Pinnacle West Reports 2020 Third-Quarter Earnings
- Record summer heat drives quarter-over-quarter earnings improvement
- Strong customer growth of 2.3% underscores Arizona’s expanding economy
- Operating performance, reliability remain strong
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Record heat contributed to the hottest summer on record in
For a second consecutive quarter, hotter-than-normal weather was the primary driver in the quarter-over-quarter improvement, increasing revenues, net of fuel and purchased power costs, by
“The third quarter picked up right where the second quarter left off – with a historic run of record heat that contributed to the hottest July and August on record. In fact, this summer proved to be the hottest ever,” said Pinnacle West Chairman, President and Chief Executive Officer
Summer 2020: The Hottest on Record
According to the
The number of residential cooling degree-days (a utility’s measure of the effects of weather) increased 15.9% over the same period in 2019 and was 24.7% higher than historical 10-year averages. Moreover, residential cooling degree-days for both July and August were the highest of any year since data tracking began in 1974. Similarly, September had the third-highest cooling degree-days of any year during this time span, with only 2001 and 2018 recording higher numbers.
In addition to being the hottest summer on record, 2020 daily temperatures set records across both the second and third quarters including:
- 14 days at or above 115 degrees, doubling the old record of 7 days set in 1974;
- 53 days at or above 110 degrees, which crushed 2011’s prior record of 33 days;
- 28 days of overnight low temperatures of 90 degrees or higher. This beat the prior record of 15 days set in 2013.
As previously reported, customers set an all-time record peak demand of 7,660 megawatts on
Operating Performance and Reliability Remain Strong
The Company’s third-quarter operating performance and reliability remained strong despite the extreme heat and regional demand for energy that, in some cases, exceeded supply. APS, however, was well prepared.
“Our employees continued to do what they do best: maintain reliable electric service for our 1.3 million customers,” Guldner said. “Our field crews consistently performed under extreme conditions, and our essential mix of baseload power plants operated exceptionally well. That execution was especially critical when this summer’s record heat strained regional energy markets, causing other utilities and system operators across the west to declare energy emergencies.”
Looking to the future, Guldner said that solid long-term planning, operational efficiencies and responsible energy policy will be increasingly critical as additional people and businesses choose to make
Customer Support Broadened to Include Energy Efficiency
The challenges of 2020, from summer heat to COVID-19, led APS to further increase direct assistance to customers struggling to pay their bills.
In addition to already having pledged
With support of the
A full list of the company’s actions in response to the pandemic is available on the Pinnacle West website, and APS customers are encouraged to visit aps.com/COVID19 for up-to-date details on available resources and support.
Financial Outlook
Given the impacts from significantly above-average weather year to date, the company increased its 2020 consolidated earnings guidance to
Key factors and assumptions underlying the 2020 outlook can be found in the third-quarter 2020 earnings presentation slides at pinnaclewest.com/investors.
Conference Call and Webcast
Pinnacle West invites interested parties to listen to the live webcast of management’s conference call to discuss 2020 third-quarter results, as well as recent developments, at
General Information
Earnings per share amounts in this news release are based on average diluted common shares outstanding. For more information on Pinnacle West’s operating statistics and earnings, please visit pinnaclewest.com/investors.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements based on our current expectations, including statements regarding our earnings guidance and financial outlook and goals. These forward-looking statements are often identified by words such as “estimate,” “predict,” “may,” “believe,” “plan,” “expect,” “require,” “intend,” “assume,” “project,” "anticipate," "goal," "seek," "strategy," "likely," "should," "will," "could," and similar words. Because actual results may differ materially from expectations, we caution readers not to place undue reliance on these statements. A number of factors could cause future results to differ materially from historical results, or from outcomes currently expected or sought by Pinnacle West or APS. These factors include, but are not limited to:
- the potential effects of the continued COVID-19 pandemic, including, but not limited to, demand for energy, economic growth, our employees and contractors, supply chain, expenses, capital markets, capital projects, operations and maintenance activities, uncollectable accounts, liquidity, cash flows, or other unpredictable events;
- our ability to manage capital expenditures and operations and maintenance costs while maintaining high reliability and customer service levels;
- variations in demand for electricity, including those due to weather, seasonality, the general economy or social conditions, customer and sales growth (or decline), the effects of energy conservation measures and distributed generation, and technological advancements;
- power plant and transmission system performance and outages;
- competition in retail and wholesale power markets;
- regulatory and judicial decisions, developments and proceedings;
- new legislation, ballot initiatives and regulation, including those relating to environmental requirements, regulatory policy, nuclear plant operations and potential deregulation of retail electric markets;
- fuel and water supply availability;
- our ability to achieve timely and adequate rate recovery of our costs, including returns on and of debt and equity capital investment;
- our ability to meet renewable energy and energy efficiency mandates and recover related costs;
- risks inherent in the operation of nuclear facilities, including spent fuel disposal uncertainty;
-
current and future economic conditions in
Arizona , including in real estate markets; - the direct or indirect effect on our facilities or business from cybersecurity threats or intrusions, data security breaches, terrorist attack, physical attack, severe storms, droughts, or other catastrophic events, such as fires, explosions, pandemic health events, or similar occurrences;
- the development of new technologies which may affect electric sales or delivery;
- the cost of debt and equity capital and the ability to access capital markets when required;
- environmental, economic and other concerns surrounding coal-fired generation, including regulation of greenhouse gas emissions;
- volatile fuel and purchased power costs;
- the investment performance of the assets of our nuclear decommissioning trust, pension, and other post-retirement benefit plans and the resulting impact on future funding requirements;
- the liquidity of wholesale power markets and the use of derivative contracts in our business;
- potential shortfalls in insurance coverage;
- new accounting requirements or new interpretations of existing requirements;
- generation, transmission and distribution facility and system conditions and operating costs;
- the ability to meet the anticipated future need for additional generation and associated transmission facilities in our region;
- the willingness or ability of our counterparties, power plant participants and power plant land owners to meet contractual or other obligations or continue or discontinue power plant operations consistent with our corporate interests; and
-
restrictions on dividends or other provisions in our credit agreements and
Arizona Corporation Commission orders.
These and other factors are discussed in Risk Factors described in Part 1, Item 1A of the Pinnacle West/APS Annual Report on Form 10-K for the fiscal year ended
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CONSOLIDATED STATEMENTS OF INCOME | |||||||
(unaudited) | |||||||
(dollars and shares in thousands, except per share amounts) | |||||||
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THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||
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2020 |
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2019 |
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2020 |
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2019 |
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Operating Revenues |
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Operating Expenses | |||||||
Fuel and purchased power |
353,171 |
344,862 |
780,074 |
817,672 |
|||
Operations and maintenance |
236,971 |
238,582 |
677,681 |
711,759 |
|||
Depreciation and amortization |
152,696 |
149,450 |
459,257 |
445,531 |
|||
Taxes other than income taxes |
54,978 |
53,809 |
168,514 |
163,989 |
|||
Other expenses |
1,677 |
794 |
3,191 |
1,904 |
|||
Total |
799,493 |
787,497 |
2,088,717 |
2,140,855 |
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Operating Income |
455,008 |
403,290 |
757,304 |
659,963 |
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Other Income (Deductions) | |||||||
Allowance for equity funds used during construction |
8,144 |
5,917 |
24,652 |
24,677 |
|||
Pension and other postretirement non-service credits - net |
14,118 |
5,752 |
42,171 |
17,240 |
|||
Other income |
13,881 |
15,191 |
42,888 |
35,245 |
|||
Other expense |
(5,838) |
(5,740) |
(14,426) |
(14,448) |
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Total |
30,305 |
21,120 |
95,285 |
62,714 |
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Interest Expense | |||||||
Interest charges |
61,497 |
57,481 |
183,421 |
175,599 |
|||
Allowance for borrowed funds used during construction |
(4,663) |
(3,486) |
(13,488) |
(14,645) |
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Total |
56,834 |
53,995 |
169,933 |
160,954 |
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Income Before Income Taxes |
428,479 |
370,415 |
682,656 |
561,723 |
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Income Taxes |
77,234 |
53,266 |
98,086 |
72,764 |
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Net Income |
351,245 |
317,149 |
584,570 |
488,959 |
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Less: Net income attributable to noncontrolling interests |
4,873 |
4,873 |
14,620 |
14,620 |
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Net Income Attributable To Common Shareholders |
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Weighted-Average Common Shares Outstanding - Basic |
112,679 |
112,463 |
112,639 |
112,408 |
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Weighted-Average Common Shares Outstanding - Diluted |
112,987 |
112,746 |
112,912 |
112,739 |
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Earnings Per Weighted-Average Common Share Outstanding | |||||||
Net income attributable to common shareholders - basic |
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Net income attributable to common shareholders - diluted |
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View source version on businesswire.com: https://www.businesswire.com/news/home/20201030005025/en/
Media Contact:
Analyst Contact:
Website: pinnaclewest.com
Source:
Media Contact: Alan Bunnell (602) 250-3376
Analyst Contact: Stefanie Layton (602) 250-4541
Website: pinnaclewest.com