Avista Corporation (NYSE:AVA) Q3 2023 Earnings Call Transcript
Avista Corporation (NYSE:AVA) Q3 2023 Earnings Call Transcript November 1, 2023
Avista Corporation beats earnings expectations. Reported EPS is $0.19, expectations were $0.11.
Operator: Good day, and thank you for standing by. Welcome to the Avista Corporation Q3 2023 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. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Stacey Wenz, Investor Relations Manager. Please go ahead.
Stacey Wenz: Good morning. Welcome to Avista's third quarter 2023 earnings conference call. Our earnings and our third quarter 10-Q were released pre-market this morning. Both are available on our website. Joining me this morning are Avista Corp.'s CEO, Dennis Vermillion; President and COO, Heather Rosentrater; Senior Vice President, CFO, Treasurer and Regulatory Affairs Officer, Kevin Christie; and Vice President, Controller and Principal Accounting Officer, Ryan Krasselt. 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 discussed in today's call.
Please refer to our 10-K for 2022 and 10-Q for the third quarter of 2023, which are available on our website for a full discussion of these risk factors. To begin, I'll recap the financial results presented in today's press release. Our consolidated earnings for the third quarter of 2023 were $0.19 per diluted share compared to a loss of $0.08 for the third quarter of 2022. Year-to-date, consolidated earnings were $1.14 per diluted share for 2023 compared to $1.06 last year. Now, I'll turn the call over to Dennis.
Dennis Vermillion: Well, thanks, Stacey and good morning everyone. I hope you're enjoying some nice fall weather wherever you're at here in Spokane and the inland Northwest. The leaves are showing their brilliant colors and we even experienced our first light snowfall last week, first one of the season. I'd like to begin by welcoming Heather Rosentrater to our earnings call this morning. In September, you may have seen we announced that Heather would become Avista's 15th President. She is the first female President in our company's 134-year history. You all get a chance to meet Heather at the EEI Financial Conference coming up in November in a couple of weeks. When you meet Heather, you'll see that she's a dynamic leader who's built a deep understanding of the utility business.
Over the years, she's established a reputation as a thought leader who has the uncanny ability to strategically anticipate what's next. I believe we have the right leadership team in place to successfully lead us forward through a rapidly changing energy landscape and the complex challenges we're facing as a business and as an industry. As we look to the future, I'm confident that we'll be -- that we'll continue to tap into our rich history of innovation and ask ourselves how might we do things differently. Commitment to our strategy and innovation landed as 1 of only 10 connected communities grants awarded by the Department of Energy. We recently completed the first year of this five-year grant that allows us to work with partners to engage customers about their energy usage at a deeper level.
Part of this brand work includes using our grid simulator in Avista's Energy Innovation Lab to explore how to make the best use of the existing grid. And at the same time, we're continuing to ask ourselves, how might we possibly expand our owned generation portfolio? How might we meet the demand for transmission assets as we move toward our clean energy future? And how might we partner with building owners and operators to actively manage not only how much energy these buildings use but when they use it. Ideas like these tap into the built environment to create a battery of sorts, moving us closer to achieving our clean energy goals and can help make energy more affordable for everyone. As we explore options rest assured, we will be prudent and wise with our decisions.
Turning to regulatory outcomes. Our results so far this year reflect significant progress we've made on the regulatory front and includes the benefits from our 2022 Washington rate cases. New electric and natural gas rates went into effect in September in Idaho, the first of a new two-year rate plan. Our Oregon general rate case was approved by the commission last week and new rates will be effective January 1st. We look to continue executing our strategy with the next multiyear rate plan to be filed in Washington in early 2024, which will allow us the opportunity to earn our allowed return. With respect to earnings, our third quarter results are ahead of our expectations. At Avista Utilities, we're seeing the benefit of our cost management efforts.
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AEL&P &P is also ahead of our expectations for the year. Year-to-date, we've experienced losses in our other businesses, which are driven by valuations of investments. There's value that comes from these investments beyond their expected contribution to earnings. These investments can create opportunities for learning, economic development within our service area and help propel us towards energy innovation and transformation necessary to meet our clean energy goals. Now, I'd like to turn this presentation over to Kevin, who will share more about our earnings.
Kevin Christie: Thanks Dennis and good morning everyone. I'd also like to extend my welcome to Heather. I very much look forward to working with her in her new role. It's also nice to no longer be the new person in the room. To expand on what Dennis was saying about our earnings, Avista Utilities earnings increased in the third quarter of 2023 compared to the third quarter of 2022. This was largely a result of the beneficial impact of our general rate cases, customer growth, and lower costs under the ERM compared to the third quarter of last year. In the third quarter of 2023, the ERM was a pre-tax expense of $1.2 million compared to a pre-tax expense of $4.5 million in the third quarter of last year. Year-to-date, we've recognized a pre-tax expense of $7.8 million in the ERM compared to a pre-tax expense of $7.3 million in 2022.
We expect to end 2023 in the 90% customer, 10% company sharing band with a decrease to earnings of $0.08 per diluted share. We are committed to investing the necessary capital in our utility infrastructure. Our planned capital expenditures at Avista Utilities are $475 million in 2023. So, that we can continue to support our customer growth and maintain our system to provide safe, reliable energy to our customers, we are increasing Avista Utilities expected capital expenditures to $500 million in 2024, $525 million in 2025, and $550 million in 2026. Additionally, we were evaluating opportunities as they come up to explore the expansion of our generation assets as well as potential transmission projects to support the integration of renewables and to propel us towards our clean energy goals.
We expect AEL&P's capital expenditures to be $17 million in 2023 and we expect to invest $15 million at our other businesses in 2023. On the liquidity front, as of September 30, we have $275 million of available liquidity under our committed line of credit and $41 million available under our letter of credit facility. We have issued $88 million of common stock through September 30 and during the fourth quarter of 2023, depending upon market conditions, we plan to issue $32 million of common stock. In 2024, we expect to issue approximately $80 million of long-term debt and $60 million of common stock to fund our capital spending for the year. We frequently talk about the importance of our cost management efforts, and that's certainly been true this year.
We've been successfully managing our costs, but we're unable to fully offset the impact of higher resource costs as a result of the year's poor hydro performance. Due to these higher resource costs, we are narrowing our 2023 consolidated earnings guidance range to $2.27 to $2.37 per diluted share. Given current expectations, if it were not for these higher resource costs, we would end the year in the upper half of the original guidance range. To recognize the impact of our cost management efforts, we have increased the floor of Avista Utilities guidance by $0.03 and now expect the contribution in the range of $2.18 to $2.24 for the year. We now expect AEL&P to contribute in the range of $0.10 to $0.12 per diluted share in 2023 to reflect the better-than-expected performance of this segment.
Year-to-date, we've recognized net losses in our other businesses, primarily due to valuation adjustments. Quarterly valuation of certain investments can cause some volatility in our earnings and it increases the transparency of these investments value. We expect our other businesses to contribute in the range of $0.01 loss to $0.01 gain per diluted share for the year. We are finalizing our 2024 business plans and expect to provide our 2024 guidance on our February earnings call. Now, we'll be happy to answer your questions.
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