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Avista Corp. Reports Financial Results for First Quarter 2011


May 6, 2011 - Spokane, WA

Avista Corp. (NYSE: AVA) today reported netincome attributable to Avista Corp. of $41.9 million, or $0.73 per dilutedshare, for the first quarter of 2011, compared to $28.8 million, or $0.52per diluted share, for the first quarter of 2010.

"We had a very good first quarter, and we are off to a great start for theyear. The increase in our consolidated earnings was primarily due to anincrease in earnings at Avista Utilities because weather in the firstquarter of this year was significantly colder and wetter than in the firstquarter of 2010, which was one of the warmest January to March periods onrecord in our service territory," said Avista Chairman, President and ChiefExecutive Officer Scott L. Morris.

"Weather conditions in the first quarter of 2011 were slightly colder thanaverage with precipitation, snowpack and streamflows well above average.This resulted in a significant increase in retail loads and hydroelectricgeneration as compared to the prior year, which increased operatingrevenues and reduced our power supply costs. Retail loads for the firstquarter of 2011 were slightly higher than our expectations. In addition,we have improved our recovery of utility operating costs and capitalinvestments through general rate increases that have gone into effect ineach of our jurisdictions since last October.

"We remain focused on increasing efficiencies in our operations to manageour costs while offering a number of services and options to assistcustomers with managing their energy usage and bills.

"Although our first quarter results reflect a significant improvement overlast year, on an annual basis we are still not earning the returnauthorized by state utility commissions in each jurisdiction due to acontinuing lag in the recovery of capital investments and increasingoperating costs. We plan to file a general rate case in Washington in thesecond quarter of 2011, and we continue to evaluate rate case plans inIdaho.

"We are pleased that both Moody's and Standard & Poor's recently upgradedour credit ratings. This is another sign of the progress we have made instrengthening our financial condition. This lowers our current and futureinterest costs, benefiting both shareholders and customers.

"We are confirming our 2011 earnings guidance with an expectation that wewill be at the high end of the range. However, it is early in the year,and there are many variables that can impact our results such asprecipitation and temperatures for the remainder of the year," Morris said.

Summary Results: Avista Corp.'s results for the first quarter of 2011 ascompared to the first quarter of 2010 are presented in the table below:



($ in thousands, except per-share data) Q1 2011 Q1 2010
---------- ---------
Operating Revenues $ 476,586 $ 456,415
---------- ---------
Income from Operations $ 84,825 $ 67,824
---------- ---------
Net Income attributable to Avista Corporation $ 41,918 $ 28,810
---------- ---------
Net Income (Loss) attributable to Avista
Corporation by Business Segment:

Avista Utilities $ 40,117 $ 27,776
---------- ---------
Advantage IQ $ 1,707 $ 1,447
---------- ---------
Other $ 94 $ (413)
---------- ---------
Earnings (Loss) per diluted share by Business
Segment attributable to Avista Corporation:

Avista Utilities $ 0.70 $ 0.50
---------- ---------
Advantage IQ $ 0.03 $ 0.03
---------- ---------
Other $ -- $ (0.01)
---------- ---------
Total earnings per diluted share attributable to
Avista Corporation $ 0.73 $ 0.52
---------- ---------

Net income for Avista Utilities for the first quarter of 2011 waspositively impacted by an increase in gross margin (operating revenues lessresource costs). This increase was primarily due to colder weather andpower supply costs that were below the amount included in base retail ratesin Washington, as well as general rate increases. The increase in grossmargin was partially offset by an increase in other operating expenses,depreciation and amortization, and taxes other than income taxes.

The increase in net income for Advantage IQ for the first quarter of 2011was primarily due to strong growth from energy management services,moderate growth from expense management services, as well as theacquisition of The Loyalton Group (Loyalton) effective December 31, 2010.

The improved results from the other businesses were due in part toincreased net income at METALfx and a net gain on investments of $0.1million for the first quarter of 2011 compared to a net loss of $0.6million for the first quarter of 2010.

Avista Utilities: Operating revenues increased $14.1 million and resourcecosts decreased $11.5 million, which resulted in an increase of $25.6million in gross margin. The gross margin on electric sales increased$14.5 million and the gross margin on natural gas sales increased $11.1million. The increase in electric gross margin was due to colder weatherthat increased retail loads, general rate increases and power supply costsbelow the amount included in base retail rates. During the first quarterof 2011, we recognized a benefit of $4.9 million under the Energy RecoveryMechanism (ERM) in Washington compared to an expense of $1.2 million forthe first quarter of 2010. The increase in our natural gas gross marginwas primarily due to colder weather that increased retail loads andpartially due to general rate increases.

Intracompany revenues and resource costs of $17.0 million representpurchases and sales of natural gas between our natural gas distributionoperations and our electric generation operations (as fuel for ourgeneration plants).

Electric revenues increased $19.7 million. Retail electric revenuesincreased by $25.2 million, and sales of fuel increased by $22.3 million,while wholesale electric revenues decreased by $27.5 million.

Retail electric revenues increased due to an increase in use per customeras a result of colder weather and the impact of general rate increases.Residential electric use per customer increased 11 percent and commercialuse per customer increased 3 percent compared to the first quarter of 2010.

Wholesale electric revenues decreased due to a decrease in sales volumesand sales prices. The decrease in sales volumes was primarily due todecreased wholesale power optimization and higher than expected retailsales caused by colder weather.

When electric wholesale market prices are below the cost of operating ournatural gas-fired thermal generating units, we sell the natural gaspurchased for generation in the wholesale market as sales of fuel. Salesof fuel increased due to an increase in thermal generation resourceoptimization and lower usage of our thermal generation plants. This wasdue in part to increased hydroelectric generation.

Natural gas revenues increased $11.4 million. Retail natural gas revenuesincreased by $28.1 million, while wholesale natural gas revenues decreasedby $17.1 million.

The increase in retail natural gas revenues was due to an increase involumes and higher retail rates. We sold more retail natural gas in thefirst quarter of 2011 as compared to the first quarter of 2010 primarilydue to colder weather. Residential natural gas use per customer increased20 percent and commercial use per customer increased 22 percent compared tothe first quarter of 2010. The increase in retail rates reflects purchasedgas adjustments, as well as general rate increases.

The decrease in our wholesale natural gas revenues reflects a decrease inprices and volumes. Wholesale sales reflect the sale of natural gas inexcess of load requirements as part of the natural gas procurement andresource optimization process. Additionally, we engage in optimization ofavailable interstate pipeline transportation and storage capacity throughwholesale purchases and sales of natural gas. With higher retail loads in2011 as compared to 2010, we had less opportunity to optimizetransportation resources. Differences between revenues and costs fromsales of resources in excess of retail load requirements and from resourceoptimization are accounted for through the PGA mechanisms.

Advantage IQ: Advantage IQ's revenues for the first quarter of 2011increased 22 percent as compared to the first quarter of 2010 and totaled$29.2 million. The increase in revenues was primarily due to strong growthfrom energy management services, moderate growth from expense managementservices, and the acquisition of Loyalton.

In the first quarter of 2011, Advantage IQ managed bills totaling $4.8billion, an increase of $0.7 billion, or 18 percent, as compared to thefirst quarter of 2010. The increase was due to an increase in both theaverage value of each bill processed and the number of accounts managed.Advantage IQ had a 6 percent increase in the number of accounts managed forthe first quarter of 2011.

In April 2011, Advantage IQ entered into a new $40 million three-yearcommitted line of credit agreement that replaced its $15 million committedcredit agreement that had an expiration date of May 2011.

Other Businesses: Operating revenues decreased $5.3 million and operatingexpenses decreased $5.7 million for the other businesses. The decrease inoperating revenues and operating expenses was primarily due to theassignment of the Lancaster power purchase agreement to Avista Corp. inDecember 2010. The improvement in results for these businesses was due inpart to increased earnings at METALfx, which had net income of $0.3 millionfor the first quarter of 2011 compared to close to break-even for the firstquarter of 2010.

Liquidity and Capital Resources: In February 2011, we entered into a newcommitted line of credit in the total amount of $400 million with anexpiration date of February 2015 that replaced our $320 million and $75million committed lines of credit that had an expiration date of April 5,2011. As of March 31, 2011, we had $313 million of available liquidityunder our committed line of credit.

Subject to market conditions, we are planning to cause the redemption of$83.7 million of Pollution Control Bonds and the refunding thereof with newbond issues in 2011. We are currently the holder of all bonds to beredeemed and refunded and, accordingly, would receive the redemptionproceeds.

We are party to a sales agency agreement under which we sell shares of ourcommon stock from time to time. In the first quarter of 2011, we sold255,000 shares for a total of $5.8 million. As of March 31, 2011, we had0.8 million shares available to be issued under this agreement.

We expect to issue up to $25 million of common stock in 2011 (includingfirst quarter issuances) in order to maintain our capital structure at anappropriate level for our business.

Utility capital expenditures were $50 million for the first quarter of2011. We expect utility capital expenditures to be about $250 million forthe full year of 2011. Actual capital expenditures may vary from ourestimates due to factors such as changes in business conditions,construction schedules and environmental requirements.

Earnings Guidance and Outlook

Based on our results for the first quarter, which were above ourexpectations, and our forecast for the remainder of the year, we areexpecting to be at the high end of our consolidated and utility earningsguidance range. It is important to note that we are still early in theyear. We expect consolidated earnings to be in the range of $1.60 to $1.80per diluted share for 2011.

We expect Avista Utilities to contribute in the range of $1.47 to $1.62 perdiluted share for 2011. We expect our 2011 utility earnings growth to belimited by several factors including: slow load growth due to economicconditions; continued lag in the recovery of our operating expenses andcapital investments; and increased operating and maintenance costs,including generation plant major maintenance expenses, and pension andmedical costs. Our range for Avista Utilities encompasses expectedvariability in power supply costs and the application of the ERM to thatpower supply cost variability. The midpoint of our utility guidance rangedoes not include any benefit or expense under the ERM. However, we areexpecting a benefit under the ERM in 2011 within the 90 percent customer/10percent company sharing band based on actual results for the first quarterand our forecast for the remainder of the year. The forecast of ourposition in the ERM can vary significantly due to a variety of factorsincluding the level of hydroelectric generation and retail loads, as wellas changes in purchased power and natural gas fuel prices. Our outlook forAvista Utilities assumes, among other variables, normal precipitation andtemperatures for the remainder of 2011.

We expect Advantage IQ to contribute in the range of $0.13 to $0.16 perdiluted share for 2011 and the other businesses to be between break-evenand a contribution of $0.02 per diluted share.

NOTE: We will host a conference call with financial analysts and investorson May 6, 2011, at 10:30 a.m. ET to discuss this news release. The call isavailable at (866) 783-2141, Pass code: 47720905. A simultaneous webcastof the call is available on our website, www.avistacorp.com. A replay ofthe conference call will be available through May 13, 2011. Call (888)286-8010, Pass code 78542679, to listen to the replay.

Avista Corp. is an energy company involved in the production, transmissionand distribution of energy as well as other energy-related businesses.Avista Utilities is our operating division that provides electric serviceto 358,000 customers and natural gas to 319,000 customers. Our serviceterritory covers 30,000 square miles in eastern Washington, northern Idahoand parts of southern and eastern Oregon, with a population of 1.5 million.Avista's primary, non-regulated subsidiary is Advantage IQ. Our stock istraded under the ticker symbol "AVA." For more information about Avista,please visit www.avistacorp.com.

Avista Corp. and the Avista Corp. logo are trademarks of AvistaCorporation.

The attached condensed consolidated statements of income, condensedconsolidated balance sheets, and financial and operating highlights areintegral parts of this earnings release.

This news release contains forward-looking statements, including statementsregarding our current expectations for future financial performance andcash flows, capital expenditures, financing plans, our current plans orobjectives for future operations and other factors, which may affect thecompany in the future. Such statements are subject to a variety of risks,uncertainties and other factors, most of which are beyond our control andmany of which could have significant impact on our operations, results ofoperations, financial condition or cash flows and could cause actualresults to differ materially from those anticipated in such statements.

The following are among the important factors that could cause actualresults to differ materially from the forward-looking statements: weatherconditions (temperatures and precipitation levels) and their effects onenergy demand and electric generation, including the effect ofprecipitation and temperatures on the availability of hydroelectricresources, the effect of temperatures on customer demand, and similarimpacts on supply and demand in the wholesale energy markets; the effect ofstate and federal regulatory decisions on our ability to recover costs andearn a reasonable return including, but not limited to, the disallowance ofcosts and investments, and delay in the recovery of capital investments andoperating costs; changes in wholesale energy prices that can affect, amongother things, the cash requirements to purchase electricity and naturalgas, the value received for sales in the wholesale energy market, thenecessity to request changes in rates that are subject to regulatoryapproval, collateral required of us by counterparties on wholesale energytransactions and credit risk to us from such transactions, and the marketvalue of derivative assets and liabilities; global financial and economicconditions (including the impact on capital markets) and their effect onour ability to obtain funding at a reasonable cost; our ability to obtainfinancing through the issuance of debt and/or equity securities, which canbe affected by various factors including our credit ratings, interest ratesand other capital market conditions; economic conditions in our serviceareas, including the effect on the demand for, and customers' payment for,our utility services; the potential effects of legislation oradministrative rulemaking, including the possible adoption of national orstate laws requiring our resources to meet certain standards and placingrestrictions on greenhouse gas emissions to mitigate concerns over globalclimate changes; changes in actuarial assumptions, interest rates and theactual return on plan assets for our pension plan, which can affect futurefunding obligations, pension expense and pension plan liabilities;volatility and illiquidity in wholesale energy markets, including theavailability of willing buyers and sellers, and prices of purchased energyand demand for energy sales; unplanned outages at any of our generatingfacilities or the inability of facilities to operate as intended; theoutcome of pending regulatory and legal proceedings arising out of the"western energy crisis" of 2000 and 2001, and including possible refunds;the outcome of legal proceedings and other contingencies; changes in, andcompliance with, environmental and endangered species laws, regulations,decisions and policies, including present and potential environmentalremediation costs; wholesale and retail competition including, but notlimited to, alternative energy sources, suppliers and deliveryarrangements; the ability to comply with the terms of the licenses for ourhydroelectric generating facilities at cost-effective levels; naturaldisasters that can disrupt energy generation, transmission anddistribution, as well as the availability and costs of materials,equipment, supplies and support services; explosions, fires, accidents, ormechanical breakdowns that may occur while operating and maintaining ourgeneration, transmission and distribution systems; blackouts or disruptionsof interconnected transmission systems; disruption to information systems,automated controls and other technologies that we rely on for operations,communications and customer service; the potential for terrorist attacks,cyber security attacks or other malicious acts, that cause damage to ourutility assets, as well as the national economy in general; including theimpact of acts of terrorism, cyber security attacks or vandalism thatdamage or disrupt information technology systems; delays or changes inconstruction costs, and/or our ability to obtain required permits andmaterials for present or prospective facilities; changes in the long-termclimate of the Pacific Northwest, which can affect, among other things,customer demand patterns and the volume and timing of streamflows to ourhydroelectric resources; changes in industrial, commercial and residentialgrowth and demographic patterns in our service territory or the loss ofsignificant customers; the loss of key suppliers for materials or services;default or nonperformance on the part of any parties from which we purchaseand/or sell capacity or energy; deterioration in the creditworthiness ofour customers and counterparties; the effect of any potential decline inour credit ratings, including impeded access to capital markets, higherinterest costs, and certain covenants with ratings triggers in ourfinancing arrangements and wholesale energy contracts; increasing healthcare costs and the resulting effect on health insurance provided to ouremployees and retirees; increasing costs of insurance, more restrictedcoverage terms and our ability to obtain insurance; work force issues,including changes in collective bargaining unit agreements, strikes, workstoppages or the loss of key executives, availability of workers in avariety of skill areas, and our ability to recruit and retain employees;the potential effects of negative publicity regarding business practices,whether true or not, which could result in, among other things, costlylitigation and a decline in our common stock price; changes intechnologies, possibly making some of the current technology obsolete;changes in tax rates and/or policies; and changes in our strategic businessplans, which may be affected by any or all of the foregoing, including theentry into new businesses and/or the exit from existing businesses.

For a further discussion of these factors and other important factors,please refer to our Annual Report on Form 10-K for the year ended Dec. 31,2010. The forward-looking statements contained in this news release speakonly as of the date hereof. We undertake no obligation to update anyforward-looking statement or statements to reflect events or circumstancesthat occur after the date on which such statement is made or to reflect theoccurrence of unanticipated events. New factors emerge from time to time,and it is not possible for management to predict all of such factors, norcan it assess the impact of each such factor on our business or the extentto which any such factor, or combination of factors, may cause actualresults to differ materially from those contained in any forward-lookingstatement.

 AVISTA CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Dollars in Thousands except Per Share Amounts) First Quarter -------------------- 2011 2010 --------- ---------Operating revenues $ 476,586 $ 456,415 --------- ---------Operating expenses: Utility resource costs 248,121 259,567 Other operating expenses 90,928 81,707 Depreciation and amortization 27,719 26,146 Utility taxes other than income taxes 24,993 21,171 --------- --------- Total operating expenses 391,761 388,591 --------- ---------Income from operations 84,825 67,824 Interest expense, net of capitalized interest (18,153) (18,941) Other expense - net (632) (1,699) --------- ---------Income before income taxes 66,040 47,184Income tax expense 23,637 17,867 --------- ---------Net income 42,403 29,317 Less: Net income attributable to noncontrolling interests (485) (507) --------- ---------Net income attributable to Avista Corporation $ 41,918 $ 28,810 ========= =========Weighted-average common shares outstanding (thousands), basic 57,342 54,869Weighted-average common shares outstanding (thousands), diluted 57,414 55,115Earnings per common share attributable to Avista Corporation: Basic $ 0.73 $ 0.53 ========= ========= Diluted $ 0.73 $ 0.52 ========= ========= Dividends paid per common share $ 0.275 $ 0.25 ========= ========= Issued May 6, 2011 AVISTA CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Dollars in Thousands) March 31, December 31, 2011 2010 ----------- -----------Assets Cash and cash equivalents $ 61,837 $ 69,413 Accounts and notes receivable 218,436 230,229 Other current assets 184,886 279,923 Total net utility property 2,731,143 2,714,237 Other non-current assets 203,620 195,793 Regulatory assets for deferred income taxes 88,667 90,025 Regulatory assets for pensions and other postretirement benefits 176,382 178,985 Other regulatory assets 107,107 112,830 Non-current utility energy commodity derivative assets 17,789 15,261 Power deferrals 10,283 18,305 Other deferred charges 23,635 35,094 ----------- ----------- Total Assets $ 3,823,785 $ 3,940,095 =========== =========== Liabilities and Equity Accounts payable $ 150,648 $ 171,707 Current portion of long-term debt 360 358 Current portion of nonrecourse long-term debt of Spokane Energy 12,754 12,463 Short-term borrowings 65,000 110,000 Other current liabilities 225,353 284,647 Long-term debt 1,101,814 1,101,499 Nonrecourse long-term debt of Spokane Energy 43,164 46,471 Long-term debt to affiliated trusts 51,547 51,547 Regulatory liability for utility plant retirement costs 224,403 223,131 Pensions and other postretirement benefits 157,698 161,189 Deferred income taxes 492,295 495,474 Other non-current liabilities and deferred credits 96,125 109,703 ----------- ----------- Total Liabilities 2,621,161 2,768,189 ----------- ----------- Redeemable Noncontrolling Interests 42,817 46,722 Equity Avista Corporation Stockholders' Equity: Common stock - net (57,622,218 and 57,119,723 outstanding shares) 833,617 827,592 Retained earnings and accumulated other comprehensive loss 326,762 298,192 ----------- ----------- Total Avista Corporation Stockholders' Equity 1,160,379 1,125,784 Noncontrolling interests (572) (600) ----------- ----------- Total Equity 1,159,807 1,125,184 ----------- ----------- Total Liabilities and Equity $ 3,823,785 $ 3,940,095 =========== =========== Issued May 6, 2011 AVISTA CORPORATION FINANCIAL AND OPERATING HIGHLIGHTS (UNAUDITED) (Dollars in Thousands) First Quarter -------------------- 2011 2010 ---------- --------- Avista Utilities Retail electric revenues $ 204,642 $ 179,491 Retail kWh sales (in millions) 2,471 2,285 Retail electric customers at end of period 358,357 356,073 Wholesale electric revenues $ 19,051 $ 46,562 Wholesale kWh sales (in millions) 596 919 Sales of fuel $ 44,372 $ 22,112 Other electric revenues $ 3,887 $ 4,092 Retail natural gas revenues $ 133,872 $ 105,766 Wholesale natural gas revenues $ 45,022 $ 62,118 Transportation and other natural gas revenues $ 4,337 $ 3,890 Total therms delivered (in thousands) 298,266 277,190 Retail natural gas customers at end of period 318,826 316,446 Intracompany revenues $ 17,036 - Income from operations (pre-tax) $ 79,499 $ 63,214 Net income attributable to Avista Corporation $ 40,117 $ 27,776 Advantage IQ Revenues $ 29,158 $ 23,942 Income from operations (pre-tax) $ 3,486 $ 3,161 Net income attributable to Avista Corporation $ 1,707 $ 1,447 Other Revenues $ 9,731 $ 15,074 Income from operations (pre-tax) $ 1,840 $ 1,449 Net income (loss) attributable to Avista Corporation $ 94 $ (413) Issued May 6, 2011

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