Avista Corp. Reports Financial Results for Fourth Quarter and Fiscal Year 2016, and Initiates 2017 Earnings Guidance
For the fourth quarter of 2016, net income attributable to
"We had a great year in 2016. We saw increased earnings at
"As we look to 2017, our earnings will be challenged due to the rate order we received in December from the Commission in
"If we are not successful in obtaining rates that are fair to both customers and the company, we expect the current order will result in significant regulatory timing lag, which was reduced in recent years through regulatory orders that provided for the timely recovery of costs. We believe we should continue investing the necessary capital to maintain a safe and reliable system and focus on managing our operating expenses. The Commission did not disallow any of our capital projects, and we believe the costs associated with these projects will be recovered in future cases.
"
"We are initiating our 2017 earnings guidance with a consolidated range of
Summary Results:
Fourth Quarter | Year-to-Date | ||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||
Net Income (Loss) by Business Segment: | |||||||||||||||||
Avista Utilities | $ | 38,059 | $ | 31,973 | $ | 132,490 | $ | 113,360 | |||||||||
Alaska Electric Light and Power Company (AEL&P) | 3,083 | 2,688 | 7,968 | 6,641 | |||||||||||||
Ecova (discontinued operations) | - | 4,662 | - | 5,147 | |||||||||||||
Other | (1,051 | ) | (802 | ) | (3,230 | ) | (1,921 | ) | |||||||||
Total net income attributable to Avista Corp. shareholders | $ | 40,091 | $ | 38,521 | $ | 137,228 | $ | 123,227 | |||||||||
Earnings (Loss) per diluted share by Business Segment: | |||||||||||||||||
Avista Utilities | $ | 0.59 | $ | 0.51 | $ | 2.07 | $ | 1.81 | |||||||||
AEL&P | 0.05 | 0.04 | 0.13 | 0.11 | |||||||||||||
Ecova (discontinued operations) | - | 0.07 | - | 0.08 | |||||||||||||
Other | (0.02 | ) | (0.01 | ) | (0.05 | ) | (0.03 | ) | |||||||||
Total earnings per diluted share attributable to Avista Corp. Shareholders | $ | 0.62 | $ | 0.61 | $ | 2.15 | $ | 1.97 | |||||||||
The table below presents the change in net income attributable to
Fourth Quarter | Year-to-Date | |||||||||||||||||
Net Income (a) | Earnings per Share | Net Income (a) | Earnings per Share | |||||||||||||||
2015 consolidated earnings | $ | 38,521 | $ | 0.61 | $ | 123,227 | $ | 1.97 | ||||||||||
Changes in net income and diluted earnings per share: | ||||||||||||||||||
Avista Utilities | ||||||||||||||||||
Electric gross margin (including intracompany) (b) | 7,745 | 0.12 | 24,948 | 0.39 | ||||||||||||||
Natural gas gross margin (including intracompany) (c) | 5,333 | 0.08 | 17,100 | 0.27 | ||||||||||||||
Other operating expenses (d) | (2,202 | ) | (0.04 | ) | (7,944 | ) | (0.12 | ) | ||||||||||
Depreciation and amortization (e) | (2,618 | ) | (0.04 | ) | (10,716 | ) | (0.17 | ) | ||||||||||
Interest expense (f) | (1,269 | ) | (0.02 | ) | (4,220 | ) | (0.07 | ) | ||||||||||
Other (g) | (1,788 | ) | (0.03 | ) | (958 | ) | (0.01 | ) | ||||||||||
Effective income tax rate (h) | 885 | 0.01 | 920 | 0.01 | ||||||||||||||
Dilution on earnings | n/a | - | n/a | (0.04 | ) | |||||||||||||
Total Avista Utilities | 6,086 | 0.08 | 19,130 | 0.26 | ||||||||||||||
AEL&P earnings | 395 | 0.01 | 1,327 | 0.02 | ||||||||||||||
Other businesses earnings (i) | (249 | ) | (0.01 | ) | (1,309 | ) | (0.02 | ) | ||||||||||
Discontinued operations | (4,662 | ) | (0.07 | ) | (5,147 | ) | (0.08 | ) | ||||||||||
2016 consolidated earnings | $ | 40,091 | $ | 0.62 | $ | 137,228 | $ | 2.15 | ||||||||||
Analysis of 2016 Consolidated Earnings
(a) The tax impact of each line item was calculated using
(b) Electric gross margin (operating revenues less resource costs) increased for both the fourth quarter and year-to-date primarily due to the following:
- General rate case decisions in
Idaho andWashington ; - An increase in decoupling revenue due to the implementation of a decoupling mechanism in
Idaho , effectiveJan. 1, 2016 and due, in part, to weather fluctuations which resulted in a decrease in year-to-date retail electric loads. The weather was warmer than the prior year in April and May (which decreased electric heating loads) and cooler than the prior year June through August (which decreased electric cooling loads). This was partially offset by weather that was cooler than the prior year in the first and fourth quarters (which increased electric heating loads); and - A decrease in electric resource costs primarily due to a decrease in purchased power, fuel for generation and other fuel costs, partially offset by an increase in regulatory amortizations and other electric resource costs. For the fourth quarter of 2016, we had a
$2.4 million pre-tax benefit under the Energy Recovery Mechanism (ERM) inWashington , compared to a$0.7 million pre-tax benefit for the fourth quarter of 2015. For the full year 2016, we recognized a pre-tax benefit of$5.1 million under the ERM compared to a benefit of$6.3 million for the full year 2015.
(c) Natural gas gross margin (operating revenues less resource costs) increased for both the fourth quarter and year-to-date primarily due to the following:
- General rate case decisions in
Washington ,Idaho andOregon ; - An increase in year-to-date retail natural gas loads compared to the prior year due to weather that was cooler in the first and fourth quarters (higher natural gas heating loads), and was partially offset by weather that was warmer in April and May (lower natural gas heating loads). The period June through September typically does not have significant retail natural gas loads; and
- An increase in decoupling revenue due, in part, to the weather described above, which resulted in year-to-date retail natural gas loads which were lower than normal. Decoupling revenues also increased due to the implementation of decoupling mechanisms in
Idaho , effectiveJan. 1, 2016 , and inOregon , effectiveMarch 1, 2016 .
(d) Other operating expenses for the fourth quarter and year-to-date 2016 increased due to an increase in medical costs, electric generation operating and maintenance expenses, natural gas distribution expenses and other postretirement benefit expenses.
(e) Depreciation and amortization increased for the fourth quarter and year-to-date 2016 due to additions to utility plant.
(f) Interest expense increased for the fourth quarter and year-to-date 2016 due to additional long-term debt being outstanding during 2016 as compared to 2015 and partially due to an increase in the overall interest rate.
(g) Other for the year-to-date 2016 increased primarily due to a decrease in the allowance for funds used during construction (AFUDC) and was partially offset by an increase in interest income for the fourth quarter and year-to-date.
(h) During the fourth quarter of 2016 our effective tax rate was 36.9 percent compared to 37.2 percent for the fourth quarter of 2015 and it was 36.3 percent for the full year 2016 and 2015.
(i) Other businesses' earnings decreased primarily due to an increase in losses on investments from initial organization costs and management fees associated with our investment in a private equity fund of strategic utility partners, as well as an impairment recorded on a building we own. This was partially offset by a slight decrease in corporate costs (including costs associated with exploring strategic opportunities) and a slight increase in net income at METALfx for the year-to-date.
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 (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 our operating revenues, resource costs and resulting gross margin (pre-tax and after-tax) for the fourth quarter and the year ended
Operating Revenues | Resource Costs | Gross Margin (Pre-Tax) | Income Taxes (a) | Gross Margin (Net of Tax) | |||||||||||||
For the three months ended Dec. 31, 2016: | |||||||||||||||||
Electric | $ | 261,598 | $ | 102,444 | $ | 159,154 | $ | 58,393 | $ | 100,761 | |||||||
Natural Gas | 151,194 | 86,130 | 65,064 | 23,871 | 41,193 | ||||||||||||
Less: Intracompany | (30,135 | ) | (30,135 | ) | - | - | - | ||||||||||
Total | $ | 382,657 | $ | 158,439 | $ | 224,218 | $ | 82,264 | $ | 141,954 | |||||||
For the three months ended Dec. 31, 2015: | |||||||||||||||||
Electric | $ | 254,889 | $ | 107,968 | $ | 146,921 | $ | 53,905 | $ | 93,016 | |||||||
Natural Gas | 142,916 | 86,274 | 56,642 | 20,782 | 35,860 | ||||||||||||
Less: Intracompany | (28,855 | ) | (28,855 | ) | - | - | - | ||||||||||
Total | $ | 368,950 | $ | 165,387 | $ | 203,563 | $ | 74,687 | $ | 128,876 | |||||||
For the year ended Dec. 31, 2016: | |||||||||||||||||
Electric | $ | 996,959 | $ | 360,591 | $ | 636,368 | $ | 233,483 | $ | 402,885 | |||||||
Natural Gas | 470,894 | 273,976 | 196,918 | 72,249 | 124,669 | ||||||||||||
Less: Intracompany | (95,215 | ) | (95,215 | ) | - | - | - | ||||||||||
Total | $ | 1,372,638 | $ | 539,352 | $ | 833,286 | $ | 305,732 | $ | 527,554 | |||||||
For the year ended Dec. 31, 2015: | |||||||||||||||||
Electric | $ | 997,873 | $ | 400,910 | $ | 596,963 | $ | 219,026 | $ | 377,937 | |||||||
Natural Gas | 521,010 | 351,101 | 169,909 | 62,340 | 107,569 | ||||||||||||
Less: Intracompany | (107,020 | ) | (107,020 | ) | - | - | - | ||||||||||
Total | $ | 1,411,863 | $ | 644,991 | $ | 766,872 | $ | 281,366 | $ | 485,506 |
(a) Income taxes were calculated using
Liquidity and Capital Resources
AEL&P has a
In 2016, we issued 1.6 million shares of common stock for total net proceeds of
In the second half of 2017, we expect to issue approximately
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.
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 a significant impact on our operations, results of operations, financial condition or cash flows which 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), including those from long-term climate change, 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; 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, financing costs and commodity costs and regulatory discretion over authorized return on investment; possibility that our integrated resource plans for electric and natural gas will not be acknowledged by the state commissions; the effect on any or all of the foregoing, resulting from changes in general economic or political factors; 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, including those caused by our transmission or electric 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 Annual Report on Form 10-K for the year ended
AVISTA CORPORATION | |||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) | |||||||||||||||||||
(Dollars in Thousands except Per Share Amounts) | |||||||||||||||||||
Fourth Quarter | Year-to-Date | ||||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||
Operating revenues | $ | 402,123 | $ | 387,305 | $ | 1,442,483 | $ | 1,484,776 | |||||||||||
Operating expenses: | |||||||||||||||||||
Utility resource costs | 161,095 | 168,078 | 551,366 | 656,964 | |||||||||||||||
Other operating expenses | 92,829 | 89,224 | 341,296 | 332,747 | |||||||||||||||
Depreciation and amortization | 41,600 | 37,403 | 161,283 | 144,194 | |||||||||||||||
Utility taxes other than income taxes | 24,066 | 22,233 | 98,735 | 97,657 | |||||||||||||||
Total operating expenses | 319,590 | 316,938 | 1,152,680 | 1,231,562 | |||||||||||||||
Income from operations | 82,533 | 70,367 | 289,803 | 253,214 | |||||||||||||||
Interest expense, net of capitalized interest | 22,058 | 19,530 | 84,479 | 76,895 | |||||||||||||||
Other income - net | (3,053 | ) | (3,110 | ) | (10,078 | ) | (9,300 | ) | |||||||||||
Income before income taxes | 63,528 | 53,947 | 215,402 | 185,619 | |||||||||||||||
Income tax expense | 23,425 | 20,071 | 78,086 | 67,449 | |||||||||||||||
Net income from continuing operations | 40,103 | 33,876 | 137,316 | 118,170 | |||||||||||||||
Net income from discontinued operations | - | 4,662 | - | 5,147 | |||||||||||||||
Net income | 40,103 | 38,538 | 137,316 | 123,317 | |||||||||||||||
Net income attributable to noncontrolling interests | (12 | ) | (17 | ) | (88 | ) | (90 | ) | |||||||||||
Net income attributable to Avista Corp. shareholders | $ | 40,091 | $ | 38,521 | $ | 137,228 | $ | 123,227 | |||||||||||
Amounts attributable to Avista Corp. shareholders: | |||||||||||||||||||
Net income from continuing operations attributable to Avista Corp. shareholders | $ | 40,091 | $ | 33,859 | $ | 137,228 | $ | 118,080 | |||||||||||
Net income from discontinued operations attributable to Avista Corp. shareholders | - | 4,662 | - | 5,147 | |||||||||||||||
Net income attributable to Avista Corp. shareholders | $ | 40,091 | $ | 38,521 | $ | 137,228 | $ | 123,227 | |||||||||||
Weighted-average common shares outstanding (thousands), basic | 64,185 | 62,308 | 63,508 | 62,301 | |||||||||||||||
Weighted-average common shares outstanding (thousands), diluted | 64,620 | 62,758 | 63,920 | 62,708 | |||||||||||||||
Earnings per common share, basic: | |||||||||||||||||||
Earnings per common share from continuing operations | $ | 0.62 | $ | 0.54 | $ | 2.16 | $ | 1.90 | |||||||||||
Earnings per common share from discontinued operations | - | 0.08 | - | 0.08 | |||||||||||||||
Total earnings per common share, basic | $ | 0.62 | $ | 0.62 | $ | 2.16 | $ | 1.98 | |||||||||||
Earnings per common share, diluted: | |||||||||||||||||||
Earnings per common share from continuing operations | $ | 0.62 | $ | 0.54 | $ | 2.15 | $ | 1.89 | |||||||||||
Earnings per common share from discontinued operations | - | 0.07 | - | 0.08 | |||||||||||||||
Total earnings per common share, diluted | $ | 0.62 | $ | 0.61 | $ | 2.15 | $ | 1.97 | |||||||||||
Dividends declared per common share | $ | 0.3425 | $ | 0.3300 | $ | 1.3700 | $ | 1.3200 | |||||||||||
Issued Feb. 22, 2017 | |||||||||||||||||||
AVISTA CORPORATION | |||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | |||||||||||
(Dollars in Thousands) | |||||||||||
December 31, | December 31, | ||||||||||
2016 | 2015 | ||||||||||
Assets | |||||||||||
Cash and cash equivalents | $ | 8,507 | $ | 10,484 | |||||||
Accounts and notes receivable | 180,265 | 169,413 | |||||||||
Other current assets | 162,569 | 126,149 | |||||||||
Total net utility property | 4,147,500 | 3,898,589 | |||||||||
Other non-current assets | 141,443 | 143,646 | |||||||||
Regulatory assets for deferred income tax | 109,853 | 101,240 | |||||||||
Regulatory assets for pensions and other postretirement benefits | 240,114 | 235,009 | |||||||||
Regulatory asset for interest rate swaps | 161,508 | 83,973 | |||||||||
Other regulatory assets | 152,670 | 132,218 | |||||||||
Other deferred charges | 5,326 | 5,928 | |||||||||
Total Assets | $ | 5,309,755 | $ | 4,906,649 | |||||||
Liabilities and Equity | |||||||||||
Accounts payable | $ | 115,545 | $ | 114,349 | |||||||
Current portion of long-term debt and capital leases | 3,287 | 93,167 | |||||||||
Short-term borrowings | 120,000 | 105,000 | |||||||||
Other current liabilities | 168,696 | 162,164 | |||||||||
Long-term debt and capital leases | 1,678,717 | 1,480,111 | |||||||||
Long-term debt to affiliated trusts | 51,547 | 51,547 | |||||||||
Regulatory liability for utility plant retirement costs | 273,983 | 261,594 | |||||||||
Pensions and other postretirement benefits | 226,552 | 201,453 | |||||||||
Deferred income taxes | 840,928 | 747,477 | |||||||||
Non-current interest rate swap derivative liabilities | 28,705 | 30,679 | |||||||||
Other non-current liabilities, regulatory liabilities and deferred credits | 153,319 | 130,821 | |||||||||
Total Liabilities | 3,661,279 | 3,378,362 | |||||||||
Equity | |||||||||||
Avista Corporation Shareholders' Equity: | |||||||||||
Common stock (64,187,934 and 62,312,651 outstanding shares) | 1,075,281 | 1,004,336 | |||||||||
Retained earnings and accumulated other comprehensive loss | 573,446 | 524,290 | |||||||||
Total Avista Corporation Shareholders' Equity | 1,648,727 | 1,528,626 | |||||||||
Noncontrolling interests | (251 | ) | (339 | ) | |||||||
Total Equity | 1,648,476 | 1,528,287 | |||||||||
Total Liabilities and Equity | $ | 5,309,755 | $ | 4,906,649 | |||||||
Issued Feb. 22, 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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