20030606_502.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER KJELLAND ER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
WORKING FILE
FROM:TERRI CARLOCK
DATE:JUNE 4, 2003
RE:A VISTA'S REQUEST FOR AUTHORITY TO BORROW UP TO
$150 MILLION IN DEBT INSTRUMENTS; CASE NO. A VU-03-
Avista Corporation (Avista) filed an Application on May 15, 2003 requesting authority to
offer, issue and sale up to $150 000 000 of secured or unsecured, fixed or floating rate bonds
notes and other indebtedness. This request also includes any assumption of any obligation or
liability as guarantor, indorser, surety or otherwise in respect to the securities of any other
person, firm, corporation, or affiliate of A vista, and any refunding, extension, renewal or
replacement of any of the foregoing securities.
The proceeds will be used for one or more of the following purposes: (a) The acquisition
of property, or the construction, completion, extension or improvement of its facilities; (b) the
improvement or maintenance of service; (c) the issuance of stock dividends; (d) the discharge or
refunding of its obligations; (e) the reimbursement of moneys actually expended from income or
from the treasury of A vista; or (e) for other purposes permitted by law. Specifically, the capital
expenditure program requires a combination of internally generated cash and external financing.
In addition, $71 250 000 of debt maturities in the next 9 months beginning in March 2003 must
be refinanced. A vista anticipates using the proceeds from the issuance of the Securities to
refinance debt maturities and to repay funds borrowed under its corporate credit facility. Avista' s
capital expenditure program is initially funded under its corporate credit facility. Capital
expenditures are expected to be $99 000 000 and $100 000 000 in 2003 and 2004, respectively.
While no specific transactions are presently pending or contemplated under the proposed
authority, Avista will only enter into transactions where the fees, interest rates and expenses
DECISION MEMORANDUM - 1 -JUNE 4, 2003
charged or incurred in connection with the transactions , and any refunding, extensions, renewals
or replacements thereof, are competitive with then-existing market prices for similar
transactions. The first issuance of debt securities under the requested authority is anticipated
before the end of 2003 and could be in the range of $45-$50 000 000 with a term of 5-30 years
and the interest rate could be in the range of 4.5% to 8%, all depending on and subject to then-
existing market prices for similar transactions.
In support of the proposed issuance of the Securities, Applicant states that it is amenable
to the Commission s prospective limitation on certain existing debt authority to that amount
already issued Order No. 27153, Case No. WWP-97-, which currently authorizes Avista to
issue $250 000 000 in principal amount of unsecured debt securities (Series C Unsecured
Medium Term Notes). To date, Avista has issued only $109 000 000 of unsecured debt under
this authority, leaving a balance of$141 000 000 remaining unissued. If necessary Avista is
willing to exchange the unissued balance of debt authority in Order No. 27153, Case No.
WWP-97-1 for new authorization for Avista to issue up to $150 000, 000 in aggregate
principal amount of the Securities as described in this Application.
STAFF RECOMMENDATION
Staff recommends approval of the requested debt authority up to $150 000 000. Staff
also recommends that the remaining authority of$141 000 000 under Order No. 27153, Case No.
WWP-97-1 be exchanged for the requested authorityof$150 000 000.
COMMISSION DECISION
Should the requested authority be approved?
Should the remaining authority of$141 000 000 under Order No. 27153, Case No.
WWP-97-1 be exchanged for the requested authority of$150 000 000?
Terri Carlock
avue03.3 5.4.
DECISION MEMORANDUM - 2 -JUNE 4, 2003