Note: This is an earnings call transcript. Content may contain errors.

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Date

Monday, Nov. 3, 2025, at 11 a.m. ET

Call participants

  • Chairman, President & Chief Executive Officer — Ted Geisler
  • Executive Vice President & Chief Financial Officer — Andrew Cooper

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Takeaways

  • EPS -- $3.39 per share, up $0.02, driven by higher transmission revenues and sales, partly offset by higher interest expense and share count.
  • 2025 EPS guidance -- Raised to $4.90-$5.10 per share, up from $4.40-$4.60 per share, reflecting robust sales growth and improved transmission revenue outlook.
  • Weather-normalized sales growth -- 5.4% growth, with 6.6% for government and industrial and 4.3% for residential customers.
  • Year-to-date residential sales growth -- 2%, which Andrew Cooper described as exceeding expectations due to robust customer additions.
  • Customer growth guidance -- Narrowed to the high end of 2%-2.5% for the year, supported by population and business expansion.
  • 2026 EPS guidance -- $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 -- Increased to 5%-7% and extended through 2030, based on confidence in sustained demand from high-load customers.
  • Capital plan -- Updated through 2028 to support critical investments in transmission and generation, targeting 7%-9% annual rate base growth, up from prior 6%-8% through 2027.
  • Transmission CapEx -- $2.6 billion cumulative investment planned through 2028; $6 billion-plus in projects identified through 2034, with annual spend rising toward an $800 million run rate including strategic expansion.
  • Equity financing need -- 85% of 2026 need already priced; $1.0-$1.2 billion additional Pinnacle West equity forecasted through 2028, with ongoing focus on equity mitigation through large customer agreements and internal funds.
  • Operations & maintenance (O&M) outlook -- 2025 full-year O&M raised to $1.025-$1.045 billion; 2026 O&M expected to decrease slightly year over year despite customer growth.
  • Desert Sun project announcement -- New generation site near Gila Bend could add up to 2,000 megawatts in two phases, with phase one serving committed customers by late 2030 and phase two targeting new high-load customers through a subscription model.
  • Palo Verde Generating Station -- Operated at 100% capacity factor during the entire summer, supporting system reliability amid record demand.
  • Pending rate case -- Actively responding to data requests, with hearing on track for Q2 of next year; 2026 guidance excludes rate case impact.
  • FERC formula rate & transmission revenues -- Transmission investments benefit from timely cost recovery and enable potential for additional wheeling revenues.
  • Committed load growth -- 4.5 gigawatts of committed incremental demand from diversified customer segments, including semiconductor manufacturing and data centers.
  • Uncommitted demand queue -- 20 gigawatts of pending large customer requests, with 1.2 gigawatts offered to subscription customers as first tranche in expansion model.
  • Regulatory lag -- Acknowledged as an ongoing issue for 2026, but being addressed through rate case and formula rate mechanisms.

Summary

Pinnacle West Capital (PNW 0.10%) 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. Ongoing regulatory proceedings and announced transmission projects may affect the pace and magnitude of future earnings and capital requirements.

  • Management stated that planned rate base growth is driven both by long-term projects entering service and a diversified mix of customer additions, with special rate agreements enacted to ensure growth pays for growth.
  • The company clarified, "All of our goes into rate base. The subscription model still goes into rate base. We are just contracting with those customers about it as more of a special rate agreement."
  • The pace of strategic transmission investment is moving toward $800 million annually, substantially above prior periods, with baseline blocking and tackling projects representing $300-$400 million and larger expansion projects creating additional earnings opportunities.
  • Planned O&M cost efficiencies are expected to be achieved even with substantial customer additions and ongoing major capital projects.
  • Management reiterated regulatory lag persists, with no 2026 guidance contribution assumed from the pending rate case, but expects to provide updated targets after case resolution and structure changes to the formula rate.

Industry glossary

  • O&M: Operations and Maintenance, referring to ongoing costs related to the operation and maintenance of generation, transmission, and distribution assets outside of capital expenditures.
  • FERC formula rate: A mechanism allowing utilities to recover transmission investment costs in a timely manner based on a pre-set formula filed with the Federal Energy Regulatory Commission.
  • Subscription model: A commercial arrangement where large power users contract for dedicated future generation capacity and infrastructure, with terms designed to align costs and project timing to specific customer ramp needs and financial contributions.
  • Rate base: The value of assets on which a regulated utility is allowed to earn a return, forming the basis for setting customer rates.
  • Wheeling revenues: Income from allowing third-party use of a utility's transmission system to move electric power across its network.
  • High-load factor customers: Customers, often large industrials or data centers, who have relatively steady, high electricity usage resulting in a high average utilization of contracted capacity.
  • CapEx: Capital expenditures, representing funds used by a utility to acquire, upgrade, and maintain physical assets.
  • CWIP: Construction Work in Progress, referring to capital projects under development that have not yet been placed into the utility's rate base.

Full Conference Call Transcript

Ted Geisler: 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, 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. 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. Importantly, our long-term planning and resource procurement paid off as we reliably served customers over multiple record peak days this quarter.

I am 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 crews battled storms, flooding, and extreme heat, yet were 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. 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 the third quarter alone.

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, a powerful signal of the long-term economic vitality 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 fifty years, with Phoenix being selected as the host city. Our region's economic momentum continues to accelerate. Site Selection Magazine recently named Maricopa County the top county in the nation for economic development in 2025, citing its success in attracting high-growth industries like semiconductors, data centers, and logistics.

Taiwan Semiconductor reaffirmed its commitment to Arizona to accelerate production of two-nanometer wafers and advanced technologies. They also announced plans to acquire a second location in Phoenix to support their vision for a standalone Gigafab cluster. Meanwhile, Amkor Technology broke ground on a $7 billion 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. 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 2,000 megawatts of reliable and affordable natural gas generation for our customers. The Desert Sun power 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. Phase 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 two capacity using our subscription model, a commercial construct designed to ensure growth pays 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 reliability, resiliency, and integration of new resources. They also expand our access to out-of-state generation and regional markets. Transmission investments benefit from constructive and timely recovery through our FERC formula rate and create opportunities for additional wheeling revenues that support affordability for our retail customers.

Turning to our pending rate case, we remain actively engaged with interveners in responding to data requests and remain on track for a hearing in Q2 of next year. As we approach 2025, our priorities remain clear: executing our mission to deliver reliable and affordable service to our customers, investing in baseload generation and transmission to serve growth, and achieving a constructive regulatory outcome that protects customer affordability while reducing regulatory lag. Thank you for your time today. I'll now turn it over to Andrew.

Andrew Cooper: Thank you, Ted, and thanks again to everyone for joining us today. 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. We reported earnings of $3.39 per share for the quarter, a modest increase of $0.02 year over year. This result was primarily attributable to higher transmission revenues and higher sales, driven by robust sales growth across customer classes. These gains were partially offset by lower weather-driven sales compared to last year's Q3, higher interest expense, reduced pension and OPEB 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 $4.90 to $5.10 per share. 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 $1.045 billion. Sales growth across all customer classes continues to be strong. We experienced 5.4% weather-normalized sales growth for the quarter, including 6.6% G&I growth, supported by the continued ramp-up of our large load customers and 4.3% 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. We are therefore narrowing our customer growth guidance range to the high end of 2% to 2.5% for the year. As we look ahead to 2026, we anticipate earnings per share of $4.55 to $4.75 per share. 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 positive contributions from our Eldorado subsidiary.

Customer growth next year is expected at 1.5% to 2.5%, supported by Arizona's ongoing population and business expansion. Last year, we set a post-recession record with nearly 35,000 new meter sets, and we're on track to match that figure again in 2025. Our forecast for 2026 customer additions remains strong. For overall sales growth, we expect weather-normalized sales to continue to grow at 4% to 6% in 2026. With continued ramping acceleration plans by our extra high load factor customers, we are increasingly confident in our forecasted long-term sales growth range and are raising it from 4% to 6% to 5% to 7% and extending it through 2030.

Our capital and financing strategy remain 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. To support this plan, we've updated our financing strategy for 2026 through 2028, maintaining a balanced mix of debt and equity aligned with our balance sheet targets.

For 2026, approximately 85% of our equity need has already been priced, with an additional $1 billion to $1.2 billion of Pinnacle West equity forecasted through 2028. 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. 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 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, data centers, and continued 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. This concludes our prepared remarks. We will now turn the call back over to the operator for questions.

Operator: Certainly. Everyone, at this time, we will be conducting a question and answer session. If you have any questions or comments, please press the answer session. Thank you. Your first question is coming from Julien Dumoulin-Smith from Jefferies. Your line is live.

Julien Dumoulin-Smith: Hey, good morning team. Thanks for the time. 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. Good progress. How are you thinking about just eventually giving visibility on 2029 and 2030, especially as what you see that here? Can you speak a little bit to the extent possible of what that trajectory as you've rolled it forward here would potentially look like in that context?

And 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 timeframe altogether to build out this generation.

Ted Geisler: Yes, Julien, thanks very much. And I'll start, and then Andrew can 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. The second step then 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, 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 4.5 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. So still a healthy margin past when the pipeline is in service. But a schedule that we're comfortable with meeting. Importantly, we've got all the key equipment secured, land interconnection is in place. So think we're in a good spot to be able to deliver on that timeline. And then the second phase of that project we've identified the opportunity to be able to serve our subscription customers with.

We've rolled out an opportunity to subscription customers for 1.2 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 the delivery timeline of that second phase corresponds with the counterparty's ramp rate, and we make sure that reliability is protected by keeping those two in sync. Both will, of course, take service from the new pipeline, but we're comfortable with the timing and how that coincides with the pipeline's in-service. And we'll continue to monitor pipeline progress along the way and be prepared to adjust if needed.

But we're comfortable with the timeline we've laid out. Andrew, you want to speak to the capital plan?

Andrew Cooper: Sure. Yeah. Julian, as it specifically relates to the Desert Sun project, 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 are in the plan. Certainly, the in-service date that Ted's talking about for Phase one, you would see that CapEx ramp up as we get closer to the end of the decade.

Certainly, around the broader capital plan, as we work through the rate case and understand the dynamics of the formula rate, and continue to develop our subscription model with our customers, that provides us the opportunity to give more visibility as, you know, we certainly want to make sure that growth pays for growth. But the plan that we put forward through '28 reflects the beginnings of some of those really big longer lead time investments we're making on the generation and the transmission side.

You could see it in, you know, the 2028 kind of new run rate transmission investments and 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 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 timeline 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.

Julien Dumoulin-Smith: Got it. And that's why I just so you kinda teed up the next piece. How is that progress going on the subscription? As far as you talk about this 1.2 gigawatt opportunity, where are you in sort of filling that bucket or that opportunity?

Ted Geisler: Yes. We've got 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 of the new pipeline. So we'll work with counterparties now to match that up with their desired in-service timing. But conversations are active. And we remain optimistic in being able to deploy the subscription model to both continue to serve part of the 20 gigawatt queue that is ready to begin service in our service territory. While also designing it in a way that helps with financing and protects customer affordability.

So I think the key elements of the model have been well received by the market. We're actively working with counterparties if it's going to be a good way to be able to serve that queue both now and going forward.

Julien Dumoulin-Smith: Yeah. Fair enough. One little detail here on 26 you've got this 55¢ bump here on transmission. That's a sustainable level. Right? Like, that's a pretty big bump.

Andrew Cooper: Yes. Yeah. Julien, we'll provide guidance going 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 construct, the formula rate, and the amount of capital that we've stepped into there, this is just the natural reflection of the plan that we've put forward and converting it now into annual earnings opportunity.

Julien Dumoulin-Smith: Got it. Excellent. Thank you, guys. All the best. Alright. Good luck.

Ted Geisler: Thanks, Julien.

Operator: Next question is coming from Nick Campanella from Barclays. Your line is live.

Nick Campanella: Hi, good morning team. This is Yahan for Nick today. Thanks very much for taking my questions. So since 2026 equity need is 85% taken care of, which is the $550 million already priced as you put in the slides, 2028, especially when we look at that $1 billion to $1.2 billion equity used for the three-year guidance period. Also, I guess, how should we think about the cadence of issuing through 2026 and 2027? And how should we think about any equity mitigation given the strong sales growth backdrop that you just provided in the update? Thanks.

Andrew Cooper: So Yahan, on the equity, as you pointed out, we have substantially derisked the need in '26 through all the equity that we've priced both through the block issuance we did in 2024 and our use of our ATM over the last two years. So we feel like we're in a good position. If we look over the incremental need over the three years, that 2026 to 2028 period, that's what that $1 billion to $1.2 billion represents. And so certainly, these projects are lumpy, so the cadence of issuance need kind of goes with that. That's where an ATM has worked well for us.

To date to be able to time our drawdowns, our issuance with the CapEx as we go through some of these larger projects. But 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 balanced capital structure and to minimize the amount of equity dilution, within that balanced 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, 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, fund those investments that it reduces the need for us to go out to the market for equity. So while that's the range today of forecasted need, we're going to continue to work through the rate case process and the engagements on the large load side. Try to mitigate that as much as possible.

Yahan: Got it. That's very helpful. And secondly, just on the transmission capital investment slide you laid out, if I could. Appreciate the clarity on the $2.6 billion cumulative transmission CapEx through '28. And also the $6 billion plus through 2034. Could you just comment on your assumption on annual transmission CapEx post-2028? And how should we interpret the $6 billion plus, especially on what's contributing and driving the upside? Thanks.

Andrew Cooper: Yes. So we haven't laid out the specifics of the plan post-2028 because these are really the projects that are reflecting the ten-year strategic transmission plan that we filed with the commission every other year. There are a host of projects in there, 500 or 600 miles of high voltage lines that we're developing to meet different needs. And there's some fungibility in terms of developing this line or that line. 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 of run rate CapEx five years ago in transmission for just sort of the local area projects, the things that we do that are 69 kV plus. That number is increasing to the $300 to $400 million range of just the blocking and tackling CapEx we do on the transmission side. And so the increment above that, that you see almost in that the potential for that $800 million plus number to be a run rate, there is a baseline $300 to $400 million in there.

And then the increment above that is reflective of the beginning of investing in those strategic transmission projects. But it's a really long runway and the number will vary from year to year. I think if you look at 2028, that is a reflection of the opportunity on an ongoing basis through the combination of core transmission and then increment from strategic transmission.

Yahan: Got it. That's super helpful. If I could another quick clarification. On the robust sales growth guidance you refreshed. I guess seeing really elevated level of 5% to 7% through 2030 while this while looking at a 7% to 9% rate base growth is through 2028. I guess, you comment on your confidence level to possibly extend the 7% to 9% rate base growth further into the horizon? And I guess what could be the key drivers contributing to that? Thanks.

Andrew Cooper: Yes. So we've laid out through 2028 on the rate base side. And one of the reasons it stepped up is that beginning to see some of those long lead projects come into service in 2028. 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. And service hub, to your point, higher sales growth we're seeing, especially from the large load type customers. And so as we continue to kind of move forward and develop the CapEx plan around Desert Sun, around those strategic for that $6 billion strategic transmission that we were just talking about.

We'll continue to look at that rate base growth rate. Our confidence is that runway is quite long. What the level is, is what we'll be able to kind of continue to work through. That CWIP disclosure 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. That take us into 2029 and 2030 and a good way to extrapolate if you do some of that math.

Yahan: Great. I appreciate the colors. Thanks for the update.

Andrew Cooper: Thanks, Yahan.

Operator: Thank you. Your next question is coming from Shahriar Perruza from Wells Fargo. Your line is live.

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

Ted Geisler: Hey, good morning.

Alex: So just on the growth rate outlook, just you guys are still targeting that 5% to 7% off the 24% midpoint. Just in the context of today's new 2026 guidance, can you just help frame what you might use as your new base? And will you be rolling forward the plan as soon as the rate case is concluded?

Andrew Cooper: Sure. Yes. So really, the rate case becomes the precipitant for us to look at all that. And if you think about these years, we really try to set as you know, have a bar for ourselves as we can to make sure that we're, you know, consistently meeting, or exceeding our and doing so in the right way. And so, you know, we want to get to the point where that 5% to 7% becomes evergreen. Right now, we're in a situation where earnings are lumpy, go and we have a rate case and we get a rate increase. Then there's regulatory lag through a lengthy rate case process.

The formula rate is really an important element here to be able to convert that earnings growth rate from being kind of a long-term look at '24 and then look at '28 something that can be more evergreen. And so I think as we work through the rate case process and structure of the formula rate, be much better positioned to talk about what all that looks like. And, you know, ultimately, that's the goal is to be able to deliver year in, year out. Produce more modest increases year over year for customers as well. That's really an important part of it. And, ultimately, that creates the better stability for us around our earnings growth.

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

Ted Geisler: Yes. Sure, Alex. So we continue to see just a robust pipeline of demand as we've articulated in the slides. We've got 4.5 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 will have to be developed even beyond. But in addition to that, we want to start making progress on committing and serving part of the 20 gigawatts of uncommitted load that is in our current queue. 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 of 1.2 gigawatts. The intent is to contract that first tranche and then we'll continue to identify generation and transmission capacity expansion opportunities. As we get to a certain point in the predevelopment of those projects to where we are confident in the timing level of capacity available for us to be able to offer. Then we'll go to the market and offer another tranche of service to that uncommitted queue. And that's the model that we anticipate being able to deploy going forward.

Bottom line is we anticipate being able to continuously offer capacity to eat into that 20 gigawatts and we think the 1.2 gigs that we've offered recently is just the first step into that trajectory.

Alex: Got it. Super helpful. I'll leave it there. Thank you.

Ted Geisler: Thank you, Alex.

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

Travis Miller: Good morning. Thank you.

Ted Geisler: Good morning, Travis.

Travis Miller: I just want to confirm on the guidance for '26. 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 $1 increase, so to speak, would be in the back end of the year. Any thoughts there?

Andrew Cooper: Yeah. Travis, you're correct. We have not made any assumptions for rate case conclusion that's informed 2026 guidance. 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 will allow us to step back and reevaluate the constructive nature of the outcome and what that means in terms of forward-looking guidance. So we'd 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.

Travis Miller: Okay. Makes sense. And then separately, that 4.5 gigawatts of committed customers, can you kind of elaborate on who those customers are and maybe is any of that going to in your system-wide base with residential or small commercial? How would you break up that 4.5 gigawatts?

Ted Geisler: Yeah. The 4.5 gigawatts is a nice balance and blend between incremental industrial growth such as chip manufacturing, TSMC and Amkor being examples of that, as well as their supply bases. As well as, of course, data centers that are already in development or even in service, but we expect to 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 a very diversified story, not too dependent on one industry or customer base or another. Maricopa County just recently ranked top county for economic development in 2025. And it's the third fastest in the US.

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 also pleased to see that affordability is still a hallmark of our service territory, favorable cost of living. Phoenix inflation is growing at about 1.4% versus the national average at 2.9%. So I think there's a lot of drivers behind why we're seeing diversified growth in that 4.5 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.

Travis Miller: Okay. Yes. No, that sounds good. And then so would most of that 4.5 gigawatts go into rate base? Or some of that the subscription model you were talking about that might be outside of rate base?

Ted Geisler: Well, let's be clear. All of our goes into rate base. The subscription model still goes into rate base. We are just contracting with those customers about it as more of a special rate agreement. Rather than out of rate base. And that special rate agreement just ensures that growth pays for growth and that the timing of their ramp coincides with the timing of the ramp of 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 of how you recover the dollars as really the difference in the subscription model.

Travis Miller: Okay. Thank you.

Operator: Thank you. Your next question is coming from Steve D'Ambrosy from RBC Capital Markets. Your line is live.

Steve D'Ambrosy: Hi, team. Good morning. Thanks very much for taking my questions. 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 $0.58 and for '26 guidance, it looks like you're embedding $0.39. I guess I would just step back and say that doesn't seem like the magnitude or mix is really that different given both years were 4% to 6% total of which 3% to 5% was from large C&I. So can you just give a little color there? Is it mix within the C&I classes? Or what's driving the difference? EPS magnitude uplift? In sales growth?

Andrew Cooper: Steve, it's Andrew. Sure. Yeah. So, you know, 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 in their ramp rate from year to year. And some of those are, you know, as we've said, it'd be been an early data center market. We've been able to develop more sophisticated forecasting on a customer-by-customer basis, who's testing equipment, who's actually ramping. And so you do see some variation within the customer class. The residential small business number is relatively stable.

And as we've seen this quarter and our guidance for this year, the expectation has continued pretty large new customer additions. And an actual positive contribution from residential sales despite the fact that we've continued to have energy efficiency and distributed generation press up against that. So it really is the year-to-year variability in some of our large load customers. I think where we really want to focus is the fact that this is a long-term set of customers. A trajectory now that we feel confident about through '20 including raising that sales growth guidance by 100 basis points over that period.

And the fact that means that the extra low tax 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 once you pair that with, you know, customer growth, residential growth, and then the continued conversion of our transmission investment into revenue through our FERC formula. Yeah, we're feeling pretty confident about the ultimate outcome.

Steve D'Ambrosy: That's really helpful. And I guess, like, that would be, like, the put and take versus what kind of we were assuming is just the sales growth versus transmission. 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 2028? And so does that scale does that $0.55 benefit scale linearly with the increase in transmission spending? Or is there something that's causing supernormal growth in recoveries and?

Andrew Cooper: Yeah. No. You know, over time, it should be proportionate to the investment. We're, you know, we are in pretty quickly right when we're putting assets into service. I think the thing that will happen is it'll get a little bit lumpier. Because in the near term, $300 to $400 million of run rate projects, those are smaller projects. That get done within a given year, maybe over two years at max. And we're moving forward into lines that may take longer to build. Of the things that we're looking at are can you energize them on a sectionalized basis so that we can reduce the regulatory lag as we're building a 100-mile line, you do it in segments.

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 our system 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. So the scaling will ultimately get there over the long term.

But in three years, there could be some lumpiness just given you're talking about that increment above the core $300 to $400 million being longer lead time projects that can take a few years to get into service.

Steve D'Ambrosy: Really helpful. Very much for the time. Appreciate it.

Andrew Cooper: Thanks, Steve.

Operator: 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 you for your participation.