Operator
Good day and thank you for standing by. Welcome to Avista Corporation Q1 2026 earnings conference call. At this time, all participants are in 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 one one 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, Stacey Walters. Please go ahead. Thank you and good morning. Thank you all for joining us
for this first quarter 2026 earnings conference call. Our earnings and first quarter Form 10-Q were released pre-market this morning. You can find both documents and this presentation on our website. Joining me today are Vista Corp 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 our subject could change. Various factors could cause actual results to differ materially from the expectations we discussed in today's call. Please refer to our Form 10-K for 2025 and our Form 10-Q for the first quarter of 2026 for a full discussion of these risk factors. Both are available on our website. On this call, we will also discuss non-GAAP utility earnings. Our first quarter earnings presentation is posted on our website and includes definitions and reconciliations for all non-GAAP disclosures, including non-GAAP utility earnings. Our non-GAAP utility earnings are comprised of results from our Avista Utilities and AEL&P segment. The unrealized gains and losses that have historically made up the majority of our non-regulated other business earnings can be significant, but they are difficult to predict and outside management's control. Discussion of non-GAAP utility results and earnings guidance reflects management's focus on the core utility business. And now, let me begin with a recap of the financial results presented in today's press release. Our consolidated first quarter 2026 earnings were $1.11 cents per diluted share compared to 98 cents in the first quarter of 2025. Our first quarter 2026 non-GAAP utility earnings were $1.10 per diluted share compared to $1.01 per diluted share in the first quarter of 2025. Now I'll turn the call over to Heather.
Thank you, Stacey. It is hard to believe the first quarter is already behind us. The year began with real momentum and the pace of activity across our business has only accelerated. In a short amount of time, we've taken meaningful steps to strengthen reliability and resilience, move forward with our growth opportunities, and continue delivering value for our customers and shareholders. We continue to advance important grid hardening work, pursue load growth opportunities, and support resource adequacy for our customers into the future, all of which contribute to the long-term strength of our utility. Our ongoing investment in grid hardening and resilience, including vegetation management, is helping to prevent outages that can occur periodically during inclement weather. Although much of the work is driven by our wildfire mitigation programs, we have experienced benefits resulting from these efforts through enhanced system resilience and storm response preparedness year-round. We have found that the predictive tools we developed to monitor wildfire weather conditions also help us better anticipate other weather-related outage risks. That means we can stage crews and materials earlier and, when appropriate, alert potentially affected customers so they can prepare before outages occur. The work we are doing to build a more wildfire resilient system also benefits us day-to-day and smoother operations and results in better outcomes for our customers and the communities we serve. And we saw directly how being better prepared through predictive tools and material pre-staging enables faster restoration work just a couple months ago. In March, nearly 60,000 and customers were impacted by outages from high winds. I commend each of the employees and partners who joined us in the restoration efforts, replacing poles, reconnecting lines, and rebuilding infrastructure to successfully restore power to all customers. And I'm happy to say that our grid hardening and resilience efforts improved the overall response to the storm. Related to the work underway to advance our growth opportunities, we remain optimistic about the opportunities ahead. We're planning for the growth identified in our most recent integrated resource plan and potential new large load customer growth in a way that supports customer affordability, system reliability, and compliance with clean energy requirements. A key part of this work is strategic resource planning, making sure we add the right mix of resources at the right time and in the most cost-effective way so we can meet reliability and clean energy requirements without taking on unnecessary expense. And negotiations continue with one of the prospective data center developer customers looking to locate in our service territory with a projected incremental load of up to 500 megawatts. Ensuring appropriate protection for our current customers is a key element of our negotiations, as we expect the new large load customer to return a significant contribution to support affordability for our existing customers. We are currently targeting a signed memorandum of understanding with this new customer by May 31st. In addition to negotiation discussions with the potential data center developer, we continue to discuss these opportunities with community leaders and other stakeholders. We are also engaging with policy makers and the Washington Commission regarding data centers to advocate for policies that ensure appropriate allocation of costs and benefits associated with the integration of these large loads. To support resource adequacy for our customers into the future, resource planning is a crucial task. As we work with potential new large load customers, we also continue to work toward final contracts with the projects selected from our recent request for proposal, including the bill transfer for a battery energy storage project included in our base capital plan and targeted to come online in 2028. At Avista, several related processes together inform our decision-making about these future resources as we consider the timing of integrating potential new large loads. Work has already begun on our 2027 Electric Integrated Resource Plan, or IRP. We've made progress with key data points for the IRP, like our Clean Energy Implementation Plan, which was recently updated and approved by the Washington Commission. Long-term affordability is central to our planning practice as we evaluate the resource needs into the future. And overall, I'm optimistic about the opportunities ahead. And now, I'll hand the call to Kevin for additional discussion of earnings.
Thank you, Heather, and good morning, everyone. Our focus on delivering results at the utility is fundamental to our success. Our performance this quarter reflects the continued commitment of our teams to disciplined cost management. We began the year with solid execution across the business, and were well-positioned as we move forward. Alongside our other initiatives, regulatory outcomes are key to our progress. The first settlement conference for our Washington GRC takes place on the 22nd of this month and will continue to work through the regulatory process if no satisfactory settlement is reached. We continue to invest in our utility infrastructure to support customer growth and maintain safe and reliable service. Based on updates to project costs, we now expect capital expenditures at Avista Utilities of $615 million in 2026. We expect capital expenditures from 2026 through 2030 of $3.4 billion. We continue to estimate potential capital investment of up to $350 million associated with integrating a new large load customer that would be incremental to the $3.4 billion five-year capital plan. Integrating that investment in our five-year projection would result in a rate-based growth of 8%. Our base capital plan also does not include incremental transmission projects like regional grid expansion and any large-load customer additions beyond the customer previously mentioned. Turning to liquidity, we expect to issue $230 million of long-term debt and up to $90 million of common stock in 2026, which includes $14 million issued in the first quarter. This morning, we are affirming our non-GAAP utility earnings guidance with a range of $2.52 to $2.72 per diluted share for 2026. Our guidance includes expected negative impacts from the energy recovery mechanism, or firm, of $0.10 in a 90% customer, 10% company sharing ban. If our current hydro forecast shows above normal levels of generation for the year, we do not expect a material change to our position in the ERM. The ERM resulted in $0.01 expense in the first quarter, and we expect to recognize the remaining $0.09 will be spread evenly over the second and third quarters. Our expected long-term return on equity at Avista Utilities is approximately $0.09, excluding the impact on the ERM. This reflects expected struggle lag of 0.6%. Over the long term, we continue to expect that our earnings will grow 4% to 6% from the midpoint of our 2025 earnings guidance. Our first quarter results are a strong start to delivering on our commitment to financial strength. Heather and I are excited to build on this strength as we look ahead. Now we'll be happy to take your questions.
Operator
At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. First question comes from Char Perezza from Wells Fargo Securities. Your line is now open.
Good morning, team. This is Whitney Motilema on for Char.
Good morning. On the electric margin, how should we think about electric utility margin from here now that the quarter has lapsed? The coal strip-related revenue effect, does 1Q represent a cleaner baseline for the rest of 26, or are there still a few unusual comparison items we should keep in mind?
Yeah, thank you, Whitney. good question. We would consider the first quarter a more clean quarter as we go forward. But we'll have to go through the whole year as we compare quarter after quarter from 25, which had cold strip in it for the entire year. And of course, 26 will not. But I think the first quarter of the
year is pretty good representation. Okay. Thank you, Kevin. And then on the regulatory side in in Oregon. Just in relation to the FAIR Act transition and as Oregon moves towards the multi-year rate plan, what is the most important element in these discussions that you need to preserve during the transition? Is it the ability to file in late 27 for 28 rates, continued access to interim recovery tools, or some form of indexing to avoid a larger first-year
catch-up? That's another good question, and it's hard to prioritize the three. They're all very important. If we're going to need to stay out longer while we're working through the proceeding, we, of course, would need some interim rate relief as we continue to make capital investments. And then as we look forward, we've had a lot of success with multi-years in other states like Idaho and Washington to have a quality first year with a strong, a quality multi-year with a strong first-year starting point, that is also equally as important as we look forward. And then, of course, earning a fair return for our shareholders. Of course. That sounds good. Thank you, Kevin and
Operator
Heather. Thank you. Thank you. Thank you. One moment for our next question. Our next question comes from Michael Logan from Barclays. Your line is now open. Hi. Thanks for taking my question.
um regarding the large load customer that put down a deposit how are you feeling about you know reaching an mou or you know when can we expect that i think you said 90 days or so on your last earnings call and then you know subsequent to that how long would the process take to reach an
esa and you know potentially formally enter your capital program yeah great question thank you so we shared that by we're working towards a May 31st date for an MOU. And so, the next step timeline would be identified through that agreement. So, I don't think we have a clear understanding of what that next step will be, but we're looking towards that May 31st date.
Okay. Thank you. And then you highlighted previously 1.7 gigawatts remain in your queue, you know, previously a potential large low customers. How are you feeling about that
pipeline? Is there an update to that number? Yeah, so we do continue to vet through those opportunities. And we're at, I think, about 1.1 gigawatts now in the queue. And we do think as we continue to work with these customers, then we have higher confidence in, you know, what may come to be. So we're excited about the opportunities that are still out there. And again, specifically the one customer, but there are other opportunities as well that we're working. And we're continuing to plan as well to be able to go out and have curated opportunities for customers once we continue to have better understanding of where geographic, the best geographic locations are that have available capacity, and we do have some of those areas on our system, and so we're also
looking to be more proactive also. Thank you. And then lastly for me, regarding the Washington rate case, I know later this month, how are you feeling about the prospects of reaching the settlement, or given that it's your first four-year plan, you're filing in the state,
do you expect it to be fully litigated? Yeah, Michael, Kevin here. Thanks for the questions. We appreciate that. And with regard to the Washington GRC, we're deep in the discovery process, which helps the parties formulate their positions as we enter into settlement. And of course, we're prepping for settlement. And I'd like to think there's an opportunity for us to settle at least some, if not all, of the case. And that being said, as you highlight, this is the first four-year that any utility, as far as we know, has filed in the state of Washington. And so there's a number of issues to work through. From a party perspective that might engage in settlement, it's hard to say how constructive or how well we can come together, given that they're going to view risks in a certain way, and we're going to view risks in a certain way. So I can't give you a probability of settlement, but I think everybody's going to give it a shot.
Great. Thank you for taking my question.
Operator
thank you thanks thank you as a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced to withdraw your question please plus star one one again again to ask a question you will need to press star one one on your telephone and wait for your name to be announced. Our next question comes from Julian. Our next question comes from Julian Dumoulin-Smith from Jefferies.
Yeah, hi, it's Brian Russo on for Julian. Good morning.
Hey, just to follow up on the four-year multi-year rate plan in Washington, And it just just remind us of, you know, your confidence or ability to kind of, you know, manage within the revenue requirements and the return requirements over the four year period, albeit with an off ramp, I think after two years, especially, you know, given, you know, lately the geopolitical backdrop, you know, fuel inflation, et cetera. Or how can you de-risk this plan, if at all, relative to what's been filed? Yeah, thanks, Brian, for the question.
We have, I guess I'll start with the off-ramp that you referred to. We have the ability, after the first year, to file a replacement for years three and four, given the 11-month process. And that would occur if some form of inflation or if we were able to see additional investments beyond what's built into the case, any additional expenditures. We've been very successful in Washington over the last several years, adding deferral mechanisms that help to hedge some of our risk. And in this particular case, we have a new mechanism that we're requesting, which is around employee benefits. That's one of the remaining more volatile, harder-to-control items for us, and if we were to have success with building that mechanism in and the other mechanisms that we have in place, we should be in pretty good shape. Now, when I say that, of course, that's barring some kind of extreme inflationary activity, and then we would have to use that mechanism where we refile if that were to occur. So we feel like we're in a good position to manage the risks that we might see materialize, and the company is very, very focused on managing our costs, and we see some opportunities as we look forward. So all of those things, again, combined, so we're optimistic.
Okay, great. And, you know, understanding that, you know, you're reporting the non-GAAP utility EPS going forward, you know, I noticed other businesses there really wasn't any non-cash mark-to-market gains, you know, this quarter. Just wondering, you know, if there's any insight there, you know, relative to what we're seeing in the broader market. And then also, any additional thoughts on monetizing any of the investments that are more liquid than others?
No, it's nice to see that things have leveled off or appeared to level off a bit from about a year ago. And we think with that calming, we would see relatively minor adjustments overall. You're referring to the bioscience company when you talk about monetization. And to the extent we're excited about the opportunity there, it's non-core investment, and we'd exit at the point in time that makes sense. If there was value created through that exit, then that would help us with our overall equity needs. And hopefully we would be issuing low or no equity for a period of time, and that would help, of course, boost our overall earnings.
Okay, great. And then just you mentioned regional transmission opportunities, possibly, that would be upside to the CapEx. Can you discuss those some more? You know, understanding North Plains Connector, you know, would likely be post 2030. It's trying to get a sense of if there's incremental upside to the CapEx relative to that $350 million that you highlight.
Yeah, I'm happy to cover this one, Brian. So, as you mentioned, obviously, the North Plains Connector, which we've talked a lot about, has that opportunity probably beyond the five-year capital budget. But we are continuing to work with peers and just other regional organizations to identify other opportunities for transmission investment that might make sense for us and our customers. And as you, we see a lot, we see there's a lot of reports out there acknowledging the need for more transmission in our region. And we do feel that we are geographically blessed where we're in between, where a lot of the load growth is and where a lot of the new resources are. And so we do see opportunities potentially in the future for additional investment there and just continue to participate in those activities.
Okay, great. Thank you very much.
Operator
I am showing no further questions at this time. I would like to turn it back to Stacey Walters for closing remarks.
Well, thank you all for joining us today and for your interest in Avista. We hope you have a great day.
Operator
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
