Avista (AVA) Q1 2026 Earnings Call Transcript

Avista reported Q1 2026 consolidated EPS of $1.11, up from $0.98, while non-GAAP utility EPS was flat at $1.10. The company reaffirmed 2026 non-GAAP utility EPS guidance of $2.52-$2.72 and lifted expected 2026 Avista Utilities capex to $615 million, with $3.4 billion planned for 2026-2030 plus up to $350 million of incremental investment tied to a potential 500 MW data center load. Management also said the Washington GRC settlement conference is set for May 22 and that the large-load customer MOU is targeted by May 31.

Analysis

AVA is transitioning from a classic regulated utility into a quasi-infrastructure growth story, but the market is likely still underwriting it like a low-beta bond proxy. The important second-order effect is that the optionality from a single 500 MW load request can materially re-rate the equity because it expands both rate base and allowed earnings without needing proportional customer acquisition spend; the asymmetry is that the upside comes from incremental capital deployment, while the downside is mostly regulatory and execution timing. If that customer signs, AVA’s capital intensity rises into a regime where financing discipline becomes as important as load growth, and the equity becomes more sensitive to the equity-issuance calendar than to quarterly utility EPS.

The Washington multiyear case is the real near-term swing factor because it determines whether AVA’s earnings path is de-risked or whether the market has to price in a longer period of regulatory lag. A four-year construct with off-ramps and deferrals is structurally favorable if management can secure mechanisms for volatile line items, but the first filing also creates precedent risk: if regulators push back, other states may copy the tighter framework, limiting the value of AVA’s growth investments. That makes the May settlement conference a time-boxed catalyst, with the highest volatility likely in the next 2-6 weeks rather than after the formal order.

Contrarian read: the market may be over-fixating on headline capital spend and underappreciating that the more important metric is how much of that spend is pre-committed versus contingent. The reduction in the large-load queue implies management is already filtering for higher-quality demand, which is positive for eventual conversion rates but also means the market should discount the pipeline less as a call option and more as a staged project-development process. On balance, this is constructive for long-duration holders, but not yet enough to justify aggressive multiple expansion until the MOU and Washington process reduce uncertainty.

Key Decisions for Investors

• Initiate a tactical long in AVA over the next 1-3 weeks ahead of the May 31 MOU deadline and May 22 settlement conference; target a 5%-8% upside on de-risking, with a stop if settlement tone turns clearly adversarial.
• Buy AVA June/September call spreads rather than outright equity to express the catalyst without taking full balance-sheet risk; the thesis is a near-term repricing on data-center optionality, not a multi-quarter fundamental rerate.
• Pair trade: long AVA / short a rate-base light regulated utility with limited load-growth optionality over the next 3-6 months, betting that AVA’s large-load narrative drives relative revaluation if the MOU lands.
• If AVA rallies on the MOU but before regulatory clarity, fade strength with a partial hedge: sell covered calls against stock or trim 25%-30% of exposure, because the stock remains vulnerable to Washington rate-case surprises.
• For broader portfolio positioning, prefer AVA only as a catalyst-driven utility rather than a core defensive holding until financing needs are clearer; monitor any equity issuance beyond the currently signaled 2026 plan as the main dilution risk.