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#Well, thank you <UNK> and good morning everyone.
I'd like to start by welcoming our new Vice President and Controller, Ryan Krasselt.
He's been with the company in various leadership roles for about 14 years, most recently as the Director of Risk Management and Assistant Treasurer.
He is a great addition to a leadership team and we are very excited to have him in this new role.
Turning to financial results, we had a solid third quarter with earnings that were slightly above our expectations.
During the quarter, we experienced higher electric loads as a result of warmer than normal weather.
However, the revenue from higher loads was mostly offset by electric decoupling in Washington and a provision for earnings sharing in Washington and Idaho.
Alaska Electric Light and Power Company had a nice third quarter with results that met our expectations.
We're pleased with how they are performing thus far.
With respect to regulatory matters in October, we reached a settlement agreement with all parties in our Idaho electric and natural gas general rate cases that, if approved, will result in new rates beginning January 1, 2016.
The Idaho agreement includes electric and natural gas decoupling mechanisms, which are similar to the mechanisms in Washington.
I'm pleased with the settlement package in Idaho, which gives us the opportunity to continue to provide the safe, reliable energy our customers expect, while earning a fair return for our shareholders.
We are continuing to work through the general rate case processes in Washington and Oregon.
Turning to strategic developments, I would like to provide you with an update on the LDC opportunity in Juneau.
We've made considerable progress and we're very excited about the possibility of bringing natural gas to Juneau and helping our customers lower their heating bills.
We estimate that the total investment in this project would be about $130 million over 10 years with about half being invested during the first five years.
We expect this project to be slightly dilutive to earnings during the first two years of a construction phase and slightly accretive during the first year of operations.
We expect about $0.05 of earnings per share by the third year of our operations and going from there as we add customers.
We believe that in order for the project to be economical for us and our customers we'll need a combination of low cost debt financing and potential state and local funds to support customer conversion costs.
We expect to seek that debt financing through mechanisms provided by the Alaska Industrial Development and Export Authority or AIDEA, a public corporation of the State of Alaska.
We will also need to file and obtain from the regulatory commission from Alaska, a non-conditional certificate of public convenience and necessity.
If we receive support for these items, we expect to be able to move forward with the project in the first half in 2016.
We should have more details after the first half of the year.
We're also excited about an opportunity for Salix.
In August Salix was notified by the Alaska Industrial Development and Export Authority that it's proposal to build an LNG liquefaction plant to serve the interior energy project, specifically to serve the Fairbanks, Alaska area was selected as one of five finalists.
In a decision by the Alaska Industrial Development Export Authority Board is expected by the end of the year.
I believe we're well-positioned to continue our long-term earnings growth at 4% to 5% with continued rate base growth in addition to these other opportunities that we are pursuing.
Based on the results from the first three quarters and our expectations for the fourth quarter, we are confirming our 2015 earnings guidance with the consolidated range of $1.86 and $2.06 per diluted share.
In March we'll talk more about that in just a few minutes So at this time I'd like to turn it over to <UNK>.
Thank you, <UNK>.
Good morning everyone.
For the third quarter of 2015, Avista Utilities contributed earnings of $0.20 per diluted share, which is an increase of $0.04 over the prior year.
Quarterly earnings increased primarily due to an increase in gross margins as <UNK> mentioned from favourable weather that was partially offset by expected increases in our operating costs, depreciation and amortization and taxes.
On a year-to-date basis, Avista Utilities contributed $1.30 per diluted share, which is a decrease from $1.38 last year.
The year-to-date earnings decreased primarily due to significantly warmer weather in the first quarter of last year, which reduced our heating loads of this year.
The decrease in heating loads was partially offset by the decoupling mechanism in Washington and favourable weather in the second and third quarters.
We also had expected increases in our operating expenses, depreciation and amortization in taxes.
We continue to be committed to updating and maintaining our utility systems.
We respect Avista Utilities' capital expenditures to be about $375 million in 2015 and 2016 and about $400 million in 2017.
This represents a slight increase for 2016 and 2017.
AEL&P we expect capital expenditures approximately $14 million in 2015, $17 million in 2016 and $13 million in 2017, a significant portion of these expenditures represent the construction of an additional backup generation plant, which we expect to go into service at the end of 2016.
At this point, I'll move on to liquidity and financing plans.
As of September 30th there were $130 million of cash borrowings and $44 million of letters to credit outstanding, leaving about $226 million in available liquidity.
There were no borrowings or letters of credit outstanding at AEL&P at the end of September.
In December, we are going to issue $100 million of 30-year Avista Corp.
first mortgage bonds.
For 2016, we expect to issue approximately $155 million of long-term debt, which includes refinancing of a $90 million piece of long-term debt that matures in the third quarter and $55 million of common stock in order to fund our capital expenditures and maintain an appropriate capital structure.
With respect to 2016 earnings guidance, we are completing the process of our Washington general rate cases and expect that to be done by January of 2016.
And we will provide our 2016 earnings guidance in our February 2016 earnings report.
As <UNK> mentioned, we are confirming our 2015 guidance for consolidated earnings to be in a range of $1.86 to $2.06 per diluted share.
And then due to significantly warmer than normal weather and reducing the loads in the first quarter, again, we continue to expect a reduction of our earnings of approximately $0.08 that's been consistent.
And that includes the impact of decoupling in Washington.
We expect this to be partially offset by the benefit under the ERM of about $0.06 per diluted share, which we've had continuing throughout this year.
We expect 2006 Avista Utilities to contribute $1.81 to $1.95 per diluted share in 2015.
And again due to the warmer than normal first quarter, we have $0.08 per diluted share including decoupling that impacts that in negative.
Our range for Avista Utilities encompasses the expected variability in power supply costs and the application of the ERM to that power supply cost.
The midpoint of our guidance for Avista Utilities doesn't include any benefit of ERM.
And as I mentioned we expect to be in the 90/10 company sharing band, which is expected at about $0.06 per diluted share to Avista Utilities earnings.
This is primarily due to lower natural gas prices for power generation fuel, partially offset by lower hydroelectric generation.
Our outlook for Avista Utilities assumes among other variables normal precipitation in temperatures for the remainder of the year and we expect Hydro generation to be about 93% of normal for the full year, which is a slight decline from our last report.
We estimate that our 2015 Avista Utilities guidance encompasses that range, encompasses a return on equity of approximately 8.4% and 9% from the bottom end to the top end.
For 2015, we expect AEL&P to contribute in the range of $0.08 to $0.12 per diluted share and our outlook for AEL&P assumes among other variables normal precipitation and hydroelectric generation for the remainder of the year.
We expect our other businesses to be at a loss of $0.03 to a loss of $0.01 per diluted share, which includes the costs associated with exploring the strategic opportunities that <UNK> mentioned.
Our guidance generally includes only normal operating conditions and does not include any unusual items as settlement transactions impairments or acquisitions or dispositions until such things are known in certain.
I'll now turn the call back over <UNK>.
Hi, <UNK>.
Yes, Michael, this is <UNK>.
The brief in that case are due today actually, so those will be filed.
So in terms of the opportunity for settlement we're really beyond that and as you've followed our company in the past, when there is an opportunity for us to settle, we always work toward that, if we can get an outcome that works for us.
In this particular case, we weren't able to get to an outcome that we were satisfied with through settlement discussions.
And if in the last several years, the Washington commission has deviated from their use of a traditional historical test period with limited pro forma adjustments.
They've taken a different approach to ratemaking, which has worked pretty well for us through using an attrition approach, which better reflects future investment, future costs and rates.
And in this case, we have filed that approach, commission staff has supported that approach, but yet the parties have opposed that.
So that's part of why we didn't reach a settlement in this agreement or settlement in this case.
And that's why we think through litigation, we think there is a reasonable opportunity for an outcome that really works for us.
So we chosen to litigate this case.
It can.
So we've asked the commission to continue to follow the approach that they've supported in the last two or three cases.
And actually one in which in (inaudible) last case they took a different approach and used some escalators which better reflected future costs and rates.
So we're cautiously optimistic that they'll continue to use that in this case.
We continue to use the historical test period that they tend to reflect more future adjustments and so it works pretty well in Idaho.
In Oregon they actually use a future test period, so there's three different methods that are being used in each state.
We would.
Yes.
Yes, we talked about Juneau and feeling pretty optimistic about where we sit.
We still have some work to do, but our hope is is that with some continued hard work that we can maybe start the project by first half of 2016.
$130 million over a 10 year period.
Again, we continue, as <UNK> said, we continue to work through those processes.
We've made good progress in the past to shrink that lag.
We still have some costs that are not allowed by the commission's just either due to law or practice and that again represents about 70 to 90 basis points.
That will continue, those costs continue and a lot of those are as in the past marketing certain Board of Directors costs, certain incentives for officers that just aren't allowed historical and lobbying costs, are not allowed, so that's very consistent.
But the other, the timing lag of the cost and the capital deployed is really where we believe we're making good progress, working with our commissions and their staffs to explain what we're doing and with the attrition in other methods.
We believe that we're really limiting that.
Thanks <UNK>.
Hi, <UNK>.
Well, so the weather benefit, I mean, we had a negative, for the year we've had a negative $0.08 and that's ---+
Most of the third quarter was really offset by two things, was the decoupling, but then also the provision for earnings sharing that we provided in most states.
And when we earned greater than our allowed return we share that 50-50 with our customers.
And so we had booked a provision for both Idaho and Washington for that.
So that really offset the weather benefit of the third quarter and we also had a slight positive from Texas.
So we are incrementally better than we thought in the third quarter, but not by a significant amount.
We did not.
And part of it was, if I want to explain, we had the $0.03 of dilution which we've talked about.
But right now we're better, we've had better second and third quarter, so we removed that.
I could have said, we have $0.03 of dilution and we offset that with a list of other things and we just chose to eliminate it.
So it's still there, the share account is still there, but we've just had better performance in the second and third quarter incrementally to remove that.
So we are slightly better than we have been.
Sure.
I'll start, but I'd like <UNK> <UNK> to add comment because <UNK> has really led the charge for us in Alaska and has done some tremendous work, both just visionary strategic work as well as relationships.
But overall we've had a great plan and we've been looking at it from an engineering perspective and really feel solid and confident that we have worked through.
I would call the technical details of how we're going to operate the system, how we would build it out.
And now we're really at a point where we want to make sure we got it, financially, where we'd like to see it.
So from a low-cost financing perspective as well as help with customer conversions, those are really the two key areas and that's what <UNK> has been working on.
So I'm going to let <UNK> kind of go from there.
Well, thanks, <UNK>.
And we have made a lot of progress.
Our outreach in the community have been strong.
We have a lot of support from local business leaders and state officials, but <UNK> is right.
That's kind of what we're looking at now is how do we get the price to the burner tip as low as we possibly can.
And when we talk about the financing mechanisms through data that is one mechanism or one way to do that on the debt financing component of that trying to lower that, so that's in progress.
We have a team that we're working with state officials to see what might be possible there.
And then with the conversions, how do we make it as easy as possible for customers to convert.
And that's really the goal there, what kind of mechanisms what kind of options or ideas might we be able to bring to the table to make it as easy as possible.
We're working with local officials to flesh that out and the state as well.
So too big, two moving parts, but both we're really excited about the prospects of building out the LDC and Juneau, we're excited about it.
We've made good progress and we're going to continue to work towards being able to start this early next year as <UNK> mentioned.
Well, we try to give you some sense for that, <UNK>, again we expect to spend $130 million over 10 years.
Half of that in the first five years, but with the two-year construction period and then we've said by the third year of operations we're expected to add $0.05 a share and then it would grow from there as we continue to add customers.
As <UNK> said, this is a customer conversion type of model where you have to get the continued customers to switch.
And so we try to bracket that by the third year of operation or fifth year of the project we expected to be $0.05 a share and then growing from there with customer conversions and additional capital.
We look at it as a regulated model.
We still have to work with the commission in Alaska to do that in all parties, but that's how we're looking at, so a regulated capital structure, a regulated type return with customer conversions.
Well, that's, so how we finance that, that's the total dollars we expect to spend over the 10 years and then we expect to finance it with equity as Avista Equity at a utility like capital structure and then debt.
And some of that data we expect to be or we are working towards the low-cost financing that the state, the state agencies provide.
We still have to work with those agencies to do that, to get that.
But we as <UNK> mentioned, he's doing a great job of working with all the people to say, this is a project we want to do and we believe the customers want to have it.
The gas would be sourced in Vancouver VLNG and then would be arched up from Seattle to Juneau, where we would construct receiving facility from storage and regas facilities and gas in the system in Juneau.
Yes.
It is.
Thanks, <UNK>.
No questions, Cynthia.
