Avista(US:AVA)2022-11-01 20:24Financial Data and Key Metrics Changes - The consolidated loss for Q3 2022 was $0.08 per diluted share, compared to earnings of $0.20 for Q3 2021. Year-to-date consolidated earnings were $1.06 per diluted share for 2022, down from $1.38 last year [5][9]. - The company lowered its 2022 guidance by $0.05 to a range of $1.88 to $2.08 per diluted share and reduced its 2023 consolidated earnings guidance by $0.15 to a range of $2.27 to $2.47 per diluted share due to inflation and rising interest rates [9][13]. Business Line Data and Key Metrics Changes - Utility earnings decreased primarily due to rising interest rates and higher depreciation, although partially offset by benefits from completed rate cases in Idaho and Washington and retail customer growth of about 1.5% [10][11]. - The Energy Recovery Mechanism (ERM) in Washington was a $4.5 million pre-tax expense in Q3 2022, compared to $3.8 million in the prior year [11]. Market Data and Key Metrics Changes - The company expects increases in borrowing costs, pension expenses, and depreciation to impact both 2022 and 2023 earnings [9][13]. - The company anticipates that the upward cost pressures from inflation and rising interest rates will continue to affect its financial performance [9][13]. Company Strategy and Development Direction - The company is focused on achieving clean energy goals and is making significant investments to enhance grid reliability and resiliency [6]. - The company plans to file gas and electric rate cases in Idaho in Q1 2023 and a general rate case in Oregon in the first half of 2023 [7][8]. - The company aims to manage costs effectively while seeking adequate rate relief to support its financial guidance [9][13]. Management's Comments on Operating Environment and Future Outlook - Management noted that the goalposts have shifted due to external economic pressures, leading to a downward revision in earnings guidance [9]. - The company expects to continue facing challenges from inflation and rising interest rates, which have impacted its cost management efforts [9][13]. Other Important Information - The company expects capital expenditures of about $475 million for both 2022 and 2023, with additional investments planned for other business segments [11][12]. - As of September 30, the company had $102 million in available liquidity under committed lines of credit and plans to issue $135 million of common stock in 2022 [12]. Q&A Session Summary Question: Can you break down the pieces of the 2023 guidance? - Management highlighted rising interest rates, increased pension expenses, and higher capital expenditures as primary drivers affecting the 2023 guidance [20][21][24]. Question: Are you still projecting long-term growth of 4% to 6%? - Management confirmed that the long-term growth projection remains consistent, with expectations to chip away at under-earning over 2024 and 2025 [33][34]. Question: How do you plan to recover additional O&M costs? - Management explained that any additional O&M costs would be included in future rate cases, with a test period developed to account for current expenses [51][52]. Question: What is the impact of the ERM on future earnings? - Management indicated that the ERM's impact would be assessed after the Washington rate case is finalized, with guidance for 2023 to be refreshed in the fourth quarter call next year [44][45]. Question: How do you improve 2024 from here? - Management stated that improvements would come from regulatory processes in Idaho and Oregon, alongside continued cost management efforts [68][69].