AVISTA CORP (AVA)·Q1 2024 Earnings Summary

Executive Summary

• Q1 2024 EPS was $0.91, up 24.7% year over year (Q1 2023: $0.73) and seasonally lower than Q4 2023 ($1.08) as operations normalized post-winter; Avista confirmed full-year 2024 EPS guidance of $2.36–$2.56 .
• Utility operating revenues rose to $594.9M, up 29.3% YoY, with utility margin improving despite an ERM pretax expense of $6.0M (vs $7.6M in Q1 2023) and elevated purchased power costs during January’s extreme cold .
• Management revised ERM expectations to a full-year negative $0.07 per share in the 90% customer/10% company band; they highlighted a prospective large customer agreement expected by end of Q2 to partially offset ERM headwinds .
• Capital execution remains robust: $117.2M utility capex in Q1; 2024 plans of $500M (Utilities) and $21M (AEL&P); remarketed $83.7M tax‑exempt bonds at 3.875% and do not expect further long-term debt issuance in 2024; ~$70M equity issuance planned .
• Wall Street consensus estimates via S&P Global for Q1 2024 EPS and revenue were unavailable at the time of retrieval; therefore, formal beat/miss assessment vs consensus cannot be provided (S&P Global data unavailable).

What Went Well and What Went Wrong

What Went Well

• Earnings “right in line with expectations,” with consolidated EPS of $0.91 and Avista Utilities net income of $67.5M on stronger utility margin from general rate cases; AEL&P results met expectations .
• Operational progress: Post Falls dam modernization launched (five-year, ~$225M project) with a $5M DOE efficiency grant; supports long-term reliability and efficiency .
• Liquidity and financing: $198.3M available under the committed line and $36.0M under letter of credit; remarketed $83.7M tax‑exempt bonds at 3.875% (~140 bps below taxable market), reducing expected 2024 debt needs .

What Went Wrong

• ERM headwinds: Q1 ERM pretax expense was $6.0M, driven by below-normal hydro and high purchased power costs during mid‑January’s cold snap; 2024 ERM now expected to be a negative $0.07/share .
• Hydrology deteriorated further vs initial expectations, reducing optimization benefits and increasing volatility under existing ERM mechanics until potential Washington rate case changes .
• Sequential EPS decline vs Q4 2023 ($1.08 → $0.91) reflects seasonal normalization and ERM impacts; management aims to offset via prospective large customer margin contribution .

Financial Results

Consolidated Performance vs Prior Year and Prior Quarter

Utility Margin

Segment Performance

KPIs and Operating Drivers

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Our earnings for the first quarter are right in line with our expectations… we are well positioned to meet our full year earnings targets.” — CEO Dennis Vermillion .
• “We currently estimate we will spend $225 million, over 5 years, [on Post Falls modernization]… selected by the U.S. Department of Energy to receive a $5 million grant.” — CEO Dennis Vermillion .
• “ERM resulted in a $6 million pretax expense in the first quarter of 2024… we expect the impact of the ERM… to be negative $0.07 per diluted share [for FY24].” — CFO Kevin Christie .
• “We expect to finalize an agreement with a prospective large electric customer… increase in utility margin would help to offset the forecast impact of the ERM in 2024.” — CFO Kevin Christie .
• “We plan to spend upwards of $55 million… on wildfire mitigation work [in 2024].” — President & COO Heather Rosentrater .

Q&A Highlights

• Recent context from Q4 2023 Q&A (relevant to Q1 2024 narrative):
  • ERM modification to a 95/5 sharing would have materially reduced 2023 ERM headwinds; guidance narrowing depends on Washington outcome .
  • Wildfire capex expected to step up to ~$35M in 2025 and ~$60M in 2026 within broader capex plan .
  • Financing rebalancing to fine-tune debt/equity; equity in 2024 guided to ~$70M .
• Note: Q1 2024 Q&A content was not accessible in our transcript retrieval; management remarks above include the updated ERM outlook, large-customer offset, capex, financing, and guidance details .

Estimates Context

• S&P Global consensus for Q1 2024 EPS and revenue could not be retrieved at time of request due to provider limits; therefore, a formal beat/miss vs Wall Street consensus cannot be determined (S&P Global data unavailable).
• Given management’s statement that EPS was “right in line with expectations,” and the confirmation of full-year guidance despite worsened hydrology/ERM, consensus adjustments may focus on the updated negative ERM impact and potential margin uplift from the large customer agreement .

Key Takeaways for Investors

• Sequential seasonality plus ERM headwinds drove EPS to $0.91; YoY growth reflects rate case benefits and stronger utility margin; full-year EPS guidance maintained .
• Bold change in ERM outlook: full-year ERM now a negative ~$0.07/share versus prior neutral — monitor Washington ERM modification proposal, which could reduce volatility and improve future guidance precision .
• Financing improved: remarketed $83.7M tax‑exempt bonds at 3.875% and do not expect further long-term debt issuance in 2024; equity issuance of ~$70M still planned — reduces rate risk and supports capex .
• Capital execution remains a core driver: $500M 2024 utility capex, Post Falls modernization underway with DOE grant; wildfire mitigation spend of ~$55M in 2024 indicates proactive risk management .
• A prospective large customer contract by end-Q2 could be a near-term offset to ERM, serving as a potential positive catalyst if finalized .
• Near-term trading: sensitivity to hydrology and wholesale power prices remains high; watch for Q2 update on customer agreement and any signals from WA regulatory proceedings on ERM .
• Medium-term thesis: rate base growth and constructive outcomes in WA/OR/ID cases underpin 4–6% long-term EPS growth off a 2025 base; execution on clean generation/transmission and grid hardening supports durability .