Pinnacle West Capital Corp

Pinnacle West Capital is strengthening efficiency through disciplined cost management and tighter control of operating expenses, supporting financial stability and infrastructure investment flexibility. Operations and maintenance expenses fell 1.1% year over year to $283.4 million in the second quarter, while first-half 2026 O&M costs declined 4.5% from the prior-year period. The company expects 2026 adjusted core O&M of $970-$980 million, and adjusted O&M excluding renewable energy and demand-side-management costs of $1.02-$1.04 billion. Pinnacle West plans to invest $2.6 billion in 2026 and nearly $7.95 billion through 2028 to support infrastructure and 7-9% rate-base growth, while expecting 2026 earnings per share of $4.55-$4.75 and 5-7% long-term EPS growth.

Pinnacle West Capital reported second-quarter 2026 earnings of $1.43 per share, down $0.15 from a year earlier, as higher interest expense, depreciation and amortization, and lower transmission revenue offset strong weather-driven demand and customer growth. Chief Financial Officer Andrew Cooper said the company expects to finish 2026 at the top end of its previously issued earnings guidance range of $4.55 to $4.75 per share, and the utility reiterated all other aspects of its outlook. Weather-normalized sales increased 9.6% year over year in the second quarter, while customer growth reached 2.1%, with residential sales rising 5.6% and commercial and industrial sales up 12.7%, driven by data center, semiconductor and advanced-manufacturing customers. Chairman, President and CEO Ted Geisler noted that Taiwan Semiconductor Manufacturing Co.'s existing facilities had a relatively flat year-over-year impact on sales so far, with the bulk of anticipated demand growth still ahead, and that TSMC announced an additional $100 billion investment in Arizona during the quarter, raising its total planned commitment in the state to $265 billion. Pinnacle West's utility subsidiary, Arizona Public Service, recorded an all-time peak demand of 9,164 megawatts on August 2, more than 500 megawatts above the prior-year record. The company also plans to convert two retired coal-fired units at its Cholla Power Plant to natural gas, a project expected to provide about 380 megawatts of dispatchable generation by 2029 and add up to approximately $440 million of capital investment, primarily in 2027 and 2028.

Pinnacle West Capital expects strong economic expansion in its service territory to drive 5-7% annual electricity sales growth through 2030, fueled by data centers and semiconductor manufacturing. The company has secured nearly 4.5 gigawatts of committed extra high-load customer demand, primarily from data centers and large manufacturers, and projects 4-6% weather-normalized sales growth in 2026. Pinnacle West plans to invest $7.95 billion between 2026 and 2028 in generation, transmission, and distribution assets, while maintaining its 2026 earnings guidance of $4.55-$4.75 per share. The expansion of TSMC's fabrication facilities in Arizona and rising investments from semiconductor suppliers are key drivers of higher industrial power demand.

Arizona Public Service plans to convert two retired coal-fired units at its Cholla Power Plant to burn natural gas, with construction starting in 2028 and the 380-megawatt facility coming online in 2029. The conversion, which still requires state regulatory approval, would use existing infrastructure to meet growing energy demand in Arizona. The Cholla plant historically operated as a 1.02-gigawatt coal-fired facility jointly owned by APS and PacifiCorp, with its last coal units shutting down in March 2025 under federal Regional Haze Program requirements. APS says the project would require minimal new transmission infrastructure and would connect to an existing natural gas pipeline via a lateral line.

Pinnacle West Capital plans to invest $2.6 billion in 2026 and nearly $7.95 billion during 2026-2028, allocating about $2.11 billion to transmission, $2.31 billion to distribution and $2.28 billion to generation infrastructure. These investments support a 7-9% rate base growth through 2028 and advance strategic transmission projects. The company expects retail electricity sales to grow 4-6% in 2026, driven by expanding manufacturing facilities and data centers, and projects 5-7% annual weather-normalized sales growth through 2030. Pinnacle West continues to target 5-7% long-term EPS growth, supported by sustained infrastructure investment and increasing electricity demand. The company currently offers a 3.42% dividend yield, exceeding the Electric Power industry average of 2.99%.

Pinnacle West Capital declared a quarterly dividend of $0.91 per share, in line with its previous payout. The dividend carries a forward yield of 3.45% and is payable on September 1 to shareholders of record as of August 3, with the ex-dividend date also set for August 3.