Standard & Poor’s Ratings Services last Friday affirmed the “BB+” corporate credit rating of Spokane, WA-based Avista Corp, citing the stability of the company’s utility operations as the primary reason. The outlook is stable, and both the rating and outlook also take into account Avista’s higher-risk energy trading and other nonutility operations, S&P said.
“Avista’s utility business is characterized by supportive regulatory environments in Washington and Idaho, low-cost hydroelectric generation, competitive rates, and operating and regulatory diversity provided by combined electric and gas utility operations in Washington, Idaho and Oregon,” said Swami Venkataraman, S&P’s San Francisco-based credit analyst.
In contrast, Venkataraman said that Avista Energy’s “riskier energy trading and marketing activities contribute to a weaker consolidated business risk profile than that of the stand-alone utility.” He said the concerns are “partly mitigated,” however, by the trading business’s small size and value at risk, along with what he called “prudent risk management policies and strong liquidity.”
S&P has given Avista’s unsecured debt that same BB+ rating as the corporate rating, however, as more secured debt is obtained, the unsecured portion will be “materially disadvantaged,” according to Venkataraman, who noted this will likely result in the unsecured debt eventually being “rated a notch below the corporate credit rating.”
Avista serves about 338,000 electric utility customers in eastern Washington and northern Idaho, and 297,000 natural gas utility customers in those two states, plus Oregon. The bulk of its revenues come from the Washington utility operations.
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