Avista Corp. Reports Financial Results for Third Quarter and Year-to-Date 2016, Confirms 2016 Earnings Guidance
"I am pleased with our third quarter performance, as our results met our expectations. Throughout 2016, we have continued to invest in our utility infrastructure to enhance the safety and reliability of our system for our customers and to support both electric and natural gas customer growth. Current investments include upgrades and maintenance of generation facilities, transmission and distribution equipment, natural gas pipe and new meter technology, some of which are large, multi-year projects that have been in-progress. The timely recovery of these costs continues to be essential to earning an adequate return on our shareholders' investment," said
"In October, we reached a settlement agreement with all parties in our
"
"During the third quarter, we committed to make investments of up to
"Based on our earnings for the first nine months of the year and our expectations for the remainder of the year, we are confirming our earnings guidance range," Morris said.
Summary Results:
Third Quarter | Year-to-Date | ||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||
Net Income (Loss) by Business Segment: | |||||||||||||||||
Avista Utilities | $ | 12,673 | $ | 12,525 | $ | 94,431 | $ | 81,387 | |||||||||
Alaska Electric Light and Power Company (AEL&P) | 866 | 394 | 4,885 | 3,953 | |||||||||||||
Ecova (discontinued operations) | - | 289 | - | 485 | |||||||||||||
Other | (1,305 | ) | (197 | ) | (2,179 | ) | (1,119 | ) | |||||||||
Total net income attributable to Avista Corp. shareholders | $ | 12,234 | $ | 13,011 | $ | 97,137 | $ | 84,706 | |||||||||
Earnings (Loss) per Diluted Share by Business Segment: | |||||||||||||||||
Avista Utilities | $ | 0.20 | $ | 0.20 | $ | 1.49 | $ | 1.30 | |||||||||
AEL&P | 0.01 | 0.01 | 0.08 | 0.06 | |||||||||||||
Ecova (discontinued operations) | - | - | - | 0.01 | |||||||||||||
Other | (0.02 | ) | - | (0.04 | ) | (0.02 | ) | ||||||||||
Total earnings per diluted share attributable to Avista Corp. shareholders | $ | 0.19 | $ | 0.21 | $ | 1.53 | $ | 1.35 | |||||||||
The table below presents the change in net income attributable to
Third Quarter | Year-to-Date | |||||||||||||||||
Net Income (a) |
Earnings per Share |
Net Income (a) |
Earnings per Share |
|||||||||||||||
2015 consolidated earnings | $ | 13,011 | $ | 0.21 | $ | 84,706 | $ | 1.35 | ||||||||||
Changes in net income and diluted earnings per share: | ||||||||||||||||||
Avista Utilities | ||||||||||||||||||
Electric gross margin (including intracompany) (b) | 3,329 | 0.05 | 17,203 | 0.27 | ||||||||||||||
Natural gas gross margin (including intracompany) (c) | 2,294 | 0.04 | 11,767 | 0.19 | ||||||||||||||
Other operating expenses (d) | (495 | ) | (0.01 | ) | (5,742 | ) | (0.09 | ) | ||||||||||
Depreciation and amortization (e) | (2,484 | ) | (0.04 | ) | (8,098 | ) | (0.13 | ) | ||||||||||
Other (f) | (1,281 | ) | (0.02 | ) | (2,121 | ) | (0.03 | ) | ||||||||||
Effective income tax rate (g) | (1,215 | ) | (0.02 | ) | 35 | - | ||||||||||||
Total Avista Utilities | 148 | - | 13,044 | 0.21 | ||||||||||||||
AEL&P earnings | 472 | - | 932 | 0.02 | ||||||||||||||
Other businesses earnings (h) | (1,108 | ) | (0.02 | ) | (1,060 | ) | (0.02 | ) | ||||||||||
Discontinued operations | (289 | ) | - | (485 | ) | (0.01 | ) | |||||||||||
Dilution on consolidated earnings | n/a | - | n/a | (0.02 | ) | |||||||||||||
2016 consolidated earnings | $ | 12,234 | $ | 0.19 | $ | 97,137 | $ | 1.53 | ||||||||||
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 quarter and year-to-date primarily due to the following:
- An increase in retail electric rates due to a general rate increase in
Idaho and the expiration of the Energy Recovery Mechanism (ERM) rebate to customers inWashington , partially offset by a general rate decrease inWashington ; - An increase in decoupling revenue which offset a decrease in year-to-date retail electric loads. The weather was cooler than the prior year in the first quarter (higher electric heating loads), and it was offset by weather that was warmer than the prior year in April and May (lower electric heating loads) and cooler than the prior year June through August (lower electric cooling loads). Decoupling revenues also increased due to the implementation of a decoupling mechanism in
Idaho , effectiveJan. 1, 2016 ; and - A decrease in electric resource costs primarily due to a decrease in purchased power and other fuel costs, partially offset by an increase in power cost amortizations and other regulatory amortizations. For the third quarter of 2016, we had a
$1.6 million pre-tax expense under the ERM inWashington , compared to a$0.1 million pre-tax expense for the third quarter of 2015. For the nine months endedSept. 30, 2016 , we recognized a pre-tax benefit of$2.7 million under the ERM compared to a benefit of$5.6 million for the nine months endedSept. 30, 2015 .
(c) Natural gas gross margin (operating revenues less resource costs) increased for both the quarter and year-to-date primarily due to the following:
- General rate increases 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 quarter (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 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 third 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 third quarter and year-to-date 2016 due to additions to utility plant.
(f) Other for the year-to-date 2016 increased primarily due to an increase in interest expense due to additional long-term debt being outstanding for the first nine months of 2016 as compared to the first nine months of 2015 as well as a decrease in the allowance for funds used during construction (AFUDC). These were partially offset by an increase in interest income for the quarter and year-to-date.
(g) During the third quarter of 2016 our effective tax rate was 38.3 percent compared to 32.4 percent for the third quarter of 2015. During the third quarter of each year, we reconcile the income tax amounts included in the financial statements for the previous year to our federal income tax return and we record any true-ups to income tax expense as necessary (return-to-accrual). During the third quarter of 2015, there was a reduction to income tax expense as a result of this return-to-accrual process, whereas in the third quarter of 2016, there were not any significant true-ups. There were no significant fluctuations in our effective tax rate for the year-to-date. For the full year of 2016, we expect our effective tax rate to be approximately 36.1 percent.
(h) Other businesses earnings decreased for both the third quarter and the year-to-date primarily related to an increase in losses on investments due to initial organization costs and management fees associated with our investment in a private equity fund of strategic utility partners. 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 table above includes 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 three and nine months ended
Operating Revenues |
Resource Costs |
Gross Margin (Pre-Tax) |
Income Taxes (a) |
Gross Margin (Net of Tax) |
|||||||||||||
For the three months ended Sept. 30, 2016: | |||||||||||||||||
Electric | $ | 237,768 | $ | 90,445 | $ | 147,323 | $ | 54,053 | $ | 93,270 | |||||||
Natural Gas | 83,335 | 58,693 | 24,642 | 9,041 | 15,601 | ||||||||||||
Less: Intracompany | (33,910 | ) | (33,910 | ) | - | - | - | ||||||||||
Total | 287,193 | 115,228 | 171,965 | 63,094 | 108,871 | ||||||||||||
For the three months ended Sept. 30, 2015: | |||||||||||||||||
Electric | 239,836 | 97,771 | 142,065 | 52,124 | 89,941 | ||||||||||||
Natural Gas | 92,109 | 71,090 | 21,019 | 7,712 | 13,307 | ||||||||||||
Less: Intracompany | (33,813 | ) | (33,813 | ) | - | - | - | ||||||||||
Total | 298,132 | 135,048 | 163,084 | 59,836 | 103,248 | ||||||||||||
For the nine months ended Sept. 30, 2016: | |||||||||||||||||
Electric | 735,361 | 258,147 | 477,214 | 175,090 | 302,124 | ||||||||||||
Natural Gas | 319,700 | 187,846 | 131,854 | 48,378 | 83,476 | ||||||||||||
Less: Intracompany | (65,080 | ) | (65,080 | ) | - | - | - | ||||||||||
Total | 989,981 | 380,913 | 609,068 | 223,468 | 385,600 | ||||||||||||
For the nine months ended Sept. 30, 2015: | |||||||||||||||||
Electric | 742,984 | 292,942 | 450,042 | 165,121 | 284,921 | ||||||||||||
Natural Gas | 378,094 | 264,827 | 113,267 | 41,558 | 71,709 | ||||||||||||
Less: Intracompany | (78,165 | ) | (78,165 | ) | - | - | - | ||||||||||
Total | $ | 1,042,913 | $ | 479,604 | $ | 563,309 | $ | 206,679 | $ | 356,630 | |||||||
(a) Income taxes were calculated using Avista Corp.'s statutory tax rate (federal and state combined) of 36.69 percent. | |||||||||||||||||
Liquidity and Capital Resources
We have a
AEL&P has a
In the nine months ended
We do not expect to issue any additional common stock in 2016, other than under the employee plans.
In
Also in
2016 Earnings Guidance and Outlook
We expect
For 2016, 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, impairments 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 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; external pressure to meet financial goals that can lead to short-term or expedient decisions that reduce the likelihood of long-term objectives being met; 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 requirements 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, 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 transmission or distribution system that may result in public injuries or property damages; 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 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 health insurance provided to our employees and retirees; third party construction of buildings, billboard signs or towers 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) | ||||||||||||||||||
Third Quarter | Year-to-Date | |||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||
Operating revenues | $ | 303,349 | $ | 313,649 | $ | 1,040,360 | $ | 1,097,471 | ||||||||||
Operating expenses: | ||||||||||||||||||
Utility resource costs | 118,737 | 138,210 | 390,271 | 488,886 | ||||||||||||||
Other operating expenses | 81,916 | 80,777 | 248,467 | 243,523 | ||||||||||||||
Depreciation and amortization | 40,433 | 36,481 | 119,683 | 106,791 | ||||||||||||||
Utility taxes other than income taxes | 22,669 | 22,269 | 74,669 | 75,424 | ||||||||||||||
Total operating expenses | 263,755 | 277,737 | 833,090 | 914,624 | ||||||||||||||
Income from operations | 39,594 | 35,912 | 207,270 | 182,847 | ||||||||||||||
Interest expense, net of capitalized interest | 21,289 | 19,166 | 62,421 | 57,365 | ||||||||||||||
Other income - net | (1,562 | ) | (2,123 | ) | (7,025 | ) | (6,190 | ) | ||||||||||
Income before income taxes | 19,867 | 18,869 | 151,874 | 131,672 | ||||||||||||||
Income tax expense | 7,606 | 6,115 | 54,661 | 47,378 | ||||||||||||||
Net income from continuing operations | 12,261 | 12,754 | 97,213 | 84,294 | ||||||||||||||
Net income from discontinued operations | - | 289 | - | 485 | ||||||||||||||
Net income | 12,261 | 13,043 | 97,213 | 84,779 | ||||||||||||||
Net income attributable to noncontrolling interests | (27 | ) | (32 | ) | (76 | ) | (73 | ) | ||||||||||
Net income attributable to Avista Corp. shareholders | $ | 12,234 | $ | 13,011 | $ | 97,137 | $ | 84,706 | ||||||||||
Amounts attributable to Avista Corp. shareholders: | ||||||||||||||||||
Net income from continuing operations attributable to Avista Corp. shareholders | $ | 12,234 | $ | 12,722 | $ | 97,137 | $ | 84,221 | ||||||||||
Net income from discontinued operations attributable to Avista Corp. shareholders | - | 289 | - | 485 | ||||||||||||||
Net income attributable to Avista Corp. shareholders | $ | 12,234 | $ | 13,011 | $ | 97,137 | $ | 84,706 | ||||||||||
Weighted-average common shares outstanding (thousands), basic | 63,857 | 62,299 | 63,282 | 62,299 | ||||||||||||||
Weighted-average common shares outstanding (thousands), diluted | 64,325 | 62,688 | 63,687 | 62,691 | ||||||||||||||
Earnings per common share, basic: | ||||||||||||||||||
Earnings per common share from continuing operations | $ | 0.19 | $ | 0.21 | $ | 1.53 | $ | 1.35 | ||||||||||
Earnings per common share from discontinued operations | - | - | - | 0.01 | ||||||||||||||
Total earnings per common share, basic | $ | 0.19 | $ | 0.21 | $ | 1.53 | $ | 1.36 | ||||||||||
Earnings per common share, diluted: | ||||||||||||||||||
Earnings per common share from continuing operations | $ | 0.19 | $ | 0.21 | $ | 1.53 | $ | 1.34 | ||||||||||
Earnings per common share from discontinued operations | - | - | - | 0.01 | ||||||||||||||
Total earnings per common share, diluted | $ | 0.19 | $ | 0.21 | $ | 1.53 | $ | 1.35 | ||||||||||
Dividends declared per common share | $ | 0.3425 | $ | 0.3300 | $ | 1.0275 | $ | 0.9900 | ||||||||||
Issued Nov. 1, 2016 | ||||||||||||||||||
AVISTA CORPORATION | ||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | ||||||||||
(Dollars in Thousands) | ||||||||||
September 30, | December 31, | |||||||||
2016 | 2015 | |||||||||
Assets | ||||||||||
Cash and cash equivalents | $ | 7,084 | $ | 10,484 | ||||||
Accounts and notes receivable | 116,054 | 169,413 | ||||||||
Other current assets | 161,237 | 126,149 | ||||||||
Total net utility property | 4,056,095 | 3,898,589 | ||||||||
Other non-current assets | 135,954 | 143,646 | ||||||||
Regulatory assets for deferred income taxes | 100,907 | 101,240 | ||||||||
Regulatory assets for pensions and other postretirement benefits | 223,596 | 235,009 | ||||||||
Regulatory asset for interest rate swaps | 246,981 | 83,973 | ||||||||
Other regulatory assets | 159,467 | 132,218 | ||||||||
Other deferred charges | 7,731 | 5,928 | ||||||||
Total Assets | $ | 5,215,106 | $ | 4,906,649 | ||||||
Liabilities and Equity | ||||||||||
Accounts payable | $ | 81,898 | $ | 114,349 | ||||||
Current portion of long-term debt and capital leases | 3,257 | 93,167 | ||||||||
Short-term borrowings | 84,000 | 105,000 | ||||||||
Other current liabilities | 172,727 | 162,164 | ||||||||
Long-term debt and capital leases | 1,678,257 | 1,480,111 | ||||||||
Long-term debt to affiliated trusts | 51,547 | 51,547 | ||||||||
Regulatory liability for utility plant retirement costs | 270,972 | 261,594 | ||||||||
Pensions and other postretirement benefits | 202,329 | 201,453 | ||||||||
Deferred income taxes | 816,334 | 747,477 | ||||||||
Non-current unsettled interest rate swap derivative liabilities | 89,683 | 30,679 | ||||||||
Other non-current liabilities and deferred credits | 135,578 | 130,821 | ||||||||
Total Liabilities | 3,586,582 | 3,378,362 | ||||||||
Equity | ||||||||||
Avista Corporation Shareholders' Equity: | ||||||||||
Common stock (64,182,487 and 62,312,651 outstanding shares) | 1,073,481 | 1,004,336 | ||||||||
Retained earnings and accumulated other comprehensive loss | 555,306 | 524,290 | ||||||||
Total Avista Corporation Shareholders' Equity | 1,628,787 | 1,528,626 | ||||||||
Noncontrolling interests | (263 | ) | (339 | ) | ||||||
Total Equity | 1,628,524 | 1,528,287 | ||||||||
Total Liabilities and Equity | $ | 5,215,106 | $ | 4,906,649 | ||||||
Issued Nov. 1, 2016 |
Contact:
Media:
Jessie Wuerst
(509) 495-8578
jessie.wuerst@avistacorp.com
Investors:
(509) 495-2998
lauren.pendergraft@avistacorp.com
Avista 24/7 Media Access
(509) 495-4174
Source: