Avista seeks full share of plant

Avista Corp. announced Wednesday it plans to buy back a half-share in a power plant it sold three years ago to Mirant Corp., which recently filed for bankruptcy.

“Our decision to seek to acquire full ownership of the plant is driven by a potentially attractive price, together with Avista’s familiarity and experience with the facility,” CEO Gary Ely said in a news release announcing the company’s second-quarter earnings.

The purchase of the half-share in the Coyote Springs II gas-fired combustion turbine in Boardman, Ore., will give Avista Utilities 140 megawatts of additional power generation. One megawatt is enough to power 650 homes.

Terms of the purchase were not released as the deal still needs to be approved by both the Federal Energy Regulatory Commission and the court handling Mirant’s bankruptcy filing. Avista anticipates the deal will close later this year or early in 2005.

The purchase could ultimately affect rates for Washington customers, Avista Utilities President Scott Morris said during a Wednesday morning meeting with analysts.

“If we do consummate the purchase of Coyote Springs, it would probably dictate us taking a real hard look at whether or not we would file a (rate) case in Washington,” Morris said in response to an analyst’s question. Idaho regulators currently are reviewing the company’s request to raise base rates in that state, and Oregon natural gas rates were raised last year.

Avista’s net income for the second quarter was $10.1 million, or 21 cents per share, up from $8.4 million, or 17 cents per share in the same time period last year. However, earnings were boosted significantly by Avista’s July 2003 sale of its majority interest in Avista Labs, now called ReliOn. In the second quarter of 2003, Avista Labs reported a loss of 8 cents a share.

Earnings were hurt by underperformance at Avista’s energy trading subsidiary, Avista Energy. That business segment reported a decline of 4 cents a share over the same quarter last year. The company attributed that largely to the idling of a thermal generation plant in Rathdrum, the output of which Avista Energy sells on the wholesale market. Because lower-cost hydroelectric generation was available on the market, there was not as much demand for the Rathdrum plant’s output, said company spokeswoman Jessie Wuerst.

Subsidiary Avista Advantage also reported a loss, due to the settlement of an employment agreement with former CEO Harry Stephens, who left the company in the first quarter. The subsidiary, which provides energy management, analysis and billing for major companies, reported a loss of a penny per share.

“Earnings for the quarter would have been positive, but for this settlement,” said Avista’s Chief Financial Officer Malyn Malquist during the Wednesday morning conference.

Avista Advantage reported a loss for the quarter of $355,000.

Though company officials would not disclose the amount of the settlement, Ely said, “It was time to make a change in the leadership there. Part of that required a payment of funds.”

Ely said the company has made an offer to a potential new chief executive for Avista Advantage and should find out within the next few days whether it will be accepted.