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) is an energy company headquartered in Spokane, Washington, operating primarily through its regulated utility businesses. Its principal subsidiary, Avista Utilities, provides electric and natural gas service to residential, commercial and industrial customers.

Avista Utilities operates electric and natural gas systems in eastern Washington and northern Idaho, as well as parts of Oregon. Through Alaska Electric Light & Power Company, Avista also provides electric service in Juneau, Alaska. The company’s operations include power generation, energy procurement, transmission and distribution, along with natural gas distribution.

Avista traces its history to the Spokane Falls Gas Light Company, established in 1889, and adopted the Avista name in 1999. The company is led by Dennis Vermillion, who serves as president and chief executive officer.

Avista Q1 2025 Earnings Call Transcript

Key Takeaways

• Q1 EPS beat: Avista delivered $0.98 per diluted share in Q1 2025 versus $0.91 a year ago—an ~8% year-over-year improvement—and is on track to meet its full-year earnings guidance.
• Large load customer talks advance: Ongoing discussions with potential new large-load customers could drive incremental investment, regional grid enhancements, job creation, future rate relief and higher sales tax revenue.
• All-source RFP filed: Avista filed a draft RFP for 50–400 MW of new generation capacity to meet 2029 needs, with bids due in June and finalists selected by year-end, exploring both build-transfer and self-build options.
• Wildfire risk mitigation progress: Washington and Idaho passed laws approving wildfire mitigation plans and disaster-cost securitization, and Avista settled the Babb Road fire litigation in principle with insurance covering the $21 million liability.
• Unregulated business volatility: The non-utility segment posted a $0.03 per share loss in Q1 due to investment valuation swings and is expected to contribute zero to earnings in 2025 amid ongoing market volatility.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by and welcome to Avista Corporation first quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. 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 one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. 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 Walters, Investor Relations Manager at Avista Corporation]

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 10-Q were released pre-market this morning. You can find both on our website. Joining me today are Avista Corp 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.

[Stacey Walters, Investor Relations Manager at Avista Corporation]

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-K for 2024 and our Form 10-Q for the first quarter of 2025 for a full discussion of these risk factors. 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 2025 were $0.98 per diluted share compared to $0.91 for the first quarter of 2024. Now, I'll turn the call over to Heather.

[Heather Rosentrater, President and CEO at Avista Corporation]

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 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. I'm happy to share that we are on track to meet our consolidated earnings targets for 2025. 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.

[Heather Rosentrater, President and CEO at Avista Corporation]

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. 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 MW up to 400 MW of generation to meet the needs we've identified for 2029. We are working through the Commission staff comments as well as other public comments in support of this process. We plan to release the final RFP at the end of May. 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, President and CEO at Avista Corporation]

We're optimistic about ownership options as part of this RFP process through bill transfer agreement options and through self-billed 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. 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.

[Heather Rosentrater, President and CEO at Avista Corporation]

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. 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 million liability. We believe that resolving this matter is in the best interest of our company and the communities we serve.

[Heather Rosentrater, President and CEO at Avista Corporation]

We remain dedicated to maintaining the highest standards of safety and reliability in our operations, and as we move forward, we will 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 has 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 are 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 and CEO at Avista Corporation]

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 are 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 are 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.S.-Mexico-Canada agreement. It is important to note, too, that should that exemption be overridden by further action, any impact from an increase in resource costs would be substantially mitigated through our resource cost-sharing mechanisms, the ERM, our PCA, and PGAs.

[Heather Rosentrater, President and CEO at Avista Corporation]

At this time, we do not anticipate a significant impact in 2025, but we will continue to monitor these ever-changing conditions. I will hand the call over to Kevin for more discussion of our earnings.

[Kevin Christie, SVP and CFO at Avista Corporation]

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 2025, we recognized a pre-tax expense, $7 million under the energy recovery mechanism, largely in line with our expectations. And AEL&P's results were right on target. At our other businesses, we recognized a $0.03 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.

[Kevin Christie, SVP and CFO at Avista Corporation]

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. 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 general rate case. If approved, new rates would take effect September 1st 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 22nd. New rates from that proceeding will also go into effect on September 1st.

[Kevin Christie, SVP and CFO at Avista Corporation]

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 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. From 2025 through 2029, we expect capital expenditures of nearly $3 billion, resulting in an annual growth rate of between 5% and 6%. 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.

[Kevin Christie, SVP and CFO at Avista Corporation]

On the liquidity front, as of March 31st, we had $221 million of available liquidity under our committed line of credit and $40 million available under our letter of credit facility. In 2025, we expect to issue up to $120 million of long-term debt and up to $80 million of common stock, including the $16 million issued during the first quarter of this year. We are confirming our earnings guidance for 2025 with a consolidated range of $2.52-$2.72 per diluted share. We expect Avista Utilities to contribute within a range of $2.43-$2.61 per diluted share. The midpoint of our guidance range for Avista Utilities includes an expected negative impact from the ERM of $0.12 in the 90% customer, 10% company sharing band. As mentioned previously, we have already incurred $0.07 under the ERM in the first quarter of 2025.

[Kevin Christie, SVP and CFO at Avista Corporation]

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&P continues to perform well, and we expect it to contribute in the range of $0.09-$0.11 per diluted share in 2025. 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%-6% from a forecast 2025 base year. Now we'll be happy to take your questions.

[Operator]

Thank you. As a reminder to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your questions, please press star one one again. The first question comes from Ross Fowler with Bank of America. Your line is now open.

[Ross Fowler, Managing Director of Equity Research at Bank of America]

Hi, Heather. Hi, Kevin. Good morning. Yes, good afternoon from me, but good morning to you. On the RFP, you kind of spoke to that pretty wide range there. Are you seeing, or is there a process, I should say, to sort of get any 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?

[Heather Rosentrater, President and CEO at Avista Corporation]

Are there opportunities to get?

[Ross Fowler, Managing Director of Equity Research at Bank of America]

For the cost of what the generation resources might be, right? If you lost the tax credits in the IRA or if tariffs were impactful to that, could people come back and change their bids into that RFP? Or are those costs already in its own bank?

[Heather Rosentrater, President and CEO at Avista Corporation]

Thank you. Yeah, thank you for clarifying that. Yeah. When we go out for the RFP, we recognize that there's a lot of uncertainty right now. We have done that in the past when there's uncertainty, had opportunities for refreshing bids after a certain amount of time. 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, Managing Director of Equity Research at Bank of America]

Thanks, Heather. 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? 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 and CEO at Avista Corporation]

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 50-400 MW, is acknowledging that there's a lot of different scenarios that could come out of our discussions with the large load customers. We'll have to see what we get with the RFP and see how those conversations continue.

[Ross Fowler, Managing Director of Equity Research at Bank of America]

Okay. Perfect. Thanks, Heather.

[Heather Rosentrater, President and CEO at Avista Corporation]

Thanks.

[Operator]

Our next question comes from Anthony Crowdell with Mizuho. Your line is open.

[Anthony Crowdell, Managing Director of Equity Research at Mizuho]

Hey, good morning, team. Just if I could hit on the wildfire settlement, just thoughts are reaching a settlement. I understand, like 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?

[Heather Rosentrater, President and CEO at Avista Corporation]

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 of Equity Research at Mizuho]

Great. If I could just pivot to the, I guess, the unregulated business. I was getting some questions from investors on, I think there's some, I don't know if it's biotech trials going on, on LUMEN-1 trials. Is there any impact to the valuation of your unregulated business with respect to these trials?

[Kevin Christie, SVP and CFO at Avista Corporation]

Thanks for the question, Anthony. This is Kevin. There could be in the future, as the trials continue to play out, they're early in the process there. We're hopeful, we're optimistic about the investment, and we think there's some encouraging signs, but it's too soon to see a valuation markup there.

[Anthony Crowdell, Managing Director of Equity Research at Mizuho]

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 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 and CFO at Avista Corporation]

Yeah. At this point in time, we're thinking it'd 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 of Equity Research at Mizuho]

Great. Thanks for taking my questions.

[Kevin Christie, SVP and CFO at Avista Corporation]

You bet. Thank you.

[Heather Rosentrater, President and CEO at Avista Corporation]

Thanks.

[Operator]

As a reminder to ask a question, please press star one one on your telephone. Our next question comes from Julien Dumoulin-Smith with Jefferies. Your line is open.

[Brian Russo, Senior Equity Research Analyst at Jefferies]

Yeah. Hi, it's actually Brian Russo on for Julian.

[Kevin Christie, SVP and CFO at Avista Corporation]

Good morning, Brian. Thank you for the questions.

[Heather Rosentrater, President and CEO at Avista Corporation]

Good morning.

[Brian Russo, Senior Equity Research Analyst at Jefferies]

Yeah. Hi, good morning. Hey, just understanding that the $0.12 under-recovery of power costs into the ERM is pretty much locked in for 2025. I think there was language in the 10-K that insinuated that you would also be under-recovering power expense in 2026. 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 and CFO at Avista Corporation]

Yeah. Again, Brian, this goes back to the root cause, and that is that when we set power supply through the regulatory process 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 benefits that would come back to customers and the company. Based on the last case, we were unable to reset the mechanism in the way we wanted and at the levels we wanted.

[Kevin Christie, SVP and CFO at Avista Corporation]

What has been happening 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. When it comes to 2025 and 2026, and until we really reset the mechanism, and we have some strategies we're employing to try to do so, but it's a multi-year strategy, not an immediate change, we wouldn't expect a material difference in 2025 or 2026 to where we would likely land in the ERM.

[Brian Russo, Senior Equity Research Analyst at Jefferies]

Okay. Understood. Then the strategy to actually modify the ERM, 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 and CFO at Avista Corporation]

Yeah. 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. 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. I think we've already commenced workshops.

[Kevin Christie, SVP and CFO at Avista Corporation]

With those workshops, we'll try to help the parties understand why the market really has changed fundamentally and why a change to the ERM is appropriate.

[Brian Russo, Senior Equity Research Analyst at Jefferies]

Okay. Great. Just to follow up on the RFP question, obviously big range, right, 50-400 MW. Bigger picture, how do you kind of manage affordability issues with growth combined with least cost and least risk as you pursue self-build generation?

[Heather Rosentrater, President and CEO at Avista Corporation]

Right. 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. 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. We are seeing that as a tool to help with the cost headwinds that we see in other areas.

[Brian Russo, Senior Equity Research Analyst at Jefferies]

Okay. Very good. Thank you very much.

[Heather Rosentrater, President and CEO at Avista Corporation]

Thank you.

[Kevin Christie, SVP and CFO at Avista Corporation]

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 Walters, Investor Relations Manager at Avista Corporation]

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

• Heather Rosentrater, President and CEO
• Stacey Walters, Investor Relations Manager
• Kevin Christie, SVP and CFO

Analysts

• Anthony Crowdell, Managing Director of Equity Research at Mizuho
• Brian Russo, Senior Equity Research Analyst at Jefferies
• Ross Fowler, Managing Director of Equity Research at Bank of America