Avista(AVA) - 2025 Q2 - Quarterly Results

Executive Summary & Financial Highlights Avista Corp. reported decreased Q2 2025 net income and diluted EPS due to losses in other non-reportable segments, with year-to-date results showing similar trends Q2 and YTD 2025 Consolidated Results Avista Corp. reported Q2 2025 net income of $14 million and diluted EPS of $0.17, down from Q2 2024, with year-to-date figures also showing a decline in diluted EPS | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :------------------------ | :------ | :------ | :------- | :------- | | Net Income (Loss) ($M): | | | | | | Avista Utilities | $23 | $24 | $101 | $91 | | AEL&P | $1 | $1 | $4 | $5 | | Other non-reportable loss | $(10) | $(2) | $(12) | $(2) | | Total net income | $14 | $23 | $93 | $94 | | EPS (Diluted): | | | | | | Avista Utilities | $0.28 | $0.31 | $1.25 | $1.17 | | AEL&P | $0.01 | $0.01 | $0.05 | $0.06 | | Other non-reportable loss | $(0.12) | $(0.03) | $(0.15) | $(0.03) | | Total diluted EPS | $0.17 | $0.29 | $1.15 | $1.20 | CEO Commentary The CEO noted strong core utility operations offsetting investment portfolio losses, expecting consolidated earnings at the low end of guidance and Avista Utilities at the upper end - Core utility operations showed strength, but investment portfolio valuations, especially in clean technology, were negatively impacted by shifting public policy and sentiment[1] - Recent multiyear rate plans in Washington, Oregon, and Idaho increase confidence in Avista Utilities' earnings, which are expected to be toward the upper end of guidance[1] - Consolidated earnings are expected to be at the low end of the 2025 guidance range due to unrealized losses on investments[1] Analysis of Consolidated Earnings This section details the factors influencing Avista Corp.'s net income and EPS for Q2 and YTD 2025, highlighting utility margin gains offset by increased operating expenses and other business losses Factors Affecting Net Income and EPS (Q2 2025 vs 2024) Q2 2025 saw increased utility margins from rate cases and customer growth, largely offset by higher operating expenses, depreciation, interest, and significant losses from other businesses | Factor (After-Tax) | Net Income Change ($M) | EPS Change | | :-------------------------- | :--------------------- | :--------- | | 2024 consolidated earnings | $23 | $0.29 | | Avista Utilities: | | | | Electric utility margin | $14 | $0.17 | | Natural gas utility margin | $5 | $0.06 | | Other operating expenses | $(11) | $(0.14) | | Depreciation & amortization | $(3) | $(0.04) | | Interest expense | $(1) | $(0.01) | | Other | $(2) | $(0.03) | | Income tax at effective rate | $(3) | $(0.04) | | Total Avista Utilities | $(1) | $(0.03) | | AEL&P earnings | $0 | $0 | | Other businesses earnings | $(8) | $(0.09) | | 2025 consolidated earnings | $14 | $0.17 | - Electric utility margin increased by $14 million (after-tax) due to general rate cases, customer growth, and non-decoupled load growth[2][3] - Natural gas utility margin increased by $5 million (after-tax) primarily from rate cases and customer growth[2][3] - Other operating expenses increased by $11 million (after-tax) due to higher employee costs, thermal generation costs, and increased amortizations and wildfire mitigation/insurance costs (with corresponding revenue increases)[2][3] Factors Affecting Net Income and EPS (YTD 2025 vs 2024) Year-to-date, Avista Utilities' margins grew significantly, but increased operating expenses and substantial losses from other businesses led to a slight consolidated net income decrease and a larger EPS decline | Factor (After-Tax) | Net Income Change ($M) | EPS Change | | :-------------------------- | :--------------------- | :--------- | | 2024 consolidated earnings | $94 | $1.20 | | Avista Utilities: | | | | Electric utility margin | $42 | $0.52 | | Natural gas utility margin | $12 | $0.15 | | Other operating expenses | $(24) | $(0.30) | | Depreciation & amortization | $(5) | $(0.07) | | Interest expense | $(1) | $(0.01) | | Other | $(5) | $(0.07) | | Income tax at effective rate | $(9) | $(0.11) | | Dilution on earnings | n/a | $(0.03) | | Total Avista Utilities | $10 | $0.08 | | AEL&P earnings | $(1) | $(0.01) | | Other businesses earnings | $(10) | $(0.12) | | 2025 consolidated earnings | $93 | $1.15 | - The effective tax rate for the first half of 2025 was 12.3%, up from 2.9% in the prior year, primarily due to a decrease in tax customer credits[9] - Losses at other businesses increased by $10 million (after-tax) year-to-date due to higher net investment losses from fair value changes and recognition of equity method investment losses[2][9] Liquidity and Capital Resources Avista Corp. maintained adequate liquidity as of June 30, 2025, and outlined debt and equity issuances along with significant capital expenditure plans for Avista Utilities and AEL&P Liquidity Position As of June 30, 2025, Avista Corp. had $106 million in available liquidity under its committed line of credit and $42 million under its letter of credit facility | Entity | Available Liquidity (as of June 30, 2025) | | :-------------------- | :---------------------------------------- | | Avista Corp. (committed line of credit) | $106 million | | Avista Corp. (letter of credit facility) | $42 million | | AEL&P (line of credit) | $9 million | Debt and Equity Issuances Avista Corp. issued $120 million in long-term debt in July 2025 and expects to issue up to $80 million in common stock for the year - Issued $120 million of long-term debt in July 2025 to repay committed line of credit borrowings; no further long-term debt issuances expected in 2025[5] - AEL&P entered into a $20 million term loan in July 2025 to repay its line of credit and fund capital expenditures[5] - Expects to issue up to $80 million of common stock in 2025, including $35 million issued in the first half[5] Capital Expenditures and Investments Avista Utilities' capital expenditures were $236 million in H1 2025, with $525 million expected for the year and $3 billion over five years | Entity | H1 2025 Capital Expenditures | 2025 Expected Capital Expenditures | 5-Year (2025-2029) Expected Capital Expenditures | | :-------------------- | :--------------------------- | :--------------------------------- | :----------------------------------------------- | | Avista Utilities | $236 million | ~$525 million | $3 billion (5-6% annual growth) | | AEL&P | $10 million | $21 million | N/A | | Other businesses | N/A | $5 million | N/A | Earnings Guidance and Outlook Avista Corp. confirmed its 2025 consolidated earnings guidance at the low end of the range, while Avista Utilities is expected to perform at the upper end, and AEL&P has its own specific guidance 2025 Consolidated Guidance Avista Corp. confirmed its 2025 consolidated earnings guidance of $2.52 to $2.72 per diluted share, expecting to be at the low end due to investment losses - Confirmed 2025 consolidated earnings guidance range of $2.52 to $2.72 per diluted share[9] - Expects to be at the low end of the consolidated range due to $0.15 per diluted share of losses from other businesses in the first half of 2025[9] Avista Utilities Guidance Avista Utilities is projected to contribute towards the upper end of its $2.43 to $2.61 per diluted share guidance for 2025, despite an anticipated ERM impact - Avista Utilities is expected to contribute toward the upper end of a range of $2.43 to $2.61 per diluted share in 2025[10] - Guidance for Avista Utilities includes an expected $0.12 negative impact from the ERM in 2025, with $0.08 already absorbed in the first half[10] AEL&P Guidance and Long-Term Growth AEL&P is expected to contribute $0.09 to $0.11 per diluted share in 2025, with long-term earnings growth projected at 4-6 percent - AEL&P is expected to contribute in the range of $0.09 and $0.11 per diluted share in 2025[11] - Long-term earnings growth is expected in the 4-6 percent range from the forecast 2025 base year[11] Non-GAAP Financial Measures This section defines utility margin as a non-GAAP measure to enhance understanding of operating performance and provides a reconciliation to GAAP operating revenues Utility Margin Definition and Purpose Electric and natural gas utility margin are non-GAAP measures used to clarify operating performance by illustrating the impact of loads, rates, and supply costs - Electric and natural gas utility margin are non-GAAP financial measures[13] - These measures enhance understanding of operating performance by showing the impact of changes in loads, rates, and supply costs[14] - They are not intended to replace utility operating revenues as determined in accordance with GAAP[14] Reconciliation of Utility Operating Revenues to Utility Margin Avista Utilities' total utility margin, net of tax, increased for both Q2 and YTD 2025 compared to 2024, primarily driven by electric utility margin growth | Metric (After-Tax, $M) | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :----------------------- | :------ | :------ | :------- | :------- | | For the three months ended June 30: | | | | | | Operating revenues | $400 | $391 | N/A | N/A | | Resource costs | $129 | $143 | N/A | N/A | | Income taxes | $56 | $52 | N/A | N/A | | Utility margin, net of tax | $215 | $196 | N/A | N/A | | For the six months ended June 30: | | | | | | Operating revenues | N/A | N/A | $1,004 | $986 | | Resource costs | N/A | N/A | $385 | $436 | | Income taxes | N/A | N/A | $131 | $116 | | Utility margin, net of tax | N/A | N/A | $488 | $434 | - Total utility margin, net of tax, increased from $196 million in Q2 2024 to $215 million in Q2 2025[15] - Total utility margin, net of tax, increased from $434 million in YTD 2024 to $488 million in YTD 2025[15] Company Overview Avista Corp. is an energy company serving approximately 423,000 electric and 383,000 natural gas customers across a 30,000 square mile service territory, with AEL&P serving Juneau, Alaska - Avista Corp. is an energy company providing electric service to approximately 423,000 customers and natural gas to approximately 383,000 customers[17] - Service territory covers 30,000 square miles in eastern Washington, northern Idaho, and parts of southern and eastern Oregon, with a population of 1.7 million[17] - AEL&P, an Avista subsidiary, provides retail electric service to 18,000 customers in Juneau, Alaska[17] Forward-Looking Statements and Risk Factors This section outlines various risks, including regulatory, operational, climate change, cybersecurity, technology, strategic, external mandates, financial, energy commodity, and compliance risks, that could materially affect future results General Disclaimer The news release contains forward-looking statements subject to numerous risks and uncertainties that could cause actual results to differ materially from expectations - The news release contains forward-looking statements about future financial performance, cash flows, capital expenditures, and operational plans[18] - These statements are subject to risks, uncertainties, and factors, many beyond the company's control, that could cause actual results to differ materially[18] Utility Regulatory Risk Risks include adverse regulatory decisions impacting cost recovery, return on investment, disallowance of costs, and potential loss of regulatory accounting treatment - Regulatory decisions affecting cost recovery and reasonable return, including disallowance or delay in recovery of capital investments, operating costs, and commodity costs[19] - Risk of losing regulatory accounting treatment, which could require write-offs of regulatory assets and loss of deferral/recovery mechanisms[19] Operational Risk Operational risks include weather impacts, wildfires, natural disasters, geopolitical conflicts, infrastructure disruptions, workforce issues, and increasing costs - Weather conditions impacting energy demand, electric generating capability (hydroelectric, wind), and wholesale energy markets[20] - Wildfires ignited by equipment, severe weather, natural disasters, political unrest, and conflicts disrupting energy generation, transmission, and distribution[20] - Workforce issues (collective bargaining, key executive loss, worker availability), increasing costs of insurance, and delays/changes in construction costs[21] Climate Change Risk Climate change risks involve increased severe weather, changes in water resources for hydroelectric facilities, and long-term shifts affecting demand and costs - Increasing frequency and intensity of severe weather or natural disasters (e.g., wildfires) disrupting energy infrastructure and affecting fuel/material costs[22] - Changes in water resource use, availability, or rights needed for hydroelectric operations[22] - Long-term climate and weather changes affecting customer demand, streamflows for hydroelectric generation, and costs of generation, transmission, and distribution[22] Cybersecurity Risk Cybersecurity risks include attacks on operational and administrative systems, potentially causing damage, disruptions, data breaches, and significant liabilities - Cyberattacks on operating systems for electric generation, transmission, and distribution facilities, potentially causing damage, disruption, liabilities, and costs[23] - Cyberattacks on administrative systems (customer billing, accounting) or systems of vendors, leading to business disruption, release of private information, and associated costs[23] Technology Risk Technology risks encompass obsolescence, new cybersecurity threats from AI, changes in IT system costs, and insufficient workforce technology skills - Changes in technologies potentially rendering current technology obsolete or introducing new cybersecurity risks, especially with developmental technologies like generative AI[24] - Changes in the use, perception, or regulation of generative AI technologies, which could limit utilization, increase regulatory scrutiny, or create intellectual property uncertainties[24] - Changes in costs impeding the implementation of new IT systems or the operation/maintenance of current production technology[24] Strategic Risk Strategic risks include changes in customer base, negative publicity, shifts in business plans, competition, increased earnings volatility from non-regulated activities, and municipalization - Growth or decline of customer base due to new uses or decline in existing services, including the trend toward distributed generation[25] - Potential effects of negative publicity on business practices, reputation, and common stock price[25] - Wholesale and retail competition, alternative energy sources, customer-owned power resource technologies, and non-regulated activities increasing earnings volatility and investment losses[25] External Mandates Risk Risks from external mandates include changes in environmental laws, initiatives impacting generating resources or natural gas usage, political pressures, and increasing costs from tariffs - Changes in environmental laws, regulations, decisions, and policies, including responses to climate change concerns and more stringent requirements for air/water quality[26] - Potential effects of federal, state, or local initiatives/legislation, including restrictions on greenhouse gas emissions or natural gas usage[26] - Political pressures or regulatory practices that could constrain or add cost burdens to distribution systems (e.g., accelerated adoption of distributed generation) or energy supply sources[26] Financial Risk Financial risks include financing ability, interest rate changes, commodity market volatility, actuarial assumptions, legal outcomes, economic conditions, and declining demand - Ability to obtain financing through debt/equity securities, affected by credit ratings, interest rates, capital market, and global economic conditions[27] - Volatility in energy commodity markets affecting hedging, cash flow, collateral requirements, and credit risk[27] - Economic conditions in service areas affecting customer demand, and declining electricity/natural gas demand due to energy efficiency, conservation, or increased electrification[27] Energy Commodity Risk Energy commodity risks involve market volatility, counterparty default, environmental regulations affecting power supply, and incidents limiting energy supply or increasing replacement commodity costs - Volatility and illiquidity in wholesale energy markets, impacting operating income, cash requirements, wholesale sales value, and collateral[28] - Default or nonperformance by parties from whom capacity or energy is purchased/sold[28] - Potential environmental regulations or lawsuits affecting the ability to utilize or causing obsolescence of power supply resources[28] Compliance Risk Compliance risks include changes in laws and regulations impacting operations and costs, and the ability to meet license and permit terms cost-effectively - Changes in laws, regulations, decisions, and policies at federal, state, or local levels impacting electric and gas operations and costs[29] - Ability to comply with terms of licenses and permits for hydroelectric or thermal generating facilities at cost-effective levels[29]