20180816Cash Management Policy Revision.pdf

RECEIVED
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August 13, ?0i8
Diane Hanian
Idaho Public Utilities Commission
472 W " Washinglon Street
Boiss, ID 83702
RE: Cash Management Policy Rcvision
'l'he Clash Management Cuidelines and Procedures document has bcen updated to ret'lect
Company's current borrowing tcmns wirh subsidiaries and other procedural changes.
Attached is a copy of the Cash Management Guidelines and Procedures document that will not
become eltective until after this Commission and IrERC have had an opportunity to review.
Please contact Karrie Wilson at [phone] if you have any questions.
Patrice K. Gorton
Director of Finance and Assistant 'l'reasurer
Pagc I ofl
Sincerelv.M{M
August 2018
Avista Corp.
Cash Management Guidelines and Procedures
In order to efficiently manage cash at the corporate and subsidiary levels, minimize borrowing costs and
maximize investment returns, the following procedures should be followed regarding cash management
activity between Avista Corp, Avista Capital and Avista Capital Subsidiaries (AERC and its subsidiaries
are excluded from these guidelines.)I. Investment/Borrowing Policies
All excess subsidiary company cash will be managed at the Avista Corp. level. Cash will be
transferred to the subsidiaries through Avista Capital to cover payables according to the guidelines set
below. (Note: A Master Promissory Note in effect for any Subsidiary will supersede these guidelines.)
l. Avista Capital may maintain a money market account with a maximum balance of $1,000,000, unless
known payments are occurring within 30 days. This account may be used to fund subsidiary payables.
Avista Capital cash balances over $1,000,000 and up to the outstanding loan balance will be
transferred to Avista Corp as a payment against the outstanding borrowings on the loan between Avista
Corp and Avista Capital.
2, Avista Capital may borrow from Avista Corp., up to $40MM, to cover subsidiary company cash needs
in accordance with board-approved limits. Avista Capital may loan excess funds to Avista Corp upon
receipt ofappropriate approvals. Regulatory restrictions should be considered prior to transferring
funds between the utility and non-regulated subsidiaries. The current guidance in Washington is WAC
480-100-244 and in Oregon it is Order No. 07-297.
3. Unless specifically stated in a master promissory note, all loans between companies are unsecured.
4. Subsidiaries with cash deficits may borrow from Avista Capital. Borrowings will be in accordance
with each company's board-approved limits. Subsidiaries will repay or loan excess funds to Avista
Capital.
5. Investment/Borrowing Rates Between Avista Corp. and Avista Capital:
a) Upon receiving appropriate approvals, excess Avista Capital cash may be invested with (loaned
to) Avista Corp. at a rate equal to Avista Corp.'s avoided short-term borrowing cost, which is the
short-term borrowing rate related to Avista Corp.'s credit facility (cunently estimated at the one-
month LIBOR plus 77.5 basis points). The rate will be reset monthly with the LIBOR rate in
effect on the second business day ofeach month.
At times Avista Corp may have no outstanding borrowings under the credit facility. If there are
no outstanding borrowings under the credit facility, excess cash should be utilized to pay down
borrowings on other short-term borrowing instruments (if any) and the borrowing rate should be
adjusted to the avoided short-term borrowing rate applicable to the bonowings that were re-paid.
At times, Avista Corp may have no outstanding cash borrowings on the credit facility or other
short-term borrowing facilities. Ifthere are no cash borrowings under any facility, excess cash
should be invested until the funds can be utilized.
b) Avista Capital may borrow from Avista Corp. up to $40MM, subject to board-approved limits, at
a rate equal to at least the Altemate Base Rate (as defined in the credit facility), currently
estimated at the Prime rate. This rate will be reset at such time as the Agent bank on the Avista
Corp. credit agreement changes the Prime rate or the margin is changed per the credit facility
pricing grid.
6. Investment/Borrowing Rates Between Avista Capital and Subsidiary Companies:
Subsidiaries of Avista Capital which are wholly-owned and are not expected to seek outside investors
within the next two years will not be charged interest on borrowings or receive interest on invested
funds with Avista Capital. The following interest rate guidelines apply to all other subsidiaries:
a) Subsidiary companies will borrow from Avista Capital at arate equal to at least the Alternate Base
Rate (as defined in the credit facility), currently estimated at the Prime rate. This rate will be
reset at such time as the Prime rate is changed by the Agent bank on the Avista Corp. credit
agreement changes the Prime rate or the margin is changed per the credit facility pricing grid.
b) Subsidiary company cash invested with (loaned to) Avista Capital will be at a rate equal to Avista
Corp.'s avoided short-term borrowing cost, which is the short-term borrowing rate related to
Avista Corp.'s credit facility (currently estimated at the one-month LIBOR plus 77.5 basis
points). The rate will be reset monthly with the LIBOR rate in effect on the second business day
of each month.
7, The Avista Corp. subsidiary accountant will maintain daily interest schedules of all borrowings and
repayments between all subsidiary companies. Documentation will include the date and amount of the
borrowing or repayment, the maturity date, if any, the applicable interest rate, and daily balances of all
outstanding loans.
II. Subsidiary Cash Management Guidelines
l. Cash Balances
Subsidiary companies will keep a maximum of $50,000 cash balance per book in their checking
accounts at any time. Accurate up-to-date balances must be maintained and deposit information
should be updated when funds are received. This information is available currently via Wells Fargo
Commercial Electronic Office reports or through the Cash Manager for Avista Corp. Excess balances
resulting from large deposits should be transferred to Avista Capital for investment or to pay down
loan balances. Transfers of excess cash to Avista Capital may be incorporated in the weekly funding
request for payables. Please contact the Avista Corp. Subsidiary Accountant for details.
2. Funding Requests from Avista Capital
Funding requests for ACH, in-bank transfers or wires must be sent to Accounts Payable and the
Treasury team by 9:00 a.m. for that day's funding for wires and next day for ACH. For cost
minimization, ACH or in-bank transfers are preferred. Vouchers, wires and ACH must be approved by
an authorized approver for funding from Avista Capital. . Funds will not be transferred without proper
signatures.
3. Emergency Funding
Emergency funding is generally initiated in the form of a wire. If a request is needed after 9:00 am but
before 3:00 pm, this would be considered emergency and a phone call is necessary to Accounts
Payable to request the funding. In addition an email with appropriate approvals should be sent to
Accounts Payable and Treasury. Same day transfer of funds over $50,000 may be accommodated but
cannot be guaranteed. Contact should be made with the Subsidiary Accountant or Cash Manager for
availability of same day funds.
All funding requests from subsidiaries, whose accounting function is not done at the corporate offices, must
be approved by an authorized person at the subsidiary.
Please note: For funding requests over $500K please notifr the Avista Corp. cash manager ofthe due
date as far in advance as possible.
4. Intercompanypayments
Intercompany payments between Avista Corp, Avista Capital and all Subsidiaries should be made
electronically. (Electronically may encompass transfers between accounts when the accounts are at the
same banking institution.) This includes payments for work orders, payroll and taxes.
These cash management guidelines and procedures will be reviewed at least annually, and at the time the
Avista Corp. bank credit agreement is renewed.
Approved
By:
CFO, Treasurer - Avista Corp.