Q2 2026 Pinnacle West Capital Corp Earnings Call Transcript
Key Points
- Strong customer and sales growth, with 2.1% customer growth and 9.6% weather-normalized sales growth in Q2, driven by a diverse mix of residential, data center, and advanced manufacturing customers.
- Beneficial weather in Q2, with early triple-digit temperatures increasing cooling demand and contributing positively to earnings.
- Solid execution on capital investment and financing strategy, including issuing $500 million in senior unsecured notes and filing a new $500 million ATM program for funding flexibility.
- Constructive progress in the rate case, with a robust evidentiary record and a clear procedural schedule, expecting a final commission decision before year-end.
- Significant growth opportunities from TSMC's additional $100 billion investment in Arizona, which is expected to drive substantial future electricity demand and support long-term growth.
- Commitment to cost management, with O&M expense declining modestly year-over-year and a focus on reducing O&M per megawatt hour over time.
- Strong operational performance, including setting a new all-time peak demand record of 9,164 megawatts, demonstrating the system's reliability and readiness for growth.
- Continued investment in transmission infrastructure, which benefits from constructive FERC formula rate recovery and creates opportunities for additional wheeling revenue.
- Reiterating guidance and expecting to finish the year at the top end of the earnings guidance range of $4.55 to $4.75 per share.
- Improved customer satisfaction, with APS ranking in the first quartile for business customer satisfaction and second quartile for residential customers in Escalent's Customer Relationship Index.
- Earnings per share decreased by $0.15 in Q2 2026 compared to Q2 2025, primarily due to higher interest expense, higher depreciation, and lower transmission revenue.
- Higher interest expense due to increased debt balances and a higher interest rate environment, which negatively impacted quarterly earnings.
- Lower transmission revenues in the quarter due to a final true-up adjustment related to 2025.
- Uncertainty regarding the pace of sales growth, with year-to-date weather-normalized sales growth tracking closer to the longer-term outlook rather than the robust Q2 levels.
- The rate case involves a complex and lengthy process, with 31 days of hearings and a final decision not expected until late in the year, creating regulatory uncertainty.
- The Cholla conversion project, while beneficial for capacity, represents up to $440 million of incremental capital investment, which could increase financial burden.
- Potential for weather and sales variability in the remaining summer months to impact full-year earnings, despite current expectations to hit the top end of guidance.
- The company has utilized all remaining capacity from its existing $900 million ATM equity program, indicating a need for continued equity financing, which could dilute shareholders.
- The Desert Southwest pipeline project is in early stages of development and faces potential siting and regulatory challenges, which could impact future gas supply and growth plans.
- The outcome of the upcoming commission election and the rate case remains uncertain, with potential for changes in regulatory dynamics that could affect future cost recovery.
Good day, everyone, and welcome to the Pinnacle West Capital Corporation 2026 second-quarter earnings conference call. (Operator Instructions)
It is now my pleasure to hand the floor over to your host, Amanda Ho. Ma'am, the floor is yours.
Thank you, Matthew. I would like to thank everyone for participating in this conference call and webcast to review our second-quarter earnings, recent developments and operating performance. Our speakers today will be our Chairman, President and CEO, Ted Geisler; and our CFO, Andrew Cooper. Jacob Tetlow, COO; and Jose Esparza, SVP of Public Policy, are also here with us.
First, I need to cover a few details with you. The slides that we will be using are available on our Investor Relations website, along with our earnings release and related information. Today's comments and our slides contain forward-looking statements based on current expectations and actual results may differ materially from expectations. Our second-quarter 2026 Form 10-Q was
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