Q1 2025 Avista Corp Earnings Call
Speaker Change: Ladies and gentlemen, thank you for standing by and welcome to Vista Corporation for a Quarter 2025 Earnings Conference call.
At this time, all participants are in a list and only mode.
Speaker Change: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you would need to press star 1-1 on your telephone. You would then hear an automated message advising your hand is raised. Do withdraw your question. Please press star 1-1 again.
Speaker Change: Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker today, Stacey Walters, investor relations manager. Please go ahead.
Speaker Change: Thank you. It's great to have you with us for Avista's first quarter 2025 earnings conference call. Our earnings and first quarter 2025 form 10Q were released pre-market this morning. You can find both on our website.
Heather Rosentrater: Joining me today are Avista Corp, President and CEO Heather Rosentrater and Senior Vice President CFO , Treasurer and Regulatory Affairs Officer Kevin Christie.
Heather Rosentrater: Today we will make certain statements that are forward looking. These involve assumptions, risks, and uncertainties which are subject to change.
Heather Rosentrater: Various factors could cause actual results to differ materially from the expectations we discussed in today's call. Please refer to our Form 10K for 2024 and our Form 10Q for the first quarter of 2025 for a full discussion of these risk factors.
Both are available on our website.
Heather Rosentrater: To begin, I'll recap the financial results presented in today's press release.
Now I'll turn the call over to Heather.
Heather Rosentrater: Thank you, Stacey, and hello everyone. Having just finished my first four months in the CEO role, I'm excited that we are off to great start 2025 and that we get to share the results of a strong first quarter.
Heather Rosentrater: Strong performance at Avista Utilities drove almost 8% improvement in our first quarter consolidated results compared to the first quarter last year. And I'm happy to share that we are on track to meet our consolidated earnings targets for 2025.
Heather Rosentrater: Our discussions with potential new large load customers, which we touched on in February , continue to advance.
Heather Rosentrater: In addition to providing potential incremental investment, we're viewing these potential new loads as opportunities to bring a net benefit to existing Avista customers and the region through enhancements to the regional grid infrastructure, employment opportunities.
Heather Rosentrater: Future rate relief and a significant boost to sales tax revenue. When we can share more details on these potential new loads we will.
Heather Rosentrater: These conversations do underscore the need for the resources identified in our 2025 Integrated Resource Plan.
Heather Rosentrater: Our plan next step involves seeking beds through a request for proposal or RFP process.
Heather Rosentrater: Our draft all-source RFP was filed for approval with the Washington Commission and communicated it to the Idaho Commission in March.
Heather Rosentrater: the RFP calls for bids from 50 megawatts up to 400 megawatts of generation to meet the needs with Identified for 2029.
Heather Rosentrater: We are working through to the Commission staff's comments as well as other public comments.
and support of this process.
Heather Rosentrater: We plan to release the final RFP at the end of May.
Heather Rosentrater: Bids will be due later in June and we expect to issue a shortlist in August .
Finalists will be selected by the end of this year.
Heather Rosentrater: More optimistic about ownership options, part of this RFP process through built transfer for agreement options and through self-build options.
Heather Rosentrater: An April critical wildfire legislation was passed in both Washington and Idaho.
Heather Rosentrater: Both states now have laws which provide for approval of wildfire mitigation plans, which is a significant step forward in addressing the risks associated with wildfire.
Heather Rosentrater: on the Washington Governor's desk to be signed as another bill which provides for the opportunity to curitize costs associated with disasters such as wildfire.
Heather Rosentrater: Overwhelming support for these changes in both states demonstrates the legislature's recognition of wildfire as a critical issue.
Heather Rosentrater: This is an important positive progress that under pens are continued efforts to mitigate the risk of wildfire.
Heather Rosentrater: I also want to share that we have reached a resolution and the litigation related to the bad roadfire.
Heather Rosentrater: This fire occurred in September 2020 when a severe wind storm blew a branch from a tree outside our right of way into a distribution line. The resulting fire caused significant damage to the towns of Maldon and Plain City in Whitman County, Washington.
Heather Rosentrater: The litigation involved claims against Avista and other parties responsible for maintaining the distribution lines and the veg taste around them.
Heather Rosentrater: After negotiations and legal proceedings, we have agreed to a settlement in principle that we believe is fair and addresses substantially all the claims brought by the affected parties.
Heather Rosentrater: The settlement will result in no impact to earnings as we expect to receive insurance proceeds for settlement of our $21 million liability.
Heather Rosentrater: We believe that resolving this matter is in the best interest of our company and the communities we serve.
Heather Rosentrater: We remain dedicated to maintaining the highest standards of safety and reliability in our operations and as we move forward we'll continue to invest in infrastructure improvements and continue to enhance our safety measures to mitigate the risk of wildfires.
Heather Rosentrater: Our focus remains on delivering reliable service to our customers while prioritizing the safety and well-being of our communities.
Speaker Change: I already covered some developments in regulation at the state level, but there's been a lot happening at the federal level as well.
Speaker Change: Terrace proposed by the new administration have not had a material impact on our financial results to date, but we continue to closely follow this dynamic situation.
Speaker Change: We're working actively with our supply chain partners, the majority of whom are domestic, to understand the impact that tariffs may have on pricing, and today's step possible, we are implementing risk mitigation activities.
Speaker Change: We worked with our supplier to redirect manufacturing of transformers from Canadian factories to factories located in the United States.
Speaker Change: We also worked out process changes with our wood pole supplier to ensure poles are sourced from the United States, and we're working to secure priceless for committed periods of time to alleviate uncertainty and inform our own planning processes.
Speaker Change: These are just a few examples of the work we're doing to mitigate tariff risk.
Speaker Change: We source a significant portion of our natural gas supply from Canada. We believe that this gas is exempt from any tariff under the U.S. Mexico-Canada agreement.
Speaker Change: It's important to note too that should that exemption be overwritten by further action, any impact from an increase in resource costs would be substantially mitigated through our resource cost sharing mechanisms, the ARM, RPCA, and PGA's.
Speaker Change: At this time, we do not anticipate a significant impact in 2025, but we will continue to monitor these ever-changing conditions.
Speaker Change: And now I'll hand the call over to Kevin for more discussion of our earnings. Thanks Heather and good morning everyone. As we turn to our earnings, our consolidated results demonstrate solid execution at Avista Utilities.
Speaker Change: improved utility margin due in part to constructive regulatory outcomes, drove a strong first quarter. Although just below consensus, our first quarter earnings are right where we expected them to be, and we're on track to meet our consolidated earnings guidance for 2025.
Speaker Change: In the first quarter of 2025, we recognized a pre-tax expense $7 million under the energy recovery mechanism, largely in line with our expectations.
and AEMP's results were right on target.
Speaker Change: At our other businesses, we recognize the three-set loss per deluded share in the first quarter.
Speaker Change: This loss is a result of periodic market valuations within our portfolio of investments.
Losses from early-stage joint venture investments in borrowing costs.
Speaker Change: As we all experienced, markets were volatile in the first quarter and not conducive to exits from venture funds.
Speaker Change: We've guided to zero for our other investments precisely because of the volatility. We expect to see from one quarter to the next or one year to the next.
Speaker Change: Over the long term, we do expect to see a return on these investments.
Speaker Change: The constructive outcomes from our 2024 Washington General Rate Cases provided a crucial foundation for 2025.
Speaker Change: In March, we reached an all-party, all-issue settlement in our Oregon GRC. If approved, new rates would take effect September 1 of this year.
Speaker Change: In Idaho, we filed electric and gas rate cases in January .
Speaker Change: and we will meet for our first settlement discussion on May 22nd.
Speaker Change: New rates from that proceeding will also go into fact on September 1.
Speaker Change: In both cases, we are primarily seeking to bring our capital invested in these service territories up to date, as well as to set costs at an appropriate level for both jurisdictions.
Speaker Change: We are committed to investing the necessary capital in our utility infrastructure. Capital expenditures at Avista Utilities were $100 million in the first quarter of 2025 to support customer growth and to maintain our system for the benefit of our customers.
We expect capital expenditures of 525 million for 2025.
Speaker Change: And from 2025 through 2029, we expect capital expenditures of nearly $3 billion, resulting in an annual growth rate of between 5 and 6%.
Speaker Change: These estimates do not include any incremental capital that would result from the RFP process that Heather just mentioned, or the opportunity that might arise from transmission projects like the North Plains connector, or new large load customers.
Speaker Change: On the liquidity front, as of March 31st, we had 221 million of available liquidity under a committed line of credit and 40 million available under our letter of credit facility.
In 2025, we expect to issue up to 120 million
Speaker Change: A long-term debt and up to 80 million of common stock, including the 16 million issued during the first quarter of this year.
Speaker Change: We are confirming our earnings guidance for 2025 with a consolidated range of $2.52 to $2.72 per
Speaker Change: We expect Avista utilities to contribute within a range of $2.43 to $2.61 per diluted chair.
The midpoint of her guidance range for Avista Utilities includes...
Speaker Change: and expected negative impact from the Earth of 12 cents in the 90% customer, 10% company sharing
Speaker Change: As mentioned previously, we have already incurred seven cents under the arm in the first quarter of 2025.
Speaker Change: Due to the staggered timing of rate cases throughout or multiple jurisdictions, going forward are expected return on equity at Avista Utilities is 8.8%.
Speaker Change: AELMP continues to perform well and we expect it to contribute in the range of $0.9 to $0.11 per deluded chair in 2025.
Speaker Change: As also mentioned previously, we expect our other businesses to have a zero contribution to earnings in 2025, with an expectation of volatility from period to period, as we recognize valuation adjustments to these investments.
Speaker Change: Over the long term, we expect to see a return on our investments as well as economic development in our service territory.
Speaker Change: Over the long term, we expect that our earnings will grow from 4% to 6% from a forecast 2025 base year.
Now we'll be happy to take your questions.
Speaker Change: Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your questions, please press star 11 again. And the first question comes from Ross Fowler with Bank of America. Your line is now open.
Ross Fowler: Hi, Heather, hi, Kevin. Good morning. It's good afternoon from Ebooka. Good morning to you.
Ross Fowler: So on the RFP, you know, you kind of spoke to that pretty wide range there. Are you seeing, you know, is there a process I should say to sort of get any.
Ross Fowler: Cost-related to the IRA changes, or potential IRA changes, or tariffs into that RFP process, are those sort of fully baked at this point?
Are there opportunities to...
Get.
for the cost of what the generation resources might be.
Ross Fowler: B. Right, if you lost the tax credits in the IRA or if tariffs were impactful for that, could people come back and change their bids into that RFP or those costs already an informed big thing?
Ross Fowler: Yeah, thank you for clarifying that. Yeah, so when we go out for the RFP, we recognize that there's a lot of uncertainty right now and so we've
Ross Fowler: Done that in the past when there's uncertainty had opportunities for refreshing bids after a certain amount of time, and so I'm sure we'll all be...
Ross Fowler: Looking at the environment, what's going on around us and determining if that will be an appropriate thing to do as we go through this process as well.
Speaker Change: Thanks, Heather, and then I guess given the large load customer you're sort of seeing and talking to and dealing with.
Speaker Change: Are you seeing sort of a push to natural gas needs within the context of the RFP, or is a separate process related to that large load customer like?
Speaker Change: You know, the difference I'm trying to get at like intermittent resources versus dispatchable resources and then how do you feel about or where would you source that natural gas from? Is it more from Canada or how would you think about that?
Speaker Change: I think that's all to be determined based on the results that we get from the RFP, but that's why we do have that large range of the 50 to 400 megawatts is acknowledging that there's
Speaker Change: A lot of different scenarios that could come out of our discussions with the large load customers and we'll have to see what we get with RFP and see how those conversations continue.
Okay, perfect. Thanks, Heather.
Speaker Change: Thanks. And our next question comes from Anthony Cordell with Mizzouo. Your line is open.
Anthony Cordell: Hey, good morning, team. Just if I could hit on the wildfires settlement. Just...
Speaker Change: You know, thoughts are reaching this settlement and I understand that you said the insurance covers it but does it end up setting up a precedent of now, any type of event the company is going to settle?
No, we don't think that this...
Speaker Change: We have been negotiating over the last several years specifically looking at the facts of this unique situation and any future situation would have its own unique facts we would consider. Thank you for your time.
Speaker Change: Lumin-1 Trials, is there any impact to the valuation of your unregulated business with respect to these trials?
Speaker Change: Well, thanks for the question, Anthony, this is Kevin, and there could be in the future as the trials continue to play out. They're early.
Speaker Change: in the process there and we're hopeful, we're optimistic about the investment and we think there's some encouraging signs but it's too soon to see evaluation mark up there.
Speaker Change: and I apologize, I'm not as familiar with the biotech space. I mean, is this something that you think we have a clearer update on it in the next quarter, or is it just the trial simply take longer, they're longer dated, and it's something more, you know, a 20-26 event or something like that.
Speaker Change: At this point in time, we're thinking to be the latter half of this year or the early part of next year, where we could see more firm results from trials. It could impact valuation. Thank you very much.
Great. Thanks for taking my questions.
Speaker Change: Thank you. As a reminder to ask a question, please press star 11 on your telephone. And our next question comes from Julian, Dominion, Smith, with Jeff Reach, your line is open.
and you're high, it's actually Brian Rousseau, I want for Julian.
Speaker Change: Good morning, Brian . Thank you for the questions. Yeah, good morning. Hey, just understanding that the, you know, the 12 cent under recovery of the power cost into the arms, pretty much, you know, locked in for 2025. I didn't think there was.
Speaker Change: Lane, which in the 10K that insinuated that you would also be under recovering.
Power Expense in 2026.
Speaker Change: and I'm curious, has there been any changes and say the forward gas and or power markets that would...
Speaker Change: you know, cause you to update that language, you know, either, you know,
positive or negative.
Speaker Change: Brian , this goes back to the root cause and that is that when we set power supply through the regulatory process.
Speaker Change: and the expected power supply cost. What is included in this process until we can get it changed is an assumption when we're long resources, which is a considerable period of time, that we'll be able to recover at a significant premium.
a benefits that would come back to customers in the company.
Speaker Change: and based on the last case, we were unable to reset the mechanism in the way we wanted and at the levels we wanted
Speaker Change: and what has been happening in the last several years is you look out, you see some potential value that we're unable to capture because of a lack of liquidity or based on that timing.
Speaker Change: So when it comes to 25 and 26 and until we really reset the mechanism and we have some...
Speaker Change: Strategies were employing to try to do so, but it's a multi-year strategy, not an immediate.
Speaker Change: Change. We wouldn't expect a material difference in 25 or 26 where we would likely land in the
Speaker Change: Okay, understood. And then those, the strategy to actually modify the arm, is that something you think that could be done outside of a general race case, you know, in, and in collaboration with the other electric utilities in state.
I think we're going to use a multi-pronged.
Speaker Change: Approach here to see what we can do to make adjustments that we think are necessary given the volatility and that the last several years haven't gone according to plan and the next couple don't look like they will either.
Speaker Change: We certainly will take a run in future rate cases, and if appropriate, and we haven't determined that that's the case yet, if appropriate, we would work with our peers who I think are in somewhat of a similar situation to see if we can make some changes. We do have a process that we've used in the past.
with workshops with the parties.
Speaker Change: in advance of a rate case where we try to make a change, and so we'll...
Speaker Change: Comments, I think we've already commenced workshops and with those workshops we'll try to help the parties understand why the market really has changed fundamentally and why change the arm is appropriate.
Speaker Change: Okay, great, and just a devolven on the RFP question, I'll be speak range.
Speaker Change: All right, 50 to 400 million. Like, a bigger picture, how do you kind of...
Least Rift, you know, as you pursue self-build generation.
Speaker Change: Right, so in general we've got our integrated resource planning process that we just submitted the most recent one a few months ago on the electric side, and so it has. [inaudible]
Speaker Change: A lot of detailed explanation about how we balance all of that from a cost and compliance perspective.
Speaker Change: You know, as we look at how we're engaging with the large load customers, we do see that as an opportunity to help with affordability for our existing residential customers. So we are seeing that as a tool to help with that.
the cost headwinds that we see in other areas.
Okay, very good. Thank you very much.
Thank you. Thanks Brian .
Speaker Change: I am showing no further questions at this time. I would now like to turn the call back over to Stacey Walters for closing remarks.
Stacey Walters: Thank you all for joining us today and for your interest in Avista. Have a great day.
Stacey Walters: This concludes today's conference call. Thank you for participating. You may now disconnect.