Avista Corp. says its sale of claims against Enron Corp. and certain affiliates contributed to the Spokane companys earnings in the first half of 2006, which it reported Aug. 2.
Malyn Malquist, the companys senior vice president and chief financial officer, says the sale of claims against Enron, the financial implosion of which touched off federal investigations and a sweeping U.S. accounting scandal, added about 4 cents a share to Avistas earnings in the first six months of this year.
It was not an insignificant amount, says Malquist. In the first half of 2006, Avista posted net income of $45 million, or 91 cents a share, up from $28.8 million, or 59 cents a share, in the year-earlier period.
Since Enron fell apart, federal courts have convicted at least three of the companys top executives of criminal charges and have found that its staff both misstated the companys earnings and manipulated energy markets during the unprecedented surge of wholesale electricity prices in the West in 2000 and 2001.
Avistas claims against the Houston-based energy giant stemmed from a contract it had with a Bothell, Wash.-based Enron subsidiary, National Energy Production Corp., or Nepco, to build the Coyote Springs 2 natural-gas fired generating plant near Boardman, Ore., Malquist says. When Enron filed for bankruptcy, it dragged Nepco into bankruptcy with it, stopping construction of the 280-megawatt Coyote Springs 2 plant, Malquist says.
Avista sued to recover costs on two grounds, he says.
It ended up costing us more to build the plant than what the contract said, he says. Secondly, the plant wasnt done on time, which forced Avista to buy additional wholesale power.
The court found in our favor; however, it found against a company that was in bankruptcy, and collecting a claim against a company in such a position can be difficult, Malquist says. The amount of both Avistas claims and those of Mirant Corp., an Atlanta company that owned the other 50 percent of the Coyote Springs 2 project, was $45 million.
Later, says Malquist, We found that there was a market for those receivables, and Avista elected in the first quarter of this year to sell its claims against Enron.
We knew we were never going to get 100 percent of the claims, Malquist says. We wanted the certainty of knowing how much the company would receive, and we really didnt want to wait out the process to collect the entire amount, he says.
Jessie Wuerst, an Avista spokeswoman, says the Spokane company realized $8.5 million from the sale of the claims. The company applied $5.5 million of that money to reduce the cost of Coyote Springs 2, which will help ratepayers because the plants cost is in the rate base of the companys Avista Utilities subsidiary, Wuerst says.
The other $3 million from the salethe part that boosted earningswas added to the companys first-half income as other electric revenue, lost margin opportunities, Wuerst says.
Avista hasnt released an accounting of how much of the $45 million in claims it owned and how much Mirant owned, Wuerst says. The company eventually bought Mirants 50 percent interest in Coyote Springs 2, but Malquist says Mirant elected to keep its Enron claims rather than include them in that transaction.
Avista bought Mirants interest in Coyote Springs 2 at favorable terms, and thanks in part to that and the $5.5 million from the Enron claims that were used to offset Avistas costs in building the plant, the plant came in substantially on budget, Wuerst says.
Malquist says he believes that the sale of the claims all but wraps up Avistas disputes with Enron.
Our dealings with Enron, other than this particular claim, were pretty limited, he says.
Contact Richard Ripley at (509) 344-1261 or via e-mail at email@example.com.
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