20171129UM 1897 Avista DR 001-033 MJM__RA General Merger Questions.docx

September 22, 2017
DAVID J. MEYER - ESQ
PATRICK EHRBAR
VICE PRESIDENT & CHIEF COUNSEL FOR
DIRECTOR OF RATES
REGULATORY & GOVERNMENTAL AFFAIRS
STATE & FEDERAL REGULATION
AVISTA CORPORATION
AVISTA CORPORATION
PO BOX 3727
PO BOX 3727
SPOKANE WA 99220-3727
SPOKANE WA 99220-3727
[e-mail]
pat.ehrbar @avistacorp.com
RE:
Docket No.
Staff Request Nos.
Response Due By
UM 1897
DR 1 – DR 33
October 6, 2017
Please provide responses to the following request for data by the due date. Please note that all responses must be posted to the PUC Huddle account. Contact the undersigned before the response due date noted above if the request is unclear or if you need more time. In the event any of the responses to the requests below include spreadsheets, the spreadsheets should be in electronic form with cell formulae intact.
Topic or Keyword: General Merger InformationPlease provide: a) a complete current Avista Corporate Organization Chart of Companies including subdivisions, and b) a corporate title, section, phone and email contact listing.Please provide complete contact listings for each of the following persons to facilitate mail, phone, and email contact:Kelly O. Norwood, VP State & Federal RegulationKevin J. Christie, (Titled as effective December, 2017) Now VP for Cust.SolutionsDavid J. Meyer, Chief Counsel – Regulatory & Governmental AffairsPatrick (Pat) D. Ehrbar, Senior. Manager – Rates & TariffsScott L. Morris, President, CEO, Chair of Board of Directors Avista CorporationDennis P. Vermillion, Senior VP Avista Corp. & President of Avista UtilitiesMark T. Thies, Senior VP, CFO, TreasurerMarian M. Durkin, Senior VP & Gen. Counsel / Corp. Sec., and Chief Compliance OfficerLiz Andrews, Manager of Revenue RequirementsJeanne PluthJennifer S. Smith, Senior Regulatory AnalystKaren S. Feltes, Chief HR Officer and Sr. VPGrant D. Forsyth, Chief EconomistJames M. Kensok, VP, and CISORyan L. Krasselt, VP, Controller and Principal Accounting OfficerHeather L. Rosentrater, VP Energy DeliveryJason R. Thrackston, Senior VP Energy ResourcesWhere applicable, please also provide contact information for support or regulatory / corporate affairs staff who are authorized to receive communications on behalf of any of the persons mentioned in DR No. 2 above.Please provide a MS Excel spreadsheet calculating the shareholder gain in percent-terms and dollar-terms from the Hydro One offer, showing each source and timing of market data used.Please provide a MS Excel spreadsheet calculating for the last ten years the following:What was Avista’s payout ratio?How many dollars did Avista dividend to shareholders?What was Avista’s CAGR in dividend growth for the first 5 years, for the second 5 years, and for the full 10-year period?How many dollars did Avista raise through stock sales?How much has Avista raised through bond sales?What was Avista’s free cash flow to the Utilities?What was Avista’s capital spending for the year?What percentage of cash flows came from financing vs. operations?Please provide each: a) valuation, b) risk assessment and c) cash flow analysis of Avista Corp. that Avista has in its possession along with any work papers, supporting spreadsheets, narratives, executive summaries and presentations.Please clarify who performed and who funded each analysis described in the immediately prior DR No. 6.Please provide each: a) valuation, b) risk assessment and c) cash flow analysis of Hydro Onethat Avista has in its possession along with any work papers, supporting spreadsheets, narratives, executive summaries and presentations.Please clarify who performed and who funded each analysis described in the immediately prior DR No. 8.Please provide a copy of Avista’s final due diligence regarding the merger with Hydro One.Please provide a copy of Avista’s executive summaries and reports regarding due diligence in this merger presented to Avista’s Board of Directors (BOD), BOD Finance Subcommittee, other BOD committees or subcommittee, and Avista Senior Management.Please explain all terminal value and net present value calculations in Avista’s response to the immediately prior four DRs. Provide supporting formulas and examples if complete spreadsheets are not available.What was the AVA shareholder paper gain in percentage (%) terms and dollar terms at close of day following the Hydro One offer?Has Hydro One made any commitments to Avista regarding retained earnings and capital investment from Hydro One into Avista to help maintain a balanced Avista capital structure of approximately 50 percent long-term debt and 50 percent common equity as Avista issues its planned $900 million in long-term debt. If so, please explain the nature and parameters of the commitment.Regarding, Avista/300, Thies/14, please explain in detail how, and at what approximate rates and spreads, after Hydro One assumes the long-term debt of Avista, Avista will be recapitalized with new debt and equity.What market premium does the Hydro One offer represent for AVA stock from Avista Corp.’s perspective? Please attach a narrative explaining Avista’s thinking and sources of information relied upon, even if Avista agrees with general press estimation of a 24% market premium.Please provide a copy of each of the: a) Moody’s and b) S&P reports and analysis showing the outlook for Avista changed to positive as a result of the proposed merger.Please provide a MS Excel spreadsheet showing whether Avista was generating cash or in need of cash infusions or new cash from financing activity: a) with and b) without other than routine Operations and Maintenance (O&M) capital spending, over each of the last ten calendar years.Please discuss Avista’s current access to each now relied upon debt and equity market and flotation method, inclusive of private placement, in comparison to access to each available type offinancing post-merger through Hydro One both in current and in stressed conditions. In this discussion, please address the possible loss or severance of relations with investors both: a) directly in AVA, and b) through entities like Blackrock, The Vanguard Group, State Street, Fidelity, and PIMCO which have governance with a U.S. focus.Please discuss and contrast financial constraints and risks that Avista faces or would face pre- and post-merger.Has Avista determined that Avista’s and Hydro One’s systems are working with sufficiently similar high voltage transmission line and substation equipment to create additional purchasing economies of scale? If so, please explain and include indicative pricing from suppliers like ABB Group showing the difference in pricing by quantity of inputs to transmission and substation equipment. Please describe the purchasing arrangements Avista participates in with other utilities or suppliers.Has Avista determined that Avista’s and Hydro One’s information technology and computer systems are sufficiently similar as to allow both to use the same software solutions at lower cost than were each to purchase the same software or different software separately? If so, please explain.Has Avista presented to, or developed jointly with Hydro One, any feasibility studies looking at fiber optic communications potential in connection with Avista transmission lines? If so, please provide a copy of the most recently studies.Has Avista presented to Hydro One any other feasibility studies looking at Avista opportunities were the U.S. to undergo a large infrastructure stimulus program? If so, please provide a copy of the most recent studies presented by Avista.Please provide a spreadsheet capturing the customer and Northwest U.S. benefits represented in the merger application, flagging each as to whether it would apply in part to Oregon.Please provide a spreadsheet and narrative showing and describing cost allocations and their derivation for Oregon ratepayers in each of the last threeAvista general rate-cases, supplementing Exhibit 702. This narrative should start at all Avista corporate costs and work down to what proportion of what costs were allocated to Oregon gas LDC ratepayers.Please provide a list of the statutes that control access to Avista’s pension and post-retirement medical funds.After the merger, could Hydro One access and draw upon pension and post-retirement medical funds? If this is possible, either directly or indirectly through control of the Avista Board of Directors, please explain.
Topic or Keyword: Workpapers and supporting documentsSee Avista 702, Ehrbar/1. Please provide workpapers in electronic excel format with formulas intact, showing how the “Factor 7” rate credit allocation was calculated for each state. Please provide documentation supporting any assumptions made in calculating the allocation factor.Please provide electronic, Excel versions of Avista/701 and Avista/702 with cell-formulas intact.Please provide work papers in electronic excel format with cell formulas intact, showing how each immediate benefit in Table No. 1 from Avista/300, page 15 was calculated. Please provide documentation used in supporting any assumptions made in calculating the benefit.Please provide a detailed explanation of the changes in funding to Avista’s charitable contributions and the changes in funding to the Avista Foundation. Please include an explanation of:
How the proposed $2,000,000 annual contribution to the Avista Foundation will be funded. Will Hydro One, Avista, or ratepayers fund this amount?
How the $2,500,000 increase in budget for charitable contributions will be funded.
Will Hydro One, Avista, or ratepayers fund this amount?
Is this additional to or inclusive of the $2,000,000 amount from subpart (a)?
How will the $7,000,000 one-time contribution to Avista Foundation be funded?
Please provide a listing of the accounting entries envisioned and whether these entries are included in any cost allocations to regulated accounts of Avista. Please provide a list of organizations receiving support, the city and state where they are located, and the amounts of such support, from Avista’s charitable contributions in each of the calendar years 2015, 2016, and 2017.
Please name your responsive file to include the Data Request number. Once you have posted your response to the Data Request to the PUC Huddle account, use the “Sharing” feature of Huddle to generate an email to authorized parties notifying them that the response has been posted. In the body of the generated email, list the Data Request number associated with your response.
You must mark confidential responses as such and post them to Huddle in the appropriate “Confidential” folder. Access to Confidential folders is limited to individuals who have signed the protective order. You should not send confidential documents (hard copy or electronic) separately to the Commission or its Staff; you should post confidential responses only to the Huddle account.
Should you need to request an extension to the due date for the data responses you will need to contact the staff attorney assigned to the case for approval.
Questions regarding the use of Huddle should be directed to [e-mail].
/s/ John Crider and Marc Hellman –Staff AdministratorsStaff Initiators:Matt [e-mail]503-378-6164
Rose [e-mail]503-378-8718