PNW: Our Most Constructive EW? Catalyst Rich AZ is Unpacking Growth to a New Pinnacle! Potential Re-rating Story for ‘26/'27

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PNW: Our Most Constructive EW? Catalyst Rich AZ is Unpacking Growth to a New Pinnacle! Potential Re-rating Story for ‘26/'27

Pinnacle West Capital Corporation Equity Research

The Mosaic Pieces for Growth: 1) confidence to be within 50 bps of the allowed ROE by ’29 –

converging the delta between EPS growth and rate base growth, – current Staff testimony supports

this goal, though still sees some structural lag post-rate case outcome; 2) growth opportunities

beyond the ~4.5GWs of committed load – PNW has ~20GWs of uncommitted load in its pipeline – any

signed contracts from the uncommitted load bucket is upside, 3) signed bilateral agreements with

large load customers – customers will be subject to demand and volumetric minimums – represents

faster cash recovery, mitigates equity needs, and supports customer protection and stranded

asset risk – provides confidence in extending the forecast horizon; 4) Extra-high load factor tariff –

customers will be allocated a much higher share of the increase to reflect cost of service; 5) weather

upside potential as the company retains the benefit within the deadband (ACC Surrebuttal states +/-

50bps deadband).

Post rate case decision, PNW will likely update its forward guidance outlook, rebase the EPS

trajectory, and provide a longer-term outlook (i.e. 5-year or longer vs current 3-year), as capex,

earnings recovery, and growth outlook gain greater visibility – matching it closer with its peers. PNW

has typically provided a 3-year outlook due to its structural lag and the lumpiness of its EPS profile,

but the FRAM adoption should create a more linear trajectory. Typically, PNW has waited to update

investors on an existing call (i.e., 3Q or 4Q updates) but could decide later to do a special call or hold an

Analyst day post decision.