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Avista Corp. Reports Results for the Second Quarter and Year-to-Date 2008

SPOKANE, Wash., July 30 // -- Avista Corp. (NYSE: AVA) today reported net income of $23.5 million, or $0.44 per diluted share, for the second quarter of 2008, an increase compared to net income of $14.2 million, or $0.26 per diluted share, for the second quarter of 2007. For the six months ended June 30, 2008, Avista Corp.'s net income was $48.8 million, or $0.91 per diluted share, an increase compared to net income of $28.3 million, or $0.53 per diluted share, for the six months ended June 30, 2007. The primary reason for the increase in consolidated results on both a quarterly and year-to-date basis was increased earnings at Avista Utilities and the 2007 net loss from Avista Energy prior to the sale of the majority of the contracts and ongoing operations of the business on June 30, 2007.

(Logo: http://www.newscom.com/cgi-bin/prnh/20040128/SFW031LOGO)

"Our results for the first half of 2008 have positioned us well to meet our earnings targets for the year. Unusual weather patterns with colder than normal temperatures and a late spring runoff resulted in higher than expected resource costs. However, the cold weather increased retail natural gas loads, and we should recover a portion of the resource costs absorbed during the first half of the year primarily due to above normal hydroelectric generation for July," said Avista Chairman, President and Chief Executive Officer Scott L. Morris.

Results for the second quarter of 2008 and the six months ended June 30, 2008 (YTD), as compared to the respective periods of 2007:

  ($ in thousands, except
   per-share data)       Q2 2008      Q2 2007     YTD 2008     YTD 2007
  Operating Revenues    $350,310     $304,005     $846,617     $763,192
  Income from Operations $56,490      $40,218     $115,551      $79,155
  Net Income             $23,545      $14,183      $48,776      $28,277
  Net Income (Loss) by
   Business Segment:
  Avista Utilities       $22,026      $17,257      $45,340      $37,184
  Advantage IQ            $1,579       $1,310       $3,345       $2,894
  Other*                    $(60)     $(4,384)         $91     $(11,801)
  Contribution to earnings
   per diluted share by
   Business Segment:
  Avista Utilities         $0.41        $0.32        $0.85        $0.70
  Advantage IQ             $0.03        $0.02        $0.06        $0.05
  Other*                      $-       $(0.08)          $-       $(0.22)
  Total earnings per
   diluted share           $0.44        $0.26        $0.91        $0.53

  * Results for Q2 2007 include a net loss from Avista Energy of
    $3.9 million, or $0.07 per diluted share.  Results for YTD 2007 include
    a net loss from Avista Energy of $11.6 million, or $0.22 per diluted

  Second Quarter and Year-to-date 2008 Highlights

Avista Utilities: The increase in our utility net income for both the quarter and year-to-date periods was primarily due to an increase in gross margin (operating revenues less resource costs). The increase in gross margin was primarily due to the implementation of the general rate increase in Washington effective Jan. 1, 2008. The increase in utility net income on a year-to-date basis was also partially due to a decrease in interest expense. This was partially offset by an increase in other operating expenses.

Due to colder than normal weather and later than expected runoff, we absorbed $4.0 million of costs in the second quarter of 2008 and $7.4 million for the first half of 2008 under the Energy Recovery Mechanism (ERM) in Washington. In addition to lower than normal hydroelectric generation, fuel and purchased power costs were higher than expected to meet increased demand.

Partially offsetting the negative effect of the costs absorbed under the ERM were higher than expected retail natural gas loads due to colder than normal weather.

Primarily as a result of the costs absorbed under the ERM, our utility earnings were slightly lower than planned for the second quarter and first half of 2008. It is important to note that the amounts recognized under the ERM can vary significantly from quarter to quarter due to a variety of factors including the level of hydroelectric generation, as well as changes in purchased power and fuel costs.

As previously reported, we filed requests for increases in electric and natural gas general rates in Washington in March 2008 and in Idaho in April 2008. Any rate adjustments, if approved by the regulatory commissions, would most likely become effective in late 2008 or in 2009.

Advantage IQ: As previously reported, Advantage IQ acquired Cadence Network, Inc. (Cadence Network), a Cincinnati-based energy and expense management company, effective July 2, 2008. As consideration, the previous owners of Cadence Network received a 25 percent ownership interest in Advantage IQ. While we anticipate an increase in annual revenues as a result of the acquisition, the transaction is expected to be slightly dilutive to Avista Corp.'s consolidated earnings in 2008 by one to two cents per share due to transaction costs and the decrease in Avista Corp.'s ownership of the subsidiary.

"Advantage IQ's acquisition of Cadence Network is another step in our plans to grow Advantage IQ and bring increased value to our shareholders and its clients," said Avista's Morris.

Advantage IQ's revenues for the first half of 2008 increased 11 percent as compared to the prior year and totaled $24.9 million. In the first half of 2008, Advantage IQ processed bills totaling $6.9 billion, an increase of 17 percent, as compared to the first half of 2007.

Net income from Advantage IQ for the second quarter and year-to-date 2008 increased as compared to the respective periods of the prior year primarily due to an increase in operating revenues as a result of customer growth. This was partially offset by a decrease in interest earnings on funds held for customers and increased operating expenses from expanding operations.

Other Businesses: Results from our other businesses improved as compared to the second quarter and year-to-date 2007 primarily due to the net loss at Avista Energy in the prior year. The remaining activities of Avista Energy are no longer a reportable business segment and are included in "Other" for segment reporting purposes.

Liquidity and Capital Resources: In April 2008, we issued $250 million of 5.95 percent First Mortgage Bonds due in 2018. The net proceeds from the issuance, together with other available funds, were used to fund debt maturities of $293.5 million (the majority being the $273 million of 9.75 percent Unsecured Senior Notes that matured on June 1, 2008).

We are planning to issue long-term debt during the second half of 2008 to fund other maturing debt, as well as to provide additional funding for capital expenditures and other corporate purposes.

Avista has a sales agency agreement to issue up to 2 million shares of common stock from time to time. We are planning to begin issuing common stock under this sales agency agreement during the second half of 2008.

In the second quarter of 2008, we completed the acquisition of a wind generation site. We expect to construct a 50 MW generation facility at a total estimated cost of over $125 million to be completed in 2011.

Utility capital expenditures were $90 million for the first half of 2008. We expect utility capital expenditures to be approximately $200 million for the full year of 2008 and over $200 million in each of 2009 and 2010. These estimates do not include any costs associated with the wind generation project.

Earnings Guidance and Outlook

We are confirming our guidance for 2008, with consolidated earnings expected to be in the range of $1.35 to $1.55 per diluted share. We expect Avista Utilities to contribute in the range of $1.20 to $1.40 per diluted share for 2008. Our outlook for Avista Utilities assumes, among other variables, normal precipitation, temperatures and hydroelectric generation for the remainder of the year. Our guidance for Advantage IQ continues to be a range of $0.10 to $0.12 per diluted share. We expect the other businesses to be between break-even and a loss of $0.03 per diluted share.

NOTE: We will host a conference call with financial analysts and investors on July 30, 2008, at 10:30 a.m. EDT to discuss this news release. The call is available at (800) 798-2801, passcode: 25635502. A simultaneous webcast of the call is available on our website, http://www.avistacorp.com/. A replay of the conference call will be available through Wednesday, August 6, 2008. Call (888) 286-8010, passcode 30896634 to listen to the replay.

Avista Corp. is an energy company involved in the production, transmission and distribution of energy as well as other energy-related businesses. Avista Utilities is our operating division that provides service to 351,000 electric and 310,000 natural gas customers in three Western states. Avista's primary, non-regulated subsidiary is Advantage IQ. Our stock is traded under the ticker symbol "AVA". For more information about Avista, please visit http://www.avistacorp.com/.

Avista Corp. and the Avista Corp. logo are trademarks of Avista Corporation.

The attached condensed consolidated statements of income, condensed consolidated balance sheets, and financial and operating highlights are integral parts of this earnings release.

This news release contains forward-looking statements, including statements regarding our current expectations for future financial performance and cash flows, capital expenditures, financing plans, our current plans or objectives for future operations and other factors, which may affect the company in the future. Such statements are subject to a variety of risks, uncertainties and other factors, most of which are beyond our control and many of which could have significant impact on our operations, results of operations, financial condition or cash flows and could cause actual results to differ materially from those anticipated in such statements.

The following are among the important factors that could cause actual results to differ materially from the forward-looking statements: weather conditions and their effect on energy demand and generation, including the effect of precipitation and temperatures on the availability of hydroelectric resources and the effect of temperatures on customer demand; changes in wholesale energy prices that can affect, among other things, cash needed to purchase electricity, natural gas for our retail customers and natural gas fuel for electric generation, and the value of surplus energy sold; volatility and illiquidity in wholesale energy markets, including the availability of willing buyers and sellers and prices of purchased energy and demand for energy sales; the effect of state and federal regulatory decisions affecting our ability to recover costs and/or earn a reasonable return including, but not limited to, the disallowance of costs that we have deferred; the potential effects of legislation or administrative rulemaking, including the possible adoption of national or state laws requiring resources to meet certain standards and placing restrictions on greenhouse gas emissions to mitigate concerns over global climate changes; the outcome of pending regulatory and legal proceedings arising out of the "western energy crisis" of 2000 and 2001, and including possible retroactive price caps and resulting refunds; the outcome of legal proceedings and other contingencies; changes in, and compliance with, environmental and endangered species laws, regulations, decisions and policies, including present and potential environmental remediation costs; wholesale and retail competition including, but not limited to, electric retail wheeling and transmission costs; the ability to relicense and maintain licenses for our hydroelectric generating facilities at cost-effective levels with reasonable terms and conditions; unplanned outages at any of our generating facilities or the inability of facilities to operate as intended; unanticipated delays or changes in construction costs, as well as our ability to obtain required operating permits for present or prospective facilities; natural disasters that can disrupt energy production or delivery, as well as the availability and costs of materials and supplies and support services; blackouts or disruptions of interconnected transmission systems; the potential for future terrorist attacks or other malicious acts, particularly with respect to our utility assets; changes in the long-term climate of the Pacific Northwest, which can affect, among other things, customer demand patterns and the volume and timing of streamflows to our hydroelectric resources; changes in economic conditions in our service territory and the United States in general, including inflation or deflation; changes in industrial, commercial and residential growth and demographic patterns in our service territory; the loss of significant customers and/or suppliers; default or nonperformance on the part of any parties from which we purchase and/or sell capacity or energy; deterioration in the creditworthiness of our customers and counterparties; our ability to obtain financing through the issuance of debt and/or equity securities, which can be affected by various factors including our credit ratings, interest rates and other capital market conditions; the effect of any change in our credit ratings; changes in actuarial assumptions, the interest rate environment and the actual return on plan assets for our pension plan, which can affect future funding obligations, costs and pension plan liabilities; increasing health care costs and the resulting effect on health insurance provided to our employees and retirees; increasing costs of insurance, changes in coverage terms and our ability to obtain insurance; employee issues, including changes in collective bargaining unit agreements, strikes, work stoppages or the loss of key executives, as well as our ability to recruit and retain employees; the potential effects of negative publicity regarding business practices, whether true or not, which could result in, among other things, costly litigation and a decline in our common stock price; changes in technologies, possibly making some of the current technology obsolete; changes in tax rates and/or policies; and changes in our strategic business plans, which may be affected by any or all of the foregoing, including the entry into new businesses and/or the exit from existing businesses.

For a further discussion of these factors and other important factors, please refer to our Annual Report on Form 10-K for the year ended Dec. 31, 2007 and Quarterly Report on Form 10-Q for the quarter ended Mar. 31, 2008. The forward-looking statements contained in this news release speak only as of the date hereof. We undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances that occur after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on our business or the extent to which any such factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.

                            AVISTA CORPORATION
             (Dollars in Thousands except Per Share Amounts)

                                                       Six Months Ended
                                   Second Quarter          June 30,
                                   2008       2007      2008       2007

  Operating revenues             $350,310   $304,005  $846,617   $763,192

  Operating expenses:
    Resource costs                188,610    153,906   512,756    461,619
    Other operating expenses       67,020     72,363   132,584    138,540
    Depreciation and
     amortization                  22,967     22,468    45,418     44,833
    Utility taxes other than
     income taxes                  15,223     15,050    40,308     39,045
      Total operating expenses    293,820    263,787   731,066    684,037

  Income from operations           56,490     40,218   115,551     79,155

  Other income (expense):
    Interest expense, net of
     capitalized interest         (21,361)   (20,793)  (41,145)   (41,860)
    Other income - net              1,721      3,547     2,764      7,258
      Total other income
       (expense) - net            (19,640)   (17,246)  (38,381)   (34,602)

  Income before income taxes       36,850     22,972    77,170     44,553

  Income taxes                     13,305      8,789    28,394     16,276

  Net income                      $23,545    $14,183   $48,776    $28,277

  Weighted-average common shares
   outstanding (thousands),
   basic                           53,301     52,775    53,160     52,736

  Weighted-average common shares
   outstanding (thousands),
   diluted                         53,704     53,313    53,543     53,324

  Total earnings per common
   share, basic                     $0.44      $0.27     $0.92      $0.54

  Total earnings per common
   share, diluted                   $0.44      $0.26     $0.91      $0.53

  Dividends paid per common
   share                           $0.165     $0.150    $0.330     $0.295

    Issued July 30, 2008

                            AVISTA CORPORATION
                          (Dollars in Thousands)

                                                  June 30,    December 31,
                                                    2008         2007

    Cash and cash equivalents                      $5,384       $11,839
    Accounts and notes receivable                 149,379       105,440
    Current utility energy commodity
     derivative assets                             98,438        12,078
    Funds held for customers                       90,574        89,885
    Other current assets                          103,263       112,943
    Total net utility property                  2,398,913     2,351,342
    Other property and investments                120,173       116,157
    Regulatory assets for deferred
     income taxes                                 114,441       117,461
    Regulatory assets for pensions and
     other postretirement benefits                 48,737        51,006
    Other regulatory assets                        37,917        43,004
    Non-current utility energy commodity
     derivative assets                            117,322        55,313
    Power and natural gas deferrals                74,320        85,885
    Unamortized debt expense                       32,383        32,542
    Other deferred charges                          8,625         4,902

       Total Assets                            $3,399,869    $3,189,797

  Liabilities and Stockholders' Equity

    Accounts payable                              $86,740      $117,546
    Current portion of long-term debt             110,383       427,344
    Short-term borrowings                          48,500             -
    Customer fund obligations                      90,574        89,885
    Deposits from counterparties                   79,240        12,510
    Current regulatory liability for
     utility derivatives                           76,613             -
    Other current liabilities                     123,976       116,364
    Long-term debt                                778,328       521,489
    Long-term debt to affiliated trusts           113,403       113,403
    Regulatory liability for utility
     plant retirement costs                       212,246       209,357
    Pensions and other postretirement
     benefits                                      79,595        90,555
    Deferred income taxes                         444,557       440,918
    Non-current regulatory liability for
     utility derivatives                          115,060        53,414
    Other non-current liabilities and
     deferred credits                              74,833        83,046

       Total Liabilities                        2,434,048     2,275,831

    Common stock - net (53,495,520 and
     52,909,013 outstanding shares)               733,583       726,933
    Retained earnings and accumulated
     other comprehensive loss                     232,238       187,033

       Total Stockholders' Equity                 965,821       913,966

       Total Liabilities and
        Stockholders' Equity                   $3,399,869    $3,189,797

    Issued July 30, 2008

                            AVISTA CORPORATION
                          (Dollars in Thousands)

                                                         Six Months Ended
                                   Second Quarter            June 30,
                                  2008         2007      2008        2007

  Avista Utilities
       Retail electric revenues $138,185     $126,612  $315,872    $278,472
       Retail kWh sales (in
        millions)                  2,026        1,999     4,523       4,376
       Retail electric
        customers at end of
        period                   350,635      344,928   350,635     344,928

       Wholesale electric
        revenues                 $38,219      $32,790   $68,895     $59,098
       Wholesale kWh sales (in
        millions)                    700          677     1,010       1,019

       Sales of fuel                $409           $6   $14,987      $8,149
       Other electric revenues    $3,859       $4,401    $7,155      $8,258

       Retail natural gas
        revenues                 $75,303      $63,564  $259,636    $241,137
       Wholesale natural gas
        revenues                 $67,433      $37,757  $126,294     $81,291
       Transportation and other
        natural gas revenues      $3,237       $2,867    $6,078      $5,858
       Total therms delivered
        (in thousands)           156,424      137,173   420,087     383,792
       Retail natural gas
        customers at end of
        period                   310,266      304,444   310,266     304,444

       Income from operations
        (pre-tax)                $53,913      $45,938  $109,713     $96,092
       Net income                $22,026      $17,257   $45,340     $37,184

  Advantage IQ
       Revenues                  $12,401      $11,415   $24,921     $22,414
       Income from operations
        (pre-tax)                 $2,563       $2,185    $5,568      $4,761
       Net income                 $1,579       $1,310    $3,345      $2,894

       Revenues                  $11,264      $24,593   $22,779     $58,515
       Income (loss) from
        operations (pre-tax)         $14      $(7,905)     $270    $(21,698)
       Net income (loss)            $(60)     $(4,384)      $91    $(11,801)

     Issued July 30, 2008
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SOURCE: Avista Corp.

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