Good day ladies and gentlemen, and welcome to the Avista Corporation First Quarter 2012 Earnings Conference Call. My name is Lacey and I’ll be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today’s call, Mr. Jason Lang, Manager of Investor Relations. Please proceed.

Thank you, Lacey. Good morning everyone. Welcome to Avista's first quarter 2012 earnings conference call. Our earnings release pre-market this morning and the release is available on our website at avistacorp.com. Joining me this morning are Avista Corp Chairman of the Board, President and CEO, Scott Morris; Senior Vice President and CFO, Mark Thies; Senior Vice President and President of Avista Utilities, Dennis Vermillion; Vice President State and Federal Regulations, Kelly Norwood; and the Vice President, Controller and Principal Accounting Officer, Christy Burmeister-Smith. I like to remind everyone that some of the statements that will be made today are forward-looking statements that involve assumptions, risks and uncertainties, which are subject to change. For reference to the various factors, which could cause actual results to differ materially from those discussed in today's call, please refer to our Form 10-K for 2011, which is available on our website. To begin this presentation, I'd like to recap the financial results presented in today's press release. Our consolidated earnings were $0.65 per diluted share for the first quarter of 2012, that compares $0.73 for the first quarter of 2011. Now, I'll turn the discussion over to Scott Morris.

Well, thank you Jason and good morning everyone. Avista had a solid first quarter of 2012 and we are confirming our consolidated earning guidance for the year. Ecova, our primary unregulated subsidiary completed the acquisitions of Prenova in November, 2011; and LPB Energy Management in January, 2012. These acquisitions increase Ecova’s market share and allow Ecova to offer its clients a broader range of services leading to potential future earnings growth. Ecova had a net loss in the first quarter, primarily due to the cost of completing the acquisitions and the accelerated pace of integrating Prenova and LPB. We expect for the full year 2012 that these acquisitions will have a neutral impact on earnings, as the benefits gained from the combination are expected to offset the costs incurred during the first quarter. Our utility earnings were within our expectations for the first quarter of 2012. However, they were slightly below the first quarter of 2011, which was colder than average with precipitation, snowpack and stream flows well above average. To maintain service reliability and meet the energy needs of our customers, we expect to continue to make significant capital investments in generation, transmission and distribution systems. Utility CAPEX was $58 million for the first quarter of 2012 and we expect capital expenditure to be about $250 million each of 2012 and 2013. The timely recovery of capital investments and operating costs remain one of our biggest challenges. We filed the general rate case in Washington in early April. The filings are designed to increase annual electric revenues by $41 million and increase annual natural gas revenues by $10 million. We also proposed a one-year rate reduction designed to rebate the customers under the energy recovery mechanism in Washington; the benefit in 2011 from low natural gas fuel prices and…

Thanks Scott. Good morning everyone. For the first of the 2012, our utility earnings contributed $0.67 per diluted share, a decrease from $0.70 in the first quarter of last year. Net income from our utility operations decreased $640,000 in the first quarter of 2012, as compared to 2011. Earnings per share also reflects dilution from common stock issuances. The first quarter of 2012, we recognized a benefit of $4.2 million under the energy recovery mechanism; that compares to $4.9 million in the first quarter of 2011. We expect the benefit under the ERM for the full year of 2012 to be within the 90% customer 10% company sharing band. This is primarily due to natural gas fuel prices below the amount included in base rates, as well as above normal hydroelectric generation expected. As part of our Washington general rate case filing, we proposed a continuation and a modification of the ERM. Among our proposed changes is a proposal for the entire power supply cost variance to be shared 90% customer, 10% company consistent with our power cost adjustment mechanism in Idaho. This would eliminate the initial $4 million debt band and the sharing bands when annual power cost variance is between $4 million and $10 million. We have also proposed that customer rates be adjusted on an annual basis to provide a surcharge or rebate to customers for any deferral balance resulting from the ERM in the prior calendar year. As Scott mentioned earlier, the first quarter of 2012 Ecova had a net loss. This was primarily due to costs associated with completing and integrating the acquisitions of Prenova and LPB. Ecova’s revenues increased $7.9 million, as compared to the first quarter of 2011 and totaled $37 million. The acquisitions of Prenova and LPB added $5.2 million to operating…

Thanks Mark and Lacey, now we’d like to turn -- to open this call up for questions.

[Operator Instructions] And our first question will come from the line of Paul Ridzon with KeyBanc.

Had a couple of questions on Ecova, what’s driving the revenue timing issues? Secondly, are the merger integration and acquisition costs, was that a 1Q event so that - not flow into the rest of the year? And then the depreciation of intangibles, I assume that’s an ongoing impact?

You’ve got three questions there. I’ll try to take them in order. On the revenue side, we did get $5.2 million of additional revenues related to the acquisition. Recall that in the first quarter LPB was closed at the end of January, so that only recognizes two months, not three months, so it is not necessarily the full and that’s part of our $37 million in revenue. Our revenues, they come in -- we have certain revenues on the expense management side and energy management side of the business that have a long consistency, but with certain projects on the utility side those can ebb and flow as we continue to do work on those projects. So, we don't -- it’s not always consistent with our revenues, but we do expect as we said earlier in the remarks that we do expect to have consistent organic growth with last year. So, we are expecting our revenues for 2012 to show that double digit growth in 2012. Now with respect to certain other costs, we forecast cost over the course of the year. We accelerated some of those costs or most of those costs into the first quarter, that doesn’t mean that we won’t have some additional integration as we continue to go, we’re not completed with the integration. We just did these transactions. So, we may have some additional cost, we don’t expect them to be significant as in the first quarter, but there may be some costs that continue to occur throughout the year as we integrate these businesses. With respect to the amortizations those will continue, those are intangible assets that we acquired as part of the transactions and we will amortize those over the course of a certain period and that could be any number of years depending on the timing or the type of intangible assets. We’ll fully disclose the different classifications in our 10-Q, which we will file later this week. Did that answer all your questions Paul, I believe I did, but if I missed one, please let me know.

Yes, you did. And I have one follow-up, just your guidance of utility assumes no ERM benefit at the mid-point, but you know saying we're in 90:10 sharing band that’s about $0.07 at least that we can add on top of that, correct?

Well, to get to the 90:10 again I will remind you of the bands, it’s $4 million on the first 1, on the debt band and then we get 25% of the next $6 million, so that’s $1.5 million. So, its $5.5 million, and then you need to do the calculation for we are expecting to issue some equity this year up to $45 million and we did issue equity last year. So, on an average basis you can do the calculation for the cents per share. We didn’t say it in that terms, we just said what the amount is.

Those are pre-tax or after tax?

Pre-tax.

Pre-tax, okay. Thank you very much.

And our next question will come from the line of Michael Klein with Sidoti and Company.

Quick follow up to that, you just talked about with Ecova, I guess, can you just talk a little bit more about, maybe the seasonality of the business and the businesses that you acquired and how that overlays with the organic business and in terms of what to expect throughout the course of the year?

Sure, Michael, the exciting thing about the acquisitions of both LPB and Prenova it really adds to the suite of products and services that we can cross-sell with a broader range of customers -- that's really one of the key drivers, strategically why we wanted to acquire those businesses. There were some like services that they provided like bill pay, but we’ve got such a suite of products and services beyond bill pay now that when we can sell into those customers we know the cross-sell and that’s why, as Mark mentioned, we’re confident that we will achieve the double-digit organic growth that we had in 2011 and 2012. From a seasonality perspective remember a lot of the revenue is recurring and that's one of the things we like about the business. I think some of the seasonality happens primarily in the utility side of the business. As Mark mentioned, some of the contracts roll-in and roll-out, we do some other work depending on when the utility wants us to do it. A lot of times that goes into the fourth quarter. We’re really excited about where Ecova is and how these two acquisitions really set Ecova up for success for the future.

Okay, and kind of shifting gears to the utilities side, I apologize if you have talked about this in more length, I might have missed it, but the proposed change for power supply costs, can you talk about that a little bit?

Are you referring the change to the ERM, the Energy Recovery Mechanism on our rate filings?

Yes.

Yes, this is Kelly; we were required from a settlement agreement 5 years ago to - after 5 years make a proposal to the commission related to the ERM to provide all parties the opportunity to propose changes, continuation and so on. So in this filing we address that, as part of the filing we are proposing to eliminate the debt bands and go to a 90:10 sharing from $1, which is consistent with what we have in place today in the State of Idaho in our power cost adjusted mechanism. As you probably remember in the last couple of years, we’ve had good hydro conditions, and we’ve also experienced in the past several years declining natural gas prices, all of which have worked in our favor. Long-term -- we’re in this for the long-term -- that may not occur and costs are going to go both ways, and so we believe long-term that a 90:10 sharing is the most appropriate place to be given that most of these changes are beyond our control in terms of changes in hydroelectric conditions, as well as market prices.

Okay. And can you just remind us on the timing of additional rate cases assigned from Washington, which is obviously filed.

Right, in Idaho, we agreed to not file for rates to be effective prior to April 1, 2013. So our plan at this point is to file later this year in Idaho. We do not have specific plans related to Oregon. We will certainly be taking a look at that later in the year.

[Operator Instructions] And our next question will come from the line of James Bellessa, with D.A. Davidson.

I'd like to go back to Ecova, is Prenova or LPB larger, which one is larger?

LPB was the larger acquisition, Jim.

Okay, and on Prenova, was that November 1, or was that end of November that you acquired that?

November 30, I believe, Jim.

And I’m wondering why there weren't integration costs folded into the fourth quarter of last year on Prenova?

Well, to some extent again as it occurs, it’s the timing of when changes occur and there may have been some cost that just didn’t rise to the level of disclosing. I’m not going to say that we didn’t have certain integration costs in the month of December with respect to that, but they weren’t significant. In the first quarter, they were big enough that we needed to disclose those costs.

Jim, and I would also just say that we knew that we were going to be closing LPB at the time we are closing Prenova. Jeff Heggedahl our CEO and the team, Jeff this is, Jeff has had over 20 of these integrations in his carrier both at Ecova prior, so we were planning on understanding we were going to close LPB and a lot of it had to do with the timing of how you want to integrate two businesses at the same time. So, some of those costs we knew were going to go into the first quarter based on the acquisition. So, it’s part of a thoughtful strategy on Jeff and his team’s part to make sure that we put these businesses together the right way.

You must have already anticipated this first quarter loss, your guidance is not changing $0.16 and $0.19, for Ecova for the full year was what you previously suggested and that’s repeated now again today?

That’s exactly right, Jim.

And our next question is a follow-up question from the line of Paul Ridzon with KeyBanc.

Could you give a little more detail on the rebate you talked about from - I guess it was the '10 and '11 ERM benefits?

Yes, this is Kelly. During 2011, we had about normal hydro, and natural gas prices were lower than what we had in base rates. So, we accumulated a rebate of $12.9 million during 2011 in the ERM. So, as part of this general rate case we are proposing that at the time at the conclusion of this rate case, we would rebate to customers over a one-year period that $12.9 million.

What would the normal mechanism be?

Normal mechanism would have us accumulate the balance until there is a 10% rate adjustment, up or down, and this $10 million is roughly, I think it’s 2.9%. So that is a proposed change in the mechanism.

What would 10% be?

10% would be order of magnitude $45 million to $50 million.

Got it. So this is rightfully rate payer money that was going to probably work its way back depending on how things flowed?

That’s correct. It doesn’t affect earnings because it is something we accumulated on our balance sheet and we are just rebating to customers.

And at this time, we have no further questions in queue. I would like to turn the conference back over to Jason Lang for any closing remarks.

I’d like to thank everyone for joining us today. We certainly appreciate your interest in our company. Have a great day.

Thank you for your participation in today’s conference. This concludes the presentation, you may all disconnect.