted load, incremental projects. Committed queue sales forecast based on high confidence projects.

Q: Implications from UNS case on APS, formula rate and fair value?

A: UNS case was generally constructive with 86% of revenue requirement ask, formula rate with post-test year plan. Differences in service territory and risk profile. APS will advocate for arguments.

Q: Thoughts on settlement for rate case?

A: Focused on traditional hearing process, open to settlement but not counting on it for this case.

Q: Pace of large load commitments in uncommitted bucket?

A: Treating uncommitted queue with infrastructure offers, actively in discussions, aim to finalize agreements and file with commission this year.

Q: Transmission funding start and DOE energy dominance financing?

A: Will look at all financing sources, including customer financing and federal grants.

Q: FFO to debt basis and earnings trajectory with formula rate?

A: FFO to debt was high 14s, aim to maintain 100 basis points cushion. Formula rate expected to lead to more linear earnings trajectory.

Q: Transparency and formula rates on earnings disclosure?

A: Aim to provide longer visibility and more consistent linear trajectory once rate case is processed.

Q: TSMC expansions and vision?

A: In active discussions with TSMC, when plans are solidified, will articulate infrastructure impact.

Q: RES DSM component of O&M and cost pressures?

A: Commission rightsized DSM plan for meaningful savings. Programs remain focused on impactful ones. Commission focused on affordability.

Q: Additional TSMC expansions vision?

A: In active discussions, will articulate infrastructure impact when plans are solidified.