Avista Corp. Reports Financial Results for First Quarter 2017 and Confirms 2017 Earnings Guidance
"We are off to a good start in 2017, with consolidated earnings above our expectations. Our higher earnings in the first quarter were mainly from increased hydroelectric generation, which put us in a benefit position in the Energy Recovery Mechanism (ERM) in
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"Our focus for 2017 continues to be on regulatory matters. During the first quarter, we had constructive meetings with members of the
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"Based on our earnings for the first quarter of 2017 and our expectations for the remainder of the year, we are confirming our earnings guidance range," Morris said.
Summary Results:
First Quarter | |||||||||
2017 | 2016 | ||||||||
Net Income (Loss) by Business Segment: | |||||||||
Avista Utilities | $ | 58,439 | $ | 54,987 | |||||
Alaska Electric Light and Power Company (AEL&P) | 3,853 | 2,961 | |||||||
Other | (176 | ) | (299 | ) | |||||
Total net income attributable to Avista Corp. shareholders | $ | 62,116 | $ | 57,649 | |||||
Earnings (Loss) per Diluted Share by Business Segment: | |||||||||
Avista Utilities | $ | 0.90 | $ | 0.88 | |||||
AEL&P | 0.06 | 0.05 | |||||||
Other | - | (0.01 | ) | ||||||
Total earnings per diluted share attributable to Avista Corp. shareholders | $ | 0.96 | $ | 0.92 | |||||
The table below presents the change in net income attributable to
First Quarter | ||||||||||
Net Income (a) | Earnings per Share | |||||||||
2016 consolidated earnings | $ | 57,649 | $ | 0.92 | ||||||
Changes in net income and diluted earnings per share: | ||||||||||
Avista Utilities | ||||||||||
Electric gross margin (including intracompany) (b) | 2,781 | 0.04 | ||||||||
Natural gas gross margin (including intracompany) (c) | 4,626 | 0.07 | ||||||||
Other operating expenses (d) | 978 | 0.02 | ||||||||
Depreciation and amortization (e) | (1,691 | ) | (0.03 | ) | ||||||
Interest expense (f) | (1,435 | ) | (0.02 | ) | ||||||
Other (g) | (1,588 | ) | (0.03 | ) | ||||||
Effective income tax rate | (219 | ) | - | |||||||
Dilution on earnings | n/a | (0.03 | ) | |||||||
Total Avista Utilities | 3,452 | 0.02 | ||||||||
AEL&P earnings (h) | 892 | 0.01 | ||||||||
Other businesses earnings | 123 | 0.01 | ||||||||
2017 consolidated earnings | $ | 62,116 | $ | 0.96 | ||||||
Analysis of 2017 Consolidated Earnings
(a) The tax impact of each line item was calculated using
(b) Electric gross margin (operating revenues less resource costs) increased for the first quarter primarily due to the following:
- An increase in retail electric rates due to a general rate increase in
Idaho ; - An increase in retail electric revenues compared to the prior year resulting from customer growth and an increase in non-decoupled electric revenues (industrial and public highway and street lighting);
- Recognition of decoupling revenue from prior years that had not met revenue recognition criteria until the current year; and
- A decrease in electric resource costs primarily due to a decrease in fuel for generation, which resulted from a decrease in thermal generation and an increase in hydroelectric generation. For the first quarter of 2017, we had a
$4.1 million pre-tax benefit under the ERM inWashington , compared to a$4.4 million pre-tax benefit for the first quarter of 2016.
(c) Natural gas gross margin (operating revenues less resource costs) increased for the first quarter primarily due to the following:
- General rate increase in
Oregon ; - An increase in retail natural gas revenues compared to the prior year resulting from customer growth; and
- Recognition of decoupling revenue from prior years that had not met revenue recognition criteria until the current year.
(d) Other operating expenses for the first quarter 2017 decreased as a result of a decrease in electric transmission and distribution operating and maintenance costs and natural gas distribution maintenance costs.
(e) Depreciation and amortization increased for the first quarter 2017 due to additions to utility plant.
(f) Interest expense increased due to additional outstanding debt during 2017 as compared to 2016 and partially due to an increase in the overall interest rate.
(g) Other for the first quarter 2017 increased primarily due to an increase in utility taxes other than income taxes. The increase in utility taxes other than income taxes was primarily due to revenue related taxes and was consistent with the increase in utility revenues.
(h) AEL&P earnings increased for the first quarter 2017 primarily as a result of an increase in electric gross margin (due to an interim general rate increase and higher electric loads due to colder weather), partially offset by an increase in operating expenses.
Non-Generally Accepted Accounting Principles (Non-GAAP) Financial Measures
The tables above and below include electric gross margin and natural gas gross margin, two financial measures that are considered "non-GAAP financial measures." Generally, a non-GAAP financial measure is a numerical measure of a company's financial performance, financial position or cash flows that excludes (or includes) amounts that are included (or excluded) in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles (GAAP). The presentation of electric gross margin and natural gas gross margin for
The following table presents
Operating Revenues | Resource Costs | Gross Margin (Pre-Tax) | Income Taxes (a) | Gross Margin (Net of Tax) | |||||||||||||
For the three months ended March 31, 2017: | |||||||||||||||||
Electric | $ | 263,718 | $ | 90,875 | $ | 172,843 | $ | 63,416 | $ | 109,427 | |||||||
Natural Gas | 170,212 | 90,287 | 79,925 | 29,325 | 50,600 | ||||||||||||
Less: Intracompany | (18,549 | ) | (18,549 | ) | - | - | - | ||||||||||
Total | $ | 415,381 | $ | 162,613 | $ | 252,768 | $ | 92,741 | $ | 160,027 | |||||||
For the three months ended March 31, 2016: | |||||||||||||||||
Electric | $ | 262,802 | $ | 94,351 | $ | 168,451 | $ | 61,805 | $ | 106,646 | |||||||
Natural Gas | 155,410 | 82,792 | 72,618 | 26,644 | 45,974 | ||||||||||||
Less: Intracompany | (18,065 | ) | (18,065 | ) | - | - | - | ||||||||||
Total | $ | 400,147 | $ | 159,078 | $ | 241,069 | $ | 88,449 | $ | 152,620 | |||||||
(a) Income taxes were calculated using
Liquidity and Capital Resources
We have a
In the second half of 2017, we expect to issue up to
2017 Earnings Guidance and Outlook
We expect
Our 2017
For 2017, we expect AEL&P to contribute in the range of
We expect the other businesses to be between a loss of
Our guidance generally includes only normal operating conditions and does not include unusual items such as settlement transactions or acquisitions/dispositions until the effects are known and certain. Our guidance also does not include any amounts related to our potential power supply update request for 2017.
NOTE: We will host a conference call with financial analysts and investors on
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 (temperatures, precipitation levels and wind patterns), which affect both energy demand and electric generating capability, including the effect of precipitation and temperature on hydroelectric resources, the effect of wind patterns on wind-generated power, weather-sensitive customer demand, and similar effects on supply and demand in the wholesale energy markets; 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 and the global economy; changes in interest rates that affect borrowing costs, our ability to effectively hedge interest rates for anticipated debt issuances, variable interest rate borrowing and the extent to which we recover interest costs through retail rates collected from customers; changes in actuarial assumptions, interest rates and the actual return on plan assets for our pension and other postretirement benefit plans, which can affect future funding obligations, pension and other postretirement benefit expense and the related liabilities; deterioration in the creditworthiness of our customers; the outcome of legal proceedings and other contingencies; economic conditions in our service areas, including the economy's effects on customer demand for utility services; declining energy demand related to customer energy efficiency and/or conservation measures; changes in the long-term global and our utilities' service area climates, which can affect, among other things, customer demand patterns and the volume and timing of streamflows to our hydroelectric resources; state and federal regulatory decisions or related judicial decisions that affect our ability to recover costs and earn a reasonable return including, but not limited to, disallowance or delay in the recovery of capital investments, operating costs and commodity costs and discretion over allowed return on investment; possibility that our integrated resource plans for electric and natural gas will not be acknowledged by the state commissions; volatility and illiquidity in wholesale energy markets, including the availability of willing buyers and sellers, changes in wholesale energy prices that can affect operating income, cash requirements to purchase electricity and natural gas, value received for wholesale sales, collateral required of us by counterparties in wholesale energy transactions and credit risk to us from such transactions, and the market value of derivative assets and liabilities; default or nonperformance on the part of any parties from whom we purchase and/or sell capacity or energy; potential environmental regulations affecting our ability to utilize or resulting in the obsolescence of our power supply resources; severe weather or natural disasters, including, but not limited to, avalanches, wind storms, wildfires, earthquakes, snow and ice storms, that can disrupt energy generation, transmission and distribution, as well as the availability and costs of materials, equipment, supplies and support services; explosions, fires, accidents, mechanical breakdowns or other incidents that may impair assets and may disrupt operations of any of our generation facilities, transmission, and electric and natural gas distribution systems or other operations and may require us to purchase replacement power; wildfires caused by our electric transmission or distribution systems that may result in public injuries or property damage; public injuries or damage arising from or allegedly arising from our operations; blackouts or disruptions of interconnected transmission systems (the regional power grid); terrorist attacks, cyber attacks or other malicious acts that may disrupt or cause damage to our utility assets or to the national or regional economy in general, including any effects of terrorism, cyber attacks or vandalism that damage or disrupt information technology systems; work force issues, including changes in collective bargaining unit agreements, strikes, work stoppages, the loss of key executives, availability of workers in a variety of skill areas, and our ability to recruit and retain employees; increasing costs of insurance, more restrictive coverage terms and our ability to obtain insurance; delays or changes in construction costs, and/or our ability to obtain required permits and materials for present or prospective facilities; increasing health care costs and cost of health insurance provided to our employees and retirees; third party construction of buildings, billboard signs, towers or other structures within our rights of way, or placement of fuel receptacles within close proximity to our transformers or other equipment, including overbuild atop natural gas distribution lines; the loss of key suppliers for materials or services or disruptions to the supply chain; adverse impacts to our
For a further discussion of these factors and other important factors, please refer to our Quarterly Report on Form 10-Q for the quarter ended
AVISTA CORPORATION | |||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) | |||||||||||
(Dollars in Thousands except Per Share Amounts) | |||||||||||
First Quarter | |||||||||||
2017 | 2016 | ||||||||||
Operating revenues | $ | 436,470 | $ | 418,173 | |||||||
Operating expenses: | |||||||||||
Utility resource costs | 165,586 | 161,719 | |||||||||
Other operating expenses | 80,663 | 81,604 | |||||||||
Depreciation and amortization | 42,173 | 39,380 | |||||||||
Utility taxes other than income taxes | 32,662 | 29,385 | |||||||||
Total operating expenses | 321,084 | 312,088 | |||||||||
Income from operations | 115,386 | 106,085 | |||||||||
Interest expense, net of capitalized interest | 23,006 | 20,497 | |||||||||
Other income - net | (3,101 | ) | (2,422 | ) | |||||||
Income before income taxes | 95,481 | 88,010 | |||||||||
Income tax expense | 33,344 | 30,345 | |||||||||
Net income | 62,137 | 57,665 | |||||||||
Net income attributable to noncontrolling interests | (21 | ) | (16 | ) | |||||||
Net income attributable to Avista Corp. shareholders | $ | 62,116 | $ | 57,649 | |||||||
Weighted-average common shares outstanding (thousands), basic | 64,362 | 62,605 | |||||||||
Weighted-average common shares outstanding (thousands), diluted | 64,469 | 62,907 | |||||||||
Earnings per common share attributable to Avista Corp. shareholders: | |||||||||||
Basic | $ | 0.97 | $ | 0.92 | |||||||
Diluted | $ | 0.96 | $ | 0.92 | |||||||
Dividends declared per common share | $ | 0.3575 | $ | 0.3425 | |||||||
Issued May 3, 2017 | |||||||||||
AVISTA CORPORATION | |||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | |||||||||||
(Dollars in Thousands) | |||||||||||
March 31, | December 31, | ||||||||||
2017 | 2016 | ||||||||||
Assets | |||||||||||
Cash and cash equivalents | $ | 26,179 | $ | 8,507 | |||||||
Accounts and notes receivable | 179,403 | 180,265 | |||||||||
Other current assets | 151,710 | 162,569 | |||||||||
Total net utility property | 4,168,603 | 4,147,500 | |||||||||
Other non-current assets | 145,744 | 141,443 | |||||||||
Regulatory assets for deferred income taxes | 117,923 | 109,853 | |||||||||
Regulatory assets for pensions and other postretirement benefits | 237,104 | 240,114 | |||||||||
Regulatory asset for interest rate swaps | 155,027 | 161,508 | |||||||||
Other regulatory assets | 152,602 | 152,670 | |||||||||
Other deferred charges | 6,064 | 5,326 | |||||||||
Total Assets | $ | 5,340,359 | $ | 5,309,755 | |||||||
Liabilities and Equity | |||||||||||
Accounts payable | $ | 72,354 | $ | 115,545 | |||||||
Current portion of long-term debt and capital leases | 3,317 | 3,287 | |||||||||
Short-term borrowings | 105,000 | 120,000 | |||||||||
Other current liabilities | 186,154 | 168,696 | |||||||||
Long-term debt and capital leases | 1,678,113 | 1,678,717 | |||||||||
Long-term debt to affiliated trusts | 51,547 | 51,547 | |||||||||
Regulatory liability for utility plant retirement costs | 276,533 | 273,983 | |||||||||
Pensions and other postretirement benefits | 223,304 | 226,552 | |||||||||
Deferred income taxes | 866,861 | 840,928 | |||||||||
Non-current unsettled interest rate swap derivative liabilities | 23,143 | 28,705 | |||||||||
Other non-current liabilities, regulatory liabilities and deferred credits | 168,587 | 153,319 | |||||||||
Total Liabilities | 3,654,913 | 3,661,279 | |||||||||
Equity | |||||||||||
Avista Corporation Shareholders' Equity: | |||||||||||
Common stock (64,386,152 and 64,187,934 outstanding shares) | 1,073,098 | 1,075,281 | |||||||||
Retained earnings and accumulated other comprehensive loss | 612,578 | 573,446 | |||||||||
Total Avista Corporation Shareholders' Equity | 1,685,676 | 1,648,727 | |||||||||
Noncontrolling interests | (230 | ) | (251 | ) | |||||||
Total Equity | 1,685,446 | 1,648,476 | |||||||||
Total Liabilities and Equity | $ | 5,340,359 | $ | 5,309,755 | |||||||
Issued May 3, 2017 | |||||||||||
Contact:
Media:
(509) 495-4916
casey.fielder@avistacorp.com
Investors:
(509) 495-2998
lauren.pendergraft@avistacorp.com
Avista 24/7 Media Access
(509) 495-4174
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