Lauren Pendergraft - IR Scott Morris - CEO Mark Thies - CFO.

Welcome to the Q3 2017 Earnings Conference Call. My name is Richard and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Ms. Lauren Pendergraft, Investor Relations Manager. Ms. Pendergraft, you may begin..

Thank you, Richard. Good morning, everyone and welcome to Avista's Third Quarter 2017 Earnings Conference Call. Our earnings and our third quarter 10-Q were released pre-market this morning and they're both available on our website at avistacorp.com. Joining me this morning are Avista Corp.

Chairman of the Board, President and CEO, Scott Morris; Senior Vice President and CFO, Mark Thies; Senior Vice President and President of Avista Utilities, Dennis Vermillion and Vice President and Controller, Ryan Krasselt.

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 2016 and our 10-Q for the third quarter of 2017, 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 2017 were $0.07 per diluted share, compared to $0.19 for the third quarter of 2016. For the year to date, consolidated earnings were $1.37 per diluted share for 2017 compared to $1.53 last year. Now, I'll turn the discussion over to Scott..

Well, thank you, Lauren and good morning everyone. First off, our Vice President of State and Federal Regulation, Kelly Norwood retired effective today. We want to thank Kelly for his 36 years of service to Avista.

His leadership in the rates and regulatory area has played an important role in achieving outcomes that have benefited all of our stakeholders. We appreciate his service and dedication and we wish him the very best in his retirement.

Kevin Christie, currently Avista's Vice President Customer Solutions will assume responsibility for the company's rates and regulatory activities, while continuing his role in customer solutions. Kevin's leadership and experience in customer solutions, finance and natural gas supply will provide for a smooth transition.

Turning towards earnings, our 2017 consolidated earnings for the third quarter and year-to-date decreased compared to the same periods in 2016 due to acquisition costs, increased operating expenses, depreciation and interest expense.

The decreases in earnings were partially offset by lower resource costs, general rate increases in Idaho and Oregon and customer growth. We are revising our consolidated earnings guidance range to $1.75 to $1.90 per diluted share from our previous range of $1.80 to $2 per diluted share.

The revision is due to an estimated $0.20 to $0.25 of acquisition costs for 2017, which were not included in our previous range. This is partially offset by lower power supply costs, operating expenses and net financing expenses when compared to our original guidance range.

During the third quarter, we filed regulatory applications requesting orders to approve the proposed acquisition by Hydro One. We also distributed our definitive proxy associated with a special meeting of Avista shareholders to vote on the transaction. We continue to work towards completing this transaction in the second half of 2018.

In addition to the request for approval of Hydro One - the Hydro One transaction, we recently filed a settlement agreement related to our 2017 Idaho electric and natural gas rate case, which, if approved, will provide rate increases in 2018 and 2019.

Also, the Oregon Commission approved our settlement agreement for our 2016 general rate case, which provided rate increases on October 1 and November 1. In Washington, we continue to work through the general rate case process with an expected resolution in the first half of 2018.

AEL&P continues to have a solid year and is on-track to meet our original expectations. In addition, we recently filed a settlement agreement related to our 2016 electric general rate case, which, if approved, will make the interim rate increases permanent. And at this time, I'm going to turn it over to Mark..

Thank you, Scott. Good morning, everyone. It's a pretty happy day today because hockey season has started. So life is back to good.

For the third quarter of 2017, Avista Utilities contributed $0.08 per diluted share compared to $0.20 in 2016 and on a year-to-date basis, Avista Utilities contributed $1.33 per diluted share, a decrease from $1.49 last year.

The decrease in earnings from both the quarter and year to date were primarily due to acquisition costs, increase in operating expenses, depreciation and interest and no rate relief in Washington in 2017. The decrease in earnings was partially offset by general rate increases in Idaho and Oregon and customer growth and lower resource costs.

Turning to capital, we continue to be committed to invest in the necessary capital in our utility infrastructure and we expect Avista Utilities' capital expenditures to total about $405 million in 2017. We expect AEL&P's capital expenditures to be about $7 million in 2017.

From a liquidity perspective, in the third quarter, we entered into a bond purchase agreement to issue $90 million of first mortgage bonds, which the cash will be drawn in December of 2017.

In the fourth quarter, we do expect to issue up to $70 million in common stock in order to fund planned capital expenditures or repay short term debt incurred for such purposes. This really could - we want to make sure we have a prudent capital structure.

Also during the third quarter, we filed for an income tax refund claim and we received approximately $42 million in the fourth quarter of this year.

On an earnings guidance front, as Scott mentioned earlier, we're revising our consolidated earnings guidance to a range of $1.75 to $1.90 per diluted share, which is a slight change from our previous range of $1.80 to $2 per diluted share. And this revision is primarily due to a couple of things.

First, we now estimate for 2017, $0.20 to $0.25 of acquisition costs related to the Hydro One transaction. These costs were not included in our previous estimates or our range. They're also offset by - we had a good year on the power supply side, we had a good hydro year, Dennis can talk about that later if anybody has questions.

Our operating expenses were down and our financing expenses were down compared to our initial guidance range. We expect Avista Utilities to contribute in the range of $1.71 to $1.80 per share for 2017, including acquisition costs. And that's a change from our previous range of $1.71 to $1.85.

The difference in our earnings guidance ranges, as I mentioned, the $0.20 to $0.25 of acquisition costs and then primarily the lower resource costs, the midpoint of our Avista Utilities' previous guidance, you'll recall, included $0.07 of expense under the ERM, which is the 90/10 customer sharing band.

Our current expectation of the ERM due to a strong hydro year and lower gas prices is to be in $4 million benefit position in the deadband, which is an improvement of $0.07 to $0.09 per diluted share from our original guidance.

Our outlook for Avista Utilities assumes, among other variables, normal precipitation, temperatures and hydroelectric generation for the rest of the year. For 2017, we continue to 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. Another change we had was we expect our other businesses to be between a loss of $0.06 and $0.04 per diluted share. This represents a change from a loss of $0.01 to a gain of $0.01 in our previous guidance.

This change is primarily due to renovation expenses at one of our subsidiaries and the recognition of the portion of net losses from our equity investments.

Our guidance again generally only includes normal operating conditions and doesn't include unusual items as settlement transactions or acquisitions or dispositions until the effects are known, which is why now we have the Hydro One transaction, we did add those costs into our guidance. I'll now turn the call back over to Lauren..

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

[Operator Instructions] And at this time, I see we have no questions at this time. I'd like to turn the call over to Lauren for closing comments..

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Thank you, Richard. I want 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. Thank you for participating. You may now disconnect..