Pinnacle West Reports 2023 Full-Year and Fourth-Quarter Results, Shares 2024 Financial Outlook
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Insights
The reported increase in net income for Pinnacle West Capital Corp. in the full year of 2023 is a noteworthy development for investors, reflecting the company's ability to leverage favorable conditions and operational performance to improve its bottom line. The impact of weather on utility companies can be significant, as it can drive higher energy demand and usage. In this case, the positive weather effects, coupled with customer growth, have contributed to the company's financial success.
Moreover, the Lost Fixed Cost Recovery (LFCR) adjustor mechanism and the surcharge from the 2019 Rate Case appeal have provided additional revenue streams. It's important to note that such regulatory mechanisms are designed to stabilize utility revenues despite fluctuations in energy consumption. The increased transmission revenue also suggests that the company has been able to capitalize on the infrastructure to distribute more power, which often correlates with economic growth and can be a positive signal for the company's future prospects.
However, the rise in expenses, including higher interest charges and operations and maintenance costs, alongside higher depreciation and amortization due to increased plant assets, indicate significant capital investments and potential pressure on future earnings. Investors should monitor these costs as they could affect profitability margins.
The utility sector is typically considered a stable investment due to its essential service nature and regulatory environment. Pinnacle West's constructive regulatory outcome achieved in the 2022 rate case is a critical factor that can influence investor confidence. Regulatory outcomes can either pose a risk or provide an opportunity for utility companies, depending on whether they allow for cost recovery and reasonable returns on investment.
Furthermore, the company's proactive steps in filing a Transmission System Plan to address reliability and accommodate Arizona's growth is a strategic move. As regions grow, the demand for energy increases and utility companies must plan accordingly to avoid service disruptions and capitalize on the growth opportunity. This forward-looking approach can be a positive indicator for long-term investors seeking companies with a clear strategy for managing and leveraging demographic and economic changes.
The financial results of Pinnacle West provide insights into broader economic trends, such as the impact of demographic changes on utility demand. Arizona's substantial growth is a microcosm of regional economic expansion, which can lead to increased energy consumption and infrastructure development. The company's ability to meet the demands of a growing customer base and ensure reliability in its service are essential for sustaining economic development in the region.
It is also worth considering the macroeconomic implications of higher interest charges. As interest rates rise, typically in response to inflationary pressures or monetary policy adjustments, companies with significant debt loads may face increased financial burden. This can affect their operational costs and investment capabilities. Thus, the economic environment can have a direct impact on the financial health of utility companies like Pinnacle West.
- Full-year financial results positively impacted by the effects of weather, robust customer growth and strong operational performance
- Constructive regulatory outcome achieved in 2022 rate case
- Company files Transmission System Plan to ensure reliability and meet Arizona’s substantial growth
For the quarter ended Dec. 31, 2023, Pinnacle West reported a consolidated net loss attributable to common shareholders of
The higher 2023 full-year results reflect an increase of approximately
“Two years ago, we outlined a plan following an unfavorable rate case decision that created financial hurdles and moved us to reset our financial outlook. We made significant progress on that plan, adapting and reaching our revised targets,” said Pinnacle West Chairman, President and CEO Jeff Guldner. “That progress is reflected in our solid 2023 financial results and a constructive outcome in our 2022 rate case that was decided late last week.
“The Arizona Corporation Commission’s (ACC) decision affirms important aspects of our rate filing and supports investments in our energy infrastructure to increase grid resilience, while also ensuring customers receive the reliability they count on – without compromising affordability.”
Guldner also lauded the efforts of employees who worked tenaciously to keep the lights on and air conditioners running throughout the year, but especially during the hottest
“By executing on comprehensive operational and financial strategies, we enter 2024 in a solid position to provide top-level service for our customers and further energize Arizona’s economic expansion.”
Arizona’s Economy: Planning for Growth
Arizona’s economy is more diverse than ever, and Arizona’s population continues to grow.
APS, the company’s principal subsidiary, experienced customer growth of
To prioritize reliability and meet substantial growth in residential and commercial energy needs, APS filed a future-focused Transmission System Plan with the ACC late last month.
“This 10-year plan includes significant upgrades to APS’s transmission system to support load growth, mitigate outage risks, connect the APS grid to additional generation resources and procure more cost-competitive energy for customers through the wholesale power market,” Guldner said, adding that in 2023, APS spent
Staying Focused on Serving Customers
Employees remain committed to putting customers first and achieving an industry-leading best-in-class customer experience. Company-wide efforts to provide a more frictionless customer experience continue to pay off, as measured by J.D. Power. For 2023, APS ranked in the second quartile of large investor-owned utilities for both business and residential customers. This is a meaningful accomplishment considering APS was fourth quartile as recently as 2021. In fact, residential customers ranked APS second in our peer set in 2023 for both “Perfect Power” (no brief or lengthy outages) and “Phone Customer Care.”
Additionally, in 2023, APS continued to improve customers’ experience by:
- Improving the ease-of-use and increasing functionality of our digital experience, including increasing use of text and email notifications to keep customers informed about their service;
- Adding more than 1,100 in-person payment locations across the state, as well as introducing new customer payment channels, including Google and Apple Pay;
- Continuing to communicate with customers in their preferred channels about topics that matter most to them, including reliability, energy efficiency, financial assistance, the environment, and programs that enable them to design their own personalized energy experience; and
-
Offering assistance and discount programs to qualified limited-income customers, as well as other non-income-based assistance programs for those struggling to pay their bills, including several assistance programs through the
State of Arizona . Collectively, these programs provided funding and discounts exceeding more than$69 million
Financial Outlook
Following the recent conclusion of APS’s rate case, the company estimates its consolidated 2024 earnings guidance will be in the range of
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 financial results and recent developments, and to provide an update on the company’s longer-term financial outlook, at 11 a.m. ET (9 a.m.
General Information
Pinnacle West Capital Corp., an energy holding company based in
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:
- uncertainties associated with the current and future economic environment, including economic growth, labor market conditions, 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 discussed in the most recent Pinnacle West/APS Form 10-K along with other public filings with the Securities and Exchange Commission, 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 | |||||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||
| (unaudited) | |||||||||||||||
| (dollars and shares in thousands, except per share amounts) | |||||||||||||||
| THREE MONTHS ENDED | TWELVE MONTHS ENDED | ||||||||||||||
| DECEMBER 31, | DECEMBER 31, | ||||||||||||||
2023 |
2022 |
2023 |
2022 |
||||||||||||
| Operating Revenues | $ |
991,574 |
|
$ |
1,009,314 |
|
$ |
4,695,991 |
|
$ |
4,324,385 |
|
|||
| Operating Expenses | |||||||||||||||
| Fuel and purchased power |
|
375,879 |
|
|
455,316 |
|
|
1,792,657 |
|
|
1,629,343 |
|
|||
| Operations and maintenance |
|
281,388 |
|
|
271,680 |
|
|
1,058,725 |
|
|
987,072 |
|
|||
| Depreciation and amortization |
|
203,598 |
|
|
189,704 |
|
|
794,043 |
|
|
753,195 |
|
|||
| Taxes other than income taxes |
|
56,064 |
|
|
54,779 |
|
|
224,013 |
|
|
220,370 |
|
|||
| Other expenses |
|
265 |
|
|
1,084 |
|
|
1,913 |
|
|
2,494 |
|
|||
| Total |
|
917,194 |
|
|
972,563 |
|
|
3,871,351 |
|
|
3,592,474 |
|
|||
| Operating Income |
|
74,380 |
|
|
36,751 |
|
|
824,640 |
|
|
731,911 |
|
|||
| Other Income (Deductions) | |||||||||||||||
| Allowance for equity funds used during construction |
|
13,047 |
|
|
14,297 |
|
|
53,118 |
|
|
45,263 |
|
|||
| Pension and other postretirement non-service credits - net |
|
10,135 |
|
|
24,748 |
|
|
40,648 |
|
|
98,487 |
|
|||
| Other income |
|
5,242 |
|
|
2,311 |
|
|
33,666 |
|
|
7,916 |
|
|||
| Other expense |
|
(9,140 |
) |
|
(37,634 |
) |
|
(25,056 |
) |
|
(52,385 |
) |
|||
| Total |
|
19,284 |
|
|
3,722 |
|
|
102,376 |
|
|
99,281 |
|
|||
| Interest Expense | |||||||||||||||
| Interest charges |
|
96,027 |
|
|
77,892 |
|
|
374,887 |
|
|
283,569 |
|
|||
| Allowance for borrowed funds used during construction |
|
(9,433 |
) |
|
(8,983 |
) |
|
(43,564 |
) |
|
(28,030 |
) |
|||
| Total |
|
86,594 |
|
|
68,909 |
|
|
331,323 |
|
|
255,539 |
|
|||
| Income (loss) Before Income Taxes |
|
7,070 |
|
|
(28,436 |
) |
|
595,693 |
|
|
575,653 |
|
|||
| Income Taxes |
|
2,787 |
|
|
(8,750 |
) |
|
76,912 |
|
|
74,827 |
|
|||
| Net Income (loss) |
|
4,283 |
|
|
(19,686 |
) |
|
518,781 |
|
|
500,826 |
|
|||
| Less: Net income attributable to noncontrolling interests |
|
4,306 |
|
|
4,306 |
|
|
17,224 |
|
|
17,224 |
|
|||
| Net Income (loss) Attributable To Common Shareholders | $ |
(23 |
) |
$ |
(23,992 |
) |
$ |
501,557 |
|
$ |
483,602 |
|
|||
| Weighted-Average Common Shares Outstanding - Basic |
|
113,534 |
|
|
113,298 |
|
|
113,442 |
|
|
113,196 |
|
|||
| Weighted-Average Common Shares Outstanding - Diluted |
|
113,534 |
|
|
113,298 |
|
|
113,804 |
|
|
113,416 |
|
|||
| Earnings Per Weighted-Average Common Share Outstanding | |||||||||||||||
| Net income (loss) attributable to common shareholders - basic | $ |
- |
|
$ |
(0.21 |
) |
$ |
4.42 |
|
$ |
4.27 |
|
|||
| Net income (loss) attributable to common shareholders - diluted | $ |
- |
|
$ |
(0.21 |
) |
$ |
4.41 |
|
$ |
4.26 |
|
|||
View source version on businesswire.com: https://www.businesswire.com/news/home/20240227572305/en/
Media Contact: Alan Bunnell (602) 250-3376
Analyst Contact: Amanda Ho (602) 250-3334
Website: pinnaclewest.com
Source: Pinnacle West Capital Corp.
FAQ
What was Pinnacle West Capital Corp.'s (PNW) consolidated net income for full-year 2023?
What were the key factors contributing to the higher 2023 full-year results?
What led to the net loss in the fourth quarter of 2023?
What is the purpose of Pinnacle West's Transmission System Plan?
