Avista(AVA) - 2024 Q2 - Quarterly Results

Financial Performance Summary Avista Corp. reported strong Q2 2024 financial results with increased net income and confirmed full-year EPS guidance, driven by core utility operations Q2 2024 Financial Highlights Avista Corp. reported strong Q2 2024 results, confirming full-year EPS guidance of $2.36 to $2.56 per diluted share, driven by core utility operations and new customer additions - The company confirmed its 2024 consolidated earnings guidance range of $2.36 to $2.56 per diluted share[1][3] - A new large electric customer, effective August 1, 2024, is expected to substantially offset higher power supply costs for the year[3] - Continued system investment improved reliability and ensured strong performance during a recent heat wave[1][2] Detailed Financial Results Consolidated net income increased to $22.9 million in Q2 2024 and $94.4 million year-to-date, primarily driven by the Avista Utilities segment Net Income and EPS by Business Segment (in thousands, except per share data) | | Second Quarter 2024 | Second Quarter 2023 | Year-to-Date 2024 | Year-to-Date 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Income | | | | | | Avista Utilities | $23,935 | $18,810 | $91,443 | $70,437 | | AEL&P | $1,109 | $1,359 | $5,020 | $5,401 | | Other | $(2,186) | $(2,685) | $(2,110) | $(3,509) | | Total Net Income | $22,858 | $17,484 | $94,353 | $72,329 | | Earnings per Diluted Share | | | | | | Avista Utilities | $0.31 | $0.25 | $1.17 | $0.93 | | AEL&P | $0.01 | $0.02 | $0.06 | $0.07 | | Other | $(0.03) | $(0.04) | $(0.03) | $(0.04) | | Total EPS | $0.29 | $0.23 | $1.20 | $0.96 | Analysis of Financial Results This section analyzes financial results, focusing on utility margin reconciliation and the drivers of consolidated earnings changes Reconciliation of Non-GAAP Measures The company uses non-GAAP utility margin to assess operating performance, with total pre-tax utility margin increasing to $247.7 million in Q2 2024 and $550.1 million year-to-date - The company presents electric and natural gas utility margin, a non-GAAP measure, to inform investors about the impact of changes in loads, rates, and supply costs[4] Avista Utilities' Reconciliation of Operating Revenues to Utility Margin (in thousands) | Period | Segment | Operating Revenues | Resource Costs | Utility Margin (Pre-Tax) | | :--- | :--- | :--- | :--- | :--- | | Q2 2024 | Total | $390,814 | $143,125 | $247,689 | | Q2 2023 | Total | $368,604 | $140,017 | $228,587 | | YTD 2024 | Total | $985,750 | $435,633 | $550,117 | | YTD 2023 | Total | $828,746 | $332,154 | $496,592 | Analysis of Consolidated Earnings Changes Year-to-date 2024 EPS increased from $0.96 to $1.20, primarily due to higher electric and natural gas utility margins from rate cases, partially offset by increased operating expenses and depreciation Year-to-Date Change in Diluted Earnings per Share (2023 vs 2024) | Factor | Change in EPS | | :--- | :--- | | 2023 Year-to-Date EPS | $0.96 | | Electric utility margin | +$0.44 | | Natural gas utility margin | +$0.10 | | Other operating expenses | -$0.12 | | Depreciation and amortization | -$0.04 | | Interest expense | -$0.03 | | Other | +$0.03 | | Income tax at effective rate | -$0.09 | | Dilution on earnings | -$0.05 | | Total Avista Utilities Change | +$0.24 | | AEL&P earnings | -$0.01 | | Other businesses earnings | +$0.01 | | 2024 Year-to-Date EPS | $1.20 | - Electric and natural gas utility margins increased primarily due to general rate cases[7][8] - Year-to-date operating expenses increased mainly due to higher thermal generation, vegetation management, legal, and employee medical costs[8] - Depreciation and amortization increased primarily due to additions to utility plant[8] Liquidity, Capital, and Guidance This section details the company's liquidity, capital resources, and confirmed 2024 earnings guidance, along with long-term growth projections Liquidity and Capital Resources As of June 30, 2024, Avista Corp. had $250.9 million in available liquidity, plans to issue $70 million in common stock, and projects $500 million in 2024 capital expenditures for Avista Utilities - As of June 30, 2024, the company had $250.9 million of available liquidity under its committed line of credit[9] - The company expects to issue approximately $70 million of common stock in 2024 and does not anticipate issuing additional long-term debt[9] 2024 Capital Expenditure Outlook | Entity | 2024 Expected Capex | H1 2024 Actual Capex | | :--- | :--- | :--- | | Avista Utilities | $500 million | $245.2 million | | AEL&P | $21 million | $6.0 million | | Other Businesses | $11 million | $5.1 million | 2024 Earnings Guidance and Outlook Avista confirmed its 2024 consolidated EPS guidance of $2.36 to $2.56, with Avista Utilities contributing $2.23 to $2.39 per share, and projects long-term earnings growth of 4% to 6% from a 2025 base 2024 Earnings Guidance per Diluted Share by Segment | Segment | Guidance Range (per diluted share) | | :--- | :--- | | Avista Utilities | $2.23 to $2.39 | | AEL&P | $0.09 to $0.11 | | Other Businesses | $0.04 to $0.06 | | Consolidated Total | $2.36 to $2.56 | - The Energy Recovery Mechanism (ERM) is expected to have a negative $0.07 per diluted share impact due to lower hydroelectric generation[11] - The addition of a new large electric customer is expected to substantially offset the forecast impact of higher power supply costs in 2024[11] - The company expects long-term earnings growth of 4% to 6% off a 2025 base year, assuming constructive general rate case outcomes[12] Forward-Looking Statements and Risk Factors This section outlines the nature of forward-looking statements and details key risks, including regulatory, operational, climate, cybersecurity, and financial factors Overview of Forward-Looking Statements This news release contains forward-looking statements regarding future financial performance and operational plans, which are subject to numerous risks and uncertainties that could cause actual results to differ materially - The news release contains forward-looking statements regarding future financial performance, cash flows, capital expenditures, and financing plans[15] - These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from those anticipated[15][29] Key Risk Factors The company faces key risks including adverse regulatory decisions, operational disruptions from weather and wildfires, climate change impacts, cybersecurity threats, and financial risks related to interest rates and commodity market volatility - Utility Regulatory Risk: Involves potential state and federal regulatory decisions to disallow or delay cost recovery, affecting the company's ability to earn a reasonable return[16] - Operational Risk: Includes weather conditions affecting energy demand and generation, wildfire liability, supply chain disruptions, and system failures[17][19] - Climate Change & Cybersecurity Risks: Encompasses increasing severe weather frequency, impacts on hydroelectric resources, and cyberattack threats on operational and administrative systems[20][21] - Financial & Energy Commodity Risks: Pertains to financing ability, interest rate fluctuations, energy and carbon market volatility, and counterparty credit risk[26][27]