Avista Corp (AVA) 2018 Q3 法說會逐字稿

Welcome to the Q3 2018 Earnings Conference Call. My name is Cheryl, and I will be your operator for today's call. (Operator Instructions) Please note that this conference call is being recorded.

I will now turn the call over to Jason Lang, Investor Relations Manager. Sir, you may begin.

Thank you, Cheryl. Good morning, everyone. Welcome to Avista's Third Quarter 2018 Earnings Conference Call. Our earnings and our third quarter 10-Q were released premarket this morning, and they're both available on our website at avistacorp.com.

Joining me this morning are Avista Corp. Chairman of the Board and CEO Scott Morris; Senior Vice President and CFO, Mark Thies; Avista Corp. President Dennis Vermillion; Vice President and Controller, Ryan Krasselt; and Director of Regulatory Affairs Pat Ehrbar.

I would like to remind everyone that some of the statements that will be made today are forward-looking statements that involve assumptions, risks and uncertainties, which are subject to change. For reference to the various factors which could cause actual results to differ materially from those discussed in today's call, please refer to our 10-K for 2017 and 10-Q for the third quarter of 2018, which are available on our website.

To begin this presentation, I would like to recap the financial results presented in today's press release. Our consolidated earnings for the third quarter of 2018 were $0.15 per diluted share compared to $0.07 for the third quarter of 2017. For the year-to-date, consolidated earnings were $1.37 per diluted share for both 2018 and 2017.

Now I'll just turn the discussion over to Scott.

Well, thank you, and good morning, everyone. To start off, I would like to provide an update on the Hydro One transaction. We continue to be fully committed to this transaction, and we're working through the regulatory processes at each of our commissions. Hearings in Washington have concluded, and we're awaiting the commission's decision. Hearings in Idaho and Oregon are scheduled to occur in the next several weeks, and we expect the transaction to close by the end of 2018.

During the third quarter, Hydro One announced the new members of their Board of Directors and the new board adopted a resolution reaffirming Hydro One's commitment to the merger and the related regulatory commitments.

With regards to earnings, we're pleased with our year-to-date results, and we remain on track to meet our annual expectations. For the first 3 quarters of 2018, we had consolidated earnings of above our expectations. For the third quarter, earnings at Avista Utilities and AEL&P were higher than expected. This was offset by losses on investments at our other businesses.

We are confirming our 2018 earnings guidance with a consolidated range of $0.30 to $0.60 per diluted share, which includes acquisition and regulatory commitment costs associated with the Hydro One transaction of $1.60 to $1.50 per diluted share.

Now I'm going to turn this over to Mark.

Thank you, Scott. Good morning, everyone. You may not have seen but the Blackhawks had big news and coach Q, who won 3 cups in 10 years, was fired yesterday. So we have a new era in Chicago hockey. Let's hope it's a good one.

For the third quarter of 2018, Avista Utilities contributed $0.18 per diluted share compared to $0.08 last year. And on a year-to-date basis, Avista Utilities contributed $1.39, an increase from $1.33 in the prior year.

The increase in earnings for the third quarter and year-to-date was due to general rate increases, customer growth and a decrease in acquisition costs all partially offset by increased operating and maintenance expense, interest and depreciation expense.

We continue to be committed to investing the necessary capital in our utility infrastructure. We expect Avista Utilities' capital expenditures to total about $435 million, which is an increase from our previous estimate of $405 million. The increase is primarily due to additional spending associated for capital for new electric and natural gas services.

During 2018, we issued $375 million of first mortgage bonds, and we don't expect to issue any additional long-term debt in 2018. And we expect -- through early 2019, we expect to raise up to $110 million of equity in order to fund planned capital expenditures, maintain an appropriate capital structure and for other general corporate purposes. The $110 million of equity may come through sales of our -- through our sales agency agreements or an equity contribution from Hydro One after the consummation of the acquisition or from a combination of those sources.

As Scott mentioned earlier, we are confirming our 2018 guidance for consolidated earnings to be in the range of $0.30 to $0.60 per diluted share. This includes acquisition and regulatory commitment costs associated with the Hydro One transaction of $1.60 to $1.50 per diluted share, assuming the transaction is completed in 2018.

We expect Avista Utilities to contribute in the range of $0.31 to $0.55 per diluted share in 2018, and this includes acquisition again and regulatory commitment costs of the $1.60 to $1.50.

The midpoint of our Avista Utilities' guidance does not include any expense or benefit under the ERM, and our current expectation is in a benefit position within the 90% customer/10% company sharing band, which we believe will add approximately $0.07 to $0.08 per diluted share. Our outlook for Avista Utilities, among other variables, assumes normal precipitation, temperatures and hydroelectric generation for the remainder of the year.

For 2018, we expect AEL&P to contribute in the range of $0.10 to $0.14 per diluted share, and our outlook for AEL&P assumes normal precipitation and hydroelectric generation for the remainder of the year.

Our other businesses, we expect to be between a loss of $0.11 and $0.09 per diluted share, which includes costs associated with exploring strategic opportunities.

Our guidance generally includes only normal operating conditions and does not include unusual items such as settlement transactions or acquisitions and dispositions until the effects are known and certain.

I'll now turn the call back to Jason.

Thanks, Mark. Cheryl, we'd like to open up the call for questions, please.

(Operator Instructions) And our first question comes from Paul Ridzon from KeyBanc.

Mark, let me know when you lose 2 coaches in 1 weekend.

Come on.

I guess, Scott, my question for you is, where do you see the most potential friction as far as the remaining approvals?

Well, as you know, we had our hearing in Washington. It was a supplemental hearing to the one we had. We currently -- we had a workshop in Oregon, where we had an opportunity to talk to our intervening parties as well as our commissioners, and we do have a hearing scheduled right after the week of Thanksgiving in Idaho. So what I would say is, we are continuing to make good progress with all 3 states, working with both interveners and all parties. So I wouldn't really say that we expect any state to be harder than the other. We respect all 3 states. They all have a voice, and we're working really hard to make sure that we address all of their concerns and issues.

(Operator Instructions) Speakers, at this time, I show no further questions in queue.

Okay. Well, I'd like to thank everyone for joining us today. We certainly appreciate your interest in our company. Have a great day.

Thank you, ladies and gentlemen. This concludes today's conference, and thank you for your participation. You may now disconnect.