Avista(US:AVA)2024-02-21 18:55Financial Data and Key Metrics Changes - Consolidated earnings for Q4 2023 were $1.8 per diluted share, up from $1.5 in Q4 2022, reflecting a year-over-year increase [3] - Full year consolidated earnings for 2023 were $2.24 per diluted share compared to $2.12 in 2022, indicating a positive trend in earnings [3] Business Line Data and Key Metrics Changes - Core utility operations demonstrated significant earnings growth of over 35% in 2023 compared to 2022, primarily due to improved cost recovery and successful cost management [11] - The Energy Recovery Mechanism (ERM) was a pre-tax expense of $8.4 million in 2023, down from $10.9 million in 2022, showing improved cost management [11] Market Data and Key Metrics Changes - The company faced challenges due to high commodity prices resulting from operational issues and extreme cold temperatures in January, impacting the natural gas system [7][8] - The company expects to purchase $9.7 million therms of natural gas annually from renewable sources, indicating a shift towards cleaner energy [8] Company Strategy and Development Direction - The company is committed to clean energy goals, including fleet electrification partnerships with school districts and investments in renewable natural gas [8] - A general rate case was filed in January for electric and gas, requesting increases of $77.1 million and $17.3 million respectively in the first year [10] Management's Comments on Operating Environment and Future Outlook - Management expressed pride in the accomplishments of 2023, highlighting improved cost recovery and resilience in navigating operational challenges [4][6] - The company anticipates earnings growth of 4% to 6% from a 2025 base year, assuming constructive outcomes in regulatory filings [18] Other Important Information - The Board increased the annual dividend to $1.90 per share, reflecting a commitment to maximizing shareholder value [9] - Capital expenditures for Avista Utilities were $485 million in 2023, with planned expenditures increasing to $575 million by 2026, primarily for wildfire mitigation projects [14] Q&A Session Summary Question: Impact of ERM on 2023 and EPS guidance - Management indicated that the ERM negatively impacted earnings by approximately $0.09, and adjustments could potentially reduce this impact [21] Question: Allocation of capital expenditures for wildfire resiliency - Management noted that capital for wildfire resiliency is expected to be about $35 million in 2025 and closer to $60 million in 2026 [23] Question: Changes in financing plan for 2024 - The increase in equity guidance from $60 million to $70 million was attributed to rebalancing debt and equity as part of regulatory considerations [26] Question: Earnings distribution and hydrology impact - Management is building expectations of current hydro conditions into forecasts, with plans to optimize resources to offset early negative impacts [29] Question: Regulatory lag and Washington rates - Management focused on mitigating the 60 basis points of timing lag with constructive outcomes in the Washington case [32] Question: Long-term investment opportunities - Management discussed potential near-term investments in clean generation and enhancements to the transmission system as part of future growth strategies [36][37] Question: Impact of wildfires on bottom line - Management confirmed that while some infrastructure was lost due to wildfires, the overall impact on the bottom line was manageable [42] Question: Effects of potential dam removals - Management stated that the removal of the four lower Snake River dams would not directly impact the company but could affect regional power prices [44]