Avista Corporation (Avista), a company involved in production, transmission, distribution of energy and other energy-related businesses, has reported operating revenues of $487.5 million for the first quarter of 2009, compared with the operating revenues of $496.3 million in the year-ago quarter. It also reported a net income of $31 million, or $0.57 per diluted share, for the first quarter of 2009, compared to the net income of $25.2 million, or $0.47 per diluted share, in the year-ago quarter.

We had a strong first quarter and are off to a great start in 2009, said Avista chairman, president and chief executive officer Scott L. Morris. Even with the decline in the economy, we saw about 1% growth in both electric and natural gas customers during the first quarter of 2009 as compared to the first quarter of 2008. During the first quarter of 2009, our subsidiary, Advantage IQ, signed new contracts that should add over $2 million in new revenues annually.”

Hydroelectric generation during the first quarter of 2009 was significantly better as compared to the first quarter of 2008. Based upon current snowpack conditions and projected stream flows, we expect hydroelectric generation to be near normal for 2009. We are also experiencing lower purchased power and fuel prices, as well as a decrease in natural gas costs. We plan to file requests in the coming weeks to pass along to our Washington and Idaho natural gas customers a benefit resulting from lower natural gas prices that we have experienced since our last price decrease to customers in January of this year. These Purchased Gas Adjustments are designed to pass through changes in natural gas costs to our customers with no change in gross margin or net income.”

In addition, we remain focused on diligently managing our operating costs, finding additional operating efficiencies, and providing reliable energy to our customers. Such measures include aggressively managing our employee headcount through attrition and restrictions on hiring.”

Further, we are actively pursuing the identification of projects that could be funded under the American Recovery and Reinvestment Act. Our focus is to identify opportunities that will match the goals of the stimulus funding and benefit our stakeholders.”

During these challenging economic times, we reflect on our 120-year history and remain committed to being innovative, achieving operational targets, and delivering the reliable service and value that both our customers and shareholders expect, Morris said.

First Quarter of 2009 Highlights

This was mainly the result of raised gross margin (operating revenues less resource costs) from the implementation of new rates in Washington and Idaho. These rate increases, determined to be reasonable and fair by the respective state regulatory commissions, were implemented following a full assessment and approval of the company’s costs.

Also contributing to the raise in gross margin was a benefit of $2.7 million in the first quarter of 2009 under the energy recovery mechanism as compared with the $3.4 million Avista Utilities absorbed in the year-ago quarter. The lower electric resource costs during the first quarter of 2009 were a result of better hydroelectric generation than anticipated, as well as lower purchased power and fuel prices.

Avista Utilities’ operating revenues declined by $11.4 million for the first quarter of 2009 as compared to the year-ago quarter, as a result of decreases in natural gas revenues of $25.6 million, partly counterbalanced by increased electric revenues of $14.2 million. The decline in natural gas revenues was mainly a result of reduced wholesale natural gas revenues, which was a result of lower wholesale natural gas prices. The raise in electric revenues was mainly due to increased retail electric revenues related to the accomplishment of new rates in Washington and Idaho.

Additionally, the improved results reflect a decline in interest expense of $3.4 million that was achieved by refinancing maturing higher cost debt with lower cost long-term debt, as well as lower interest rates on borrowings under Avista’s $320 million committed line of credit.

Other utility operating expenses raised $6 million for the first quarter of 2009 as compared to the year-ago quarter, mainly due to a raise of $2.8 million in operating and maintenance expenses at Avista’s generation facilities, as well as a $2.5 million increase in pension and other postretirement benefit costs.

Advantage IQ: Advantage IQ’s net income attributable to Avista was $1.2 million, or $0.02 per diluted share, for the first quarter of 2009 compared with the $1.8 million or $0.03 per diluted share, in the year-ago quarter. This was mainly a result of a decline in interest earnings on funds held for customers (due to lower interest rates), Avista’s reduced ownership% age in the business and amortization of intangible assets resulting from the Cadence Network, Inc. (Cadence Network) transaction. As earlier reported, Advantage IQ acquired Cadence Network, a Cincinnati-based energy and expense management company, effective July 2, 2008. As consideration, the previous owners of Cadence Network received a 25% ownership interest in Advantage IQ.

Advantage IQ’s revenues for the first quarter of 2009 raised 38% as compared to the year-ago quarter and totaled $17.3 million. The raise in revenues was due to an increase in service revenues of 57%, partly counterbalanced by a 74% decrease in interest revenue. In the first quarter of 2009, Advantage IQ managed bills totaling $4.6 billion, an increase of $1.2 billion, or 35%, as compared to the first quarter of 2008. The acquisition of Cadence Network added $1 billion in managed bills for the first quarter of 2009.

Liquidity and Capital Resources: As of March 31, 2009, Avista had a combined $354.1 million of available liquidity under our $320 million committed line of credit, $200 million committed line of credit and $85 million revolving accounts receivable sales facility. Avista expects issuing long-term debt during the second half of 2009 to decrease the balances outstanding under the company’s committed line of credit agreements. Additionally, during 2009 Avista is at present planning to remarket or refund the $66.7 million of pollution control bonds that Avista repurchased in the previous year.

On April 1, 2009, the company has redeemed the total amount outstanding ($61.9 million) of our junior subordinated debt securities held by AVA capital trust III. Concurrently, AVA capital trust III redeemed all of the preferred trust securities issued to third parties ($60 million) and all of the common trust securities issued to the company ($1.9 million). The net redemption of $60 million was funded by borrowings under Avista’s $320 million committed line of credit agreement.

The company has a sales agency agreement to issue up to 2 million shares of common stock from time to time. Avista issued 750,000 common shares under this agreement in the previous year. Avista will carry on evaluating issuing common stock in future periods; however, the company is not currently planning to issue common stock in 2009.

Utility capital expenditures were $42 million for the first quarter of 2009. Avista anticipates utility capital expenditures to be about $210 million for each of the full years of 2009 and 2010, reflecting the company’s continued investment in upgrading the aging utility infrastructure to raise reliability. Actual capital expenditures may vary from Avista’s estimates due to factors such as changes in business conditions, construction schedules and environmental requirements.