Good day and thank you for being here. Welcome to the Avista Corporation Second Quarter 2022 Earnings Conference Call. All participants are currently in listen-only mode. After the presentation, there will be a question-and-answer session. I will now turn the conference over to Stacey Wenz, Investors Relations Manager. The floor is yours.

Good morning, everyone. Welcome to Avista's second quarter 2022 earnings conference call. Our earnings and our second quarter 10-Q were released pre-market this morning, both are available on our website. Joining me this morning are Avista Corp, President and CEO, Dennis Vermillion; Executive Vice President, Treasurer and CFO, Mark Thies; and Senior Vice President, External Affairs and Chief Customer Officer, Kevin Christie. Today, we will make certain statements that are forward-looking. These 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 2021 and 10-Q for the second quarter of 2022, which are available on our website. I'll begin by recapping the financial results presented in today's press release. Our consolidated earnings for the second quarter of 2022 were $0.16 per diluted share compared to $0.20 for the second quarter of 2021. For the year-to-date, consolidated earnings were $1.15 per diluted share for 2022 compared to $1.18 last year. Now I'll turn the discussion over to Dennis.

Well, thanks Stacey, and good morning everyone. I hope you're enjoying your summer so far. After a cool, wet spring, summer finally hit our region with a vengeance here recently. We had triple-digit temperatures across the entire Pacific Northwest region and it made national news. Of course, the ongoing investments we've made to our system help keep our customers safe and cool during the excessive heat, and we were relieved to see these temperatures give way to a more normal summer weather pattern this week as the heat wave moved eastward to share with everybody else across the country. Our second quarter consolidated earnings met our expectations. We continue to be on track to meet our full-year consolidated guidance. Our performance was primarily the result of increased net investment gains by our other businesses. Through the second quarter, the utility continued to be challenged by higher costs, particularly rising interest rates and inflation. We are very pleased to have reached a multi-party settlement in our multi-year Washington general rate cases, both electric and gas. If approved by the Washington Commission, this outcome provides a positive framework for our Washington operations that benefits both our customers and our shareholders. As part of the settlement, we wrote off $4 million in costs related to the dry ash disposal project at Colstrip during the second quarter. We expect inflation to decrease from current levels in 2023, and that, combined with the rate relief and cost management efforts, positions us to earn our allowed return in 2023. We're proud to be the first investor-owned utility to have approval of our clean energy implementation plan with the Washington Commission; we did that in June of this year. Avista's plan is a roadmap of specific actions we expect to take over the next four years to make progress towards goals established by the Clean Energy Transformation Act or CETA, and of course our own clean energy goals. As we work towards achieving these goals, we are committed to balancing reliability and affordability while meeting our long-standing commitment to environmental sustainability. The benchmarks included in the plan were created with customer input, and we also work very closely with commission staff and other stakeholders to develop and strengthen the plan. We recently completed a permanent fish passage facility at our Cabinet Gorge Dam that will help restore and expand bull trout populations in the Clark Fork River Basin, reflecting our ongoing commitment to environmental stewardship. This $60 million multi-year project also fulfills elements of our FERC licensing obligations and is the culmination of over 20 years of study, negotiations, planning, and collaboration with Native American tribes, state and federal agencies, and other stakeholders. We're very excited to have this facility up and running, and our team did a great job. In June, we opened Upriver Park, which incorporates a portion of the Washington Centennial Trail along with Spokane River in the heart of the city. Like the fish passage project, the park fulfills elements of our FERC licensing obligations, as it contributes to an ecologically healthy shoreline and provides river access and water-based recreation. The project also provides a neighborhood park and river access for a disadvantaged low-income neighborhood and has increased safety along the very popular Centennial Trail by removing vehicle traffic. Moving to rate cases, as I mentioned, we are pleased to have reached the settlement for our 2022 Washington general rate cases and we expect that rate relief in December of 2022. In Idaho, we expect to file rate cases in the first quarter of 2023. And then you saw, I'm sure, in Alaska, we filed our general rate case in July; we expect an interim and refundable base rate increase of 4.5% effective in September of '22. For guidance, we are confirming our 2022 earnings guidance with a consolidated range of $1.93 to $2.13 and are revising our segment earnings guidance for 2022 to decrease the contribution from Avista Utilities and increase the contribution from our other businesses by $0.10 per diluted share each. We expect to be near the lower end of the consolidated range primarily due to higher power supply costs. We are confirming our 2023 consolidated earnings guidance range of $2.42 to $2.62 per diluted share. At this time, I'll turn the presentation over to Mark.

Thank you, Dennis, and good morning everyone. Thanks for joining us today. So, like Dennis said, we've got a lot of great things that have occurred in the quarter and, as we look forward, I'm very excited about that. The one thing I'm not excited about is the Blackhawks are in a major rebuild. We are dumping everybody and getting almost nothing for it. So I might even be able to get season tickets this year if they come down low enough. So that's a tough one, but compared to the second quarter of '21, as Dennis mentioned, Avista Utilities was down primarily due to the write-off of that dry ash disposal system at Colstrip. We believe that the outcome of that settlement is a positive for customers and shareholders, and that was just one part of the overall negotiation, so we took that charge. We also have higher operating and maintenance costs, depreciation, and interest expense, and these increases were partially offset by benefits from our completed rate cases previously in Idaho and Washington, which were effective late in 2021. The benefits from the rate cases are recognized through lower income tax expense, so you don't see that necessarily through margin; it comes through because of the customer tax credit—that's where we see the benefits, in a lower income tax expense. We also continue to have strong retail customer growth at about 1.5%, which is better than our previous amounts of 0.5% to 1%. We are showing continued strength there. The Energy Recovery Mechanism, as Dennis mentioned, had a pre-tax expense of $4.8 million compared to $7.6 million of expense in the prior quarter, and for the year-to-date, we were at about $2.8 million versus $3.3 million. All that said, for the year 2022, we expect to be in the expense position in the 90/10 customer sharing band, and it is expected to be about $0.09 a share negative for us. With respect to capital, we are slightly increasing our capital again, about $30 million. We expect Avista Utilities to spend $475 million in '22 and '23, which is an increase from $445 million previously. We expect the AEL&Ps capital expenditures to be $10 million in '22 and $13 million in '23, and we expect to invest about $15 million in our other businesses in '22 and '23, which is pretty consistent with where we've been. From a liquidity perspective, we have almost $200 million of available liquidity under our committed lines of credit, and in the first quarter, that's due to...in the first quarter, we issued $400 million of long-term debt and we used those proceeds to repay our borrowings under our credit facility, but also we had a maturity in April of $250 million. During 2022, we expect this to be a slight increase to $135 million of common stock; that's really to fund the additional CapEx, and that includes $61 million that we've issued to date. And for '23, we expect to issue $140 million of long-term debt and $120 million of equity, and that again is to fund our capital expenditures. With respect to guidance, as Dennis mentioned, we are confirming our '22 guidance on a consolidated basis, but we did decrease the utility by $0.10 and increase other by $0.10. The utility, half of that was about—almost half of that was really due to the write-off of that dry ash disposal system. The other half is some increased costs that we've seen, interest and other costs, which we believe will be able to recover through cost management and the settlement in the rate case, assuming that the commission does approve that. We're still waiting for Commission approval. But assuming the Commission approves that, we believe we'll be able to recover some of those costs through that settlement. We are confirming our—as Dennis mentioned, we are confirming our '23 consolidated guidance in the range of $2.42 to $2.62 on a consolidated basis, and that doesn't assume again timely and appropriate rate relief, not only in Washington but in all of our jurisdictions. We expect Avista Utilities to contribute in the range of $1.71 to $1.87 in '22, and again that's due primarily to the write-off of the Washington due to the settlement of $4 million for the dry ash disposal, rising interest rates and inflation. The midpoint of our guidance does not include any expense or benefit under the ERM, and as I mentioned earlier, we expect that to be about $0.09 this year. Looking ahead to '23, we continue to expect that Avista utilities will contribute in the range of $2.30 to $2.46, and in March of '22, we did settle our general rate case in Oregon and in June of '22, we settled our general rate case in Washington. Now we need commission approvals for those for them to become effective, but we anticipate—as we look at our guidance, we anticipate that those do get approved. Rates from really from these cases will come at the end of '22 and into '23, which will provide us that opportunity to earn our allowed return. In addition to that, we would expect to continue to manage our cost to get that—we need both, some cost management as well as these rate cases. We do expect to file a general rate case in Idaho in '23; those rates—we expect that rate relief to come in the second half. The Idaho case runs out in September 1 of '23, so we would expect to file in time to get that to go forward. And we do expect again our continued customer growth of 1% to 1.5%. We expect AEL&P to contribute $0.08 to $0.10 in both '22 and '23, and we expect an interim and refundable base rate increase of 4.5% for the rate case that they just filed to be effective in September of '22 from their general rate case. Our outlook for Avista Utilities and AEL&P assumes again normal precipitation and normal hydroelectric generation in '23. With respect to our other businesses, as Dennis mentioned, we are increasing our guidance by $0.10 there. We did see a strong second quarter due to the valuations of our investments, and we had some net investment gains there. We expect that to continue. So we're at $0.14 to $0.16 for 2022, but we return to our normal again $0.04 to $0.06 in 2023 from those other businesses. Our guidance again, to remind generally includes only normal operating conditions and doesn't include anything unusual or non-recurring until the effects are known, and then we include them. With that, I'll turn it back over to Stacey.

Thank you, Mark. We are open for questions.

We have a question from Kody Clark with Bank of America. Please proceed.

Hi, good morning. Thanks for taking my questions.

Good morning, Kody.

Good morning, Kody.

Just curious if you can discuss more of the drivers behind the CapEx increase. Was that a function of a pull-forward of work or more inflation on the capital side?

It's probably more inflation, Kody. I mean, our capital projects, they change just as we continue to work through, but it's slight inflation. It's not a significant increase, and we just felt it was necessary to put that out there. So I would say it's primarily inflation and then there is some mix of projects in there, but those are all fine details for a small increase.

Yes. Understood. And as we think about the impact of inflation and higher rates, can you talk a little bit more about that? How that cascades into 2023 and what's giving you confidence that inflation will abate in 2023? And maybe if you can provide some more color on any major contracts next year that would have to be negotiated, labor, contractors or supply or anything like that, that would be helpful? Thank you.

Well, we just completed...I'm talking about the labor contract, Dennis.

Yes, our labor—we just completed a labor contract with IBEW Local 77. It's our biggest union membership group. And so we're locked in with wage increases per that agreement for the next three years. So that was a big one. We did see a little bit of adjustment just given market conditions for skilled craftsmen, line workers, and other skilled tradesmen, and we factored that into the contract, and that is factored in forward-looking into our budgeting process as we move forward, but that's a big one and it's good to have that one done.

And Kody, that was also included in our filing for our rate case. So we did include those costs. So that's probably what was one of the larger contracts; there are all kinds of smaller contracts that may come to, but we factor that in. And we believe that we look at what's out there and what the Fed is saying and where inflation is. I don't know where that's going to be; we tag it around 3% for next year. It's higher this year. Whether things change or not, whether the new bill coming out gets approved and can help to slow inflation, we don't know. What we put in our forecast is we expect about 3% inflation. And we are expecting to manage our costs. What gives us confidence as we look at our ability to manage our costs, which we've done for a very long time. We expect that to continue and we will be able to achieve our forecasted goals.

Right. Okay, got it. So 3% year-over-year increase in O&M; that's kind of the assumption you're running within that 2023 guidance?

Well, the inflation, it's not just O&M, right? There is inflation all over, and we will have to manage our costs to get there. So there will be inflation, and then we will let some cost management to get to our achieve our goals. It will be less than 3% for our O&M, but there are other costs we have to manage as well. We haven't put out specifics for all of those; it's just August, right? We're still in that process as we go forward to work through our forecasting and our budgets, but we have confidence that we can get there.

Understood. Okay, thanks for the time.

Thanks, Kody.

Thanks, Kody.

Thank you. One moment for our next question, please. We have a question from the line of Brandon Lee with Mizuho. Please go ahead.

Hi, good morning, Dennis. Good morning, Mark.

Good morning, Brandon.

Good morning, Brandon.

Hi, just a quick question on—do you guys expect to benefit from the Inflation Production Act, and if so, can you kind of highlight where you could see potential benefits?

Well, yes. Good question. We're looking through it. Obviously, the bill isn't over the finish line yet. And there is some question whether or not we get 50 Democrats on board. And there are some things that look interesting in there for sure, related to the tax package around storage, hydrogen, and carbon capture, EVs and some of those other things. As I mentioned, we're just in the process of kind of digging through it, but it is. It's a big bill, right? And the devil's in the details for sure. So we'll just continue to evaluate, and then obviously whether or not it ultimately is passed, we'll have to watch that as well.

Great, thanks. That's all I had. Thanks a lot.

Thank you.

Thank you. I'm not showing any further questions in the queue, sir.

Okay. Well, thank you everyone for joining us today. We appreciate your interest in Avista and hope you enjoy the rest of your summer. Have a great day.

And with that, ladies and gentlemen, we conclude today's conference call. Thank you for your participation. You may now disconnect.