Consolidation and Nature of Operations

3 Months Ended

Mar. 31, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

The unaudited condensed consolidated financial statements include the accounts of Pinnacle West and our subsidiaries: APS, El Dorado Investment Company (“El Dorado”), and Pinnacle West Power, LLC (“PNW Power”). Intercompany accounts and transactions between the consolidated companies have been eliminated. The unaudited condensed consolidated financial statements for APS include the accounts of APS and the Palo Verde Generating Station (“Palo Verde”) sale leaseback variable interest entities (“VIEs”). See Note 6 for further discussion. PNW Power is a wholly-owned subsidiary that was created in September 2023 to hold certain investments in wind and transmission joint projects that were previously held in Bright Canyon Energy Corporation (“BCE”). See Note 14 for additional information. Our accounting records are maintained in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

BCE was a Pinnacle West subsidiary that was formed in 2014. On August 4, 2023, Pinnacle West entered into a purchase and sale agreement pursuant to which all of our equity interest in BCE was sold. The sale was completed on January 12, 2024. See Note 14 for more information relating to the sale of BCE.

Amounts reported in our interim Condensed Consolidated Statements of Income are not necessarily indicative of amounts expected for the respective annual periods, due to the effects of seasonal temperature variations on energy consumption, timing of maintenance on electric generating units, and other factors.

Our condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments except as otherwise disclosed in the notes) that we believe are necessary for the fair presentation of our financial position, results of operations, and cash flows for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in conformity with GAAP have been condensed or omitted pursuant to such regulations, although we believe that the disclosures provided are adequate to make the interim information presented not misleading. The accompanying condensed consolidated financial statements and these notes should be read in conjunction with the audited consolidated financial statements and notes included in our 2023 Form 10-K.

Supplemental Cash Flow Information

The following table summarizes supplemental Pinnacle West cash flow information (dollars in thousands):


	Three Months Ended March 31,
	2024		2023
Cash paid (received) during the period for:
Income taxes, net of refunds	$	20,970	$	(12)
Interest, net of amounts capitalized	83,974		62,241
Significant non-cash investing and financing activities:
Accrued capital expenditures	$	217,684	$	115,559
Cash paid for amounts included in the measurement of lease liabilities — operating cash flows:	3,544		3,851
Right-of-use operating lease assets obtained in exchange for operating lease liabilities	6,747		551,239

BCE Sale non-cash consideration (Note 14)	45,608		—

The following table summarizes supplemental APS cash flow information (dollars in thousands):


	Three Months Ended March 31,
	2024		2023
Cash paid during the period for:

Interest, net of amounts capitalized	$	73,035	$	53,610
Significant non-cash investing and financing activities:
Accrued capital expenditures	$	217,684	$	112,219
Cash paid for amounts included in the measurement of lease liabilities — operating cash flows:	3,544		3,851
Right-of-use operating lease assets obtained in exchange for operating lease liabilities	6,747		551,239