Q3 2025 Pinnacle West Capital Corp Earnings Call

November 3, 2025

We will open the floor for your questions and comments after the presentation.

It is now my pleasure to turn the floor over to your host Amanda Ho Ma'am the floor is yours.

Thank you Matthew I would like to thank everyone for participating in this conference call and webcast to review our third quarter earnings recent developments and operating performance. Our speakers today will be our chairman President and CEO, Ted Geisler, and our CFO, Andrew Cooper, Jacob Tetlow, CFO and Jose as far as the SVP of public policy are also here with us.

Speaker #1: Good day, everyone, and welcome to the Pinnacle West Capital Q3 2025 earnings conference call. At this time, all participants are placed on a listen-only mode.

First I need to cover a few details on the.

Speaker #1: And we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Amanda Ho.

Slide.

The slides that we will be using are available on our investor Relations website, along with our earnings release and related information today's comments and our slides contain forward looking statements based on current expectations and actual results may differ materially from expectations. Our third quarter 2025 Form 10-Q was filed this morning. Please refer to that document for forward looking statement.

Speaker #1: Ma'am, the floor is yours.

Speaker #2: Thank you, Matthew. I would like to thank everyone for participating in this conference call and webcast to review our Q3 earnings, recent developments, and operating performance.

Speaker #2: Our speakers today will be our Chairman, President, and CEO, Theodore Geisler, and our CFO, Andrew Cooper. Jacob Tetlow, COO, and Jose Esparza, SVP of Public Policy, are also here with us.

Cautionary language as well as the risk factors and MD&A sections, which identify risks and uncertainties that could cause actual results to differ materially from those contained in our disclosures a replay of this call will be available shortly on our website for the next 30 days. It will also be available by telephone through November 10, 2025, I will now turn the call over to Ted.

Speaker #2: First, I need to cover a few details with you. The slides that we will be using are available on our Investor Relations website, along with our earnings release and related information.

Speaker #2: Today's comments and our slides contain forward-looking statements based on current expectations, and actual results may differ materially from expectations. Our Q3 2025 Form 10-Q was filed this morning.

Thank you Amanda and thank you all for joining us today in the third quarter, we delivered strong operational and financial performance underscoring the discipline and focus that define our strategy today.

Speaker #2: Please refer to that document for forward-looking statements, cautionary language, as well as the risk factors and MD&A sections, which identify risks and uncertainties that could cause actual results to differ materially from those contained in our disclosures.

Today I'll share how we plan to continue to meet rising customer demand and how we successfully navigated a dynamic summer season I'll also highlight our long term planning efforts and strategic investments that position us for sustainable growth.

Speaker #2: A replay of this call will be available shortly on our website for the next 30 days. It will also be available by telephone through November 10, 2025.

Andrew will walk through how increased sales in transmission revenue of led us to revise our 2025 earnings guidance, along with our forward looking financial expectations.

Speaker #2: I will now turn the call over to Ted.

Speaker #3: Thank you, Amanda, and thank you all for joining us today. In Q3, we delivered strong operational and financial performance, underscoring the discipline and focus that define our strategy.

Importantly, our long term planning and resource procurement paid off as we reliably serve customers over multiple record peak days this quarter I'm proud of our entire team for stepping up during the summer season to support our customers and communities with the industry, leading reliability, a hallmark of our company.

Speaker #3: Today, I'll share how we plan to continue to meet rising customer demand and how we successfully navigated a dynamic summer season. I'll also highlight our long-term planning efforts and strategic investments that position us for sustainable growth.

Our crews battled storms flooding and extreme heat yet we're prepared to ensure customers were taken care of with rapid response and operational excellence. Additionally, Palo Verde generating station operated at 100% capacity factor the entire summer delivering a solid performance for our customers and the entire desert southwest region.

Speaker #3: Then, Andrew will walk through how increased sales and transmission revenue have led us to revise our 2025 earnings guidance, along with our forward-looking financial expectations.

Speaker #3: Importantly, our long-term planning and resource procurement paid off as we reliably served customers over multiple record peak days this quarter. I'm proud of our entire team for stepping up during the summer season to support our customers and communities with industry-leading reliability, a hallmark of our company.

Our peak demand record reflects the strong underlying economic growth in our service territory with weather normalized sales growth of five 4% and residential sales growth of four 3% in the third quarter alone Arizona's population growth remains robust fueled by major employers expanding our operations and driving demand for skilled labor.

Speaker #3: Our crews battled storms, flooding, and extreme heat. Yet, we're prepared to ensure customers are taken care of with rapid response and operational excellence. Additionally, Palo Verde Generating Station operated at 100% capacity factor the entire summer, delivering a solid performance for our customers and the entire Desert Southwest region.

The state's ability to attract and retain high quality talent is truly a key differentiator and a powerful signal of the long term economic fatality, we're helping support.

Semicon West recognized as North America's largest microelectronic exhibition and conference was held outside California for the first time in more than 50 years with Phoenix being selected as the host city.

Speaker #3: Our peak demand record reflects the strong underlying economic growth in our service territory, with weather-normalized sales growth of 5.4% and residential sales growth of 4.3% in Q3 alone.

Speaker #3: Arizona's population growth remains robust, fueled by major employers expanding their operations and driving demand for skilled labor. The state's ability to attract and retain high-quality talent is truly a key differentiator and a powerful signal of the long-term economic vitality we're helping support.

Our regions economic momentum continues to accelerate site selection magazine recently named America accounting the top county in the nation for economic development in 2025.

Deciding at success in attracting high growth industries, like semiconductors data centers and logistics.

One semiconductor reaffirmed its commitment to Arizona accelerating production of two nanometer wafers and advanced technologies. They also announced plans to acquire a second location in Phoenix to support their vision for Standalone Giga fab cluster.

Meanwhile, Amcor technology broke ground on a 7 billion dollar advanced semiconductor packaging and testing facility, which is an increased investment of $5 billion over their original plans.

The first phase is expected to be completed by mid 2027 with production beginning in early 2028.

To support this growth we're executing our plan for long term investments in both transmission and Baseload generation, which are essential to secure a reliable grid for the long term.

In Q2, we announced our role as the anchor shipper on the desert southwest expansion project and just days ago, We announced our plans to develop a new generation site near Gila Bend, just southwest of Phoenix, which could add up to 2000 megawatts of reliable and affordable natural gas generation to our customers.

It doesn't sunpower plant is a two phase project designed to serve both existing customers and the rising demand from extra large energy users like data centers and manufacturers.

To support this growth we're executing our plan for long term investments in both transmission and base load generation, which are essential to secure a reliable grid for the long term.

One is expected to begin serving committed customers by late 'twenty 30 phase.

<unk> two is expected to support new demand from our queue of high load factor customers importantly.

We're working with customers now to contract for the phase II capacity using our subscription model.

Commercial construct designed to ensure growth pace for growth, while protecting affordability for all customers.

Investment in generation alone will not be enough to support the growth in customer demand, we're making significant investments in transmission as well with multiple projects underway and more in development. These projects are expected to enhance.

The desert Sunpower plant is a two phase project designed to serve both existing customers and the rising demand from extra large energy users like data centers and manufacturers.

Phase one is expected to begin serving committed customers by late 2030.

Reliability resiliency and integration of new resources. They also expand our access to outer state generation and regional markets transmission investments benefit from constructive and timely recovery through our formula rate and creates opportunities for additional wheeling revenues that support the affordability for our retail customers.

Phase two is expected to support new demand from our queue of high load factor customers.

Accordingly.

We're working with customers now have a contract for the phase II capacity using our subscription model our commercial construct designed to ensure growth pace for growth, while protecting affordability for all customers.

Turning to our pending rate case, we remain actively engaged with intervenors and responding to data requests and remain on track for a hearing in Q2 of next year.

As we approached the end of 2025 priorities remain clear executing our mission to deliver reliable and affordable service to our customers.

Reliability resiliency and integration of new resources. They also expand our access to outer state generation and regional markets transmission investments benefit from constructive and timely recovery through a FERC formula rate and creates opportunities for additional wheeling revenues that support the affordability for our retail customers.

Investing in Baseload generation and transmission to serve growth and achieving a constructive regulatory outcome that protect customer affordability, while reducing regulatory lag. Thank.

Thank you for your time today, I'll now turn it over to Andrew.

Thank you Ted and thanks, again to everyone for joining us today.

Turning to our pending rate case, we remain actively engaged with intervenors and responding to data requests and remain on track for a hearing in Q2 of next year.

This morning, we released our third quarter 2025 financial results I'll walk through the key drivers behind our performance provide context on our updated 2025 guidance and share our outlook for 2026 and beyond.

As we approach the end of 2025 priorities remain clear executing our mission to deliver reliable and affordable service to our customers.

We reported earnings of $3 39 per share for the quarter, a modest increase of two cents year over year.

<unk> and base load generation and transmission to serve growth and achieving a constructive regulatory outcome that protect customer affordability, while reducing regulatory lag.

This result was primarily attributable to higher transmission revenues and higher sales driven by robust sales growth across customer classes.

Thank you for your time today, I'll now turn it over to Andrew.

Thank you Ted and thanks, again to everyone for joining us today.

These gains were partially offset by lower weather driven sales.

Compared to last year's Q3, higher interest expense reduced pension benefits and an increase in our outstanding share count.

Based on strong sales growth along with above normal weather an increase in transmission revenues and contributions from Eldorado. We are raising our 2025 EPS guidance from a range of $4 40 to $4 60 per share up to $4 97 to $5 10 per share.

We reported earnings of $3 39 per share for the quarter, a modest increase of two cents year over year. This result was primarily attributable to higher transmission revenues and higher sales driven by robust sales growth across customer classes.

With the ability to derisk future operating expenses, our updated guidance reflects an increase to our forecasted O&M for the year to a range of 1.025 billion to 1.04 or $5 billion.

These gains were partially offset by lower weather driven sales.

Compared to last year's Q3 higher interest expense reduced patchy I could've had benefits an increase in our outstanding share count.

Sales growth across all customer classes continues to be strong we experienced five 4% weather normalized sales growth for the quarter, including six 6% C&I growth supported by the continued ramp up of our large load customers.

Based on strong sales growth along with above normal weather an increase in transmission revenues and contributions from El Dorado, we are raising our 2025 EPS guidance from a range of $4 40 to $4 60 per share up to $4 90 to $5 10 per share.

And four 3% residential growth year to date residential sales growth stands at 2% exceeding our expectations and fueled by continued customer growth at the top end of our range.

With the ability to derisk future operating expenses, our updated guidance reflects an increase to our forecasted O&M for the year to a range of 1.025 billion to 1.04 or $5 billion.

Therefore, narrowing our customer growth guidance range to the high end of two to two 5% for the year hasn't.

As we look ahead to 2020 six we anticipate earnings per share of $4 55.

To $4 75 per share do.

The expected year over year decrease compared to our revised 2025 earnings guidance is due to the projection of normal weather and higher financing and D&A costs as we work through the rate case process. We continue to expect robust customer and sales growth increased transmission revenues focused O&M management and some pause.

And four 3% residential growth year to date residential sales rose, 22% exceeding our expectations and fueled by continued customer growth at the top end of our range.

Therefore, narrowing our customer growth guidance range to the high end of two to two 5% for the year.

Contributions from our El Dorado subsidiary.

Customer growth next year is expected at one 5% to two 5% supported by Arizona ongoing population and business expansion.

As we look ahead to 2026, we anticipate earnings per share of $4 55 to $4 75 per share.

Last year, we set a post recession record with nearly 35000 new meter sets. We're on track to match that figure again in 2025, and our forecast for 2026 customer additions remained strong.

The expected year over year decrease compared to our revised 2025 earnings guidance is due to the projection of normal weather and higher financing and DNA costs as we work through the rate case process. We continue to expect robust customer and sales growth increased transmission revenues focused O&M management and some pause.

For overall sales growth, we expect weather normalized sales to continue to grow at 4% to 6% in 2026 and with the strong residential sales growth trends and continued ramping acceleration plans by our extra high load factor customers, including in the advanced manufacturing space. We are increasingly confident in our forecast at the long term.

Contributions from our El Dorado subsidiary.

Customer growth next year is expected at one 5% to two 5%.

Courted by hours or the ongoing population and business expansion.

Sales growth range and are raising it up from 4% to 6% to 5% to 7% and extending it through 2030.

Last year, we set a post recession record with nearly 35000 new meter sets. We're on track to match that figure again in 2025, and our forecast for 2026 customer additions remained strong.

Our capital and financing strategy remains focused on enabling growth, while maintaining affordability and financial discipline.

We've updated our capital plan through 2028 to include critical strategic investments in transmission and generation that support reliability and the demands of our rapidly growing service territory.

As highlighted by Ted we look forward to developing these new resources for the benefit of our customers.

These investments are expected to drive rate base growth of 7% to 9% through 2028, an increase from our prior guidance of 6% to 8% through 2027.

Sales growth range and are raising it up from 4% to 6% to 5% to 7% and extending it through 2030.

Our capital and financing strategy remains focused on enabling growth, while maintaining affordability and financial discipline.

To support this plan, we've updated our financing strategy for 26 through 28, maintaining a balanced mix of debt and equity aligns with our balance sheet targets for.

We've updated our capital plan through 2020 to include critical strategic investments in transmission and generation that support reliability and the demands of our rapidly growing service territory.

For 2026, approximately 85% of our equity need has already been priced with an additional one to $1 2 billion of pinnacle west equity forecasted through 2028.

As highlighted by Ted we look forward to developing these new resources for the benefit of our customers.

On the O&M front, our 2026 outlook reflects our commitment to cost efficiency.

These investments are expected to drive rate base growth of 7% to 9% through 2028, an increase from our prior guidance of 6% to 8% through 2027.

The slight year over year decrease despite continued customer growth and we remain focused on reducing O&M per megawatt hour over the long term.

To support this plan, we've updated our financing strategy for 26 through 28, maintaining a balanced mix of debt and equity aligned with our balance sheet targets for.

Finally, we are affirming our long term EPS growth guidance range of 5% to 7% based on the midpoint of our original 2024 guidance range.

For 2026, approximately 85% of our equity need has already been priced with an additional one to $1 2 billion of pinnacle west equity forecasted through 2028.

We recognize that regulatory lag will continue to be a factor in 2026. However, we remain confident in our long term financial strategy. Our service territory offers unique advantages, including strong growth across all customer classes and a diversified economic base that includes advanced manufacturing Datacenters and continued.

On the O&M front, our 2026 outlook reflects our commitment to cost efficiency, we expect a slight year over year decrease despite continued customer growth and we remain focused on reducing O&M per megawatt hour over the long term.

Population growth working closely with the Arizona Corporation Commission and stakeholders, we're committed to addressing regulatory lag improving recovery timing and ensuring affordability as we continue serving new and existing customers.

Finally, we are affirming our long term EPS growth guidance range of 5% to 7% based on the midpoint of our original 2024 guidance range.

We recognize the regulatory lag will continue to be a factor in 2026. However, we remain confident in our long term financial strategy. Our service territory offers unique advantages, including strong growth across all customer classes and a diversified economic base that includes advanced manufacturing Datacenters and continued <unk>.

This concludes our prepared remarks, I will now turn the call back over to the operator for questions.

Certainly everyone at this time, we'll be conducting a question and answer session.

Have any questions or comments. Please press star one on your phone at this time we.

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These hold while we poll for questions.

Thank you. Your first question is coming from Julien Dumoulin Smith from Jefferies. Your line is live.

This concludes our prepared remarks, I will now turn the call back over to the operator for questions.

Hey, good morning team. Thanks for the time I appreciate it and nicely done I got to say again.

Certainly everyone at this time, we'll be conducting a question and answer session.

Let me if I can kick it off here, obviously, the gas build as a front and center here for you guys. Good good progress how are you thinking about just eventually giving visibility on 29, and 30, especially as what you'd see it up here can you speak a little bit.

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Extent possible what that trajectory as you rolled it forward here would potentially look like in that context.

Please hold while we poll for questions.

Maybe speak a little bit more to the sequencing of getting this pipeline built in time and in service to align with what seems like a fairly.

Thank you. Your first question is coming from Julien Dumoulin Smith from Jefferies. Your line is live.

Hey, good morning team. Thanks for the time I appreciate it and nicely done I got to say again look let me if I can kick it off here obviously the gas build is front and center here for you guys.

Tight timeframe altogether, the build out of this generation.

Yeah, Julien thanks, very much and it I'll start and then Andrew can talk about the capital plan.

Good progress how are you.

Are you thinking about just eventually giving visibility on 29 and 30, especially as what you have teed up here can you speak a little bit.

The pipeline is expected to be in service in 2029, we're staying very close to that project and remain confident in the milestones between here and there.

The extent possible of what that trajectory as you rolled it forward here would potentially look like in that context.

And so as you know that was the first key step second step that is starting to announce some of the generation capacity projects that we've been working on desert Sun being the first major announcement and project that we would expect and so as we've said when you think about this in really two phases. The first phase is going to be necessary to.

Maybe speak a little bit more to the sequencing of getting this pipeline built in time and in service to align with what seems like a fairly tight.

Tight timeframe altogether, the build out of this generation.

Yes, Julian thanks, very much and it I'll start and then.

Support committed customers, that's a part of the four and a half gigawatts that we've already committed to and are building out to serve and we'd expect to be able to have that phase in service and 23%. So still a healthy margin past one the pipelines in service.

Andrew can you talk about the capital plan.

The pipeline is expected to be in service in 2029, we're staying very close to that project and remain confident in the milestones between here and there and so as you know that was the first key step second step that is starting to announce some of the generation capacity projects that we've been working on desert Sun being the first major.

But our schedule that we're comfortable with meeting importantly, we've got all the key equipment secured land interconnection is in place so.

We're in a good spot to be able to deliver on that timeline and then the second phase of that project.

And project that we would expect.

So as we've said when you think about this in really two phases. The first phase is going to be necessary to support committed customers. That's a part of the four five gigawatts that we've already committed to and are building out to serve and we'd expect to be able to have that phase in service in 2030, or so still a healthy margin.

We've identified.

The opportunity to be able to serve our subscription customers with we've rolled out an opportunity to subscription customers for one two gigawatts and we're actively working with those counterparties on their desired timing and ramp rate to be able to take advantage of that second phase and that's one of the benefits of the subscription model is we can ensure that.

Past one the pipelines in service.

But our schedule that we're comfortable with meeting importantly, we've got all the key equipment secured land interconnection is in place so.

The delivery timeline of that second phase corresponds with the Counterparties ramp rate and we make sure that reliability is protected by keeping those two and sink both we'll of course take service from the new pipeline, but we're comfortable with the timing and how that coincides with with the pipelines are in service and will continue to monitor pie.

We are in a good spot to be able to deliver on the timeline and then the second phase of that project.

We've identified.

Your line progress along the way and.

Be prepared to adjust if needed, but we're comfortable with the timeline, we laid out Andrew you want to speak to the capital plan sure. Yeah, you know Julien as.

Specifically relates to the desert Sun project here or there is some of the capital related to that project both on the.

The.

Delivery timeline of that second phase corresponds with the Counterparties ramp rate and we make sure that reliability is protected by keeping those two in sync.

Generation side as well as small enough on the transmission side in the current plan you've got you know long lead equipment and land and things like that that are in the plan and certainly given the in service date that heads talking about for phase. One you would see that capex ramp up as we get closer to the end of the decade.

Both will of course take service from the new pipeline, but we're comfortable with the timing and how that coincides with with the pipelines in service and will continue to monitor pipeline progress along the way and.

Around the broader capital plan.

Be prepared to adjust if needed, but we're comfortable with the timeline, we laid out Andrew you want to speak to the capital plan sure, Yes, Julien as.

If you work through the rate case and understand the dynamics of the formula rate and continue to develop our subscription model with our customers that would provide us the opportunity to give more visibility as you know, we certainly want to make sure that that grows pacer growth, but you know the the plan that we put forward through 'twenty eight reflects the beginnings of some of those really big long long ago.

Specifically relates to the desert Sun project here or there is some of the capital related to that project both on the.

Generation side as well as small amounts on the transmission side in the current plan, you've got long lead equipment and land and things like that that are in the plan and certainly given the in service date that heads talking about for phase. One you would see that capex ramp up as we get closer to the end of the decade.

Lead time investments, we're making on the generation and the transmission side you could see it in the <unk>.

<unk> thousand and 28 kind of new run rate for transmission investments in some of the additional information we provided about our ability to start to look at that additional $6 billion backlog of FERC regulated transmission assets and start to begin to develop those in parallel.

Right.

Around the broader capital plan.

We worked through the rate case and understand the dynamics of a formula rate and continuing to develop our subscription model with our customers that would provide us the opportunity to give more visibility as we certainly want to make sure that that growth.

With a project like Desert Sun. So yeah. That's the plan we feel good about the plan for 28 and as we are able to certainly provide more information about the time line through the end of the decade, and we've tried to start to do that with some of the construction work in progress disclosure that we've been providing over the last few quarters.

What's your growth, but you know the.

Plan that we put forward through 'twenty eight reflects the beginnings of some of those really big long longer lead time investments, we're making on the generation and the transmission side you can see it in the 2028 kind of new run rate for transmission investments in some of the additional information we provided about our ability to start to look at that additional $6 billion.

Got it and just you kind of teed up the next piece, how how is that progress going on the subscription that's what you're talking about this 1.2 gigawatt opportunity where are you in sort of a critical filling that bucket or that that opportunity.

Backlog of FERC regulated transmission assets and start to begin to develop those in parallel.

Yeah. We've got active dialogue you know this was tranche one of our subscription and recognize that the timing of tranche one coincides with developing that phase two of desert Sun as well as the in service the new pipeline. So we're working with Counterparties now to match that up with their desired in service timing.

With a project like Desert Sun. So that's the plan we feel good about the plan for 28 and as we are able to certainly provide more information about the time line through the end of the decade, and we've tried to start to do that with some of the construction work in progress disclosure that we've been providing over the last few quarters.

But the conversations are active and we remain optimistic in being able to deploy a subscription model.

Got it and just you kind of teed up the next piece.

How is that progress going on the subscription that's what you're talking about this 1.2 gigawatt opportunity.

Both continue to.

Where are you in sort of a critical filling that bucket or that that opportunity.

Serve a part of the 20 gigawatt Q that is.

Yeah, we've got a active dialogue this was tranche one of our subscription and recognize that the timing of tranche one coincides with developing that phase two of desert Sun as well as the in service the new pipeline. So we're working with Counterparties now to match that up with their desired in service timing.

Ready to begin service in our service territory, while also designing it in a way that helps with financing and protect customer affordability. So I think the key elements of the model has been well received by the market.

We're actively working with Counterparties EBIT.

But it's going to be a good way to be able to serve that Q, both now and going forward.

But the conversations are active and we remain optimistic in being able to deploy subscription model to both continue to <unk>.

Yes fair enough one little detail here on 26, you've got this 55 cent bump here on transmission, that's a sustainable level right, that's a pretty big bump.

Serve part of the 20 gigawatt Q that is.

Yeah, Julian we will provide guidance as we go forward I would say on that but I think it's reflective of the trend we've been very committed to investing in our FERC regulated transmission business and that's some of the capital that I was talking about both because of that need to access resources from further afield and to serve our growth and given the first call.

We're actively working with Counterparties.

It's going to be a good way to be able to serve that Q, both now and going forward.

Truck the formula rate and the amount of capital that we've stepped into there. This is just a natural reflection of the plan that we've put forward and converting it now into our annual earnings opportunity.

Yes fair enough one little detail here on 26, you've got this 55 cent bump here on transmission, that's a sustainable level right, that's a pretty big bump.

Got it excellent. Thank you guys all the best Alright, good luck. Thanks.

Yeah, Julian we will provide guidance as we go forward, obviously on that but I think it's reflective of the trend we've been very committed to investing in our FERC regulated transmission business and that's some of the capital that I was talking about both because of that need to access resources from further afield and to serve our growth and given the FERC concert.

Thanks, Kevin.

Thank you. Your next question is coming from Nick Campanella from Barclays. Your line is live.

Hey, good morning team. This is stupid mix of day, thanks, very much for taking my questions.

So clearly just one quick one clarification on equity dilution if I could so since 2026 equity need is 85% taking care of our wishes to $550 million already price that you put in the slides.

The formula rate and the amount of capital that we've stepped into there. This is just a natural reflection of the plan that we've put forward and converting it now into our annual earnings opportunity.

What's the true incremental equity needs for 2006 to 28, especially when we look at that one to $1 2 billion in total Paul total equity to use for the three year guidance period.

Got it excellent. Thank you guys all the best Alright, good luck.

Thanks, Kevin.

Thank you. Your next question is coming from Nick Campanella from Barclays. Your line is live.

So I guess, how should we think about the cadence of issuing through 'twenty six 'twenty seven and.

Hey, good morning team. This is stupid mixed today, thanks very much for taking my questions.

So clearly just one quick one clarification on equity dilution if I could.

How should we think about any equity need mitigation given the strong sales growth backdrop that you just provided an update thanks.

Since 2026 equity need is 85% taken care of.

Okay. So yeah on.

Which was the $550 million already price as you put in the slides.

On the equity.

As you pointed out we have substantially de risked the need in 'twenty six through all the equity that we've priced below through the block issuance. We did in 2024 and our use of our ATM over the last two years. So it would feel like we're in a good position. If we look over the incremental need over the three years that 26 or 28 period, that's about 1%.

What's the true incremental equity needs for 2006 to 28, especially when we look at that one to $1 2 billion in total all total equity needs for the three year guidance period, and also I guess, how should we think about the cadence of issuing through 'twenty six 'twenty seven.

1.2 billion represents.

How should we think about any equity need mitigation given the strong sales growth backdrop that you just provided an update thanks.

And so you know certainly these projects are lumpy. So the cadence of issuance need kind of goes with that that's where an ATM is worthwhile for us to date to be able to time or draw downs on our issuance with the Capex as we go through some of these larger projects.

Okay. So yeah on.

On the equity.

Your last question around mitigation is really the key one when you think about that range and our ability to meet our long term aspirations around a balanced capital structure and to minimize the amount of equity dilution within that balance capital structure. It really comes back to all the work we're doing both around reducing regulatory lag through the rate case process to improve retained earnings.

$1 2 billion and represents.

And so certainly if projects are lumpy. So the cadence of issuance need kind of goes with that that's where an ATM is worthwhile for us to date to be able to time.

And are going to fund that capital from internally generated funds and then to look to our large load customers in this subscription discussion to make sure that to the extent that we can secure cash upfront to fund those investments that it reduces the need for us to go out to the market for equity so.

Or draw downs in our issuance with the Capex as we go through some of these larger projects.

Your last question around mitigation is really the key one when you think about that range and our ability to meet our long term aspiration around a balanced capital structure and to minimize the amount of equity dilution within that balance capital structure. It really comes back to all the work we're doing both around reducing regulatory lag through the rate case process to improve her tanned to earnings.

Well that's the range today are forecasted need we're going to continue to work through the rate case process and the engagements on the large loan side to try to mitigate that as much as possible.

Got it that's very helpful.

And secondly, just on the transmission capital investment slide you've laid out if I could.

And our ability to fund that capital from internally generated funds and then to look to our large load customers in this subscription discussion to make sure that to the extent that we can secure cash upfront to fund those investments that it reduces the need for us to go out to the market for equity so.

Appreciate the clarity on the $2 6 billion cumulative transmission Capex through 28, and also the 6 million plus through 2034 could you just comment on your assumption and your transmission Capex post 2028.

The range today are forecasted need we're going to continue to work through the rate case process and the engagements on the large loan side to try to mitigate that as much as possible.

And how should we.

Interpret this $6 billion, plus especially on what's contributing in driving the upside.

Okay.

Yeah. So we haven't laid out the specifics of the plan post 2028, because you know.

Got it that's very helpful.

And secondly, just on the transmission capital investment slide you've laid out if I could.

These are really the projects that are reflected in a 10 year strategic transmission plan that was filed with the commission every other year. There are a host of projects in there five or 600 miles of high voltage lines that we're developing to meet different needs and theres. Some fungibility in terms of getting it all that's flying without lineup. So we're doing a lot of that work today the way I am.

The clarity on the $2 6 billion cumulative transmission Capex through 28, and also the 6 million plus through 2034 could you just comment on your assumption and your transmission Capex post 2028, and how should we.

Think about it overall is that we went from under $200 million a year run rate Capex five years ago in.

Interpret this 6 billion plus especially on what's contributing in driving the upside.

In transmission.

Yeah. So we haven't laid out the specifics of the plan post 2028, because these are really the projects that are reflected in a 10 year strategic transmission plan that was filed with the commission every other year. There are a host of projects in there five or 600 miles of high voltage lines that we're developing to meet different needs than theirs.

The.

Local area projects or things that we do there are 69 kv plus that number is increasing to the $3 million to $400 million range of just a blocking and tackling cap actually do on the transmission side and for the increments above that that you see on this thing.

That the potential for that 850 plus million number to be a run rate. There is a baseline three or 400 in there and then you have to think about that is reflective of the beginning of investing in the strategic transmission projects, but it's a really long runway and that number will vary from year to year, but I think if you look at 2028 that is a reflection of the opportunity on an ongoing basis.

Some fungibility in terms of did it all that's flying without lineup. So we're doing a lot of that work today. The way I would think about it overall is that we went from under $200 million a year run rate Capex five years ago.

Transmission.

Just sort of the.

The combination of core transmission and that increment from strategic transformation.

Local area projects or things that we do there are six young kv plus that number is increasing to the $3 million to $400 million range are just the blocking and tackling capex should be due on the transmission side and so the increments above that that you see almost of them there.

Got it that's super helpful. If I could just another quick clarification.

On the robust sales growth guidance, you refresh I guess seeing them.

That the potential for that 850 plus million number to be a run rate. There is a baseline three or 400 in there and then if we think about that is reflective of the beginning of investing in our strategic transmission projects, but it's a really long runway and that number will vary from year to year, but I think if you look at 2028 that is a reflection of the opportunity on an ongoing base.

Really elevated level at 5% to 7% to 2030, while this while looking at a 7% to 9% rate base growth through 2028, I guess can you comment on your confidence level to possibly extend the seven to nine.

Ramius growth further into the horizon, and I guess, what could be the key drivers contributing to that.

The combination of core transmission and that increment from strategic transformation.

Got it that's super helpful. If I could just another quick clarification.

Yeah. So.

We've laid out through 2028 on the rate base side and you know one of the reasons stepped up is that you're beginning to see some of those long lead projects.

The robust sales growth guidance.

I guess seeing.

Really elevated level at 5% to 7% through 2030, while this while looking at a 7% to 9% rate base growth through 2028, I guess can you comment on your confidence level to possibly extend the seven to nine.

Come into service in 28, the Best example, being Red Hawk the expansion of our natural gas facility. There as you get into 2029, and 2030 and beyond more of these larger projects come in in service up to your point the higher sales growth, we're seeing especially from the large load type customers and so you know as we continue to that.

Rate base growth further into the horizon, and I guess, what could be the key drivers contributing to that.

To move forward and develop our Capex plan around desert Sun around those strategic for that $6 billion of strategic transmission that we were just talking about we'll continue to look at that rate base growth rate. Our confidence is that that runway is quite long on what the level is is what we'll be able to kind of continuing to work through that and see what the disclosure that I mentioned.

Yeah. So you know.

We've laid out through 2028 on the rate base side and one of the reasons stepped up is that you're beginning to see some of those long lead projects come into service in 28, and the Best example, being Red Hawk the expansion of our natural gas facility. There as you get into 2029, and 2030 and beyond more of these larger projects come in.

Earlier, it's also a good way to think about some of the projects that we know are already in the hopper.

Take a chance to 29 and 30 in a good way to extrapolate if you do something about that.

And service up to your point, the higher sales growth, we're seeing especially from the large load type customers and so you know as.

Great I appreciate that color thanks for the update.

As we continue to kind of move forward and develop the Capex plan around desert Sun around.

Excellent.

Thank you. Your next question is coming from sharper Russo from Wells Fargo. Your line is live.

Around those strategic for that $6 billion of strategic transmission that we were just talking about we'll continue to look at that rate base growth rate. Our confidence is that that runway is quite long on what the level is is what we'll be able to kind of continue to work through that and see what disclosures that I mentioned earlier. It's also a good way to think about some of the projects that we know are already in the hopper.

Hey, good morning, everyone. This is actually Alex on for Sean Thanks for taking my question.

Hey, Alex Good morning, Hey, good morning, So just on the growth rate outlook you guys are still targeting that five to seven after 24 mid point just in the context of today's new 26 guidance can you just help frame what you might use as your new base and would you.

They take a chance of 29 and 30 in a good way to extrapolate if you do some of that math.

All forward the plan as soon as the rate case is concluded.

Great I appreciate that color thanks for the update.

Yeah.

Sure Yeah, so real.

Okay.

Thank you. Your next question is coming from sharper Russo from Wells Fargo. Your line is live.

The ratio has been kind of a separate than for us to look at all of that and if you think about these here is we really try to set as you know high bar for ourselves as we can to make sure that we're consistently meeting or exceeding expectations and doing so in the right way and so yes, we want to get to the point, where the that Fox.

Hey, good morning, everyone. This is actually Alex on for <unk>. Thanks for taking my question.

Hey, Alex Good morning, Hey, good morning, So just on the growth rate outlook you guys are still targeting that five to seven after 24 mid point just in the context of today's new 26 guidance could you just help frame what you might use as your new base and when you drill.

10% becomes a evergreen right now we're in a situation where earnings are lumpy. We go and we have a rate case, when we get a rate increase and then you know there's regulatory lag through Atlanta rate case process. The formula rate is really an important element here to be able to convert.

Pull forward the plan as soon as the rate case is concluded.

Yeah.

Sure yes so.

Really the ratio has been kind of a separate than for us to look at all of that and if you think about these years, we really try to set as you know a high bar for ourselves as we can to make sure that we're consistently meeting or exceeding expectations and doing so in the right way and so.

That earnings growth rate from being kind of a long term look at 24, and then look at 28 is something that can be more evergreen and so I think as we work through the rate case process on the structure of the formula rate will be much better positioned to talk about what all that looks like and ultimately that's the goal is to be able to deliver year in year out produce more.

Yes, we want to get to the point, where the that five 7% becomes an evergreen right now we're in a situation where earnings are lumpy, but when we have a rate case and we get a rate increase and then you know there's regulatory lag through Atlanta rate case process. The formula rate is really an important element here to be able to convert.

Modest increases your year over year for customers as well, that's a really important part of it and ultimately that creates better stability for us around the earnings growth.

Got it Okay. That's helpful. And then just switching gears here just you can just give you a sense of more of a sense on the megawatt pipeline you have around the hyperscale side, and just sort of how you think about capacity first generation needs. Thank you.

<unk>.

That earnings growth rate from being part of a long term look at 24, and then look at 28 is something that can be more evergreen and so I think as we work through the rate case process and the structure of the formula rate will be much better positioned to talk about what all that looks like and ultimately that's the goal is to be able to deliver year in year out produce more model.

Yeah sure out so we continue to see just a robust pipeline of demand.

We've articulated in the slides, we've got four five gigawatts of incremental demand that we've already committed to that's in part what desert Sun is going to be serving as well as future generation and transmission investments that are included in our guidance period, and we will have to be developed even beyond but in addition to that we wanted to.

Just increases your year over year for customers as well, that's really important part of it and ultimately that creates better stability for us around the earnings growth.

Got it Okay. That's helpful. And then just switching gears here just you can just give you this.

A more of a sense on the megawatt pipeline you have around the Hyperscale side, and just sort of how you think about capacity first generation needs. Thank you.

Start making progress on committing in serving part of the 20 Gigawatts of uncommitted load that is in our current Q and so that's also part of what desert Sun will begin to be able to allow us to serve but of course, we anticipate wanting to be able to offer much more than just that initial.

Yeah sure out so we continue to see just a robust pipeline of demand.

Articulated in the slides, we've got four five gigawatts of incremental demand that we've already committed to.

Tranche, a 1.2 gigawatts. So the intent is a contract that first tranche and then we'll continue to.

That's in part what desert Sun is going to be serving as well as future generation and transmission investments that are included in our guidance period, and we will have to be developed even beyond but in addition to that we want to start making progress on committing in serving part of the 20 gigawatts of uncommitted load.

Identify generation and transmission capacity expansion opportunities.

How do we get to a certain point in the pre development of those projects to where we are confident in the timing and level of capacity available for us to be able to offer and we will go to the market and offer a another tranche of service to the uncommitted Q and that's the model that we anticipate being able to deploy going forward bottom line as we anticipate.

That is in our current Q and so that's also part of what desert Sun will begin to be able to allow us to serve but of course, we anticipate wanting to be able to offer much more than just that initial tranche a 1.2 gigawatts. So the intent is a contract that first tranche and then we'll continue to.

Being able to continuously offered capacity to eat into that 20, Gigawatts and we think the one two gigs that we've offered recently is just the first step into that trajectory.

To.

Identify generation and transmission capacity expansion opportunities.

Got it Super helpful. I'll leave it there thank you.

Thank you.

Yeah.

Thank you. Your next question is coming from Travis Miller from Morningstar. Your line is live.

Good morning, Thank you.

Good morning.

I just wanted to confirm on the guidance for 'twenty six there's no contribution from the rate case is that correct and then.

Being able to continuously offer capacity to eat into that 20, Gigawatts and we think the one two gigs that we've offered recently is just the first step into that trajectory.

Correct.

Any ideas or guidance you could give on what maybe a dollar increase there so to speak would be in.

In the back end of the year.

Got it Super helpful. I'll leave it there thank you.

Thoughts there.

Thank you.

Yeah, Travis you're you're correct, we have not made any assumptions for rate case conclusion that some form in 2026 guidance.

Yeah.

Thank you. Your next question is coming from Travis Miller from Morningstar. Your line is live.

As we've said we do anticipate the case resolving in the last quarter of the year and given that's such a small quarter for us anyhow and the timing just didn't seem prudent for us to be able to make any assumptions at this point, but certainly once the case concludes that'll allow us to step back and reevaluate the constructive nature of the outcome of what that means.

Good morning, Thank you.

Morning.

Just wanted to confirm on the guidance for 'twenty six there's no contribution from the rate case is that correct and then.

If that's correct.

Any ideas or guidance you could give on what maybe a dollar increase there so to speak would be in.

In terms of forward looking guidance. So we would look to do that at that time as well as the details around how the formula rate would work both timing and level on a go forward basis. So look for further updates once the case concludes on all those aspects.

In the back end of the year.

Thoughts there.

Yeah, Travis you're correct, we have not made any assumptions for rate case conclusion that some form in 2026 guidance.

Okay. It makes sense.

As we've said we do anticipate the case resolving in the last quarter of the year and given that such a small quarter for us anyhow and the timing just didn't seem prudent for us to be able to make any assumptions at this point, but certainly once the case concludes that'll allow us to step back and reevaluate.

And then separately for point.

Five gigawatts.

Customers.

Or elaborate on who those customers are and maybe.

Is any of that going to kind of your system.

Wide base with it.

The constructive nature of the outcome of what that means in terms of forward looking guidance. So we'd look to do that at that time.

And then for more small commercial.

And how do you how would you break up that for now.

Once.

Well as the details around how the formula rate would work both timing and level on a go forward basis. So look for further updates once the case concludes on all those aspects.

Yeah, the four and a half gigawatts is a nice balance and blend between incremental industrial growth such as chip manufacturing TSMC and EMCORE being examples of that as well is there a supply basis Oh.

Okay makes sense.

Then separately.

Five gigawatts.

Customers didn't get them.

As well as of course, Datacenters that are already in development or even in service, but we expect a ramp through this period and then importantly, we continue to see steady and robust residential and small business growth. So I'd say, that's one of the hallmarks of our growth story is very diversified story not too dependent on one industry.

I don't know who those customers are and maybe.

Is any of that going to.

Our system.

Wide base, whether residential or small commercial.

Or how do you how would you break up that for you.

Going once.

Yes, the four five Gigawatts is a nice balance and blend between incremental industrial growth such as chip manufacturing TSMC and EMCORE being examples of that as well is there a supply basis.

Or or customer base or another you know Maricopa County, just recently ranked top county for economic development in 2025.

The third fastest in the U S. Phoenix just ranked number one of the top 15 growth markets for manufacturing and all of that is separate from a data center story. It just shows the true underlying growth. We're also pleased to see that affordability is still is a hallmark of our service territory favorable cost of living Phoenix inflow.

It.

As well as of course data centers that are already in development or even in service, but we expect a ramp through this period and then importantly, we continue to see just steady and robust residential and small business growth. So I'd say, that's one of the hallmarks of our growth story is very diversified story not too dependent on one industry.

<unk> is growing at about one 4% versus national average of two nine so I think theres a lot of drivers behind why were seeing diversified growth in that four five gigawatts represents all sectors, which gives us confidence in the growth rate, but also means that we've got a lot of infrastructure to deploy to continue to keep up with the various sectors that are demanding it.

Or customer base are another matter.

A couple of County, just recently ranked top county for economic development in 2025.

The third fastest in the U S. Our Phoenix just ranked number one of the top 15 growth markets for manufacturing and all of that is separate from a data center story.

Okay.

Sounds good and then.

Most of that four point guard Gigawatts go into rate base.

Just shows the true underlying growth. We're also pleased to see that affordability is still is a hallmark of our service territory and favorable cost of living Phoenix inflation is growing at about one 4% versus national average of two 9%. So I think theres a lot of drivers behind why were seeing diversified growth in that four five gigawatts represents all sectors, which gives.

Or some of that the subscription model you were talking about that might be outside of rate base.

Well, let's be clear all of our investment goes into rate base. The subscription model still goes into rate base. We're just contracting with those customers think about it as more of a special rate agreement rather than out of rate base and that special rate agreement, just ensures that growth pace for growth and that.

As confidence in the growth rate, but also means that we've got a lot of infrastructure to deploy that continue to keep up with the various sectors that are demanding it.

The timing of their ramp coincides with the timing of the ramp up the infrastructure to be built to serve them as well as potentially getting their help to finance some of that infrastructure. So that we maintain a healthy balance sheet as we grow these rate based investments specifically for data centers. So it's all going in the rate base, it's just a matter.

Okay, Yeah, no that sounds good and then so would most of that $4 five gigawatts go into rate base.

Or some of the subscription model you were talking about that might be outside of rate base.

How you recover the dollars is is really the difference in the subscription model.

Okay. Okay very good no that's helpful. Thank you.

Thank you.

Thank you. Your next question is coming from Steve Dan perceive from RBC capital markets. Your line is live.

Hi, good morning, Thanks, very much for taking my questions.

Good morning.

Was hoping for a little bit more color on the year over year change in sales growth as an EPS driver I know for 25 guidance you had embedded 58 cents.

And for.

Matter of how you recover the dollars is is really the difference in the subscription model.

26 kind of it looks like you're embedding 39 cents.

I guess I would just step back and say it doesn't seem like the magnitude or mix is really that different given both years were four 6% total of which 3% to 5% was from large C&I. So can you just give a little color. There is it mix in within the C&I classes are what's driving the difference in magnitude uplift.

Okay. Okay very good no that's helpful. Thank you.

You.

Thank you. Your next question is coming from Steve to MRC from RBC capital markets. Your line is live.

Hi, good morning, Thanks, very much for taking my questions.

Morning.

I just was hoping for a little bit more color on the year over year change in sales growth as an EPS driver I know for 25 guidance you had embedded 58 cents.

Yeah.

Hey, Steve It's Andrew sure. Yeah. So you know youre right twenty-six does have a bit of a smaller contribution there and that's really the fact that we're talking about a pretty big group of customers that has puts and takes and their ramp rate from year to year and some of those are you know as we've.

And for Us.

26 kind of it looks like you're embedding 39 cents.

I guess I would just step back and say that it doesn't seem like the magnitude or mix is really that different given both years were four 6% total of which 3% to 5% was from large C&I. So can you just give a little color. There is it mix in within the C&I classes are what's driving the difference.

<unk>.

Been an early data center market, we've been able to develop more sophisticated forecasting on a customer by customer basis, who's testing are quite vantage who's actually ramping.

And so you do see some variation within the customer classes residential small business number is relatively stable and as we've seen this quarter and our guidance for this year. The expectation of continued pretty large new customer addition, and actual positive contribution from residential.

Yes magnitude uplift themselves.

Hey, Steve It's Andrew sure Yeah. So you're right 26 does have a bit of a smaller contribution there and that's really the fact that we're talking about a pretty big group of customers that has puts and takes and their ramp rate from year to year and some of those.

Our sales despite the fact that we can hit that energy efficiency and distributed generation pressed up against that so it really is the your year to year variability in some of our large load customers I think where we.

Yep.

Been an early data center market, we've been able to develop more sophisticated forecasting on a customer by customer basis, who's testing are quite vantage who's actually ramping.

And so you do see some variation within the customer classes residential small business number is relatively stable and as we've seen this quarter and our guidance for this year. The expectation of continued pretty large new customer additions and a actual positive contribution from residential.

Really want to focus is the fact that this is a long term set of customers with a trajectory now that we feel confident about through 'twenty.

Including a raising that guidance by 100 basis points over that period.

And the fact that that means that the childhood Hector contributions that steps up by 100 basis points as well so over the long term feeling really good there is some intra year variability, but one once you pair that with continued customer growth residential growth and then the continued conversion of our transmission investments into our revenue transfer formula.

Sales. Despite the fact that we can hit that energy efficiency and distributed generation pressed up against that so it really is the your year to year variability in some of our large load customers I think where we are.

Really want to focus is the fact that this is a long term set of customers with a trajectory now that we feel confident about through 'twenty.

Yeah, we're feeling pretty confident about the ultimate outcome.

That's really helpful and I guess that would be like the put and take versus what kind of we were assuming there's just the sales growth versus transmission. Okay. I know Julian asked about it but can you talk a little bit more about that clearly throughout the rest of the plan transmission growth steps up materially into 'twenty eight.

Including raising that guidance by 100 basis points over that period.

But that means that the childhood Patrick contributions that steps up by 100 basis points as well so over the long term feeling really good there is some intra year variability, but when you pair that with <unk>.

And so does that does that 55 cent benefit scale linearly with the increase in transmission spending or is there something that you know, causing supernormal growth.

Continued customer growth residential growth and then the continued conversion of our transmission investment into a revenue driver for formula.

Recoveries, Yeah, no you know over time that you'd be proportionate to the investment where we earn pretty you know pretty quickly right. When we're putting assets into service I think the thing that will happen is you'll get a little bit lumpier because in the near term that $3 million to $400 million and run rate projects. Those are smaller projects that get done within a given year maybe.

Yeah, we're feeling pretty confident about the ultimate outcome.

That's really helpful and I guess that would be like the put and take versus what kind of we were assuming is just the sales growth versus transmission. Okay. I know Julian asked about it but can you talk a little bit more about that clearly throughout the rest of the plan transmission growth steps up materially into 'twenty eight.

Over two years that at back and we're moving forward into lines that may take longer to build some of the things that we're looking at or can you energize them is sexualized basis. So that we can reduce the regulatory lag. If we're building a 100 mile line can you do it and in segments.

And so does that does that 55 cent benefit scale linearly with the increase in transmission spending or is there something that you know, causing supernormal growth.

Recoveries, yes no.

Overtime that should be proportionate to the investment where we earn pretty.

That's the type of thing that we're thinking about to make sure that we continue to translate that opportunity into earnings. The other thing that's been nice about the transmission opportunity is that it's part of the broader wholesale market and so the opportunity to offset some of the impact to our retail customer base through willing others willing over.

Pretty quickly right when we're putting assets into service I think the thing that will happen is it will get a little bit lumpier because in the near term that three years to $400 million run rate projects. Those are smaller projects that can find within a given year, maybe over two years back and we're moving forward into lines that may take longer to build some of the things that we're looking at our <unk>.

Our system has been a big part of our customer affordability story as well so there's multiple benefits of doing it we are doing some larger projects of the scaling will ultimately get there over the long term, but entry year there could be some lumpiness just given you're talking about that increment above the core three or $400 million being longer lead time projects that can take a few here.

And you amortize them as such.

<unk> basis, so that we can reduce the regulatory lag if we're building a 100 mile line can you do it in segments.

Just to get into service.

Okay. That's really helpful. Thanks, very much for the time appreciate it.

Thanks, Steve.

Thank you that completes our Q&A session everyone. This concludes today's event you may disconnect at this time and have a wonderful day.

Tim has been a big part of our customer affordability story as well so there's multiple benefits to doing it we are doing some larger projects of the scaling will ultimately get there over the long term, but intra year. There can be some lumpiness just given you're talking about that incrementally positive core three or 400 million being longer lead time projects that can take a few years ago.

Thank you.

<unk> service.

Okay. That's really helpful. Thanks, very much for the time appreciate it.

Thanks, Steve.

Thank you that completes our Q&A session.

Everyone. This concludes today's event you may disconnect at this time and have a wonderful day. Thank.

Thank you for your participation.

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