AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 5/6 · 19/10/2026
Moat—
Insufficient evidence for every rubric criterion; no category score is inferred.
structural advantage · — · Established regulated infrastructure and reduced deregulation activity suggest efficient scale, but do not establish exclusive rights or economic barriers sufficient to confirm a moat.
durability · — · Long-lived nuclear licenses demonstrate asset duration, while realized regulatory lag limits confidence in durable economic rents. Moat durability remains unestablished.
customer dependency · — · Customer growth demonstrates demand, but the passages do not establish switching restrictions or unavoidable dependence on APS rather than alternative supply.
erosion resilience · — · Actual growth counters realized competitive weakness, but does not establish durable protection against self-generation, stranded investment or inadequate recovery.
Pricing power50
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 2/4 · The approximately $491.7 million annual base revenue increase became effective in March 2024, and $43.2 million of previously lost revenue was collected by December 2025. These establish regulated pricing recovery. Related pricing offsets and actual regulatory lag limit strength; the latest $609 million request is not realized pricing.
retention · 3/4 · Three-year average customer growth of 2.2%, further 2.1% growth through June 2026 and higher weather-adjusted retail sales demonstrate strong continuing demand indirectly. Aggregate growth does not measure individual retention or establish switching friction.
margin resilience · 2/4 · The six-month bridge shows fuel and purchased-power changes offset by related revenue and deferrals, alongside higher contribution after those costs. This demonstrates cushioning, although weather and usage contributed. Realized regulatory lag and uncertain environmental recovery limit resilience.
contractual freedom · 1/4 · Retail rate changes depend on ACC authorization. Approved increases demonstrate access to regulated recovery, while pending rate and formula-mechanism requests establish weak unilateral freedom to set prices and terms.
Predictability75
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 100.00
- Revenue growth volatility (pp)
- 3.36
- Positive FCF years (%)
- 0.00
- FCF margin volatility (pp)
- 1.93
Financial strength3
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 0.00
- netDebtEbitGrade
- 0.00
- interestCoverageGrade
- 13.91
- currentRatioGrade
- 0.00
- Net debt / operating income (x)
- 9.89
- Interest coverage (x)
- 2.53
- Current ratio (x)
- 0.54
Capital allocation47
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 6.11
- 3-year average dilution (%)
- 1.90
- 3-year average SBC / revenue (%)
- 0.45
- cashConversionGrade
- 0.00
Management63
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · Construction contributions reduced actual investing outflows despite increased capital spending, and completed resources added over 400 MW. Settled equity issuance, further financing commitments and parent debt capitalization of 62% against a 65% ceiling balance these achievements. Planned spending is substantial; project returns and budget adherence remain insufficiently disclosed.
incentive alignment · 2/4 · Actual earnings and operational incentive components, multiyear officer RSUs and disclosed CEO shares establish alignment mechanisms. Change-of-control vesting without termination weakens performance linkage, while incentive earnings benefited primarily from customer growth and transmission revenue. Complete ownership and long-term performance conditions remain missing.
execution · 3/4 · Completed capacity additions, achieved top-quartile outage frequency and seventeen consecutive years of Palo Verde generation above 30 million MWh, with a 90.8% capacity factor in 2025, support strong demonstrated execution. These issuer-reported operating outcomes provide direct evidence; earnings outperformance also reflected demand and transmission revenue.
governance · 3/4 · Independent committees, lead independent leadership, shareholder special-meeting and proxy-access rights, and documented auditor oversight support strong governance practices. Combined chairman and CEO roles and single-trigger equity vesting are counterweights. Nominee independence is not treated as evidence of subsequent election.
Evidence
APS is Arizona’s largest and longest-serving electric company and generates safe, affordable and reliable electricity for approximately 1.5 million retail customers in 11 of Arizona’s 15 counties.
Business Overview / retail customers and geographic coverage · Filed 04/08/2026
Our reportable business segment is our regulated electricity segment, which consists of traditional regulated retail and wholesale electricity businesses (primarily electric service to Native Load customers) and related activities, and includes electricity generation, transmission, and distribution.
Business / regulated generation, transmission and distribution · Filed 25/02/2026
In April 2022, the Arizona Legislature passed, and the Governor signed a bill that repealed the electric deregulation law that
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Table of Contents
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Regulatory matters / deregulation repeal · Filed 25/02/2025
had been in place in Arizona since 1998.
Regulatory matters / repealed law’s historical scope · Filed 25/02/2025
On August 27, 2024, the ACC administratively closed this docket due to inactivity and obsolescence.
Regulatory matters / competition docket closure · Filed 25/02/2025
The NRC issued full power operating licenses for Unit 1 in June 1985, Unit 2 in April 1986, and Unit 3 in November 1987, and issued renewed operating licenses for each of the three units in April 2011, which extended the licenses for Units 1, 2, and 3 to June 2045, April 2046, and November 2047, respectively.
Business / Palo Verde operating license expiration dates · Filed 25/02/2026
Retail customers in APS’s service territory increased 2.1% for the period ended June 30, 2026 compared with the prior-year period.
MD&A / actual retail customer growth · Filed 04/08/2026
Modification of the ACC’s retail electric competition rules or other efforts of deregulation and other factors, such as customers installing behind the meter technologies or large customers developing large, utility scale generation projects to serve their energy needs, may result increased competition, which could have a significant adverse impact on APS’s business and results of operations.
Risk factors / deregulation and customer self-generation · Filed 25/02/2026
Our 2025 TSR was 8.85%. This performance reflects a recognition that the rate case procedural schedule will extend through the entire year of 2026 and the Company continues to be challenged with regulatory lag during this period.
CD&A / actual regulatory lag and rate case timing · Filed 03/04/2026
The difficulty in forecasting these demands and the 36 Table of Contents additional risk of these arrangements could lead to stranded costs and other effects that could have material adverse impacts on APS’s financial condition, results of operations, and cash flows.
Risk factors / load forecasting and potential stranded costs · Filed 25/02/2026
Capital Expenditures. The following table summarizes the estimated capital expenditures for the next three years (dollars in millions): Capital Expenditures Estimated for the Year Ending December 31, 2026 2027 2028 APS Generation: Gas and Other Generation $ 635 $ 550 $ 490 Nuclear Generation 170 185 215 Renewables and Energy Storage 20 5 5 Distribution 765 795 750 Transmission 550 695 860 Other 460 420 380 Total APS $ 2,600 $ 2,650 $ 2,700 The estimated capital expenditures presented above do not include amounts related to the Cholla gas conversion project, which is currently expected to cost up to approximately $440 million.
MD&A / estimated capital expenditures and excluded Cholla conversion · Filed 04/08/2026
APS intends to seek recovery of any such environmental compliance costs through our rates but cannot predict whether it will obtain such recovery.
Environmental matters / uncertain compliance cost recovery · Filed 04/08/2026
On February 22, 2024, the ACC approved the 2022 Rate Case ROO with certain amendments that resulted in, among other things, (i) an approximately $491.7 million increase in the annual base revenue requirement, (ii) a 9.55% return on equity, (iii) a 0.25% return on the increment of fair value rate base greater than original cost, (iv) an effective fair value rate of return of 4.39%, (v) a return set at the Company’s weighted average cost of capital on the net prepaid pension asset and net other post-employment benefit liability in rate base, (vi) an adjustment to generation maintenance and outage expense to reflect a more reasonable level of test year costs, (vii) approval of the SRB mechanism with modifications to customer notifications, procedural timelines and the inclusion of any qualifying technology and fuel source bid received through an ASRFP, and (viii) recovery of all DSM costs through the DSM Adjustment Charge (“DSMAC”) rather than through base rates.
Regulatory matters / approved 2022 rate case revenue requirement · Filed 04/08/2026
The ACC issued the final order for the 2022 Rate Case on March 5, 2024, with the new rates becoming effective for all service rendered on or after March 8, 2024.
Regulatory matters / effective date of approved retail rates · Filed 04/08/2026
The portion of the CRS representing the recovery of the $59.6 million of lost revenue between December 2021 and June 20, 2023, $43.2 million of which has been collected as of December 31, 2025, will cease upon full collection of the lost revenue.
Regulatory matters / collected previously lost revenue · Filed 25/02/2026
The following table summarizes the major components of this change (dollars in millions): Increase (Decrease) Operating revenues Fuel and purchased power Net change Effects of weather $ 57 $ 16 $ 41 Higher retail revenues due to changes in usage patterns, and customer growth, partially offset by the related pricing and the impacts of energy efficiency 93 55 38 Higher transmission revenues (Note 7) 15 — 15 LFCR revenue (Note 7) 6 — 6 Lower renewable energy regulatory surcharges, partially offset by lower operations and maintenance costs (22) 5 (27) Changes in net fuel and purchased power costs, including off-system sales margins and related deferrals 61 61 — Miscellaneous items, net 4 1 3 Total $ 214 $ 138 $ 76 Operations and maintenance.
MD&A / six-month revenue and fuel expense bridge · Filed 04/08/2026
For the three years through 2025, APS’s customer growth averaged 2.2% per year.
MD&A / three-year actual customer growth · Filed 25/02/2026
Retail electricity sales in kWh, adjusted to exclude the effects of weather variations, increased 3.9% for residential customers, 13.6% for commercial and industrial customers, 3.9% for residential customers, and 9.5% for all retail customers for the period ended June 30, 2026 compared with the prior-year period.
MD&A / weather-adjusted retail electricity sales · Filed 04/08/2026
Pinnacle West’s consolidated net cash used for investing activities was $1,200 million in 2026 compared to $1,253 million in 2025, a decrease of $53 million of cash used primarily related to a $70 million increase in contributions in aid of construction; partially offset by a $25 million increase in capital expenditures.
MD&A / actual investing outflows and construction contributions · Filed 04/08/2026
See Note 13. The following table summarizes the activity relating to these forward sale agreements and the ATM Program as of June 30, 2026 (dollars in thousands, except price per share): Forward Sale Agreements Number of Shares Forward Sales Price Per Share Aggregate Value February 2024 Forward Sale Agreements Initial Price 11,240,601 $ 64.51 (a) $ 725,131 Settlements December 23, 2024 5,377,115 (b) $ 64.17 $ 345,049 (c) September 4, 2025 243,186 (b) $ 63.12 $ 15,350 (c) December 18, 2025 1,193,950 (b) $ 62.82 $ 75,004 (c) ATM Program Initial Price (e) 8,306,132 $ 97.38 (a) (d) $ 808,887 (a) Subject to certain adjustments.
Liquidity / settled equity forwards and outstanding program activity · Filed 04/08/2026
For both Pinnacle West and APS, these covenants require that the ratio of consolidated debt to total consolidated capitalization not exceed 65%.
Debt provisions / maximum debt capitalization ratio · Filed 04/08/2026
As of June 30, 2026, the ratio was approximately 62% for Pinnacle West and 51% for APS.
Debt provisions / actual June 2026 capitalization ratios · Filed 04/08/2026
•Completed construction and put in service the Agave Battery Energy Storage System, Ironwood Solar, and new gas units at Sundance, adding over 400 MWs of capacity to the APS system.
CD&A / completed generation and storage additions · Filed 03/04/2026
•APS placed in the top quartile for reliability, based on the average numbers of outages per customer per year.
CD&A / achieved outage-frequency reliability ranking · Filed 03/04/2026
•For the 17th consecutive year – and 21st overall – Palo Verde Generating Station's ("PVGS" or "Palo Verde") three nuclear units exceeded 30 million MWh of net generation.
CD&A / seventeen consecutive years of nuclear generation achievement · Filed 03/04/2026
It also achieved a capacity factor of 90.8%.
CD&A / achieved Palo Verde capacity factor · Filed 03/04/2026
Base Salary Cash Annual Incentives 1 year Earnings CEO(1): 50.0% Other NEOs: 50.0% Universal measure of business financial performance; encourages achievement of bottom-line earnings goals.
Executive compensation / annual earnings incentive weighting · Filed 03/04/2026
Cash Business Unit Performance(2) 50.0% Pre-established operational business unit performance goals that include safety, customer experience and operational quality and efficiency metrics.
Executive compensation / operational incentive weighting and metrics · Filed 03/04/2026
Restricted stock units are granted to officers and key employees and typically vest and settle in equal annual installments over a 4-year period after the grant date.
Share-based compensation / officer RSU grants and vesting period · Filed 25/02/2026
Butler, Jr. — 1,413; Mr. Geisler — 37,567; and Mr.
Stock ownership / disclosed CEO shares held in joint trust · Filed 03/04/2026
The performance shares and RSUs, plus, where applicable, dividend equivalents, for the NEOs vest upon a change of control whether or not there is a subsequent termination of employment (subject, however, to the Board’s ability to override the vesting).
Executive compensation / change-of-control vesting · Filed 03/04/2026
The 2025 earnings results for the 2025 Incentive Plans were driven primarily by: •increased customer growth resulting in higher than expected weather-normalized sales growth; and •higher transmission service revenues.
Executive compensation / actual drivers of incentive earnings · Filed 03/04/2026
Board Independence •Lead Independent Director role with clearly defined and robust responsibilities •Nine of ten Director nominees are independent and the members of all of the Board committees are independent 9/10 Independent Director Nominees Board Oversight •Robust management succession planning •Focused Board oversight of strategy and risk •Thorough CEO performance oversight process Board Performance •Annual Board, committee, and individual Director evaluations and discussions with the Lead Independent Director •Director skills and experience necessary to provide oversight of our strategy and operations •Robust Board refreshment, with Director retirement policy Shareholder Rights •A group of 15% of our shareholders can call a special meeting (“Shareholder Special Meeting Rights”) •Annual elections of all Directors with cumulative voting •No poison pill plan or similar anti-takeover provision in place •No supermajority provisions in our Articles of Incorporation or Bylaws •Proxy access rights allow up to 20 shareholders owning 3% of our outstanding stock for at least 3 years to nominate up to 25% of the Board Compensation Governance •Shareholder feedback informs compensation program design.
Governance highlights / committees, lead director and shareholder rights · Filed 03/04/2026
Accountant’s Independence Controls In further making its selection of D&T as the independent accountant for 2026, the Committee took into account the following controls over D&T: •the Audit Committee’s oversight of D&T, which included meeting with D&T multiple times in 2025, meetings in executive session without the presence of management from time to time as requested by the Audit Committee members, and a committee-directed process for selecting the lead partner; •pre-approval policies of all services performed by D&T for the Company, and allowing the engagement of D&T only when the Audit Committee or its Chair believes D&T is best suited for the job; •D&T conducts periodic internal quality reviews of its audit work and rotates lead partners every five years; and •as an independent public accounting firm, D&T is subject to Public Company Accounting Oversight Board (“PCAOB”) inspections, independent peer reviews, and PCAOB and SEC oversight.
Audit matters / actual independent accountant oversight · Filed 03/04/2026
Below are a few highlights of our activities during 2025: CEO Transition Effective April 1, 2025, we appointed Ted Geisler as Chairman of the Board, President and Chief Executive Officer of Pinnacle West and APS.
Independent directors’ letter / combined chairman and CEO appointment · Filed 03/04/2026
25 • Service territory is one of the fastest growing in the nation with a diverse customer base • Improved regulatory environment with focus on reducing regulatory lag • Strong customer centric strategy focused on reliability and customer experience • Proven track record of efficient O&M practices and focus on customer affordability • Solid balance sheet and well managed financing plan • Attractive financial growth profile building off original 2024 midpoint We have a stable foundation with solid execution going forward
2025 Rate Case
27 2025 APS Rate Case – Updated Positions Overview of rate request ($ in millions) key components Rate Base Growth $206 12 months Post-test Year Plant $162 Fair Value Increment $89 WACC (7.63%) $129 Other (Base fuel, depreciation study, etc.) $107 Total Revenue Requirement $692 Adjustor Transfers $(83) Net Revenue Increase $609 Customer Net Revenue Impact on Day 1 14.69% Additional details • APS has requested rates become effective in the second half of 2026 • Docket number: E-01345A-25-0105 • Additional details, including filing, can be found at http://www.pinnaclewest.com/investors Numbers may not foot due to rounding.
Investor presentation / updated requested revenue increase · Filed 30/09/2026
29 2025 APS Rate Case – Updated Positions Formula Rate Adjustment Mechanism (FRAM) proposal • Historic test year, with authorized ROE and capital structure approved in most recent rate case • Inclusion of 6 months post-test year plant • Removal of System Reliability Benefit and the Tax Expense Adjustor Mechanism if FRAM is approved • No rate adjustment if actual ROE falls within +/- 40 bps of authorized ROE • Revenue surplus/deficiency allocated based on ACC jurisdictional cost of service results FRAM proposed schedule ACC filing of Annual Update May 1 Last day for data requests for informal information exchange and to submit informal challenge(s).
Investor presentation / proposed formula rate mechanism · Filed 30/09/2026
Case/Docket # Q1 Q2 Q3 Q4 2025 Rate Case E-01345A-25-0105: Staff and Intervenor Direct Testimony filed March 2 and March 18 • APS Rebuttal Testimony filed April 3 • Staff and Intervenor Surrebuttal Testimony filed May 1 • APS Rejoinder Testimony filed May 11 • Rate Case hearing began May 18 • Initial briefs filed August 27 • Reply briefs filed September 11 Final Decision estimated December 2026 Power Supply Adjustor (PSA) E-01345A-22-0144: 2026 PSA rate reset effective Feb.
Investor presentation / pending rate case and estimated decision date · Filed 30/09/2026
The impact of wildfires could negatively affect APS’s results of operations.
Risk factors / possible wildfire effects · Filed 25/02/2026
