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Edited Transcript of AVA earnings conference call or presentation 26-Feb-20 3:30pm GMT

·27 min read

Q4 2019 Avista Corp Earnings Call SPOKANE Mar 9, 2020 (Thomson StreetEvents) -- Edited Transcript of Avista Corp earnings conference call or presentation Wednesday, February 26, 2020 at 3:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Dennis P. Vermillion Avista Corporation - CEO, President & Director * John Wilcox Avista Corporation - IR Manager * Kevin J. Christie Avista Corporation - Senior VP of External Affairs & Chief Customer Officer * Mark T. Thies Avista Corporation - Executive VP, CFO & Treasurer ================================================================================ Conference Call Participants ================================================================================ * Brian J. Russo Sidoti & Company, LLC - Research Analyst * Christopher Ronald Ellinghaus Siebert Williams Shank & Co., L.L.C., Research Division - Principal & Senior Equity Utility Analyst * Philip Stephen Covello ExodusPoint Capital Management, LP - Analyst * Richard Jude Ciciarelli BofA Merrill Lynch, Research Division - Research Analyst * Vedula Murti Millennium Management LLC - Senior Analyst & Assistant Portfolio Manager ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Welcome to the Q4 2019 earnings conference call. My name is James, and I'll be your operator for today's call. (Operator Instructions) And also note, this conference is being recorded. I'd now like to turn the call over to John Wilcox. John, you may begin. -------------------------------------------------------------------------------- John Wilcox, Avista Corporation - IR Manager [2] -------------------------------------------------------------------------------- Thanks, James, and good morning, everyone. And welcome to Avista's Fourth Quarter and Fiscal Year 2019 Earnings Conference Call. Our earnings and our 2019 Form 10-K were released premarket this morning and are both available on our website at avistacorp.com. Joining me this morning are Avista Corp. President and CEO, Dennis Vermillion; Executive Vice President, Treasurer and CFO, Mark Thies; Senior Vice President, External Affairs and Chief Customer Officer, Kevin Christie; and Vice President, Controller and Principal Accounting Officer, Ryan Krasselt. I would like to remind everyone that some of the statements that will be made today are forward-looking statements that involve assumptions, risks and uncertainties, which are subject to change. For reference to the various factors which could cause actual results to differ materially from those discussed in today's call, please refer to our Form 10-K for 2019, which is available on our website. To begin this presentation, I would like to recap the financial results presented in today's press release. Our consolidated earnings for the fourth quarter of 2019 were $0.76 per diluted share compared to $0.70 for the fourth quarter of 2018. For the full year, consolidated earnings were $2.97 per diluted share for 2019 compared to $2.07 last year. Now I'll turn the discussion over to Dennis. -------------------------------------------------------------------------------- Dennis P. Vermillion, Avista Corporation - CEO, President & Director [3] -------------------------------------------------------------------------------- Well, thanks, John, and good morning, everyone. Our performance during 2019 was strong as we were able to achieve both our financial and operational goals, while being on the forefront of innovation in our industry. Financially, we had a good year as our earnings for 2019 were in the upper half of our guidance, and Mark will provide further details on that a little bit later. Operationally, we are on track with 1 of the largest capital projects in our history, the deployment of advanced metering infrastructure in Washington. The development of this infrastructure will provide customers with more real-time data so that they can better manage their energy use. We also announced plans to join the Western Energy Imbalance Market in 2022, which will expand our ability to integrate additional renewable energy into our electric generation resource mix and allow us to share resources and costs more effectively across a larger geographic area. We have continued to be on the cutting-edge of innovation in our industry and region. In 2019 through our partnership with McKinstry, we began construction of the new Catalyst building in Spokane, Washington, which is a zero-energy, zero-carbon, 159,000-square foot building, along with the Scott Morris Center for Energy Innovation. When these 2 projects are completed in 2020, a centralized system will provide energy to multiple buildings in the eco-district. Last year, we established our clean energy goals with an ultimate target of serving our customers with carbon-neutral electricity by the end of 2027 and carbon-free electricity by 2045. We also donated $7 million to the Avista Foundation to support area communities to prevent homelessness, promote youth education and success and support small communities in our service area over the years to come. We were proud to announce yesterday that Avista has been recognized as one of the 2020 World's Most Ethical Companies by Ethisphere, a global leader in defining and advancing the standards of ethical business practices. This is just a tremendous achievement, and it acknowledges how Avista interacts as a business and as people with our natural environment, communities and employees. Our actions are mission-driven and values-based with a commitment to achieving our organizational goals in ways that deliver value for all of our stakeholders. We're honored to receive this recognition, which demonstrates the leadership of our employees and Avista's commitment to ethical corporate culture built on trust, integrity and respect. In 2019, we reached settlements in all of our general rate cases with approvals by the commissions in Oregon and Idaho, and we are waiting the decision from the Washington Commission on the partial settlement agreement for our 2019 general rate cases. We're also waiting on the decision for the 2015 remand case. Looking ahead, we remain focused on running a great utility and continuing to invest prudent capital to maintain and update our infrastructure and provide reliable energy services to our customers. To facilitate the timely recovery of our costs, including capital investments that are not included in our current rates, we expect to file general rate cases in Washington, Idaho and Oregon in 2020. We are initiating our earnings guidance with a consolidated range of $1.95 to $2.15 per diluted share, which represents over 9% growth from our midpoint of the original 2019 guidance, of course, excluding the effects of Hydro One. This earnings guidance range assumes approval of our partial general rate case settlement by the Washington Commission. Lastly, earlier this month, the Board increased our dividend by 4.5% to an annual dividend of $1.62 per share. And at this time, I'll turn this presentation over to Mark. -------------------------------------------------------------------------------- Mark T. Thies, Avista Corporation - Executive VP, CFO & Treasurer [4] -------------------------------------------------------------------------------- Thank you, Dennis. Good morning, everybody. As stated in last quarter's call, my Blackhawks still stink and we're in last place in the Central division. We are mathematically alive for the playoffs, but it's a tough road and I'm not very optimistic. I am optimistic about our company, though. And our earnings, as Dennis mentioned, were in the upper half of our guidance range and benefited from customer growth in both natural gas and electric. We did receive the termination fee related to Hydro One, that's the big bump that was early in the year. And in 2019, our other businesses had strong earnings primarily related to the sale of METALfx and then net investment gains related to our nonregulated investment activity. With respect to capital expenditures, we remain committed to investing the necessary capital in our utility infrastructure. We expect Avista Utilities to have capital expenditures, about $405 million in 2020, and we expect AEL&P to be about $9 million. In our other businesses, we expect to continue to invest, and it's about $15 million for 2020. With respect to liquidity. We continued to have strong liquidity with $196 million available under our committed line of credit. And in 2019, we issued about $65 million in common stock and we sold bonds in November of $180 million, and those bonds are due in 2049, they're 30-year bonds. In 2020, we expect to issue approximately $160 million of long-term debt and $60 million of equity in order to refinance, we have a $52 million maturity, long-term debt maturity, to fund our planned capital expenditures and maintain an appropriate capital structure. As Dennis mentioned, we are initiating our 2020 guidance for consolidated earnings to be in the range of $1.95 to $2.15 per diluted share. And this, again, guidance range assumes approval of our partial general rate case settlement by the Washington Commission. We experienced regulatory lag during 2019, and we do expect this to continue through 2021 due to our continued investment in infrastructure and the fact that we didn't file a rate case in 2018. In April, we filed a general rate case in Washington, and we completed an electric-only rate case in Idaho with new rates effective December 1. We also filed in Oregon in March, and those new rates are effective January 15 of this year, 2020. And we expect those cases to provide rate relief and start reducing the lag that we have been experiencing. Going forward, we will continue to try to reduce the regulatory timing lag and more closely align our returns with those authorized by 2022, and we continue to anticipate an annual earnings growth rate of 9% to 10% from 2020 to 2022. And again, we are basing that off of the midpoint of our original 2019 guidance. And then following 2022, we expect to have a 4% to 6% growth rate going forward beyond 2022. Our earnings growth rates again, exclude the -- they are based on the midpoint of the original 2019, but exclude the $1.01 related to the Hydro One transaction. These growth rates are really necessary. We have to have timely and appropriate rate relief in all of our jurisdictions. To -- our 2020 guidance range reflects structure -- unrecovered structural costs of about 90 basis points, that's consistent. And our guidance range for 2020 has improved our lag, it's now approximately 80 basis points. And the results in an expected return for Avista Utilities of approximately 7.7% in 2020 for an ROE. For 2020, we expect Avista Utilities to contribute in the range of $1.89 to $2.01 and the midpoint of our guidance does not include any benefit or expense under the ERM. Our current expectation for the ERM is a benefit within the 90% customer/10% company sharing band, which is expected to add approximately $0.07 per share. We expect AEL&P to contribute between $0.08 and $0.12 per diluted share. Our outlook for Avista Utilities and AEL&P assumes, among other variables, normal precipitation and normal hydroelectric generation for the year. We expect our other businesses to be between a loss of $0.02 to earnings of $0.02 per diluted share. Our guidance, again, only includes normal operating conditions and does not include any unusual items such as settlement transactions or acquisitions or dispositions until the effects are known. I'll now turn the call back over to John. -------------------------------------------------------------------------------- John Wilcox, Avista Corporation - IR Manager [5] -------------------------------------------------------------------------------- And now we would like to open the call for questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Very good. We can begin our Q&A now. (Operator Instructions) Our first question is from Richard Ciciarelli from Bank of America. -------------------------------------------------------------------------------- Richard Jude Ciciarelli, BofA Merrill Lynch, Research Division - Research Analyst [2] -------------------------------------------------------------------------------- Congrats on the quarter and the year, guys. Just had a quick question on -- it looks like you increased the top end of the growth rate from 4% to 5% to 4% to 6% post '22. Was just curious, what's kind of driving the increased confidence there? Is there anything specific to the Utilities? -------------------------------------------------------------------------------- Mark T. Thies, Avista Corporation - Executive VP, CFO & Treasurer [3] -------------------------------------------------------------------------------- I don't think -- well, it's -- again, most of our earnings come from the Utilities. So really, it was just a -- as we looked at our forecast going forward and believe that, again, this is still, need timely and fair rate relief in each of our jurisdictions. But as we looked at our forecast and our ability to have some customer growth and continued growth in our rate base, we believe that that slight improvement in the top end was warranted. So we added that this quarter. And that's really for '23 and beyond. -------------------------------------------------------------------------------- Richard Jude Ciciarelli, BofA Merrill Lynch, Research Division - Research Analyst [4] -------------------------------------------------------------------------------- Right, right. That makes a lot of sense. And just wanted to touch base on the other businesses. I guess historically, there's been a bit of a drag there. And now you're pointing breakeven at the midpoint of the guidance. What's kind of the driving factor there? And is that expected to continue to improve throughout the outlook? -------------------------------------------------------------------------------- Mark T. Thies, Avista Corporation - Executive VP, CFO & Treasurer [5] -------------------------------------------------------------------------------- Well, the driving effect for this -- for the -- for 2019, we had the sale of METALfx and then we had some earnings from our other investments that -- we do expect, as we continue to invest in these other businesses, we do expect them to generate earnings and income. We haven't really given forward guidance on -- out in the -- beyond this year, but as we continue, you've seen the improvement to get to, as you mentioned, Richard, the midpoint is a breakeven. We would expect as we get out over the next 3 to 5 years, it would be in a $0.05 to $0.10 a share if we continue to invest at the levels that we've been investing and the performance of those investments continues to be what we expect. That can always change, but we do expect it to be -- start generating positive earnings for us as we go forward. -------------------------------------------------------------------------------- Operator [6] -------------------------------------------------------------------------------- Our next question is from Brian Russo of Sidoti. -------------------------------------------------------------------------------- Brian J. Russo, Sidoti & Company, LLC - Research Analyst [7] -------------------------------------------------------------------------------- With the upcoming Washington rate case filing at -- to -- or targeting for second quarter or third quarter, when would new rates go into effect in 2021? Is it still that April 1 or will that be pushed out given the later-than-usual filing? -------------------------------------------------------------------------------- Mark T. Thies, Avista Corporation - Executive VP, CFO & Treasurer [8] -------------------------------------------------------------------------------- Brian, Washington is an 11-month process, and historically, they have used the entire 11 months. So it would be 11 months from when we file. -------------------------------------------------------------------------------- Brian J. Russo, Sidoti & Company, LLC - Research Analyst [9] -------------------------------------------------------------------------------- Okay. Got it. And then could we just assume, it looked like the year 2 revenue request that was not settled on totaled about $23 million to $24 million. Is that kind of a good kind of benchmark as to what revenue increase you might file in this upcoming rate case? And then what is -- what will be the new historical test year? -------------------------------------------------------------------------------- Mark T. Thies, Avista Corporation - Executive VP, CFO & Treasurer [10] -------------------------------------------------------------------------------- I think the best way to get a benchmark is to look at what we file. We have to reevaluate every time what we're going to file for. So in the second or third quarter in Washington, in the first quarter here in Oregon and then second half of the year in Idaho, we are constantly evaluating where we are with our capital deployment and our expenses, and then we file our case. So that's when we're going to -- you're going to have the best. I wouldn't use a prior year second year as what you think it's going to be. And Brian, I apologize, I forgot the second half of your question. Oh, the test year? -------------------------------------------------------------------------------- Brian J. Russo, Sidoti & Company, LLC - Research Analyst [11] -------------------------------------------------------------------------------- The test year, yes. -------------------------------------------------------------------------------- Mark T. Thies, Avista Corporation - Executive VP, CFO & Treasurer [12] -------------------------------------------------------------------------------- The test year will be at least 2019, if we file later in the year. We might move that forward to a quarter or 2, depending on when we file. -------------------------------------------------------------------------------- Brian J. Russo, Sidoti & Company, LLC - Research Analyst [13] -------------------------------------------------------------------------------- Okay. Got it. And the AMI deferral that is mentioned in the 10-K, will that be included for recovery in this upcoming rate case? -------------------------------------------------------------------------------- Kevin J. Christie, Avista Corporation - Senior VP of External Affairs & Chief Customer Officer [14] -------------------------------------------------------------------------------- Brian, this is Kevin Christie. We're still analyzing the case, and at this point in time, we can't say for sure that that will be true. It will either be this case or the next though. -------------------------------------------------------------------------------- Brian J. Russo, Sidoti & Company, LLC - Research Analyst [15] -------------------------------------------------------------------------------- Okay. And then lastly, on the rate case, what would be the optimal capitalization that you'd look to file for it? I think the last case was 47% or 48% equity? And how does that compare with where you ended at year-end 2019 at close to 54% debt? -------------------------------------------------------------------------------- Mark T. Thies, Avista Corporation - Executive VP, CFO & Treasurer [16] -------------------------------------------------------------------------------- Well, again, that's a consolidated cash structure you're looking at. When we look at our regulated jurisdictional cap structure, we are very close. We may not be exactly on, but we're very close at all times. That's why we issued the equity the way we do it to maintain that capital structure on a jurisdictional basis. At 48.5% in Washington is where we currently are. Again, assuming that the settlement gets approved by the commission. -------------------------------------------------------------------------------- Brian J. Russo, Sidoti & Company, LLC - Research Analyst [17] -------------------------------------------------------------------------------- Okay. And then on the remand potential refund in the K also such a wide range of $3.6 million, which is what you guys took a charge for in '19, but the top end is $77 million. And I'm just trying to get a sense for what are the scenarios there? And how might that change your equity needs relative to any outcome there? -------------------------------------------------------------------------------- Mark T. Thies, Avista Corporation - Executive VP, CFO & Treasurer [18] -------------------------------------------------------------------------------- Well, I mean yes, it is a wide range and that's because the parties have very diverse beliefs on what -- each of the issues in that case. When that -- when the commission decides is when we're going to look at -- they could decide in our favor, they could decide on ether parties favor or somewhere in between, we don't know. We'll have to evaluate that, and we'll have to look at is their decision reasonable and then evaluate what our options are with respect to that. That's when we would also look at what are our equity needs. Because it would be a onetime -- we believe it would be a onetime adjustment and then the commission would determine how that gets returned to customers if they -- if they selected a number that's different than what we've recorded. -------------------------------------------------------------------------------- Brian J. Russo, Sidoti & Company, LLC - Research Analyst [19] -------------------------------------------------------------------------------- Okay, great. And then... -------------------------------------------------------------------------------- Mark T. Thies, Avista Corporation - Executive VP, CFO & Treasurer [20] -------------------------------------------------------------------------------- We'll evaluate our need based on whatever that number is. -------------------------------------------------------------------------------- Brian J. Russo, Sidoti & Company, LLC - Research Analyst [21] -------------------------------------------------------------------------------- Okay. Understood. And then on the guidance for 2020, obviously, the midpoint is a 0 or a balance that you're forecasting to be in the 90%/10%. Is that driven by low gas prices or -- and/or can you comment on the current outlook for hydro conditions? -------------------------------------------------------------------------------- Mark T. Thies, Avista Corporation - Executive VP, CFO & Treasurer [22] -------------------------------------------------------------------------------- Well, that's determined based on the amount of power supply costs that are embedded in our rates in Washington. And then our forecast of what do we expect our power supply cost to be. So yes, it's a combination of -- we do expect normal hydro, right? We're now where we are, it's about 100% in our different basins. But recognize we're still early, right? That's where the snowpack is, but it depends how it comes off with the melt. But where we are right now is about 100% in our expectations. So it is primarily a little bit lower gas prices and then some slightly favorable hydro conditions. -------------------------------------------------------------------------------- Brian J. Russo, Sidoti & Company, LLC - Research Analyst [23] -------------------------------------------------------------------------------- Okay. And then on the (inaudible) the EPS. -------------------------------------------------------------------------------- Mark T. Thies, Avista Corporation - Executive VP, CFO & Treasurer [24] -------------------------------------------------------------------------------- Brian, you're breaking up a little bit. Are you on speaker? -------------------------------------------------------------------------------- Brian J. Russo, Sidoti & Company, LLC - Research Analyst [25] -------------------------------------------------------------------------------- No, I'm on the headset. Can you hear me now? -------------------------------------------------------------------------------- Mark T. Thies, Avista Corporation - Executive VP, CFO & Treasurer [26] -------------------------------------------------------------------------------- A little better. -------------------------------------------------------------------------------- Brian J. Russo, Sidoti & Company, LLC - Research Analyst [27] -------------------------------------------------------------------------------- Yes. Just on the guidance, the mid -- original midpoint of the 2019 guidance. What was that to use as a base? -------------------------------------------------------------------------------- Mark T. Thies, Avista Corporation - Executive VP, CFO & Treasurer [28] -------------------------------------------------------------------------------- $1.87 was the midpoint. $1.77 to $1.97. Now that's excluded -- I'm sorry, $2. You've got to take out the Hydro One. So excluding the Hydro One termination fee, it was $1.77 to $1.97, $1.87 being the midpoint. -------------------------------------------------------------------------------- Brian J. Russo, Sidoti & Company, LLC - Research Analyst [29] -------------------------------------------------------------------------------- Okay. Great. And your decision to participate in the EIM. Any more further color or outlook on how that might change your integrated resource planning and PPA roll-off, I think, in the mid-20s? -------------------------------------------------------------------------------- Dennis P. Vermillion, Avista Corporation - CEO, President & Director [30] -------------------------------------------------------------------------------- Yes, this is Dennis. As I mentioned, we're hard at work internally and we plan to join the EIM in the first part of 2020. So really -- or excuse me, 2022. Yes. Having access to that market will allow us to better integrate their renewables, both our existing and the future renewables, we would expect to add on to our system as we move forward to meet our clean electricity goals. And as I mentioned, it helps us spread costs over that larger area. So we're on track. If you're familiar with that market, most of the larger players in the West are either members or are in, like us, in the process of joining. So we think that that will only enhance our ability to manage our system and manage our costs and integrate the new renewables that will come online. We'll be filing our latest IRP actually later this week, I believe, in Idaho, so that will be available on our website and you'll be able to see what our plans are moving forward, both in the short and long term to meet our goals going forward. -------------------------------------------------------------------------------- Brian J. Russo, Sidoti & Company, LLC - Research Analyst [31] -------------------------------------------------------------------------------- Okay. And then just, lastly, there were paper or policy statement issued by the Washington Commission on CETA legislation. Any comments on that? -------------------------------------------------------------------------------- Dennis P. Vermillion, Avista Corporation - CEO, President & Director [32] -------------------------------------------------------------------------------- Well, we think it's a constructive policy statement. Obviously, all the utilities are still digesting how that helps us going forward. But our early read indicates that the commission is giving us an opportunity to have multiyear rate plans and a mechanism to work through how that could work. The devil's in the details, but we're optimistic at this point. -------------------------------------------------------------------------------- Operator [33] -------------------------------------------------------------------------------- Our next question from Chris Ellinghaus of Siebert Williams. -------------------------------------------------------------------------------- Christopher Ronald Ellinghaus, Siebert Williams Shank & Co., L.L.C., Research Division - Principal & Senior Equity Utility Analyst [34] -------------------------------------------------------------------------------- Mark, you talked a little bit about the improvement you're expecting in the investment, other income. Can you give us any color on what's moving that today in sort of that $0.05 to $0.10 goal? Over what sort of time frame are you looking for that? -------------------------------------------------------------------------------- Mark T. Thies, Avista Corporation - Executive VP, CFO & Treasurer [35] -------------------------------------------------------------------------------- Three to 5 years. And again, we continue to make some investments, I believe, prudent investments. And with those investments, we expect to have some income with that. So we do expect some income growth over the next 3 to 5 years, growing to a $0.05 to $0.10 amount per share as we get out, again, 3 to 5 years towards the end of that period. And all the specific investments, we just -- we were in Energy Impact Partners Fund I. We just joined Fund II. Those were both $25 million commitments. And we started to see through Fund I some earnings come out of that. We expect that to continue with Fund II, and we believe that that will be the case. And we're making other investments in the University District and in innovation that we believe will get us those numbers. I'm not giving you specifics because I don't have the specifics. But again, we believe we'll continue to invest and we will make some money at that and start to have some slight improvement in our earnings overall. -------------------------------------------------------------------------------- Christopher Ronald Ellinghaus, Siebert Williams Shank & Co., L.L.C., Research Division - Principal & Senior Equity Utility Analyst [36] -------------------------------------------------------------------------------- Okay. Can you give us any color on general timing of when you expect to make your filings this year? -------------------------------------------------------------------------------- Mark T. Thies, Avista Corporation - Executive VP, CFO & Treasurer [37] -------------------------------------------------------------------------------- For the rate cases? -------------------------------------------------------------------------------- Christopher Ronald Ellinghaus, Siebert Williams Shank & Co., L.L.C., Research Division - Principal & Senior Equity Utility Analyst [38] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Mark T. Thies, Avista Corporation - Executive VP, CFO & Treasurer [39] -------------------------------------------------------------------------------- What we said, first quarter for Oregon, second to third quarter for Washington and second half of the year for Idaho. That's about as specific as we can get. We're analyzing all the details and putting -- looking at possibilities of multiyear plans. And how the policy statement affects it in Washington. So we want to make sure that -- and also once we get -- as is our practice, once we get rate cases adjudicated by each jurisdiction, then we try to take that time when we're not in a rate case to go over and meet with our commissioners individually and with their policy staff to talk about our plans and make sure that we're -- we have an ability to discuss what we're thinking with the commissions before we file. So until all that happens, we don't have the details of exactly when we will file. -------------------------------------------------------------------------------- Christopher Ronald Ellinghaus, Siebert Williams Shank & Co., L.L.C., Research Division - Principal & Senior Equity Utility Analyst [40] -------------------------------------------------------------------------------- Yes. Sorry, I must have missed that part. Are you -- as far as the equity goes for the year, obviously, you've got a good uncertainty in terms of what the remand might do? Are you planning to be sort of using the ATM on a more consistent basis? Or do you want to wait and see what that remand number might do? -------------------------------------------------------------------------------- Mark T. Thies, Avista Corporation - Executive VP, CFO & Treasurer [41] -------------------------------------------------------------------------------- Well, again, we expect that the commission will have their order on our general rate case for rates to go into effect by April 1. So we think around there, they may try, the commission may, we have no insight in that, may try to get all of these orders. We have a couple of them out there. Together, at the same time, so we just have one change to our customer bills. And if that is the case, we will wait. We'll find out what that is and we'll go forward. But even if we don't get that, if they waited because they have more pondering to do, we'll begin -- we do need our equity, we'll begin to use that ATM. And if we get a number that's significant and causes us to have additional equities, we'll tell you at the time. -------------------------------------------------------------------------------- Christopher Ronald Ellinghaus, Siebert Williams Shank & Co., L.L.C., Research Division - Principal & Senior Equity Utility Analyst [42] -------------------------------------------------------------------------------- Okay. And can we assume that your guidance and your equity expectation is based on your proposal on the remand number? -------------------------------------------------------------------------------- Mark T. Thies, Avista Corporation - Executive VP, CFO & Treasurer [43] -------------------------------------------------------------------------------- It's just based on our number. Yes, the $3.6 million that we already booked in '19. We have not assumed anything going forward that they come out. We don't really have an ability to make any other assumption. -------------------------------------------------------------------------------- Christopher Ronald Ellinghaus, Siebert Williams Shank & Co., L.L.C., Research Division - Principal & Senior Equity Utility Analyst [44] -------------------------------------------------------------------------------- Okay. Do you -- I haven't seen it in the 10-K yet, but what's the delta on METALfx from '19 to '20 for operating earnings? -------------------------------------------------------------------------------- Mark T. Thies, Avista Corporation - Executive VP, CFO & Treasurer [45] -------------------------------------------------------------------------------- METALfx is not in '20. There was a gain in '19 of, I want to say, $0.04 is an estimate. It might be off slightly there. So they were -- but that was a gain. That wasn't their operating earnings. And they're not included in our guidance for '20. -------------------------------------------------------------------------------- Christopher Ronald Ellinghaus, Siebert Williams Shank & Co., L.L.C., Research Division - Principal & Senior Equity Utility Analyst [46] -------------------------------------------------------------------------------- The earnings prior to the sale, what was that level in '19? -------------------------------------------------------------------------------- Mark T. Thies, Avista Corporation - Executive VP, CFO & Treasurer [47] -------------------------------------------------------------------------------- It was about $0.01 a year, if I recall. I don't -- I mean I'd have to go back. That's -- I know I'm close. I may not be exact, but it wasn't significant earnings, it was about $1 million a year. They were positive earnings, which is a good thing. -------------------------------------------------------------------------------- Christopher Ronald Ellinghaus, Siebert Williams Shank & Co., L.L.C., Research Division - Principal & Senior Equity Utility Analyst [48] -------------------------------------------------------------------------------- And going back to the investment other income. Is that $0.05 to $0.10 based on just the first 2 Energy Impact Partners investment? -------------------------------------------------------------------------------- Mark T. Thies, Avista Corporation - Executive VP, CFO & Treasurer [49] -------------------------------------------------------------------------------- No. It's all about our investment, Chris. As we go forward, we're going to continue to invest in the next 3 to 5 years and we expect to get some earnings out of that. We're not just making the investments and not make money. -------------------------------------------------------------------------------- Christopher Ronald Ellinghaus, Siebert Williams Shank & Co., L.L.C., Research Division - Principal & Senior Equity Utility Analyst [50] -------------------------------------------------------------------------------- No. I understand. I just want to make sure that includes incremental investments over that 5-year period as well. -------------------------------------------------------------------------------- Mark T. Thies, Avista Corporation - Executive VP, CFO & Treasurer [51] -------------------------------------------------------------------------------- It does. -------------------------------------------------------------------------------- Christopher Ronald Ellinghaus, Siebert Williams Shank & Co., L.L.C., Research Division - Principal & Senior Equity Utility Analyst [52] -------------------------------------------------------------------------------- Okay. At roughly that $15 million kind of number? -------------------------------------------------------------------------------- Mark T. Thies, Avista Corporation - Executive VP, CFO & Treasurer [53] -------------------------------------------------------------------------------- Somewhere, $15 million to $20 million, yes. -------------------------------------------------------------------------------- Operator [54] -------------------------------------------------------------------------------- Our next question from Vedula Murti of Avon. -------------------------------------------------------------------------------- Vedula Murti, Millennium Management LLC - Senior Analyst & Assistant Portfolio Manager [55] -------------------------------------------------------------------------------- Just want to double-check in terms of, I think you indicated that the 2020 guide is -- still has 80 basis points of lag that's outside the structural lag you always have. Can you -- one, did I hear that correctly? And two, is the structural lag 90 basis points, as I recall? -------------------------------------------------------------------------------- Mark T. Thies, Avista Corporation - Executive VP, CFO & Treasurer [56] -------------------------------------------------------------------------------- Yes and yes. -------------------------------------------------------------------------------- Operator [57] -------------------------------------------------------------------------------- Our next question from Phil Covello of ExodusPoint. -------------------------------------------------------------------------------- Philip Stephen Covello, ExodusPoint Capital Management, LP - Analyst [58] -------------------------------------------------------------------------------- Chris and Brian actually answered my questions already. Pretty exhausted, so I'll step out of the queue. -------------------------------------------------------------------------------- Operator [59] -------------------------------------------------------------------------------- And a question from Brian Russo again. -------------------------------------------------------------------------------- Brian J. Russo, Sidoti & Company, LLC - Research Analyst [60] -------------------------------------------------------------------------------- Just real quickly, can you remind us what your dividend policy is? -------------------------------------------------------------------------------- Mark T. Thies, Avista Corporation - Executive VP, CFO & Treasurer [61] -------------------------------------------------------------------------------- Well, we try to stay in the 65% to 75% range of earnings where we -- as our earnings grow back into, we're slightly high at this point. But we expect, as we grow back in there with the 9% to 10%, to be in that range as we get forward. And we tend to grow our dividend in that 4% to 5% range we have historically. So we just -- as Dennis mentioned, we just grew our dividend about 4.5% this year to get to $1.62. -------------------------------------------------------------------------------- Operator [62] -------------------------------------------------------------------------------- (Operator Instructions) John, it looks like there's no more questions. -------------------------------------------------------------------------------- John Wilcox, Avista Corporation - IR Manager [63] -------------------------------------------------------------------------------- Okay. I want to thank everyone for joining us today. We certainly appreciate your interest in our company. Have a great day. -------------------------------------------------------------------------------- Operator [64] -------------------------------------------------------------------------------- Thank you, ladies and gentlemen. This concludes our conference. Thank you for participating. You may now disconnect.