Pinnacle West(PNW) - 2025 Q1 - Quarterly Report

Part I - Financial Information Presents the company's unaudited Q1 2025 financial statements, management's analysis, and market risk disclosures Item 1. Financial Statements Provides the unaudited condensed consolidated financial statements for Pinnacle West and its subsidiary APS Pinnacle West Capital Corporation Financial Statements Details the Q1 2025 financial performance and position for the parent company, Pinnacle West Pinnacle West - Q1 2025 vs. Q1 2024 Financial Highlights (in thousands, except per share amounts) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Operating Revenues | $1,032,280 | $951,712 | | Operating Income | $57,222 | $66,792 | | Net Income (Loss) Attributable to Common Shareholders | $(4,644) | $16,862 | | Diluted EPS | $(0.04) | $0.15 | | Net Cash from Operating Activities | $401,895 | $347,353 | - Total assets increased to $27.24 billion as of March 31, 2025, from $26.10 billion at December 31, 2024, primarily driven by increases in property, plant and equipment and operating lease right-of-use assets[26] Arizona Public Service Company Financial Statements Outlines the Q1 2025 financial performance and position for the subsidiary, APS APS - Q1 2025 vs. Q1 2024 Financial Highlights (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Operating Revenues | $1,032,280 | $951,712 | | Operating Income | $60,715 | $70,884 | | Net Income Attributable to Common Shareholder | $279 | $15,117 | | Net Cash from Operating Activities | $408,674 | $365,980 | - APS's total assets grew to $27.10 billion as of March 31, 2025, from $25.99 billion at year-end 2024, reflecting continued investment in property, plant, and equipment[43] Combined Notes to Condensed Consolidated Financial Statements Offers supplementary details and accounting policies related to the consolidated financial statements - On January 12, 2024, Pinnacle West completed the sale of its equity interest in Bright Canyon Energy Corporation (BCE)[52] - Pinnacle West's reportable business segment is its regulated electricity segment, which is conducted through its wholly-owned subsidiary, APS[57] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Analyzes Q1 2025 financial results, key business drivers, operational performance, and capital resources Overview Discusses the company's strategic focus on providing reliable, affordable, and clean energy in Arizona - The company's strategy focuses on creating a sustainable energy future for Arizona by providing reliable, affordable, and clean energy, with a strong emphasis on customer experience and financial assistance programs[297][298][299] - APS is making significant investments in grid reliability, including a Ten-Year Transmission Plan and wildfire mitigation efforts such as installing AI-based fire sensing cameras and implementing a Public Safety Power Shutoff (PSPS) program[301][303] - The company has a clean energy commitment with three main goals: achieve 100% clean, carbon-free electricity by 2050; reach a 65% clean energy mix by 2030; and exit coal-fired generation by 2031[315][320] - APS is actively procuring new resources through All-Source Requests for Proposal (ASRFP), with the 2024 ASRFP seeking 2,000 MW of resources for operation beginning in 2028 through 2030[326] Key Financial Drivers Highlights customer growth and increased electricity demand from data centers as primary financial drivers - Retail customer growth was 2.3% for the period ended March 31, 2025, with a projected annual growth of 1.5% to 2.5% through 2027[368] - Weather-adjusted retail electricity sales (kWh) are projected to increase by 4.0% to 6.0% annually through 2027, largely driven by the growth of data centers and large manufacturing facilities[370] - Due to unprecedented demand from extra high load factor customers (>25 MW), APS has notified prospective customers that it cannot commit to new large projects at this time and has developed a prioritization queue[371] Results of Operations Compares Q1 2025 operational results to Q1 2024, detailing factors driving the net income change - For Q1 2025, Pinnacle West reported a consolidated net loss of $5 million, a $22 million decrease from the $17 million net income in Q1 2024[383] Key Drivers of Change in Net Income (Q1 2025 vs Q1 2024, in millions) | Factor | Impact on Net Income | | :--- | :--- | | Negative Drivers | | | Higher operations and maintenance | $(42) | | Higher depreciation and amortization | $(25) | | Lower pension and other postretirement credits | $(9) | | Lower other income (incl. prior year BCE gain) | $(9) | | Higher interest charges | $(8) | | Positive Drivers | | | Favorable impact of new customer rates | $46 | | Lower income taxes | $10 | | Higher transmission & LFCR revenue | $10 | - Operations and maintenance expenses increased by $42 million, primarily due to higher costs for non-nuclear generation planned outages ($17 million) and information technology ($13 million)[387][390] Liquidity and Capital Resources Details cash flow activities, capital expenditure plans, and financing strategies for the company - Net cash from operating activities increased by $55 million to $402 million in Q1 2025, mainly due to higher cash receipts from electric revenues and lower taxes paid[401][404] - Net cash used for investing activities increased by $162 million to $586 million, driven by a $123 million increase in capital expenditures and the absence of $39 million in proceeds from the BCE sale received in the prior year[401][407] APS Estimated Capital Expenditures (in millions) | Year | Estimated Amount | | :--- | :--- | | 2025 | $2,400 | | 2026 | $2,550 | | 2027 | $2,650 | - As of March 31, 2025, Pinnacle West had outstanding forward sale agreements related to approximately $825 million of common stock, including agreements under its ATM program and a February 2024 offering[399][417] Item 3. Quantitative and Qualitative Disclosures About Market Risk Describes the company's exposure to interest rate, commodity price, and investment value risks - The company manages exposure to commodity price fluctuations in electricity and natural gas by using derivative instruments such as futures, forwards, options, and swaps[433] Fair Value of Energy Derivative Contracts by Maturity (as of March 31, 2025, in millions) | Year | Fair Value | | :--- | :--- | | 2025 | $51 | | 2026 | $31 | | 2027 | $5 | | 2028 | $(1) | | 2029 | $0 | | Total | $86 | - A hypothetical 10% increase in electricity and natural gas prices would result in a $98 million gain in the market value of the company's risk management assets and liabilities as of March 31, 2025[437] Item 4. Controls and Procedures Confirms the effectiveness of the company's disclosure controls and internal financial reporting procedures - Both Pinnacle West's and APS's management, including their respective CEOs and CFOs, concluded that the companies' disclosure controls and procedures were effective as of March 31, 2025[441][442] - There were no changes in internal control over financial reporting during the first quarter of 2025 that materially affected, or are reasonably likely to materially affect, the internal controls for either Pinnacle West or APS[443] Part II - Other Information Includes information on legal proceedings, risk factors, and other corporate disclosures Item 1. Legal Proceedings References notes within the financial statements for details on regulatory and environmental legal matters - Information regarding legal proceedings, including regulatory, environmental, and other matters, is detailed in Note 6 and Note 10 of the financial statements[446][447] Item 1A. Risk Factors Refers to the company's 2024 Annual Report for a comprehensive discussion of business risk factors - The report directs readers to the Risk Factors section of the 2024 Form 10-K for a comprehensive discussion of factors that could materially affect the business[448] Item 5. Other Information Discloses that no directors or officers adopted or terminated insider trading plans during the quarter - During the fiscal quarter ended March 31, 2025, no directors or executive officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements[449]