[Management View]
Pinnacle West Capital (PNW) increased its 2025 EPS guidance following strong sales and transmission revenue, highlighting a proactive capital plan aimed at grid reliability and customer growth. Management described the Desert Sun generation and extensive transmission projects as strategic investments to meet both immediate and future demand, while noting that 85% of required 2026 equity is already secured. Growth guidance for weather-normalized sales and rate base was raised, with large, committed, and prospective demand from industrial and data center customers cited as supporting these targets.

[Outlook]
2025 EPS guidance has been raised to $4.90-$5.10 per share, reflecting robust sales growth and improved transmission revenue outlook. For 2026, EPS guidance is set at $4.55-$4.75 per share, noting an expected decrease due to normalization of weather and higher financing and depreciation expenses. Long-term sales growth guidance has been increased to 5%-7% and extended through 2030. The capital plan has been updated through 2028 to support critical investments in transmission and generation, targeting 7%-9% annual rate base growth.

[Financial Performance]
EPS for Q3 2025 was $3.39 per share, up $0.02 year over year, driven by higher transmission revenues and sales, partly offset by higher interest expense and share count. Weather-normalized sales growth was 5.4%, with 6.6% for government and industrial and 4.3% for residential customers. Year-to-date residential sales growth was 2%, exceeding expectations due to robust customer additions.

[Q&A Highlights]
Question 1: How are you thinking about giving visibility on 2029 and 2030, especially regarding the gas build and pipeline sequencing?
Answer: The pipeline is expected to be in service in 2029, with the first phase of the Desert Sun project serving committed customers by 2030. The second phase will serve subscription customers, aligning with their ramp rates. The capital plan includes long lead equipment and land, with CapEx ramping up closer to the end of the decade.

Question 2: How is the progress on the subscription model for the 1.2 gigawatt opportunity?
Answer: Active dialogue with counterparties is ongoing, with the subscription model designed to serve the 20 gigawatt queue and protect customer affordability. The model has been well received, and the company is optimistic about its deployment.

Question 3: How should we think about the cadence of equity issuance through 2026 and 2027, given the strong sales growth backdrop?
Answer: The equity need for 2026 is 85% derisked, with the remaining $1 billion to $1.2 billion forecasted through 2028. The company aims to minimize equity dilution through regulatory lag reduction, internal funds, and large customer agreements.

Question 4: Can you comment on the annual transmission CapEx post-2028 and the $6 billion plus through 2034?
Answer: The baseline transmission CapEx is $300-$400 million annually, with the increment above that reflecting strategic projects. The $6 billion plus represents a long runway of projects, with annual spend potentially reaching $800 million.

Question 5: Can you elaborate on the 4.5 gigawatts of committed customers and the mix of residential and small commercial growth?
Answer: The 4.5 gigawatts include industrial growth, data centers, and robust residential and small business growth. All investments go into the rate base, with the subscription model ensuring growth pays for growth.

Question 6: Can you provide more color on the year-over-year change in sales growth as an EPS driver?
Answer: The 2026 guidance reflects a smaller contribution from sales growth due to variability in large load customer ramp rates. The long-term sales growth guidance has been raised to 5%-7%, with continued strong customer additions and transmission investments.

[Sentiment Analysis]
The tone of the analysts was positive, with appreciation for the company's strategic investments and strong sales growth. Management was confident in their long-term growth plans and proactive in addressing regulatory and financing challenges.

[Quarterly Comparison]
| Metric | Q3 2025 | Q3 2024 |
|-------------------------------|---------------|---------------|
| EPS | $3.39 | $3.37 |
| Weather-normalized sales growth | 5.4% | N/A |
| Residential sales growth | 4.3% | N/A |
| Year-to-date residential sales growth | 2% | N/A |

[Risks and Concerns]
Regulatory lag remains an ongoing issue, with no 2026 guidance contribution assumed from the pending rate case. The company is actively addressing this through rate case and formula rate mechanisms. Financing needs and equity dilution are also concerns, with efforts to mitigate through internal funds and large customer agreements.

[Final Takeaway]
Pinnacle West Capital demonstrated strong financial performance in Q3 2025, driven by higher transmission revenues and robust sales growth. The company raised its 2025 EPS guidance and outlined strategic investments in transmission and generation to support long-term growth. Management's proactive approach to addressing regulatory and financing challenges, along with a diversified customer base, positions the company well for sustained growth. Investors should monitor the progress of the Desert Sun project and the resolution of the pending rate case for further insights into the company's future performance.