Pinnacle West Capital Corp. executives have raised their forecast for 2023 profits thanks to a positive resolution to a rate case appeal and the extreme heat that has tested Arizona over the past month.
Chairman, President and CEO Jeff Guldner and CFO Andrew Cooper told analysts and investors Aug. 3 that they now expect the Phoenix-based utility to produce 2023 earnings per share of $4.10 to $4.30, the midpoint of which is nearly 4% higher than their previous guidance. Helping drive that is the June agreement between the parent of Arizona Public Service Co. and state regulators that lifted the company’s allowed return on equity on its 2019 rate case to 8.9% from 8.7%. Cooper told analysts the lift amounts to an annualized benefit of $52.5 million.
Also helping drive up the Pinnacle West team’s forecast—and offsetting a relatively cool June in the Phoenix area that depressed second-quarter results—is the searing heat of recent weeks. Guldner said the company set a load record of 8,193 MW on July 20 and noted that Phoenix recently set a record for consecutive days above 110 degrees. That came after a June that was on average nearly 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,” Guldner said in commenting on the company’s Q2, which showed net income of $111 million (down from $164 million in the prior-year quarter) on revenues of $1.1 billion.
Also worth noting is that the profit guidance increase incorporates $30 million more in operations and maintenance spending than executives had previously forecast as well as retail sales growth for all of 2023 of between 2% and 4%, down from 3.5% to 5.5% three months ago. That drop, Cooper said, is due to delays in some large manufacturing and data center projects being built in Arizona, most notable among them Taiwan Semiconductor Manufacturing Corp.’s chip factory.
Guldner and Cooper are sticking to their capital spending forecasts for this year and beyond—they plan to spend nearly $1.7 billion and steadily grow that to $1.85 billion by 2025—while they wait for APS’ 2022 rate case application proceedings to wrap. The hearing of that application is scheduled to begin next week.
Shares of Pinnacle West (Ticker: PNW) were down more than 3% to roughly $80 in midday trading Aug. 3. Year to date, they are still up about 7%, a move that has pushed the company’s market capitalization to more than $9 billion.
