Avista Corporation 10-K Summary: Fiscal Year Ended December 31, 2000
Business Context and Reporting Period
This Form 10-K covers Avista Corporation for the fiscal year ended December 31, 2000. Avista is an energy, information, and technology company headquartered in Spokane, Washington, operating primarily in the Pacific Northwest. The company is organized into four lines of business: Avista Utilities (regulated electric and natural gas distribution, transmission, and generation), Energy Trading and Marketing (wholesale trading via Avista Energy and generation development via Avista Power), Information and Technology (billing services, fuel cells, and telecommunications), and Avista Ventures (investment and portfolio management).
Key Financial Metrics
| Metric | 2000 | 1999 |
|---|---|---|
| Total Operating Revenues | $7,911.5 million | $7,905.0 million |
| Net Income | $91.7 million | $26.0 million |
| Income Available for Common Stock | $67.9 million | $4.6 million |
| Diluted Earnings Per Share (EPS) | $1.47 | $0.12 |
| Total Assets | $12,563.9 million | $3,713.5 million |
| Long-Term Debt | $679.8 million | $718.2 million |
| Cash and Cash Equivalents | $194.4 million | $40.0 million |
| Operating Cash Flow | $76.2 million | $111.2 million |
Note: The significant increase in Total Assets is primarily driven by the mark-to-market valuation of energy commodity assets and liabilities held by Avista Energy due to volatile market prices.
Material Changes vs. Prior Period
- Energy Trading Surge: The Energy Trading and Marketing segment recorded a pre-tax income of $250.2 million in 2000, a reversal from a $97.8 million loss in 1999. This was driven by a well-positioned portfolio in volatile Western energy markets.
- Utility Segment Loss: Avista Utilities recorded a pre-tax operating income of only $3.2 million in 2000, down from $142.6 million in 1999. This decline was caused by unprecedented wholesale power prices (spiking to over $180/MWh in June 2000) and losses from wholesale trading short positions.
- Regulatory Deferrals: Due to high power costs, Avista Utilities deferred $33.9 million in Washington and $4.5 million in Idaho for future recovery from ratepayers.
- Capital Structure Shift: In February 2000, the company converted all remaining Series L Convertible Preferred Stock into common stock, resulting in a one-time charge of $21.3 million to preferred dividend requirements and increasing common equity.
- Asset Sales: Avista Utilities sold its 17.5% interest in the Centralia Power Plant, recording a $9.0 million after-tax gain (with $28.2 million deferred for customer credits).
Guidance, Outlook, and Risks
Outlook: Management expects Avista Utilities to earn between $0.90 and $1.00 per share in 2001, assuming current streamflow and weather projections. Consolidated earnings are expected to be lower than the utility segment alone due to continued support for Information and Technology subsidiaries and reduced contributions from Energy Trading.
Key Risks and Contingencies:
- California Energy Crisis: Avista Energy has net accounts receivable of $66.3 million from California Power Exchange (CalPX) and related entities. While a $8.3 million bad debt reserve was established, collection remains uncertain due to defaults by Southern California Edison and PG&E. The company is litigating to suspend "backcharges" levied by CalPX.
- Hydroelectric Conditions: Streamflows for 2001 are forecast at 60% of normal, potentially requiring increased purchases from the high-cost short-term wholesale market.
- Legal Proceedings: The company faces a consolidated securities class action lawsuit regarding 2000 trading losses and an investigation by the Commodity Futures Trading Commission (CFTC) regarding 1998 futures trading.
- Regulatory Recovery: The company is seeking regulatory approval to recover deferred power costs incurred in 2000 and 2001 through rate adjustments.
Investor Verification Checklist
- California Exposure: Verify the status of the $66.3 million receivable from CalPX/CalISO and the outcome of the litigation regarding backcharges.
- Regulatory Approvals: Monitor the Washington Utilities and Transportation Commission (WUTC) and Idaho Public Utilities Commission (IPUC) decisions on the recovery of the $38.4 million in deferred power costs.
- Hydro Forecast Accuracy: Track actual 2001 streamflow conditions against the 60% of normal forecast to assess potential cost overruns.
- Energy Trading Strategy: Confirm the continued scaling back of Avista Energy's risk profile and trading volumes as management intends.
- Legal Reserves: Review updates on the CFTC investigation and the securities class action lawsuit for potential additional accruals.