Avista (AVA) Q4 2007 earnings summary

Executive summary

• 2007 net income was $38.5 million vs. $72.9 million in 2006; lower Avista Utilities earnings and an $11.9 million Energy Marketing and Resource Management loss drove the decline.

• The sale of substantially all Avista Energy contracts and operations to Shell Energy closed June 30; the transaction reduced business risk and was expected to stabilize earnings.

• Moody’s and S&P upgraded credit ratings to investment grade; ratings remained at the lower end of that category.

Financial highlights

• Operating revenues were $1.418 billion vs. $1.506 billion in 2006; income from operations was $138.4 million vs. $199.6 million.

• Net income was $38.5 million vs. $72.9 million; diluted EPS was $0.72 vs. $1.46.

• 2007 included a $4.3 million pre-tax loss on the Avista Energy sale, a $2.3 million turbine impairment and a $3.8 million debt-repurchase-cost write-off.

Outlook and guidance

• Utility net income was expected to increase in 2008, supported by Washington rate increases, a projected ERM benefit, slightly above-normal hydro generation and higher retail loads.

• Utility capital expenditures were expected to be $200 million in 2008; spending was projected above $200 million in each of 2009 and 2010.

• Advantage IQ net income could decrease slightly in 2008 as customer growth and operating efficiencies were expected to be offset by lower interest earnings.

• Expected 2008 pension contributions were at least $15 million; new funding rules could require higher cash contributions.