Pinnacle West Capital Corporation (NYSE:PNW) today reported
consolidated net income attributable to common shareholders of $442.0
million, or $3.95 per diluted share, for full-year 2016. This result
compares with net income of $437.3 million, or $3.92 per share, in 2015.
"Reflecting steady improvement in Arizona's economic conditions and our
employees' continued focus on sustainable cost management, our year-end
results were in line with our expectations," said Pinnacle West
Chairman, President and Chief Executive Officer Don
Brandt. "In addition, our employees contributed to strong
operational performance, including a record-setting performance at the
Palo Verde Nuclear Generating Station."
Palo
Verde achieved its 25th consecutive year as the nation's
largest power producer – producing 32.3 million megawatt-hours of
carbon-free electricity. The plant's three units achieved a capacity
factor of 93.2 percent, and Unit 3's fall 2016 refueling and maintenance
outage was the shortest in plant history at 28 days, 17 hours. By
comparison, the average length of a refueling and maintenance outage at
all U.S. reactors in 2015 was 36.3 days, according to most recent
industry data.
Brandt cited additional examples of the Company's 2016 achievements:
On October 1, the company commenced participation in the western
regional Energy Imbalance Market (EIM), resulting in trading
efficiencies and customer savings of about $6 million during the 2016
fourth quarter.
Arizona Public Service (APS) launched a suite of new tools that
provides customers with an improved and more customized service
experience, including a mobile app, an online outage map and a new
automated phone system.
APS continued investing in an advanced energy grid, including new
technologies that enable customers to have greater choice and control
over their energy use, while increasing reliability. These
technologies included two separate "next generation" microgrids
installed in Phoenix and at the Marine Corps Air Station in Yuma, Ariz.
The Red Rock Solar Plant – APS's largest self-owned grid-scale solar
power plant at 40 megawatts – also was completed, helping the company
reach one gigawatt of solar on its system and becoming the only
utility outside California to achieve this milestone. To date, the
company's total investment in solar energy is about $2 billion.
APS's power reliability for 2016 remained among the strongest in the
industry and received a top-quartile score from JD Power for "Power
Quality & Reliability" among residential customers.
Looking forward, Brandt said the company remains committed to investing
in infrastructure that creates value for customers and shareholders
alike, while also building on the positive regulatory outcome in
Arizona's value and cost of distributed generation docket, which was
decided in late 2016.
"We will continue to work collaboratively with regulators and other
stakeholders on key issues important to Arizona's energy future,
including achieving a constructive regulatory outcome in our current
rate review," he said. "In many respects, this case serves as a
transition from the challenges of the present to the opportunities of
the future. "
The 2016 full-year financial results comparison was positively impacted
by the following major factors:
Higher lost fixed cost recovery revenue, an increase in
transmission proceeds and revenue from the Company's AZ Sun program
improved earnings by $0.18 per share compared to 2015.
Retail electricity sales improved earnings $0.05 per share due
to changes in customer usage patterns and related pricing. Compared to
a year ago, total customer growth improved 1.4 percent.
The effects of weather variations improved the Company's
earnings by $0.02 per share, although weather was still unfavorable
compared to normal. For the year, the company had a 6 percent decrease
in cooling degree-days and a 5 percent decrease in heating degree-days
(measures of the effects of weather) versus 2015. Compared to 10-year
historical averages, cooling and heating degree days were down 2.7
percent and 18.7 percent, respectively.
Lower interest expense, net of AFUDC, contributed $0.02 per
share.
The net effect of miscellaneous items increased earnings $0.06
per share, including the second-quarter sale of a 50 percent ownership
stake in an existing transmission line, which resulted in a $0.03
contribution to the Company's bottom line in the second quarter.
The above positive factors were largely offset by higher operations and
maintenance expenses, which reduced annual earnings by $0.30 per share.
These expenses were largely associated with major planned outages at the
company's Four Corners Power Plant in the first half of the year; higher
transmission, distribution and customer service costs associated with
implementation of new systems; and higher employee benefit costs, among
other items.
For the quarter ended December 31, 2016, Pinnacle West reported
consolidated net income attributable to common shareholders of $53.2
million, or $0.47 per diluted share. This result compares with net
income of $41.1 million, or $0.37 per share, for the same period a year
ago.
The 2016 fourth-quarter results comparison versus the same 2015 period
was positively impacted by lower operating expenses, partially offset by
lower retail electricity sales. While October 2016 proved to be hotter
than average, sales decreased in the last two months of the year, with
December turning out to be the third mildest December since 1970 – a
span of 46 years.
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 2016 year-end
and fourth-quarter results, as well as recent developments, at 11 a.m.
ET (9 a.m. AZ time) today, February 24. 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, March 3, 2017, by calling (877)
481-4010 in the U.S. and Canada or (919) 882-2331 internationally and
entering conference ID number 10176.
About Pinnacle West Capital
Pinnacle
West Capital Corp., an energy holding company based in Phoenix, has
consolidated assets of about $16 billion, about 6,200 megawatts of
generating capacity and 6,300 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.
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.
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" 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 high reliability and customer
service levels;
variations in demand for electricity, including those due to weather,
seasonality, 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, 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 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 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
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;
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 December 31, 2016, 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
TWELVE MONTHS ENDED
DECEMBER 31,
DECEMBER 31,
2016
2015
2016
2015
Operating Revenues
$
739,199
$
734,430
$
3,498,682
$
3,495,443
Operating Expenses
Fuel and purchased power
243,257
232,737
1,075,510
1,101,298
Operations and maintenance
208,277
222,019
911,319
868,377
Depreciation and amortization
122,852
125,109
485,829
494,422
Taxes other than income taxes
40,597
42,323
166,499
171,812
Other expenses
1,400
2,408
3,541
4,932
Total
616,383
624,596
2,642,698
2,640,841
Operating Income
122,816
109,834
855,984
854,602
Other Income (Deductions)
Allowance for equity funds used during construction
11,061
9,001
42,140
35,215
Other income
516
72
901
621
Other expense
(3,252
)
(5,390
)
(15,337
)
(17,823
)
Total
8,325
3,683
27,704
18,013
Interest Expense
Interest charges
50,834
48,895
205,720
194,964
Allowance for borrowed funds used during construction
(5,121
)
(4,203
)
(19,970
)
(16,259
)
Total
45,713
44,692
185,750
178,705
Income Before Income Taxes
85,428
68,825
697,938
693,910
Income Taxes
27,309
22,847
236,411
237,720
Net Income
58,119
45,978
461,527
456,190
Less: Net income attributable to noncontrolling interests
4,873
4,861
19,493
18,933
Net Income Attributable To Common Shareholders
$
53,246
$
41,117
$
442,034
$
437,257
Weighted-Average Common Shares Outstanding - Basic
111,545
111,149
111,409
111,026
Weighted-Average Common Shares Outstanding - Diluted
112,223
111,738
112,046
111,552
Earnings Per Weighted-Average Common Share Outstanding
Net income attributable to common shareholders - basic
$
0.48
$
0.37
$
3.97
$
3.94
Net income attributable to common shareholders - diluted
