Avista, CMS 3Qs Should Be Better than Expected
Avista Corp., flying high on an over-the-top performance by its trading
subsidiary, and CMS Energy, buoyed by favorable power transactions and
cost reductions, both said Friday they will report above consensus estimates
for the third quarter. Spokane, WA-based Avista officially will report
its earnings Oct. 25, and CMS, headquartered in Dearborn, MI, will follow
the next day.
Avista's good news probably could not have come at a better time, pummeled
by falling earnings since the middle of the year and now facing lawsuits
by shareholders who feel that the company deceived them regarding company
practices (see NGI, Aug. 7).
However, company officials last week said that strong energy trading
revenue from its unregulated Avista Energy subsidiary and a beneficial
accounting change will contribute to "significant positive earnings."
Analysts polled by First Call had expected Avista to lose 13 cents a share,
on average. For the third quarter of 1999, Avista reported a profit of
52 cents per share.
Avista Energy, the company's energy trading subsidiary, has captured
earnings opportunities in the California and western regional marketplace.
Avista Utilities also helped to mitigate expected losses after obtaining
an accounting order from the State of Washington that allows it to defer
excess purchased power costs incurred through mid-2001.
"Avista Energy has done an outstanding job of capturing earnings
opportunities in the rapidly changing California and western regional marketplace,"
said CEO T.M. "Tom" Matthews. "In the utility, we are preparing
to comply with a ruling ordering us to file a new rate case focused on
a more permanent treatment of purchased power costs."
Also anticipating a rosy third quarter report, CMS Energy said Friday
that it expects its earnings to jump between 10% and 15% higher than its
previous estimate of 40 cents per share in sustainable earnings, all related
to "favorable power transactions and cost reductions."
Company officials said that the earnings give CMS more confidence in
its 2000 estimates, which remain unchanged at $2.50 a share. The guidance
assumes recovery this year of a 5% residential electric rate reduction,
which, if not allowed, would reduce earnings by 18 cents a share. Final
accounting guidance is expected when the Michigan Public Service Commission
issues its securitization financing order on Oct. 24.
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