Avista sees Q3 earnings rise to $0.36 per share, driven by utility operations and strategic initiatives, while affirming 2025 guidance amid investment opportunities.

OPERATOR - (00:01:32)

Good day and thank you for standing by. Welcome to the Avista Corporation Q3 2025 earnings conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised to withdraw your question. Please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Stacy Walters, Investor Relations Manager. Please go ahead.

Stacy Walters - Investor Relations Manager - (00:02:12)

Good morning. It's great to have you with us for Avista's third quarter 2025 earnings conference call. Our earnings and third quarter Form 10Q were released pre market this morning. You can find both documents on our website. Joining me today are AvistaCorp President and CEO Heather Rosentrader and Senior Vice President CFO Treasurer and Regulatory Affairs Officer Kevin Christie. We will be making forward looking statements during this call. These involve assumptions, risks and uncertainties which are subject to change. Various factors could cause actual results to differ materially from the expectations we discuss in today's call. Please refer to our Form 10K for 2024 and our Form 10Q for the third quarter of 2025 for a full discussion of these risk factors. Both are available on our website. I'll begin with a recap of the financial results presented in today's press release. Consolidated earnings year to date in 2025 were $1.51 per diluted share compared to $1.44 year to date in 2024. For the third quarter of 2025, our consolidated earnings were $0.36 per diluted share compared to $0.23 per diluted share for the third quarter of 2024. Now I'll turn the call over to Heather Rosentrader.

Heather Rosentrader - President and CEO - (00:03:39)

Thank you Stacy. I want to start by highlighting that our third quarter results underscore the strength of our core utility operations and our disciplined approach to cost management. Year to date results at Avista utilities of $1.63 per diluted share reflect a nearly 15% increase over 2024's year to date results. This reflects the constructive regulatory outcomes and diligent capital deployment that continue to enhance our to advance our long-term strategy as we pursue our strategic initiatives, including the projects shortlisted in our 2025 Request for Proposals or RFP. We remain firmly committed to supporting reliable and affordable customer service, community investment and shareholder value. Today we are affirming our earnings guidance with Avista Utilities expected to be at the upper end of its guidance range and consolidated results expected at the lower end of the range due to valuation losses in our other businesses during the first half of the year. The 2025 wildfire season has ended and I'm pleased with the significant progress we've made with our Wildfire Resiliency Program. We concluded the season without needing to initiate a public safety power shutoff, fortunately, but we were well prepared to elevate our system into risk responsive levels as conditions warranted. This success is the direct result of strategic grid and process improvements, continued collaboration with communities and first responders, and the dedication of our team. This summer we completed pilot projects for both strategic undergrounding and installation of covered conductor. We'll be building on this work going forward with the lessons learned informing our key decision making about where and how to deploy these technologies as we advance towards our grid hardening goals. In addition, we began installation of weather stations throughout our service territory. These stations bring critical real time data to our operations teams and inform future system design decisions. Our goal is to have a weather station installed on every circuit by 2029. We also expanded our network of AI enabled cameras giving our teams and first responders greater access to wildfire monitoring and early detection tools. By the end of 2026, we expect to have coverage of a majority of our high risk areas through these technologically advanced cameras. All these tools continue to improve and expand the data that goes into our Fire Weather Dashboard which enables us to react faster to changing conditions and better understand and mitigate risk. This month we will submit our Wildfire Mitigation Plan to the Idaho Public Utilities Commission. We've been filing our Wildfire Mitigation plans with the Commission for many years now. However, this will be the first wildfire mitigation plan filed after the Wildfire Standard of Care act was passed by the Idaho Legislature earlier this year. The new legislation establishes a standard of care for wildfire risk mitigation and utilities reasonably implementing their plans will now have protection against liability for wildfire. In Idaho and in Washington. We're working through the rulemaking process with other stakeholders following the Washington legislation also passed earlier this year around filing and approval of wildfire mitigation plans. We kicked off our 2025 All Source RFP back in May looking for up to 425 megawatts of new capacity and at least 5 megawatts of demand response. As I mentioned in last quarter's earnings call, we saw a positive response to the RFP receiving over 80 bids with 69 supply side bids totaling nearly 14 gigawatts of capacity and 17 demand response projects offering almost 300 megawatts. We've narrowed the responses down to a short list and these bidders sent in more detailed proposals in October. There's one final chance for bidders to refresh their prices this month. From there, we'll make our final project selections and start negotiations before the year ends. The short list has diverse options with supply side resources like wind, solar storage, both stand-alone and hybrid, and thermal, as well as demand response projects. There's a mix of ownership options too, including self builds, build-transfer agreements and power purchase agreements, which gives us more financial flexibility. Some projects are in Montana and could leverage our existing transmission resources in the state as modeled in our Integrated Resource Plan. A big focus is on taking advantage of federal tax credits before they expire. To fully qualify, selected projects need to begin construction by July 2026 and be online by 2029 to 2030. We are working with shortlist bidders to make sure everyone's on track to meet those deadlines and get the most out of any applicable tax credits. I continue to be optimistic about the opportunities ahead, particularly as we engage with potential large load customers. These conversations are increasingly central to our long term planning and investment strategy. Our RFP is helping us evaluate new generation resources and system capacity and is playing a key role in informing our discussions with large industrial customers who are exploring expansion opportunities within our service territory. We're working closely with several of these potential customers to assess how incremental load can be integrated into our system in a way that supports reliability, affordability and long term value. Serving this level of demand will require not only new generation but also regional grid expansion. System impact studies show we have capacity to accommodate a portion of these requests with these near term opportunities best suited to serve customers with scalable implementation capability. We are committed to being competitive in attracting these loads and we view them as an important tool to support customer affordability and as a catalyst for innovation, infrastructure investment and long term value creation. We'll continue to update you on our progress in future calls. Now I'll hand the call to Kevin for more discussion of our earnings.

Kevin Christie - Senior Vice President, CFO, Treasurer and Regulatory Affairs Officer - (00:10:38)

Thank you Heather. I'm pleased to report a beat to market expectations with our third quarter financial results. Our third quarter results reflect significant growth from the same period in 2024. The strength of our consistent operational execution, including constructive regulatory outcomes, customer load growth, and our continuing commitment to cost discipline drive our success alongside our other initiatives. Regulatory outcomes are key to our progress and in the third quarter we implemented constructive approved settlements of both our Oregon and Idaho general rate cases. We expect to file our next Washington general rate case in the first quarter of 2026. In Washington, we were required to file multi year rate plans of at least two and up to four years. While many of the details of the case are still in development, we are evaluating whether we file a two year, three year or four year rate plan. With good regulatory alignment, we are confident that a longer rate plan can be beneficial for us and our customers. The law also provides us with the ability to file a new plan during a three or a four year rate plan if necessary. We continually invest in our utility infrastructure to support customer growth and maintain our. Systems so that we can safely and. Reliably serve our customers. Capital expenditures at Avista utilities were $363 million in the first three quarters of 2025. We expect capital expenditures of $525 million in 2025. From 2025 through 2030, we expect capital expenditures of $3.7 billion resulting in an annual growth rate of 6%. In addition to this base capital, our current estimate of the potential capital opportunity for both our RFP and the addition of a potential large load customer is up to 500 million from 2026 through 2029. If these opportunities materialize, we expect the potential capital to be weighted approximately75/25 between a potential new large load customer and self build opportunities. We also expect that this potential investment would be spread somewhat evenly throughout the four year period. These estimates do not include any incremental capital requirements that could result from incremental transmission projects like regional grid expansions. In July we issued $120 million of long term debt and we do not expect further debt issuances this year. We expect to issue up to $80 million of common stock in 2025. That includes $45 million which was issued during the first 3/4 of the year. In 2026 we expect to issue approximately $120 million of long term debt and up to $80 million of Common Stock. We are confirming our consolidated earnings guidance with a range of $2.52 to $2.72 per diluted share for 2025 as a result of the $0.16 of losses associated with our investment portfolio year to date we expect to be at the low end of the consolidated range. We expect the Vista Utilities to contribute toward the upper end of the range of $2.43 to $2.61 per diluted share. Our guidance for Avista Utilities includes an expected negative impact from the energy recovery mechanism of $0.14 in the 90% customer, 10% company sharing band. We have incurred $0.12 under the ERM. Year to date due to the staggered timing of rate cases throughout our multiple jurisdictions. Going forward, our expected return on equity. At Avista Utilities is 8.8%. Avista Energy and Load Management Program continues to perform well and we expect it to contribute 9 to 11 cents per diluted share over the long term. We expect that our earnings will grow. 4 to 6% from the midpoint of our 2025 guidance. I'd like to finish by saying that. At Avista we have positive momentum, our core business is performing per our expectations, and we have much to be optimistic. About as we look to execute upon our business plans. Now. We'll be happy to take your questions.

OPERATOR - (00:15:02)

Thank you. At this time, we will conduct questions in session as a reminder to ask check a question you can name star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please wait while we compile the Q and A roster. Our first question comes from the line of Char Pereza with Wells Fargo. Your line is now open.

Alex - (00:15:31)

Hey, good morning everyone. It's actually Alex on for Char Pereza. Thanks for taking our questions.

Kevin Christie - Senior Vice President, CFO, Treasurer and Regulatory Affairs Officer - (00:15:36)

Hi there, Alex.

Alex - (00:15:37)

Good morning.

Kevin Christie - Senior Vice President, CFO, Treasurer and Regulatory Affairs Officer - (00:15:38)

Hey, good morning.

Alex - (00:15:39)

Good morning. Good morning. So just on the 80 million equity needs you have out there for 26, you know you have a lot of incremental capex opportunities you've highlighted. So just want to get a sense on additional funding sources. Would you look at other avenues and you know, maybe what about a diversification divestiture of your other business to fund the growth at the utility? Is that something you'd consider? Thanks.

Kevin Christie - Senior Vice President, CFO, Treasurer and Regulatory Affairs Officer - (00:16:02)

Yeah, thanks for the question, Alex. Yeah, we're, we're indicating that an expectation of up to 80 million for 2026 as we mentioned. And if we are fortunate enough to have additional spending opportunity or capital investment opportunity for the RFP large customer or both, then that might change the equity needs, but not significantly. So, and I would continue to expect that we would use our periodic offering program as the vehicle. It's not a significant enough increase in equity needs that we would need to do something more dramatic by making a sale of some business or something like that.

Alex - (00:16:44)

Okay, got it. And just sort of just the messaging just around looks like the rate base outlook from 5 to 6%. You're now expecting that 6% at the utility. Can you just remind us if that includes the incremental CapEx opportunities you've highlighted or that push you past that 6%? And can you just Walk us through what that means to your 4 to 6 earnings range over the long term. Thanks.

Kevin Christie - Senior Vice President, CFO, Treasurer and Regulatory Affairs Officer - (00:17:09)

As we continue to have opportunity to add to or capital plan and if. It comes in the form of the. Items we highlighted and or additional transmission. That would help take us toward the. Top end of our growth range that we stayed at 4 to 6%. I don't believe it would take us above that. But let's see what happens with large loads and there's a. As Heather indicated, there's a lot of great conversation going on with potential developers.

Alex - (00:17:40)

Great, that's super helpful. I'll leave it there. Thank you.

Kevin Christie - Senior Vice President, CFO, Treasurer and Regulatory Affairs Officer - (00:17:43)

Thanks Alex.

OPERATOR - (00:17:45)

As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. Our next question comes from the line of Julian Dumoulin Smith with Jeffries. Your line is now open.

Brian - (00:18:00)

Yeah, hi, good morning, it's Brian. Restaurant for Julian.

Kevin Christie - Senior Vice President, CFO, Treasurer and Regulatory Affairs Officer - (00:18:04)

Hi Brian.

Brian - (00:18:05)

Good morning. Good morning. Hey, just on the upcoming Washington MYRP filing, you know you mentioned you're evaluating the two or three or four year plan. Just you know, curious. How do you manage around, you know, external risks of inflation and interest rates and even power costs while under more than the two year plan that you're currently in. Would you need to seek modifications to kind of insulate yourself from power costs?

Kevin Christie - Senior Vice President, CFO, Treasurer and Regulatory Affairs Officer - (00:18:45)

Well, there's a few aspects here that I want to get into with you Brian. First, after a two year period, so. Let'S say hypothetically speaking that we file a four year and we move our. Way through the first couple of years or even just the first year and. We find that we're off track either because of inflation or we've had additional investment opportunities that aren't reflected in the case, then we have the opportunity to refile. So that case then becomes a two year and you in essence start over. So we've got a wonderful set of. Optionality to move forward if we need to by in essence cutting that case back from three or four years to. A two year your case. In addition, as we think about how we would proceed and again these pieces are all coming together so it's all preliminary. We would expect to have power supply. Resets in each subsequent year. At least that would be our objective as we go into the case. So when you ask about the irm, that's how we would address that. Now I'll just proactively answer a question about the erm. We have talked about how the outcome from the last case wasn't quite what we had hoped it would be in Washington and we've gone through that workshop process that we felt we were obligated to do, had great conversations with the parties that involve get involved in these workshops. And our approach going into this next case is to likely not try to. Modify the IRM itself. And that's because of the order that we heard from in our last case in the commission, the words that they used. And Puget is still out working on a proceeding that comes. Well, I think towards the middle of next year we'll have a better idea of whether or not Puget had success modifying their like mechanism. So we're going to set the ERM. Aside for now and then we're going to look to see if Puget has success. And if they do, then we'll try to move forward with something similar. And what we're going to focus on is resetting power supply costs at a more appropriate level. And we think we have a path to setting power supply at that more appropriate level. And if we're able to do that, then the impact of the ERM is somewhat muted.

Brian - (00:21:11)

Okay, great. I think. Are we still assuming a power cost drag in 2026 per your most recent disclosures?

Kevin Christie - Senior Vice President, CFO, Treasurer and Regulatory Affairs Officer - (00:21:23)

Yeah, I think our disclosures have covered that pretty well. I'll reinforce that without a change to the ERM and given how power supply was set in the last case, that we would expect a drag from the ERM now hopefully because of weather and other factors, it won't be as severe as it is in 2025, but it's. Too soon to be able to predict that.

Brian - (00:21:52)

Okay, great. And just can you remind us again on the other businesses how the mark to market works? I think there's a quarter lag. Right. So this September quarter actually reflected June mark to market values. So it's possible hypothetically in your year end update that could capture September clean energy investment values which arguably were well off their lows following the old triple B and executive order, et cetera.

Kevin Christie - Senior Vice President, CFO, Treasurer and Regulatory Affairs Officer - (00:22:31)

Yeah, you're following it pretty well, Brian. And there is a quarter lag for some of our investments, a fairly significant amount of the investments. And so this quarter reflects second quarter for those investments and we'll see how it turns out for the rest of the year. We're, as we've mentioned before, not able. To call the bottom, but we're encouraged. That we saw the impacts in the first half of the year and then this quarter it flattened out to some extent and the dust seems to be settling around some of the clean energy narrative that had been out there. So we're optimistic. But again it's hard for us to be able to call whether or not that will completely turn around by the time we are talking to you next quarter.

Brian - (00:23:14)

Okay, great. And then just lastly on the potential incremental capex, how should we think about kind of the mix of debt and equity financing? Is it 5050 or something different than that?

Kevin Christie - Senior Vice President, CFO, Treasurer and Regulatory Affairs Officer - (00:23:32)

Well, our base capital plan that we've described and the amount of debt versus equity for base capital for this year and as now we're describing for next year is 120 million debt, 80 million equity and then if we have incremental spending opportunities after that, there's of course a lot of complexities that we would. Have to work our way through. But generally speaking, I'd expect in incremental capital would be in roughly 50. 50.

Brian - (00:24:00)

Okay, got it. Well, thank you very much.

Kevin Christie - Senior Vice President, CFO, Treasurer and Regulatory Affairs Officer - (00:24:03)

Thank you, Brian. Thanks, Brian.

OPERATOR - (00:24:06)

Thank you. I am showing no further questions at this time. I would now like to turn it back to Stacey Walters for closing remarks.

Stacy Walters - Investor Relations Manager - (00:24:15)

Thank you all for joining us today and for your interest in Avista. Have a great.

OPERATOR - (00:24:22)

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.