Avista Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 6, 2025

Key Takeaways

  • Positive Sentiment: Confirmed 2025 consolidated earnings guidance of $2.52–$2.72 per share, expecting Avista Utilities to land at the upper end.
  • Positive Sentiment: Achieved all-party, all-issue settlements in Oregon and Idaho and maintain a constructive Washington multi-year rate plan, enabling new rates effective September 1.
  • Negative Sentiment: Recorded $0.12 per share valuation losses in Q2 from clean technology-focused venture funds due to shifts in public policy and market sentiment.
  • Neutral Sentiment: Issued an all-source RFP for 100–425 MW of generation, receiving over 80 bids across wind, solar, battery, gas, and other resources, with a shortlist expected this month.
  • Positive Sentiment: Hold a pipeline of more than 3,000 MW of potential large industrial load requests—exceeding current peak load—highlighting significant growth opportunities and grid expansion needs.
AI Generated. May Contain Errors.
Earnings Conference Call
Avista Q2 2025
00:00 / 00:00

There are 6 speakers on the call.

Speaker 3

Thank you for standing by. Welcome to the Avista Corporation Q2 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 the session, you will need to press star one one on your telephone. You will then hear an automated message advising that 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 hand the conference over to your speaker today, Stacey Walters, Investor Relations Manager. Please go ahead.

Speaker 5

Good morning. It's great to have you with us for Avista Corporation's second quarter 2025 earnings conference call. Our earnings and second quarter 2025 Form 10-Q were released pre-market this morning. You can find both on our website. Joining me today are Avista Corporation President and CEO, Heather Rosentrater, and Senior Vice President, CFO, Treasurer, and Regulatory Affairs Officer, Kevin Christie. We will be making forward-looking statements during this call. 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 second quarter of 2025 for a full discussion of these risk factors. Both are available on our website. I'll begin with a recap of the financial results presented in today's press release.

Speaker 5

Our consolidated earnings for the first half of 2025 were $1.15 per diluted share, compared to $1.20 for the first half of 2024. For the second quarter of 2025, our consolidated earnings were $0.17 per diluted share, compared to $0.29 for the second quarter of 2024. Now, I'll turn the call over to Heather.

Speaker 2

Thanks, Stacey, and hello everyone. The results we're sharing today reflect continued strategic progress at Avista Utilities, as well as headwinds from shifts in market sentiment related to clean technology. I'm happy to share that even with these headwinds, we are affirming our consolidated earnings guidance for 2025. At Avista Utilities, our year-to-date results of $1.25 per diluted share reflect a nearly 7% increase over 2024's year-to-date results and highlight the continued strength of our strategic execution. We also continue to make progress in activities that set us up for success going forward. In the second quarter, our all-party, all-issue settlement in Oregon was approved by the Commission, and we reached an all-party, all-issue settlement in Idaho. Both cases build on the constructive regulatory outcomes already in place through our Washington multi-year rate plan and serve to raise our confidence in our expectations for Avista Utilities' earnings in 2025.

Speaker 2

However, market conditions in the clean energy sector weighed on our consolidated earnings performance in the second quarter. Valuations within our portfolio of investments, primarily those in clean technology-focused funds, were significantly impacted by shifts in public policy and sentiment. These valuations are disappointing, and Kevin will share more about our investments in a few minutes. I want to take time to highlight the strong fundamentals of our business. Our core utility operations continue to be strong, and our solid results at Avista Utilities reflect strong performance, underpinned by diligent cost management and constructive regulatory outcomes. I want to commend the efforts of each of our employees working hard each day to position us for this strategic success.

Speaker 2

We will continue to focus on doing what we do best: serving our customers and communities with compassion and optimism for the future, providing the reliable energy our customers count on us to provide. Ensuring that we can continue to provide that safe and reliable energy is the purpose behind our current all-source request for proposals, or RFP. We issued our RFP in May, seeking 100 to 425 megawatts of generation to meet the needs we've identified in our Integrated Resource Plan by 2029. We received more than 80 bids for consideration, including a wide array of resource options, including wind, solar, battery storage, natural gas, distributed energy, demand response, and combinations of these resources. Equally broad in scope were the contract and ownership options included in the bids.

Speaker 2

We submitted self-build resource bids for consideration and also received bids for build transfer agreements, power purchase agreements, and other contract structures. Together with our independent evaluator, we are reviewing each bid. We expect to have a shortlist of preferred projects by the end of this month. We intend to request selected shortlist projects to resubmit detailed proposals that include any necessary repricing, as well as clarity on their ability to take advantage of safe harboring allowed by the budget reconciliation bill. We anticipate contract negotiations with final selected projects will begin in the fourth quarter of 2025. I continue to be optimistic about the opportunities that are ahead of us. Information from this RFP process is also crucial to inform our conversations with potential large load customers.

Speaker 2

In addition to several requests from existing large industrial customers for expansion, we have over 3,000 megawatts of requests in our pipeline of potential demand, looking for system integration within the next three to five years. For context, our peak electric native load is just under 2,000 megawatts. We continue to advance conversations with these potential customers, and our all-source RFP responses provide us with up-to-date supply resource costs and availability information to help inform those conversations. However, meeting the demand from these potential customers will entail not only additional generation but also regional grid expansion. While we don't have available capacity to serve all the current requests in the pipeline, system impact studies indicate that we have capacity available to accommodate a portion of those requests. The level of available capacity varies by location, and we are most optimistic about our ability to serve customers with scalable implementation capability.

Speaker 2

I believe in our ability to be competitive with these potential loads while also ensuring benefits for our existing customers and look forward to sharing our progress in future calls. Now, I'll hand the call to Kevin for more discussion of our earnings.

Speaker 4

Thanks, Heather, and good morning, everyone. Like Heather said, Avista Utilities' performance continues to be strong and reflects our ongoing success with constructive regulatory outcomes, as well as continuous cost management. As expected, Avista Utilities' earnings in the second quarter of 2025 are slightly below the same period from 2024. This is primarily due to the changes in the shape of authorized levels of resource costs year over year, as well as how our operating costs are incurred on a more consistent basis throughout the year, while revenue is typically highest in the first and fourth quarters. Consolidated earnings were materially impacted by valuation losses of $0.12 per diluted share in the second quarter. These are disappointing results, and I want to discuss them directly. The majority of these changes in valuation were connected to our investments in clean technology-focused venture funds.

Speaker 4

Shifts in public policy and sentiment with regard to the role of clean energy in America's energy future have had a material impact on the value of these funds. As clarity is restored to public policy, we anticipate that the volatility in valuation will moderate. The value recorded in our financials represents our portion of the fund's value on a one-quarter lag basis due to the timing of when we receive financial information from these investments. Uncertainty surrounding the impact of tariffs, as well as the extent to which the highly anticipated tax reconciliation bill would prioritize investment in natural gas or fossil fuel generation over clean energy, both negatively impacted values in the first quarter. In general, clean technology funds and indices reached their lowest valuation point in years right around the close of the first quarter of this year.

Speaker 4

The variety of the businesses within the clean technology funds suggests that these valuations may have reached a relative low point, but we can't say that for certain given the dynamics outside our control and the fact that public policy and tariffs are still evolving. When we set guidance for other businesses at zero for the year, we pointed to our expectation of volatility from one quarter or one year to the next through the recognition of valuation adjustments. We don't predict the valuations of these companies. We continue to see strategic value in learning about innovations related to the utility of the future and the future of energy technology, as well as investing in the economic development of our service territory. Over the long term, we do expect benefits from these investments through economic development, shared learning, and gains.

Speaker 4

Building on the constructive outcomes from our 2024 Washington general rate cases, our all-party, all-issue settlement in our Oregon GRC was approved by the Commission. New rates will take effect September 1. In Idaho, we reached an all-party, all-issue settlement for the general rate cases we filed in January. If approved by the Commission, new rates from that proceeding will also go into effect September 1. Work has already begun to prepare for the next Washington GRC, which we expect to file in the first quarter of 2026. We are continuously investing in our utility infrastructure to support customer growth and maintain our system so that we can safely and reliably serve our customers. Capital expenditures at Avista Utilities were $236 million in the first half of 2025. We expect overall capital expenditures of $525 million in 2025.

Speaker 4

From 2025 through 2029, we expect capital expenditures of nearly $3 billion, resulting in an annual growth of between 5% and 6%. These estimates do not include any incremental capital requirements that could result from our RFP process or opportunities that might arise from transmission projects, whether the regional grid expansion that Heather Rosentrater mentioned, or large projects like the North Plains Connector, or new large load customers. Any incremental capital is most likely to occur in the latter half of our capital plan. Turning to liquidity, as of June 30, we had available liquidity of $106 million under our committed line of credit and $42 million under our letter of credit facility. In July, we issued $120 million of long-term debt and do not expect further debt issuances this year.

Speaker 4

We expect to issue up to $80 million of common stock in 2025, and that includes $35 million, which was issued during the first half of the year. Earlier this year, S&P removed the negative watch from our credit rating, evidence of the strength of our balance sheet and business plans. We are confirming our consolidated earnings guidance with a range of $2.52 to $2.72 per diluted share for 2025. As a result of the $0.15 of valuation losses associated with our investment portfolio that we recognized in the first half of the year, we expect to be at the low end of our consolidated range. We expect Avista Utilities to contribute toward the upper end of the range of $2.43 to $2.61 per diluted share.

Speaker 4

Our guidance for Avista Utilities includes an expected negative impact from the Energy Recovery Mechanism, of $0.12 in the 90% customer, 10% company sharing band. We have already incurred $0.08 in the first half of the year. 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%. AELMP continues to perform well, and we expect it to contribute $0.09 to $0.11 per diluted share in 2025. Over the long term, we expect our earnings will grow 4% to 6% from a forecast 2025 base year. Before we shift to your questions, let me close with this: Avista Utilities is in a strong position. In each of our jurisdictions, we're well positioned with quality rate case outcomes, which provide necessary recovery of our costs and set costs at an appropriate level.

Speaker 4

We've been diligent in our cost management, ensuring that the expected increase in O&M year over year is achievable. Finally, we've benefited from increases in non-decoupled revenue year over year, evident in our electric utility margin year to date. It's on the strength of the utility results that we are affirming our original guidance. Now, we'd be happy to take your questions.

Speaker 2

Certainly. 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 question, please press star one one again, and please stand by while we compile our Q&A roster. Our first question will come from Julian Dumoulin-Smith of Jefferies. Julian, your line is open.

Operator

This is Brian Russo on for Julian. Good morning.

Speaker 4

Good morning, Brian.

Operator

Morning. Hey, just the 3,000 megawatts of large load that you're in discussions with, is there any way to kind of characterize that? Is it all data centers, or could it be high-tech manufacturing or other type reshoring? How does that kind of tie into maybe the high end of that 100 to 400 megawatts in the RFP?

Speaker 2

Yeah, thanks, Brian. I appreciate the question. The 3,000 megawatts in the pipeline is a wide variety of different types of load, so there's not necessarily one specific one that's significant out of that. Like I mentioned, it's really nice to have the responses of the RFP because we can better inform those conversations with potential customers, because, as you can imagine, the supply cost is a big portion of their consideration. Now that we have, over the next month or two, we'll have much better information around the potential type of generation, cost of generation, and timeline of generation to be able to inform those conversations. We're looking forward to be able to advance those with that additional information.

Operator

Right. Okay. I guess are you comfortable with the high end of the RFP of 400 megawatts, or could you conceptually need even more on any kind of normal type win rate on this large customer load?

Speaker 2

Right. Fortunately, with the 80 bids that we received and the broad range of type of generation, we feel like with the bids we've received, we have plenty of opportunity to support any of those conversations.

Operator

Okay, great. Just on the other businesses, I'm just curious, and I appreciate the commentary before, despite non-cash volatility creates in earnings. I'm just wondering, like longer term, I think you've already lowered kind of the annual business investment allocation, I think to $5 million, somewhat more a year ago or two. I'm just wondering, you know, would you possibly look for exit or monetization opportunities when they present themselves in the near and intermediate term?

Speaker 4

Yeah, Brian, thanks for the question. It's Kevin. We, of course, are analyzing what to do as we move forward with these. As I mentioned, we get the strategic benefit, and we don't want to lose that as we look forward. We are going to moderate the budgets a bit as we see how the dust settles, what happens with clean energy, clean tech. In particular, I want to point out that within the funds we have, there's this broad brush name of clean technology that's being applied, and those are the indexes that we're often comparing to. The types of investments within the portfolios, it's quite broad, and many of which aren't even really related to clean technology. It'll be interesting to see how this all plays out.

Speaker 4

Some of what needs to transpire, as I mentioned a call or two ago, is the ability for the IPO market to open up for our ability to see exits from the funds of the investments that the funds have made. We think there are several opportunities that will help things turn around a bit here. We're not going to rest on our heels here and just see how it plays out. We have some strategies we're reviewing and trying to see if we should be making some changes how we think about our non-regulated businesses.

Operator

All right, great. Lastly, you know, it's nice that you're at the higher end of the Avista Utilities guidance range now, but it seems like you're still maintaining that 8.8% earned ROE. Is there potential upside to further close that regulatory gap considering the success or achievements you've had to date to get to the high end of this year's range?

Speaker 4

I think that we want to make sure that we place a number out there for you all that's achievable. We think that the 8.8 is achievable. If we are successful, and I'd like to think that we will be, as you think about what Heather Rosentrater shared, we have opportunities for additional investments that could benefit us and some growth that could benefit us. That would really drive additional EPS growth. I think the ROE at the utilities, 8.8, is a number that's achievable, and we'll stick there for now.

Operator

Okay, great. Thank you very much.

Speaker 4

Thank you, Brian.

Speaker 2

Thanks, Brian. As a reminder, to ask a question, please press star one one on your telephone. Our next question will be coming from Sophie Karp of KBCM. Your line is open.

Speaker 2

Hi. Good morning. Thank you for taking my question.

Operator

Good morning, Sophie.

Operator

Good morning. Morning. If you can talk a little bit about the RFPs here. I don't know if I missed it in the prepared remarks. Are there any thermal resources in the?

Speaker 2

Are there any thermal resources in the RFP? We did have natural gas as one of the resources that we received, with solar and wind and battery storage and others.

Speaker 2

How do you guys feel about, like, I guess, your perspective win rate in its round? Maybe I don't know if it's early to really talk about that, but with a thermal resource being in there, maybe it's a little easier for you to win that versus a renewable resource because of, like, accounting and utilization issue. Can you discuss that a little bit?

Speaker 2

I don't know if I caught all of that in terms of we're working with a third-party evaluator to look at all of the 80 bids and assess the cost, the timeframes, the feasibility of them, and also folding that into our compliance requirements in Washington State specifically. We're looking at all of the above. I'm not sure if that.

Speaker 2

I was just wondering if you could share whether you bid into the thermal resource. Was it your bid or a third party? Is it easier for Avista Utilities to win a thermal resource versus a renewable plant?

Speaker 2

At this time, with the evaluation underway, we're not sharing specifically what the self-bid options that we put in are. We do think that our bids will be competitive. That's why we put them in. That's all I can share.

Speaker 2

Got it. Okay. I was just wondering if you could talk a little bit about the outlook for wildfires in your region. How is it shaping up so far? What are you guys seeing on the ground? It's been a pretty dry summer in the West.

Speaker 2

Yeah, the fire activity has been, I think, above normal, but for us, it's been good so far. We haven't seen significant starts. In August, we'll see. It is drier than normal this summer. We're using all of our mitigation tactics to minimize that risk going forward.

Speaker 2

Good. Okay. Thank you. That's all for me.

Speaker 2

Thank you, Sophie.

Speaker 4

Thanks, Sophie.

Speaker 2

Thank you. I'm showing no further questions. I would now like to turn the conference back to Stacey for closing remarks.

Speaker 5

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

Speaker 2

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

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