SPOKANE, Wash., Aug. 1 /PRNewswire-FirstCall/ -- Avista Corp.
(NYSE:AVA) today reported net income of $14.2 million, or $0.26 per
diluted share, for the second quarter of 2007, as compared to net
income of $13.5 million, or $0.27 per diluted share, for the second
quarter of 2006. For the six months ended June 30, 2007, Avista
Corp.'s net income was $28.3 million, or $0.53 per diluted share, a
decrease compared to net income of $45.0 million, or $0.91 per
diluted share, for the six months ended June 30, 2006. (Logo:
http://www.newscom.com/cgi-bin/prnh/20040128/SFW031LOGO ) "This is
a year of repositioning for our company, with a focus on the future
of our utility operations," said Avista Chairman and Chief
Executive Officer Gary G. Ely. "The most significant event to date
is the completion of the sale of substantially all of Avista
Energy's contracts and ongoing operations to Coral Energy Holding,
L.P. This transaction lowers our corporate risk profile and should
increase the stability of our earnings. Over time, we plan to
strategically deploy the majority of the proceeds from the
transaction into our utility operations. "Given the net loss at
Avista Energy, as well as other variables that have worked against
us in our utility operations, such as weather and the timing of
hydroelectric generation, our consolidated earnings for the year
will be below our original expectations," Ely said. Results for the
second quarter of 2007 and the six months ended June 30, 2007
(YTD), as compared to the respective periods of 2006: ($ in
thousands, except Q2 2007 Q2 2006 YTD YTD per-share data) 2007 2006
Operating Revenues $304,005 $287,394 $763,192 $786,596 Income from
Operations $40,218 $42,578 $79,155 $113,516 Net Income $14,183
$13,459 $28,277 $45,031 Net Income (Loss) by Business Segment:
Avista Utilities $17,257 $16,879 $37,184 $43,051 Energy Marketing
& Resource $(3,938) $(4,610) $(11,561) $436 Management
Advantage IQ $1,310 $1,558 $2,894 $2,985 Other $(446) $(368) $(240)
$(1,441) Contribution to earnings per diluted share by Business
Segment:* Avista Utilities $0.32 $0.34 $0.70 $0.87 Energy Marketing
& Resource $(0.07) $(0.09) $(0.22) $0.01 Management Advantage
IQ $0.02 $0.03 $0.05 $0.06 Other $(0.01) $(0.01) -- $(0.03) Total
earnings per diluted share $0.26* $0.27* $0.53 $0.91 * Although net
income increased for the second quarter 2007 as compared to the
second quarter of 2006, earnings per diluted share decreased
primarily due to the issuance of 3,162,500 shares of common stock
in December 2006. Second Quarter and Year-to-date 2007 Highlights
Avista Utilities: The increase in second quarter 2007 net income
over the second quarter of 2006 was primarily due to decreases in
interest expense and taxes other than income taxes. This was
partially offset by a decrease in gross margin (operating revenues
less resource costs) and an increase in other operating expenses.
The decrease in gross margin was primarily due to the difference in
electric resource costs as compared to the amount included in base
retail rates. We recognized a benefit of $0.8 million under the
Washington Energy Recovery Mechanism (ERM) for the second quarter
of 2007 compared to a benefit of $2.0 million under the ERM for
same period in 2006. The decrease in gross margin for the quarter
was also due to a decline in use per customer and a corresponding
decrease in retail sales volumes for both electric and natural gas.
This appears to be primarily due to warmer than normal weather
during the heating season and our customers' response to price
increases, particularly with respect to natural gas use. On a
year-to-date basis, utility earnings decreased as compared to the
same period in 2006. This was primarily due to a decrease in gross
margin as well as an increase in other operating expenses. This was
partially offset by a decrease in interest expense. The decline in
gross margin was primarily due to the difference in electric
resource costs as compared to the amount included in base retail
rates. On a year-to-date basis, we recognized an expense of $2.4
million under the ERM compared to a benefit of $7.2 million under
the ERM for the same period in 2006. In our original earnings
guidance, we expected to absorb about $6 million of costs under the
ERM for the full year of 2007. Although we are expecting annual
hydro generation to be near normal for 2007, the timing of the
spring runoff, outages at generating plants, below normal hydro
generation in May and June, and higher than anticipated purchased
power and fuel costs lead us now to expect to absorb approximately
$8 million of costs under the ERM for the full year of 2007. In
April 2007, we filed a general rate case in Washington requesting
rate increases averaging 15.9 percent for electric and 2.3 percent
for natural gas. The current schedule from the Washington Utilities
and Transportation Commission (WUTC) anticipates an order in the
general rate case on or before March 1, 2008. Advantage IQ:
Earnings from Advantage IQ for the second quarter and year-to-date
2007 were slightly below our original expectations primarily due to
expenses incurred for consulting services during the second
quarter. These consulting costs, which should create value over the
next few years, were not considered in our original earnings
guidance for Advantage IQ. We are implementing certain strategic
investments at Advantage IQ aimed at creating long-term value that
will increase operating and capitalized costs in the short-term.
This could limit earnings growth from this segment in 2007, while
enhancing the long-term profit potential of Advantage IQ. Other:
Results from the Other segment were close to break-even for
year-to-date 2007, an improvement from the comparable period of
2006. This was primarily due to net gains on certain long-term
venture fund investments in 2007 as compared to net losses in 2006.
Energy Marketing and Resource Management: On June 30, 2007, Avista
Energy completed the sale of substantially all of its contracts and
ongoing operations to Coral Energy Holding, L.P., a subsidiary of
Shell, and certain of Coral Energy's subsidiaries. Completion of
this transaction effectively ends substantially all of the
operations of this business segment. The lower than expected
results from this segment were primarily due to: --
underperformance on the power side of the business; -- losses on a
power purchase agreement related to a natural gas-fired combined
cycle combustion turbine plant in northern Idaho; -- the difference
between the estimated market value and the required accounting for
certain contracts and physical assets under management, which
accounted for over one-half of Avista Energy's net loss; and -- a
loss on the net assets sold to Coral Energy. Liquidity and Capital
Resources: For the remainder of 2007, we expect net cash flows from
operating activities, proceeds from the Avista Energy transaction
and our committed line of credit to provide adequate resources to
fund: -- capital expenditures; -- maturing long-term debt and
preferred stock; -- dividends; and -- other contractual
commitments. Proceeds from the sale of Avista Energy's net assets
to Coral Energy together with the liquidation of Avista Energy's
remaining net current assets (primarily receivables, restricted
cash and deposits with counterparties) are expected to result in
total proceeds of approximately $170 million to be received in the
third quarter of 2007. As of the end of July, we have received most
of these funds. Over time, we plan to redeploy the majority of the
proceeds from the transaction into our regulated utility
operations. We plan to continue to invest in generation,
transmission and distribution systems with a focus on providing
reliable and cost-effective service to our customers. Utility
capital expenditures were $92 million for the six months ended June
30, 2007. We expect utility capital expenditures to be in the range
of $180 to $190 million for 2007 and over $200 million in each of
2008, 2009 and 2010. Earnings Guidance and Outlook At this time, we
are revising our guidance for Avista Utilities downward by $0.10
per diluted share to a range of $1.00 to $1.10 per diluted share
for 2007. The decrease is primarily due to our expectation of
absorbing higher costs under the ERM and lower retail loads. As
disclosed in February 2007, we were expecting to be at the lower
end of our original guidance of $1.10 to $1.20 per diluted share as
the WUTC denied our request for rate relief in December 2006. These
negative factors are partially offset by the deployment of proceeds
from the Avista Energy transaction primarily through the repayment
of borrowings under our committed line of credit and the short-term
investment of excess funds. The outlook for Avista Utilities
assumes, among other variables, normal precipitation, temperatures
and hydroelectric generation during the second half of the year.
The 2007 outlook for our Energy Marketing and Resource Management
segment has been revised to a loss of $0.22 per diluted share. The
loss from this segment reflects the operating loss for the first
half of 2007 and the loss on the sale of substantially all of
Avista Energy contracts and ongoing operations. With the completion
of the transaction, we are not expecting any significant activity
in this segment for the second half of 2007. We are making a slight
revision to our guidance for Advantage IQ to a contribution range
of $0.11 to $0.13 per diluted share, a change from our previous
guidance of $0.13 to $0.14 per diluted share. This decrease is
primarily due to expenses for consulting services during the second
and third quarters. We expect the Other business segment to lose
$0.02 per diluted share. Based on the revisions to each segment, we
are revising our guidance for 2007 consolidated earnings to be in a
range of $0.85 to $1.00 per diluted share. Avista is initiating its
2008 guidance for consolidated earnings 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, as well as the implementation of the Washington general
rate case in March 2008. We expect Advantage IQ to contribute in a
range of $0.13 to $0.15 per diluted share and the Other business
segment 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 August 1, 2007, at 10:30 a.m. EDT to discuss this
news release. The call is available at (866) 356-3093, passcode:
61018964. A replay of the conference call will be available through
Wednesday, August 8, 2007. Call (888) 286-8010, passcode 65938322
to listen to the replay. A simultaneous webcast of the call is
available on our website, http://www.avistacorp.com/. 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
345,000 electric and 304,000 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, our 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
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,
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,
as well as the market value of derivative assets and liabilities;
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 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 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
concerning us or affecting directly or indirectly our operations;
the potential effects of any legislation or administrative
rulemaking passed into law, including the possible adoption of
national, regional, or state restrictions on greenhouse gas
emissions and global warming; changes in, and compliance with,
environmental and endangered species laws, regulations, decisions
and policies, including present and potential environmental
remediation costs; 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 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 future
economic conditions in our 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 our service territory; the loss of
significant customers and/or suppliers; failure to deliver on the
part of any parties from which we purchase and/or sell capacity or
energy; changes in the creditworthiness of our customers and energy
trading 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 premiums paid for 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 quickly obsolete;
changes in tax rates and/or policies; and changes in our strategic
business plans and/or our 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, 2006 and Quarterly Report on Form 10-Q for the
quarter ended Mar. 31, 2007. 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, 2007 2006 2007 2006 Operating
revenues $304,005 $287,394 $763,192 $786,596 Operating expenses:
Resource costs 153,906 140,282 461,619 462,014 Other operating
expenses 72,363 64,787 138,540 126,825 Depreciation and
amortization 22,468 21,424 44,833 43,852 Utility taxes other than
income taxes 15,050 18,323 39,045 40,389 Total operating expenses
263,787 244,816 684,037 673,080 Income from operations 40,218
42,578 79,155 113,516 Other income (expense): Interest expense, net
of capitalized interest (20,793) (23,329) (41,860) (46,653) Other
income - net 3,547 2,078 7,258 4,553 Total other income (expense) -
net (17,246) (21,251) (34,602) (42,100) Income before income taxes
22,972 21,327 44,553 71,416 Income taxes 8,789 7,868 16,276 26,385
Net income $14,183 $13,459 $28,277 $45,031 Weighted-average common
shares outstanding (thousands), basic 52,775 48,958 52,736 48,877
Weighted-average common shares outstanding (thousands), diluted
53,313 49,694 53,324 49,498 Total earnings per common share, basic
$0.27 $0.27 $0.54 $0.92 Total earnings per common share, diluted
$0.26 $0.27 $0.53 $0.91 Dividends paid per common share $0.150
$0.140 $0.295 $0.280 Issued August 1, 2007 AVISTA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Dollars in
Thousands) June 30, December 31, 2007 2006 Assets Cash and cash
equivalents $103,302 $28,242 Restricted cash 3,621 29,903 Accounts
and notes receivable 187,639 286,150 Current energy commodity
derivative assets -- 343,726 Other current assets 266,627 344,253
Total net utility property 2,267,618 2,215,037 Non-utility
properties and investments-net 57,505 60,301 Non-current energy
commodity derivative assets -- 313,300 Other property and
investments-net 61,671 60,030 Regulatory assets for deferred income
taxes 103,363 105,935 Regulatory assets for pensions and other
postretirement benefits 52,814 54,192 Other regulatory assets
34,518 31,752 Non-current utility energy commodity derivative
assets 31,960 25,575 Power and natural gas deferrals 77,025 97,792
Unamortized debt expense 43,275 46,554 Other deferred charges
14,192 13,766 Total Assets $3,305,130 $4,056,508 Liabilities and
Stockholders' Equity Accounts payable $179,589 $286,099 Current
energy commodity derivative liabilities -- 313,499 Current portion
of long-term debt 307,720 26,605 Current portion of preferred stock
(subject to mandatory redemption) 26,250 26,250 Short-term
borrowings 16,000 4,000 Other current liabilities 254,792 288,756
Long-term debt 655,377 949,854 Long-term debt to affiliated trusts
113,403 113,403 Non-current energy commodity derivative liabilities
-- 309,990 Regulatory liability for utility plant retirement costs
203,242 197,712 Pensions and other postretirement benefits 99,120
103,604 Deferred income taxes 425,199 459,756 Other non-current
liabilities and deferred credits 97,848 62,455 Total Liabilities
2,378,540 3,141,983 Common stock - net (52,826,120 and 52,514,326
outstanding shares) 720,349 715,620 Retained earnings and
accumulated other comprehensive loss 206,241 198,905 Total
Stockholders' Equity 926,590 914,525 Total Liabilities and
Stockholders' Equity $3,305,130 $4,056,508 Issued August 1, 2007
AVISTA CORPORATION FINANCIAL AND OPERATING HIGHLIGHTS (Dollars in
Thousands) Six Months Ended Second Quarter June 30, 2007 2006 2007
2006 Avista Utilities Retail electric revenues $126,612 $126,394
$278,472 $271,788 Retail kWh sales (in millions) 1,999 2,011 4,376
4,303 Retail electric customers at end of period 344,928 339,091
344,928 339,091 Wholesale electric revenues $32,790 $33,278 $59,098
$72,429 Wholesale kWh sales (in millions) 677 929 1,019 1,404 Sales
of fuel $6 $8,310 $8,149 $39,247 Other electric revenues $4,401
$4,513 $8,258 $11,038 Retail natural gas revenues $63,564 $63,019
$241,137 $229,980 Wholesale natural gas revenues $37,757 $19,682
$81,291 $50,897 Transportation and other natural gas revenues
$2,867 $2,880 $5,858 $5,987 Total therms delivered (in thousands)
137,173 121,150 383,792 342,774 Retail natural gas customers at end
of period 304,444 298,490 304,444 298,490 Income from operations
(pre-tax) $45,938 $49,338 $96,092 $112,250 Net income $17,257
$16,879 $37,184 $43,051 Energy Marketing and Resource Management
Gross margin (operating revenues less resource costs) $1,012
$(3,881) $(7,306) $7,534 Realized gross margin $4,673 $12,197
$17,288 $17,472 Unrealized gross margin $(3,661) $(16,078)
$(24,594) $(9,938) Loss from operations (pre-tax) $(7,491) $(8,906)
$(21,071) $(2,586) Net income (loss) $(3,938) $(4,610) $(11,561)
$436 Electric sales (millions of kWhs) 4,371 6,891 8,715 13,870
Natural gas sales (thousands of dekatherms) 16,557 46,367 43,447
96,530 Advantage IQ Revenues $11,415 $9,545 $22,414 $18,622 Income
from operations (pre-tax) $2,185 $2,563 $4,761 $4,962 Net income
$1,310 $1,558 $2,894 $2,985 Other Revenues $5,195 $5,458 $9,708
$10,751 Loss from operations (pre-tax) $(414) $(417) $(627)
$(1,110) Net loss $(446) $(368) $(240) $(1,441) Issued August 1,
2007 http://www.newscom.com/cgi-bin/prnh/20040128/SFW031LOGO
http://photoarchive.ap.org/ DATASOURCE: Avista Corp. CONTACT:
Media, Hugh Imhof, +1-509-495-4264, , or Investors, Jason Lang,
+1-509-495-2930, , both of Avista Corp.; or Avista 24|7 Media
Access, +1-509-495-4174 Web site: http://www.avistacorp.com/
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