Avista Q1 2025 Earnings Report

Avista EPS Results

• Actual EPS: $0.98
• Consensus EPS: $1.05
• Beat/Miss: Missed by -$0.07
• One Year Ago EPS: $0.91

Avista Revenue Results

• Actual Revenue: $603.00 million
• Expected Revenue: $636.30 million
• Beat/Miss: Missed by -$33.30 million
• YoY Revenue Growth: +1.30%

Avista Announcement Details

• Quarter: Q1 2025
• Date: 5/7/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, May 7, 2025
• Conference Call Time: 12:30PM ET

Avista (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.

Avista Q1 2025 Earnings Call Transcript

Key Takeaways

• Avista reported Q1 EPS of $0.98 per diluted share, up from $0.91 a year ago, driven by an ~8% improvement at Avista Utilities, and management remains on track to meet full-year guidance of $2.52–$2.72.
• The company filed a draft all-source RFP for 50–400 MW of new generation to meet 2029 needs, with a final RFP due in May, bids in June, a shortlist in August and finalist selection by year-end.
• Key wildfire risk measures advanced as Washington and Idaho passed legislation for wildfire mitigation plan approval and disaster cost securitization, and Avista settled the Babb Road Fire litigation with insurance covering its $21 million liability.
• Regulatory progress includes an all-party settlement in the Oregon general rate case and Idaho electric and gas cases filed in January, with new rates expected to take effect September 1 in both states.
• Avista is mitigating federal tariff risks by sourcing transformers and wood poles in the U.S., asserting Canadian gas supply is USMCA-exempt, and relying on cost-sharing mechanisms to offset any tariff-driven increases.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by and welcome to Vista Corporation First Quarter twenty twenty five 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. To ask a question during this session, you would need to press 11 on your telephone. You will then hear an automated message advising your hand is raised.

[Operator]

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.

[Stacey Wenz, Investor Relations Manager at Avista]

Thank you. It's great to have you with us for Avista's First Quarter twenty twenty five Earnings Conference Call. Our earnings and first quarter twenty twenty five Form 10 Q were released premarket this morning. You can find both on our website. Joining me today are Avista Corp.

[Stacey Wenz, Investor Relations Manager at Avista]

President and CEO, Heather Rosentrater and Senior Vice President, CFO, Treasurer, and Regulatory Affairs Officer, Kevin Christie. Today, we will make certain statements that are forward looking. These involve assumptions, risks and uncertainties, which are subject to change. Various factors could cause actual results to differ materially from the expectations we discuss in today's call. Please refer to our Form 10 ks for 2024 and our Form 10 Q for the first quarter of twenty twenty five for a full discussion of these risk factors.

[Stacey Wenz, Investor Relations Manager at Avista]

Both are available on our website. To begin, I'll recap the financial results presented in today's press release. Our consolidated earnings for the first quarter of twenty twenty five were $0.98 per diluted share compared to $0.91 for the first quarter of twenty twenty four.

[Stacey Wenz, Investor Relations Manager at Avista]

Now I'll turn the call over to Heather.

[Heather Rosentrater, President & CEO at Avista]

Thank you, Stacy, and hello, everyone. Having just finished my first four months in the CEO role, I'm excited that we are off to a great start to 2025 and that we get to share the results of a strong first quarter. 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, President & CEO at Avista]

Our discussions with potential new large load customers, which we touched on in February, continue to advance. 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, future rate relief and a significant boost to sales tax revenue. When we can share more details on these potential new loads, we will. These conversations do underscore the need for the resources identified in our 2025 integrated resource plan. Our planned next step involves seeking bids through a request for proposal or RFP process.

[Heather Rosentrater, President & CEO at Avista]

Our draft all source RFP was filed for approval with the Washington Commission and communicated to the Idaho Commission in March. The RFP calls for bids from 50 megawatts up to 400 megawatts of generation to meet the needs we've identified for 2029. We are working through the commission staff's comments as well as other public comments in support of this process. We plan to release the final RFP at the May. Bids will be due later in June, and we expect to issue a shortlist in August.

[Heather Rosentrater, President & CEO at Avista]

Finalists will be selected by the end of this year. We're optimistic about ownership options as part of this RFP process through built transfer agreement options and through self build options. In April, critical wildfire legislation was passed in both Washington and Idaho. 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. On the Washington governor's desk to be signed is another bill which provides for the opportunity to securitize costs associated with disasters such as wildfire.

[Heather Rosentrater, President & CEO at Avista]

Overwhelming support for these changes in both states demonstrates the legislature's recognition of wildfire as a critical issue. This is important positive progress that underpins our continued efforts to mitigate the risk of wildfire. I also want to share that we have reached a resolution in the litigation related to the Babb Road Fire. This fire occurred in September 2020 when a severe windstorm 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 Malden and Pine City in Whitman County, Washington.

[Heather Rosentrater, President & CEO at Avista]

The litigation involved claims against Avista and other parties responsible for maintaining the distribution lines and the vegetation around them. 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. The settlement will result in no impact to earnings as we expect to receive insurance proceeds for settlement of our 21,000,000 liability. We believe that resolving this matter is in the best interest of our company and the communities we serve. We remain dedicated to maintaining the highest standards of safety and reliability in our operations.

[Heather Rosentrater, President & CEO at Avista]

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. Our focus remains on delivering reliable service to our customers, while prioritizing the safety and well-being of our communities. I already covered some developments in regulation at the state level, but there's been a lot happening at the federal level as well. Tariffs 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. 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 to the extent possible, we are implementing risk mitigation activities.

[Heather Rosentrater, President & CEO at Avista]

We worked with our supplier to redirect manufacturing of transformers from Canadian factories to factories located in The United States. 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 price lists for committed periods of time to alleviate uncertainty and inform our own planning processes. These are just a few examples of the work we're doing to mitigate tariff risk. 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.

[Heather Rosentrater, President & CEO at Avista]

S.-Mexico Canada agreement. 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 IRM, our PCA, and PGAs. At this time, we do not anticipate a significant impact in 2025, but we will continue to monitor these ever changing conditions. And now, I'll hand the call over to Kevin for more discussion of our earnings.

[Kevin Christie, SVP, CFO, Treasurer & Regulatory Affairs Officer at Avista]

Thanks, Heather, and good morning, everyone. As we turn to our earnings, our consolidated results demonstrate solid execution at Avista Utilities. 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. In the first quarter of twenty twenty five, we recognized a pretax expense $7,000,000 under the energy recovery mechanism, largely in line with our expectations.

[Kevin Christie, SVP, CFO, Treasurer & Regulatory Affairs Officer at Avista]

And AEL and P's results were right on target. At our other businesses, we recognized a $03 loss per diluted share in the first quarter. This loss is a result of periodic market valuations within our portfolio of investments, losses from early stage joint venture investments and borrowing costs. As we all experienced, markets were volatile in the first quarter and not conducive to exits from venture funds. 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.

[Kevin Christie, SVP, CFO, Treasurer & Regulatory Affairs Officer at Avista]

Over the long term, we do expect to see a return on these investments. The constructive outcomes from our 2024 Washington General Rate Cases provided a crucial foundation for 2025. In March, we reached an all party, all issue settlement in our Oregon GRC. If approved, new rates would take effect September one of this year. In Idaho, we filed electric and gas rate cases in January, and we will meet for our first settlement discussion on May 22.

[Kevin Christie, SVP, CFO, Treasurer & Regulatory Affairs Officer at Avista]

New rates from that proceeding will also go into effect on September 1. 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. We are committed to investing the necessary capital in our utility infrastructure. Capital expenditures at Avista Utilities were $100,000,000 in the first quarter of twenty twenty five to support customer growth and to maintain our system for the benefit of our customers. We expect capital expenditures of $525,000,000 for 2025.

[Kevin Christie, SVP, CFO, Treasurer & Regulatory Affairs Officer at Avista]

And from 2025 through 2029, we expect capital expenditures of nearly $3,000,000,000 resulting in an annual growth rate of between 56%. 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. On the liquidity front, as of March 31, we had $221,000,000 of available liquidity under our committed line of credit and $40,000,000 available under our letter of credit facility. In 2025, we expect to issue up to $120,000,000 of long term debt and up to $80,000,000 of common stock, including the $16,000,000 issued during the first quarter of this year. We are confirming our earnings guidance for 2025 with a consolidated range of $2.52 to $2.72 per diluted share.

[Kevin Christie, SVP, CFO, Treasurer & Regulatory Affairs Officer at Avista]

We expect Avista Utilities to contribute within a range of $2.43 to $2.61 per diluted share. The midpoint of our guidance range for Avista Utilities includes an expected negative impact from the of $0.12 in the 90% customer, 10% company sharing band. As mentioned previously, we have already incurred $07 under the in the first quarter of twenty twenty five. Due to the staggered timing of rate cases throughout our multiple jurisdictions, going forward, our expected return on equity at Avista Utilities is 8.8%. AEL and P continues to perform well and we expect it to contribute in the range of $09 to $0.11 per diluted share in 2025.

[Kevin Christie, SVP, CFO, Treasurer & Regulatory Affairs Officer at Avista]

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. Over the long term, we expect to see a return on our investments as well as economic development in our service territory. 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.

[Operator]

Thank

[Operator]

And the first question comes from Ross Fowler with Bank of America. Your line is now open.

[Ross Fowler, Head - North America Power & Utilities Equity Research at Bank of America]

Hi Heather. Hi Kevin. Good morning. Yes good afternoon from me but good morning to So on the RFP you kind of spoke to that pretty wide range there. Are you seeing or is there a process I should say sort of get any cost related to the IRA changes or potential IRA changes or tariffs into that RFP process?

[Ross Fowler, Head - North America Power & Utilities Equity Research at Bank of America]

Are those sort of fully baked at this point?

[Heather Rosentrater, President & CEO at Avista]

Are there opportunities to get

[Ross Fowler, Head - North America Power & Utilities Equity Research at Bank of America]

For the cost of what the generation resources might be, right? If 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

[Ross Fowler, Head - North America Power & Utilities Equity Research at Bank of America]

costs already in and forward basis?

[Heather Rosentrater, President & CEO at Avista]

Thank you. 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 done that in the past when there's uncertainty, had opportunities for refreshing bids after a certain amount of time.

[Heather Rosentrater, President & CEO at Avista]

And so, I'm sure we'll be 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.

[Ross Fowler, Head - North America Power & Utilities Equity Research at Bank of America]

Thanks Heather. And then, I guess, given the large load customer you're sort of seeing and talking to and dealing with, 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 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?

[Heather Rosentrater, President & CEO at Avista]

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 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 the RFP and see how those conversations continue.

[Ross Fowler, Head - North America Power & Utilities Equity Research at Bank of America]

Okay, perfect. Thanks Heather.

[Heather Rosentrater, President & CEO at Avista]

Thanks.

[Operator]

And our next question comes from Anthony Cordell with Mizuho. Your line is open.

[Anthony Crowdell, Managing Director at Mizuho Financial Group]

Hey, good morning team. Just if I could hit on the wildfire settlement, just thoughts on reaching the settlement. Understand that you said the insurance covers it, but does it end up setting up a precedent of now and any type of event the company is going to settle?

[Heather Rosentrater, President & CEO at Avista]

No, we don't think that this creates any kind of precedent. 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.

[Anthony Crowdell, Managing Director at Mizuho Financial Group]

Great. And then if I could just pivot to the, I guess, the unregulated business. So, was hearing some questions from investors on, think there's some I don't know if it's biotech trials going on, on like LUMIN-one trials. Is there any impact to the valuation of your unregulated business with respect to these trials?

[Kevin Christie, SVP, CFO, Treasurer & Regulatory Affairs Officer at Avista]

Well, there 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 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 markup there.

[Anthony Crowdell, Managing Director at Mizuho Financial Group]

And I apologize, I'm not as familiar with the biotech space. Mean, this something that you think we have a clear update on it in the next quarter? Or is it just the trials typically take longer, they're longer dated and it's something more a 2026 event or something like that?

[Kevin Christie, SVP, CFO, Treasurer & Regulatory Affairs Officer at Avista]

Yes, 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 that could impact valuation.

[Anthony Crowdell, Managing Director at Mizuho Financial Group]

Great, thanks for taking my questions.

[Kevin Christie, SVP, CFO, Treasurer & Regulatory Affairs Officer at Avista]

You bet, thank you.

[Heather Rosentrater, President & CEO at Avista]

Thanks.

[Operator]

And our next question comes from Julien Dumoulin Smith with Jefferies.

[Brian Russo, Analyst at Jefferies]

Yes, hi. It's actually Brian Russo on for Julien.

[Kevin Christie, SVP, CFO, Treasurer & Regulatory Affairs Officer at Avista]

Good morning, Brian. Thank you for

[Kevin Christie, SVP, CFO, Treasurer & Regulatory Affairs Officer at Avista]

the

[Brian Russo, Analyst at Jefferies]

Hi. Good morning. Hey, just understanding that the, you know, the $0.12 under recovery of power costs into the ERMs pretty much locked in for 2025. I think there was language in the 10 ks that insinuated that you would also be under recovering power expense in 2026. And I'm curious, has there been any changes in, say, the forward gas and or power markets that would cause you to update that language, either positive or negative?

[Kevin Christie, SVP, CFO, Treasurer & Regulatory Affairs Officer at Avista]

Yeah. And again, Brian, this goes back to the root cause, and that is that we when we set power supply through the regulatory process and the expected power supply costs, 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 benefits that would come back to customers in the company. And based on the last case, we were unable to reset the mechanism in the way we wanted and at the levels we wanted. And what has been happening in the last several years is as 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. So when it comes to '25 and '26, and until we really reset the mechanism, and we have some strategies we're employing to try to do so, but it's a multiyear strategy, not an immediate change, we wouldn't expect a material difference in '25 or '26 to where we would likely land in the

[Brian Russo, Analyst at Jefferies]

Okay, understood. And then the strategy to actually modify the is that something you think that could be done outside of a general rate case and in collaboration with the other electric utilities in the state?

[Kevin Christie, SVP, CFO, Treasurer & Regulatory Affairs Officer at Avista]

I think we're going to use a multi pronged 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. 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 in advance of a rate case where we try to make a change. And so we'll commence, I think we've already commenced workshops, with those workshops we'll try to help the parties understand why the market really has changed fundamentally and why a change to the is appropriate.

[Brian Russo, Analyst at Jefferies]

Okay, great. And then just to follow-up on the RFP question, obviously big range, right, 50 to 400 megawatts. Like bigger picture, how do you kind of manage affordability issues with growth combined with least cost and least risk, you know, as you pursue self build generation?

[Heather Rosentrater, President & CEO at Avista]

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 a lot of detailed explanation about how we balance all of that from a cost and compliance perspective. 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.

[Brian Russo, Analyst at Jefferies]

Okay, very good. Thank you very much.

[Heather Rosentrater, President & CEO at Avista]

Thank you.

[Kevin Christie, SVP, CFO, Treasurer & Regulatory Affairs Officer at Avista]

Thanks, Brian.

[Operator]

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 Wenz, Investor Relations Manager at Avista]

Thank you all for joining us today and for your interest in Avista. Have a great day.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.

Participants

Executives

• Stacey Wenz, Investor Relations Manager
• Heather Rosentrater, President & CEO
• Kevin Christie, SVP, CFO, Treasurer & Regulatory Affairs Officer

Analysts

• Ross Fowler, Head - North America Power & Utilities Equity Research at Bank of America
• Anthony Crowdell, Managing Director at Mizuho Financial Group
• Brian Russo, Analyst at Jefferies