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Avista, CMS 3Qs Should Be Better than Expected

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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