SPOKANE, Wash., Aug. 2 /PRNewswire-FirstCall/ -- Avista Corp.
(NYSE:AVA) today reported net income of $13.5 million, or $0.27 per
diluted share, for the second quarter of 2006, a decrease as
compared to net income of $18.6 million, or $0.38 per diluted
share, for the second quarter of 2005. For the six months ended
June 30, 2006, Avista Corp.'s net income was $45.0 million, or
$0.91 per diluted share, an increase as compared to net income of
$28.8 million, or $0.59 per diluted share, for the six months ended
June 30, 2005. (Logo:
http://www.newscom.com/cgi-bin/prnh/20040128/SFW031LOGO ) "We are
on track for a good year in 2006 due to improved year-to-date
earnings from Avista Utilities and the continued trend of earnings
growth from Advantage IQ," said Avista Chairman and Chief Executive
Officer Gary G. Ely. "We are satisfied with Avista Energy's
operations, which are on track for the year as measured on an
economic basis. However, its reported results continue to differ
from economic results due to the required accounting for certain
contracts and assets under management," Ely added. Results for the
second quarter of 2006 and the six months ended June 30, 2006
(YTD), as compared to the respective periods of 2005: ($ in
thousands, except per- share data) Q2 2006 Q2 2005 YTD 2006 YTD
2005 Operating Revenues $287,394 $272,832 $786,596 $635,496 Income
from Operations $42,578 $49,219 $113,516 $87,402 Net Income $13,459
$18,604 $45,031 $28,793 Net Income (Loss) by Business Segment:
Avista Utilities $16,879 $18,407 $43,051 $37,393 Energy Marketing
& Resource Management $(4,610) $(250) $436 $(8,608) Advantage
IQ $1,558 $918 $2,985 $1,726 Other $(368) $(471) $(1,441) $(1,718)
Contribution to earnings per diluted share by Business Segment:
Avista Utilities $0.34 $0.38 $0.87 $0.76 Energy Marketing &
Resource Management $(0.09) $(0.01) $0.01 $(0.18) Advantage IQ
$0.03 $0.02 $0.06 $0.04 Other $(0.01) $(0.01) $(0.03) $(0.03) Total
earnings per diluted share $0.27 $0.38 $0.91 $0.59 Second Quarter
and Year-to-Date 2006 Highlights Avista Utilities: For the second
quarter of 2006 Avista Utilities' net income decreased as compared
to the same period in 2005. This decrease was primarily due to the
$3.2 million pre-tax gain on the sale of Avista's South Lake Tahoe,
California natural gas distribution properties during the second
quarter of 2005, as well as an increase in interest expense for the
second quarter of 2006. During the first half of 2005, the company
carried higher levels of short-term borrowings under its committed
line of credit at relatively low interest rates. During the fourth
quarter of 2005, the company essentially refinanced these
borrowings on a long-term basis at a fixed interest rate of 6.25
percent. A result of this prudent long-term financing decision was
an increase in interest expense for 2006 as compared to 2005. Gross
margin increased for the second quarter of 2006 as compared to the
second quarter of 2005 primarily due to lower power supply costs,
the effects of the Jan. 1, 2006, Washington general rate increase
and customer growth. The increase in gross margin was partially
offset by an increase in other operating expenses and taxes other
than income taxes. Net income for Avista Utilities increased for
the six months ended June 30, 2006, as compared to the six months
ended June 30, 2005, due to several factors. Most significantly,
electric resource costs were lower than the amount included in base
retail rates. These lower costs were primarily the result of
improved hydroelectric generation during the first half of the
year. Avista Utilities' benefit under the Energy Recovery Mechanism
(ERM) was $7.2 million for the first half of 2006 as compared to
$0.7 million for the first half of 2005. In June 2006, the
Washington Utilities and Transportation Commission (WUTC) approved
the modification of the ERM through a settlement agreement between
Avista and the other parties in the proceeding. The settlement
agreement provides for the continuation of the ERM with certain
agreed-upon modifications and was effective retroactive to Jan. 1,
2006. The settling parties have agreed to review the ERM after five
years. Under the modified ERM, Avista's annual deadband is reduced
from $9 million to $4 million. Annual power supply cost variances
between $4 million and $10 million will be shared equally between
Avista and its customers. As such, 50 percent of the annual power
supply cost variance in this range is deferred for future surcharge
or rebate to Avista's customers, and the remaining 50 percent is an
expense of, or benefit to, Avista. Once the annual power supply
cost variance from the amount included in base rates exceeds $10
million, 90 percent of the cost variance will be deferred for
future surcharge or rebate. The remaining 10 percent of the
variance beyond $10 million is an expense of, or benefit to, Avista
without affecting current or future customer rates. Also
contributing to the increase in net income for the first half of
2006 was the general rate increase implemented in Washington on
Jan. 1, 2006, and the sale of claims against Enron Corporation and
certain of its affiliates during the first quarter of 2006. During
the first half of 2006, Avista Utilities' power and natural gas
deferrals were reduced by $37.9 million. As of June 30, 2006,
deferred power costs were $80.0 million and deferred natural gas
costs were $29.7 million. Avista is forecasting hydroelectric
generation to be 104 percent of normal in 2006 assuming normal
precipitation for the remainder of the year. This forecast may be
revised based on precipitation, temperatures and other variables
during the year. Energy Marketing and Resource Management: This
business segment had a net loss for the second quarter of 2006 due
to the significant difference between the economic management and
the required accounting for certain contracts and physical assets
under the management of Avista Energy. The operations of Avista
Energy are managed on an economic basis, reflecting 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 and its control of natural gas-fired
generation through a power purchase agreement, as well as certain
other agreements. These differences had an estimated $7.9 million
(or $0.16 per diluted share) after-tax negative effect on results
for the second quarter of 2006 compared to an estimated $2.3
million (or $0.05 per diluted share) after-tax positive effect on
results for the second quarter of 2005. This business segment had
net income for the first half of 2006 as compared to a significant
net loss for the first half of 2005. The improved results were
primarily due to Avista Energy's asset management activities and
positive results from its natural gas end-user business and natural
gas trading. The estimated difference between the economic
management and the required accounting for certain contracts and
physical assets under management had an estimated $5.3 million (or
$0.11 per diluted share) after-tax negative effect on results for
the six months ended June 30, 2006, as compared to an estimated
$3.9 million (or $0.08 per diluted share) after-tax negative effect
on results for the six months ended June 30, 2005. Economic results
for this segment were consistent with the company's expectations
for the first half of 2006. A significant portion of the estimated
$5.3 million difference between the economic management and the
required accounting for certain contracts and physical assets under
management for the first half of 2006 is expected to reverse in the
first half of 2007 when the contracts are settled or realized. This
assumes stable commodity prices and no additional transactions by
Avista Energy. Until the contracts are settled or realized, this
difference could also increase or decrease due to changes in
forward market prices. Advantage IQ: To more effectively
communicate its identity in the marketplace and to enhance the
understanding of the services they provide, Avista Advantage has
changed its name to Advantage IQ. The earnings improvement at
Advantage IQ for the second quarter and first half of 2006 as
compared to the same periods in 2005 was primarily due to an
increase in operating revenues resulting from customer growth.
Advantage IQ's revenues increased by 25 percent for the six months
ended June 30, 2006, as compared to the six months ended June 30,
2005, while the dollar volume of bills processed increased by 19
percent for the same period. Advantage IQ has over 350 clients
representing approximately 192,000 billed sites in North America.
Other Business Segment: The net loss in the Other business segment
was less for the second quarter and first half of 2006 as compared
to the second quarter and first half of 2005, primarily due to the
improved performance of Advanced Manufacturing and Development
(doing business as METALfx). Liquidity and Capital Resources: Total
debt outstanding for Avista Corp. decreased approximately $64
million in the first half of 2006 primarily due to operating cash
flows in excess of utility capital expenditures, dividends and
other funding requirements. Avista Utilities plans to continue to
invest in its generation, transmission and distribution systems
with a focus on providing reliable service to its customers. The
utility capital budget is approximately $160 million for 2006, and
for the first half of the year these capital expenditures totaled
approximately $70 million. Potential Holding Company Formation: At
the 2006 Annual Meeting on May 11, Avista Corp. shareholders
approved a proposal to proceed with a statutory share exchange,
which would change the company's organization to a holding company
structure. The holding company is expected to ultimately become the
parent to Avista Utilities and Avista Capital, which is the parent
to the company's non-utility subsidiaries. Avista Corp. received
approval from the Federal Energy Regulatory Commission on April 18,
2006, (conditioned on approval by the state regulatory agencies)
and from the Idaho Public Utilities Commission on June 30, 2006.
Avista Corp. also has filed for approval from the utility
regulators in Washington, Oregon and Montana. The statutory share
exchange is subject to the receipt of the remaining state
regulatory approvals and the satisfaction of other conditions. The
company anticipates that the statutory share exchange and the
holding company structure implementation will not be completed
earlier than the fourth quarter of 2006. Earnings Guidance and
Outlook For 2006, Avista Corp. 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. The
outlook for the utility assumes, among other variables, near normal
weather, temperatures and hydroelectric generation for the
remainder of the year. 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
related to the required accounting for certain contracts and
physical assets under management. Avista Corp. expects Advantage IQ
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 339,000 electric and 298,000 natural gas
customers in three Western states. Avista's non-regulated
subsidiaries include Advantage IQ 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
August 2, 2006, at 10:30 a.m. EDT 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 August 9, 2006. Call 888-286-8010, passcode
44199070 to listen to the replay. The webcast will be archived at
http://www.avistacorp.com/ for one year. 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 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 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 natural gas for retail
customers and natural gas fuel for electric generation, as well as
the market value of derivative assets and liabilities and
unrealized gains and losses; volatility and illiquidity in
wholesale energy markets, including the availability and prices of
purchased energy and demand for energy sales; the effect of state
and federal regulatory decisions affecting the ability of the
Company to recover its costs and/or earn a reasonable return,
including, but not limited to, the disallowance of previously
deferred costs; 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; 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; the potential impact of
changes to electric transmission ownership, operation and
governance, such as the formation of one or more regional
transmission organizations or similar entities; wholesale and
retail competition including, but not limited to, electric retail
wheeling and transmission costs; the ability to relicense and
maintain licenses for hydroelectric generating facilities at
cost-effective levels with reasonable terms and conditions;
unplanned outages at any Company-owned generating facilities or the
inability of generating facilities to operate as intended;
unanticipated delays or changes in construction costs, as well as
the ability to obtain required operating permits 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, which can have an impact on
the Company's ability to deliver energy to its customers; the
potential for future terrorist attacks or other malicious acts,
particularly with respect to utility plant 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 hydroelectric resources; changes in future economic
conditions in the Company's service territory and the United States
in general, including inflation or deflation and monetary policy;
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, which can be affected by various factors including the
Company's credit ratings, interest rate fluctuations and other
capital market conditions; the effect 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, which can affect future
funding obligations, costs and pension plan liabilities; 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;
changes in, and compliance with, environmental and endangered
species laws, regulations, decisions and policies, including
present and potential environmental remediation costs; and changes
in the strategic business plans of the Company and/or any of its
subsidiaries, 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 the company's Annual
Report on Form 10-K for the year ended Dec. 31, 2005 and Quarterly
Report on Form 10-Q for the quarter ended March 31, 2006. 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) Six Months Ended Second Quarter June 30,
2006 2005 2006 2005 Operating revenues $287,394 $272,832 $786,596
$635,496 Operating expenses: Resource costs 140,282 130,975 462,014
353,132 Other operating expenses 64,787 58,683 126,825 118,013
Depreciation and amortization 21,424 21,388 43,852 44,094 Utility
taxes other than income taxes 18,323 15,776 40,389 36,064 Total
operating expenses 244,816 226,822 673,080 551,303 Gain on sale of
utility properties -- 3,209 -- 3,209 Income from operations 42,578
49,219 113,516 87,402 Other income (expense): Interest expense, net
of capitalized interest (23,329) (22,533) (46,653) (45,519) Other
income - net 2,078 1,840 4,553 3,662 Total other income (expense) -
net (21,251) (20,693) (42,100) (41,857) Income before income taxes
21,327 28,526 71,416 45,545 Income taxes 7,868 9,922 26,385 16,752
Net income $13,459 $18,604 $45,031 $28,793 Weighted-average common
shares outstanding (thousands), basic 48,958 48,508 48,877 48,493
Weighted-average common shares outstanding (thousands), diluted
49,694 48,904 49,498 48,893 Total earnings per common share, basic
$0.27 $0.38 $0.92 $0.59 Total earnings per common share, diluted
$0.27 $0.38 $0.91 $0.59 Dividends paid per common share $0.140
$0.135 $0.280 $0.270 Issued August 2, 2006 AVISTA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Dollars in
Thousands) June 30, December 31, 2006 2005 Assets Cash and cash
equivalents $35,849 $25,917 Restricted cash 40,140 25,634 Accounts
and notes receivable 211,161 502,947 Current energy commodity
derivative assets 416,906 918,609 Other current assets 326,128
297,261 Total net utility property 2,156,918 2,126,417 Non-utility
properties and investments-net 60,255 77,731 Non-current energy
commodity derivative assets 383,883 511,280 Other property and
investments-net 61,384 61,944 Regulatory assets for deferred income
taxes 108,737 114,109 Other regulatory assets 29,940 26,660
Non-current utility energy commodity derivative assets 61,405
46,731 Power and natural gas deferrals 109,747 147,622 Unamortized
debt expense 45,627 48,522 Other deferred charges 18,957 17,110
Total Assets $4,067,037 $4,948,494 Liabilities and Stockholders'
Equity Accounts payable $230,095 $511,427 Current energy commodity
derivative liabilities 398,472 906,794 Current portion of long-term
debt 201,435 39,524 Short-term borrowings 7,000 63,494 Other
current liabilities 254,250 208,649 Long-term debt 820,400 989,990
Long-term debt to affiliated trusts 113,403 113,403 Preferred stock
(subject to mandatory redemption) 26,250 26,250 Non-current energy
commodity derivative liabilities 378,549 488,644 Regulatory
liability for utility plant retirement costs 191,760 186,635
Deferred income taxes 470,887 488,934 Other non-current liabilities
and deferred credits 155,831 153,622 Total Liabilities 3,248,332
4,177,366 Common stock - net (49,043,990 and 48,593,139 outstanding
shares) 630,380 620,598 Retained earnings and accumulated other
comprehensive loss 188,325 150,530 Total Stockholders' Equity
818,705 771,128 Total Liabilities and Stockholders' Equity
$4,067,037 $4,948,494 Issued August 2, 2006 AVISTA CORPORATION
FINANCIAL AND OPERATING HIGHLIGHTS (Dollars in Thousands) Six
Months Ended Second Quarter June 30, 2006 2005 2006 2005 Avista
Utilities Retail electric revenues $126,394 $115,372 $271,788
$251,219 Retail kWh sales (in millions) 2,011 1,930 4,303 4,180
Retail electric customers at end of period 339,091 331,311 339,091
331,311 Wholesale electric revenues $33,278 $32,743 $72,429 $60,477
Wholesale kWh sales (in millions) 929 864 1,404 1,362 Sales of fuel
$8,310 $16,606 $39,247 $26,253 Other electric revenues $4,513
$4,025 $11,038 $7,843 Retail natural gas revenues $63,019 $52,674
$229,980 $191,868 Wholesale natural gas revenues $19,682 $13,676
$50,897 $13,790 Transportation and other natural gas revenues
$2,880 $3,223 $5,987 $6,585 Total therms delivered (in thousands)
121,150 110,244 342,774 293,337 Retail natural gas customers at end
of period 298,490 289,688 298,490 289,688 Income from operations
(pre-tax) $49,338 $48,903 $112,250 $100,509 Net income $16,879
$18,407 $43,051 $37,393 Energy Marketing and Resource Management
Gross margin (operating revenues less resource costs) $(3,881)
$3,773 $7,534 $(4,811) Realized gross margin $12,197 $3,565 $17,472
$12,493 Unrealized gross margin $(16,078) $208 $(9,938) $(17,304)
Income (loss) from operations (pre-tax) $(8,906) $(973) $(2,586)
$(14,781) Net income (loss) $(4,610) $(250) $436 $(8,608) Electric
sales (millions of kWhs) 6,891 6,902 13,870 13,670 Natural gas
sales (thousands of dekatherms) 46,367 31,221 96,530 86,116
Advantage IQ Revenues $9,545 $7,703 $18,622 $14,943 Income from
operations (pre-tax) $2,563 $1,658 $4,962 $3,134 Net income $1,558
$918 $2,985 $1,726 Other Revenues $5,458 $4,784 $10,751 $8,632 Loss
from operations (pre-tax) $(417) $(369) $(1,110) $(1,460) Net loss
$(368) $(471) $(1,441) $(1,718) Issued August 2, 2006
http://www.newscom.com/cgi-bin/prnh/20040128/SFW031LOGO
http://photoarchive.ap.org/ DATASOURCE: Avista Corp. CONTACT:
media, Jessie Wuerst, +1-509-495-8578, or , or investors, Jason
Lang, +1-509-495-2930, or , or Avista 24/7 Media Access,
+1-509-495-4174 all of Avista Corp. Web site:
http://www.avistacorp.com/
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