20060103Decision memo.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER KJELLAND ER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:TOM MCKEOWN AND TERRI CARLOCK
DATE:DECEMBER 28, 2005
RE:IN THE MATTER OF A VISTA CORPORATION'S APPLICATION FOR
AUTHORITY TO ISSUE OF UP TO 7,000 000 SHARES OF AUTHORIZED
BUT UNISSSUED COMMON STOCK; CASE NO. A VU-05-
On December 7 2005 , Avista Corporation (A vista) applied for authority to offer, issue and
sell up to 7 000 000 shares of authorized but unissued Common Stock, without par value
Common Stock") under both the Applicant's Periodic Offering Program (2 000 000) and its
Long- Term Incentive Plan (5 000 000). 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 discharge or
refunding of its obligations, (d) the reimbursement of moneys actually expended from income or
from the treasury of Avista to the extent permitted, or (e) for other purposes permitted by law.
Avista proposes that the 2 000 000 Common Stock issued and sold under the Periodic
Offering Program will be subject to the following pricing limitations: the price received by Avista
before agent commission, will not be less than $0.25 below the last price at which A vista
Common Stock was reported in the record of composite quotations published in the Wall Street
Journal on the trading day immediately preceding the day for the fixing of such price, and will also
not be less than 100% of the book value per share of A vista s Common Stock as of the last day of
the most recently ended calendar year.
Avista proposes to issue up to 5 000 000 shares of authorized but unissued Common Stock
under its Long-Term Incentive Plan ("L TIP"). A vista has issued awards under the L TIP and is
currently using open market purchases to fulfill its obligations under the LTIP. Avista would also
like the flexibility to issue authorized but unissued shares of Common Stock to more effectively
DECISION MEMORANDUM DECEMBER 28, 2005
improve the common equity ratio of its capital structure and reduce costs associated with issuing
stock through underwritings.
STAFF RECOMMENDATION
The proposed methods of Common Stock issuance provides an opportunity for A vista to
reduce underwriting costs and provides flexibility in meeting its Long Term Incentive Plan
commitments. Staff recommends approval of the requested Common Stock issuance authority.
However, Staff recommends that A vista be required to file a status report with the Commission
reflecting pertinent quarterly financial information to include the following: (a) Debt to Equity
Ratio, (b) Enterprise Value, (c) Net Income Available to Common Stock, and (d) Common Shares
Outstanding. Staff proposes to work on an acceptable format with A vista to meet these
recommended filings.
COMMISSION DECISION
Does the Commission accept Staffs recommendations to:
1. Approve A vista s request to issue up to 2 000 000 shares of authorized but unissued
Common Stock, without par value, under a periodic offering program.
2. Approve Avista s request to issue up to 5 000 000 shares of authorized but unissued
Common Stock under its Long Term Incentive Plan.
3. Approve Staff s recommended additional filing requirements and for Staff to work with
A vista to structure the format.
Tom McKeown
i:udmemos/avuuO5.2 dm
DECISION MEMORANDUM DECEMBER 28 , 2005