Avista(AVA) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company's consolidated earnings for 2025 were $2.38 per diluted share, an increase from $2.29 in 2024 [3] - Non-GAAP utility earnings for 2025 were $2.55 per diluted share, compared to $2.38 per diluted share in 2024 [4] - For Q4 2025, consolidated earnings were $0.87 per diluted share, up from $0.84 per diluted share in Q4 2024 [4] - Non-GAAP utility earnings for Q4 2025 were $0.88 per diluted share, slightly down from $0.89 per diluted share in Q4 2024 [4] Business Line Data and Key Metrics Changes - Avista Utilities' results were impacted by a one-time adjustment related to Colstrip investments, which decreased earnings per share by $0.07 [6] - Despite headwinds, utility results landed within the original guidance range, and excluding specific factors, results would have exceeded the midpoint of the 2025 utilities earnings guidance [6] Market Data and Key Metrics Changes - The company filed a 4-year rate plan with the Washington Utilities and Transportation Commission, addressing rising costs related to grid modernization and clean energy compliance [6][10] - A significant deposit was received from a data center developer intending to locate in Washington, with an initial load expected to be 125 megawatts, ramping up to 500 megawatts by 2030 [8] Company Strategy and Development Direction - The company aims to reduce the frequency of regulatory proceedings and provide greater stability in cost recovery and shareholder returns through the 4-year rate plan [6] - Selected projects from the RFP process include upgrades to natural gas turbines, a 100 megawatt battery energy storage system, and a 200 megawatt wind power purchase agreement [7] - The company is exploring early acquisition of resources to capitalize on tax credit opportunities and enhance flexibility until more load is needed [10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term strength of the utility, despite facing unprecedented uncertainty [5] - The company expects earnings to grow 4%-6% from the midpoint of 2025 consolidated earnings guidance, raising the long-term expected return on equity to approximately 9% [20] Other Important Information - The board of directors raised the dividend to $1.97 per share, marking 24 consecutive years of dividend increases with a compound annual growth of over 5% [11] - Capital expenditures for Avista Utilities were $553 million in 2025, expected to rise to $585 million in 2026, with a projected $3.4 billion in capital expenditures from 2026 to 2030 [15][16] Q&A Session Summary Question: Financing decisions for 2026 - Management indicated that financing decisions would be sequenced based on capital investment opportunities and would likely follow a periodic offering program unless significant investment opportunities arise [26][28] Question: Integration of new large load customer - The next step involves moving towards a Memorandum of Understanding (MOU) with the new customer, ensuring existing customers are insulated from potential impacts if the large load does not materialize [29][30] Question: Financing plan for potential $350 million CapEx - Management expects a 50/50 debt and equity structure for the potential $350 million CapEx, considering hybrids if additional capital is needed [38][40] Question: Monetizing non-regulated investments - The company is open to monetizing non-regulated investments if opportunities arise, which could help reduce the need for equity issuance [41] Question: Long-term EPS growth expectations - Management remains confident in achieving a 4%-6% growth rate, despite a lower result in 2025, with a long-term ROE target of 9% [51][53] Question: Rate-based CAGR and CapEx inclusion - The upside CapEx is not included in the current CAGR projections, but it is considered a proxy for potential investment opportunities [54]