As filed with the Securities and Exchange Commission on July 5, 2001
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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AVISTA CORPORATION
(Exact name of registrant as specified in its charter)
WASHINGTON 91-0462470
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1411 EAST MISSION AVENUE
SPOKANE, WASHINGTON 99202
(509) 489-0500
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
DAVID J. MEYER, ESQ. J. ANTHONY TERRELL, ESQ.
Avista Corporation Thelen Reid & Priest LLP
1411 East Mission Avenue 40 West 57th Street
Spokane, Washington 99202 New York, New York 10019
(509) 495-4316 (212) 603-2108
(Names and addresses, including zip codes, and telephone numbers,
including area codes, of agents for service)
Copies to:
JOHN E. BAUMGARDNER, JR.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Approximate date of commencement of proposed sale of the securities
to the public:
WHEN MARKET CONDITIONS WARRANT AFTER THIS REGISTRATION STATEMENT
BECOMES EFFECTIVE.
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If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SHARES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED PER UNIT (1) PRICE (1) REGISTRATION FEE
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Common Stock (no par value) 3,700,000 shares $18.55 $68,635,000 $17,159
Preferred Stock Purchase Rights 3,700,000 rights (2) (3)
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act. The estimated offering
price for the Common Stock is based on the average of the high and low
prices of the Common Stock reported in the consolidated reporting system on
July 3, 2001.
(2) The Preferred Share Purchase Rights ("Rights") are appurtenant to and will
trade with the Common Stock. The value attributable to the Rights, if any,
is reflected in the market price of the Common Stock.
(3) Since no separate consideration is paid for the Rights, the registration
fee for such securities is included in the fee for the Common Stock.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED JULY 5, 2001
PROSPECTUS
3,700,000 SHARES
AVISTA CORPORATION
COMMON STOCK
(NO PAR VALUE)
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Avista Corporation may offer from time to time up to 3,700,000 shares of
its Common Stock, no par value, at prices and on terms to be determined at the
time of sale.
Avista Corp. may sell the new shares directly to one or more purchasers or
to or through agents, underwriters or dealers. A supplement to this prospectus
will describe each offering of the new shares. See PLAN OF DISTRIBUTION.
Outstanding shares of Avista Corp.'s Common Stock are listed on the New
York Stock Exchange and the Pacific Stock Exchange under the symbol "AVA". The
new shares will also be listed on those exchanges. Like the outstanding shares,
the new shares will be issued and will trade with the related preferred share
purchase rights.
You should carefully read this prospectus (including the documents
incorporated by reference) and the prospectus supplement before you invest in
the new shares.
SEE "RISK FACTORS" BEGINNING ON PAGE 2 TO READ ABOUT CERTAIN FACTORS YOU
SHOULD CONSIDER BEFORE BUYING THE NEW SHARES.
------------
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is _________, 2001
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
This prospectus incorporates by reference important business and financial
information about Avista Corp. that is not included in or delivered with this
prospectus. See AVAILABLE INFORMATION. You may obtain copies of documents
containing such information from us, without charge, by either calling or
writing to us at:
AVISTA CORPORATION
1411 EAST MISSION AVENUE
SPOKANE, WASHINGTON 99202
ATTENTION: TREASURER
TELEPHONE: (509) 489-0500
TABLE OF CONTENTS
PAGE
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AVAILABLE INFORMATION......................................1
RISK FACTORS...............................................2
AVISTA CORPORATION.........................................4
USE OF PROCEEDS............................................8
DESCRIPTION OF COMMON STOCK................................8
General..............................................8
Dividend Rights......................................8
Voting Rights........................................8
Classified Board of Directors........................9
Fair Price Provision.................................9
Preferred Share Purchase Rights......................9
Liquidation Rights..................................11
Pre-Emptive Rights..................................11
Miscellaneous.......................................11
SAFE HARBOR FOR FORWARD LOOKING STATEMENTS................11
PLAN OF DISTRIBUTION......................................13
LEGAL MATTERS.............................................14
EXPERTS...................................................14
WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OTHER THAN THIS
PROSPECTUS AND THE USUAL SUPPLEMENTS TO THIS PROSPECTUS. YOU SHOULD NOT ASSUME
THAT THE INFORMATION CONTAINED OR INCORPORATED IN THIS PROSPECTUS IS ACCURATE AS
OF ANY DATE AFTER THE DATE OF THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER
TO SELL ANY SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY ANY SECURITIES
IN ANY JURISDICTION IN WHICH AN OFFER IS NOT PERMITTED.
i
AVAILABLE INFORMATION
Avista Corp. files annual, quarterly and special reports, proxy statements
and other information with the SEC. You may read and copy this information at
the SEC's Public Reference Room and at its Regional Offices:
Public Reference Room New York Regional Office Chicago Regional Office
Judiciary Plaza 7 World Trade Center Citicorp Center
450 Fifth Street, N.W. Suite 1300 500 West Madison Street
Room 1024 New York, New York 10048 Suite 1400
Washington, D.C. 20549 Chicago, Illinois 60661-2551
You may obtain information on the operation of the SEC's public reference
rooms by calling the SEC at 1-800-SEC-0330. You may also obtain copies of such
material by mail from the Public Reference Section of the SEC, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The SEC also
maintains an Internet site that contains Avista Corp.'s reports, proxy
statements and other information filed with the SEC. The address of that site is
http://www.sec.gov.
Avista Corp.'s Common Stock is listed on the New York and Pacific Stock
Exchanges, and reports, proxy statements and other information concerning Avista
Corp. can also be inspected at the offices of those exchanges located at the New
York Stock Exchange, 20 Broad Street, New York, New York 10005, and the Pacific
Stock Exchange, 301 Pine Street, San Francisco, California 94104, respectively.
Avista Corp. is incorporating into this prospectus by reference:
o Avista Corp.'s most recent Annual Report on Form 10-K filed with the
SEC pursuant to the Exchange Act and
o all other documents filed by Avista Corp. with the SEC pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the filing of Avista Corp.'s most recent Annual Report and prior to
the termination of the offering made by this prospectus,
and all of those documents are deemed to be a part of this prospectus from the
date of filing such documents. We refer to the documents incorporated into this
prospectus by reference as the "Incorporated Documents". Any statement contained
in an Incorporated Document may be modified or superseded by a statement in this
prospectus or in any prospectus supplement or in any subsequently filed
Incorporated Document. The Incorporated Documents as of the date of this
prospectus are:
o Annual Report on Form 10-K for the year ended December 31, 2000, as
amended;
o Quarterly Report on Form 10-Q for the quarter ended March 31, 2001;
and
o Current Report on Form 8-K dated May 2, 2001.
Avista Corp. maintains an Internet site at http://www.avistacorp.com which
contains information concerning Avista Corp. and its affiliates. The information
contained at Avista Corp.'s Internet site is not incorporated in this prospectus
by reference and you should not consider it a part of this prospectus.
RISK FACTORS
You should carefully consider the following factors in addition to the
other information in this prospectus.
WE NEED TO FINANCE OUR OPERATIONS AND CAPITAL EXPENDITURES. OUR LEVEL OF
INDEBTEDNESS COULD AFFECT OUR ABILITY TO DEDICATE SUFFICIENT CASH FLOW TO THESE
PURPOSES.
We have incurred significant long-term indebtedness to support capital
expenditures, to fund electric and natural gas deferrals and to maintain working
capital. At June 30, 2001, we had total long-term debt of approximately $1,079.5
million. In addition, we will need to finance capital expenditures and obtain
additional working capital from time to time. The cash requirements to service
the total amount of our indebtedness, both short-term and long-term, could
reduce the amount of cash flow available to fund working capital, future
acquisitions, the deferral accounts discussed below, dividends, other corporate
requirements and capital expenditures.
IF WE ARE UNABLE TO RECOVER DEFERRED PURCHASED POWER AND, TO A LESSER EXTENT,
NATURAL GAS COSTS EXCEEDING AMOUNTS INCLUDED IN CURRENT RETAIL RATES, WE MAY
EXPERIENCE AN ADVERSE IMPACT ON CASH FLOW AND EARNINGS.
Purchased power and natural gas costs incurred to serve Avista Utilities'
retail customers are generally recovered or expected to be recovered in base
rates. However, there is a lag between the time we incur any increases in these
costs and the time we collect these increases from customers. As more fully
described in Note 1 of Notes to Financial Statements --"Power Cost Deferrals and
Power and Natural Gas Adjustment Provisions" in Avista Corp.'s Annual Report on
Form 10-K for the year 2000, costs in excess of those included in base rates are
deferred as an asset on our balance sheet and not shown as an expense until
recovered from our retail customers.
In 2000 the price of electric energy in western wholesale markets rose to
unprecedented levels, accompanied by increases in natural gas prices, in both
cases far above the levels included in base rates. Wholesale energy prices
remained high during the first quarter of 2001 but weakened from time to time
during the second quarter, and in June the Federal Energy Regulatory Commission
(the "FERC") took action to mitigate market prices, as discussed below.
We have mechanisms in place to recover (subject to certain limitations)
increases in gas costs in Washington, Idaho and Oregon, and we regularly make
filings to recover increased costs under these mechanisms. As of March 31, 2001,
we had balances of deferred gas costs totaling $79.3 million. We also have a
mechanism in place to recover (subject to certain limitations) increases in
purchased power costs in Idaho and had a balance of deferred purchased power
costs in Idaho of $5.2 million, a power cost rebate of $0.9 million which is
being flowed through to customers, and a surcharge deferral balance of $6.8
million, as of March 31, 2001. On March 23, 2001, we filed an application in
Washington to establish the prudency of the purchased power costs incurred as
well as for approval of a method to recover the cost increases. As of March 31,
2001, we had a balance of deferred purchased power costs of $56 million plus
accrued interest of $0.7 million in Washington. We will be able to recover these
balances of deferred costs only in the amounts, and at the times, authorized by
the respective state commissions.
As discussed in AVISTA CORPORATION - "Recent Developments", on May 23,
2001, the Washington Utilities and Transportation Commission ("WUTC") approved a
settlement agreement regarding the recovery of these deferral balances reached
among Avista Corp., the staff of the WUTC and other parties. Due to recent
changes in wholesale market conditions, however, the terms of the settlement
agreement may not result in full recovery by February 2003.
RECENT CHANGES IN THE ENERGY MARKETS IN THE WESTERN UNITED STATES HAVE LED TO
SIGNIFICANT INCREASES IN WHOLESALE POWER PRICES. BECAUSE OF THESE HIGH PRICE
LEVELS, A DECREASE IN OUR POWER RESOURCE AVAILABILITY OR AN INCREASE IN CUSTOMER
DEMAND THAT REQUIRES US TO PURCHASE MORE POWER COULD HAVE AN ADVERSE IMPACT ON
OUR CASH FLOW AND EARNINGS.
2
Wholesale power prices rose dramatically starting in the second quarter of
2000 and remain significantly above historic levels in the Pacific Northwest,
including our service territory, and throughout the western United States. While
prices decreased somewhat during the second quarter of 2001, the wholesale
markets remained volatile. Significant emerging factors include the gradual
depletion of excess generating capacity in the West, increasing instances of
transmission congestion and increased ownership of generating facilities by
entities which are not traditional "public utilities." Also, wholesale power
markets have been affected by the restructuring of electric utility regulation
at both state and federal levels.
Federal and state officials, including the FERC, the California Public
Utility Commission and the Attorneys General of California, Oregon and
Washington, have commenced reviews to determine the causes of the changes in the
wholesale energy markets. See AVISTA CORPORATION - "Recent Developments" for a
discussion of a wholesale price mitigation plan recently implemented by the
FERC.
Under normal water conditions and customer demand, we would be able to
provide almost all of our forecasted native load energy requirements with our
own generation plants and long-term contracts until the end of 2003, with the
balance covered through short-term contracts. However, current forecasts show
streamflow conditions for hydroelectric generation for 2001 at no better than
60% of normal. In response to the reduced hydroelectric generation, we have made
additional fixed price purchases of energy to cover our retail and firm
wholesale load requirements for 2001 with additional purchases from the higher
cost short-term wholesale market. If hydroelectric conditions further
deteriorate, or our generating plants do not operate as planned, or weather
conditions cause retail loads to increase, we would incur additional costs from
increased purchases in the higher cost short-term wholesale energy market. This
would have an adverse impact on our cash flow and, if not ultimately recovered,
on our earnings.
WE ARE SUBJECT TO THE RISKS INHERENT IN THE UTILITY BUSINESS, INCLUDING NORMAL
OPERATING RISKS, SUCH AS THE COST OF FUEL AND THE POSSIBILITY OF PLANT OUTAGES,
AND, IN OUR CASE, THE SUFFICIENCY OF STREAMFLOWS. WE ARE ALSO SUBJECT TO
REGULATORY RISKS, SUCH AS INCREASED ENVIRONMENTAL REGULATION AND THE CHALLENGE
TO OBTAIN SATISFACTORY RATE RELIEF, AS WELL AS TO RISKS ASSOCIATED WITH
DEREGULATION OF ENERGY MARKETS.
The utility business involves many operating risks. For example, there may
be a breakdown or failure of electrical generating or other equipment, fuel
interruption or performance below expected levels of output or efficiency. Also,
some of our facilities use natural gas and coal in their generation of
electricity. The market prices and availability of natural gas and coal
fluctuate. Increasing prices for these commodities or a lack of availability
could impair our cash flow and, if not ultimately recovered, have a negative
impact on our earnings. In addition, our hydroelectric plants require continuous
water flow for their operation. A drought or other water flow impairment may
limit our ability to produce and market electricity from these facilities.
In addition, the utility business is subject to complex and stringent
energy, environmental, and other governmental laws and regulations. The
acquisition, ownership and operation of power generation facilities requires
numerous permits, approvals, and certificates from appropriate federal, state,
and local governmental agencies. If environmental regulations, such as emission
limits, are tightened, this could increase the amount we must invest to bring
our facilities into compliance. In general, the prices we are allowed to charge
for our electric and natural gas services are intended to provide, after
recovery of allowable operating expenses, an opportunity to earn a reasonable
rate of return. The regulatory commissions of the states in which we operate may
limit our ability to increase prices, and future changes in the regulatory
framework may also affect our ability to earn a reasonable rate of return.
More recently, wholesale power markets have been affected by the
restructuring of electric utility regulation at both federal and state levels.
In particular, deregulation in California, combined with increased demand and
limitations on supply, has affected wholesale power prices throughout the West.
In addition, although there is currently no legislative or regulatory movement
toward deregulation in Washington or Idaho, in a deregulated environment,
evolving technologies might provide alternate energy supplies at lower costs,
leading to lower adjusted market prices and reducing margins for traditional
utilities that use technologies and generating assets with capital and operating
costs higher than the adjusted market price.
3
WE ARE SUBJECT TO THE FINANCIAL, LIQUIDITY, CREDIT AND COMMODITY PRICE RISKS
ASSOCIATED WITH ENERGY TRADING AND MARKETING ACTIVITIES.
Our subsidiary, Avista Energy, trades electricity and natural gas, along
with derivative commodity instruments, including futures, options, swaps and
other contractual arrangements. Most transactions are conducted on a largely
unregulated "over-the-counter" basis, there being no central clearing mechanism
(except in the case of specific instruments traded on the commodity exchanges).
As a result of these trading activities, we are subject to various risks,
including market risk, liquidity risk, commodity risk and credit risk. Although
Avista Energy scaled back operations to focus primarily in the western United
States during 2000, its trading operations continue to be affected by, among
other things, volatility of prices within the electric energy and natural gas
markets, the demand for and availability of energy, lower unit margins on new
sales contracts and deregulation of the electric utility industry.
Avista Energy is presently renegotiating its credit agreement with its
primary lending banks, which by its terms expired on June 30, 2001. Avista
Energy anticipates entering into an amended and restated credit agreement with a
term of 364 days. This new amended and restated credit agreement is expected to
provide up to a $145 million credit facility when fully subscribed. It is
anticipated that $100 million of the $145 million facility will be subscribed
initially, and with the addition of other banks after origination, the total
subscribed commitments will be $145 million.
In connection with matching loads and resources, Avista Utilities also
engages in wholesale sales and purchases of electric capacity and energy, and,
accordingly, is also subject to commodity price risk, credit risk and other
risks associated with these activities.
WHETHER OR NOT WE PAY DIVIDENDS ON COMMON STOCK DEPENDS ON OUR RESULTS OF
OPERATIONS AND FINANCIAL CONDITION, AS WELL AS OTHER CONDITIONS.
Avista Corp.'s Board of Directors considers the level of dividends on
Avista Corp.'s common stock on a continuing basis, taking into account numerous
factors including, without limitation, Avista Corp.'s results of operations and
financial condition, as well as general economic and competitive conditions. As
discussed in this prospectus and the documents incorporated by reference, Avista
Corp.'s businesses are subject to a variety of risks and uncertainties
(including, but not limited to, the risk factors discussed in this section),
which could affect the Board's decisions regarding dividends.
Avista Corp.'s net income available for dividends is derived from Avista
Utilities' operations, since Avista Energy's ability to pay dividends is
currently limited by the terms of its credit agreement. As discussed in
DESCRIPTION OF COMMON STOCK - "Dividends", Avista Corp.'s ability to pay
dividends is limited by the terms of its Restated Articles of Incorporation, as
amended, and certain of its senior unsecured debt securities.
AVISTA CORPORATION
GENERAL
Avista Corp., which was incorporated in the State of Washington in 1889, is
an electric and gas utility company having operations located in the Pacific
Northwest. We also have subsidiaries involved in energy, information and
technology businesses. As of March 31, 2001, our employees included
approximately 1,460 people in our utility operations and approximately 800
people in our subsidiary businesses. Our corporate headquarters are in Spokane,
Washington, which serves as the Inland Northwest's center for manufacturing,
transportation, health care, education, communication, agricultural and service
businesses.
Our operations are organized into four lines of business--Avista Utilities,
Energy Trading and Marketing, Information and Technology, and Avista Ventures.
Avista Utilities, which is an operating division of Avista Corp. and not a
separate entity, represents the regulated utility operations. Avista Capital, a
wholly owned subsidiary of Avista Corp., owns all of the subsidiary companies
engaged in the other lines of business.
4
Avista Corp.'s lines of business, and the companies included within them,
are illustrated below:
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AVISTA CORPORATION*
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/
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/ /
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AVISTA UTILITIES** AVISTA CAPITAL*
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/
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/ / /
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ENERGY INFORMATION AND AVISTA VENTURES**
TRADING AND MARKETING** TECHNOLOGY** -----------------
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/ / /
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AVISTA ENERGY* / AVISTA ADVANTAGE*/ AVISTA VENTURES* /
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AVISTA POWER*/ AVISTA LABS* / OTHER*/
------------/ ----------- / -----
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AVISTA COMMUNICATIONS*/
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* - denotes a business entity.
** - denotes an operating division or line of business
ENERGY BUSINESSES
Avista Utilities provides electricity and natural gas distribution and
transmission services in a 26,000 square mile area in eastern Washington and
northern Idaho with a population of approximately 835,000. It also provides
natural gas distribution service in a 4,000 square mile area in northeast and
southwest Oregon and in the South Lake Tahoe region of California, with the
population in these areas approximating 500,000. At the end of 2000, retail
electric service was supplied to approximately 313,000 customers in eastern
Washington and northern Idaho; retail natural gas service was supplied to
approximately 279,000 customers in parts of Washington, Idaho, Oregon and
California. Our retail customers include residential, commercial and industrial
classifications, with the residential classification accounting for the most
energy consumed and the greatest contribution to revenues. Avista Utilities also
engages in wholesale sales and purchases of electric capacity and energy.
In addition to providing electric transmission and distribution services,
Avista Utilities is responsible for electric generation and production. Avista
Utilities owns and operates eight hydroelectric projects, a wood-waste fueled
generating station and two natural gas-fired combustion turbine (CT) generating
units. It also owns a 15% share in a two-unit coal-fired generating facility and
leases and operates two additional natural gas-fired CT generating units. These
facilities have a total net capability of approximately 1,470 megawatts, of
which 65% is hydroelectric and 35% is thermal. In addition, Avista Utilities has
a number of long-term power purchase and exchange contracts that increase its
available resources.
Under normal water conditions and loads, Avista Utilities' generation
plants and long-term contracts would be able to cover approximately 90% of its
forecasted native load energy requirements in 2001, and 100% thereof in 2002 and
2003. The balance would be covered through short-term contracts. Avista
Utilities has covered essentially all of its electric energy requirements in the
forward markets for 2001. For a discussion of current water conditions, see RISK
FACTORS.
As part of the Company's strategy to manage the decrease in electric
resources caused by the current poor hydroelectric conditions and volatile
energy markets, Avista Utilities is implementing several buy-back and rebate
programs for residential, commercial and industrial customers. The programs are
designed to encourage conservation. Additionally, Avista Utilities is pursuing
the acquisition and construction of several small generation projects throughout
its service territory.
5
Avista Utilities anticipates residential and commercial electric load
growth to average approximately 2.6% annually for the next five years primarily
due to expected increases in both population and the number of businesses in its
service territory. The number of electric customers is expected to increase and
the average annual usage by residential customers is expected to remain steady.
Avista Utilities expects natural gas load growth, including transportation
volumes, in its Washington and Idaho service area to average approximately 2.7%
annually for the next five years. The Oregon and South Lake Tahoe, California
service areas are anticipated to realize 3.4% growth annually during that same
period. The natural gas load growth is primarily due to expected conversions
from electric space and water heating to natural gas, and increases in both
population and the number of businesses in its service territories. These
electric and natural gas load growth projections are based on purchased economic
forecasts, publicly available studies, and internal analysis of company-specific
data, such as energy consumption patterns and internal business plans. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Future Outlook" in Avista Corp.'s Annual Report on Form 10-K for the
year ended December 31, 2000 and its Quarterly Report on Form 10-Q for the
quarter ended March 31, 2001 for additional information.
Energy Trading and Marketing is comprised of Avista Energy, Inc., and
Avista Power, Inc. Avista Energy is an electricity and natural gas trading and
marketing business. Avista Power was formed to develop, purchase and own
electric generation assets. Avista Energy and Avista Power operate primarily in
the Western Systems Coordinating Council ("WSCC"), which is comprised of the
eleven Western states.
Avista Energy is in the business of buying and selling electricity and
natural gas. Avista Energy's customers include commercial and industrial
end-users, electric utilities, natural gas distribution companies and other
trading companies. Avista Energy also trades electricity and natural gas
derivative commodity instruments.
Avista Power has electric generation projects under development and
construction in strategic locations primarily in the WSCC. Avista Power and
Cogentrix Energy, Inc. have entered into an agreement to jointly build and/or
buy interests in natural gas-fired electric generation plants in the states of
Washington, Oregon and Idaho. A project under this agreement is the 270 megawatt
facility located near Rathdrum, Idaho, with 100% of its output contracted to
Avista Energy for 25 years. Non-recourse project financing was completed in
March 2000 and the facility is currently under construction, with commercial
operation expected to start in the third quarter of 2001.
In December 2000, Avista Utilities selected the Coyote Springs 2 project
("CS2"), a 280 megawatt combined-cycle natural gas-fired plant near Boardman,
Oregon to add generation to its portfolio. Construction commenced in January
2001 under a fixed price turnkey engineering, procurement and construction
contract with project completion anticipated in mid-2002. The process is
underway to transfer ownership from Avista Power to Avista Utilities.
OTHER BUSINESS
Information and Technology is comprised of Avista Advantage, Inc., Avista
Laboratories, Inc. and Avista Communications, Inc.
o Avista Advantage is an e-commerce provider of facilities management billing
and information services to commercial customers throughout the U.S. and
Canada. Its primary product lines include consolidated billing, resource
accounting, energy analysis, load profiling and maintenance and repair
billing services.
o Avista Labs is in the process of developing both modular Proton Exchange
Membrane fuel cells for power generation at the site of the consumer or
industrial user and fuel cell components.
o Avista Communications is an Integrated Communications Provider providing
local dial tone, data transport, internet services, voice messaging and
other telecommunications services to under-served communities primarily in
ten Northwest markets. Avista Communications is also involved in designing,
building and managing metropolitan area fiber optic networks.
6
Avista Ventures includes Avista Ventures, Inc. and several other minor
subsidiaries. Avista Ventures was formed to align Avista Corp.'s investment and
acquisition activities in the strategic growth areas of energy, information and
technology. In addition, Avista Ventures holds investments in real estate and
majority ownership of AM&D, a metals fabrication and manufacturing business.
BUSINESS STRATEGY
Avista Corp.'s general business strategy is to:
o maintain a strong, low-cost utility business focused on delivering
efficient, reliable and high quality service to its customers;
o reduce the size and risk associated with its energy trading activities;
o pursue opportunities to develop new generation to support the growing power
requirements in the Northwest; and
o have access to electric and natural gas resources, both owned and under
long-term contract, in excess of projected requirements.
RECENT DEVELOPMENTS
On May 23, 2001, the WUTC approved a settlement agreement which had been
reached among Avista Corp., the staff of the WUTC and other parties with respect
to deferred energy costs. The agreement, among other things, provides for the
extension of Avista Corp.'s deferral accounting mechanism through February 2003.
Due to the planned addition of generating resources as well as the expiration of
certain long-term power sale agreements, Avista Utilities expects to be in a
power surplus position by July 2002. The agreement was based, in part, on the
expectation that Avista Utilities' profits from surplus power sales would offset
the power cost deferral balance, reducing the balance to zero by the end of
February 2003 without any price increase to retail customers. These expectations
were based on assumptions as to a number of variables including, but not limited
to, streamflow conditions, thermal plan performance, level of retail loads,
wholesale market prices and the amount of additional generating resources.
Avista Utilities is evaluating the effect of the recent decline in wholesale
market prices and the FERC price mitigation plan described below on its ability
to recover its deferred balances under the settlement agreement. Avista
Utilities reserved the right to request an immediate rate surcharge to recover
the deferral balance if circumstances change. See RISK FACTORS.
On May 31, 2001, Avista Corp. renewed its committed line of credit and
repaid all outstanding borrowings under that facility. The new $220 million
credit facility expires on May 29, 2002. As of June 30, 2001, there were no
amounts borrowed under this committed line of credit.
Avista Corp. is in the process of obtaining a construction loan to finance
$120 million of the construction costs for the Coyote Springs 2 project with a
term that matches the construction period. A term sheet has been signed with two
co-lenders to fully underwrite such construction loan.
On June 19, 2001, the FERC issued an order adopting a price mitigation plan
applicable to certain wholesale power sales in California and throughout the
western United States during the period June 20, 2001 through September 30,
2002. The order applies to pre-schedule (day-ahead) and real-time (hour-ahead)
transactions in the western United States. In general terms, when operating
reserves fall below 7.5% in California and the California Independent System
Operator calls a Stage 1 alert, the market price is capped at the operating cost
of the highest cost unit in operation during the Stage 1 condition. The price
during non-Stage 1 periods is based on 85% of the price established during the
most recent Stage 1 alert. Sellers that do not wish to establish rates on the
basis of this price mitigation plan may propose cost-of-service rates covering
all of their generating units in the Western Systems Coordinating Council for
the duration of the mitigation plan. Since the adoption of this plan, wholesale
market prices in the West have continued to drop.
7
USE OF PROCEEDS
Unless we indicate differently in a supplement to this prospectus, the net
proceeds from the issuance and sale of the new shares will be used (a) to fund
Avista Utilities' construction, facility improvement and maintenance programs,
(b) to pay short-term debt and maturing long-term debt of Avista Corp. issued to
fund a portion of the construction, improvement and maintenance programs, (c) to
reimburse Avista Corp.'s treasury for funds previously expended for any of these
purposes and (d) for other corporate purposes.
DESCRIPTION OF COMMON STOCK
GENERAL
The authorized capital stock of Avista Corp. consists of 10,000,000 shares
of Preferred Stock, cumulative, without nominal or par value, which is issuable
in series (the "Preferred Stock"), and 200,000,000 shares of Common Stock
without nominal or par value (the "Common Stock"). Following is a brief
description of certain of the rights and privileges of the Common Stock. For a
complete description, reference is made to Avista Corp.'s Restated Articles of
Incorporation, as amended (the "Articles"), and its Bylaws (the "Bylaws") and to
the laws of the State of Washington. The following summary, which does not
purport to be complete, is qualified in its entirety by such reference.
DIVIDEND RIGHTS
After full provision for all Preferred Stock dividends declared or in
arrears, the holders of Common Stock are entitled to receive such dividends as
may be lawfully declared from time to time by Avista Corp.'s Board of Directors.
The Indenture, dated as of April 3, 2001, between Avista Corp. and Chase
Manhattan Bank and Trust Company, National Association, trustee, under which
$400 million of senior unsecured notes are outstanding, contains restrictions on
the payment of dividends. So long as there is no default under the Indenture,
Avista Corp. does not expect these restrictions to limit its ability to continue
to pay dividends on its capital stock.
VOTING RIGHTS
The holders of the Common Stock have sole voting power, except as indicated
below or as otherwise provided by law. Each holder of Common Stock is entitled
to one vote per share, except that, in the election of directors, each holder
has "cumulative" voting rights by which he or she is entitled to that number of
votes which is equal to the number of directors to be elected multiplied by the
number of shares held. These votes may all be cast for a single nominee for
director or may be distributed among any two or more nominees.
If dividends payable on any shares of Preferred Stock shall be in arrears
in an amount equal to the aggregate amount of dividends accumulated on such
shares of Preferred Stock over the eighteen (18) month period ended on such
date, the holders of such stock become entitled, as one class, to elect a
majority of the Board of Directors, and the holders of the Common Stock, voting
as a single class, will be entitled to elect the remaining directors of the
Company. Such right does not cease until all defaults in the payment of
dividends on the Preferred Stock shall have been cured.
In addition, the consent of various proportions of the Preferred Stock at
the time outstanding is required to adopt any amendment to the Articles which
would authorize any new class of stock ranking prior to or on a parity with the
Preferred Stock as to certain matters, to increase the authorized number of
shares of the Preferred Stock or to change any of the rights or preferences of
outstanding Preferred Stock.
8
CLASSIFIED BOARD OF DIRECTORS
Both the Articles and the Bylaws, provide for a Board of Directors divided
into three classes. Each class will generally serve for a term of three years,
with only one class of directors being elected in each year. The classification
of the Board of Directors reduces the impact of cumulative voting rights.
The Articles and Bylaws also provide that directors may be removed only for
cause and only by the affirmative vote of the holders of at least a majority of
the outstanding shares of Common Stock. The Articles and Bylaws further require
an affirmative vote of the holders of at least 80% of the outstanding shares of
Common Stock to alter, amend or repeal the provisions relating to the
classification of the Board of Directors and the removal of members from, and
the filling of vacancies on, the Board of Directors.
"FAIR PRICE" PROVISION
The Articles contain a "fair price" provision which requires the
affirmative vote of the holders of at least 80% of the outstanding shares of
Common Stock for the consummation of certain business combinations, including
mergers, consolidations, recapitalizations, certain dispositions of assets,
certain issuances of securities, liquidations and dissolutions involving Avista
Corp. and a person or entity who is or, under certain circumstances, was, a
beneficial owner of 10% or more of the outstanding shares of Common Stock (an
"Interested Shareholder") unless
o such business combination shall have been approved by a majority of the
directors unaffiliated with the Interested Shareholder or
o certain minimum price and procedural requirements are met. The Articles
provide that the "fair price" provision may be altered, amended or repealed
only by the affirmative vote of the holders of at least 80% of the
outstanding shares of Common Stock.
PREFERRED SHARE PURCHASE RIGHTS
General
Reference is made to the Rights Agreement, dated as of November 12, 1999
(the "Rights Agreement"), between Avista Corp. and The Bank of New York, as
Rights Agent, filed with the Commission. The following statements are qualified
in their entireties by such reference.
On November 12, 1999, the Avista Corp. Board of Directors authorized the
Rights Agreement to replace the existing rights plan which expired on February
16, 2000. Under the Rights Agreement, Avista Corp. granted one preferred share
purchase right (a "Right") on each outstanding share of Common Stock to holders
of Common Stock outstanding on February 15, 2000 or issued thereafter. The
description and terms of Rights are set forth in the Rights Agreement.
Each Right entitles the registered holder, subject to regulatory approvals
and other specified conditions, to purchase one one-hundredth of a share of
Preferred Stock at a purchase price of $70.00 (the "Purchase Price"). The Rights
are exercisable only if a person or group
o acquires beneficial ownership of 10% or more of the outstanding shares of
Common Stock, or
o commences a tender or exchange offer, the consummation of which would
result in the beneficial ownership by a person or group of 10% or more of
the outstanding shares of Common Stock.
Until that time, the Rights are evidenced by and trade with the shares of
Common Stock. The Rights will expire on March 31, 2009 unless Avista Corp. first
redeems or exchanges them, in each case as described below.
9
The purchase of stock pursuant to the Rights may be subject to regulatory
approvals and other specified conditions. Under no circumstances will a person
or group that acquires 10% of the Common Stock be entitled to exercise Rights.
"Flip-in"
If any person or group acquires beneficial ownership of 10% or more of the
outstanding shares of Common Stock, each unexercised Right will entitle its
holder to purchase that number of shares of Common Stock or, at the option of
Avista Corp. Preferred Stock, which has a market value at that time of twice the
Purchase Price.
"Flip-over"
In the event that any person or group has acquired beneficial ownership of
10% or more of the outstanding shares of Common Stock, and Avista Corp.
o consolidates or merges with or into, or
o sells 50% or more of its assets or earning power to,
any person or group, each unexercised Right would instead entitle its holder to
purchase the acquiring company's common shares having a market value of twice
the Purchase Price.
Exchange
If a person or group acquires beneficial ownership of more than 10% but
less than 50% of the outstanding shares of Common Stock, Avista Corp. may
exchange each outstanding Right for one share of Common Stock or cash,
securities or other assets having a value equal to the market value of one share
of Common Stock. That exchange may be subject to regulatory approvals.
Redemption
Avista Corp. may redeem the Rights, at a redemption price of $0.01 per
Right, at any time until any person or group has acquired beneficial ownership
of 10% or more of the outstanding shares of Common Stock.
Certain Adjustments
The Purchase Price, the amount and type of securities covered by each Right
and the number of Rights outstanding will be adjusted to prevent dilution
o in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Stock,
o if holders of the Preferred Stock are granted certain rights, options or
warrants to subscribe for Preferred Stock or securities convertible into
Preferred Stock or equivalent preferred shares at less than the current
market price of the Preferred Stock, or
o upon the distribution to holders of the Preferred Stock of evidences of
indebtedness or assets (excluding regular quarterly cash dividends) or of
subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustments in the Purchase Price will be made
until cumulative adjustments amount to a least 1% of the Purchase Price. Avista
Corp. will not issue fractional shares of Preferred Stock other than in integral
multiples of one ten-thousandth of a share. Instead, Avista Corp. will make an
adjustment in cash based on the market price of the Preferred Stock on the last
trading date prior to the date of exercise.
10
Amounts Outstanding
Avista Corp. distributed one Right to shareholders of the company for each
share of Common Stock owned of record by them at the close of business on
February 15, 2000. Until the earliest of
o such time as any person or group acquires beneficial ownership of 10% or
more of the outstanding shares of Common Stock,
o March 31, 2009, or
o the redemption of the Rights,
Avista Corp. will issue one Right with each share of Common Stock that is issued
after February 15, 2000 so that each outstanding share of Common Stock will have
an appurtenant Right. Avista Corp. has initially authorized and reserved 600,000
shares of Preferred Stock for issuance upon exercise of the Rights.
Amendment
Avista Corp. may amend the Rights Agreement in any respect until any person
or group has acquired beneficial ownership of 10% or more of the outstanding
shares of Common Stock. Thereafter, Avista Corp. may amend the Rights Agreement
in any manner which will not adversely affect the holders of the Rights in any
material respect.
The Rights have certain antitakeover effects. The Rights may cause
substantial dilution to a person or group that attempts to acquire Avista Corp.
on terms not approved by Avista Corp.'s Board of Directors, except pursuant to
an offer conditioned on a substantial number of Rights being acquired or
redeemed. The Rights should not interfere with any merger or other business
combination approved by the Avista Corp.'s Board of Directors prior to the time
that a person or group has acquired beneficial ownership of 10% or more of the
Common Stock since until such time the Rights may be redeemed, or the Rights
Agreement amended, as described above.
LIQUIDATION RIGHTS
In the event of any liquidation of Avista Corp., after satisfaction of the
preferential liquidation rights of the Preferred Stock, the holders of Common
Stock would be entitled to share ratably in all assets of Avista Corp. avai1able
for distribution to shareholders.
PRE-EMPTIVE RIGHTS
No holder of any stock of Avista Corp. has any pre-emptive rights.
MISCELLANEOUS
The presently outstanding shares of Common Stock are fully paid and
nonassessable.
The Common Stock is listed on the New York Stock Exchange and the Pacific
Exchange.
The New York Transfer Agent and Registrar for the Common Stock is The Bank
of New York, 101 Barclay Street, 11th Floor, New York, New York 10286.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
We are including the following cautionary statement in this prospectus to
make applicable and to take advantage of the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995 for any forward-looking
statements made by, or on behalf of, Avista Corp. Forward-looking statements
11
include statements concerning plans, objectives, goals, strategies, projections
of future events or performance, and underlying assumptions (many of which are
based, in turn, upon further assumptions) and are all statements which are other
than statements of historical fact, including without limitation those that are
identified by the use of the words "anticipates", "estimates", "expects",
"intends", "plans", "predicts", and similar expressions. From time to time, we
may publish or otherwise make available forward-looking statements of this
nature. All such subsequent forward-looking statements, whether written or oral
and whether made by or on behalf of Avista Corp., are also expressly qualified
by these cautionary statements.
Forward-looking statements involve risks and uncertainties which could
cause actual results or outcomes to differ materially from those expressed. Our
expectations, beliefs and projections are expressed in good faith and are
believed by us to have a reasonable basis, including without limitation
management's examination of historical operating trends, data contained in our
records and other data available from third parties, but there can be no
assurance that our expectations, beliefs or projections will be achieved or
accomplished. Furthermore, any forward-looking statement speaks only as of the
date on which such statement is made, and we undertake 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 Avista Corp.'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 UTILITIES' OPERATIONS
In addition to other factors and matters discussed elsewhere herein, some
important factors that could cause actual results or outcomes for Avista
Utilities' operations to differ materially from those discussed in
forward-looking statements include continuing legislative developments,
governmental policies and regulatory actions with respect to allowed rates of
return, financings, or industry and rate structures, weather conditions,
wholesale and retail competition (including but not limited to electric retail
wheeling and transmission cost), availability of economic supplies of natural
gas, present or prospective natural gas distribution or transmission competition
(including but not limited to prices of alternative fuels and system
deliverability costs), the costs of power and natural gas in wholesale markets
and the ability to recover purchased power and purchased gas costs, the ability
to make profitable sales of any surplus electric capacity or energy in wholesale
markets, present or prospective generation, operations and construction of plant
facilities, and acquisition and disposal of assets or facilities.
ENERGY TRADING AND MARKETING OPERATIONS
Energy Trading and Marketing includes the operations of Avista Energy and
Avista Power. In addition to other factors and matters discussed elsewhere
herein, some important factors that could cause actual results or outcomes for
the Energy Trading and Marketing operations to differ materially from those
discussed in forward-looking statements include further industry restructuring
evolving from federal and/or state legislation, regulatory actions by federal
and state utility commissions, demand for and availability of energy throughout
the country, wholesale competition, availability of economic supplies of natural
gas, governmental controls on market operations and prices, margins on purchased
power, changes in market factors, the formation of additional alliances or
entities, the availability of economically feasible generating projects and the
availability of funding for new generating assets.
INFORMATION AND TECHNOLOGY, AND AVISTA VENTURES' OPERATIONS
Certain additional important factors which could cause actual results or
outcomes for the remaining Avista Corp. subsidiaries' operations to differ
materially from those discussed in forward-looking statements include
competition from other companies and other technologies, obsolescence of
technologies, the ability or inability to reduce costs of the technologies down
to economic levels, the ability to obtain new customers and retain old ones,
reliability of customer orders, business acquisitions, disposal of assets, the
availability of funding from other sources, research and development findings
and the availability of economic expansion or development opportunities.
12
FACTORS COMMON TO ALL OPERATIONS
The business and profitability of Avista Corp. are also influenced by,
among other things, economic risks, changes in and compliance with environmental
and safety laws and policies, weather conditions, population growth rates and
demographic patterns, market demand for energy from plants or facilities,
changes in tax rates or policies, unanticipated project delays or changes in
project costs, unanticipated changes in operating expenses or capital
expenditures, labor negotiation or disputes, changes in credit ratings or
capital market conditions, inflation rates, inability of the various
counterparties to meet their obligations with respect to financial instruments,
changes in accounting principles and/or the application of such principles to
Avista Corp., changes in technology and legal proceedings.
PLAN OF DISTRIBUTION
Avista Corp. may sell the new shares from time to time in any of four ways:
(a) directly to a limited number of institutional purchasers or to a single
purchaser, (b) through agents, (c) through underwriters or (d) through dealers.
The prospectus supplement relating to each offering of new shares will set forth
the terms of such offering, including the name or names of any such agents,
underwriters or dealers, the purchase price of such shares and the net proceeds
to Avista Corp. from the issuance and sale thereof, any underwriting discounts
and other items constituting underwriters' compensation, the initial public
offering price and any discounts or concessions allowed or reallowed or paid to
dealers. Any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.
If Avista Corp. uses agents to sell new shares, the agents will agree to
endeavor to solicit purchases of shares. Avista Corp. would have the sole right
to accept such offers to purchase new shares and would have the right to reject
any such offer in whole or in part. Agents may have the right to reject any such
offers in whole or in part.
If Avista Corp. uses underwriters to sell new shares, the underwriters will
be obligated to purchase such shares for their own account and may resell them
in one or more transactions. Unless otherwise set forth in the prospectus
supplement relating to an offering of new shares, the obligations of any
underwriter or underwriters to purchase such shares will be subject to certain
conditions precedent, and such underwriter or underwriters will be obligated to
purchase all of such shares if any are purchased, except that, in certain cases
involving a default by one or more underwriters, less than all of such shares
may be purchased.
New shares sold through agents or underwriters may be sold by means of (i)
ordinary brokers' transactions, (ii) block transactions (which may involve
crosses) in accordance with the rules of the New York Stock Exchange, the
Pacific Stock Exchange and other exchanges on which the shares are admitted to
trading privileges (the "Exchanges"), including transactions in which any agent
may sell shares as agents but may also position and resell all or a portion of
the blocks as principals, (iii) offerings off the floors of the Exchanges or
(iv) a combination of any such methods. Sales may be made at market prices
prevailing at the time of sale (or at prices based on prevailing market prices),
or at negotiated prices based on prevailing market prices (which could be
subject to change). Any such offering would be described in a supplement to this
prospectus setting forth the terms of the offering and the number of shares
being offered.
Any underwriters, dealers or agents participating in any distribution of
new shares may be deemed to be underwriters, and any discounts or commissions
received by them on the sale or resale of shares may be deemed to be
underwriting discounts and commissions, under the Securities Act. Agents,
underwriters and dealers may be entitled under agreements entered into with
Avista Corp. to indemnification by Avista Corp. against certain liabilities,
including liabilities under the Securities Act.
The outstanding shares of Avista Corp.'s Common Stock are listed on the New
York Stock Exchange and the Pacific Stock Exchange. The new shares will also be
listed on those Exchanges, subject to official notice of issuance.
13
Any agents, underwriters and/or one or more of their affiliates may engage
in transactions with and perform services for Avista Corp. and certain of its
affiliates in the ordinary course of business.
LEGAL MATTERS
The legality of the new shares and the related Rights will be passed upon
for Avista Corp. by Thelen Reid & Priest LLP and Heller Ehrman White & McAuliffe
LLP and for any underwriters or agents by Sullivan & Cromwell. In giving their
opinions, Thelen Reid & Priest LLP and Sullivan & Cromwell may rely as to
matters of Washington, California, Idaho, Montana and Oregon law upon the
opinion of Heller Ehrman White & McAuliffe LLP.
In the opinion of Thelen Reid & Priest LLP and Heller Ehrman White &
McAuliffe LLP, the statutory law of the State of Washington permits Washington
corporations to enter into shareholder rights plans, such as the Rights
Agreement, and to issue rights thereunder, such as the Rights. Such counsel
note, however, that they are aware of no reported court decisions applying
Washington law that address the authorization by a board of directors of
shareholder rights plans or the issuance of rights thereunder. Such counsel
believe, however, that a court applying Washington law, when presented with such
questions, after giving effect to the "business judgment rule" under Washington
law, most likely would look to and apply the corporation law of the State of
Delaware. Accordingly, the opinions of such counsel as to the legal issuance of
the Rights are based upon such conclusion. Such counsel express no opinion as to
the enforceability of the Rights or the Rights Agreement.
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this prospectus by reference from Avista Corp.'s most recent
annual report on Form 10-K have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is incorporated herein by
reference, and have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
14
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION (ESTIMATED).
Filing fee-- Securities and Exchange Commission...................... $17,159
Fees of state regulatory authorities................................. 1,000
Legal counsel fees................................................... 200,000
Auditors' fees....................................................... 20,000
Blue Sky counsel and filing fees..................................... 10,000
Printing, including Form S-3, prospectus, exhibits, etc.............. 15,000
Transfer Agent's Fees................................................ 10,000
Miscellaneous expenses............................................... 26,841
======
Total Estimated Expenses....................................... $300,000
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article Seventh of the Registrant's Restated Articles of Incorporation, as
amended (the "Articles"), provides, in part, as follows:
"No Director shall have any personal liability to the Corporation or its
shareholders for monetary damages for his or her conduct as a Director of
the Corporation; provided, however, that nothing herein shall eliminate or
limit any liability which may not be so eliminated or limited under
Washington law, as from time to time in effect. No amendment, modification
or repeal of this paragraph shall eliminate or limit the protection
afforded by this paragraph with respect to any act or omission occurring
prior to the effective date thereof."
Reference is made to the Section 23B.08.320 of the Revised Code of Washington,
which sets forth the extent to which the liability of directors may be
eliminated under the laws of the State of Washington.
Article Seventh of the Articles further provides, in part, as follows:
"The Corporation shall, to the full extent permitted by applicable law, as
from time to time in effect, indemnify any person made a party to, or
otherwise involved in, any proceeding by reason of the fact that he or she
is or was a director of the Corporation against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by him or her
in connection with any such proceeding. The Corporation shall pay any
reasonable expenses incurred by a director in connection with any such
proceeding in advance of the final determination thereof upon receipt from
such director of such undertakings for repayment as may be required by
applicable law and a written affirmation by such director that he or she
has met the standard of conduct necessary for indemnification, but without
any prior determination, which would otherwise be required by Washington
law, that such standard of conduct has been met. The Corporation may enter
into agreements with each director obligating the Corporation to make such
indemnification and advances of expenses as are contemplated herein.
Notwithstanding the foregoing, the Corporation shall not make any
indemnification or advance which is prohibited by applicable law. The
rights to indemnity and advancement of expenses granted herein shall
continue as to any person who has ceased to be a director and shall inure
to the benefit of the heirs, executors and administrators of such a
person."
The Registrant has entered into indemnification agreements with each director as
contemplated in Article Seventh of the Articles.
Reference is made to Section 23B.08.510 of the Revised Code of Washington, which
II-1
sets forth the extent to which indemnification is permitted under the laws of
the State of Washington.
Article IX of the Registrant's Bylaws contains an indemnification provision
similar to that contained in the Articles and, in addition, provides in part as
follows:
"Section 2. Liability Insurance. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee, or agent of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust, other
enterprise, or employee benefit plan against any liability asserted against
him and incurred by him in any such capacity or arising out of his status
as such, whether or not the Corporation would have the power to indemnify
him against such liability under the laws of the State of Washington."
Insurance is maintained on a regular basis (and not specifically in connection
with this offering) against liabilities arising on the part of directors and
officers out of their performance in such capacities or arising on the part of
the Registrant out of its foregoing indemnification provisions, subject to
certain exclusions and to the policy limits.
ITEM 16. EXHIBITS.
Reference is made to the Exhibit Index on p. II-7 hereof.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in this
registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") that are
incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-2
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the registrant's annual report pursuant to
Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in this registration statement
shall be deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof;
(5) That, for purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(6) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted against the
Registrant by such director, officer or controlling person in connection with
the securities being registered, such Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
II-3
POWER OF ATTORNEY
The Registrant hereby appoints each Agent for Service named in this
registration statement as its attorney-in-fact to sign in its name and behalf,
and to file with the Securities and Exchange Commission any and all amendments,
including post effective amendments, to this registration statement, and each
director and/or officer of the Registrant whose signature appears below hereby
appoints each such Agent for Service as his or her attorney-in-fact with like
authority to sign in his or her name and behalf, in any and all capacities
stated below, and to file with the Securities and Exchange Commission, any and
all such amendments.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Spokane and
State of Washington on the 5th day of July, 2001.
AVISTA CORPORATION
/S/ GARY G. ELY
-----------------------------------
Gary G. Ely
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed by the following persons in
the capacities and on the date indicated.
SIGNATURE TITLE DATES
/S/ GARY G. ELY Principal Executive July 5, 2001
- ----------------------------------- Officer and Director
Gary G. Ely
(Chairman of the Board, President
and Chief Executive Officer)
/s/ JON E. ELIASSEN Principal Financial and July 5, 2001
- ----------------------------------- Accounting Officer
J. E. Eliassen
(Senior Vice President and Chief
Financial Officer)
/S/ ERIK J. ANDERSON Director July 5, 2001
- -----------------------------------
Erik J. Anderson
/S/ KRISTIANNE BLAKE Director July 5, 2001
- -----------------------------------
Kristianne Blake
/S/ D.A. CLACK Director July 5, 2001
- -----------------------------------
David A. Clack
/S/ S.M.R. JEWELL Director July 5, 2001
- -----------------------------------
Sarah M. R. (Sally) Jewell
II-4
/S/ J.F. KELLY Director July 5, 2001
- -----------------------------------
John F. Kelly
/S/ JESSIE J. KNIGHT, JR. Director July 5, 2001
- -----------------------------------
Jessie J. Knight, Jr.
/S/ EUGENE W. MEYER Director July 5, 2001
- -----------------------------------
Eugene W. Meyer
/S/ BOBBY SCHMIDT Director July 5, 2001
- -----------------------------------
Bobby Schmidt
/S/ R. JOHN TAYLOR Director July 5, 2001
- -----------------------------------
R. John Taylor
/S/ DANIEL J. ZALOUDEK Director July 5, 2001
- -----------------------------------
Daniel J. Zaloudek
II-5
EXHIBIT 23(B)
CONSENT
We consent to the incorporation by reference in this Registration Statement
of Avista Corporation on Form S-3 of our report dated February 2, 2001 (February
26, 2001 as to Note 22), appearing in the Annual Report on Form 10-K of Avista
Corporation for the year ended December 31, 2000 and to the reference to us
under the heading "Experts" in the Prospectus, which is part of this
Registration Statement.
/s/ Deloitte & Touche LLP
Seattle, Washington
July 3, 2001
II-6
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ----------- ----------------------
*1(a) - Form of Underwriting Agreement
*1(b) - Form of Sales Agency Agreement
3(a) - Restated Articles of Incorporation (previously filed as
Exhibit 3(b) to Annual Report on Form 10-K for the year
ended December 31, 1998)
3(b) - Bylaws (previously filed as Exhibit 4(a) to Quarterly
Report on Form 10-Q for the quarter ended June 30, 2000)
4 - Rights Agreement, dated as of November 15, 1999, between
the Registrant and Bank of New York, Rights Agent
(previously filed as Exhibit 4 to Current Report on Form
8-K, dated November 15, 1999)
5(a) - Opinion of Heller Ehrman White & McAuliffe LLP
5(b) - Opinion of Thelen Reid & Priest LLP
23(a) - Consents of Heller Ehrman White & McAuliffe LLP. and
Thelen Reid & Priest LLP are contained in their opinions
filed as Exhibits 5(a) and 5(b), respectively
23(b) - Consent of Deloitte & Touche LLP (contained on page II-6)
24 - Power of Attorney (contained on page II-4)
- -------------------
* To be filed subsequently as an exhibit to an amendment to this
Registration Statement or a Current Report on Form 8-K.
II-7
Exhibit 5(a)
July 5, 2001
Avista Corporation
1411 East Mission Avenue
Spokane, WA 99202
RE: AVISTA CORPORATION - REGISTRATION STATEMENT ON FORM S-3
3,700,000 SHARES OF COMMON STOCK
Ladies and Gentlemen:
We are acting as counsel to Avista Corporation, a Washington corporation
(the "COMPANY"), in connection with the proposed offering by the Company of up
to 3,700,000 shares of the Company's Common Stock, no par value (the "NEW
SHARES"), as described in a Registration Statement on Form S-3 (the
"REGISTRATION STATEMENT") of the Company to be filed under the Securities Act of
1933, as amended (the "ACT"), relating to the New Shares. The New Shares will be
offered and issued together with the related preferred share purchase rights
(the "NEW RIGHTS") in accordance with that certain Rights Agreement, dated as of
November 15, 1999 (the "RIGHTS AGREEMENT"), between the Company and The Bank of
New York, as rights agent.
We have reviewed, among other things, the Company's Restated Articles of
Incorporation and Bylaws, each as amended, and related agreements and records of
corporate proceedings and other actions taken or proposed to be taken by the
Company in connection with the authorization, issuance and sale of the New
Shares and the New Rights, and we have made such other factual inquires as we
have deemed necessary. We have also reviewed the following regulatory orders and
decisions (the "ORDERS") related to the authorization, issuance and sale of the
New Shares and the New Rights:
(a) Order No. UE-000675, entered May 30, 2000, of the Washington Utilities
and Transportation Commission;
(b) Order No. UE-000231, entered April 12, 2000, of the Washington
Utilities and Transportation Commission;
(c) Order No. 28410, entered June 15, 2000, in Case No. AVU-U-00-2 of the
Idaho Public Utilities Commission;
(d) Order No. 28312, entered March 27, 2000, in Case No. AVU-U-00-1 of the
Idaho Public Utilities Commission;
(e) Order No. 00-331, entered June 23, 2000, in Docket No. UF-4171 of the
Public Utility Commission of Oregon, together with staff reports
appended thereto which constitute a part of the order;
Heller Ehrman White & McAuliffe LLP
701 Fifth Avenue, Suite 6100 Seattle, WA 98104-7098 www.hewm.com
- --------------------------------------------------------------------------------
Seattle Portland Anchorage San Francisco Silicon Valley Los Angeles
San Diego New York Washington D.C. Hong Kong Singapore
Affiliated Carnelutti Offices: Milan Rome Paris Padua Naples
Avista Corporation
HELLER EHRMAN July 5, 2001
ATTORNEYS Page 2
(f) Order No. 00-173, entered March 27, 2000, in Docket No. UF-4168 of the
Public Utility Commission of Oregon, together with staff reports
appended thereto which constitute part of the order;
(g) Decision No. 00-06-064, entered June 22, 2000, of the Public Utilities
Commission of the State of California; and
(h) Default Order No. 4535, entered July 2, 1979, in Docket No. 6690 of
the Public Service Commission of the State of Montana.
Based upon the foregoing and our examination of such questions of law as we
have deemed necessary or appropriate for the purpose of this opinion, and
subject to the limitations and qualifications expressed herein, we are of the
opinion that, when the New Shares are issued and delivered as contemplated in
the Registration Statement, the New Shares will be legally issued, fully paid
and non-assessable and the New Rights will be legally issued.
It is also our opinion that Section 23B.06.240 of the Washington Business
Corporation Act permits Washington corporations to enter into shareholder rights
plans, such as the Rights Agreement, and to issue rights thereunder, such as the
New Rights. We note, however, that there are no reported decisions applying
Washington law that address the validity of actions taken by the board of
directors of a Washington corporation in authorizing a shareholder rights plan
or the issuance of rights thereunder.
We believe, however, that a court applying the law of the State of
Washington, when presented with questions concerning matters such as the
authorization and issuance of the New Rights, after giving effect to the
"business judgment rule" under Washington statutory and case law, most likely
would look to and apply the corporate law of the State of Delaware. Accordingly,
our opinion relating to the legal issuance of the New Rights is based, in part,
upon such conclusion.
We do not herein express any opinion as to the enforceability of the New
Rights or the Rights Agreement.
For purposes of the opinions contained in this letter, we have assumed,
without making any inquiry into the reasonableness or validity thereof, that the
New Shares and the New Rights will be issued and sold in compliance with the due
authorization of the Company's Board of Directors and the Orders.
The opinions expressed herein are limited to (i) the federal laws of the
United States of America, (ii) the laws of the State of Washington, (iii) to the
extent applicable, the statutes (and regulations promulgated thereunder) of the
States of California, Idaho, Montana and Oregon pertaining to the regulation of
public utilities in those states, and (iv) the corporation law of the State of
Delaware. We disclaim any opinion as to the laws of any other jurisdiction. We
further disclaim any opinion as to any statute, rule, regulation, ordinance,
order or other promulgation of any regional or local governmental body or as to
any related judicial or administrative opinion.
Heller Ehrman White & McAuliffe LLP
Avista Corporation
HELLER EHRMAN July 5, 2001
ATTORNEYS Page 3
We hereby consent to the filing of this opinion as Exhibit 5(a) to the
Registration Statement, and to the references to our firm, as counsel, in the
Registration Statement and in the prospectus contained therein. In giving this
consent, we do not thereby admit that we are within the category of persons
whose consent is required under Section 7 of the Act or the rules and
regulations promulgated thereunder.
Very truly yours,
/s/ HELLER EHRMAN WHITE & MCAULIFFE LLP
HELLER EHRMAN WHITE & MCAULIFFE LLP
Heller Ehrman White & McAuliffe LLP
Exhibit 5(b)
July 5, 2001
Avista Corporation
1411 East Mission Avenue
Spokane, WA 99202
Ladies and Gentlemen:
We are acting as counsel to Avista Corporation, a Washington
corporation (the "Company"), in connection with the filing by the Company of a
Registration Statement on Form S-3 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Act"), relating to the registration of
3,700,000 shares of the Company's Common Stock, no par value (the "New Shares"),
as described in the Registration Statement. The New Shares will be offered and
issued together with the related preferred share purchase rights (the "New
Rights") in accordance with the Rights Agreement, dated as of November 15, 1999
(the "Rights Agreement"), between the Company and The Bank of New York, as
rights agent.
Subject to the qualifications hereinafter expressed, we are of the
opinion that, when the New Shares are issued and delivered as contemplated in
the Registration Statement, the New Shares will be legally issued, fully paid
and non-assessable and the New Rights will be legally issued.
It is also our opinion that Section 23B.06.240 of the Washington
Business Corporation Act permits Washington corporations to enter into
shareholder rights plans, such as the Rights Agreement, and to issue rights
thereunder, such as the New Rights. However, we are not aware of any court
decisions applying Washington law that address the validity of actions taken by
the board of directors of a Washington corporation in authorizing a shareholder
rights plan or the issuance of rights thereunder.
In our view, it is reasonable to assume, and we do assume, that a
court applying the law of the Sate of Washington, when presented with questions
concerning matters such as the authorization and issuance of the New Rights,
after giving effect to the "business judgment rule" under Washington statutory
and case law, most likely would look to and apply the corporation law of the
State of Delaware. Accordingly, our opinion relating to the legal issuance of
the New Rights is based, in part, upon such assumption.
We do not herein express any opinion as to the enforceability of the
New Rights or the Rights Agreement.
For purposes of the opinions set forth above, we have assumed that the
New Shares and the New Rights will be issued and sold in compliance with the due
authorization of the Company's Board of Directors and the "Orders" referred to
in the aforesaid opinion of Heller Ehrman White & McAuliffe LLP.
To the extent that the opinions set forth above relate to or are
dependent upon matters governed by the laws of the States of Washington,
California, Idaho, Montana and Oregon, we have relied the opinion of Heller
Ehrman White & McAuliffe LLP, which is being filed as Exhibit 5(a) to the
Registration Statement, and our opinions are subject to the limitations and
qualifications set forth in such opinion of Heller Ehrman White & McAuliffe LLP.
We hereby consent to the filing of this opinion as Exhibit 5(b) to the
Registration Statement and to the references to our firm, as counsel, in the
Registration Statement and in the prospectus contained therein. In giving the
foregoing consent, we do not admit that we are within the category of persons
whose consent is required under Section 7 of the Act or the rules and
regulations promulgated thereunder.
Very truly yours,
/s/ THELEN REID & PRIEST LLP
THELEN REID & PRIEST LLP
2