HomeMy WebLinkAbout20170609Thies Exhibit 2.pdfDAVID J. MEYER
VICE PRESIDENT AND CHIEF COUNSEL FOR
REGULATORY & GOVERNMENTAL AFFAIRS
AVISTA CORPORATION
P.O. BOX 3727
1411 EAST MISSION AVENUE
SPOKANE, WASHINGTON 99220-3727
TELEPHONE: (509) 495-4316
FACSIMILE: (509) 495-8851
DAVID.MEYER@AVISTACORP.COM
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION ) CASE NO. AVU-E-17-01
OF AVISTA CORPORATION FOR THE ) CASE NO. AVU-G-17-01
AUTHORITY TO INCREASE ITS RATES )
AND CHARGES FOR ELECTRIC AND )
NATURAL GAS SERVICE TO ELECTRIC ) EXHIBIT NO. 2
AND NATURAL GAS CUSTOMERS IN THE )
STATE OF IDAHO ) MARK T. THIES
FOR AVISTA CORPORATION
(ELECTRIC AND NATURAL GAS)
Standard & Poor's Moody's
Last Upgraded
Credit Outlook
A+A1
A A2 First Mortgage Bonds
Secured Medium-Term Notes
A-First Mortgage Bonds A3
Secured Medium-Term Notes
BBB+Baa1 Avista Corp./Issuer rating
BBB Avista Corp./Corporate credit rating Baa2 Trust-Originated Preferred Securities
BBB-Baa3
INVESTMENT GRADE
BB+Trust-Originated Preferred Securities Ba1
BB Ba2
BB-Ba3
(1)
(2)The Company received upgrades from Moody's Investors Service in January 2014. The upgrades were one level for First Mortgage Bonds
and the Issuer Rating and two levels for Trust-Originated Preferred Securities.
Stable Stable
AVISTA CORPORATION
Long-term Securities Credit Ratings
March/August 2011(1)January 2014 (2)
The Company received an upgrade from Standard & Poor's to its Corporate credit rating in March 2011 and to its First Mortgage Bonds in
August 2011.
Exhibit No. 2
Case Nos. AVU-E-17-01 and AVU-G-17-01
M. Thies, Avista
Schedule 1, Page 1 of 5
Proposed Component
Structure Cost Cost
Total Debt 50.0%5.72%2.86%
Common Equity 50.0%9.90%(1)4.95%
Total 100.0%7.81%
Percent of Component
Total Capital Cost Cost
Total Debt 50.1%5.75%2.88%
Common Equity 49.9%9.50%(2)4.74%
TOTAL 100.00%7.62%
(1)Proposed return on common equity
(2)Last approved ROE as of 1/1/2017.
AVISTA CORPORATION
Embedded Cost of Capital
December 31, 2016
AVISTA CORPORATION
Proposed Cost of Capital
Exhibit No. 2
Case Nos. AVU-E-17-01 and AVU-G-17-01
M. Thies, Avista
Schedule 1, Page 2 of 5
Line Coupon Maturity Settlement Principal Issuance Settled IR Hedges Discount Loss/Reacq Net Yield to Outstanding
No.Description Rate Date Date Amount Costs Loss/(Gain)(Premium)Expenses Proceeds Maturity 12/31/2017
(a)(b)( c)(d)(e)(f)(g)(g)(h)(i)(j)(k)
1 FMBS - SERIES A 7.530%5/5/2023 5/6/1993 5,500,000 42,712 - - 963,011 4,494,277 9.359%5,500,000
2 FMBS - SERIES A 7.540%5/5/2023 5/7/1993 1,000,000 7,766 - - 175,412 816,822 9.375%1,000,000
3 FMBS - SERIES A 7.390%5/11/2018 5/11/1993 7,000,000 54,364 - - 1,227,883 5,717,753 9.287%7,000,000
4 FMBS - SERIES A 7.450%6/11/2018 6/9/1993 15,500,000 120,377 - 50,220 2,140,440 13,188,963 8.953%15,500,000
5 FMBS - SERIES A 7.180%8/11/2023 8/12/1993 7,000,000 54,364 - - - 6,945,636 7.244%7,000,000
6 ADVANCE ASSOCIAT 1 2.412%7 6/1/2037 6/3/1997 40,000,000 1,296,086 - - (1,769,125) 40,473,039 2.366%40,000,000
7 FMBS - SERIES 6.370%6/19/2028 6/19/1998 25,000,000 158,304 - - 188,649 24,653,047 6.475%25,000,000
8 5.45% SERIES 5.450%12/1/2019 11/18/2004 90,000,000 1,192,681 - 239,400 - 88,567,919 5.608%90,000,000
9 FMBS - 6.25% 6.250%12/1/2035 11/17/2005 150,000,000 1,812,935 (4,445,000) 367,500 - 152,264,565 6.139%150,000,000
10 FMBS - 5.70% 5.700%7/1/2037 12/15/2006 150,000,000 4,702,304 3,738,000 222,000 - 141,337,696 6.120%150,000,000
11 5.95% SERIES 5.950%6/1/2018 4/3/2008 250,000,000 2,246,419 16,395,000 835,000 - 230,523,581 7.034%250,000,000
12 5.125% SERIES 5.125%4/1/2022 9/22/2009 250,000,000 2,284,788 (10,776,222) 575,000 2,875,817 255,040,618 4.907%250,000,000
13 3.89% SERIES 3.890%12/20/2020 12/20/2010 52,000,000 385,129 - - 6,273,664 45,341,207 5.578%52,000,000
14 5.55% SERIES 5.550%12/20/2040 12/20/2010 35,000,000 258,834 - - 5,263,822 29,477,345 6.788%35,000,000
15 4.45% SERIES 4.450%12/14/2041 12/14/2011 85,000,000 692,833 10,557,000 - - 73,750,167 5.340%85,000,000
16 4.23% SERIES 4.230%11/29/2047 11/30/2012 80,000,000 730,833 18,546,870 - 105,020 60,617,277 5.868%80,000,000
17 4.11% SERIES 4.110%12/1/2044 12/18/2014 60,000,000 428,205 (5,429,000) - - 65,000,795 3.650%60,000,000
18 4.37% SERIES 4.370%12/1/2045 12/16/2015 100,000,000 590,761 9,383,299 - - 90,025,940 5.017%100,000,000
19 3.54% SERIES 3.540%12/1/2051 12/15/2016 175,000,000 4 1,001,382 3 53,966,197 120,032,418 5.596%175,000,000
20 Forecasted issuance 4.554%8 9/30/2047 9/30/2017 80,000,000 2 800,000 3 79,199,997 4.616%80,000,000
21 1,658,000,000
22
23 Repurchase 5 7.74%12/31/2017 6/30/2006 6,875,000 483,582 6,391,418 8.721%
24 Repurchase 5 5.72%3/1/2034 12/30/2009 17,000,000 1,916,297 15,083,703 6.661%
25 Repurchase 5 6.55%10/1/2032 12/31/2008 66,700,000 3,709,174 62,990,826 7.034%
26 IDAHO TOTAL DEBT OUTSTANDING AND COST OF DEBT AT December 31, 2017 1,658,000,000
27
28 Adjusted Weighted Average Cost of Debt 5.716%
29
30
31 1 Average Monthly Average Rate over a twelve month period
32 2 Forecasted issuance pursuant to the Company's internal forecast
33 3 The Company forecast issuance expenses of 1% based on historical costs
34 4 2016 debt issued in Dec 2016
35 5 Coupon Rate at the time of repurchase
36 6 Calculated using the Internal Rate of Return method
37 7 Forecasted variable interest rate, see p. 4 of this Exhibit
38 8 Forecasted Rates are based on forward rates from Thomson Reuters analysis tools plus an estimated credit spread and the estimated impact of interest rate swaps
AVISTA CORPORATION
Cost of Long-Term Debt Detail - Idaho
December 31, 2017
Exhibit No. 2
Case Nos. AVU-E-17-01 and AVU-G-17-01
M. Thies, Avista
Schedule 1, Page 3 of 5
1 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Avg of
2 (a)(b)(b)( c)(d)(e)(f)(g)(h)(i)(j)(k)(l)(m)(o)
3 Trust Preferred*$40,000,000 $40,000,000 $40,000,000 $40,000,000 $40,000,000 $40,000,000 $40,000,000 $40,000,000 $40,000,000 $40,000,000 $40,000,000 $40,000,000 $40,000,000 40,000,000$
4
5 Number of Days in Month 30 31 28 31 30 31 30 31 31 30 31 30 31
6 Forecasted Rates Trust Preferred**1.8057%1.8057%1.8057%2.0000%2.2200%2.2200%2.2200%2.3200%2.3200%2.3200%2.5000%2.5000%2.5000%
7 Trust Preferred Interest Expense 60,189$ 62,195$ 56,176$ 68,889$ 74,000$ 76,467$ 74,000$ 79,911$ 79,911$ 77,333$ 86,111$ 83,333$ 86,111$ 964,627$
8
9
10 Coupon Maturity Settlement Principal Issuance Loss/Reacq Net Yield to Outstanding Effective
11 Description Rate Date Date Amount Costs Expenses Proceeds Maturity 12/31/2017 Cost
12 (a)(b)( c)(d)(e)(f)(g)(h)(i)(j)(k)
13 Trust Preferred 2.412%6/1/2037 6/3/1997 40,000,000$ 1,296,086$ (1,769,125)$ 40,473,039$ 2.366%40,000,000$ 946,269$
14
15 *Original issue principal amount was $50 million. The Company repurchased $10 million of the securities outstanding.
16 **Forecasted Rates are based on forward rates from Thomson Reuters analysis tools plus the 87.5 basis points pursuant to the debt agreement.
AVISTA CORPORATION
Cost of Long-Term Variable Rate Debt Detail
December 31, 2017
Exhibit No. 2
Case Nos. AVU-E-17-01 and AVU-G-17-01
M. Thies, Avista
Schedule 1, Page 4 of 5
10-K
12/31/2016
10-K
cap structure
%
12/31/2016 Adjustments
Adjusted
Regulatory
Balance
12/31/2016
Adjusted
cap
structure %
12/31/2016
2017
Activity
Adjusted
Regulatory
Balance
12/31/2017
Adjusted
cap
structure %
12/31/2017
Short-term borrowings 120,000 (120,000) a -
Long-term debt 1,678,717$ (140,717)$ b 1,538,000$ 80,000$ 1,618,000$
Current portion of long-term debt and capital leases 3,287 (3,287) c - -
Debt to affiliated trust 51,547 (11,547) d 40,000 40,000
Total long-term debt 1,733,551$ 52.9%(155,551)$ 1,578,000$ 50.1%80,000$ 1,658,000$ 51.3%
Total Avista Corporation stockholders' equity 1,648,727$ 47.1%(77,796)$ e 1,570,931$ 49.9%-$ 1,570,931$ 48.7%
a
b
Long Term Debt Adjustments (dollars in thousands):
AEL&P Long-Term Debt (75,000)$
AERC Long-Term Debt (15,000)$
Capital Lease Obligations (65,435)$
Unamortized Debt Discounts 792$
Unamortized long-term debt issuance costs 10,639$
Unsecured short-term loan to be refinanced on a long-term basis -$
Committed line of credit to be refinanced on a long-term basis -$
Current portion of long-term debt and capital leases 3,287$ Total (140,717)$
c
d
e
Equity Adjustments (dollars in thousands):12/31/2016
Capital Stock Expense 15,757$
Accumulated other comprehensive loss 7,568$
Investment in AERC (101,121)$
Total (77,796)$
f
g
h Forecasted Equity Activity (dollars in thousands):12/31/2017
Change in equity in AERC
Equity Activity CONFIDENTIAL
Total
These adjustments are made to reflect our actual principal amount outstanding. We exclude amounts related to unamortized debt discount, and unamortized debt issuance costs and short-term debt
reclassified as long-term debt. The amounts related to settled interest rate swaps, unamortized debt discount, and unamortized debt issuance costs are included as a cost of debt. Additionally,
amounts related to capital leases and subsidiary long-term debt are excluded from Avista Utilities long-term debt.
Current portion of capital leases are inlcuded as debt in the 10-K but consistent with past practice we are not included for regulatory cap structure
We hold $11.547 million of these securities. The $40 million adjusted balance relates to the current outstanding balance to third party investors.
The numbers provided in the 10-K do not include capital stock expense; in order to recover the costs incurred for issuing equity and accumulated other comprehensive loss; in order to reflect our
actual equity balance. The investment in AERC is included as equity in the 10-K and is adjusted out for regulatory cap structure
Forecasted issuance of $80 million in 2017.
Forecasted issuance of $250 million and $130 million and a maturity of $272.5 million in 2018.
Short-term borrowings are inlcuded as debt in the 10-K, but consistent with past practice are not included for regulatory cap structure
AVISTA CORPORATION
Capital Structure Reconciliation
(dollars in thousands)
Long-term Debt
Equity
Exhibit No. 2
Case Nos. AVU-E-17-01 and AVU-G-17-01
M. Thies, Avista
Schedule 1, Page 5 of 5
Exhibit No. 2
Case No. AVU-E-17-01
M. Thies, Avista
Schedule 2, Page 1 of 1
CONFIDENTIAL subject to Attorney’s Certificate of Confidentiality
Company’s planned capital expenditures and long-term debt issuances by year
Pages 1 of 1
Exhibit No. 2
Case No. AVU-E-17-01
M. Thies, Avista
Schedule 3, Page 1 of 9
CONFIDENTIAL subject to Attorney’s Certificate of Confidentiality
Interest Rate Risk Management Plan
Pages 1 of 9
Exhibit No. 2
Case Nos. AVU-E-17-01 and AVU-G-17-01
M. Thies, Avista
Schedule 4, Page 1 of 1
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Requested Weighted Cost of Equity
Source: SNL Financial, Pending Rate Cases filed May1, 2016 through April 30, 2017.
Avista Proposed
4.95%