Pinnacle West Capital (PNW) risk factors, FY2024 10-K

REGULATORY RISKS

1. 01Our financial condition depends upon APS’s ability to recover costs in a timely manner from customers through regulated rates and otherwise execute its business strategy
2. 02The operation of APS’s nuclear power plant exposes it to substantial regulatory oversight and potentially significant liabilities and capital expenditures
3. 03APS is subject to numerous environmental laws and regulations, and changes in, or liabilities under, existing or new laws or regulations may increase APS’s cost of operations or impact its business plans
4. 04Concern over climate change has led to significant legislative and regulatory efforts to limit CO2, which is a major byproduct of the combustion of fossil fuel, and other GHG emissions
5. 05Co-owners of our jointly owned generation and transmission facilities may have unaligned goals and positions due to the effects of legislation, regulations, economic conditions, or changes in our industry, which could have a significant impact on our ability to continue operations of such facilities
6. 06Deregulation or restructuring of the electric industry may result in increased competition, which could have a significant adverse impact on APS’s business and its results of operations

OPERATIONAL RISKS

1. 07APS’s results of operations can be adversely affected by various factors impacting demand for electricity
2. 08in distributed renewable energy programs would result in lower demand since customers would be meeting some of their own energy needs
3. 09The operation of power generation facilities and transmission systems involves risks that could result in reduced output or unscheduled outages or could otherwise significantly impact APS’s results of operations
4. 10facilities due to vandalism or other deliberate acts that could lead to outages or other adverse effects. If APS’s facilities operate below expectations, especially during its peak seasons, it may lose revenue or incur additional expenses, including increased purchased power expenses
5. 11The impact of wildfires could negatively affect APS’s results of operations
6. 12The inability to successfully develop, acquire or operate generation resources to meet future resource needs and load forecasts in accordance with reliability requirements and other new or evolving standards and regulations could adversely impact our business
7. 13The lack of access to sufficient supplies of water could have a material adverse impact on APS’s business and results of operations
8. 14We are subject to cybersecurity risks and risks of unauthorized access to our systems that could adversely affect our business and financial condition
9. 15We rely extensively on IT systems, networks, and services, including internet sites, data hosting and processing facilities, and other hardware, software and technical applications and platforms. Some of these systems are managed, hosted, provided, or used by third parties to assist in conducting our business
10. 16There are inherent risks in the ownership and operation of nuclear facilities, such as environmental, health, fuel supply, spent fuel disposal, regulatory and financial risks and the risk of terrorist attack that could adversely affect our business and financial condition
11. 17Changes in technology could create challenges for APS’s existing business
12. 18acceptance of new technologies could also enable the entry of new market participants, such as technology companies, into the interface between APS and its customers and could have other unpredictable effects on APS’s traditional business model
13. 19We are subject to employee workforce factors that could adversely affect our business and financial condition

FINANCIAL RISKS

1. 20A downgrade of our credit ratings could materially and adversely affect our business, financial condition, and results of operations
2. 21Our cash flow depends on the performance of APS and its ability to make distributions
3. 22We may not have adequate insurance coverage for liabilities
4. 23Pinnacle West’s ability to meet its debt service obligations could be adversely affected because its debt securities are structurally subordinated to the debt securities and other obligations of its subsidiaries
5. 24The use of derivative contracts in the normal course of our business could result in financial losses that negatively impact our results of operations

GENERAL RISKS

1. 25Proposals to change policy in Arizona or other states made through ballot initiatives or referenda may increase the Company’s cost of operations or impact its business plans
2. 26General economic conditions could materially affect our business, financial condition, and results of operations
3. 27The market price of our common stock may be volatile
4. 28Financial market disruptions or new rules or regulations may increase our financing costs or limit our access to various financial markets, which may adversely affect our liquidity and our ability to implement our financial strategy
5. 29Certain provisions of our articles of incorporation and bylaws and of Arizona law make it difficult for shareholders to change the composition of our board and may discourage takeover attempts