SPOKANE, Wash., Feb. 10 /PRNewswire-FirstCall/ -- Avista Corp.
(NYSE:AVA) today reported improvement in both fourth quarter and
annual earnings as compared to 2004 performance. For the fourth
quarter of 2005, net income was $25.4 million, or $0.52 per diluted
share, as compared to net income of $22.6 million, or $0.46 per
diluted share, for the same period in 2004. For the year ended Dec.
31, 2005, Avista Corp.'s net income was $45.2 million, or $0.92 per
diluted share, as compared to net income of $35.2 million, or $0.72
per diluted share, for the year ended Dec. 31, 2004. (Logo:
http://www.newscom.com/cgi-bin/prnh/20040128/SFW031LOGO ) "For the
fiscal year 2005, we are pleased with the strong performance of
Avista Utilities and Avista Advantage, and we are expecting
continued improvement in our consolidated results for 2006 as
compared to 2005. Our utility operation continues to move closer to
earning its allowed rates of return," said Avista Chairman,
President and Chief Executive Officer Gary G. Ely. "We had a strong
fourth quarter of 2005 due primarily to the recovery of a
significant portion of the accounting-related losses for Avista
Energy's management of natural gas inventory incurred earlier in
the year," Ely added. Results for the fourth quarter of 2005 and
the year ended Dec. 31, 2005, as compared to the respective periods
of 2004: ($ in thousands, except per-share data) Q4 2005 Q4 2004
YTD 2005 YTD 2004 Operating Revenues $458,432 $340,408 $1,359,607
$1,151,580 Income from Operations $59,811 $56,131 $152,024 $140,470
Net Income $25,412 $22,580 $45,168 $35,154 Net Income (Loss) by
Business Segment: Avista Utilities $16,889 $19,891 $52,479 $32,467
Energy Marketing & Resource Management $8,253 $5,940 $(8,621)
$9,733 Avista Advantage $922 $553 $3,922 $577 Other $(652) $(3,804)
$(2,612) $(7,623) Contribution to earnings per diluted share by
Business Segment: Avista Utilities $0.34 $0.41 $1.07 $0.67 Energy
Marketing & Resource Management $0.17 $0.12 $(0.18) $0.20
Avista Advantage $0.02 $0.01 $0.08 $0.01 Other $(0.01) $(0.08)
$(0.05) $(0.15) SUBTOTAL (before cumulative effect of accounting
change) $0.52 $0.46 $0.92 $0.73 Cumulative effect of accounting
change -- -- -- $(0.01) Total earnings per diluted share $0.52
$0.46 $0.92 $0.72 Fourth Quarter and Year-to-Date 2005 Highlights
Avista Utilities: The increase in Avista Utilities' net income for
2005 as compared to 2004 reflects the positive effects of general
rate increases implemented during the second half of 2004 in
Washington and Idaho, and the gain on the sale of Avista Utilities'
South Lake Tahoe natural gas properties. Results for 2004 were
reduced by write-offs of $14.4 million ($9.4 million, net of tax)
related to the Idaho Public Utility Commission general rate case
order. The fourth quarter is typically a strong earnings quarter
for Avista Utilities due to generally colder weather and increased
heating loads. The decrease in net income for the fourth quarter of
2005 as compared to the fourth quarter of 2004, however, was
primarily due to increases in operating costs. Hydroelectric
generation was approximately 95 percent of normal in 2005. The
earnings impact of below normal hydroelectric generation is
mitigated by regulatory mechanisms in Washington and Idaho that
defer 90 percent of increased power supply costs for recovery in
future periods, excluding the annual $9 million Energy Recovery
Mechanism (ERM) deadband in Washington. For 2005, total electric
resource costs exceeded the amount included in base electric rates
by $18 million, of which $9.9 million was absorbed by Avista
(including the $9 million ERM deadband in Washington and $0.9
million representing 10 percent of costs above the ERM deadband)
while $8.1 million was deferred for future recovery from customers.
These additional electric resource costs were due to below normal
hydroelectric generation, as well as an increase in the volume and
price of purchased power and generation fuel costs. During the
fourth quarter of 2005, natural gas rate increases of 23.5 percent,
23.8 percent and 22.5 percent were implemented in Washington, Idaho
and Oregon, respectively. These natural gas rate increases are
designed to pass through increases in purchased natural gas costs
to customers with no change in Avista's gross margin or net income.
On Dec. 21, 2005, the Washington Utilities and Transportation
Commission (WUTC) approved Avista's combined electric and natural
gas general rate case settlement agreement with certain conditions,
which were subsequently accepted by the settling parties. The WUTC
order provided increases of 7.5 percent for electric and 0.6
percent for natural gas base rates, effective Jan. 1, 2006. The
majority of the increase in electric revenues is related to
increased power supply costs. As such, a significant portion of the
increase in revenues will not increase gross margin or net income
because it will be matched by an increase in costs. The WUTC
rejected the proposal in the settlement agreement to reduce the
annual ERM deadband from $9 million to $3 million. However, Avista
was directed to make a filing with the WUTC by Jan. 31, 2006, with
proposed changes to the ERM, including any changes to the ERM
deadband. On Jan. 31, Avista made its filing with the WUTC,
proposing that the ERM be continued for an indefinite period of
time and that the annual $9 million deadband be eliminated. The
elimination of the $9 million deadband would reduce the volatility
of Avista's earnings that has been caused by variations in
hydroelectric generation, as well as prices for fuel and purchased
power. The WUTC indicated in its order that it would provide for an
expedited process that would allow for a determination of any
change to the deadband or any other aspect of the ERM in early
2006. The WUTC also stated that any changes to the ERM ordered by
the WUTC in 2006 would be effective for the full year (beginning
Jan. 1, 2006). Based on recent snowpack surveys, hydroelectric
generation is forecasted to be slightly above normal in 2006. This
is an early forecast, which will be revised based on precipitation,
temperatures and other variables during the year. However,
temperatures were above normal for the month of January 2006, which
resulted in a reduction in retail electric and natural gas loads.
Energy Marketing and Resource Management: The increase in net
income for the fourth quarter of 2005 was primarily due to the
required accounting treatment for the management of natural gas
inventory and the recovery of unrealized losses recorded during the
first nine months of the year. This business segment's net loss for
2005 was primarily related to losses in Avista Energy's natural gas
portfolio. The net loss for 2005 was the first annual net loss for
this business segment since 1999. While Avista Energy scaled back
its natural gas trading portfolio considerably in the second half
of 2005, some losses did continue to occur during the fourth
quarter as Avista Energy continued to unwind positions established
in earlier periods. Avista Energy continued to produce positive
results on the electric side of its business for 2005, including
trading, marketing, and managing the output and availability of
combustion turbines and hydroelectric assets owned by other
entities. However, the results for 2005 decreased as compared to
2004, and for the fourth quarter of 2005 the electric side of the
business had a slight loss primarily due to unfavorable price
movements. The operations of Avista Energy are managed on an
economic basis, reflecting all contracts and assets under
management at estimated market value consistent with industry
practices, which is different from the required accounting for
certain contracts and physical assets under management. These
differences primarily relate to Avista Energy's management of
natural gas inventory, as well as Avista Energy's control of
natural gas-fired generation through a power purchase agreement.
These differences had a $12.0 million after-tax positive effect on
results for the fourth quarter of 2005, primarily due to the
decrease in natural gas prices during the quarter, which
essentially resulted in the recovery of unrealized losses from the
first nine months of the year under the required accounting for the
management of natural gas inventory. For the full year of 2005, the
difference between the economic management and the required
accounting for certain contracts and assets under management had an
after-tax positive effect on results of $0.4 million. Management is
expecting this business segment to have a profitable year in 2006
for a number of reasons. For example, Avista Energy has already
substantially covered the demand charges for its Lancaster power
purchase agreement for 2006, which is well ahead of where it has
been in past years. Avista Energy also continues to expand its
profitable asset optimization business and its natural gas end-user
business. In addition, Avista Energy has more closely aligned its
natural gas and electric trading activities in an effort to improve
coordination and communication between the groups and is intending
to return its natural gas trading business to profitability during
2006. Avista Advantage: This business segment continues to produce
positive earnings. The significant improvement for fiscal year 2005
as compared to 2004 was primarily due to an increase in operating
revenues from customer growth. Avista Advantage's revenues
increased by 35 percent for 2005, as compared to 2004, while the
average cost of processing a bill decreased by 6 percent for the
same period. Avista Advantage has over 350 clients representing
approximately 175,000 billed sites in North America. The number of
billed sites increased by approximately 33,000, or 24 percent, in
2005. Avista Advantage continues to have strong client retention
with an average 95 percent retention rate over the past three
years. In early 2005, Avista Advantage acquired TelAssess, Inc.
Although not a significant financial transaction, this acquisition
has provided Avista Advantage a foundation on which to expand
beyond existing utility bill information services to provide
similar services relating to telecom expense management. Other
Business Segment: The net loss in the Other business segment was
less for the fourth quarter and fiscal year 2005 as compared to the
respective periods of 2004, primarily due to losses from asset
impairments and write-offs incurred in 2004. Liquidity and Capital
Resources: Total debt outstanding increased approximately $40
million in 2005 primarily to fund utility capital expenditures that
were in excess of operating cash flows. Avista has increased
capital expenditures in order to meet load growth needs and to
continue to provide reliable service to its customers. Utility
capital expenditures totaled approximately $210 million, the most
significant of which were the acquisition of the remaining interest
in Coyote Springs 2, transmission system enhancements, and the
repurchase of Avista's corporate headquarters and central operating
facility in Spokane. For 2006, Avista established a utility capital
budget of approximately $160 million. Significant projects include
the continued enhancement of Avista's transmission system and
upgrades to generating facilities. Avista is committed to
investment in its generation, transmission and distribution systems
with a focus on increasing capacity and improving reliability. As
outlined in Avista's 2005 Electric Integrated Resource Plan, which
was filed with regulators in Washington and Idaho, quarterly energy
deficits are projected to begin in 2007 and annual energy deficits
are projected to begin in 2010. To meet forecasted increases in
electric loads, Avista issued a request for proposals in January
2006 to add approximately 35 average megawatts of long-term
renewable energy supplies to begin in the fourth quarter of 2007.
Avista has also recently entered into an agreement with Idaho Power
to jointly investigate possible future coal-based generation
resources. During the fourth quarter of 2005, Avista issued $150
million of 6.25 percent First Mortgage Bonds due in 2035 primarily
to refinance borrowings on its $350 million committed line of
credit. As of Dec. 31, 2005, Avista had $63 million outstanding on
its line of credit. The quarterly dividend for the fourth quarter
of 2005 was $0.14 per common share, an increase of $0.005 per
common share over the previous quarterly dividend as authorized by
Avista's board of directors. Earnings Guidance and Outlook For
2006, Avista is confirming its guidance for consolidated earnings
to be in the range of $1.30 to $1.45 per diluted share. The company
expects Avista Utilities to contribute in the range of $1.00 to
$1.15 per diluted share for 2006. If the annual ERM deadband
remains at $9 million for 2006, the company expects Avista
Utilities' earnings to be at the lower end of this range. The
outlook for the utility assumes, among other variables, normal
weather and temperatures, and slightly above normal hydroelectric
generation. The 2006 outlook for the Energy Marketing and Resource
Management segment is a contribution range of $0.20 to $0.30 per
diluted share, excluding any positive or negative effects of
changes in natural gas prices on the required accounting for the
management of natural gas inventory. The company expects Avista
Advantage to contribute in a range of $0.10 to $0.12 per diluted
share and the Other business segment to lose $0.05 per diluted
share. 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 a company
operating division that provides service to 338,000 electric and
297,000 natural gas customers in three Western states. Avista's
non-regulated subsidiaries include Avista Advantage and Avista
Energy. Avista Corp.'s stock is traded under the ticker symbol
"AVA." For more information about Avista, please visit
http://www.avistacorp.com/. NOTE: Avista Corp. and the Avista Corp.
logo are trademarks of Avista Corporation. NOTE: Avista Corp. will
host a conference call on Feb. 10, 2006, at 10:30 a.m. EST to
discuss this report with financial analysts. Investors, news media
and other interested parties may listen to the simultaneous webcast
of this conference call. To register for the webcast, please go to
http://www.avistacorp.com/. A replay of the conference call will be
available until Feb. 17, 2006. Call 888-286-8010, passcode 80177501
to listen to the replay. The webcast will be archived at
http://www.avistacorp.com/ for one year. The following 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 the
company's current expectations for future financial performance and
cash flows, capital expenditures, the company's current plans or
objectives for future operations, future hydroelectric generation
projections, projected energy deficits in future periods 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 the company's control and
many of which could have significant impact on the company's
operations, results of operations, financial condition or cash
flows and could cause actual results to differ materially from the
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,
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 requirements to purchase
electricity and natural gas for retail customers, as well as the
market value of derivative assets and liabilities and unrealized
gains and losses; the impact of state and federal regulatory
decisions affecting the ability of the Company to recover its costs
and/or earn a reasonable return; the outcome of pending regulatory
and legal proceedings arising out of the "western energy crisis" of
2001 and 2002, and including possible retroactive price caps and
resulting refunds; changes in the utility regulatory environment in
the individual states and provinces in which the Company operates
as well as the United States and Canada in general; the outcome of
legal proceedings and other contingencies concerning the Company or
affecting directly or indirectly its operations; the potential
effects of any legislation or administrative rulemaking passed into
law, including the Energy Policy Act of 2005 which was passed into
law in August 2005; the impact from the potential formation of a
Regional Transmission Organization; wholesale and retail
competition; volatility and illiquidity in wholesale energy
markets; changes in global energy markets; the ability to relicense
the Spokane River Project at a cost-effective level with reasonable
terms and conditions; unplanned outages at any Company-owned
generating facilities; unanticipated delays or changes in
construction costs with respect to present or prospective
facilities; natural disasters that can disrupt energy delivery as
well as the availability and costs of materials and supplies and
support services; blackouts or large disruptions of transmission
systems; the potential for future terrorist attacks, particularly
with respect to utility plant assets; changes in the long-term
climate of the Pacific Northwest; changes in future economic
conditions in the Company's service territory and the United States
in general; changes in industrial, commercial and residential
growth and demographic patterns in the Company's service territory;
the loss of significant customers and/or suppliers; failure to
deliver on the part of any parties from which the Company purchases
and/or sells capacity or energy; changes in the creditworthiness of
customers and energy trading counterparties; the Company's ability
to obtain financing through the issuance of debt and/or equity
securities; the impact of any potential change in the Company's
credit ratings; changes in actuarial assumptions, the interest rate
environment and the actual return on plan assets with respect to
the Company's pension plan; increasing health care costs and the
resulting effect on health insurance premiums paid for employees
and on the obligation to provide postretirement health care
benefits; increasing costs of insurance, changes in coverage terms
and the 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 the ability to
recruit and retain employees; changes in rapidly advancing
technologies, possibly making some of the current technology
quickly obsolete; changes in tax rates and/or policies; and changes
in, and compliance with, environmental and endangered species laws,
regulations, decisions and policies, including present and
potential environmental remediation costs. For a further discussion
of these factors and other important factors, please refer to the
company's Annual Report on Form 10-K for the year ended Dec. 31,
2004 and Quarterly Report on Form 10-Q for the quarter ended
September 30, 2005. The forward-looking statements contained in
this news release speak only as of the date hereof. The company
undertakes 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 the company's
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
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Dollars in
Thousands except Per Share Amounts) Year Ended Fourth Quarter
December 31, 2005 2004 2005 2004 Operating revenues $458,432
$340,408 $1,359,607 $1,151,580 Operating expenses: Resource costs
295,433 183,834 815,590 618,595 Other operating expenses 63,830
63,293 241,131 247,796 Depreciation and amortization 21,449 19,655
86,911 78,425 Utility taxes other than income taxes 17,909 17,495
68,044 66,294 Total operating expenses 398,621 284,277 1,211,676
1,011,110 Gain on sale of utility properties -- -- 4,093 -- Income
from operations 59,811 56,131 152,024 140,470 Other income
(expense): Interest expense, net of capitalized interest (22,733)
(23,064) (91,025) (91,654) Other income - net 2,857 1,662 10,030
8,390 Total other income (expense) - net (19,876) (21,402) (80,995)
(83,264) Income before income taxes 39,935 34,729 71,029 57,206
Income taxes 14,523 12,149 25,861 21,592 Net income before
cumulative effect of accounting change 25,412 22,580 45,168 35,614
Cumulative effect of accounting change (net of tax) (Note 1) -- --
-- (460) Net income $25,412 $22,580 $45,168 $35,154
Weighted-average common shares outstanding (thousands), basic
48,568 48,446 48,523 48,400 Weighted-average common shares
outstanding (thousands), diluted 48,997 48,935 48,979 48,886
Earnings per common share, basic: Earnings before cumulative effect
of accounting change $0.52 $0.47 $0.93 $0.74 Loss from cumulative
effect of accounting change (Note 1) -- -- -- (0.01) Total earnings
per common share, basic $0.52 $0.47 $0.93 $0.73 Earnings per common
share, diluted: Earnings before cumulative effect of accounting
change $0.52 $0.46 $0.92 $0.73 Loss from cumulative effect of
accounting change (Note 1) -- -- -- (0.01) Total earnings per
common share, diluted $0.52 $0.46 $0.92 $0.72 Dividends paid per
common share $0.140 $0.130 $0.545 $0.515 Note 1. Amount for the
year ended December 31, 2004 represents the implementation of
Financial Accounting Standards Board Interpretation No. 46R,
"Consolidation of Variable Interest Entities," which resulted in
the consolidation of several minor entities. Issued February 10,
2006 AVISTA CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED) (Dollars in Thousands) December 31, December 31, 2005
2004 Assets Cash and cash equivalents $25,917 $88,317 Restricted
cash 25,634 26,175 Accounts and notes receivable 502,947 313,899
Current energy commodity assets 918,609 284,231 Current utility
energy commodity derivative assets 69,494 12,557 Other current
assets 220,478 182,961 Total net utility property 2,126,417
1,956,063 Investment in exchange power-net 33,483 35,933
Non-utility properties and investments-net 77,731 78,564
Non-current energy commodity assets 511,280 254,657 Investment in
affiliated trusts 13,403 13,403 Other property and investments-net
15,058 19,721 Regulatory assets for deferred income taxes 117,354
123,159 Other regulatory assets 26,660 43,428 Non-current utility
energy commodity derivative assets 46,731 55,825 Power and natural
gas deferrals 147,622 148,206 Unamortized debt expense 48,522
53,413 Other deferred charges 17,110 21,109 Total Assets $4,944,450
$3,711,621 Liabilities and Stockholders' Equity Accounts payable
$511,427 $325,194 Current energy commodity liabilities 906,794
253,527 Current portion of long-term debt 39,524 85,432 Short-term
borrowings 63,494 68,517 Other current liabilities 208,649 149,168
Long-term debt 989,990 901,556 Long-term debt to affiliated trusts
113,403 113,403 Preferred stock (subject to mandatory redemption)
26,250 28,000 Non-current energy commodity liabilities 488,644
215,055 Regulatory liability for utility plant retirement costs
186,635 175,575 Non-current utility energy commodity derivative
liabilities 88 33,490 Deferred income taxes 484,890 488,471 Other
non-current liabilities and deferred credits 153,534 121,028 Total
Liabilities 4,173,322 2,958,416 Common stock - net (48,593,139 and
48,471,511 outstanding shares) 620,598 617,884 Retained earnings
and accumulated other comprehensive loss 150,530 135,321 Total
Stockholders' Equity 771,128 753,205 Total Liabilities and
Stockholders' Equity $4,944,450 $3,711,621 Issued February 10, 2006
AVISTA CORPORATION FINANCIAL AND OPERATING HIGHLIGHTS (Dollars in
Thousands) Year Ended Fourth Quarter December 31, 2005 2004 2005
2004 Avista Utilities Retail electric revenues $138,653 $132,258
$511,864 $506,428 Retail kWh sales (in millions) 2,303 2,187 8,530
8,363 Retail electric customers at end of period 338,369 331,014
338,369 331,014 Wholesale electric revenues $50,692 $21,886
$151,429 $62,399 Wholesale kWh sales (in millions) 549 393 2,508
1,472 Sales of fuel $8,709 $5,063 $41,831 $63,990 Other electric
revenues $6,056 $4,463 $17,988 $19,264 Total natural gas revenues
$177,464 $120,161 $438,205 $320,493 Total therms delivered (in
thousands) 188,528 164,254 562,307 495,584 Retail natural gas
customers at end of period 297,277 304,850 297,277 304,850 Income
from operations (pre-tax) $47,585 $50,274 $165,378 $134,073 Net
income $16,889 $19,891 $52,479 $32,467 Energy Marketing and
Resource Management Gross margin (operating revenues less resource
costs) $16,415 $14,114 $2,016 $38,842 Realized gross margin $19,411
$8,217 $40,142 $39,520 Unrealized gross margin $(2,996) $5,897
$(38,126) $(678) Income (loss) from operations (pre-tax) $10,974
$8,056 $(18,267) $11,681 Net income (loss) $8,253 $5,940 $(8,621)
$9,733 Electric sales (millions of kWhs) 6,923 7,875 28,377 32,629
Natural gas sales (thousands of dekatherms) 51,561 64,479 182,874
219,719 Avista Advantage Revenues $8,605 $6,636 $31,748 $23,444
Income from operations (pre-tax) $1,637 $1,092 $6,973 $1,742 Net
income $922 $553 $3,922 $577 Other Revenues $5,056 $4,483 $18,532
$17,127 Loss from operations (pre-tax) $(385) $(3,291) $(2,060)
$(7,026) Net loss before cumulative effect of accounting change
$(652) $(3,804) $(2,612) $(7,163) Net loss $(652) $(3,804) $(2,612)
$(7,623) Issued February 10, 2006 First Call Analyst: FCMN Contact:
debbie.simock@avistacorp.com
http://www.newscom.com/cgi-bin/prnh/20040128/SFW031LOGO
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media, Jessie Wuerst, +1-509-495-8578, or , or investors, Jason
Lang, +1-509-495-2930, or , both of Avista Corp.; or Avista 24/7
Media Access, +1-509-495-4174 Web site: http://www.avistacorp.com/
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