20210325Avista to Staff 75 Attachment A2.PDF

INFRASTRUCTURE AND PROJECT FINANCE
CREDIT OPINION
27 July 2017
Update
RATINGS
Avista Corp.
Domicile Spokane, Washington,United States
Long Term Rating Baa1
Type LT Issuer Rating
Outlook Stable
Please see the ratings section at the end of this reportfor more information. The ratings and outlook shown
reflect information as of the publication date.
Contacts
Ryan Wobbrock 212-553-7104
Vice President
[e-mail]
Jillian Cardona [phone]
Associate Analyst
[e-mail]
Jim Hempstead 212-553-4318
MD-Utilities
[e-mail]
AVISTA CORP.
A Vertically Integrated Electric and Gas Utility
Summary Rating Rationale
Avista Coporation's (Avista) Baa1 issuer rating reflects its primary business as a low-risk
vertically integrated electric and gas utility with supportive cost recovery mechanisms,
such as electric and gas revenue decoupling. Recent events in Washington, Avista's primary
regulatory jurisdiction, create some uncertainty for the company going forward, but Avista's
financial profile can provide cushion to offset any negative effects over the next 12-18
months.
Avista has some unregulated exposure in addition to its ownership of regulated utility Alaska
Electric Light and Power (AEL&P, Baa3 Stable), which provide marginal operational and cash
flow diversity, but remain neutral in terms of affecting the ratings of Avista.
Recent Events
On 19 July, Canadian electric utility Hydro One, Ltd. (HOL unrated) announced it had
reached an agreement to acquire Avista for $53 per share in a $5.3 billion all-cash
transaction, including the assumption of roughly $1.9 billion of Avista reported debt. The
$53 per share purchase price represents a premium of around 24% to Avista's 18 July closing
price. HOL has indicated that part of the transaction financing will include the issuance
of nearly $2.6 billion of HOL debt and about CAD1.4 billion of contingent convertible
debentures.
Moody's expects that the transaction debt will be issued directly by HOL, a much larger
holding company, and that it will not materially change Avista's financial or leverage metrics.
Moody's also assumes that there will be no significant change to Avista's regulated capital
structure and dividend policy. As such, we believe that HOL's ownership will be credit neutral,
based on current assumptions and Avista's ratings were affimred with a stable outlook
immediately following the announcement.
Exhibit 1
Historical CFO Pre-WC, Total Debt and CFO Pre-WC to Debt
$323 $330 $380 $386 $393
$1,638
$1,752 $1,838
$1,991 $1,975
19.7%
18.8%
20.7%
19.4%
19.9%
17.5%
18.0%
18.5%
19.0%
19.5%
20.0%
20.5%
21.0%
$0
$500
$1,000
$1,500
$2,000
$2,500
12/31/2013 12/31/2014 12/31/2015 12/31/2016 3/31/2017(LTM)
CFO Pre-W/C Total Debt (CFO Pre-W/C) / Debt
Source: Moody's Investors Service
Staff_PR_075 Attachment A2 Page 1 of 6
MOODY'S INVESTORS SERVICE INFRASTRUCTURE AND PROJECT FINANCE
Credit Strengths
» Low-risk utility with supportive cost recovery mechanisms
» Stable cash flow production
Credit Challenges
» Some uncertainty over degre to which Avista may be required to support acquisition debt
» New Washington rate case pending following significant recent miscommunication between Avista and the WUTC
» Clean Air Rule in Washington could be costly
Rating Outlook
The stable outlook incorporates our view that despite a recent rate filing snafu in Washington, Avista's financial profile will maintain
cash flow from operations pre-working capital (CFO pre-WC) to debt in the high-teens range and that it will continue to receive
adequate cost recovery within its regulatory jurisdictions.
The stable outlook also incorporates our view that the proposed acquisition by HOL will not unduly stress Avista's capital structure or
dividend policy going forward and that unregulated operations will remain below 15% of consolidated earnings and cash flow.
Factors that Could Lead to an Upgrade
» Demonstrated improvement in regulatory relationships
» CFO pre-WC to debt above 21% on a sustainable basis
» CFO pre-WC less dividends above 17% on a sustained basis
Factors that Could Lead to a Downgrade
» Sustained depredation of regulatory relationships
» CFO pre-WC to debt at 17% on a consistent basis
» Direct financial support of HOL's acquisition debt
Key Indicators
Exhibit 2
KEY INDICATORS [1]
Avista Corp.
12/31/2013 12/31/2014 12/31/2015 12/31/2016 3/31/2017(L)
CFO pre-WC + Interest / Interest 5.0x 5.2x 5.7x 5.4x 5.3x
CFO pre-WC / Debt 19.7%18.8%20.7%19.4%19.9%
CFO pre-WC – Dividends / Debt 15.2%14.3%16.2%15.0%15.4%
Debt / Capitalization 46.7%44.6%44.8%44.5%43.7%
[1] All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations.
Source: Moody's Financial Metrics™
This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on
www.moodys.com for the most updated credit rating action information and rating history.
2 27 July 2017 AVISTA CORP.: A Vertically Integrated Electric and Gas Utility
Staff_PR_075 Attachment A2 Page 2 of 6
MOODY'S INVESTORS SERVICE INFRASTRUCTURE AND PROJECT FINANCE
Detailed Rating Considerations
DIRECT SUPPORT OF HYDRO ONE'S ACQUISITION FINANCING WOULD BE CREDIT NEGATIVE
In total, the announced acquisition is credit negative for both HOL and its primary subsidiary Hydro One Inc. (HOI A3 negative)
and could be potentially for Avista because of the significant increase in debt used to finance the acquisition. However, as currently
envisioned, we expect that the transaction debt will be a direct obligation of HOL, a much larger holding company, and that it will not
materially change Avista's financial obligations in terms of support. This is because HOL's primary credit support is derived from HOI's
CAD$17.8 billion rate base and over CAD$700 million of annual net income that can be used for HOL debt obligations.
Should HOL’s acquisition debt begin to depend upon Avista for support, it would be a material credit negative for Avista. By adding
$2.6 billion of acquisition debt to Avista's $1.9 billion of reported debt, we estimate a cash flow to debt coverage of around 9% on
a reported basis, well below current levels. Furthermore, Avista's roughly $90 million of LTM 1Q17 dividends can only support $2.6
billion of acquisition debt interest payments at a 3.46% coupon. While Avista’s own balance sheet is protected to some degree by state
regulatory commission oversight, we would see any significant linkage between Avista and acquisition-related debt support as a drag
on Avista’s overall credit quality.
SIGNIFICANT MISCOMMUNICATION WITH WASHINGTON REGULATORS
In Washington, there appears to have been some form of miscommunication between Avista and the Washington Utilities and
Transportation Commission (WUTC). This became evident when Avista's most recent rate filing was rejected by the WUTC in
December 2016, which was followed by a WUTC denial for reconsideration of the December decision in February 2017. This was a
surprising outcome considering our view that a core competency of utility management is managing regulatory relationships and an
outright denial by the regulator is unusual and unexpected.
Since the WUTC is Avista's most important regulator, overseeing roughly 60% of the company's revenue generation, we anticipate that
the company will have a declining financial profile over the next 12-18 months while Avista awaits the outcome of its new rate filing,
discussed below. While this is a credit negative development, Avista currently has a strong enough financial profile to absorb this rate
case delay without any ratings impact (see financial section, below). Moreover, we view this snafu as temporary, and expect that the
company will continue to receive adequate and timely cost recovery of prudently incurred costs.
In an attempt to address WUTC concerns, Avista filed new electric and gas general rate cases in May. The company is now requesting
total electric and gas rate increases of almost $90 million and $17 million, respectively, in a three-step plan spanning May 2018 to May
2020. The electric filing requests a roughly $64 million increase in May 2018, a $14 million rate increase in May 2019, and another
roughly $14 million increase in May 2020. For the same time periods, Avista requested gas increases of $8.3 million, $4 million and $4
million, respectively. Both electric and gas filings propose a 9.9% allowed return on equity, compared to the 9.5% currently allowed in
rates.
FINANCIAL PROFILE PROVIDES SOME CUSHION FOR RATE CASE DELAY
Avista's key financial metrics, such as cash flow from operations before the changes in working capital (CFO pre-WC) to debt, continue
to be very stable at around 19%. This level is in-line with other Baa1 vertically integrated peers and should provide a degree of financial
flexibility for the company to withstand the modest financial decline expected over the next 12-18 months.
For example, Avista estimates that the delay in obtaining a rate order will reduce its earnings per diluted share between $0.20 to $0.30
for 2017. We estimate that this would equate to between $13 million and $20 million of net income. This reduction of net income
could reduce cash flow to debt metrics by up to 100 basis points, or around 18%, assuming no increase in debt. We expect this trend
to correct itself if there is an acceptable settlement or WUTC approval of Avista's most recent general rate case filing. However, should
cash flow to debt remains in the mid-teen's percent range (e.g., 16% or 17%) there could be negative ratings pressure for Avista.
We see a more significant risk with Avista's level of deferred taxes generated in 2016. The company benefitted from around $125
million of deferred tax increases that represented roughly 35% of CFO in 2016. We expect this level to decline significantly going
forward, which could place additional pressure on financial metrics. For example, if deferred taxes reduced to around $75 million (the
average level from 2012-2016), 2016 CFO pre-WC to debt would be 17%.
3 27 July 2017 AVISTA CORP.: A Vertically Integrated Electric and Gas Utility
Staff_PR_075 Attachment A2 Page 3 of 6
MOODY'S INVESTORS SERVICE INFRASTRUCTURE AND PROJECT FINANCE
WASHINGTON'S CLEAN AIR RULE PROVIDES AN ASPECT OF UNCERTAINTY
In September 2016, the Washington State Department of Ecology adopted the Clean Air Rule (CAR) which establishes emission
standards for green house gas (GHG) emissions from certain sources in the state, including power plants and natural gas distributors.
The plan calls for a reduction of GHG emissions over time, at a pace of 1.7% annually until 2035; however, the base level has not been
set by the Department of Ecology.
Exactly how, and at what cost, the rule might affect Avista's power plant generation and natural gas distribution is currently unclear.
Under the rule, Avista can comply by simply reducing emissions or providing Emission Reduction Units (ERUs) - a cap and trade type
mechanism within Washington state borders, which has yet to be administered.
We view the ability to reduce emissions from owned generation as more feasible than from natural gas deliveries - which are primarily
based on customer needs and generally outside the control of the company - since the company only acts as a conduit for natural gas
deliveries. Therefore, if Avista is held financially accountable for the emissions of roughly 117 Bcf of gas deliveries per year, rates and
customer bills could rise with no added benefit of service - a credit negative.
The first compliance period ranges from 2017 to 2020, giving Avista time to incorporate a compliance strategy. We note that several
parties, including Avista, filed a joint action in the US District Court for the Eastern District of Washington challenging the CAR; thus, a
prolonged litigation period will likely ensue.
Liquidity Analysis
We expect Avista to maintain adequate liquidity over the next 12-18 months.
Avista's external liquidity source consists of a $400 million senior secured revolving credit facility, which expires in April 2021. As of 31
March 2017, there were $147 million of cash borrowings, leaving $253 million available under the line of credit. Since Avista currently
has unsecured investment grade ratings from two nationally recognized rating agencies, the company has the option to request the
banks to relinquish the existing First Mortgage Bond collateral position, but it has chosen not to do so for economic reasons. Despite
the collateral staying in place at Avista's discretion, the secured nature of the credit facilities somewhat constrains Avista's liquidity
flexibility, in our opinion, since the typical investment grade issuer (having an unsecured facility) can use collateral as an option to
improve bank credit access during periods of unforeseen liquidity stress.
Avista was in compliance with the facility’s sole covenant of less than 65% capitalization, with a ratio of 52.2% as of 31 March 2017.
We note that the company has no material adverse change language beyond the close of the facility - a credit positive.
AEL&P has a $25 million line of credit which expires in November 2019 and requires a consolidated debt to capitalization covenant of
67.5%. As of 31 March 2017, there were no borrowings or letters of credit outstanding under the facility and AEL&P was in compliance
with its covenant, with a ratio of 54.6%.
Avista's next material debt maturities occur in May and June 2018, when $7 million and an aggregate of around $265 million of senior
debt is due, respectively.
Profile
Avista Corporation (Avista, Baa1 Stable) is primarily a regulated electric and gas utility servicing around 375,000 electric and 335,000
gas customers in Washington, Idaho and Oregon. Avista also owns Alaska Energy and Resources Company (AERC; not rated), parent of
Alaska Electric Light and Power Company (AEL&P; Baa3) which serves around 17,000 electric customers in Juneau, Alaska.
Avista's utility operations are primarily regulated by the Washington Utilities and Transportation Commission (WUTC), Idaho Public
Utilities Commission (IPUC) and the Oregon Public Utility Commission (OPUC). AEL&P is under the purview of the Regulatory
Commission of Alaska (RCA).
4 27 July 2017 AVISTA CORP.: A Vertically Integrated Electric and Gas Utility
Staff_PR_075 Attachment A2 Page 4 of 6
MOODY'S INVESTORS SERVICE INFRASTRUCTURE AND PROJECT FINANCE
Rating Methodology and Scorecard Factors
Exhibit 3
Rating Factors
Avista Corp.
Regulated Electric and Gas Utilities Industry Grid [1][2]
Factor 1 : Regulatory Framework (25%)Measure Score Measure Score
a) Legislative and Judicial Underpinnings of the Regulatory Framework A A A A
b) Consistency and Predictability of Regulation Baa Baa Baa Baa
Factor 2 : Ability to Recover Costs and Earn Returns (25%)
a) Timeliness of Recovery of Operating and Capital Costs Baa Baa Baa Baa
b) Sufficiency of Rates and Returns Baa Baa Baa Baa
Factor 3 : Diversification (10%)
a) Market Position Baa Baa Baa Baa
b) Generation and Fuel Diversity A A A A
Factor 4 : Financial Strength (40%)
a) CFO pre-WC + Interest / Interest (3 Year Avg)5.6x A 4.7x - 5.1x A
b) CFO pre-WC / Debt (3 Year Avg)20.9%Baa 16% - 19%Baa
c) CFO pre-WC – Dividends / Debt (3 Year Avg)16.3%Baa 11% - 14%Baa
d) Debt / Capitalization (3 Year Avg)43.7%A 43% - 45% A
Rating:
Grid-Indicated Rating Before Notching Adjustment Baa1 Baa1
HoldCo Structural Subordination Notching 0 0 0
a) Indicated Rating from Grid Baa1 Baa1
b) Actual Rating Assigned (P)Baa1 (P)Baa1
Moody's 12-18 Month Forward
View
As of Date Published [3]
Current
LTM 3/31/2017
[1] All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations.
[2] As of 3/31/2017.
[3] This represents Moody's forward view; not the view of the issuer; and unless noted in the text, does not incorporate significant acquisitions and divestitures.
Source: Moody’s Financial Metrics™
Ratings
Exhibit 4
Category Moody's Rating
AVISTA CORP.
Outlook Stable
Issuer Rating Baa1
First Mortgage Bonds A2
Senior Secured A2
Senior Unsecured MTN (P)Baa1
ALASKA ELECTRIC LIGHT AND POWER
COMPANY(AELP)
Outlook Stable
Issuer Rating Baa3
AVISTA CORP. CAPITAL II
Outlook Stable
BACKED Pref. Stock Baa2
Source: Moody's Investors Service
5 27 July 2017 AVISTA CORP.: A Vertically Integrated Electric and Gas Utility
Staff_PR_075 Attachment A2 Page 5 of 6
MOODY'S INVESTORS SERVICE INFRASTRUCTURE AND PROJECT FINANCE
© 2017 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT
RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE
RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY
MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS
DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S
OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE
MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S
PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT
PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE
SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION
AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR
PURCHASE, HOLDING, OR SALE.
MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR
RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT
YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW,
AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED
OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY
PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.
All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well
as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it
uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However,
MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s publications.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any
indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any
such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or
damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a
particular credit rating assigned by MOODY’S.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory
losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the
avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents,
representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.
NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH
RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.
Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including
corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating,
agreed to pay to Moody’s Investors Service, Inc. for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain
policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and
rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at
www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”
Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors
Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended
to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you
represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or
indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as
to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be reckless
and inappropriate for retail investors to use MOODY’S credit ratings or publications when making an investment decision. If in doubt you should contact your financial or other
professional adviser.
Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s
Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally
Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an
entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered
with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.
MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred
stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for appraisal and rating services rendered by it fees
ranging from JPY200,000 to approximately JPY350,000,000.
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.
REPORT NUMBER 1083843
6 27 July 2017 AVISTA CORP.: A Vertically Integrated Electric and Gas Utility
Staff_PR_075 Attachment A2 Page 6 of 6