NYSE:AVA Avista Q1 2023 Earnings Report $41.15 -0.11 (-0.27%) Closing price 04/25/2025 03:59 PM EasternExtended Trading$41.10 -0.05 (-0.13%) As of 04/25/2025 07:57 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Avista EPS ResultsActual EPS$0.73Consensus EPS $1.16Beat/MissMissed by -$0.43One Year Ago EPS$0.99Avista Revenue ResultsActual Revenue$474.60 millionExpected Revenue$485.37 millionBeat/MissMissed by -$10.77 millionYoY Revenue Growth+2.70%Avista Announcement DetailsQuarterQ1 2023Date5/3/2023TimeBefore Market OpensConference Call DateWednesday, May 3, 2023Conference Call Time10:30AM ETUpcoming EarningsAvista's Q1 2025 earnings is scheduled for Tuesday, April 29, 2025Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Avista Q1 2023 Earnings Call TranscriptProvided by QuartrMay 3, 2023 ShareLink copied to clipboard.There are 8 speakers on the call. Operator00:00:01Welcome to the Avista Corporation First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. Operator00:00:30I would now like to hand the conference over to your speaker today, Stacy Wentz, Investor Relations Manager. Please go ahead. Speaker 100:00:39Good morning. Welcome to Avista's Q1 2023 earnings conference call. Our earnings and our Q1 10 Q were released premarket this morning. Both are available on our website. Joining me this morning are Avista Corp President and CEO, Dennis Vermillion Executive Vice President, Treasurer and CFO, Mark Theiss Senior Vice President, External Affairs and Chief Customer Officer, Kevin Christie and Vice President, Controller and Principal Accounting Officer, Ryan Krasfield. Speaker 100:01:12Today, we will make certain statements that are forward looking. These involve assumptions, risks and uncertainties, which are subject to change. For reference to the various factors, which could cause actual results to differ materially from those discussed in today's call, please refer to our 10 ks for 2022 and 10 Q for the Q1 of 2023, which are available on our website. I'll begin by recapping the financial results presented in today's press release. Our consolidated earnings for the Q1 of 2023 were $0.73 per diluted share compared to $0.99 for the Q1 of Speaker 200:01:56Before we discuss our earnings, I'd like to say congratulations to Mark. You may have seen the press release we issued this morning announcing Mark's upcoming retirement. It's an important decision and we're so happy, Mark, for you and your family. Mark's Responsibilities will transition next week on May 11 following our Annual Meeting. Even though he'll stay on as Executive Vice President until his I'd like to thank you, Mark, For your 15 years of dedicated service to Avista, you joined the company in 2008 during I'm looking at some war wounds here, but during the great recession, you helped us successfully navigate through that global The actual crisis and of course the recent pandemic during your tenure, those are some pretty significant achievements book in your time at Avista, I could go on and on all the great things in the middle of that, but we will save that for another time In the interest of time, throughout the years, you've earned the respect of many in our industry, and I've watched you, Mark, as you've applied all your experience Finance and in the utility sector to build and lead a strong finance team at Avista that will carry on your legacy long after you've retired. Speaker 200:03:27Mark is always the voice in the room that's advocating for our investors. And Mark, you've built trusted With bankers and investors to ensure that Avista has access to the capital necessary to fund our business and ongoing investments, The investments that we need to make to maintain and upgrade our utility as we serve our customers. You've also been instrumental in overseeing the financial success of our other businesses, including the sale of our subsidiary, Acova, and there's so much more in that space as well. Your actions have helped build Avista's financial strength and flexibility to position us for the future as we transition this role. So Mark, we are grateful for everything that you've done and we wish you all the best in your retirement as you begin your next chapter in your life. Speaker 200:04:17So with Mark retiring, you saw that we've named Kevin Christie to become our new CFO, Treasurer and Senior Vice President of Regulatory Affairs. He'll assume these responsibilities next Thursday at the close of our Annual Meeting on May 11th. So congratulations, Kevin. Many of you already know Kevin from his participation on these earnings calls. He's been on them for a while, Ever since he stepped into his role as Senior Vice President of External Affairs, which included the regulatory affairs portion and then also as Chief Customer Officer for the company. Speaker 200:04:53Kevin has extensive experience in finance and the energy industry. After earning a Bachelor of Arts degree in accounting from Washington State University, go Cougs, he joined GTN or Gas Transmission Northwest as an Accountant has then progressed into leadership. Since joining Avista in 2005, Kevin has held numerous leadership roles, including Senior Director of Finance in 2012, Vice President in 2015 and Senior Vice President in 2019. In addition to his finance experience, Kevin brings expertise from across our business. Kevin, in one of your more recent accomplishments while leading Our regulatory affairs team, you worked effectively with regulators to secure the approval and implementation of our multi year rate cases to help provide long term Financial stability and success for the company. Speaker 200:05:45Your experience and credibility in the regulatory arena along with The trusted relationships that you've built with our commissions over the last several years, these are obviously critical assets as you step into the CFO role. As part of this leadership transition, we made some strategic organizational changes that leverage our relationship and trust. Kevin And his regulatory team have established with our commissions and other key external stakeholders. At the same time, it also formalizes the alignment between our internal functions of Regulatory Affairs, Finance and Accounting, and we're grateful for how effectively these teams already work together because They play a vital role in Avista's ongoing success as we strive to achieve our allowed returns. In the coming days weeks, we'll be reaching out All of you to introduce you to Kevin and if you plan to attend the AGA Financial Conference in a couple of weeks, the American Gas Association Financial Forum, you'll get an opportunity to spend some time with Kevin in all of this. Speaker 200:06:47So we look forward to that. So congratulations, Kevin. You have our full support. Now moving on, in April, we announced the results of our 2022 AllSource RFP, A 30 year agreement for 100 Megawatts of Wind. When combined with our recent agreements with the Chelan County PUD that we Signed at the end of 2021 in our 2022 agreement with Columbia Basin Hydro, more than 70% of our peak generating capability will be Produced from non emitting resources in 2026. Speaker 200:07:24We also announced 2 renewable natural gas contracts and the extension of our power purchase agreement With the Lancaster generating facility, the RNG projects contribute to our aspirational clean energy goals within our natural gas operations And the extension of the Lancaster deal meets an important need for our cost effective reliable generation And ensuring adequate resource supply during a dynamic energy market, which we have been seeing lately. Each of these agreements contribute to achieving our clean energy goals and implementing our clean energy implementation plan. So with rate cases, our strategy to return to earning our allowed return includes filing timely rate cases, And we are executing on that strategy with a multiyear rate plan that's been filed in the Idaho Commission. We did that in February. And a general rate case that we filed in Oregon in March, and we continue to work our way through the regulatory processes for both of those proceedings. Speaker 200:08:27With respect to earnings, we are off to a solid start in 2023. Our results are slightly ahead of our expectations for the Q1. As we work to manage our costs, we always do a good job of that and we continue to, especially in the face of continuing inflation and increasing interest rates. We expected commodity prices to remain elevated throughout the winter and they did. So as a result, our net power supply costs were High in the Q1 of the year, we expect lower net power supply costs for the rest of the year resulting in a net benefit under the for 2023. Speaker 200:09:05So we are confirming our annual consolidated guidance for 2023 with a range of $2.27 To $2.47 a share. However, on a quarterly basis, our earnings will differ from recent years. And Mark's going to get into that and share a little bit more about what that will look like for us. So with that, I'd like to now turn this presentation over to Mark one last time. Mark, take it away. Speaker 300:09:34Thanks, Dennis. Thanks for your nice words and Good morning, everyone. And even though this is my last call, I still have to start with the Blackhawks comment. And really May 11 is when I Transition out of my role and Kevin takes over, but May 8 is really the key date, which is the drawing for the lottery in the NHL to see if the Black Cox can pick up Conor Bedard. The hockey playoffs have been interesting as the both the President's Trophy and defending champion are out of the hockey playoffs So it will be exciting and I'll continue to watch. Speaker 300:10:07Before I talk about earnings, I want to thank everybody, investors and analysts and people at Bankers that have all followed Avista over the years and it's been a long run for me at Avista and then also prior to that at Black Hills, Getting to know many of you and I've really appreciated all that. I do look forward to being away from all of that, I will say, And spend time with my family. We have a new granddaughter and I'll be very excited to do that. I have to at least thank my wife, Betsy, for putting up with me all these years. It's been terrific throughout my career. Speaker 300:10:41I want to make sure that I thank and recognize all the people at Avista that I've had the privilege to work with. It's been an honor. Dennis mentioned the strength of our accounting team, our finance team, our tax team and strategy and nothing could be more true. They're terrific teams And it's been my pleasure and honor to work with them for the last 15 years. So with that, I'll get into the Q1 and probably to start, I know we missed expectations from what people had and we probably said I'll take responsibility for that. Speaker 300:11:11I should have thought about that when we came out with guidance. We knew that The way it would play out because of the allocation to how taxes are spread over the year and how our tax credits impact our earnings That our quarterly differences were going to be there. We just had never given quarterly guidance before. So that I will take accountability for. We beat our expectations in this quarter. Speaker 300:11:35And when we model it out, we decided that we're going to come out and put quarterly expectations out there. So in our guidance, We have those quarterly expectations. I'll get to that a little bit later, but I really wanted to start with that. So also in the Q1, our earnings were Down. We had increases in our margin due to general rate cases that we completed last year and this year And then also customer growth, and they were offset, as Dennis mentioned, by higher net power supply costs, which we expected coming into the Q1. Speaker 300:12:07The energy recovery mechanism in Washington was a pretax expense of $7,600,000 in the Q1 compared to $1,900,000 So that's Almost $0.10 difference from the prior year. But for the year, as we look forward, we In 'twenty one for Idaho and Washington, so that had an impact of our tax customer credits And that is rolling off at the end of this year in Q3 and that's what really causes the difference in our utility margin and our effective tax rate. So when all that moves, we end up spreading more of our income from the Q1 into primarily the Q4. So when we look at our guidance and I'll really just get back to the guidance, if you excluding the The Q1 was 35% of our earnings, our annual expected earnings at Avista Utilities. I'm excluding AEL and P and other, they're small and pretty ratable Over the year. Speaker 300:13:24But then we wanted to come out and say, we expect the distribution of the remaining quarters to be 5% of our earnings in the 2nd quarter, 10% of our earnings in the 3rd quarter and 50% in the 4th quarter. And that's all primarily due to the allocation of income taxes. Like I said, we did make our Q1 and we're happy with that. And I know it's we've never given quarterly guidance before. I think it's important to do that. Speaker 300:13:49And so that's how those amounts will be spread. So moving on to kind of the capital committed, as Dennis mentioned, we continue to Fund the necessary capital in our utility infrastructure and we expect Vista Utilities to spend $475,000,000 this year, AEL and P to spend about $19,000,000 and other businesses about $15,000,000 From a liquidity perspective, we did close A bond offering in the Q1 and we have $264,000,000 of available liquidity under our committed lines of credit And $26,000,000 under a separate letter of credit facility. And in the second quarter, we do expect to increase The capacity on our line for our credit facility from $400,000,000 to $500,000,000 With respect to equity, We do expect to issue $120,000,000 of which we issued $30,000,000 in the Q1. So now moving on to the earnings guidance. As Dennis previously mentioned, we are confirming our guidance, 2023 guidance of $2.27 to $2.47 a share on a consolidated basis. Speaker 300:15:02And for Avista Utilities, this is where we have A little bit of more detail for you. We expect Avista Utilities to contribute $2.15 to $2.31 per share, which is consistent. The midpoint of that range does not include the which while negative in the Q1, we do expect to be $0.03 positive for the year. In our Q1 earnings, I said this earlier, but I want to repeat it because I think it is important. It's a change for us. Speaker 300:15:29Our Q1 earnings represent 35% of our forecasted annual utility earnings and that excludes the impact of the So you have to add back the negative $0.08 In the in the Q1 and then the math gets you there to 35%. We expect 5% of our earnings in the 2nd quarter, 10% in the Q3 and 50% in the 4th quarter. And again, all of those exclude the impacts of the in each quarter. And as historically we've done, we will continue to report Where we are in the each quarter and where we expect to be for the year. Our guidance also assumes timely and appropriate rate relief in all of our jurisdictions Within the utility and then we also expect AEL and P consistently to contribute $0.08 to $0.10 and our other businesses To contribute $0.04 to $0.06 which is consistent with our past guidance. Speaker 300:16:19Our guidance generally only includes normal operating conditions and doesn't include Any unusual or non recurring items until the effects of those are known. So now, I will turn the call back over to Stacy for questions one last time. Speaker 100:16:33Thank you. We welcome your questions. Operator00:16:52Our first question comes from Brian Russo with Sidoti. Speaker 400:16:58Hi, good morning. Speaker 300:17:00Good morning, Brian. Speaker 400:17:02Hey, just thank you for the quarterly dispersion of earnings, very helpful. When we think about the and the reversal of the expense as we move through the year, When might the bulk of that occur? Is it going to be it seems as if hydro Where snowpack is high and so assuming normal runoff, would you get the biggest benefit or reversal of that expense In the Q2? Speaker 300:17:38No. I mean, it's we'll speak to those each Cora will come out with it. What we do expect is some of that reversal in the second and third quarters, but we don't we haven't given the specific guidance for the year. We will Each quarter as we always have, Brian, come out and say, here's what the impact was and then here's where we expect it to be for the full year. We'll continue to do that, but we're not giving guidance on this one as to specifically when and how much it comes off, but we do expect it to come off For the most part in the second and third quarters, and I'm not going to go further than that. Speaker 400:18:15Can you what are the water supply level Like in your major areas? Speaker 300:18:24Well, for us, We're around normal on hydro and we expect right now it all comes down to how does it melt off. And we're just starting, I mean, really, it's been a long cold spring. Those are good. Long cold springs are good. It keeps the snow up in the mountains. Speaker 300:18:43We're just starting to hit some heat now, so we're getting some of that hydro. We expect normal hydro at this point assuming that We don't have anything significant with 2 extended period of high heat, but that's always the case and it looks like we'll be there right now. Speaker 400:19:02Okay, got it. And then also just in your effort to improve your earned ROE or returns in Washington, What is the rate case strategy? I know we had some time before you'd actually file, but I mean, are you looking to file for new rates to be effective for the full year of 2025? Speaker 500:19:28Hey, Brian, this is Kevin Christie. Thanks for the question. Yes, we'll put together our rate case strategy over the next few months. We're already entering into the test period and we'll leverage the last case that we put forth to achieve the 2 year rate plan. The idea, I think, is to get it filed as soon as we feel we need rate relief, which will be pretty darn close to that first date after the 2 year period of the last case. Speaker 400:19:57Okay. Got it. And then, just in Idaho, can you remind me What did what was the requested ROE that you filed for? And what was the most recently approved ROE in Idaho. Speaker 500:20:15Yes, Brian. We filed for a 10.25 ROE in Idaho, and in the prior case, it was a 9.4. Speaker 400:20:26Okay, great. That's all I had. And Mark, good luck in the future. It was a pleasure working with you. Speaker 300:20:33Thanks, Brian. You as well. Operator00:20:39Our next question comes from Sophie Karp with KeyBanc. Speaker 600:20:45Hello. Speaker 300:20:47Good morning, Sophie. Speaker 600:20:49Hi, good morning. Thank you for taking my question. And Mark, you will be missed. But I'm sure you have to do than to go to all the conferences with us. So Speaker 300:20:58May not get as many Blackhawks comments. Speaker 600:21:03Yes. So a couple of questions for me. First, like are you guys thinking of given actually quarterly guidance maybe going forward because you just We've been trying to read between lines of your remarks and it's very helpful to get some breakdown ex but is that something that you would consider? Speaker 300:21:22I think we have to look at it this year because of the allocation of and this all comes back to those tax Call to go through all of those accounting items. But to the extent they are significantly off where we think normal expectations would be, we have to consider it. Like I said, I should have done it. We should have done it at the start when we came out with our guidance and did not. I take responsibility for that. Speaker 300:21:52We probably should have done it. I'm not a fan of quarterly guidance because things can move around a little bit, but it was so significant this year we needed to do it. To the extent Next year turns down and it's there, we'll have to consider that, but that's a future consideration that I'll defer to Kevin and Dennis and the team to think about that. I don't As a matter of course, I'm not a fan of it consistently because there's just enough variability that I don't want to have to try Speaker 600:22:27And then on the recovery, I Have it in my notes that you were supposed to file for it in April. Can you just remind us If you have indeed filed for that and what the cadence is from here on those kind of like deferred cost, power cost recovery Filings and the actual recovery, I guess. Speaker 500:22:49Yes. Hi, Sophie, it's Kevin. Thanks for the question. We did make the filing As scheduled and we're in the middle of the process moving towards recovery of the costs related to What we call the bucket, the $30 plus 1,000,000 that we had, and so that's in place and we would expect the commission to move forward and approve it. Speaker 600:23:11Okay. Is there like a process where you could propose some sort of a more automatic recovery of that? Or is that just They're going to be part of a rate case? Speaker 500:23:22No, it's outside of rate case. It's own filing. We've made that filing and we would expect the commission to approve it outside of a rate And we would see that filing in the near future for new rates in effect this summer. Speaker 600:23:34Okay, got it. Thank you. That's all for me. Speaker 300:23:37Thank you, Operator00:23:45Our next question comes from Alex Mortimer Speaker 600:23:58So just on the side of Speaker 700:23:59Avista Utilities, the 23 guidance of $215,000,000 to $231,000,000 would represent a pretty significant increase From the 161 from 2022, can you provide any color on where you expect to be within that range, if there's a bias towards The high, middle and low, and then sort of what are the drivers that are going to allow you to make up that pretty significant gap? Speaker 300:24:22Well, I mean, part of it is 2022 was a significantly down year. We lowered expectations several times Over the course of the prior years and didn't have time to really get a rate case in our jurisdictions in Washington, our largest jurisdiction, To get timely relief until we finally at the very end of 'twenty two got the 2 year rate case that Kevin and his team came up with and that really has Significantly helped 2023 relative to 2022 with the rate cases from that, a second year in Idaho and then in Oregon rate case. So those All three of those helped and we had higher cost in 2022 that we weren't able to work with those rate cases and Some cost management, as Dennis mentioned, we were able to come out with the stronger guidance. The stronger guidance in 2023 versus 2022 is also More consistent with historically where we wanted to be, we're not quite all the way back yet because inflation kind of kicked in right after we settled Washington. But As Kevin mentioned in the strategy, we'll file again in Washington and we've already filed in Idaho and Oregon. Speaker 300:25:30So as we go forward, We believe with timely rate relief, which is important and we need to work with our commissions, that we will be able to get back to earning our allowed return. That's just going to take some time. That's really the difference. The we don't I don't really the is it's negative right now in the Q1, dollars 0.08 but we do expect it to be for the year back So if you're looking at and we generally guide, we give you a range, which implies we're guiding to the midpoint. And so with that, if the ends up in the positive, we would expect to be slightly positive in the upper half of our range Is what our guidance is for Avista Utilities at this time. Speaker 700:26:14Okay, understood. And then I know you mentioned on the Q4 call that you expect about 80 basis points of regulatory lag. As you work through rate cases this year, sort of when do you see that beginning to ease? Is Most of that related to Washington or as you work through cases this year, do you see that easing in 'twenty 23, 'twenty four, 'twenty five? Speaker 300:26:34Well, you'll start to see a little bit of it because again, if you look and this is just very high level, 60% is Washington, 30% is Idaho, 10% is Oregon just as a very high level, there's a couple of percents off on there, but that's close enough. Washington, we're not going to we filed that. We got a very good outcome for that, But then inflation hit right after that. So it's going to take until that next case that we file that really affects the end of 'twenty four and into 'twenty five Is where we'll have the opportunity to get back in Washington. We'll continue to manage our costs. Speaker 300:27:04We'll continue to run our business efficiently. But from a regulatory perspective, that's where we are. Idaho and Oregon, we just filed, right? We just filed in February in Idaho and in March in Oregon. Idaho rates, we expect to go into service September 1, assuming a normal process with the commissions and then Oregon would not go into effect until January 1, 2024. Speaker 300:27:28So 'twenty three will get a little bit and it's included in our expectations from Idaho and then 'twenty four will have Idaho and Oregon on a more current Great schedule and then Washington will be what we need to pick up and that will occur in 2025. Speaker 700:27:43Okay, understood. And finally, I know obviously not a Large driver of 2023 guidance at this point, but can you touch a little bit on the biotech investment from the end of last year and what led you to report a gain in fair value? And then kind of some of assumptions that led to that fair value calculation given that it was such a large driver of last year's results and then not a significant driver this year? Speaker 300:28:06Well, again, it was we value that quarterly. It didn't change significantly in the Q1, it's value quarter. But as we talked about last year, That investment started as a biofuel investment and turned into the biotech because of what they developed and they are in different clinical trials And have created value, but the results of those clinical trials are going to be 12 to 18 months. So we don't really expect additional Significant additional news on that, so really into 2024, kind of mid-twenty 24 and later Is when we would expect more news. So some of that is just news driven. Speaker 300:28:44They got the 1st round and there were some value created and we had to report that. We did report that last year, the end of the year. And then now we just continue to manage that as we go forward. We will report that every quarter to the extent there's anything That goes on with that and this quarter was a quiet one. Speaker 700:29:03Okay, understood. That's all for me and look forward to seeing you at AJ. Speaker 300:29:09Thank you. Operator00:29:13That concludes today's question and answer session. I'd like to turn the call back to Dennis Vermillion for closing remarks. Speaker 200:29:20Well, thank you. And as we sign off today, I hope you all join me in wishing Mark a happy retirement. Mark, I know you're counting down the days and looking forward to having more time with your family and With the granddaughter and doing all the fun things that you like to do most, I know there's probably some fishing in your future. Soon. Speaker 600:29:42Blackhawks, Speaker 200:29:45you win and lose with them, I know. And that will turn around at some point. It always does. And then of course some fine wine. So cheers to you on a wonderful retirement. Speaker 200:29:57Thank you. And to everyone on the phone today, thank you for joining us, and we appreciate your interest in our company. And I wish you all a terrific day and a great week. Thank you.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallAvista Q1 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Avista Earnings HeadlinesAvista Foundation awards 58 grants supporting health and human servicesApril 21, 2025 | globenewswire.comEPA grants exemptions to dozens of coal plants from mercury, air toxics emission rulesApril 19, 2025 | msn.comTrump’s betrayal exposed Trump’s Final Reset Inside the shocking plot to re-engineer America’s financial system…and why you need to move your money now.April 26, 2025 | Porter & Company (Ad)Avista (NYSE:AVA) Hasn't Managed To Accelerate Its ReturnsApril 9, 2025 | finance.yahoo.comAvista Corp. First Quarter 2025 Earnings Conference Call and Webcast AnnouncedApril 9, 2025 | globenewswire.comAvista Corp. First Quarter 2025 Earnings Conference Call and Webcast AnnouncedApril 9, 2025 | globenewswire.comSee More Avista Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Avista? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Avista and other key companies, straight to your email. Email Address About AvistaAvista (NYSE:AVA), together with its subsidiaries, operates as an electric and natural gas utility company. It operates in two segments, Avista Utilities and AEL&P. The Avista Utilities segment provides electric distribution and transmission, and natural gas distribution services in parts of eastern Washington and northern Idaho; and natural gas distribution services in parts of northeastern and southwestern Oregon, as well as generates electricity in Washington, Idaho, Oregon, and Montana. This segment also engages in the supply of electricity to customers in Montana; and wholesale purchase and sale of electricity and natural gas. The AEL&P segment offers electric services in Juneau, Alaska. The company generates electricity through hydroelectric, thermal, wind, and solar generation facilities. As of December 31, 2023, it supplied retail electric services to approximately 416,000 customers; and retail natural gas services to approximately 381,000 customers. The company also operates five hydroelectric generation facilities with capacity of 102.7 MW; and four diesel generating facilities with a capacity of 107.5 MW. It also engages in venture fund investments, real estate investments, and other investments. Avista Corporation was incorporated in 1889 and is headquartered in Spokane, Washington.View Avista ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Markets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Market Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Upcoming Earnings Cadence Design Systems (4/28/2025)Welltower (4/28/2025)Waste Management (4/28/2025)AstraZeneca (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Starbucks (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Regeneron Pharmaceuticals (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 8 speakers on the call. Operator00:00:01Welcome to the Avista Corporation First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. Operator00:00:30I would now like to hand the conference over to your speaker today, Stacy Wentz, Investor Relations Manager. Please go ahead. Speaker 100:00:39Good morning. Welcome to Avista's Q1 2023 earnings conference call. Our earnings and our Q1 10 Q were released premarket this morning. Both are available on our website. Joining me this morning are Avista Corp President and CEO, Dennis Vermillion Executive Vice President, Treasurer and CFO, Mark Theiss Senior Vice President, External Affairs and Chief Customer Officer, Kevin Christie and Vice President, Controller and Principal Accounting Officer, Ryan Krasfield. Speaker 100:01:12Today, we will make certain statements that are forward looking. These involve assumptions, risks and uncertainties, which are subject to change. For reference to the various factors, which could cause actual results to differ materially from those discussed in today's call, please refer to our 10 ks for 2022 and 10 Q for the Q1 of 2023, which are available on our website. I'll begin by recapping the financial results presented in today's press release. Our consolidated earnings for the Q1 of 2023 were $0.73 per diluted share compared to $0.99 for the Q1 of Speaker 200:01:56Before we discuss our earnings, I'd like to say congratulations to Mark. You may have seen the press release we issued this morning announcing Mark's upcoming retirement. It's an important decision and we're so happy, Mark, for you and your family. Mark's Responsibilities will transition next week on May 11 following our Annual Meeting. Even though he'll stay on as Executive Vice President until his I'd like to thank you, Mark, For your 15 years of dedicated service to Avista, you joined the company in 2008 during I'm looking at some war wounds here, but during the great recession, you helped us successfully navigate through that global The actual crisis and of course the recent pandemic during your tenure, those are some pretty significant achievements book in your time at Avista, I could go on and on all the great things in the middle of that, but we will save that for another time In the interest of time, throughout the years, you've earned the respect of many in our industry, and I've watched you, Mark, as you've applied all your experience Finance and in the utility sector to build and lead a strong finance team at Avista that will carry on your legacy long after you've retired. Speaker 200:03:27Mark is always the voice in the room that's advocating for our investors. And Mark, you've built trusted With bankers and investors to ensure that Avista has access to the capital necessary to fund our business and ongoing investments, The investments that we need to make to maintain and upgrade our utility as we serve our customers. You've also been instrumental in overseeing the financial success of our other businesses, including the sale of our subsidiary, Acova, and there's so much more in that space as well. Your actions have helped build Avista's financial strength and flexibility to position us for the future as we transition this role. So Mark, we are grateful for everything that you've done and we wish you all the best in your retirement as you begin your next chapter in your life. Speaker 200:04:17So with Mark retiring, you saw that we've named Kevin Christie to become our new CFO, Treasurer and Senior Vice President of Regulatory Affairs. He'll assume these responsibilities next Thursday at the close of our Annual Meeting on May 11th. So congratulations, Kevin. Many of you already know Kevin from his participation on these earnings calls. He's been on them for a while, Ever since he stepped into his role as Senior Vice President of External Affairs, which included the regulatory affairs portion and then also as Chief Customer Officer for the company. Speaker 200:04:53Kevin has extensive experience in finance and the energy industry. After earning a Bachelor of Arts degree in accounting from Washington State University, go Cougs, he joined GTN or Gas Transmission Northwest as an Accountant has then progressed into leadership. Since joining Avista in 2005, Kevin has held numerous leadership roles, including Senior Director of Finance in 2012, Vice President in 2015 and Senior Vice President in 2019. In addition to his finance experience, Kevin brings expertise from across our business. Kevin, in one of your more recent accomplishments while leading Our regulatory affairs team, you worked effectively with regulators to secure the approval and implementation of our multi year rate cases to help provide long term Financial stability and success for the company. Speaker 200:05:45Your experience and credibility in the regulatory arena along with The trusted relationships that you've built with our commissions over the last several years, these are obviously critical assets as you step into the CFO role. As part of this leadership transition, we made some strategic organizational changes that leverage our relationship and trust. Kevin And his regulatory team have established with our commissions and other key external stakeholders. At the same time, it also formalizes the alignment between our internal functions of Regulatory Affairs, Finance and Accounting, and we're grateful for how effectively these teams already work together because They play a vital role in Avista's ongoing success as we strive to achieve our allowed returns. In the coming days weeks, we'll be reaching out All of you to introduce you to Kevin and if you plan to attend the AGA Financial Conference in a couple of weeks, the American Gas Association Financial Forum, you'll get an opportunity to spend some time with Kevin in all of this. Speaker 200:06:47So we look forward to that. So congratulations, Kevin. You have our full support. Now moving on, in April, we announced the results of our 2022 AllSource RFP, A 30 year agreement for 100 Megawatts of Wind. When combined with our recent agreements with the Chelan County PUD that we Signed at the end of 2021 in our 2022 agreement with Columbia Basin Hydro, more than 70% of our peak generating capability will be Produced from non emitting resources in 2026. Speaker 200:07:24We also announced 2 renewable natural gas contracts and the extension of our power purchase agreement With the Lancaster generating facility, the RNG projects contribute to our aspirational clean energy goals within our natural gas operations And the extension of the Lancaster deal meets an important need for our cost effective reliable generation And ensuring adequate resource supply during a dynamic energy market, which we have been seeing lately. Each of these agreements contribute to achieving our clean energy goals and implementing our clean energy implementation plan. So with rate cases, our strategy to return to earning our allowed return includes filing timely rate cases, And we are executing on that strategy with a multiyear rate plan that's been filed in the Idaho Commission. We did that in February. And a general rate case that we filed in Oregon in March, and we continue to work our way through the regulatory processes for both of those proceedings. Speaker 200:08:27With respect to earnings, we are off to a solid start in 2023. Our results are slightly ahead of our expectations for the Q1. As we work to manage our costs, we always do a good job of that and we continue to, especially in the face of continuing inflation and increasing interest rates. We expected commodity prices to remain elevated throughout the winter and they did. So as a result, our net power supply costs were High in the Q1 of the year, we expect lower net power supply costs for the rest of the year resulting in a net benefit under the for 2023. Speaker 200:09:05So we are confirming our annual consolidated guidance for 2023 with a range of $2.27 To $2.47 a share. However, on a quarterly basis, our earnings will differ from recent years. And Mark's going to get into that and share a little bit more about what that will look like for us. So with that, I'd like to now turn this presentation over to Mark one last time. Mark, take it away. Speaker 300:09:34Thanks, Dennis. Thanks for your nice words and Good morning, everyone. And even though this is my last call, I still have to start with the Blackhawks comment. And really May 11 is when I Transition out of my role and Kevin takes over, but May 8 is really the key date, which is the drawing for the lottery in the NHL to see if the Black Cox can pick up Conor Bedard. The hockey playoffs have been interesting as the both the President's Trophy and defending champion are out of the hockey playoffs So it will be exciting and I'll continue to watch. Speaker 300:10:07Before I talk about earnings, I want to thank everybody, investors and analysts and people at Bankers that have all followed Avista over the years and it's been a long run for me at Avista and then also prior to that at Black Hills, Getting to know many of you and I've really appreciated all that. I do look forward to being away from all of that, I will say, And spend time with my family. We have a new granddaughter and I'll be very excited to do that. I have to at least thank my wife, Betsy, for putting up with me all these years. It's been terrific throughout my career. Speaker 300:10:41I want to make sure that I thank and recognize all the people at Avista that I've had the privilege to work with. It's been an honor. Dennis mentioned the strength of our accounting team, our finance team, our tax team and strategy and nothing could be more true. They're terrific teams And it's been my pleasure and honor to work with them for the last 15 years. So with that, I'll get into the Q1 and probably to start, I know we missed expectations from what people had and we probably said I'll take responsibility for that. Speaker 300:11:11I should have thought about that when we came out with guidance. We knew that The way it would play out because of the allocation to how taxes are spread over the year and how our tax credits impact our earnings That our quarterly differences were going to be there. We just had never given quarterly guidance before. So that I will take accountability for. We beat our expectations in this quarter. Speaker 300:11:35And when we model it out, we decided that we're going to come out and put quarterly expectations out there. So in our guidance, We have those quarterly expectations. I'll get to that a little bit later, but I really wanted to start with that. So also in the Q1, our earnings were Down. We had increases in our margin due to general rate cases that we completed last year and this year And then also customer growth, and they were offset, as Dennis mentioned, by higher net power supply costs, which we expected coming into the Q1. Speaker 300:12:07The energy recovery mechanism in Washington was a pretax expense of $7,600,000 in the Q1 compared to $1,900,000 So that's Almost $0.10 difference from the prior year. But for the year, as we look forward, we In 'twenty one for Idaho and Washington, so that had an impact of our tax customer credits And that is rolling off at the end of this year in Q3 and that's what really causes the difference in our utility margin and our effective tax rate. So when all that moves, we end up spreading more of our income from the Q1 into primarily the Q4. So when we look at our guidance and I'll really just get back to the guidance, if you excluding the The Q1 was 35% of our earnings, our annual expected earnings at Avista Utilities. I'm excluding AEL and P and other, they're small and pretty ratable Over the year. Speaker 300:13:24But then we wanted to come out and say, we expect the distribution of the remaining quarters to be 5% of our earnings in the 2nd quarter, 10% of our earnings in the 3rd quarter and 50% in the 4th quarter. And that's all primarily due to the allocation of income taxes. Like I said, we did make our Q1 and we're happy with that. And I know it's we've never given quarterly guidance before. I think it's important to do that. Speaker 300:13:49And so that's how those amounts will be spread. So moving on to kind of the capital committed, as Dennis mentioned, we continue to Fund the necessary capital in our utility infrastructure and we expect Vista Utilities to spend $475,000,000 this year, AEL and P to spend about $19,000,000 and other businesses about $15,000,000 From a liquidity perspective, we did close A bond offering in the Q1 and we have $264,000,000 of available liquidity under our committed lines of credit And $26,000,000 under a separate letter of credit facility. And in the second quarter, we do expect to increase The capacity on our line for our credit facility from $400,000,000 to $500,000,000 With respect to equity, We do expect to issue $120,000,000 of which we issued $30,000,000 in the Q1. So now moving on to the earnings guidance. As Dennis previously mentioned, we are confirming our guidance, 2023 guidance of $2.27 to $2.47 a share on a consolidated basis. Speaker 300:15:02And for Avista Utilities, this is where we have A little bit of more detail for you. We expect Avista Utilities to contribute $2.15 to $2.31 per share, which is consistent. The midpoint of that range does not include the which while negative in the Q1, we do expect to be $0.03 positive for the year. In our Q1 earnings, I said this earlier, but I want to repeat it because I think it is important. It's a change for us. Speaker 300:15:29Our Q1 earnings represent 35% of our forecasted annual utility earnings and that excludes the impact of the So you have to add back the negative $0.08 In the in the Q1 and then the math gets you there to 35%. We expect 5% of our earnings in the 2nd quarter, 10% in the Q3 and 50% in the 4th quarter. And again, all of those exclude the impacts of the in each quarter. And as historically we've done, we will continue to report Where we are in the each quarter and where we expect to be for the year. Our guidance also assumes timely and appropriate rate relief in all of our jurisdictions Within the utility and then we also expect AEL and P consistently to contribute $0.08 to $0.10 and our other businesses To contribute $0.04 to $0.06 which is consistent with our past guidance. Speaker 300:16:19Our guidance generally only includes normal operating conditions and doesn't include Any unusual or non recurring items until the effects of those are known. So now, I will turn the call back over to Stacy for questions one last time. Speaker 100:16:33Thank you. We welcome your questions. Operator00:16:52Our first question comes from Brian Russo with Sidoti. Speaker 400:16:58Hi, good morning. Speaker 300:17:00Good morning, Brian. Speaker 400:17:02Hey, just thank you for the quarterly dispersion of earnings, very helpful. When we think about the and the reversal of the expense as we move through the year, When might the bulk of that occur? Is it going to be it seems as if hydro Where snowpack is high and so assuming normal runoff, would you get the biggest benefit or reversal of that expense In the Q2? Speaker 300:17:38No. I mean, it's we'll speak to those each Cora will come out with it. What we do expect is some of that reversal in the second and third quarters, but we don't we haven't given the specific guidance for the year. We will Each quarter as we always have, Brian, come out and say, here's what the impact was and then here's where we expect it to be for the full year. We'll continue to do that, but we're not giving guidance on this one as to specifically when and how much it comes off, but we do expect it to come off For the most part in the second and third quarters, and I'm not going to go further than that. Speaker 400:18:15Can you what are the water supply level Like in your major areas? Speaker 300:18:24Well, for us, We're around normal on hydro and we expect right now it all comes down to how does it melt off. And we're just starting, I mean, really, it's been a long cold spring. Those are good. Long cold springs are good. It keeps the snow up in the mountains. Speaker 300:18:43We're just starting to hit some heat now, so we're getting some of that hydro. We expect normal hydro at this point assuming that We don't have anything significant with 2 extended period of high heat, but that's always the case and it looks like we'll be there right now. Speaker 400:19:02Okay, got it. And then also just in your effort to improve your earned ROE or returns in Washington, What is the rate case strategy? I know we had some time before you'd actually file, but I mean, are you looking to file for new rates to be effective for the full year of 2025? Speaker 500:19:28Hey, Brian, this is Kevin Christie. Thanks for the question. Yes, we'll put together our rate case strategy over the next few months. We're already entering into the test period and we'll leverage the last case that we put forth to achieve the 2 year rate plan. The idea, I think, is to get it filed as soon as we feel we need rate relief, which will be pretty darn close to that first date after the 2 year period of the last case. Speaker 400:19:57Okay. Got it. And then, just in Idaho, can you remind me What did what was the requested ROE that you filed for? And what was the most recently approved ROE in Idaho. Speaker 500:20:15Yes, Brian. We filed for a 10.25 ROE in Idaho, and in the prior case, it was a 9.4. Speaker 400:20:26Okay, great. That's all I had. And Mark, good luck in the future. It was a pleasure working with you. Speaker 300:20:33Thanks, Brian. You as well. Operator00:20:39Our next question comes from Sophie Karp with KeyBanc. Speaker 600:20:45Hello. Speaker 300:20:47Good morning, Sophie. Speaker 600:20:49Hi, good morning. Thank you for taking my question. And Mark, you will be missed. But I'm sure you have to do than to go to all the conferences with us. So Speaker 300:20:58May not get as many Blackhawks comments. Speaker 600:21:03Yes. So a couple of questions for me. First, like are you guys thinking of given actually quarterly guidance maybe going forward because you just We've been trying to read between lines of your remarks and it's very helpful to get some breakdown ex but is that something that you would consider? Speaker 300:21:22I think we have to look at it this year because of the allocation of and this all comes back to those tax Call to go through all of those accounting items. But to the extent they are significantly off where we think normal expectations would be, we have to consider it. Like I said, I should have done it. We should have done it at the start when we came out with our guidance and did not. I take responsibility for that. Speaker 300:21:52We probably should have done it. I'm not a fan of quarterly guidance because things can move around a little bit, but it was so significant this year we needed to do it. To the extent Next year turns down and it's there, we'll have to consider that, but that's a future consideration that I'll defer to Kevin and Dennis and the team to think about that. I don't As a matter of course, I'm not a fan of it consistently because there's just enough variability that I don't want to have to try Speaker 600:22:27And then on the recovery, I Have it in my notes that you were supposed to file for it in April. Can you just remind us If you have indeed filed for that and what the cadence is from here on those kind of like deferred cost, power cost recovery Filings and the actual recovery, I guess. Speaker 500:22:49Yes. Hi, Sophie, it's Kevin. Thanks for the question. We did make the filing As scheduled and we're in the middle of the process moving towards recovery of the costs related to What we call the bucket, the $30 plus 1,000,000 that we had, and so that's in place and we would expect the commission to move forward and approve it. Speaker 600:23:11Okay. Is there like a process where you could propose some sort of a more automatic recovery of that? Or is that just They're going to be part of a rate case? Speaker 500:23:22No, it's outside of rate case. It's own filing. We've made that filing and we would expect the commission to approve it outside of a rate And we would see that filing in the near future for new rates in effect this summer. Speaker 600:23:34Okay, got it. Thank you. That's all for me. Speaker 300:23:37Thank you, Operator00:23:45Our next question comes from Alex Mortimer Speaker 600:23:58So just on the side of Speaker 700:23:59Avista Utilities, the 23 guidance of $215,000,000 to $231,000,000 would represent a pretty significant increase From the 161 from 2022, can you provide any color on where you expect to be within that range, if there's a bias towards The high, middle and low, and then sort of what are the drivers that are going to allow you to make up that pretty significant gap? Speaker 300:24:22Well, I mean, part of it is 2022 was a significantly down year. We lowered expectations several times Over the course of the prior years and didn't have time to really get a rate case in our jurisdictions in Washington, our largest jurisdiction, To get timely relief until we finally at the very end of 'twenty two got the 2 year rate case that Kevin and his team came up with and that really has Significantly helped 2023 relative to 2022 with the rate cases from that, a second year in Idaho and then in Oregon rate case. So those All three of those helped and we had higher cost in 2022 that we weren't able to work with those rate cases and Some cost management, as Dennis mentioned, we were able to come out with the stronger guidance. The stronger guidance in 2023 versus 2022 is also More consistent with historically where we wanted to be, we're not quite all the way back yet because inflation kind of kicked in right after we settled Washington. But As Kevin mentioned in the strategy, we'll file again in Washington and we've already filed in Idaho and Oregon. Speaker 300:25:30So as we go forward, We believe with timely rate relief, which is important and we need to work with our commissions, that we will be able to get back to earning our allowed return. That's just going to take some time. That's really the difference. The we don't I don't really the is it's negative right now in the Q1, dollars 0.08 but we do expect it to be for the year back So if you're looking at and we generally guide, we give you a range, which implies we're guiding to the midpoint. And so with that, if the ends up in the positive, we would expect to be slightly positive in the upper half of our range Is what our guidance is for Avista Utilities at this time. Speaker 700:26:14Okay, understood. And then I know you mentioned on the Q4 call that you expect about 80 basis points of regulatory lag. As you work through rate cases this year, sort of when do you see that beginning to ease? Is Most of that related to Washington or as you work through cases this year, do you see that easing in 'twenty 23, 'twenty four, 'twenty five? Speaker 300:26:34Well, you'll start to see a little bit of it because again, if you look and this is just very high level, 60% is Washington, 30% is Idaho, 10% is Oregon just as a very high level, there's a couple of percents off on there, but that's close enough. Washington, we're not going to we filed that. We got a very good outcome for that, But then inflation hit right after that. So it's going to take until that next case that we file that really affects the end of 'twenty four and into 'twenty five Is where we'll have the opportunity to get back in Washington. We'll continue to manage our costs. Speaker 300:27:04We'll continue to run our business efficiently. But from a regulatory perspective, that's where we are. Idaho and Oregon, we just filed, right? We just filed in February in Idaho and in March in Oregon. Idaho rates, we expect to go into service September 1, assuming a normal process with the commissions and then Oregon would not go into effect until January 1, 2024. Speaker 300:27:28So 'twenty three will get a little bit and it's included in our expectations from Idaho and then 'twenty four will have Idaho and Oregon on a more current Great schedule and then Washington will be what we need to pick up and that will occur in 2025. Speaker 700:27:43Okay, understood. And finally, I know obviously not a Large driver of 2023 guidance at this point, but can you touch a little bit on the biotech investment from the end of last year and what led you to report a gain in fair value? And then kind of some of assumptions that led to that fair value calculation given that it was such a large driver of last year's results and then not a significant driver this year? Speaker 300:28:06Well, again, it was we value that quarterly. It didn't change significantly in the Q1, it's value quarter. But as we talked about last year, That investment started as a biofuel investment and turned into the biotech because of what they developed and they are in different clinical trials And have created value, but the results of those clinical trials are going to be 12 to 18 months. So we don't really expect additional Significant additional news on that, so really into 2024, kind of mid-twenty 24 and later Is when we would expect more news. So some of that is just news driven. Speaker 300:28:44They got the 1st round and there were some value created and we had to report that. We did report that last year, the end of the year. And then now we just continue to manage that as we go forward. We will report that every quarter to the extent there's anything That goes on with that and this quarter was a quiet one. Speaker 700:29:03Okay, understood. That's all for me and look forward to seeing you at AJ. Speaker 300:29:09Thank you. Operator00:29:13That concludes today's question and answer session. I'd like to turn the call back to Dennis Vermillion for closing remarks. Speaker 200:29:20Well, thank you. And as we sign off today, I hope you all join me in wishing Mark a happy retirement. Mark, I know you're counting down the days and looking forward to having more time with your family and With the granddaughter and doing all the fun things that you like to do most, I know there's probably some fishing in your future. Soon. Speaker 600:29:42Blackhawks, Speaker 200:29:45you win and lose with them, I know. And that will turn around at some point. It always does. And then of course some fine wine. So cheers to you on a wonderful retirement. Speaker 200:29:57Thank you. And to everyone on the phone today, thank you for joining us, and we appreciate your interest in our company. And I wish you all a terrific day and a great week. 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