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Pinnacle West Capital (NYSE:PNW), a utility company with a market capitalization of $10.6 billion, formally filed its 2025 general rate case with the Arizona Corporation Commission, seeking a $580 million revenue increase and implementation of formula rate plans. The filing, announced Monday, uses a December 31, 2024, historical test year and $12.5 billion rate base. According to InvestingPro data, the company operates with a significant debt burden, with a debt-to-equity ratio of 1.8x.
The utility company is requesting a 10.7% return on equity and is using its actual capital structure with a 52.35% equity layer. Pinnacle West is also seeking approval for $1.1 billion of post-test-year plant investments for the 12 months ending December 31, 2025.
The net impact for post-test-year rate base additions is reduced by approximately $797 million of offsets from associated accumulated depreciation and taxes during the post-test year period, according to the filing details.
KeyBanc maintained its Overweight rating and $101.00 price target on Pinnacle West stock following the announcement. The firm expects the rate case to reduce regulatory lag and validate its thesis of an improving regulatory environment in Arizona.
A final order on the rate case is expected more than 12 months from now, according to KeyBanc analyst commentary on the filing.
In other recent news, Pinnacle West Capital Corporation reported an unexpected loss for the first quarter of 2025, with earnings per share at -$0.04, missing the forecasted $0.02. Despite the earnings miss, the company exceeded revenue expectations, reporting $1.03 billion against a forecast of $988.95 million. Jefferies adjusted its price target for Pinnacle West to $109.00 from $111.00, maintaining a Buy rating, citing potential long-term growth from high-load customers. Meanwhile, Mizuho (NYSE:MFG) lowered its price target for the company to $102.00 from $104.00, while still maintaining an Outperform rating, following Pinnacle West’s filing for a rate increase.
The company recently held its Annual Meeting of Shareholders, where all director nominees were elected, and executive compensation was approved. Additionally, shareholders ratified Deloitte & Touche LLP as the independent accountant for the year ending December 31, 2025. However, a shareholder proposal titled "Support Special Shareholder Meeting Improvement" was rejected. Pinnacle West is also seeking a 14% rate increase based on a 10.7% return on equity, as part of its first formula rate proposal.
The Arizona Superior Court rejected a challenge to these formula-based rates, marking a significant development in the regulatory landscape for Pinnacle West. Analysts from Mizuho and Jefferies both highlighted the potential impact of formula rates on the company’s financial structure and customer billing, with Jefferies noting the possibility of implementation by 2027. Investors are keeping a close watch on these developments as Pinnacle West navigates the evolving regulatory and economic environment.
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