20051014Decision memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
CO MMISSI 0 NER HANSEN
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:TERRI CARLOCK
DATE:OCTOBER 14, 2005
RE:IN THE MATER OF A VISTA CORPORATION'S APPLICATION FOR
AUTHORITY TO ISSUE $100 000 000 OF DEBT; CASE NO. AVU-05-
On September 21 , 2005, Avista Corporation (Avista) applied for authority to offer, issue
and sale up to and including $100 000 000 of secured or unsecured, fixed or floating rate bonds
notes or other form of indebtedness. The proceeds will be used for the following purposes:
(a) acquisition of property, or the construction, completion, extension, or improvement of
facilities, (b) the improvement or maintenance of service, (c) the issuance of stock dividends
(d) the discharge or refunding of its obligations, or ( e) the discharge or reimbursement of
treasury for expenditures permitted by law. The expected use is more specifically to refinance
$50 million of debt maturities due over the 12-month period beginning November 2005 and
$56 million associated with the Rathdrum generating facility lease.
The interest rate, depending on market conditions at the time of issuance, is expected not
to exceed 7%. The term of the security(ies) is expected to be 10 to 40 years. Avista also
requests authority to refund, extend, renew or replace the proposed security(ies) to allow the
greatest flexibility.
STAFF RECOMMENDATION
The proposed issuance and redemptions provide an opportunity for A vista to reduce
borrowing costs and to increase flexibility with future refinance options. Staff recommends
approval of the requested debt authority. However, the possible purpose for use of the proceeds
is too broad. The expected use to refund $50 million debt on the 12-month period beginning
DECISION MEMORANDUM - 1 -OCTOBER 14, 2005
November 2005 and the funding of costs associated with the Rathdrum generation facility are
reasonable. This longer-term authority should not be granted to fund the issuance of stock
dividends or annual maintenance expenses.
Staff recommends A vista be required to file an annual status report with the Commission
showing all actual and proposed activity with this authority and to meet annually with Staff to
discuss A vista s current financing status. Staff also recommends that A vista be required to file
term sheets prior to refunding, extending, renewing or replacing the proposed security(ies) as a
condition of Staff s recommendation that the authority under this initial approval be continuing.
A vista will file information pertaining to the types of issuances to be made and the
expected terms as soon as practical prior to the issue, but no later than the date of issuance.
A vista will file all final documents from the issuances with the Commission. A vista
acknowledges that for ratemaking purposes, that the determination of capital costs, capital
structure and any associated ratemaking decision is reserved for the appropriate proceeding.
COMMISSION DECISION
Does the Commission accept Staff s recommendations to:
1) Approve Avista s request for authority to issue and sell up to and including
$100 000 000 debt.
2) Approve Staffs recommended filing requirements.
3) Approve Avista s request for the Commission s authority under this Order
continue to be in force to allow refunding, extending, renewing or replacing the
proposed security(ies).
Terri Carlock
i :udmemos/avuu05 .dmI 0.2005
DECISION MEMORANDUM - 2 -OCTOBER 14, 2005