The leaders of Pinnacle West Capital Corp. have bumped their current-year capital spending plan to $1.8 billion as they look to keep up with the strong population and economic growth of Arizona.
The parent company of Arizona Public Service had been planning to invest $1.67 billion in its operations in 2023 but CFO Andrew Cooper told analysts on a conference call that “the need here was discrete” and that the new work will improve the reliability of APS’ fleet. The late-year bump will fund investments in both distribution and transmission projects and, Cooper added, also accounts for higher prices for some of the equipment APS needed.
Zooming out, he said, the need to spend more is driven by continued solid customer growth: The utility’s residential customer growth has topped 2% each year since 2019 and C&I sales have grown 2.8% so far this year.
“The one trend that I think is critical to highlight [is] within our regulated footprint,” Cooper said. “That additional $55 million that we’re spending on our FERC transmission assets this year […] is reflective of a trend that we’ve seen over the last few years of continuing to lean in there. There’s a massive need in the transmission system.”
Cooper and Guldner have ballparked 2024 and 2025 capital spending to also be around $1.8 billion—with transmission and distribution investments accounting for roughly 45% of that figure—but those forecasts are very likely to climb once they receive a decision on their 2022 rate case. Hearings by the Arizona Corporation Commission on the case concluded a month ago and briefs in the case are due later this month.
Alongside the rate case, Guldner and his team have recently filed an integrated resource plan sketching out Pinnacle West’s energy needs for the next 15 years as its service area continues to grow. Guldner told analysts the plan looks to blend owned projects with power purchase agreements and aims for nearly two-thirds of the company’s energy to be carbon-free by 2030.
Phoenix-based Pinnacle West posted a third-quarter net profit of nearly $403 million on operating revenues of $1.64 billion. Those numbers were up from $331 million an $1.47 billion, respectively, in the same period of 2022. Operating income climbed nearly $100 million to $516 million, helped by a very hot summer that featured 36 days of overnight low temperatures above 90 degrees.
Shares of Pinnacle West (Ticker: PNW) fell slightly Nov. 2 on the earnings report and were changing hands around $74.90 in morning trading Nov. 3. Over the past six months, they are down about 5%, which has trimmed the company’s market capitalization to $8.5 billion.