LONG-TERM DEBT AND CAPITAL LEASES

The following details long-term debt outstanding as of December 31 (dollars in thousands):



Maturity Year	Description	Interest Rate	2018			2017
Avista Corp. Secured Long-Term Debt
2018	First Mortgage Bonds	5.95%	—			250,000
2018	Secured Medium-Term Notes	7.39%-7.45%	—			22,500
2019	First Mortgage Bonds	5.45%	90,000			90,000
2020	First Mortgage Bonds	3.89%	52,000			52,000
2022	First Mortgage Bonds	5.13%	250,000			250,000
2023	Secured Medium-Term Notes	7.18%-7.54%	13,500			13,500
2028	Secured Medium-Term Notes	6.37%	25,000			25,000
2032	Secured Pollution Control Bonds (1)	(1)	66,700			66,700
2034	Secured Pollution Control Bonds (1)	(1)	17,000			17,000
2035	First Mortgage Bonds	6.25%	150,000			150,000
2037	First Mortgage Bonds	5.70%	150,000			150,000
2040	First Mortgage Bonds	5.55%	35,000			35,000
2041	First Mortgage Bonds	4.45%	85,000			85,000
2044	First Mortgage Bonds	4.11%	60,000			60,000
2045	First Mortgage Bonds	4.37%	100,000			100,000
2047	First Mortgage Bonds	4.23%	80,000			80,000
2047	First Mortgage Bonds	3.91%	90,000			90,000
2048	First Mortgage Bonds (2)	4.35%	375,000			—
2051	First Mortgage Bonds	3.54%	175,000			175,000
	Total Avista Corp. secured long-term debt		1,814,200			1,711,700
Alaska Electric Light and Power Company Secured Long-Term Debt
2044	First Mortgage Bonds	4.54%	75,000			75,000
	Total secured long-term debt		1,889,200			1,786,700
Alaska Energy and Resources Company Unsecured Long-Term Debt
2019	Unsecured Term Loan	3.85%	15,000			15,000
	Total secured and unsecured long-term debt		1,904,200			1,801,700
Other Long-Term Debt Components
	Capital lease obligations (3)		57,210			62,148
	Unamortized debt discount		(882		)	(626		)
	Unamortized long-term debt issuance costs		(13,654		)	(10,285		)
	Total		1,946,874			1,852,937
	Secured Pollution Control Bonds held by Avista Corporation (1)		(83,700		)	(83,700		)
	Current portion of long-term debt and capital leases		(107,645		)	(277,438		)
	Total long-term debt and capital leases		$	1,755,529		$	1,491,799

(1)

In December 2010, $66.7 million and $17.0 million of the City of Forsyth, Montana Pollution Control Revenue Refunding Bonds (Avista Corporation Colstrip Project) due in 2032 and 2034, respectively, which had been held by Avista Corp. since 2008 and 2009, respectively, were refunded by new variable rate bond issues (Series 2010A and Series 2010B). The new bonds were not offered to the public and were purchased by Avista Corp. due to market conditions. The Company expects that at a later date, subject to market conditions, these bonds may be remarketed to unaffiliated investors. So long as Avista Corp. is the holder of these bonds, the bonds will not be reflected as an asset or a liability on Avista Corp.'s Consolidated Balance Sheets.

(2)

In May 2018, the Company issued and sold $375.0 million of 4.35 percent first mortgage bonds due in 2048 through a public offering. The total net proceeds from the sale of the bonds were used to repay maturing long-term debt of $272.5 million, repay the outstanding balance under Avista Corp.'s $400.0 million committed line of credit and for other general corporate purposes. In connection with the issuance and sale of the first mortgage bonds, the Company cash-settled fourteen interest rate swap derivatives (notional aggregate amount of $275.0 million) and paid a net amount of $26.6 million. See Note 6 for a discussion of interest rate swap derivatives.


(3)	Effective January 1, 2019, due to the adoption of the new lease standard (ASU 2016-02), capital leases will now be defined as finance leases. See Note 2 for further discussion of the new lease standard.

The following table details future long-term debt maturities including long-term debt to affiliated trusts (see Note 15) (dollars in thousands):



	2019		2020		2021		2022		2023		Thereafter		Total
Debt maturities	$	105,000	$	52,000	$	—	$	250,000	$	13,500	$	1,451,547	$	1,872,047

Substantially all of Avista Utilities' and AEL&P's owned properties are subject to the lien of their respective mortgage indentures. Under the Mortgages and Deeds of Trust (Mortgages) securing their first mortgage bonds (including secured medium-term notes), Avista Utilities and AEL&P may each issue additional first mortgage bonds under their specific mortgage in an aggregate principal amount equal to the sum of:


•	66-2/3 percent of the cost or fair value (whichever is lower) of property additions of that entity which have not previously been made the basis of any application under that entity's Mortgage, or


•	an equal principal amount of retired first mortgage bonds of that entity which have not previously been made the basis of any application under that entity's Mortgage, or


•	deposit of cash.

Avista Utilities and AEL&P may not individually issue any additional first mortgage bonds (with certain exceptions in the case of bonds issued on the basis of retired bonds) unless the particular entity issuing the bonds has “net earnings” (as defined in that entity's Mortgage) for any period of 12 consecutive calendar months out of the preceding 18 calendar months that were at least twice the annual interest requirements on all mortgage securities at the time outstanding, including the first mortgage bonds to be issued, and on all indebtedness of prior rank. As of December 31, 2018, property additions and retired bonds would have allowed, and the net earnings test would not have prohibited, the issuance of $1.2 billion in aggregate principal amount of additional first mortgage bonds at Avista Utilities and $27.0 million at AEL&P.

Snettisham Capital Lease Obligation

The long-term capital lease above is a PPA between AEL&P and AIDEA, an agency of the State of Alaska, under which AEL&P has a take-or-pay obligation, expiring in December 2038, to purchase all the output of the 78 MW Snettisham Hydroelectric Project. For accounting purposes, this PPA is treated as a capital lease.

The balances related to the Snettisham capital lease obligation as of December 31 were as follows (dollars in thousands):



	2018		2017
Capital lease obligation (1)	$	57,210	$	59,745
Capital lease asset (2)	71,007		71,007
Accumulated amortization of capital lease asset (2)	16,386		12,745


(1)	The capital lease obligation amount is equal to the amount of AIDEA's revenue bonds outstanding.


(2)	These amounts are included in utility plant in service on the Consolidated Balance Sheets.

Interest on the capital lease obligation and amortization of the capital lease asset are included in utility resource costs in the Consolidated Statements of Income and totaled the following amounts for the years ended December 31 (dollars in thousands):



	2018		2017
Interest on capital lease obligation	$	2,921	$	3,042
Amortization of capital lease asset	3,641		3,641

In August 2015, AIDEA issued $65.7 million of new revenue bonds for the purpose of refunding all of the remaining outstanding revenue bonds (originally issued in 1998) for the Snettisham Hydroelectric Project. The revenue bonds have interest rates ranging from 4.0 percent to 5.0 percent and mature in January 2034. The capital lease obligation on Avista Corp.'s Consolidated Balance Sheet at any given time is equal to the amount of revenue bonds outstanding at that time. The payments by AEL&P under the PPA between AEL&P and AIDEA are unconditional, notwithstanding any suspension, reduction or curtailment of the operation of the project. The bonds are payable solely out of AIDEA's receipts under the PPA. AEL&P is also obligated to operate, maintain and insure the project. AEL&P's payments for power under the agreement are between $10.7 million and $13.2 million per year, including the capital lease principal and interest of approximately $5.5 million per year.

Snettisham Electric Company, a non-operating subsidiary of AERC, has the option to purchase the Snettisham project with certain conditions at any time for the principal amount of the bonds outstanding at that time.

While the PPA is treated as a capital lease for accounting purposes, for ratemaking purposes this agreement is treated as an operating lease with a constant level of annual rental expense (straight line expense). Because of this regulatory treatment, any difference between the operating lease expense for ratemaking purposes and the expenses recognized under capital lease treatment (interest and depreciation of the capital lease asset) is recorded as a regulatory asset and amortized during the later years of the lease when the capital lease expense is less than the operating lease expense included in base rates.

The Company evaluated this PPA to determine if it has a variable interest which must be consolidated. Based on this evaluation, AIDEA is not consolidated under ASC 810 "Consolidation" because AIDEA is a government agency and ASC 810 has a specific scope exception which does not allow for the consolidation of government organizations.

The following table details future capital lease obligations, including interest, under the Snettisham PPA (dollars in thousands):



	2019		2020		2021		2022		2023		Thereafter		Total
Principal	$	2,660	$	2,800	$	2,935	$	3,085	$	3,235	$	42,495	$	57,210
Interest	2,795		2,662		2,522		2,375		2,221		12,079		24,654
Total	$	5,455	$	5,462	$	5,457	$	5,460	$	5,456	$	54,574	$	81,864