UNITED STATES | ||
SECURITIES AND EXCHANGE COMMISSION | ||
Washington D.C. 20549 | ||
FORM 8-K | ||
CURRENT REPORT | ||
PURSUANT TO SECTION 13 OR 15(d) OF | ||
THE SECURITIES EXCHANGE ACT OF 1934 | ||
Date of Report (Date of earliest event reported): March 21, 2018 | ||
AVISTA CORPORATION | ||
(Exact name of registrant as specified in its charter) | ||
Washington | 1-3701 | 91-0462470 |
(State of other jurisdiction of incorporation) | (Commission file number) | (I.R.S. Employer Identification No.) |
1411 East Mission Avenue, Spokane, Washington | 99202-2600 | |
(Address of principal executive offices) | (Zip Code) | |
Registrant's telephone number, including area code: | 509-489-0500 | |
Web site: http://www.avistacorp.com | ||
(Former name or former address, if changed since last report) | ||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Section 7 – Regulation FD Disclosure
Item 7.01 Regulation FD Disclosure.
On March 21, 2018 and March 22, 2018, management of Avista Corporation (Avista Corp. or the Company) will be participating in meetings with investors and analysts as part of the West Coast Utilities Seminar hosted by Williams Capital Group L.P. in Las Vegas, Nevada. The same business update presentation will be used at all of the meetings. A copy of the business update presentation is furnished as Exhibit 99.1 and is available in the “Investors” section of Avista Corp.'s website at http://investor.avistacorp.com/events-and-presentations.
As part of this update, Avista Corp. expects to confirm its 2018 liquidity expectations and the on-going impacts from the federal income tax law changes, which were enacted in December 2017. The 2018 liquidity expectations and the impacts from the federal income tax law changes were included in Avista Corp.'s fourth quarter and fiscal year 2017 earnings release furnished on Form 8-K on February 21, 2018. The Company's expectations for 2018 are subject to the risks, uncertainties and other factors set forth or referred to in such earnings release and the Company's annual report on Form 10-K for the year ended December 31, 2017.
The information in this report, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
Section 9 - Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits.
The inclusion in this Current Report or in Exhibit 99.1 of a reference to Avista Corp.'s Internet address shall not, under any circumstances, be deemed to incorporate the information available at such Internet address into this Current Report. The information available at Avista Corp.'s Internet address is not part of this Current Report or any other report furnished or filed by Avista Corp. with the Securities and Exchange Commission.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
AVISTA CORPORATION | ||
(Registrant) | ||
Date: | March 20, 2018 | /s/ Marian M. Durkin |
Marian M. Durkin | ||
Senior Vice President, General Counsel, | ||
Corporate Secretary and Chief Compliance Officer | ||
Positioned for performance:
An overview of 2017 and beyond
West Coast Utilities Seminar
Las Vegas, Nevada
March 21-22, 2018
NYSE: AVA www.avistacorp.com
Exhibit 99.1
Disclaimer
2
All forward-looking statements in this presentation are based on underlying
assumptions (many of which are based, in turn, upon further assumptions). These
statements are subject to a variety of risks and uncertainties and other factors. Most
of these factors are beyond our control and may have a significant effect on our
operations, results of operations, financial condition or cash flows, which could cause
actual results to differ materially from those anticipated in the forward-looking
statements.
Such risks, uncertainties and other factors include, among others, those included in
the appendix herein and in our most recent Annual Report on Form 10-K, or Quarterly
Report on Form 10-Q, filed with the Securities and Exchange Commission. Those
reports are also available on our website at www.avistacorp.com
3
Steadily building long-term value
Reliably building value for our customers,
investors, communities and employees
Projecting long-term earnings and dividend growth of 4% to 5%
Avista Utilities
AEL&P
Strategic
Investments
5% to 6% rate base growth through utility capital investments
Upgrading infrastructure to enhance service and system reliability
Customer growth ~1%
Annual reduction to earnings of $0.05-$0.06 per share due to impacts
from tax reform
Moderate rate base growth through utility capital investments
Customer and load growth less than 1%
Developing platforms for future growth
□ Exploring data science and advanced analytics
□ Investing in emerging technologies
Continued focus on financial performance
4
Increased quarterly dividend 4.2% to $0.3725
16th consecutive year of dividend increases
In 2018, we expect to issue approximately $375 million of long-term debt and up to $85 million of equity.
Equity issuances may come from sales agency agreements or from an equity contribution from
Hydro One upon consummation of the acquisition or from a combination of those sources
2018 earnings guidance to be provided during Q1 earnings call after conclusion of the Washington general
rate case
Expect order on or before April 26
$1.85
$3.10
$1.97
$2.15
2013 2014 2015 2016 2017*
Continuing Operations Ecova (DiscOp)
$1.79
Total Earnings per Diluted Share Attributable to Avista Corporation
* 2017 earnings reduced by $0.16 per diluted share associated with tax law
changes and $0.19 per diluted share of acquisition costs.
5
Washington
May 26, 2017, filed an electric and natural gas rate request designed to increase annual electric
revenues by $61.4 million and annual natural gas revenues by $8.3 million, effective May 1, 2018
• Dec. 1, 2017, filed updated revenue requirements in rebuttal testimony due to changed timing of capital projects
Requests based on a 9.9% return on equity with a 50% common equity ratio
Three-Year Rate Plan
New rates, if approved, will take effect May 1, 2018, with annual increases in May 2019 and May 2020
Power supply costs would be updated each year (on rebuttal, only update power supply costs in Year 1)
No new general rate cases would be filed with new rates effective prior to May 1, 2021
Driving effective regulatory outcomes
Recovery of costs and capital investments
ELECTRIC NATURAL GAS
Filed
Revenue Increase
Filed
Base %
Increase
Rebuttal
Revenue
Increase
Filed
Revenue Increase
Filed
Base %
Increase
Rebuttal
Revenue
Increase
May 1, 2018 $61.4M 12.5% $54.4M $8.3M 9.3% $6.6M
May 1, 2019 $14.0M* 2.5% $13.5M $4.2M 4.4% $3.7M
May 1, 2020 $14.4M* 2.5% $13.9M $4.4M 4.4% $3.8M
*Excludes power supply adjustment
6
Working through the impacts of Tax Reform
2017 Impacts
Recorded a $442.3 million regulatory liability
$339.9 million in excess deferred taxes and $102.4 million in income tax
gross-up of the excess deferred taxes
Recorded a $10.2 million, or $0.16 per diluted share, adjustment to
income tax expense in fourth quarter
$7.5 million related to Avista Utilities and $2.7 million related to other
businesses
Ongoing
Impacts
Estimated customer benefit of $50-$60 million annually
Current regulatory proceedings to address impacts
Expect annual reduction to earnings of $0.05-$0.06 per diluted share
Future operating cash flows are negatively affected and could impact credit
rating agency metrics
Moody’s rating outlook changed to negative
7
Avista to be acquired by Hydro One
Key
Transaction
Terms
Offer price of US$53.00 per Avista common share in cash
Represents a 24% premium to Avista’s closing price on July 18, 2017 of US$42.74
Equity purchase price of US$3.4 billion (C$4.4 billion)
Total enterprise value of US$5.3 billion (C$6.7 billion), including Avista debt assumed
Avista preserves corporate identity and maintains headquarters in Spokane
Timing
and
Approvals
Shareholder approval obtained at special meeting on Nov. 21, 2017
Filed for approval with all five state regulators and FERC
Received FERC approval
Requested state regulatory decisions by August 2018
Proposed customer rate credit of $31.5 million over 10 years
Upcoming key dates:
3/27: WA settlement agreement filed by parties
3/29: OR company rebuttal due
4/10: WA testimony in support of settlement agreement
4/12: OR settlement conference #2
4/26: ID settlement conference #1
Expect to file other regulatory approvals in 2018
Expected closing date in the second half of 2018
8
Our focus in 2018
Photo: Pullman Energy Storage Project
Continue to operate our business consistent with our 129 year history
Focused on regulatory approval process and successful completion of the merger with Hydro
One in the second half of 2018
Business as usual
We welcome your questions
Company Contact
Lauren Pendergraft, Investor Relations Manager
509-495-2998
Lauren.pendergraft@avistacorp.com
www.avistacorp.com
Photo: Huntington Park, Spokane, Wash.
9
Appendix
10
11
Strong and stable utility core
Regulated electric and natural gas operations
Serves customers in Washington, Idaho and Oregon
Contributes about 95% of earnings
Regulated electric operations
Serves customers in City and Borough of Juneau
Avista Utilities
Alaska Electric Light
& Power Company
(AEL&P)
Long history of service, trust,
innovation and collaboration
Photo: Spokane River Upper Falls
Avista Utilities
Significant investments in utility infrastructure
12
13
Diverse customer base
□ 30,000 square mile service territory
□ Service area population 1.6 million
– 382,000 electric customers
– 347,000 natural gas customers
Strong customer focus
□ 90% percent or better customer satisfaction
ratings every year since 1999
□ Developing key customer initiatives
Invested in our communities
□ More than $2.5 million per year in charitable
donations and over 48,500 volunteer hours
from our employees
Providing safe and reliable service for 129 years
Solid foundation and continued commitment to innovation
Information as of Dec. 31, 2017
14
A responsible mix of generation
Hydro
49%
Biomass
2%Wind
4.5%
Coal
9.5%
Natural Gas
35%
Avista Utilities Electricity Generation Resource Mix*
Dec. 31, 2017
Strategy is to control a portfolio of resources that responsibly meet our long-term
energy needs
Filed electric Integrated Resource Plan in August; long resources until 2026
□ 2026 resource acquisitions include a mix of upgrades to our thermal fleet, demand response,
energy efficiency and a natural gas-fired peaker
Exceeds Washington state’s 15% Renewable Portfolio Standard for the next 20 years
Founded on clean, renewable hydropower
*Based on maximum capacity
Excludes AEL&PPost Falls Dam, Idaho
Projected
Investments to upgrade our systems
5% to 6% rate base growth
15
$151 $138 $138 $135
$74 $94 $95 $95
$49 $38
$62 $60
$44 $69
$47 $48
$70
$51 $46 $45
$30 $15 $17 $22
$418
$405 $405 $405
2017* 2018 2019 2020
Failed Plant &
Operations
Customer
Requested
Performance &
Capacity
Customer Service,
Quality
& Reliability
Mandatory &
Compliance
Asset
Condition
Excludes capital expenditures at AEL&P of $6.4 million in 2017 and projected capital expenditures of $7 million in
2018, $8 million in 2019, and $7 million in 2020
*Includes AFUDC and amounts accrued at year-end
16
Investing to enhance service and system reliability
Little Falls Plant Upgrade
Grid Modernization
Aldyl A Natural Gas
Pipe Replacement
Advanced Metering
Infrastructure (AMI)
Electric Vehicle Pilot
Program
Customer Facing
Technology
17
Driving effective regulatory outcomes
Recovery of costs and capital investments
Idaho
Dec. 28, 2017, the Idaho Public Utilities Commission approved a multi-party settlement agreement designed to increase annual
electric base revenues by $12.9 million, or 5.2 percent, effective Jan. 1, 2018, and by $4.5 million, or 1.8 percent, effective Jan. 1, 2019
For natural gas, the settlement agreement is designed to increase annual base revenues by $1.2 million, or 2.9 percent, effective Jan. 1, 2018, and
by $1.1 million, or 2.7 percent on Jan. 1, 2019
Based on 50% equity ratio and 9.5% return on equity
Alaska
Nov. 15, 2017, all-party settlement agreement approved by Regulatory Commission of Alaska designed to increase base
revenues by 3.86% or $1.3 million, the level of interim rates that went into effect Nov. 23, 2016
Previously approved additional $2.9 million annually from interruptible service will be decreased to $2.06 million annually; a one-time $0.9 million
credit will be credited back to customers through the Cost of Power Adjustment (COPA)
Based on a 58.18% equity ratio and an 11.95% return on equity
Oregon
Sept. 13, 2017, received Commission approval of an all-party settlement agreement designed to increase annual natural gas base
revenues by 5.9% or $3.5 million
Rate adjustment of $2.6 million was effective Oct. 1, 2017, and a second adjustment of $0.9 million was effective Nov. 1, 2017
Based on 50% equity ratio and 9.4% return on equity
Alaska Electric Light & Power Company
(AEL&P)
Growing the utility core
18
Oldest regulated electric utility in Alaska, founded in 1893
19
Serves 17,000 electric customers in the City and Borough of
Juneau, meeting nearly all of its energy needs with hydropower
One of the lowest-cost electric utilities in the state
Approved capital structure of 58.18% equity ratio and an
authorized return on equity of 11.95%
Diversifying our utility footprint
Juneau, Alaska
20
Strategic Investments
Developing platforms for future growth
LNG opportunities continue to be impacted by current market
economics
□ Salix (subsidiary)
– Generation – substitution for diesel
– Marine and rail fueling
□ Plum Energy
– Small LNG project investments
Targeted investments
□ Energy Impact Partners
– Private equity fund that invests in emerging technologies,
services, and business models throughout electric supply chain
with a collaborative, strategic investment approach
□ TROVE
– Leverage AMI, consumer and other data through predictive
analytics to create utility value
□ Spirae
– Microgrid and distributed energy resource management platform
Creating new growth platforms
21
*LNG: Liquefied natural gas
22
Financial
Performance Metrics
Prudent Balance Sheet and Liquidity
Debt
52.7%
Equity
47.3%
Consolidated Capital Structure
Dec. 31, 2017
23
Additional long-term debt maturities beyond 2027 not shown
*Excludes debt maturities of $15 million at Alaska Energy and Resources Company in 2019
$261 million of available liquidity at Avista Corp. as of December 31, 2017
Issued and sold $90 million of first mortgage bonds with a coupon of 3.91% due in 2047
Issued 1.3 million shares of common stock for total net proceeds of $56 million
In 2018, we expect to issue approximately $375 million of long-term debt and up to $85
million of equity.
Equity issuances may come from sales agency agreements or from an equity contribution from
Hydro One upon consummation of the acquisition or from a combination of those sources
$273
$90
$52
$250
$14
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Significant maturity in 2018
($ millions)
*
$1.85
$3.10
$1.97
$2.15
2013 2014 2015 2016 2017*
Continuing Operations Ecova (DiscOp)
$1.79
24
Continued long-term earnings growth
Total Earnings per Diluted Share
Attributable to Avista Corporation
Business Segments Q4 2017 Q4 2016
Avista Utilities $0.44 $0.59
AEL&P $0.05 $0.05
Other $(0.07) $(0.02)
Diluted EPS $0.42 $0.62
* 2017 earnings reduced by $0.16 per diluted share associated with tax law changes and $0.19 per diluted share
of acquisition costs.
*Current quarterly dividend of $0.3725 annualized
25
Dividend growth expected to keep pace with long-term earnings growth
Attractive and growing dividend
$1.27
$1.32
$1.37
$1.43
$1.49*
2014 2015 2016 2017 2018
26
A solid investment
Strong and responsible core utility
□ Investing substantially to modernize infrastructure and
upgrade systems
□ Steady returns and attractive dividend yield
□ One of the greenest utilities in the U.S.*
□ Committed to reducing current regulatory timing lag
Focus on utility growth
□ Selective acquisitions
□ Developing new products and services and supporting
economic development throughout service area
Positioning for the future
□ Leverage AMI data through applied analytics, gain
insight into leading-edge energy solutions
□ Track record of innovation (e.g. Itron, ReliOn, Ecova)
*Source: Benchmarking Air Emissions of the 100 Largest Power Producers in the United States,
NRDC, July 2016
Photo: Cabinet Gorge Dam
Reliably building value for
our customers, investors,
communities and employees
Risk factors that may affect future results
27
The following are among the important factors that could cause actual results to differ materially from the forward-looking statements: weather conditions (temperatures, precipitation levels and wind patterns),
which affect both energy demand and electric generating capability, including the effect of precipitation and temperature on hydroelectric resources, the effect of wind patterns on wind-generated power,
weather-sensitive customer demand, and similar effects on supply and demand in the wholesale energy markets; our ability to obtain financing through the issuance of debt and/or equity securities, which can
be affected by various factors including our credit ratings, interest rates and other capital market conditions and the global economy; changes in interest rates that affect borrowing costs, our ability to
effectively hedge interest rates for anticipated debt issuances, variable interest rate borrowing and the extent to which we recover interest costs through retail rates collected from customers; changes in
actuarial assumptions, interest rates and the actual return on plan assets for our pension and other postretirement benefit plans, which can affect future funding obligations, pension and other postretirement
benefit expense and the related liabilities; deterioration in the creditworthiness of our customers; the outcome of legal proceedings and other contingencies; economic conditions in our service areas, including
the economy's effects on customer demand for utility services; declining energy demand related to customer energy efficiency and/or conservation measures; changes in long-term climates, both globally and
within our utilities' service areas, 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, commodity costs, interest rate swap derivatives 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, which could result in future resource acquisitions based on the integrated resource plans that are later deemed imprudent; volatility and illiquidity in wholesale energy markets, including
the availability of willing buyers and sellers, changes in wholesale energy prices that can affect operating income, cash requirements to purchase electricity and natural gas, value received for wholesale sales,
collateral required of us by counterparties in wholesale energy transactions and credit risk to us from such transactions, and the market value of derivative assets and liabilities; default or nonperformance on
the part of any parties from whom we purchase and/or sell capacity or energy; potential environmental regulations affecting our ability to utilize or resulting in the obsolescence of our power supply resources;
severe weather or natural disasters, including, but not limited to, avalanches, wind storms, wildfires, earthquakes, snow and ice storms, that can disrupt energy generation, transmission and distribution, as well
as the availability and costs of materials, equipment, supplies and support services; explosions, fires, accidents, mechanical breakdowns or other incidents that may impair assets and may disrupt operations
of any of our generation facilities, transmission, and electric and natural gas distribution systems or other operations and may require us to purchase replacement power; explosions, fires, accidents or other
incidents arising from or allegedly arising from our operations that may cause wildfires, injuries to the public or property damage; blackouts or disruptions of interconnected transmission systems (the regional
power grid); terrorist attacks, cyber attacks or other malicious acts that may disrupt or cause damage to our utility assets or to the national or regional economy in general, including any effects of terrorism,
cyber attacks or vandalism that damage or disrupt information technology systems; work force issues, including changes in collective bargaining unit agreements, strikes, work stoppages, the loss of key
executives, availability of workers in a variety of skill areas, and our ability to recruit and retain employees; increasing costs of insurance, more restrictive coverage terms and our ability to obtain insurance;
delays or changes in construction costs, and/or our ability to obtain required permits and materials for present or prospective facilities; increasing health care costs and cost of health insurance provided to our
employees and retirees; third party construction of buildings, billboard signs, towers or other structures within our rights of way, or placement of fuel receptacles within close proximity to our transformers or
other equipment, including overbuild atop natural gas distribution lines; the loss of key suppliers for materials or services or disruptions to the supply chain; adverse impacts to our Alaska operations that could
result from an extended outage of its hydroelectric generating resources or their inability to deliver energy, due to their lack of interconnectivity to any other electrical grids and the extensive cost of
replacement power (diesel); changing river regulation at hydroelectric facilities not owned by us, which could impact our hydroelectric facilities downstream; compliance with extensive federal, state and local
legislation and regulation, including numerous environmental, health, safety, infrastructure protection, reliability and other laws and regulations that affect our operations and costs; the ability to comply with the
terms of the licenses and permits for our hydroelectric or thermal generating facilities at cost-effective levels; cyber attacks on us or our vendors or other potential lapses that result in unauthorized disclosure
of private information, which could result in liabilities against us, costs to investigate, remediate and defend, and damage to our reputation; disruption to or breakdowns of information systems, automated
controls and other technologies that we rely on for our operations, communications and customer service; changes in costs that impede our ability to effectively implement new information technology systems
or to operate and maintain current production technology; changes in technologies, possibly making some of the current technology we utilize obsolete or introducing new cyber security risks; insufficient
technology skills, which could lead to the inability to develop, modify or maintain our information systems; growth or decline of our customer base and the extent to which new uses for our services may
materialize or existing uses may decline, including, but not limited to, the effect of the trend toward distributed generation at customer sites; the potential effects of negative publicity regarding our business
practices, whether true or not, which could hurt our reputation and result in litigation or a decline in our common stock price; changes in our strategic business plans, which may be affected by any or all of the
foregoing, including the entry into new businesses and/or the exit from existing businesses and the extent of our business development efforts where potential future business is uncertain; non-regulated
activities may increase earnings volatility; failure to complete the proposed acquisition of the Company by Hydro One, which would negatively impact the market price of Avista Corp.'s common stock and could
result in termination fees that would have a material adverse effect on our results of operations, financial condition, and cash flows; changes in environmental laws, regulations, decisions and policies, including
present and potential environmental remediation costs and our compliance with these matters; the potential effects of initiatives, legislation or administrative rulemaking at the federal, state or local levels,
including possible effects on our generating resources of restrictions on greenhouse gas emissions to mitigate concerns over global climate changes; political pressures or regulatory practices that could
constrain or place additional cost burdens on our distribution systems through accelerated adoption of distributed generation or electric-powered transportation or on our energy supply sources, such as
campaigns to halt coal-fired power generation and opposition to other thermal generation, wind turbines or hydroelectric facilities; wholesale and retail competition including alternative energy sources, growth
in customer-owned power resource technologies that displace utility-supplied energy or that may be sold back to the utility, and alternative energy suppliers and delivery arrangements; failure to identify
changes in legislation, taxation and regulatory issues which are detrimental or beneficial to our overall business; the new federal income tax law and its intended and unintended consequences on financial
results and future cash flows, including the potential impact to credit ratings, which may affect our ability to borrow funds or increase the cost of borrowing in the future; policy and/or legislative changes
resulting from the current presidential administration in various regulated areas, including, but not limited to, environmental regulation and healthcare regulations; and the risk of municipalization in any of our
service territories.