UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | Commission File Number | | Exact Name of Each Registrant as specified in its charter; State of Incorporation; Address; and Telephone Number | IRS Employer Identification No. | | --- | ...

Financial Data and Key Metrics Changes - The company reported earnings of $0.94 per share for Q2 2023, down $0.51 compared to the same quarter last year, primarily due to extremely mild weather in June [36][69] - The updated EPS guidance range for the year is now $4.10 to $4.30 per share, reflecting the impact of a new surcharge approved by the commission [38][35] Business Line Data and Key Metrics Changes - Operating and Maintenance (O&M) guidance for 2023 has been increased to a range of $915 million to $935 million, with expectations of flat O&M per megawatt hour compared to last year [5][12] - Year-over-year increases in O&M categories were attributed to inflation and high customer growth, with generation fleet O&M constituting a significant portion of the increase [45] Market Data and Key Metrics Changes - Customer growth remains steady at 2% for Q2, with Arizona continuing to be a popular migration destination, contributing to strong fundamentals for customer growth [37] - Weather-normalized sales growth for the quarter was 0.1%, with commercial and industrial sales growth at 2.2% [70] Company Strategy and Development Direction - The company is focused on maintaining reliability and affordability while transitioning to 100% clean and carbon-free electricity by 2050 [43] - A new all-source RFP for 1,000 megawatts is being issued to ensure a diverse energy mix and reliable service [43] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by the recent heat wave but emphasized the company's preparedness and ability to deliver reliable service [2][67] - The company is actively working to reduce regulatory lag and improve the predictability of earnings streams [55][80] Other Important Information - The company successfully broke its previous peak demand record in July, reaching nearly 8,200 megawatts, a 500-megawatt increase from the prior record set in 2020 [34] - The company is advocating for a generation rider to address regulatory lag and support capital deployment [49] Q&A Session Summary Question: Comments on the rate case and generation rider - Management noted that there is interest from staff in understanding the value of the proposed generation rider, and they are advocating for it to address regulatory lag [9][10] Question: Impact of pension-related adjustments on future EPS - Management indicated that pension-related adjustments would be reflected in revenue requirements and customer charges, with ongoing advocacy for these adjustments [23][91] Question: Expectations for O&M in the latter part of the year - Management stated that they will evaluate O&M opportunities and risks at the end of the summer, considering weather impacts and operational needs [76] Question: Long-term growth rate expectations post-rate case - Management expressed confidence in achieving a linear earnings stream within the 5% to 7% growth rate, with updates to key drivers expected after the rate case concludes [80][81]

A clear plan for clean energy transition 3 Long-term EPS growth target based on the Company's current weather-normalized 5-year compound annual growth rate projections from 2022-2026. 4 Forecasted guidance range through 2025. 6 Managed capital plan to support customer growth, reliability, and clean transition $167 $265 $260 $255 $577 $520 $530 $530 $217 $260 $300 $300 $345 $360 $465 $520 $226 $265 $245 $245 2022 2023E 2024E 2025E Other Generation Clean Generation Transmission Distribution Other APS Total 20 ...

[Part I — Financial Information](index=6&type=section&id=Part%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20FINANCIAL%20STATEMENTS) This section presents unaudited condensed consolidated financial statements for Pinnacle West and APS, covering income, balance sheets, cash flows, and combined notes [Pinnacle West Capital Corporation Financial Statements](index=7&type=section&id=Pinnacle%20West%20Capital%20Corporation%20Financial%20Statements) Pinnacle West reported Q2 2023 net income of **$106.7 million**, down from **$164.3 million** in Q2 2022, with total assets increasing to **$24.0 billion** Pinnacle West Condensed Consolidated Statements of Income (unaudited, in thousands) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | **2023** | **2022** | **2023** | **2022** | | **OPERATING REVENUES** | $1,121,703 | $1,061,669 | $2,066,658 | $1,845,200 | | **OPERATING INCOME** | $183,280 | $223,095 | $233,997 | $277,587 | | **NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS** | $106,663 | $164,312 | $103,366 | $181,268 | | **Diluted EPS** | $0.94 | $1.45 | $0.91 | $1.60 | Pinnacle West Condensed Consolidated Balance Sheets (unaudited, in thousands) | | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total current assets** | $1,851,737 | $1,750,554 | | **Total property, plant and equipment** | $17,408,173 | $16,854,354 | | **TOTAL ASSETS** | $23,979,342 | $22,723,405 | | **Total current liabilities** | $1,932,581 | $1,762,141 | | **LONG-TERM DEBT LESS CURRENT MATURITIES** | $8,164,315 | $7,741,286 | | **Total shareholders' equity** | $5,966,924 | $6,048,647 | | **TOTAL LIABILITIES AND EQUITY** | $23,979,342 | $22,723,405 | Pinnacle West Condensed Consolidated Statements of Cash Flows (unaudited, in thousands) | | Six Months Ended June 30, | | :--- | :--- | :--- | | | **2023** | **2022** | | **Net cash provided by operating activities** | $437,613 | $588,286 | | **Net cash used for investing activities** | ($883,771) | ($794,250) | | **Net cash provided by financing activities** | $448,984 | $225,184 | | **NET INCREASE IN CASH AND CASH EQUIVALENTS** | $2,826 | $19,220 | [Arizona Public Service Company Financial Statements](index=14&type=section&id=Arizona%20Public%20Service%20Company%20Financial%20Statements) APS reported Q2 2023 net income of **$118.9 million**, down from **$170.0 million** in Q2 2022, with total assets growing to **$23.8 billion** APS Condensed Consolidated Statements of Income (unaudited, in thousands) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | **2023** | **2022** | **2023** | **2022** | | **OPERATING REVENUES** | $1,121,703 | $1,061,669 | $2,066,658 | $1,845,200 | | **OPERATING INCOME** | $188,213 | $226,253 | $242,867 | $284,547 | | **NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDER** | $118,937 | $169,969 | $129,600 | $194,169 | APS Condensed Consolidated Balance Sheets (unaudited, in thousands) | | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total property, plant and equipment** | $17,335,778 | $16,800,254 | | **TOTAL ASSETS** | $23,793,210 | $22,543,852 | | **Total shareholder equity** | $7,025,373 | $6,941,726 | | **Long-term debt less current maturities** | $7,041,004 | $6,793,529 | | **TOTAL LIABILITIES AND EQUITY** | $23,793,210 | $22,543,852 | APS Condensed Consolidated Statements of Cash Flows (unaudited, in thousands) | | Six Months Ended June 30, | | :--- | :--- | :--- | | | **2023** | **2022** | | **Net cash provided by operating activities** | $465,520 | $600,296 | | **Net cash used for investing activities** | ($865,258) | ($765,560) | | **Net cash provided by financing activities** | $399,498 | $183,672 | | **NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS** | ($240) | $18,408 | [Combined Notes to Condensed Consolidated Financial Statements](index=21&type=section&id=Combined%20Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section details accounting policies and financial data, covering revenue, debt, regulatory matters, derivatives, commitments, leases, and asset retirement obligations [Note 2. Revenue](index=22&type=section&id=Note%202.%20Revenue) Pinnacle West's Q2 2023 operating revenues increased to **$1.12 billion**, primarily from retail electric service to residential and non-residential customers Pinnacle West Consolidated Revenue by Source (in thousands) | Revenue Source | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Residential | $542,315 | $537,589 | $952,039 | $904,935 | | Non-Residential | $516,712 | $462,669 | $922,849 | $822,185 | | Wholesale Energy Sales | $27,282 | $29,902 | $122,885 | $58,805 | | Transmission Services | $33,152 | $29,352 | $64,943 | $54,844 | | **Total operating revenues** | **$1,121,703** | **$1,061,669** | **$2,066,658** | **$1,845,200** | - The allowance for doubtful accounts decreased to **$19.8 million** as of June 30, 2023, from **$23.8 million** at the end of 2022, reflecting lower bad debt expense and higher write-offs during the period[73](index=73&type=chunk) [Note 3. Long-Term Debt and Liquidity Matters](index=24&type=section&id=Note%203.%20Long-Term%20Debt%20and%20Liquidity%20Matters) Pinnacle West and APS enhanced liquidity by replacing credit facilities, with APS issuing **$500 million** in senior notes, bringing total long-term debt to **$8.48 billion** - On April 10, 2023, Pinnacle West replaced its **$200 million** credit facility with a new one maturing in 2028, and APS replaced its two **$500 million** facilities with a new **$1.25 billion** facility maturing in 2028[75](index=75&type=chunk)[77](index=77&type=chunk) - On June 30, 2023, APS issued **$500 million** of 5.55% unsecured senior notes due August 1, 2033, to repay short-term debt and for general corporate purposes[79](index=79&type=chunk) [Note 4. Regulatory Matters](index=26&type=section&id=Note%204.%20Regulatory%20Matters) This note details regulatory activities, including APS's **$460 million** retail rate case filing, the favorable resolution of the 2019 rate case appeal, and the Power Supply Adjustor mechanism - **2022 Retail Rate Case:** APS filed an application in October 2022 seeking a net annual retail base rate increase of **$460 million**, based on a **10.25%** return on equity (ROE) In June 2023, ACC Staff recommended a **$251-$312 million** increase with a **9.6%** ROE, while RUCO recommended an **$84.9 million** increase with an **8.2%-8.7%** ROE APS filed rebuttal testimony in July 2023 reducing its requested increase to **$383.1 million**[84](index=84&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk) - **2019 Retail Rate Case Resolution:** In June 2023, the ACC approved a joint resolution following a court appeal, allowing recovery of **$215.5 million** in Four Corners SCR costs and **$59.6 million** in lost revenue, effective July 1, 2023[96](index=96&type=chunk)[97](index=97&type=chunk) - **Power Supply Adjustor (PSA):** To address a growing under-collected balance, the ACC approved a new PSA rate effective March 2023, designed to bring the balancing account to near-zero over a 24-month period; the deferred fuel and purchased power regulatory asset was **$433.3 million** as of June 30, 2023[121](index=121&type=chunk)[117](index=117&type=chunk) [Note 7. Derivative Accounting](index=46&type=section&id=Note%207.%20Derivative%20Accounting) The company uses derivatives to manage commodity and interest rate exposure, with most energy derivative gains/losses deferred via PSA, resulting in a **$109.6 million** net liability position - Unrealized gains and losses on energy derivatives for regulated operations are deferred for future rate treatment through the Power Supply Adjustor (PSA) mechanism[183](index=183&type=chunk) - In October 2022, Bright Canyon Energy entered into an interest rate swap with a notional value of **$32 million** to hedge variable interest rate exposure for the Los Alamitos project, designated as a cash flow hedge[192](index=192&type=chunk) - If the company's credit rating were to fall below investment grade, it could be required to post approximately **$58.3 million** in additional collateral for energy derivative contracts and **$161 million** for non-derivative contracts[196](index=196&type=chunk) [Note 8. Commitments and Contingencies](index=50&type=section&id=Note%208.%20Commitments%20and%20Contingencies) This note outlines commitments and contingencies, including a **$5.5 billion** increase in fuel and purchased power commitments, environmental regulations, and legal disputes, such as the impaired Clear Creek wind farm investment - Fuel and purchased power commitments increased by **$5.5 billion** since the 2022 Form 10-K, primarily due to new purchased power and energy storage agreements[202](index=202&type=chunk) - APS estimates its share of costs to comply with the Coal Combustion Residuals (CCR) rule is approximately **$30 million** for Four Corners and **$19 million** for Cholla, with additional corrective action costs estimated at **$10-$15 million** and **$35-$40 million**, respectively, over 30 years[214](index=214&type=chunk)[216](index=216&type=chunk) - BCE's equity method investment in the Clear Creek wind farm was fully impaired in Q4 2022 due to disputes over system upgrades and related power curtailment, resulting in a write-down of the **$17.1 million** carrying value to zero[229](index=229&type=chunk)[391](index=391&type=chunk) [Note 14. Leases](index=71&type=section&id=Note%2014.%20Leases) The company leases various assets, including significant purchased power agreements, with total lease liabilities of **$1.31 billion** and future commitments of **$6.3 billion** for uncommenced leases Operating Lease Liabilities Maturity (in thousands) | Year | Total Lease Payments | | :--- | :--- | | 2023 (remaining) | $108,550 | | 2024 | $117,765 | | 2025 | $132,048 | | 2026 | $143,548 | | 2027 | $167,517 | | Thereafter | $1,016,922 | | **Total lease commitments** | **$1,686,350** | | Less imputed interest | ($374,154) | | **Total lease liabilities** | **$1,312,196** | - APS has executed but not yet commenced lease arrangements, primarily for energy storage assets, with expected total fixed payments of approximately **$6.3 billion** over the lease terms[294](index=294&type=chunk) - In January 2023, APS modified and extended two existing purchased power operating lease agreements, one to 2032 and the other to 2034[289](index=289&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=75&type=section&id=Item%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on financial condition and operations, covering strategic overview, key financial drivers, operating results, liquidity, capital resources, and market risks [Overview](index=75&type=section&id=Overview) Management discusses the company's core strategy to achieve a sustainable energy future for Arizona, targeting **65%** clean energy by 2030 and **100%** carbon-free electricity by 2050 - The company has a three-part clean energy goal: **65%** clean energy by 2030 (with **45%** from renewables), exiting coal-fired generation by 2031, and achieving **100%** clean, carbon-free electricity by 2050[316](index=316&type=chunk)[317](index=317&type=chunk)[318](index=318&type=chunk)[319](index=319&type=chunk) - APS is advancing its clean energy goals through competitive all-source RFPs, with the 2022 RFP resulting in contracts for **840 MW** of solar plus storage, **555 MW** of stand-alone storage, and **216 MW** of wind, and a new RFP for **~1,000 MW** issued in June 2023[328](index=328&type=chunk)[329](index=329&type=chunk) - APS plans to install more than **2,100 MW** of energy storage by 2025, combining utility-owned projects and purchased power agreements[339](index=339&type=chunk) [Key Financial Drivers](index=91&type=section&id=Key%20Financial%20Drivers) Financial results are driven by retail electric revenues, influenced by customer growth projected at **1.5% to 2.5%** and weather-adjusted retail sales growth of **4.5% to 6.5%** annually through 2025 Growth Projections (Annual) | Metric | 2023 Projection | 2023-2025 Average Projection | | :--- | :--- | :--- | | Customer Growth | 1.5% to 2.5% | 1.5% to 2.5% | | Retail Sales Growth (Weather-Normalized) | 2.0% to 4.0% | 4.5% to 6.5% | - Projected sales growth is significantly impacted by several large data centers and new large manufacturing facilities, expected to contribute **3.5% to 5.5%** to average annual growth through 2025[401](index=401&type=chunk) [Results of Operations](index=93&type=section&id=Results%20of%20Operations) Consolidated net income decreased to **$107 million** in Q2 2023 and **$103 million** for H1 2023, primarily due to higher O&M, interest charges, and depreciation Net Income Attributable to Common Shareholders (in millions) | Period | 2023 | 2022 | Net Change | | :--- | :--- | :--- | :--- | | **Three Months Ended June 30** | $107 | $164 | ($57) | | **Six Months Ended June 30** | $103 | $181 | ($78) | - Key negative drivers for Q2 2023 vs Q2 2022 were higher O&M expense (**-$32M**), higher interest charges (**-$20M**), lower pension credits (**-$15M**), and higher depreciation (**-$9M**)[417](index=417&type=chunk) - Key negative drivers for H1 2023 vs H1 2022 were higher O&M expense (**-$62M**), higher interest charges (**-$34M**), lower pension credits (**-$29M**), and higher depreciation (**-$14M**)[425](index=425&type=chunk) [Liquidity and Capital Resources](index=98&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Operating cash flow decreased by **$150 million** in H1 2023, while capital expenditures are projected at **$1.67 billion** in 2023, **$1.80 billion** in 2024, and **$1.85 billion** in 2025 Summary of Cash Flows - Pinnacle West Consolidated (in millions) | Six Months Ended June 30, | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Net cash flow provided by operating activities | $438 | $588 | ($150) | | Net cash flow used for investing activities | ($884) | ($794) | ($90) | | Net cash flow provided by financing activities | $449 | $225 | $224 | APS Estimated Capital Expenditures (in millions) | Category | 2023 | 2024 | 2025 | | :--- | :--- | :--- | :--- | | Nuclear Generation | $120 | $120 | $120 | | Renewables and ESS | $240 | $345 | $400 | | Other Generation | $265 | $245 | $245 | | Distribution | $520 | $530 | $530 | | Transmission | $260 | $300 | $300 | | Other | $265 | $260 | $255 | | **Total APS** | **$1,670** | **$1,800** | **$1,850** | - Pinnacle West and APS are in compliance with their debt covenants, maintaining a debt-to-capitalization ratio of approximately **60%** for Pinnacle West and **52%** for APS as of June 30, 2023[451](index=451&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=105&type=section&id=Item%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to market risks from changes in interest rates and commodity prices, which are managed through hedging strategies and derivative instruments - The company is exposed to market risks from changes in interest rates, commodity prices, and the value of investments in its nuclear decommissioning trusts and benefit plan assets[462](index=462&type=chunk) Hypothetical 10% Price Movement Impact on Derivative Market Value (in millions, as of June 30, 2023) | Commodity | Gain (Loss) from Price Up 10% | Gain (Loss) from Price Down 10% | | :--- | :--- | :--- | | Electricity | $10 | ($10) | | Natural gas | $52 | ($52) | | **Total** | **$62** | **($62)** | [Item 4. Controls and Procedures](index=105&type=section&id=Item%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting during the quarter - Pinnacle West's and APS's management, including their respective CEOs and CFOs, concluded that as of June 30, 2023, their disclosure controls and procedures were effective[472](index=472&type=chunk)[473](index=473&type=chunk) - No changes occurred during the quarter ended June 30, 2023, that materially affected, or are reasonably likely to materially affect, the internal control over financial reporting for either Pinnacle West or APS[475](index=475&type=chunk) [Part II — Other Information](index=107&type=section&id=Part%20II%20%E2%80%94%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=107&type=section&id=Item%201.%20LEGAL%20PROCEEDINGS) This section refers to Note 4 for regulatory matters and Note 8 for environmental, Superfund, and other disputes regarding legal proceedings - For information regarding pending or threatened litigation and other matters, the report refers to Note 4 (ACC and FERC-related matters) and Note 8 (environmental matters, Superfund-related matters and other disputes)[478](index=478&type=chunk)[479](index=479&type=chunk)[480](index=480&type=chunk) [Item 1A. Risk Factors](index=107&type=section&id=Item%201A.%20RISK%20FACTORS) This section incorporates by reference the risk factors detailed in the company's 2022 Form 10-K, which could materially affect business and financial results - The report incorporates by reference the risk factors detailed in the 2022 Form 10-K[481](index=481&type=chunk) [Item 5. Other Information](index=107&type=section&id=Item%205.%20OTHER%20INFORMATION) This section discloses ongoing collective bargaining negotiations between APS and IBEW, and confirms no Rule 10b5-1 trading plan adoptions or terminations by directors or officers - APS is in ongoing negotiations with the IBEW for a new contract for approximately **1,200** union employees, with the previous agreement remaining in effect[482](index=482&type=chunk) - During the quarter ended June 30, 2023, no directors or executive officers adopted or terminated a Rule 10b5-1 trading plan[483](index=483&type=chunk) [Item 6. Exhibits](index=108&type=section&id=Item%206.%20EXHIBITS) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications, XBRL data files, and incorporated by reference documents - The exhibits include CEO and CFO certifications (Exhibits 31.1-31.4, 32.1-32.2) and XBRL interactive data files[484](index=484&type=chunk)

Pinnacle West Capital Corporation (NYSE:PNW) Q1 2023 Results Conference Call May 4, 2023 12:00 PM ET Company Participants Amanda Ho - Director of Investor Relations Jeffrey Guldner - President and Chief Executive Officer Andrew Cooper - Senior Vice President and Chief Financial Officer Ted Geisler - President, Arizona Public Service Company Jacob Tetlow - Executive Vice President of Operations Jose Esparza - Senior Vice President of Public Policy Conference Call Participants Dariusz Lozny - Bank of America ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | Commission File Number | Exact Name of Each Registrant as specified in its charter; State of Incorporation; Address; and Telephone Number | IRS Employer Identification No. | | --- | --- | ...

Financial Data and Key Metrics Changes - For Q4 2022, the company reported a loss of $0.21 per share, down $0.45 compared to Q4 2021 [11] - Full-year 2022 earnings were $4.26 per share, down from $5.47 per share in 2021, primarily due to the negative rate case outcome [12][14] - The company experienced a $17.1 million impairment charge related to a Bright Canyon energy equity investment in Q4 2022 [36] Business Line Data and Key Metrics Changes - Customer growth for Q4 2022 was 2.1%, consistent with the full-year growth rate [13] - Weather-normalized sales growth for 2022 was 2.4%, with a 1.2% increase in Q4 compared to the prior year [38] - Strong commercial and industrial (C&I) growth of 4.6% over 2021 was noted, driven by Arizona's economic diversification [38] Market Data and Key Metrics Changes - Arizona had the fifth highest population growth in 2022, contributing to customer growth [13] - The Phoenix Metro area was recognized as a top three industrial market to watch in 2023, indicating strong economic activity [38] Company Strategy and Development Direction - The company aims to achieve a constructive outcome in its pending rate case and improve customer communication and engagement in 2023 [9] - A commitment to reach 100% clean carbon-free energy by 2050 was reiterated, with over 2,100 megawatts of clean energy resources procured [8] - The capital plan was updated to $5.3 billion from 2023 to 2025, with an average annual growth rate of 5% to 7% for rate base growth [40] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by the unfavorable outcome of the previous rate case but expressed confidence in long-term value creation for customers and shareholders [9][11] - The company expects headwinds in 2023 from higher benefit expenses, interest expenses, and plant depreciation and amortization [14][15] - Management emphasized a focus on cost management and operational efficiencies to navigate inflationary pressures [14] Other Important Information - The pension plan is 106% funded, with no expected contributions needed in the near term, although higher benefit expenses are anticipated in 2023 [15] - The company is deferring any equity issuance until after the current rate case resolution [16] Q&A Session Summary Question: What is the outlook for future equity needs beyond the current rate case? - The company anticipates an equity need of $400 million to $500 million in 2024, dependent on the capital plan developed post-rate case [43] Question: How does the company plan to mitigate pension expense volatility? - Management is exploring regulatory recovery options and other cost levers to manage pension expenses effectively [57] Question: What is the impact of the Court of Appeals ruling on the Four Corners SCR and Ocotillo projects? - A favorable ruling would not be retroactive but could lead to recovery of disallowed capital costs, impacting EPS positively [50][52] Question: What is the company's strategy regarding clean generation spending? - The company is focused on optimizing the mix of utility-owned generation and power purchase agreements (PPAs) to maximize benefits from tax credits [58][72] Question: What is the feedback from rating agencies regarding credit outlook? - The company is committed to maintaining a 16% to 18% FFO-to-debt ratio to support its current ratings, with future adjustments dependent on the rate case outcome [66][80]

Financial Performance & Guidance - Full Year 2022 EPS was $426, primarily impacted by results of prior rate case, compared to $547 in 2021[13] - The company provides 2023 EPS guidance of $395-$415[21] - Adjusted gross margin for 2023 is projected to be $267 - $272 billion[21] - Adjusted operating and maintenance expense for 2023 is expected to be $885 - $905 million[21] Growth & Investment - Retail customer growth is projected at 15%-25%[21] - Weather-normalized retail electricity sales growth is forecasted at 35%-55%, including a 20%-40% contribution from new large manufacturing facilities and data centers[21] - The company plans a capital investment of $532 billion from 2023-2025[28] - The company projects steady rate base growth with 5-7% annual growth for FERC and ACC[32] Regulatory & Operations - A new rate case was filed on October 28, 2022, requesting a total revenue increase of $460 million and a customer net bill impact of 136% on day 1[93] - The company is targeting declining O&M per MWh, with total adjusted O&M expected to be $885M-$905M in 2023[42] - The company has contracted over 2,100 MW of clean energy and storage to be in service for APS customers by the end of 2025[62]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number charter; State of Incorporation; Address; and Telephone Number IRS Employer Identification No. 1-8962 PINNACLE WEST CAPITAL CORPORATION 8 ...

Financial Performance & Guidance - The company's 2022 EPS guidance is between $4.20 and $4.35[10] - Adjusted gross margin (operating revenues, net of fuel and purchased power expenses) is projected to be $2.59 – $2.61 billion[10] - Adjusted operating and maintenance expenses are expected to be $880 – $895 million[10] - Interest expense, net of allowance for borrowed and equity funds used during construction (AFUDC ~$64 million), is projected to be $213 – $215 million[10] Rate Case & Regulatory - A new rate case was filed on October 28, 2022, requesting rates to become effective December 1, 2023, seeking a total revenue increase of $460 million, which would result in a 13.6% customer net bill impact on day 1[19] - The rate case includes a request for $130 million in rate base growth and $140 million for 12 months post test year plant[19] - The company is appealing the prior rate case, with oral arguments set for November 30[45, 78] Growth & Investment - The company forecasts long-term EPS growth target of 5%-7%[14] - Retail customer growth is projected at 1.5%-2.5%[10, 13, 14] - Weather-normalized retail electricity sales volume is expected to be 2.0-3.0% higher compared to prior year, including a 0.5-1.5% contribution from new large manufacturing facilities and data centers[10] - The company plans a total capital investment of $4.7 billion from 2022-2024[25, 38] Clean Energy Transition - The company has contracted for nearly 1,600 MW of clean energy and storage to be in service for APS customers by the end of 2024[53, 56] - An All-Source RFP has been issued, seeking 1,000 – 1,500 MWs of resources, including up to 600 – 800 MWs of renewable resources to be in service from 2025 – 2027[53]