Business Acquisitions

3 Months Ended

Mar. 31, 2014

Business Acquisitions [Abstract]

Business Combination Disclosure [Text Block]

BUSINESS ACQUISITIONS

Alaska Energy and Resources Company - Avista Corporation

On November 4, 2013, the Company entered into an agreement and plan of merger (Merger Agreement) with Alaska Energy and Resources Company (AERC), a privately-held company based in Juneau, Alaska. If all necessary approvals are received, when the transaction is complete, AERC will become a wholly-owned subsidiary of Avista Corp.

The primary subsidiary of AERC is Alaska Electric Light & Power Company (AEL&P), a regulated utility which provides electric services to approximately 16,000 customers in the City and Borough of Juneau, Alaska. In 2013, AEL&P had annual revenues of $42.6 million, a total rate base of $109 million and had 60 full-time employees. The utility has a firm retail peak load of approximately 68 MW. AEL&P owns four hydroelectric generating facilities, having a total present capacity of 24.7 MW, and has a power purchase commitment for the output of the Snettisham hydroelectric project, having a present capacity of 78 MW, for a total hydroelectric capacity of 102.7 MW. AEL&P is not interconnected to any other electric system. The utility also has 93.9 MW of diesel generating capacity to provide back-up service to firm customers when necessary.

In addition to the regulated utility, AERC owns the AJT Mining subsidiary, which is an inactive mining company holding certain properties.

The merger consideration at closing will be $170 million, less AERC's indebtedness and is subject to other customary closing adjustments (Merger Consideration). The transaction will be funded primarily through the issuance of Avista Corp. common stock to the shareholders of AERC. The transaction is expected to close by July 1, 2014, following the receipt of necessary regulatory approvals, the approval of the merger transaction by the requisite number of AERC shareholders and the satisfaction of other closing conditions. Avista Corp. shareholder approval is not required.

Pursuant to the Merger Agreement, among other things, each of the issued and outstanding shares of AERC common stock (other than Dissenting Shares) will be converted into the right to receive consideration as follows:

i. the number of shares of Avista Corp. common stock equal to one share of AERC common stock multiplied by the Exchange Ratio; and

ii. a portion of the Representative Reimbursement Amount.

For purposes of the foregoing:

The Exchange Ratio is the ratio obtained by dividing the Per Share Amount by (i) $21.48 if the Avista Corp. Closing Price is less than or equal to $21.48, (ii) the Avista Corp. Closing Price, if the Avista Corp. Closing Price is greater than $21.48 and less than $34.30 or (iii) $34.30 if the Avista Corp. Closing Price is greater than or equal to $34.30.

The Per Share Amount is the amount determined by dividing (a) the Merger Consideration (as adjusted) by (b) the aggregate number of shares of AERC common stock outstanding immediately prior to the closing of the transaction.

The Representative Reimbursement Amount is a $500,000 cash payment to be made by Avista Corp. at the Closing to the Shareholders’ Representative account. The purpose of the Representative Reimbursement Amount is to reimburse the Shareholders’ Representative for expenses incurred by the Shareholders’ Representative in acting for the current shareholders of AERC in connection with the Merger. The total Merger Consideration will be reduced by the Representative Reimbursement Amount.

Dissenting Shares will not be converted into, or represent the right to receive, the Merger Consideration or any portion of the Representative Reimbursement Amount. Such shareholders will be entitled to receive payment of the fair value of Dissenting Shares held by them in accordance with the provisions of AS 10.06.580 of the Alaska Corporations Code. Any amounts paid to Dissenting Shares over the amounts otherwise payable in the form of Merger Consideration are indemnified expenses owed by AERC to Avista Corp.

The Merger Agreement has been approved by Avista Corp.'s and AERC's Boards of Directors, the UTC, the IPUC, the Public Utility Commission of Oregon (OPUC), the U.S. Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice, but the consummation of the transaction is subject to the satisfaction or waiver of specified closing conditions, including:

• the registration under the Securities Act of 1933 of the shares of common stock that will be issued to AERC shareholders;

• the approval of such shares for listing on the New York Stock Exchange;

• the approval of the merger transaction by the requisite number of AERC shareholders;

• the receipt of regulatory approvals and other consents required to consummate the merger transaction, including, among others, approvals from the Regulatory Commission of Alaska and any other applicable regulatory bodies on the terms and conditions specified in the definitive purchase agreement;

• the absence of the occurrence of a material adverse effect (as defined in the Merger Agreement) relating to either AERC or Avista Corp. after the date of the signed agreement; and

• other customary closing conditions.

The Merger Agreement also provides for customary termination rights for each of the Company and AERC, including the right for either party to terminate if the Merger has not been consummated by December 31, 2014, provided, however, that the failure of the Merger to have been consummated on or before December 31, 2014 was not caused by the failure of such party or any affiliate of such party to perform any of its obligations under the Merger Agreement. Upon termination of the Merger Agreement in accordance with its terms, there will be no further liability under the agreement except that nothing shall relieve any party thereto from liability for any breach of the agreement.

There may be certain commitments and contingencies that will be assumed when the merger transaction is consummated; however, Avista Corp. has not fully completed its evaluation of all the potential commitments and contingencies as of the date of this filing.

During the three months ended March 31, 2014, Avista Corp. incurred $0.5 million (pre-tax) of transaction related fees which have been expensed and presented in the Condensed Consolidated Statements of Income in other operating expenses within utility operating expenses. Since the start of the planned transaction through March 31, 2014, Avista Corp. has expensed $2.1 million (pre-tax) in total transaction fees associated with the transaction and Avista Corp. expects to incur additional transaction related fees upon consummation of the transaction.