Some of the shock waves that have rolled out in virtually every direction from Enron Corp. since it filed for protection from creditors Dec. 2 are being felt here at Avista Corp.


Enrons bankruptcy filing constituted a default under contracts that affiliates of the Houston energy giant had with Avista and some of its subsidiaries to buy and sell energy, to build the Coyote Springs 2 power plant, and to buy and sell electricity under a power-exchange agreement with a Portland utility that Enron owns.


Despite those defaults, Were in a good position, because we owe them, they dont owe us, says Avista Senior Vice President and Chief Financial Officer Jon Eliassen.


Thats the position he would prefer to be in, because while companies that are in Chapter 11 often try aggressively to collect what theyre owed, they usually dont act so quickly when it comes to paying their own debts, Eliassen says. He also says that any losses Avista experiences from the contracts with the Enron subsidiaries arent expected to have a material effect on the Spokane company.


Enron subsidiaries owe Avista Corp. and its Avista Energy subsidiary a total of $17.2 million for electricity the two Spokane companies delivered to the Enron subsidiaries last November, Eliassen says.


Meanwhile, Avista Corp. and Avista Energy could owe to Enron subsidiaries less than $47 million to settle out contracts for future energy sales that Avista Corp. and Avista Energy terminated after Enron filed for Chapter 11 protection, Eliassen says.


Thats the worst-case scenario, and its a conservative estimate, he says. We may not owe them anything, really. Basically, thats going to be up to the Bankruptcy Court judge.


When Enron and certain of its affiliates filed for protection under Chapter 11 of the U.S. Bankruptcy Code, the filing constituted an event of default under contracts between Avista Corp. and Avista Energy, respectively, and certain Enron affiliates, Enron Power Marketing Inc., Enron North America Co., and Enron Canada Corp., that are guaranteed by Enron, Avista says in its recent 10-K annual report. As a result, Avista Corp. and Avista Energy terminated all but one of these contracts and suspended trading activities with most Enron affiliates.


While it appears that Avista owes Enron more than Enron owes Avista, the Spokane company has a right of offset under its energy-sales contracts, and will deduct the $17.2 million that the Enron subsidiaries owe Avista and Avista Energy from what the two Spokane companies end up owing the Enron subsidiaries, Eliassen says. Assuming such an offset, he says, Our exposure is less than $30 million.


The contracts mostly involve sales of electricity over the next two to three years to the Enron subsidiaries by Avista Corp. and Avista Energy, with some purchases of energy by them from the Enron subsidiaries. The estimate that Avista Corp. and Avista Energy would have to pay less than $47 million to settle out the contracts is based on broker quotes and assumptions on future market prices and other factorsand those quotes and assumptions could change, Eliassen says.


Also, he says, When the contracts are terminated, we get the power back, and we can resell it to someone else. Its impossible to say how much Avista will receive when it sells the power to other buyers, however, because the prices of those sales will be subject to market conditions at the time of the sales, Eliassen says. He says the contracts primarily are with Avista Energy, Avista Corp.s energy-trading subsidiary, and have nothing to do with the regulated business of Avista, which is Avista Utilities.


Just as Enron guaranteed the obligations of its subsidiaries under the power sale and purchase agreements, so it guaranteed the obligations of its wholly-owned National Energy Production Corp. subsidiary, which is responsible for the engineering, procurement, and construction of the Coyote Springs 2 gas-fired power plant, near Boardman, Ore., Avista says. Avista launched construction of the $185 million, 280-megawatt plant last year and sold a 50 percent interest in the project to Mirant Corp., of Atlanta, in October. The generating plant is still under construction.


Even though National Energy wasnt included in the bankruptcy filings by Enron and its affiliates, the filing by Enron constituted a default under the Coyote Springs 2 construction contract because Enron guaranteed National Energys obligations, Avista says.


eIt says that after Enrons filing, National Energy and Coyote Springs 2 LLC, which was formed by Avista to build Coyote Springs 2, amended the construction contract. The change authorized Coyote Springs 2 LLC to make immediate draws under a letter of credit posted to secure National Energys performance and enabled Coyote Springs 2 LLC to pay National Energys third-party subcontractors directly. Coyote Springs 2 LLC is continuing to assess the ability of National Energy to perform its obligations under the contract, Avista says.


Eliassen says that even though there was some slowdown in the work on the plant right after Enron filed for protection from creditors, the plant is still on schedule.


Well have the plant on line in the third quarter, he says.


Finally, even before Enron filed for protection from creditors, one of its affiliates, Enron Power Marketing Inc., defaulted on two $150,000 monthly payments it owed to Avistas Spokane Energy LLC subsidiary under a power-exchange agreement between Avista Corp. and Portland General Electric (PGE), which Enron owns.


Under that agreement, which doesnt expire until 2016, Avista provides electricity to PGE during the Portland utilitys peak demand period each day, sometimes for as long as eight hours or so. PGE provides power to Avista at another time of day so Avista can maximize its resources during those periods by doing such things as allowing reservoirs to fill rather than generating hydropower with the water.


Avista obtained advance payment of $145 million in 1998 for the value of the power-exchange agreement, Eliassen says. An Enron subsidiary, Enron Power Marketing Inc. (EPMI), helped set up for that so-called monetization agreement and acts as an intermediary because of regulatory restrictions that keep Spokane Energy LLC, which was set up solely for the monetizing of the power-exchange agreement, and Avista Corp. from dealing directly with each other, Avistas 10-K says.


It says EPMI is obligated to pay about $150,000 a month to Avista Corp. for its power purchases and servicing functions under the power-exchange agreement. After EPMI missed two of those payments, Avista Corp. and EPMI in December entered into an agreement that allows Avista Corp. to continue receiving the monthly payments from EPMI while it evaluates alternatives regarding EPMIs future involvement in the monetization transaction.