Avista Corp. (AVA)
Q3 2009 Earnings Call
October 28, 2009; 10:30 am ET
Scott Morris - Chairman of the Board, President & Chief Executive Officer
Mark Thies - Senior Vice President & Chief Financial Officer
Jason Thackston - Vice President of Finance
David Meyer - Vice President & Chief Counsel for Regulatory & Governmental Affairs
Christy Burmeister-Smith - Vice President, Controller & Principal Accounting Officer
Jason Lang - Manager, Investor Relations
Paul Ridzon - KeyBanc
Brian Russo - Ladenburg Thalmann & Co.
James Bellessa - D.A. Davidson & Co.
Chris Ellinghaus - Shields & Co.
Paul Ridzon - Key Bank
Previous Statements by AVA
» Avista Corp. Q4 2008 Earnings Call Transcript
» Avista Corporation Q3 2008 Earnings Call Transcript
» Avista Corp. Q2 2008 Earnings Call Transcript
I’d now like to turn the presentation over to Mr. Jason Lang, Investor Relations Manager. Please proceed, sir.
Thank you, Ann. Good morning everyone and welcome to Avista’s third quarter 2009 earnings conference call. Our earnings were released pre-market this morning and the release is available on our website at www.avistacorp.com.
Joining me this morning are Avista Corp, Chairman of the Board, President and CEO, Scott Morris; Senior Vice President and CFO, Mark Thies; Vice President of Finance, Jason Thackston; Vice President and Chief Council for Regulatory and Governmental Affairs, David Meyer; and Vice President, Controller and Principal Accounting Officer, Christy Burmeister-Smith.
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 2008 and Form 10-Q for the period ended June 30, 2009, which are available on our website.
To begin this presentation I’d like to recap the financial results presented in today’s press release. For the third quarter of 2009, our consolidated net income was $0.15 per diluted share compared to net income of $0.13 per diluted share for the third quarter of 2008. On a year-to-date basis our earnings were $1.18 per diluted share compared to $1.04 per diluted share for the first nine months of 2008.
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. We’re pleased with our 2009 results through September 30. Our continued solid financial performance keeps us on tract to meet our earnings expectation for the year. We are expecting to be at the upper end of our range for consolidated and utility earnings for 2009. We continue to make progress in the timely recover of our costs and capital investments we’re making in our generation, transmission and distribution infrastructure.
New rates went into effect in Idaho August 1 and in September we reached an all party settlement in our Oregon natural gas general rate case. As approved by the Oregon commission new rates will become effective in Oregon on November 1. As part of the settlements we have agreed to refund a total of $2.4 million to our Oregon customers related to Oregon Senate Bill 408 over two month period, November and December of 2009.
This refund is approximately equal to the new revenue from the general rate increase for this period. In Washington we reach the partial settlement in our general electric and natural gas rate case in September. The settlement resolved issues in the areas of cost of capital, power supply, rate spread and rate design and funding under the low income rate-payer assistance program.
Issues in the case that remain unresolved include, among others, the prudence and timing of the addition of the power purchase agreement for the Lancaster plant. Capital additions to rate base, labor costs, tree trimming costs, information systems costs and the proposed continuation of the natural gas decoupling mechanism. These issues are being addressed in further regulatory proceedings before the WUTC.
We expect a decision from the WUTC on the remaining issues and new rates to become effective by the end of the 2009, some eleven months after the case was initially filed. In November we will be lowering natural gas rates for customers in all jurisdictions because of a decline in wholesale prices. These purchase gas adjustments are designed to pass through changes in natural gas costs to our customers with no change in gross margin or net income.
Since beginning of the year, when considering all rate changes effective through November 1, residential natural gas rates will have decreased 30% in Idaho, 28% in Washington and 12% in Oregon. Also contributing to our improvement in results for 2009 are lower interest costs and a decrease in income tax expense. The decline in interest expense was primarily the result of financing transactions and decisions we made in 2008 and 2009. In September we issued $250 million of 5.125% debt due in 2022.
I would like to comment about the economy and our service territory. We’re observing declines in employment throughout our service area due to cutbacks and construction, forest products, mining and manufacturing. Unemployment rates are much higher than a year ago in our Eastern Washington, and Northern Idaho, and Southern Oregon service areas. The housing markets in Spokane, Coeur d’Alene, Idaho and Medford, Oregon are showing year-over-year increases in permits, but the commercial construction markets remain weak.