PNW — Pinnacle West Capital Corporation

PNW Q1 2026 Earnings Call Summary

1. Key Financial Results and Metrics:

• Earnings per share (EPS) for Q1 2026 were $0.27, a significant improvement from a loss of $0.04 per share in Q1 2025.
• Key contributors to the earnings increase included higher transmission revenue (16¢ benefit), favorable weather (13¢ benefit), and lower operating and maintenance (O&M) expenses.
• Weather-normalized sales growth was reported at 9.4%, driven by a 14.6% increase in commercial and industrial (C&I) sales and a 1.8% increase in residential sales.
• Customer growth was strong at 2.2%, near the high end of annual guidance.
• O&M expenses decreased significantly due to lower planned outage costs and reduced energy efficiency program expenses.

2. Strategic Updates and Business Highlights:

• PNW is actively supporting TSMC's expansion in Arizona, which is expected to boost local economic growth and energy demand.
• The company is advancing its generation and transmission projects, including the Red Hawk expansion (adding 400 MW of natural gas capacity) and the Desert Sun project.
• PNW is utilizing automation and advanced analytics to enhance operational efficiency and reliability.
• The company is focused on improving customer service, achieving high rankings in customer satisfaction metrics.

3. Forward Guidance and Outlook:

• PNW reaffirmed its annual sales growth guidance of 4% to 6% for 2026, with long-term sales growth projected at 5% to 7% through 2030.
• The company is preparing for summer demand with Palo Verde Unit 2 returning to service soon.
• PNW's rate case is on track, with hearings scheduled for May 18, 2026, which may impact future earnings and regulatory lag.

4. Bad News, Challenges, or Points of Concern:

• Increased financing costs and a smaller contribution from the Eldorado investment compared to the previous year were noted as slight drags on earnings.
• Higher depreciation and amortization expenses were reported due to new plant placements.
• The company faces challenges in managing regulatory lag, which could impact earnings growth and capital recovery.

5. Notable Q&A Insights:

• Analysts inquired about the sustainability of recent sales growth trends and the potential for future adjustments to long-term growth guidance.
• Management expressed confidence in ongoing customer additions and the potential for converting uncommitted load into committed contracts through their subscription model.
• Discussions on the potential conversion of retired coal plants to gas generation were highlighted, with ongoing analysis expected to align with the Integrated Resource Plan (IRP) filing later this summer.
• The company noted robust interest in its subscription model, with ongoing negotiations expected to yield contracts by year-end.
• PNW's management emphasized that the repeal of the renewable energy standard is not expected to impact operations, as the company is already exceeding previous goals.

Overall, PNW reported a strong start to 2026, with positive financial metrics and strategic initiatives aimed at supporting growth, despite facing challenges related to regulatory lag and rising costs.