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AVISTA CORP (AVA)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 EPS was $0.29, up from $0.23 in Q2 2023, and YTD EPS was $1.20 vs $0.96 last year; management confirmed FY 2024 consolidated EPS guidance of $2.36–$2.56 per diluted share .
  • Utility margin increased on the back of recent general rate cases; ERM delivered a $1.3M pretax benefit in Q2 but remained a $4.7M YTD pretax expense due to below-normal hydro and January cold-driven power purchases; management expects full-year ERM impact of -$0.07/share, substantially offset by a new large electric customer that began August 1 .
  • Liquidity and capex intact: ~$250.9M available under the line of credit and $43.5M under the letter of credit; Avista Utilities capex was $245.2M in H1 and remains guided at $500M for 2024; no additional long-term debt expected in 2024 .
  • Regulatory and infrastructure catalysts: Washington general rate case hearing starts Sept 30 with an order expected mid-December; IRP work points to transmission participation (Grid United North Plains Connector) and new renewables around 2029; a quarterly dividend of $0.475 was declared, payable Sept 13 .

What Went Well and What Went Wrong

  • What Went Well

    • Utility earnings in Q2 were “in line with expectations”; CEO: “We’re positioned well to deliver on our commitments to our shareholders and our customers” .
    • Grid investments boosted reliability during a prolonged regional heat wave; management highlighted better system performance vs past events .
    • Addition of a new large electric customer (effective Aug 1) expected to substantially offset higher power supply costs in 2024 .

  • What Went Wrong

    • Hydrology below normal and January cold snap elevated purchased power costs; ERM remained a YTD pretax expense of $4.7M in H1 (despite a $1.3M Q2 benefit) and is expected at -$0.07/share for FY 2024 .
    • Other operating expenses increased year-to-date on thermal generation, vegetation management, legal, employee medical, and amortizations of deferred costs (neutral to net income) .
    • Effective tax rate turned positive (2.9% in H1) vs negative prior year, with tax customer credits expected to be ~50% of 2023 levels, modestly reducing EPS tailwinds vs last year .

Financial Results

  • Consolidated EPS and Net Income
MetricQ4 2023Q1 2024Q2 2024
Diluted EPS ($)$1.08 $0.91 $0.29
Total Net Income ($USD Thousands)—$71,495 $22,858

Note: Q4 2023 net income was not disclosed in the documents read.

  • Segment Breakdown (Net Income and EPS)
SegmentQ2 2023 Net Income ($USD Thousands)Q2 2024 Net Income ($USD Thousands)Q2 2023 EPS ($)Q2 2024 EPS ($)
Avista Utilities$18,810 $23,935 $0.25 $0.31
AEL&P$1,359 $1,109 $0.02 $0.01
Other$(2,685) $(2,186) $(0.04) $(0.03)
Total$17,484 $22,858 $0.23 $0.29
  • Avista Utilities Operating Revenues and Utility Margin (Non-GAAP)
Metric ($USD Thousands)Q2 2023Q1 2024Q2 2024
Total Operating Revenues$368,604 $594,936 $390,814
Electric Operating Revenues$283,130 $366,894 $289,473
Natural Gas Operating Revenues$93,529 $233,907 $103,950
Utility Margin (Pre-Tax) Total$228,587 $302,428 $247,689
Utility Margin (Net of Tax) Total$180,584 $238,919 $195,674
Resource Costs Total$140,017 $292,508 $143,125
Income Taxes (Utility Margin)$48,003 $63,509 $52,015
  • KPIs and Other Metrics
KPIQ2 2024YTD / FY 2024
ERM Impact (Pretax)+$1,300k Q2 benefit -$4,700k pretax H1 expense ; -$0.07/share expected FY impact
Liquidity (Avista Corp)$250.9M LOC; $43.5M L/C (as of Jun 30) CFO: $251M LOC; $44M L/C (as of Jun 30)
Capex (Avista Utilities)$245.2M H1 $500M FY plan
Capex (AEL&P)$6.0M H1 $21M FY plan
Other Investments$5.1M invested YTD $11M FY plan
Equity Issuance$17.6M issued H1 ~$70M expected FY
Long-term Debt Issuance—Not expected in 2024
Dividend$0.475/share declared; payable Sept 13, 2024 —

Guidance Changes

MetricPeriodPrevious Guidance (Q1 2024)Current Guidance (Q2 2024)Change
Consolidated EPSFY 2024$2.36–$2.56 $2.36–$2.56 Maintained
Avista Utilities EPS ContributionFY 2024$2.23–$2.39 $2.23–$2.39 Maintained
AEL&P EPS ContributionFY 2024$0.09–$0.11 $0.09–$0.11 Maintained
Other Businesses EPS ContributionFY 2024$0.04–$0.06 $0.04–$0.06 Maintained
ERM ImpactFY 2024-$0.07/share (90% customer/10% company band) -$0.07/share (90% customer/10% company band) Maintained
Effective Tax RateFY 2024Positive ~1.8% (implied by Q1 outlook) Expected 1.8% Maintained
ROE (Avista Utilities)FY 2024~8.1% expected ~8.1% expected Maintained
Capex (Avista Utilities)FY 2024$500M $500M Maintained
Capex (AEL&P)FY 2024$21M $21M Maintained
Equity IssuanceFY 2024~$70M ~$70M (H1 actual $17.6M) Maintained
Long-term DebtFY 2024No additional LT debt expected No additional LT debt expected Maintained
DividendQ3 2024—$0.475/share declared; payable 9/13/24 New declaration
Washington GRC Schedule2H 2024Filed; settlement attempts ongoing Hearing Sep 30; order mid-Dec Timeline clarified

Earnings Call Themes & Trends

TopicQ4 2023 (Prev-2)Q1 2024 (Prev-1)Q2 2024 (Current)Trend
Wildfire mitigation & grid hardening2026 capex rising on wildfire projects; no bottom-line impact from 2023 fires ~$55M 2024 wildfire spend; PSPS added to toolkit System performed well in record July heat; continued vegetation mgmt and fire safety mode Improving preparedness
ERM and power supply costsProposed ERM modification to 95/5 sharing; 2023 ERM pretax expense $8.4M ERM -$6.0M pretax in Q1; expect -$0.07/share FY Q2 +$1.3M pretax; YTD -$4.7M; -$0.07/share FY within sharing band Stabilizing with offset from new customer
Integrated Resource Plan (IRP) & new renewablesEvaluating clean generation and transmission opportunities Resource adequacy concerns amid electrification; may accelerate generation needs Draft PRS shared in July; transmission participation (Grid United) considered; new renewables needed ~2029 Advancing planning
Large customer load addition—Anticipated by end of Q2 to offset ERM impact Commenced Aug 1; expected to offset higher power supply costs Positive margin driver
Regulatory trajectoryInitiated WA multiyear cases; >50% Year 1 power supply reset OR case in 2H 2024; ID in Q1 2025 WA rebuttal mid-Aug; hearing Sep 30; order mid-Dec Key catalyst approaching
Financing & liquidity2024 plan: ~$85M debt, ~$70M equity (initial) Remarketed $83.7M tax-exempt; no further 2024 debt ~$251M LOC and ~$44M L/C available; ~$70M equity in 2024 Equity-funding capex, debt steady

Management Commentary

  • “Our financial results demonstrate the strength of our core utility operations, as our second quarter utility earnings were in line with our expectations… we’re positioned well to deliver on our commitments to our shareholders and our customers.” — CEO Dennis Vermillion .
  • “Effective Aug. 1, we began serving this [new large electric] customer. We continue to expect this load to offset higher power supply costs in 2024.” — CFO Kevin Christie .
  • “July was the hottest month on record for the Spokane area… Our system performed well during the recent heatwave. The investments we've made in our grid… ensured strong and stable performance.” — President & COO Heather Rosentrater .
  • “We are confirming our earnings guidance for 2024 with a consolidated range of $2.36 to $2.56 per diluted share.” — CFO Kevin Christie .

Q&A Highlights

  • Transmission participation: Management is in discussions with utilities and Grid United on the North Plains Connector; views participation as promising and consistent with IRP strategy .
  • Washington rate case: Settlement window remains technically open, but near-term settlement unlikely given rebuttal timing; hearing Sep 30, order expected mid-December .
  • Large customer economics: 2024 incremental revenue is outside current rates; future margin treatment will be considered within power supply outcomes in the rate case .
  • Monetizing nonregulated investments: Possible if markets improve; would help equity needs but remains a small part of the business .

Estimates Context

  • We attempted to retrieve S&P Global consensus for Q2 2024 EPS and revenue; data was unavailable due to provider daily limit. As a result, comparisons versus Wall Street consensus are not included. We confirm actual EPS of $0.29 and Avista Utilities operating revenues of $390,814k for Q2 2024 from company documents .

Key Takeaways for Investors

  • Utility margin momentum from rate cases is supporting EPS growth, while ERM headwinds are being actively mitigated by the new large customer load; watch hydrology and late-year optimization for ERM trajectory .
  • Regulatory outcomes are the principal near-term catalyst: WA GRC hearing late September, order mid-December; constructive outcomes underpin the long-term 4–6% earnings growth target off 2025 .
  • Capex and funding plan are clear and conservative: $500M Avista Utilities capex for 2024, ~$70M equity issuance, no additional LT debt, ample liquidity under credit facilities .
  • Grid reliability and wildfire mitigation investments are proving out operationally (record July heat) and should continue to support customer and regulatory narratives .
  • Transmission and renewables pipeline (Grid United participation, renewables needed by 2029) position AVA for regional resource adequacy and future rate base growth .
  • Dividend continuity adds income stability; $0.475/share declared for Q3 2024 .
  • Near-term trading: Stock sensitivity likely tied to ERM updates, hydrology headlines, and WA case developments; medium-term thesis anchored to execution on IRP, transmission participation, and constructive regulatory outcomes .