Pinnacle West Cap Exec Insights: EPS Growth, Environmental CapEx

On Thursday, Pinnacle West Capital (NYSE:PNW) reported its first quarter earnings and discussed the following topics in its earnings conference call. Here’s what the C-suite revealed.

EPS Growth

Shar Pourreza – Citigroup: Just a quick question, Jim I know you mentioned, that you would look to issue 2012 EPS guidance, following a final order in the GOC, and then Don did a great job presenting some growth drivers, outside of base rates during his prepared remarks. Given that you could be in a multiyear stipulation under the settlement, would you also issue some type of an EPS growth trajectory during the stayout period, when you begin to issue guidance again?

A Closer Look: Pinnacle West Earnings Cheat Sheet>>

James R. Hatfield – SVP and CFO, Pinnacle West Capital Corporation and Arizona Public Service Company: Great question Shar, and the answer to that is yes, and if you remember our last settlement, we issue guidance over a couple year period, and we would look to do, some sort of EPS growth, looking over the settlement period, again to give investors comfort of our ability to manage through that.

Environmental CapEx

Kevin Cole – Credit Suisse: Is it still too early to have any really cooling driven weather at all? Or how does that –

James R. Hatfield – SVP and CFO, Pinnacle West Capital Corporation and Arizona Public Service Company: Couple of weekends ago we had a record 106 degrees I believe on a Saturday and Sunday. Yes, it’s getting hot here before in May. I think you might have a pleasant visit for AGA.

Kevin Cole – Credit Suisse: So I guess with the Four Corners’ approval a couple of weeks ago, does this implicitly approve the $300 million of environmental CapEx, and then also treatment of units 1, 2, 3?

Donald E. Brandt – Chairman, President and CEO, Pinnacle West Capital Corporation and Chairman and CEO, Arizona Public Service Company: From a CapEx perspective, I would say no. From a units 1, 2, and 3 treatment, the answer would be yes.

Kevin Cole – Credit Suisse: What is the process for getting this $300 million of environmental CapEx approved?

James R. Hatfield – SVP and CFO, Pinnacle West Capital Corporation and Arizona Public Service Company: Well assuming we close, we’ll put our CapEx plans and depending upon when that’s needed to be in service 2016, the 2018 will begin design and engineering work for the plant, which is consistent with what was filed in our IRP back on March 30.

Kevin Cole – Credit Suisse: Then with the $700 million of equity, I think you guys kind of agreed to in the last settlement. I guess from my chart it doesn’t look like you need that much and from a customer perspective I’d imagine this as the most expensive form of financing. With this new settlement are you able to rebase that number or does it kind of nullify that to that previous number?

James R. Hatfield – SVP and CFO, Pinnacle West Capital Corporation and Arizona Public Service Company: It does not nullify it Kevin, but obviously if we don’t believe we need that amount of equity by 2014 we’ll certainly make our case to the selling parties in 2009 and I would not expect that they would want us issue the most expensive form of cost of money if it’s not needed, and keep in mind too, since that last settlement in ’09 we have been upgraded this well, which helps our situation.