Pinnacle West Capital’s 2026 Q2 Earnings Call: TSMC Load Forecast, IRP Delays, and Sales Growth Drivers Don’t Match

Date of Call: Aug 4, 2026

Financials Results

• EPS: $1.43 per share, a decrease of 15 cents compared to the second quarter of 2025

Guidance:

• Reiterating all other aspects of guidance and expecting to finish the year at the top end of the earnings guidance range of $4.55 to $4.75 per share.
• Year-to-date weather normalized sales growth has tracked more closely with the longer-term outlook (5% to 7%) than the 2026 guidance range (4% to 6%).
• Capital expenditure guidance is not updated today but does not include the recently announced Joya Conversion Project, which could add up to ~$440 million in incremental capital investment, mostly in 2027 and 2028.

Business Commentary:

Strong Economic Growth in Arizona:

• Pinnacle West Capital Corporation reported a record peak demand of 9,164 megawatts in August, exceeding last year's record by more than 500 megawatts.
• The growth was driven by Arizona's strong economic trajectory, particularly in semiconductor manufacturing and advanced technology, highlighted by Taiwan Semiconductor Manufacturing Company's additional $100 billion investment, bringing its total commitment to $265 billion.

Customer and Sales Growth:

• The company achieved 2.1% customer growth and weather normalized sales growth of 9.6% compared with the second quarter of last year.
• This growth was supported by strong residential sales growth of 5.6% and commercial and industrial sales increasing by 12.7%, driven by data center and advanced manufacturing customer expansion.

Infrastructure and Resource Investments:

• Pinnacle West announced its intent to convert two retired coal-fired units at the Choy Power Plant to natural gas, expected to provide approximately 380 megawatts of reliable, dispatchable generation by 2029.
• The investment is part of an all-of-the-above resource strategy to meet growing demand and enhance system reliability and resiliency.

Regulatory and Financial Developments:

• The company concluded 31 days of hearings on its rate case on July 7th, with initial briefs due August 27th and reply briefs due September 11th.
• The process aims to establish a constructive outcome and consistent framework for recovering ongoing investments to support Arizona's growth and future energy needs.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted 'solid second quarter', 'strong and sustainable growth trajectory' in Arizona, a 'major highlight' with TSMC's $100B additional investment, record peak demand exceeding prior year by over 500MW, and 'robust' sales growth. They are 'confident' in the rate case resolution this year and see 'sustained runway' for growth.

Q&A:

• Question from Shar Parooza (Wells Fargo): Concerns about whether the strong sales growth in Q2 will continue for the remainder of the year and thoughts on longer-term sales growth guidance.
  Response: Management sees sustained runway for robust sales growth, citing diversity across residential and CNI, residential outperforming expectations, and CNI growth well above the top end of the long-term range, supported by ongoing large customer commitments.

• Question from Shar Parooza (Wells Fargo): Inquiry into the upcoming IRP filing, whether the TSMC announcement is already assumed in the load forecast, and the filing timeline.
  Response: Company is on track to file the IRP by end of October, and will include the full intended build-out of TSMC in the load forecast as part of committed customer growth; conversations on uncommitted queue projects will be detailed later upon contract finalization.

• Question from Richard Sunderland (Truist Securities): Follow-up on the TSMC update and its impact on the uncommitted load queue and the Desert Southwest gas project.
  Response: Company is working with TSMC to finalize details on incremental capacity and ramp schedule for the new investment; Desert Southwest pipeline is critical for next decade's gas supply and is on schedule, following existing pipeline route to minimize impact.

• Question from Julian DeMoulin-Smith (Jefferies): Questions on how sales growth transposes into the IRP, the reason for the IRP filing date change from August to October, and what to expect in the filing.
  Response: The filing was moved to October to capture updated variables like the Cholla conversion and latest TSMC growth trends, ensuring the most up-to-date analysis. The IRP will provide detailed timing of committed load ramp and resource buckets needed to serve it.

• Question from Travis Miller (Morningstar): Inquiry into any surprises or notable developments from the rate case hearings.
  Response: Hearing concluded with strong evidence supporting company's positions on regulatory lag and cost recovery; Commission staff was constructive, and company remains confident in a favorable outcome this year.

• Question from Travis Miller (Morningstar): Next steps and signals for transmission projects.
  Response: Company has increased transmission investment significantly, with large projects like a multi-billion dollar line for system resiliency; transmission revenue continues to grow year-over-year, with wheeling revenue helping affordability.

• Question from Paul Patterson (Glenrock Associates): Takeaways from the recent primary election and potential impacts on regulation.
  Response: Company is confident in its ability to work constructively with any commissioner, emphasizing its strong record on reliability, customer satisfaction, and low rates, which it believes will resonate regardless of political changes.

• Question from Paul Patterson (Glenrock Associates): Potential operational or long-term impacts of the Colorado River drought and water allocation changes.
  Response: No operational impact expected as Palo Verde uses 100% recycled wastewater; long-term is more about economic adjustments for water supply solutions, not raw water availability.

• Question from Steve Ambrosi (RBC Capital): Follow-up on the TSMC announcement regarding potential power demand from the incremental investment.
  Response: Directionally, the prior investment of over $100B for more than a gigawatt of demand is a fair rule of thumb for the incremental $100B, but details on fab requirements and ramp schedule are still being finalized with TSMC.

• Question from Steve Ambrosi (RBC Capital): Clarification on the strong C&I sales growth and its relation to long-term guidance.
  Response: Strong C&I growth is due to a combination of data center ramp rates, new manufacturers in Phoenix, and residential customer growth; diversity of growth and ongoing customer dialogue support the robust runway.

Contradiction Point 1

Inclusion of TSMC Commitment in IRP Load Forecast

Contradiction on whether TSMC's full build-out is already assumed in the base forecast.

Shar Parooza (Wells Fargo) - Shar Parooza (Wells Fargo)

2026Q2: The IRP will include all committed customer growth, including the full intended build-out of TSMC (now totaling 12 facilities). Details on the incremental $100 billion investment... are still being finalized with TSMC regarding capacity, timing, and ramp schedules. - [Ted Geisler](CEO)

Can you provide insight into the upcoming Integrated Resource Plan (IRP) filing, including how the 4.5 gigawatts of committed load and the new TSMC announcement are shaping it, whether the TSMC investment is included in the 20-gigawatt uncommitted load forecast, and if the filing remains on track for the end of October? - Alex (Wells Fargo)

2026Q2: The IRP filing remains on track for the end of October. The load forecast will include all committed customer growth, including the full intended build-out of TSMC (now totaling $265 billion in commitments). The company is working with TSMC to finalize the timing and ramp schedule of the additional $100 billion investment. - [Andrew Cooper](CEO)

Contradiction Point 2

IRP Filing Timeline and Content Scope

The timeline for the IRP filing was pushed back, and its scope was expanded to include new variables.

Julian DeMoulin-Smith (Jefferies) - Julian DeMoulin-Smith (Jefferies)

2026Q2: The IRP filing was moved to October to ensure it captures the most up-to-date analysis, including new variables like the likelihood of converting the Cholla coal units and the latest TSMC expansion plans. - [Ted Geisler](CFO)

How are you transposing the strong sales growth into the IRP, what caused the filing delay to October and any scope changes, and what should we expect for annual ramp/resource portfolios and potential formal updates next year? - Julien Dumoulin-Smith (Jefferies)

2026Q1: The IRP will be a material update, incorporating the latest long-term sales growth forecasts... The near-term action plan will show specific announced projects. - [Ted Geisler](CFO)

Contradiction Point 3

Drivers of Strong Sales Growth

Contradiction on whether the strong sales growth is driven by C&I or includes residential/C&I.

Shar Parooza (Wells Fargo) - Shar Parooza (Wells Fargo)

2026Q2: The strong sales growth in Q2 was driven by diversification across residential and Commercial & Industrial (C&I) sectors, including data centers and semiconductor manufacturing. - [Andrew Cooper](CEO)

Will the current level of sales growth continue for the remainder of the year, and how do you see sales growth evolving long-term based on existing trends? - Alex (Wells Fargo)

2026Q2: Q2 sales growth was robust and diverse across residential and C&I. Year-to-date weather-normalized sales growth... has tracked closer to the company’s long-term outlook... than its 2026 guidance... C&I growth (12.7% in Q2, above the long-term top end). - [Andrew Cooper](CEO)

Contradiction Point 4

Status of TSMC Investment Inclusion in Load Forecasts

The company's certainty regarding the inclusion of the latest TSMC investment in its load forecasts appears to have changed.

Shar Parooza (Wells Fargo) - Shar Parooza (Wells Fargo)

2026Q2: The IRP will include all committed customer growth, including the full intended build-out of TSMC... Details on the incremental $100 billion investment... are still being finalized with TSMC... - [Ted Geisler](CFO)

Can you provide updates on the Integrated Resource Plan (IRP) filing, including the status of the 4.5 gigawatts of committed load, whether the TSMC investment is included in the 20-gigawatt uncommitted load forecast, and if the filing remains on track for October? - Julien Dumoulin-Smith (Jefferies)

2026Q1: The IRP will incorporate... the committed 4.5 GW of extra load factor growth... The uncommitted projects remain upside. - [Ted Geisler](CFO)

Contradiction Point 5

Characterization of Sales Growth and Its Drivers

Inconsistent portrayal of the primary driver of recent strong sales growth.

Julian DeMoulin-Smith (Jefferies) - Julian DeMoulin-Smith (Jefferies)

2026Q2: Yes, the strong sales growth year-to-date is occurring despite a relatively flat TSMC contribution, as the majority of TSMC’s demand increase is yet to come in the coming years. - [Ted Geisler](CEO)

Is the strong sales growth year-to-date in addition to a flat TSMC contribution? - Stephen D’Ambrisi (RBC Capital Markets)

2025Q4: The 2026 forecast reverts to a normal dynamic where extra-high load factor (HLS) customer ramp-up is the dominant driver. - [Andrew Cooper](CFO)