- Disciplined cost management and strong operational performance more
than offset milder-than-normal weather
- Company affirms 2014 guidance, introduces 2015 guidance
Company Website:
http://www.pinnaclewest.com
PHOENIX -- (Business Wire)
Pinnacle
West Capital Corp. (NYSE: PNW) today reported consolidated net
income attributable to common shareholders for the 2014 third quarter of
$244.0 million, or $2.20 per diluted share. This result compares with
net income of $226.2 million, or $2.04 per share, for the same period a
year ago.
“By focusing on operational excellence, disciplined cost management and
sound capital investments, our financial performance in the third
quarter was solid despite weather that, for the third summer in a row,
was less favorable than normal,” said Pinnacle West Chairman, President
and Chief Executive Officer Don
Brandt, noting that this was the fourth consecutive quarter that
operations and maintenance costs have been a positive earnings driver.
“As a result, we continue to expect our full-year on-going earnings to
fall within our projected range of $3.60 to $3.75 per diluted share.”
Comparison of 2014 third-quarter financial results to the 2013 period
was positively affected by the following factors (a non-GAAP
reconciliation table is provided at the end of this release):
- Lower operating expenses increased earnings by $0.06 per share
compared with the prior-year quarter. The decrease in expenses largely
was the result of lower employee benefit costs, lower depreciation and
amortization, as well as lower property tax rates. These benefits were
partially offset by higher fossil maintenance costs.
The
operating expense variance excludes costs associated with renewable
energy, energy efficiency and similar regulatory programs, which are
largely offset by comparable amounts of operating revenues.
- Decreased interest expense, net of AFUDC, contributed $0.04 per
share.
- Regulatory adjustment mechanisms, specifically comprised of the
Lost Fixed Cost Recovery (LFCR) mechanism and the retail Transmission
Cost Adjustor, contributed a combined $0.03 per share.
- The Company’s AZ Sun Program, currently comprised of 150
megawatts of community-scale photovoltaic plants,increased
earnings by $0.03 per share compared to the prior year.
- A lower effective tax rate improved results by $0.02 per share.
- And, other miscellaneous items contributed $0.01 per share to
the bottom line.
These factors were partially offset by the effects of weather variations
which negatively impacted the Company’s earnings by $0.03 per share
compared to the prior quarter. This year’s quarter was slightly cooler
than the same period last year, highlighted by the mildest August
weather recorded in 20 years. As a result, residential cooling
degree-days (a proxy for the effects of weather) were 5.5 percent lower
than last year’s third quarter, and 7.6 percent below normal based on a
rolling 10-year average.
The Company also experienced positive retail customer growth of 1.4
percent during the quarter, reflecting a steady improvement in Arizona’s
economy. However, weather-normalized retail electricity sales in the
2014 third-quarter were flat compared to last year’s comparable period
largely due to the effects of energy efficiency, customer conservation
and distributed generation.
Financial Outlook
Looking ahead to 2015, the Company estimates its on-going consolidated
earnings will be within a range of $3.75 to $3.95 per diluted share.
Longer-term, the Company’s goal is to achieve a consolidated earned
return on average common equity of more than 9.5 percent annually
through 2016.
Key factors and assumptions underlying both the 2014 and 2015 outlooks
can be found in the third-quarter 2014 earnings presentation slides on
the Company’s website 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 the Company’s 2014
third-quarter results, as well as recent developments, at 12 noon ET (9
a.m. AZ time) today, October 31. The webcast can be accessed at pinnaclewest.com/presentations
and will be available for replay on the website for 30 days. To access
the live conference call by telephone, dial (877) 407-8035 or (201)
689-8035 for international callers. A replay of the call also will be
available until 11:59 p.m. (ET), Friday, Nov. 7, 2014, by calling (877)
660-6853 in the U.S. and Canada or (201) 612-7415 internationally and
entering conference ID number 13591441.
General Information
Pinnacle
West Capital Corp., an energy holding company based in Phoenix, has
consolidated assets of about $14 billion, nearly 6,400 megawatts of
generating capacity and about 6,400 employees in Arizona and New Mexico.
Through its principal subsidiary, Arizona
Public Service, the Company provides retail electricity service to
nearly 1.2 million Arizona homes and businesses. For more information
about Pinnacle West, visit the Company’s website at pinnaclewest.com.
Dollar amounts in this news release are after income taxes. Earnings per
share amounts are based on average diluted common shares outstanding.
For more information on Pinnacle West’s operating statistics and
earnings, please visit pinnaclewest.com/investors.
|
| |
| |
PINNACLE WEST CAPITAL CORPORATION |
NON-GAAP FINANCIAL MEASURE RECONCILIATION |
| | | |
|
| | Three Months Ended September 30, | |
|
$ millions pretax, except per share amounts | | 2014 |
| Four Corners Deferral |
| Palo Verde Lease Extensions |
| 2014 Adjusted |
| 2013** | | EPS Impact |
| | | |
| | |
| | |
| | | | | | | |
Operations and maintenance* | | $ | 223 | | | $ | (6 | ) | | $ | - | | | $ | 217 | | | 233 | | | | |
Renewable energy (excluding AZ Sun), demand side management and
similar regulatory programs
| |
|
32
|
|
|
|
-
|
|
|
|
-
|
|
|
|
32
|
| |
44
|
| |
|
|
Net O&M | | | 191 | | | | (6 | ) | | | - | | | | 185 | | | 189 | | | $ | 0.02 |
| | | | | | | | | | | | | | | | |
|
Depreciation and amortization* | | | 104 | | | | 7 | | | | (5 | ) | | | 106 | | | 107 | | | $ | 0.02 |
| | | | | | | | | | | | | | | | |
|
Taxes other than income taxes* | | | 41 | | | | (1 | ) | | | - | | | | 40 | | | 43 | | | $ | 0.02 |
| | | | | | | | | | | | | | | | |
|
Allowance for equity funds used during construction*
| | |
(7
|
)
| | |
-
| | | |
-
| | | |
(7
|
)
| |
(6
|
)
| | | |
Interest charges*
| | |
47
| | | |
(2
|
)
| | |
-
| | | |
45
| | |
51
| | | | |
Allowance for borrowed funds used during construction*
| |
|
(3
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(3
|
)
| |
(3
|
)
| |
|
|
Interest expense, net AFUDC | | | 37 | | | | (2 | ) | | | | | | 35 | | | 42 | | | $ | 0.04 |
| | | | | | | | | | | | | | | | |
|
Other expenses (operating)*
| | |
1
| | | |
-
| | | |
-
| | | |
1
| | |
2
| | | | |
Other income*
| | |
(2
|
)
| | |
2
| | | |
-
| | | |
-
| | |
-
| | | | |
Other expense*
| |
|
4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4
|
| |
7
|
| |
|
|
Other | | | 3 | | | | 2 | | | | - | | | | 5 | | | 9 | | | $ | 0.02 |
| | | | | | | | | | | | | | | | |
|
Net income attributable to non-controlling interests* | | | 4 | | | | - | | | | 5 | | | | 9 | | | 9 | | | | - |
| | | | | | | | | | | | | | | | |
|
* Line items from Consolidated Statements of Income ** No impact to 2013 Consolidated Statements of Income related
to Four Corners deferral or Palo Verde lease extensions Totals may not sum due to rounding |
|
NON-GAAP FINANCIAL INFORMATION
In this press release, we refer to “on-going earnings.” On-going
earnings is a “non-GAAP financial measure,” as defined in accordance
with SEC rules. In this release we also provide a reconciliation to show
various deferral impacts of our Four Corners transaction and impacts to
our non-controlling interests for the Palo Verde lease extensions. We
believe on-going earnings and the information provided in the
reconciliation provide investors with useful indicators of our results
that are comparable among periods because they exclude the effects of
unusual items that may occur on an irregular basis. Investors should
note that these non-GAAP financial measures involve judgments by
management, including whether an item is classified as an unusual item.
We use on-going earnings, or similar concepts, to measure our
performance internally in reports for management.
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” 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:
-
our ability to manage capital expenditures and operations and
maintenance costs while maintaining reliability and customer service
levels;
-
variations in demand for electricity, including those due to weather,
the general economy, customer and sales growth (or decline), and the
effects of energy conservation measures and distributed generation;
-
power plant and transmission system performance and outages;
-
competition in retail and wholesale power markets;
-
regulatory and judicial decisions, developments and proceedings;
-
new legislation or regulation including those relating to
environmental requirements, 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 debt and equity capital;
-
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, particularly in
real estate markets;
-
the cost of debt and equity capital and the ability to access capital
markets when required;
-
environmental and other concerns surrounding coal-fired generation;
-
volatile fuel and purchased power costs;
-
the investment performance of the assets of our nuclear
decommissioning trust, pension, and other postretirement 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
baseload 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 extend the rights for continued power plant operations;
-
technological developments affecting the electric industry; and
-
restrictions on dividends or other provisions in our credit agreements
and ACC 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 December 31, 2013, and in Part II, Item 1A of the
Pinnacle West/APS Quarterly Report on Form 10-Q for the quarter ended
June 30, 2014, which readers should review carefully before placing any
reliance on our financial statements or disclosures. Neither Pinnacle
West nor APS assumes any obligation to update these statements, even if
our internal estimates change, except as required by law.
|
| |
PINNACLE WEST CAPITAL CORPORATION |
CONSOLIDATED STATEMENTS OF INCOME |
(unaudited)
|
(dollars and shares in thousands, except per share amounts)
|
| |
| |
| | |
| |
| |
| | | | | | | | | |
|
| | |
THREE MONTHS ENDED
| | |
NINE MONTHS ENDED
|
| | |
SEPTEMBER 30,
| | |
SEPTEMBER 30,
|
| | |
2014
|
|
2013
| | |
2014
|
|
2013
|
| | | | | | | | | |
|
Operating Revenues | |
$
|
1,172,667
| | |
$
|
1,152,392
| | | |
$
|
2,765,182
| | |
$
|
2,754,866
| |
| | | | | | | | | |
|
Operating Expenses | | | | | | | | | |
Fuel and purchased power
| | |
382,361
| | | |
350,953
| | | | |
923,001
| | | |
859,216
| |
Operations and maintenance
| | |
223,418
| | | |
233,323
| | | | |
647,522
| | | |
685,873
| |
Depreciation and amortization
| | |
103,660
| | | |
107,388
| | | | |
310,582
| | | |
317,410
| |
Taxes other than income taxes
| | |
40,850
| | | |
43,256
| | | | |
130,699
| | | |
124,091
| |
Other expenses
| |
|
603
|
| |
|
1,784
|
| | |
|
2,320
|
| |
|
5,853
|
|
Total
| |
|
750,892
|
| |
|
736,704
|
| | |
|
2,014,124
|
| |
|
1,992,443
|
|
| | | | | | | | | |
|
Operating Income | |
|
421,775
|
| |
|
415,688
|
| | |
|
751,058
|
| |
|
762,423
|
|
| | | | | | | | | |
|
Other Income (Deductions) | | | | | | | | | |
Allowance for equity funds used during construction
| | |
7,038
| | | |
5,569
| | | | |
21,979
| | | |
18,698
| |
Other income
| | |
2,366
| | | |
160
| | | | |
7,514
| | | |
1,387
| |
Other expense
| |
|
(4,193
|
)
| |
|
(7,435
|
)
| | |
|
(9,385
|
)
| |
|
(13,421
|
)
|
Total
| |
|
5,211
|
| |
|
(1,706
|
)
| | |
|
20,108
|
| |
|
6,664
|
|
| | | | | | | | | |
|
Interest Expense | | | | | | | | | |
Interest charges
| | |
47,626
| | | |
50,587
| | | | |
152,346
| | | |
151,372
| |
Allowance for borrowed funds used during construction
| |
|
(3,479
|
)
| |
|
(3,235
|
)
| | |
|
(11,039
|
)
| |
|
(10,861
|
)
|
Total
| |
|
44,147
|
| |
|
47,352
|
| | |
|
141,307
|
| |
|
140,511
|
|
| | | | | | | | | |
|
Income Before Income Taxes | | |
382,839
| | | |
366,630
| | | | |
629,859
| | | |
628,576
| |
| | | | | | | | | |
|
Income Taxes | |
|
134,753
|
| |
|
131,912
|
| | |
|
215,698
|
| |
|
221,424
|
|
| | | | | | | | | |
|
Net Income | | |
248,086
| | | |
234,718
| | | | |
414,161
| | | |
407,152
| |
| | | | | | | | | |
|
Less: Net income attributable to noncontrolling interests
| | |
4,125
| | | |
8,555
| | | | |
21,976
| | | |
25,338
| |
| | |
| |
| | |
| |
|
Net Income Attributable To Common Shareholders | |
$
|
243,961
|
| |
$
|
226,163
|
| | |
$
|
392,185
|
| |
$
|
381,814
|
|
| | | | | | | | | |
|
| | | | | | | | | |
|
Weighted-Average Common Shares Outstanding - Basic | | |
110,686
| | | |
110,009
| | | | |
110,579
| | | |
109,935
| |
| | | | | | | | | |
|
Weighted-Average Common Shares Outstanding - Diluted | | |
111,103
| | | |
111,053
| | | | |
110,962
| | | |
110,913
| |
| | | | | | | | | |
|
Earnings Per Weighted-Average Common Share Outstanding | | | | | | | | | |
Net income attributable to common shareholders - basic
| |
$
|
2.20
| | |
$
|
2.06
| | | |
$
|
3.55
| | |
$
|
3.47
| |
Net income attributable to common shareholders - diluted
| |
$
|
2.20
| | |
$
|
2.04
| | | |
$
|
3.53
| | |
$
|
3.44
| |
| | | | | | | | | | | | | | | | | |
|
Contacts:
Pinnacle West Capital Corp.
Media Contact:
Alan Bunnell,
602-250-3376
Analyst Contact:
Paul Mountain, 602-250-4952
Website:
pinnaclewest.com
Source: Pinnacle West Capital Corp.
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