HomeMy WebLinkAbout28312.doc BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
AVISTA CORPORATION FOR AN ORDER AUTHORIZING THE ISSUANCE OF 600,000 SHARES OF PREFERRED STOCK AND COMMON STOCK WHICH MAY BE REQUIRED TO PERMIT THE EXERCISE AND EXCHANGE OF RIGHTS PURSUANT TO A SHAREHOLDERS RIGHTS AGREEMENT )
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CASE NO. AVU-U 00 1
ORDER NO. 28312
On February 15, 2000, Avista Corporation filed an Application with the Idaho Public Utilities Commission for an Order authorizing Avista Corporation to issue up to 600,000 shares of authorized but unissued Serial Preferred Stock, without par value, and shares of authorized but unissued Common Stock, without par value, not to exceed those amounts which may be necessary to permit the exercise and exchange of rights issued to Avista’s common shareholders pursuant to a Shareholders Rights Agreement (“Rights Agreement”) adopted by Avista’s Board of Directors on November 12, 1999.
Having fully considered this Application and the attached exhibits in Case No. AVU U 00 1 and the applicable laws and rules, the Commission grants the Application.
BACKGROUND
Avista Corporation is a Washington corporation qualified to do business within the State of Idaho and is a public utility engaged in the generation, purchase, transmission, distribution and sale of electric energy and the purchase, distribution and sale of natural gas.
On November 12, 1999, Avista adopted a new Shareholder Rights Agreement to replace the previous Rights Agreement which has now expired. Under the new Rights Agreement, Avista will grant one preferred share purchase right (Right) on each outstanding share of Common Stock to holders of Common Stock outstanding on February 15, 2000 or issued thereafter. The description and terms of the preferred share purchase right were set forth in the Rights Agreement, dated November 12, 1999, between Avista and The Bank of New York, as Rights Agent, which was included as an Exhibit to Avista’s Application.
Under the new Rights Agreement, each Right will entitle the registered holder, subject to regulatory approvals and other specified conditions, to purchase one one-hundredth (1/100) of a share of the Avista’s Preferred Stock, without par value, at a purchase price of $70.00.
The Rights will expire on March 31, 2009, unless Avista first redeems or exchanges the Rights. Avista may redeem the Rights, at a redemption price of $0.01 per Right, at any time until any person or group has acquired beneficial ownership of 10% or more of the outstanding shares of Common Stock. Once that occurs, Avista may no longer redeem Rights. If a person or group acquires beneficial ownership of more than 10% but less than 50% of the outstanding shares of Common Stock, Avista may exchange each outstanding Right for one share of Common Stock or cash, securities or other assets having a value equal to the market value of one share of Common Stock. That exchange may be subject to regulatory approvals.
The Rights will become exercisable, as described below, only when a person or group: (1) acquires beneficial ownership of 10% or more of the outstanding shares of Common Stock; or (2) commences a tender or exchange offer which would result in beneficial ownership of 10% or more of the outstanding shares of Common Stock. Until that time, the Rights will be evidenced by, and will trade with, the shares of Common Stock.
However, under no circumstances, will the person or group that acquires ownership, or commences tender or exchange of 10% or more of the outstanding shares of Common Stock be entitled to exercise Rights.
With this exception, each Right will entitle its holder to purchase that number of shares of Common Stock or, at the option of Avista, Preferred Stock, which has a market value at that time of twice the Purchase Price. In the event that Avista consolidates, merges with or into, or sells 50% or more of its assets or earning power to, any person or group, each Right would entitle its holder to purchase the acquiring company's common shares having a market value of twice the Purchase Price.
The Purchase Price, the amount and type of securities covered by each Right and the number of Rights outstanding will be adjusted to prevent dilution: (1) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Preferred Stock; (2) if holders of the Preferred Stock are granted certain rights, options or warrants to subscribe for Preferred Stock or securities convertible into Preferred Stock or equivalent preferred shares at less than the current market price of the Preferred Stock; or (3) upon the distribution to holders of the Preferred Stock of evidences of indebtedness or assets (excluding regular quarterly cash dividends) or of subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustments in the Purchase Price will be made until cumulative adjustments amount to a least 1% of the Purchase Price. Avista will not issue fractional shares of Preferred Stock other than in integral multiples of one ten-thousandth (1/10,000) of a share. Instead, Avista will make an adjustment in cash based on the market price of the Preferred Stock on the last trading date prior to the date of exercise.
Avista will distribute one Right to its shareholders for each share of Common Stock owned of record by them at the close of business on February 15, 2000. Until the earliest of: (1) such time as any person or group acquires beneficial ownership of 10% or more of the outstanding shares of Common Stock, (2) March 31, 2009, or (3) the redemption of the Rights, Avista will issue one Right with each share of Common Stock that is issued after February 15, 2000 so that each outstanding share of Common Stock will have an appurtenant Right. Avista has initially authorized and reserved 600,000 shares of Preferred Stock for issuance upon exercise of the Rights.
The authorized capital stock of Avista presently consists of 210,000,000 shares, consisting of 200,000,000 shares of Common Stock without par value and 10,000,000 shares of Preferred Stock without par value. As of February 1, 2000, there were 35,766,865 shares of Common Stock outstanding and 1,858,210 shares of Preferred Stock outstanding.
Avista may amend the Rights Agreement in any respect until any person or group has acquired beneficial ownership of 10% or more of the outstanding shares of Common Stock. Once that occurs, Avista may amend the Rights Agreement in any manner which will not adversely affect the holders of the Rights in any material respect.
One one-hundredth (1/100) of a share of Preferred Stock is designed, to the extent possible, to be the economic equivalent of one share of Common Stock. Accordingly, each share of Preferred Stock will be entitled to a preferential quarterly dividend payment equal to the greater of: (1) a minimum amount per share to be determined prior to issuance; or (2) an amount equal to 100 times the dividend declared per share of Common Stock. In the event of liquidation, dissolution or winding up, the holders of the Preferred Shares will be entitled to a preferential liquidation payment equal to $100.00 per share plus a premium equal to the excess, if any, of (1) an amount equal to 100 times the aggregate amount, if any, to be distributed per share to the holders of the Common Shares over (2) $100.00, plus an amount equivalent to the accumulated and unpaid dividend thereon, if any, to the date of such liquidation, dissolution or winding up. These Rights are protected by anti-dilution provisions. Preferred Stock purchasable upon exercise of the Rights will not be redeemable, and no sinking fund provisions exist for the Preferred Stock. No fractional shares of Preferred Stock will be issued (other than fractions which are integral multiples of one one-hundredth (1/100) of a share of Preferred Stock, which may, at the election of Applicant, be evidenced by depository receipts), and, in lieu thereof, an adjustment in cash will be made based on the market price of the Preferred Stock.
Avista states that the present distribution of the Rights is not taxable to Avista or its shareholders. Moreover, the Rights are not dilutive, will not affect reported earnings per share, and will not weaken Avista’s financial strength, interfere with its business plans or adversely impact its utility service. Avista will receive no proceeds from the issuance of the Rights.
Avista agreed that any and all costs associated with the preparation and adoption of the Rights Agreement and those costs associated with the issuance of the Preferred Stock and Common Stock in the event the Rights become exercisable should be shareholders costs and considered below the line for ratemaking purposes. In the event the Rights become exercisable and additional securities are issued, any resulting change in Avista’s capital structure should not be considered for ratemaking purposes.
FINDINGS
The Commission has jurisdiction over this Application pursuant to the provisions of Idaho Code § 61-901 et seq., and the Application reasonably conforms to Rules 141 through 150 of the Commission’s Rules of Procedure (IDAPA 31.01.01.141-150). Avista is an electric corporation within the definition of Idaho Code § 61-119, is a gas corporation within the definition of Idaho Code § 61-117, and is a public utility within the definition of Idaho Code § 61-129. The issuance of the Rights and the adoption of the Rights Agreement was authorized by the Board of Directors.
The issuance is for a lawful purpose and are within Avista’s corporate powers. However, this is only a general approval and is not a finding of fact or a conclusion of law that the particular use to which these funds are to be put is approved by this Order. The issuance of an order authorizing the proposed issuance does not constitute agency determination/approval of the type of financing or the related costs for ratemaking purposes. The Commission does not have before it for determination and, therefore, does not determine the effect of issuance on rates to be charged by Avista for electric and gas services to consumers in the state of Idaho.
Based upon the Staff’s recommendation, the Commission further finds that it is reasonable and appropriate that Avista file any amendment of the Rights Agreement and that such amendment be approved by the Commission prior to the effective date of the amendment. The Commission further finds that the proposed transaction is in the public interest and a formal hearing on this matter would serve no public purpose.
All lawful fees have been paid by Applicant as provided by Idaho Code § 61-905.
O R D E R
IT IS THEREFORE ORDERED Avista Corporation be, and the same hereby is, authorized to issue up to 600,000 shares of authorized but unissued Serial Preferred Stock, without par value, and shares of authorized but unissued Common Stock, without par value, not to exceed those amounts necessary to permit the exercise and exchange of Rights issued to Applicant’s common shareholders pursuant to the Rights Agreement.
IT IS FURTHER ORDERED that this authority expires March 31, 2009.
IT IS FURTHER ORDERED that Avista notify the Commission by letter at least seven days (7) before the likely trigger/exercise of the Rights Agreement. If the Rights Agreement is triggered/exercised by immediate purchases with less than the seven-day lead-time, the Applicant will notify the Commission of the trigger/exercise by telephone and FAX to be followed by letter verification. The notice shall include as much information as available to the trigger/exercise situation.
IT IS FUTHER ORDERED that Avista shall file any amendment of the Rights Agreement with the Commission for approval prior to the effectiveness of such amendment.
IT IS FURTHER ORDERED that the foregoing authorization is without prejudice to the regulatory authority of the Commission with respect to rates, utility capital structure, service, accounts, valuation, estimates for determination of cost or any other matter which may come before this Commission pursuant to its jurisdiction and authority as provided by law.
IT IS FURTHER ORDERED that we authorize the issuance and sale of securities that are the subject of this Application, but retain jurisdiction to approve the use of any proceeds that may result from the exchange of such rights.
IT IS FURTHER ORDERED that any and all costs associated with the preparation and adoption of the Rights Agreement and those costs associated with the issuance of the Preferred Stock and Common Stock in the event that the Rights become exercisable shall be shareholder costs and shall be below the line for ratemaking purposes.
IT IS FURTHER ORDERED that approval of this shareholder Rights Agreement is not approval of the capital structure that will result from the Rights' exercise. The Commission will defer until a subsequent proceeding any determination as to what the proper capital structure should be for ratemaking purposes, and in such an instance the Commission may use a hypothetical capital structure for ratemaking purposes or treat the capital structure as though the Rights were never exercised.
IT IS FURTHER ORDERED that quarterly after the Rights become exercisable for shares of Preferred Stock and Common Stock authorized herein, Applicant shall furnish to the Commission a report including the number of shares sold, the average price of such Preferred Stock and of such Common Stock, and the net proceeds from the sale.
IT IS FURTHER ORDERED that nothing in this Order and no provisions of Chapter 9, Title 61, Idaho Code, or any act or deed done or performed in connection therewith shall be construed to obligate the State of Idaho to pay or guarantee in any manner whatsoever any security authorized, issued assumed or guaranteed under the provisions of Chapter 9, Title 61, Idaho Code.
IT IS FURTHER ORDERED that nothing in this Order shall be construed to obligate the state of Idaho to pay or guarantee in any manner whatsoever any security authorized, issued, assumed or guaranteed under the provisions of this Order. See Idaho Code 61-906.
IT IS FURTHER ORDERED that the issuance of this Order does not constitute acceptance of Avistas exhibits or other material accompanying this Application for any purpose other than the issuance of this Order.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally decided by this Order) or in interlocutory Orders previously issued in this Case No. AVU U-00-1 may petition for reconsideration within twenty-one (21) days of the service date of this Order with regard to any matter decided in this Order or in interlocutory Orders previously issued in this Case No. AVU U-00-1. Within seven (7) days after any person has petitioned for reconsideration, any other person may cross-petition for reconsideration. See Idaho Code 61 626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
day of March 2000.
DENNIS S. HANSEN, PRESIDENT
MARSHA H. SMITH, COMMISSIONER
PAUL KJELLANDER, COMMISSIONER
ATTEST:
Myrna J. Walters
Commission Secretary
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A holder for these purposes does not include the person or group that acquires ownership, or commences tender or exchange of 10% or more of the outstanding shares of Common Stock be entitled to exercise Rights.
See Footnote 1.
ORDER NO. 28312 1
Office of the Secretary
Service Date
March 27, 2000