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Avista Corp. (AVA)
Q4 2008 Earnings Call
February 18, 2009 10:30 am ET
Jason Lang – Manager, Investor Relations
Scott Morris – Chairman, President and Chief Executive Officer
Malyn Malquist – Executive Vice President
Mark Thies – Senior Vice President and Chief Financial Officer
Kelly Norwood – Vice President, Regulatory Affairs
Christy Burmeister-Smith – Vice President, Controller and Principal Accounting Officer
Paul Ridzon – Keybanc Capital Markets
Brian Russo – Ladenburg Thalmann
James Bellessa – D.A. Davidson & Company
Hasan Doza – Luminus Management
Chris Shelton – Millennium Partners
Patrick McGlinchey – Sidoti & Company
Previous Statements by AVA
» Avista Corp. Q3 2009 Earnings Call Transcript
» Avista Corporation Q3 2008 Earnings Call Transcript
» Avista Corp. Q2 2008 Earnings Call Transcript
Thank you, Erica. Good morning everyone and welcome to Avista's fourth quarter and fiscal year 2008 earnings conference call. Our earnings were released pre-market this morning and the release is available on our website at avistacorp.com.
Joining me this morning are Avista Corp. Chairman of the Board, President and CEO, Scott Morris; Executive Vice President Malyn Malquist; Senior Vice President and CFO Mark Thies; Vice President of Finance and Treasurer, Ann Wilson; Vice President State and Federal Regulation, Kelly Norwood; Vice President, Controller and Principal Accounting Officer Christy Burmeister-Smith; and the President and CEO at Advantage IQ, Stu Stiles.
Before we begin, I'd like to remind you that some of the statements that will be made today are forward-looking statements that involve risks and uncertainties which are subject to change. A reference to the various factors which could cause actual results to differ materially from those discussed in today's call, I will direct you to our Form 10-K 2007 and Form 10-Q for the quarter ended September 30, 2008, which are available on our website.
To begin this presentation I would like to recap the financial results presented in today's press release. For the fourth quarter of 2008, our consolidated net income was $0.32 per diluted share compared to net income of $0.26 per diluted share for the fourth quarter of 2007. For the year ended December 31, 2008, our earnings were $1.36 per diluted share compared to $0.72 per diluted share for the year ended December 31, 2007.
Now I'll turn the discussion over to Avista's Chairman of the Board, President and Chief Executive Officer, Scott Morris.
Thank you, Jason, and good morning everyone. Overall, we are pleased with our results for the fourth quarter and year ended December 31, 2008. We expect continued improvement in our financial results in 2009 due to the implementation of a general rate increase in Idaho that became effective October 1st and the implementation of a general rate increase in Washington effective January 1, 2009.
A previous general rate increase in Washington implemented at the beginning of 2008 partially contributed to the improvement in our utility results as well as lower interest costs. Avista Utilities also had weak earnings in 2007. In addition to the improvement at the utility, our consolidated results improved as compared to 2007, which were lower due to the net loss at Avista Energy in 2007.
Despite a good winter snow pack in early 2008 the late spring runoff resulted in excess water being spilled which yielded lower than normal hydroelectric generation for the first half of the year. Purchase power costs were higher than expected due in part to colder than normal temperatures starting the first quarter heating season and an increase in the price of wholesale power. Therefore, for fiscal year 2008 we absorbed $7.4 million of costs under the energy recovery mechanism in Washington compared to $8.5 million in 2007.
Also contributing to the increase and net income for 2008 was $5.7 million of interest income related to the company's 2001 through 2003 tax years and the resulting refund received from the Internal Revenue Service, which included the settlement of the indirect overhead cost issue. This was partially offset by $1.4 million of interest expense related to 2004 and 2005 tax years. Both amounts were recorded during the third quarter of 2008.
As approved by the Idaho Public Utility Commission electric rates for Idaho customers increased by 12% and natural gas rates increased by 4.7% effective October 1st. Combined, these rate changes are designed to increase annual revenues by $27.1 million. Effective January 6, 2009 natural gas rates decreased 4.7% in Idaho reflect an adjustment to the purchase gas adjustment mechanism, a decrease in 2009 revenues of $3.1 million. As you know PGAs are designed to pass through changes in natural gas costs to our customers with no change in gross margin or net income.
As approved by the Washington Utilities and Transportation Commission base electric rates for Washington customers increased by an average of 9.1%, base natural gas rates increased by an average of 2.4% effective on January 1, 2009. Combined, these rate changes are designed to increase annual revenues by $37.3 million.
In January 2009, the Office of Public Counsel filed a petition for judicial review of the Washington Commission's recent order approving the company's multi-party settlement. Public Counsel raised a number of issues that were previously argued before the Commission. The appeal itself does not prevent the new rates continuing to be in effect.