AVA - Earnings call transcript Q4 2018

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Operator

Good morning. And welcome to the Fourth Quarter 2018 Earnings Conference Call. My name is Brandon, and I will be your operator for today. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. this being note Please Instructions] conference recorded. is [Operator it Jason Lang. I will to turn now And over

You sir. may begin,

Jason Lang

Thank you, call. Brandon. fourth quarter Good morning, everyone. fiscal XXXX Welcome year earnings conference and to Avista’s

and Our released earnings on pre-market morning were our are this website. available

like Corp. Dennis are CEO, Senior External Customer statements and and Vermillion; to and Vice this President the Thies; Mark the uncertainties, Officer, President Morris; and assumptions, change. Controller, to some be I of Chief would risks subject Avista everyone President, Ryan of remind Vice me Board statements made Chairman Kevin Joining Krasselt. Avista that Vice CFO, morning today that and Scott Corp. and Christie; will that President, are are Affairs which forward-looking involve

the the cause differ could XXXX, in to quarter reference the would to actual in call like which financial for factors release. to from recap which materially available begin XX-K our presented please various XX-Q third I to our and today’s today’s website. presentation, refer discussed results To those on this of press are XXXX results for For

Our for earnings fourth to per compared diluted of for $X.XX were quarter the share, XXXX consolidated of XXXX. $X.XX quarter the fourth

year earnings full $X.XX last $X.XX share per year. diluted XXXX, the For consolidated compared were for to a

Now, over the to discussion I turn will Scott.

Scott Morris

We want believe provide utility thank their and have been same them in continue have I a Oregon, in as we on were we parties by would agreements were the collaborating agreements tremendous company to in emphasized with the and reflected to were various the ensuring want transaction the celebrate the including the independent effort One a timely just with express Hydro want to We this a were involved. to Council We because not staffs operate to the process, outstanding a who Well, everyone allowed the collaboration as to in thank able worked of and you, agreements of to months their the as Washington, stakeholders the Jason, we for and over and while we transaction values off, are all us Montana everyone. dedicated reach this The we are we and to as parties, -- Idaho company, that our parties to of reached my reached enjoyed interest employees, interests the over months. disappointed an Hydro service. stakeholders, outstanding employees all this and successful XX deepest obtaining on One benefits communities them to our our serving and to gratitude of I commitment and And able that of of contain the industry. agreements unprecedented To the partner. would and our I good that joint customers, as committed approval, morning, level in remarkable effort we stakeholders. unprecedented achieve the and who with start our effort by were and would thinking last everyone us The Throughout in to our shareholders. well few. past Alaska, innovative well great transaction future. wish Washington, our our XX name involved, the Public best all safeguards agreements all our and serve as regulatory

Avista we and to on reliable providing was I not safe unequal who is and nearly Lastly, XXX-year building forward though let legacy. energy distract our we thank our well-positioned and never transaction and transaction employees, that them believe our even want customers dedication from our to completed, to and communities, this look the

half with first invest continue capital at focused capital expect rate not in -- the requested effective in to And in the dates costs, remain our facilitate of we $XX our addition to at and utility Idaho prudent capital recovery our strategy we of in that to million investments early to continued other XXXX to XXXX. expenditures and and to about our the businesses infrastructure and latest timely related innovations utility house college maintain like services reliable development and programs. are projects general cases degree environmental file service building we that will invest And our provide running included to that prudent Washington, energy great in mainly economic ahead, Looking in This on and update rates, several in customers. Oregon to including energy we our is XXXX. expect local our current territory and a showcase

with earnings Looking that our had pleased Avista XXXX earnings back we AEL&P and expectations. utilities were results above are our to

We remaining from of a are the Hydro includes share, costs. and diluted which our to One received termination earnings initiating guidance per range diluted payment consolidated $X.XX share a diluted per XXXX the for with per $X.XX fee of share transaction $X.XX a

this time, it going Mark. I over at So, to to am turn

Mark Thies

you, we Thank have playoff hockey always back to won Scott. are Blackhawks with start my out into six so things discussion, I morning, looking Good in like up. are reference everyone. row and

per quarter share For the Utilities fourth diluted per contributed share, Avista last XXXX, compared $X.XX $X.XX diluted of to year.

a diluted increase in $X.XX the and increases, year. spent the in and $X.XX year, Avista an was per diluted rate in depreciation versus increase The Utilities per growth XXXX, a costs by in general quarter fourth share last operation full cost, interests in and increased customer the the from maintenance. year-to-date For transaction share to due cost XXXX and was offset partially decrease primarily

As necessary XXXX. AEL&P’s and million invest to $XXX about infrastructure Avista expect the be capital be we Scott capital in million to Utilities’ utility continue our about be and capital committed $X said, in to to we in

fee and fee costs, corporate to had balance used January XXXX. purposes of purpose share transaction taxes clearer. related these Hydro For million $X.XX our diluted guidance $XX make share, for initiating of we in just in to equity external for long-term In bit XX of ongoing proceedings. I for and liquidity, costs plan the capital the for incurred XXXX months, focus things need order of will and proceedings fund of general from in the -- Due to structure. received a so this the an commissions could fee and part spend file guidance to mentioned, expect want to and which costs. $XX could not make merger financing. earnings on are income finance issue to maturing of Hydro One the in elected diluted regulatory diluted XXXX, million general and their -- we $XXX to for appropriate to $X.XX from includes million transaction debt, and Scott staffs reduces sure $X.XX The the up be be to thing little cases our our One capital we termination XXXX, we reimbursing per time $XXX refinance related long-term on to just debt including our be to the the to we million rate maintain termination to termination are share the year past in -- related per focus per

had in a we that increase Idaho two-year approved received effective in a X While we related January ‘XX. base rate plan to

infrastructure in in enhance ‘XX. to ‘XX And invest costs system not maintain utility we portions have of to rates during rate limited of and Oregon in continue relief May base customers. are since ‘XX our in to November only of had since reflected and We these our ‘XX Washington current

rate the remedying to due regulatory -- to filings. lag. the half such, regulatory through As XXXX the delay in in cases begin through and ‘XX through first we lag to in ‘XX, with Idaho expect requested days file rate Oregon case of plan our XXXX, Washington, to from effective our in incur early in We

Going achieve to reduce more forward, timing strive from closely returns rate by aligned we of this to earnings XXXX. an growth we those will earned lag anticipate continue the X% To XXXX to and XX% with authorized XXXX. our to

from XXXX the termination also We we are removing using are base, a that. as fee but

utility and rate XXXX. relief growing jurisdictions. our well guidance, to the base And if $X.XX XXXX timely out as look of our this X% again, fee growth are we X% you take and in So XX% each rate termination assumes our that then and at XXXX at for to then you to appropriate beyond the normal from the X%

approximately XXXX encompasses in X.X% unrecovered XXXX. guidance basis includes guidance earnings Utilities points. by return cost XXXX in basis expected for on the Avista our which Our in the to approximately XX results by And points, structural addition lag equity on reduce equity that estimated our approximately XXX return of return timing equity on reduces regulatory

fee received include transaction includes by We not diluted the any share share Hydro to contribute per and in costs. One in diluted per termination The of or of our range the of expect midpoint remaining under Avista ERM $X.XX the diluted per does to guidance share of payment which Washington. expense in $X.XX the again benefit Utilities ‘XX, offset from $X.XX

diluted to expected is a a for add customer, -- current $X.XX ERM expectation Our which in benefit company position band, with XX% be share. sharing the XX% share is per

precipitation, hydroelectric Avista Our for outlook for temperatures Utilities assumes and normal generation year. the

per also assumes expect the share diluted in for to we range our for AEL&P year. AEL&P of per hydroelectric $X.XX $X.XX normal in XXXX, share the diluted to and For contribute outlook generation precipitation

exploring diluted and other share, opportunities. strategic of between $X.XX a includes of share with our diluted a expect to businesses loss We per associated be per costs which $X.XX loss

generally known. over dispositions includes actual normal or call not now only include as items back positions unusual the guidance settlement effects Our until I will does and transactions conditions the turn operating Jason. or to such are

Jason Lang

up to open Mark. like the for Brandon, call would Thanks, questions. we

Operator

ExodusPoint ahead. Thank Please Andrew you. from Levi. [Operator Instructions] And have go we

Andrew Levi

guys. Can me? you hear Hi,

Mark Thies

Andy. can We Yeah.

Andrew Levi

you, are How time? long

Mark Thies

Good.

time. Yourself. Yeah. Long

Andrew Levi

well. Welcome as back. Good

sheet, of that, FFO Just more the where because don’t kind but if of on what debt, ratio you be on questions metrics talk on you I metrics and first equity what can we your, or XX about ml, a I you to should don’t is guess, year just you are at you be. know focused mind, are where end at see your of utility whether and the you should are if the couple I focused do issuing the going on, focused to the -- the where just balance

Mark Thies

equity or strive achieve for jurisdictions that our that’s a our in that we But jurisdiction. by we how so prudent capital ratio that’s it by in to maintain an vary really the what’s those look given each much year look allowed and we structure do how is equity and with need at we line what and commissions of So at. to is authorized raise metrics a

also our sure ratio really equity of to part is rating credit grade investment that make we of equity the that investment look the to and at designed ratings agencies are level our strong FFO takes maintaining We grade, But our on utility it. for jurisdictions. maintain

Andrew Levi

understand. I

that at can ‘XX and so, modeling the basis? the your then look to as didn’t and balance equity, sheet, any I kind of equity whatever be the at if end But your there So, looking be kind are at the ratio where million need I gets that guess, that you give was. where tax how coming you had And $XXX we on again, then million isn’t? you it But on, and of apologize. a in regulatory look between guidance your I and ‘XX, that of $XX you us should there you

Mark Thies

we what given, We what continue there. --as type to to continue equity and on from that -- relief for given deploy capital lot haven’t A really our guidance need of of we haven’t Andy our on jurisdictions. really depends we get we we

that that than We give an we can that… don’t give basis. farther annual So We historically consider that. on

Andrew Levi

Okay.

Mark Thies

future in we but calls, … not done that. have

Andrew Levi

off X%, pretty and And midpoint were are every you then only make I on XXXX the XX%? X%, XX% is it. that sure, or we grow in XXXX using then we clear guidance, mean, grow that $X.XX just so and that $X.XX but we year the take Got of

Mark Thies

-- this with takes Again some our and relief jurisdictions that... this in takes

Andrew Levi

Yeah.

Of course.

Mark Thies

allow and the …but that’s ‘XX end earning by rate ‘XX. annual to end -- allowed us an of that’s annual get growth our return growth of to to back

Andrew Levi

earn you But the off is what you or off is ‘XX XXXX? what in that $X.XX ever,

Mark Thies

$X.XX $X.XX, -- I think $X.XX, it’s a yeah.

Andrew Levi

Okay.

Mark Thies

Yes.

Andrew Levi

Okay.

Mark Thies

Yes.

Andrew Levi

Okay.

-- $X.XX So okay.

$X don’t has I in and that around sorry. XXXX chugging you So know,

Mark Thies

do can math, You Andy. the

Andrew Levi

Yeah. Yeah.

Okay.

type So it’s and like ‘XX number XXX for [ph] ‘XX.

on and cases size you in just filing very, filings or That’s portion, -- should would lag you past, larger like cases? rate be think very the that type of the relief because of Okay. the about clear and have what of the we than how lack assumes, for kind of the

Kevin Christie

Hi, Andy. This is Kevin Christie.

we gas We electric moving lag that be jurisdiction. and rate are get will not look forward. to making on we side lag, in our yet. the handle have on the to finalize need do filings what numbers rates like a up both We timing each and in But better will related capital exactly for

right that’s our to that be assuming what with can’t we we we forward support now, move you share commissions. we doing from going number So our are but as get

Andrew Levi

Okay.

appreciate You guys I clear. very Julian’s for that Boston you it guys were and guess in thing? really will up I be

Mark Thies

don’t don’t conferences. I I up, know know, know for I that’s coming what

Andrew Levi

Yeah. got road, you, Come conference. to thank the Come but the Come time you on. we with on to back with meet very on get much.

Mark Thies

Andy. Thanks

Andrew Levi

Yeah.

Operator

have From Ridzon. KeyBanc Paul go we Please ahead.

Paul Ridzon

you. Thank

So third you equity. in said $XXX of the you about needed quarter million

came are strength the XXXX getting was, just it of $XX are telling from breakup you You finally us you need $XX deal million out? and only that million kind the what fee now where backfill of

Mark Thies

next my so There question, Got Andy if sorry. Paul… sorry, to get was, you recall, No. --Paul, to

Paul Ridzon

that man, hurt… Man, Oh!

Mark Thies

I apologize. that’s I -- know apologize, I Paul,

didn’t the with right, we had the transaction close was year and transaction, significant transaction those our structure, to would the closure didn’t… reduced were the balance our in which costs with we quarter, so guidance because when occur, XXXX, capital year in third would that assuming that of associated So have One in needed other the from of infusion we equity our we last would an Hydro more costs there have

Paul Ridzon

So that’s the have rate relief that would you booked?

Mark Thies

$XXX not year an we associated had with we that so was equity our they pay that relief, It’s that equity in and didn’t and in rate equity, time needs last occur, contribution million. expenses the it that would included to transaction had was have at No. it’s

fees to now, is this expect we the the structure. then less right know need capital we we to million our this additional of got balance termination and equity and an payment you So issue $XX year

Paul Ridzon

then, or am ‘XX? is confused to ‘XX on a growth earnings ‘XX So to the is to wording to I And The more X% it. last just after Got get I and question. little got XX% ‘XX trying that the… confused

Mark Thies

And ‘XX, ‘XX. year, ‘XX right. then you in is will grow the base ‘XX and

Paul Ridzon

‘XX But also does is XX%? -- to ‘XX, that between the that and X% incorporate

Mark Thies

It’s does. It Yes. an growth… annual

Paul Ridzon

Okay.

Mark Thies

growth annual rate. …an

Paul Ridzon

-- you said ‘XX, clarification, between it helpful. what’s phrase I bridge but sure ‘XX you wasn’t ‘XX for way the ‘XX, the and The release it’s so to the thank

Mark Thies

you. Thank

Paul Ridzon

past? you have other that that efficiency of can -- explored us in kind energy flavor, energy And and exploring is some are type you other all you opportunities, that related give stuff the of

Scott Morris

Yeah. Scott. Yes. Yes, Paul. This is

primarily continue some some things that are We at teams distribution, things working and our others around engineering and in investigate looking opportunities there marketplace, we -- around we some automation, on, other innovation some of will the have to those. are interesting out there so

Paul Ridzon

you Thank much. very

Mark Thies

Paul. Thanks,

Operator

from And Glenrock ahead. have go Patterson. Associates, Paul Please we

Paul Patterson

Hey. Good morning.

Mark Thies

Paul. morning, Good

Paul Patterson

questions will basis base these answered. point to The A of deficit is a But to structural touch change of XX the want you things. lot speak few just correct. on see ROE, the in so that that, are

Mark Thies

No.

Reform up lower of a get Tax we been that’s a a benefit because it We it be of went a to tax used from expect little that historically there little it. time, but long for bit, less

up those the but slightly change, So costs it really end ended didn’t higher. being at of the day

to I but basis used basis basis think or points that’s Tax Reform. have due its points XX to and XX at we XX all now points, it

Paul Patterson

you will And few the changing that next years. over see

Mark Thies

No. Those kind historical… costs are of

Paul Patterson

Okay.

Mark Thies

… it primarily up executive and… more mix of directors incentives, doesn’t as costs

Paul Patterson

got I you. understand. I

Mark Thies

Okay.

Paul Patterson

transaction major thought share of like you through in terms of outlook looking But or just or that with sort learned forward here, obviously have in effort, a combinations the us. possible activity would mean, went guys should we future of sort the then I to you for the any lessons

Scott Morris

customers, those would we stakeholders. able stool that extremely were all net have and all states is be was states, the in in accomplished tremendous still very focused We opportunity challenging but you to absolute our unprecedented of Being that five benefit to a to states and five not got were also having states values value One tremendous say employees being anything those have utility industry. legs I even our it extraordinary to unprecedented safeguards states. was the some And to in that and it’s this is our Hydro communities. got in for our the deal do safeguards get I of for anything an mention What that operates an we shareholders, our have that accepted. to of our four and get commitment having and value our for

need continue So future we we to will to work do to on on what We to really continue strategies. are going focused our to hard forward. our we move and this company like stay

Paul Patterson

wondering say, political just factor in Nonetheless, an the to would situation regulatory somewhat, kind seem in am of I not the developments with it was that sort insignificantly and Canada outcome. of unusual perhaps, I

So, what without does -- wondering political I the you that that something perhaps issues. potential again mean am is I pursue that that like guess, of might sort

Scott Morris

stay I company to say some don’t because now from from with to agendas we in, really political want from in we an we can perspective. energy We just states the want -- get back focused that track I regulatory speculate, to different on need lag operate particularly right do what perspective. to this very five on

So, and there. you very and Montana from Alaska have different got Idaho, Washington different Oregon is

into So getting from has approved. expectation a multiple a lot all and perspective. from there’s of thing regulatory regards just it And that environmental a to we doing on perspective, successfully from community in from regulatory perspective, any going not levels do an kind to a but be something of added that perspective

diverse us in So, it’s what say ideas of and while out. Toronto turned do challenging no just environment and an that our I the for five yes a we matter that agenda states disappointing was would was stakeholders. it there given in objectives how

Paul Patterson

the for filings, your What going this you this that period Feb relief words rate after laid those then, during In finally times after on in is And filings, XXXX another expectation for? Great. how for initial just many XXXX out Okay. filings. forecast regulatory

Kevin Christie

Yeah. This Kevin… is

Paul Patterson

like you how going do expect many the be first guys initial initial Hydro set are forward, the In mean, fillings, what arena of follow back said holding other about think how after I that One do regulatory should to you words you filings? do it basically -- we how during me, after often merger, in times, back this you this

Kevin Christie

in after Due This somewhat this we Oregon varies. our to state back rules Christie. around what expect determined, We’d work to next the is case within have need to soon to looks there. to then from in yet it through Kevin be fillings be we each Washington and the time Idaho will go like

Paul Patterson

Thanks Okay. so much.

Mark Thies

Paul. Thanks

Operator

From have Pourreza. Shar ahead. Guggenheim we Please go

Constantine Lednev

Hi. Good morning. actually taking for questions. for Shar. It’s Thanks Constantine Lednev the

Mark Thies

morning. Good

Constantine Lednev

of assumptions stuff that’s can or already relatively of kind appropriate structure, was lot answered ask of cases, When we because there? that Since that good the I the little put the for you morning. relief rate wanted A lot to a -- of the bit. was the rate broad and going like and going of about what’s to staying just stuff in of are talk kind commission these an in capital ROE’s already any there terms same plan the be of front think in clarify

Mark Thies

really needs we our continue maintain as the been capital is, wouldn’t system request, requests that system. and last I vibrancy to for have spending historically spend the expect from over anticipate what been to the in we of -- significant mentioned several consistent movement Kevin we think have the significant earlier the as we have that our and reason there we capital the years

we changing So think don’t have -- rate to or we not I looking capital. don’t are Kevin and ask a there file are return of is going significantly perspective cases consistently I for are to

Kevin Christie

that’s that. be Yeah. pretty all spend This practices I about with consistent would and capital been expect recovering Kevin. past to is that

Constantine Lednev

points One kind you expected you mentioned that Okay. I have of think, and points. Yeah. rate guided or XX XXX basis And to base. the basis on structural small lag be nuance, is in other a the remarks, prepared roughly

Mark Thies

and XX -- was basis a regulatory XXX was points points points structural refer lag. basis -- was the basis ‘XX to XX is what So timing in we

Constantine Lednev

Yeah.

Thank it. clarifying for you Got that. Okay.

Mark Thies

you. Thank

welcome. are You

Constantine Lednev

Thanks. me. for it That’s

Mark Thies

Thank you.

Operator

Capital From Please go Vedula Murti. have Avon we ahead.

Vedula Murti

Good morning.

Mark Thies

Vedula. Hi,

Vedula Murti

are consistently to a about you ROE, of as three X% take that guidance use part I year am $X.XX. the ERM that I period. XX% topic, that normalize the look good. forecast the we When think or growth maintained is the, that able $X.XX will same to anticipate your rate for When again, do ERM guess, growth the the to be years to some for Avista old the Utilities $X.XX should over exclude $X targeting you we trajectory feel that be this your reason you from $X.XX around at excluding we to

Mark Thies

from right we When mid-point we the are about on now. the and the ERM of ERM rate, is, about guidance talking based are are guiding exclude we -- we power when growth our The talking supply that.

on We are in power order that can cost for teams as on not filing Washington. the change work last But supply our commission things. based

is to our of of mid-point consolidated guide our we the guidance what that guidance growth mid-point So excluding the off and is basis. rate ERM on the a

Vedula Murti

Westmoreland am Coal, And bankruptcy of My is proceeding is that bankruptcy a issue kind of about for me the may re-pricing or of for what of coal part supplier topic. you potentially affect wondering in there on the kind explain type may Colstrip guys? me Colstrip can in for mean just coal tariffs, and it fuel a also as that is the restructuring where you so is understanding update who could not currently stands thing. different and obviously that I or that

Mark Thies

are I bankruptcy. they mean, is ongoing, bankruptcy Well, an their that’s

You the bankruptcy an are to on ongoing until comment don’t comment on. between that really and are we have correct. in negotiation something and They we that’s parties

that that. on contract coal supply until and know a will extent expecting to now the will we continue to have and operate it we that out we something comes impacts we that differently. plant we future put if and are So will we Right out us guides then to

Vedula Murti

regulatory not price, would what reason, coal or the some there or filing be are it would -- handled? for If deal, to other be higher be a ways mechanism of the contract there simply resolution is some that in can’t bankruptcy the results

Mark Thies

supply of supply all the that energy the that our the it mean, to I goes, cost we may base to and it cost, part add then through would we would run as power through have our changed supply And consider our costs runs ERM. Well power extent recovery enough, mechanism filing runs of will the what and part a don’t general we more know normal to and that’s the when a have filing, that rate and through the filings that. this provide we ERM But market. will be of for I information more know resolution color,

Vedula Murti

net -- are So go the coal pricing other the cut basically so emergence to contract again consequence actually the as the higher resolution -- that to go and if the then under kind if lower way? be prices peak fuel resulted -- in ERM would at of and ERM if will through and coal were this benefit a would and that will tariff current

Mark Thies

Yes.

Vedula Murti

Okay. Thank you very much.

Mark Thies

Thank you, Vedula

Operator

We [Operator Please have Instructions] ahead. up do Paul Ridzon. go a from follow

Paul Ridzon

a of again kind strategy the anticipate Washington, you in or re-plan multi-year file up bringing you what’s do there? When

Kevin Christie

time XXXX in it be order Kevin doesn’t look multi-year plan file feasible a again, court no, this to due rate will our it to around. GRC, like

file goes we from it that’s then how So there. one, go will and

Paul Ridzon

And timing make rate place going to you for to early you commissions the of to rates anything as to do cases far extraordinary in was regular then the XXXX. Are that have happen? look ask comment as

Kevin Christie

No.

Paul Ridzon

Okay.

be you assume, is filing I that would short in order So should fairly fair.

Kevin Christie

statement. fair That’s

Paul Ridzon

Okay. Thank you again.

Mark Thies

Paul. Thanks,

Operator

Instructions] [Operator

Scott Morris

That our seems questions. to be of all

great certainly We our today. us joining Have for everyone thank a company. your to in appreciate like interest day. would I So

Operator

joining. gentlemen. and Thank for today’s concludes ladies you conference. This you, Thank

disconnect. You may now

Avista (AVA) 8 Feb 192018 Q4 Earnings call transcript