Jason Lang – Investor Relations Scott L. Morris – Chairman, President and Chief Executive Officer Mark Thies – Senior Vice President and Chief Financial Officer Dennis Vermillion – Senior Vice President Christy Burmeister-Smith – Vice President, Controller and Principal Accounting Officer Kelly Norwood – Vice President

Andy S. Levi – Avon Capital Advisors LLC Paul T.

Ridzon – KeyBanc Capital Markets, Inc. Jim D.

von Riesemann – CRT Capital Group LLC Brian J. Russo – Ladenburg Thalmann & Co., Inc.

Thanks, Brandon, and good morning, everyone. Welcome to Avista's first quarter 2014 earnings conference call.

Our earnings were released 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 the President of Avista Utilities, Dennis Vermillion; Vice President, State and Federal Regulation, Kelly Norwood; and the Vice President, Controller and Principal Accounting Officer, Christy Burmeister-Smith.

I would 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 2013 which is available on our website.

In addition we plan to file our Form 10-Q for the first quarter of 2014 later today. To begin this presentation, I would like to recap the financial results presented in today's press release.

Our consolidated earnings were $0.81 per diluted share for the first quarter of 2014, compared to $0.71 for the first quarter 2013. Now, I’ll turn the discussion over to Scott.

Well, thank you, Jason, and good morning, everyone. I’ll just start, I do want to mention that our company is celebrating its 125th year anniversary and serving our customers and communities with safe, reliable energy this year On March 30, 1889, the incorporation papers forming the Washington Water Power Company was signed here in Spokane, eight months before the Washington territories became a state.

There are only three territorial companies remaining in the state and we’re very proud to be one of them. As part of our anniversary celebration, last week, we’ve rededicated Huntington park and celebrated city plaza, a beautiful area along the river that provides extraordinary views and a closeup experience of our magnificent lower falls in downtown Spokane.

our history of innovation and service excellence continues to be reflected today and the work of our employees and what they are doing to meet the energy needs of our customers and they lay a solid foundation for the energy demand for the future. Turning to the results, our first quarter consolidated and utility earnings were above our expectations and we’re off to a good start this year.

Our utility earnings increase due to the colder than normal weather, which increased both electric and natural gas retail heating levels. We continue to make progress towards completing the acquisition of Alaska Energy and Resources Company, and we do expect to close by July 1.

The transaction reflects our strategy to expand and diversify energy assets and deliver long-term value to the customers’ communities and investors that we serve. Ecova had a solid first quarter and is on track to meet our expectations for 2014.

as you recall in the past, we have discussed our interest in potentially monetizing our investment in Ecova. during 2012, Ecova had a difficult year with earnings below our expectations and we said we needed to reprove the business with solid performance in 2013, and we did just that and we continue with that performance in 2014, because of this, we believe now is the right time excuse me to explore opportunities to potentially monetize our investment.

we still believe in the great growth and earnings potential of this company; however we believe that someone else maybe better suited to take this company to the next level. As we mentioned in the earnings release this morning, we are in the process of exploring a possibility of selling our interests in Ecova.

We’ve received offers that we are evaluating. However, there’s no assurance that the terms of any proposed transaction will ultimately be acceptable to the company that the conditions to any proposed transaction would be satisfied or that any proposed transaction would be completed, if no such transaction is completed, we will continue to support Ecova’s growth initiative.

The value of any potential sales transaction will depend on marketing conditions, transaction structure and other factors. With better than expected earnings during the first quarter and based on our outlook for the remainder of the year, we are confirming our 2014 earnings guidance.

We expect to be near the upper end of the range, including the impact of the earned. this excludes any impact from the planned acquisition of AERC and Mark will provide more details on our earnings guidance in just a few minutes.

so with that, I’m going to turn it over to Mark.

Thank you, Scott. Good morning, everyone.

I just want to give a report is better than Blackhawks did last night. so we have good earnings to report, and we’re happy with that, utility earnings contributed $0.80 per diluted share for the first quarter 2014, an increase from $0.71 last year, and the increase is primarily due to colder weather what Scott mentioned, which increases our heating loads.

And the input also helping that was the implementation of general rate cases in each of our jurisdictions. And these were partially offset by expected increases and other operating expenses, depreciation and amortization and taxes other than income.

For the first quarter of 2014, we did recognize the pre-tax benefit of $1.3 million under the energy recovery mechanism in Washington that compares to benefit last year of $3.1 million. And for the full year of 2014, we expect to be in a benefit position within the arm, within the 75%, 25% company sharing band.

We are committed to updating and maintaining our system and in the first quarter we did spend $60 million on utility CapEx. Recall we expect the spend about $355 million this year in CapEx and over $350 million in 2015 and 2016.

Moving onto Ecova, their first quarter earnings were consistent with the first quarter last year at $0.02 per diluted share. Now, this does include about a half a million of cost associated with looking into the opportunity to evaluate these offers and we’ve had.

Ecova’s revenues increased 5% and totaled $44.4 million and this was an increase primarily from energy management services. Their total operating expenses including the cost to evaluate the transaction increased about 5% this year.

Our net loss on our other businesses was $0.01 per diluted share for 2014. And the net loss includes corporate cost and cost with exploring strategic opportunities and these are partially offset by net income at middle effects.

We continue to look at opportunities to develop new markets and ways for customers using electricity and natural gas primarily through LNG and CNG. We expect to continue that effort as we go forward.

I’m now going to discuss our liquidity and financing plans. In April of 2014, we amended our $400 million credit facility and expanded the expiration date to 2019, which is two years, to April of 2019.

As of March 31, we had $279 million available liquidity under our $400 million facility with $111 million of cash borrowings and $9.6 million of letters of credit outstanding. In 2014, we continue to expect and issue approximately $145 million of common stock, primarily related to the closing of the acquisition of AERC and to maintain an appropriate capital structure for our business.

We also plan to issue approximately $190 million of long-term debt, including about $90 million of combined debt issuances at AERC and AEL&P, associated with rebalancing of the capital structure at that company. As Scott mentioned earlier and we are confirming our 2014 earnings guidance consolidated to be in a range of $1.77 to $1.97 per diluted share.

But we do expect to be near the upper end of our consolidated and utility earnings guidance range, including the impacts of zero. This range does not include any impact from the planned acquisition of AERC and we expect that the addition of that AERC to Avista Corp will be slightly dilutive to earnings per share in 2014 and that it will be accretive to earnings per share in 2015 and beyond.

We expect Avista Utilities to contribute in the range of $1.68 to $1.82 per diluted share and we expect to be near the upper end of the range including zero. We expect Ecova to contribute in the range of $0.12 to $0.16 per diluted share and we expect the other businesses to lose between $0.01 and $0.03 per diluted share.

Our guidance, including 2014 guidance generally includes only normal operating conditions and does not include unusual amounts such as settlement transactions, impairments, acquisitions and dispositions until the effects of those activities are known in start. I’ll now turn the call back over to Jason for questions.

Thanks, Mark. Brandon, we’d now like to open call up for questions.

Hi, I never get go first. How are you guys doing?

Good morning, Andy.

Glad to see you guys with Ecova up for sale and just to confirm it, you’re actually selling the company, right? That’s the plan, right?

To sell the company, yes.

Right, no, IPO or anything like that, right?

No, not at this point. We looked at all of our opportunities and felt this was the best avenue.

Okay. And if it’s possible, could you frame, I mean again, the potential proceeds and also what’s the tax basis of the company?

To the extent, we get a transaction will come out with that. We’re evaluating the proposals that we have received and if we feel that it makes sense to do that.

We’ll walk through all the details of that, with the different bases and the values of what we would expect to do with the cash. The cash there really are, it’s pretty simple on what’s available to do with cash.

You can invest in your businesses. You can pay a dividend, buyback stock or reduce debt.

So those are the options and until we have a determination of what value and what the after-tax proceeds are going to be, I’m not going to speculate on what components of any of that we’re going to do.

Is there way to kind of guide us and we’ll sell on a multiple to debt/EBITDA on a multiple to revenues and a multiple to earnings?

Well, you can calculate all of those types of things. Typically, as we look at the businesses, the businesses are simple.

We’d look generally at multiples of revenue or multiples of EBIT.

Okay.

But we haven’t gone out and said what those values are. there is – we don't intend to in this call.

Okay. And again, would you hope this transaction could be as you get out to 2015 or 2016, maybe you would add like $0.18 of earnings in Ecova, kind of our estimate, not your estimate.

And so with the option as you said to either reinvested buyback start pay down debtor do a combination of all three. should this transaction be neutral to earnings, freedom to earnings you think, or is that kind of part of the decision they can process on the offers that you get?

I think that’s part of the decision-making process on what we get and we’ll evaluate the value that we receive in a potential transaction again, I want to make sure that I do state that, we may not conclude a transaction as Scott mentioned in his comments. We don’t get a transaction that’s ahead of value that we think make sense.

we like this business and we will continue to run the business, we’re not – this isn’t an attempt to have a fire sale. we think they have we created and the team there has created a great value for us and that’s what we would expect to have in this.

So, but to go through any specifics, that’s really going to be determined based on what we see and if we reach agreement, when we reach agreement will issue information to the market about that agreement if it occurs.

Is there – I’m sorry, go ahead.

We don't reach a transaction, we will also come out. Now that we mentioned the possibility, we will also come out and say we suspended that activity if we’re not able to reach agreement.

And is there a book value for what it done, the books for anything like that?

Yes, we haven’t disclosed. I mean if you look at our 10-Q and our 10-K, there is a value of the investment, where off the top of my head I don’t know what it is, but it is we do disclose that in our segment, but note it is a separate segment and recognize we own on a share basis 80%.

Right. And timing on when we may hear from you ?

Yes. Well, when we – if we are able to construct a deal, we will announce that when we have a signed agreement, and if – those talks, breakdown and it determines that we're not going to be able to have a deal, we will have to disclose that at that time.

I can’t tell you how long it will be to be there, we are evaluating a proposal that can take sometime.

Would it be care to say by the end of the third quarter we should hear or by the end of the year or?

Well, I would, yes I would expect, we would expect at least by the end of third quarter then we would have information out there to update on this.

Okay. And whatever proceeds you get, you still need to issue the shares for Alaska, right?

Yes, that transaction is a stock deal.

Right. So that you have to issue the shares and so any proceeds you get again would either be a potentials stock buyback, pay down of debt, or if you were to invest it in somewhere else, what are you thinking there?

We invest a lot in our utility. We are looking at other opportunities.

I mean, we have opportunities to invest, and we would look at that. We don’t have anything announceable, I would say, there is a transaction out there, so that’s, I’m not going to comment on that.

Yes. I guess it really comes down to proceeds and how much proceeds you get, then does it offset the earnings impact of losing Ecova and also the growth from Ecova that was going to grow $0.03, $0.04 a year.

So then, how does that comes down, which you’re trying to figure out what’s the value of the stock x once Ecova sold the proceeds?

Okay, then thank you very much. I took a lot of your time and I will follow-up Jason offline.

Thank you.

I always get to go first and Andy stole my spot. What’s the current condition of hydro?

I’m sorry, Paul, the hydro condition?

Yes.

This is Dennis, we're sitting pretty good. As of yesterday, the Northwest River Forecast Center had the Clark Fork River at a 134% in normal.

And remember the Clark Fork is where our biggest hydro generation is. And the Spokane River was at a 129% in normal.

So those would look good. Now remember that the run off actually is dependent on weather, how quickly it comes, that will determine how much actual generation we get, but we're well above the normal on our forecast and we're in pretty good place.

And I don’t want to beat on Ecova, but was this decision, did you wake up one morning and decide it was time or were there people knocking on your door maybe your thought process?

Paul, again, what I would say is that we have always been extremely confident the business. I said before that Ecova hit their numbers every single year that our expectations for 2004, except for the flub in 2012.

We always do that long-term there’s a couple of drivers that made us realize that perhaps, we weren’t the best holder of this business long-term and we’ve always thought about that. When the company performed well in 2013, which we expected because we knew that in 2012, there was really a lag based on some synergies that we thought we are going to develop in 2012, they didn’t happened, we knew that come in 2013 and they did.

Once they did, we proved it. We felt like now it’s the time to go ahead and test and see if it was something that we would do in the marketplace.

No, it was our decision, and we’re looking at it, and we will kind of go from there to see where this takes us.

In your commentary around not doing an IPO related to the concept that there’s maybe a better national owner of this?

Yes. Paul, there’s a couple of things that we really feel that, we really are excited about the organic growth opportunities have always been.

We said a couple of thing about the business that we think that are exciting for long-term. One is there's some really good international opportunities for this business.

We’re not experts in the International businesses. So, that’s one of the drivers, we also know that there’s a number of acquisitions that can happen in this space books both small and large.

So, as we evaluated the business for its long-term opportunities, we strongly look in an IPO, but we also look at the opportunity for this business continue to grow, and felt like selling it was the best avenue for success. Now, remember that call that has over 1,300 employees and many of those are in Spokane, so we are very focused on the economic development piece of this, we want these jobs to stay in Spokane.

We want to make sure this business states helping to the long-term. So, it some – there is a lot of things that were thing about as we develop our strategies around it.

Is there any debt allocated to Ecova?

Yes. They have their own debt and we disclose that every quarter.

We are filing our 10-Q later today. So, you’ll see that.

Great, great. Okay, thank you very much guys.

Thanks, Paul.

(Indiscernible) let me just start, can you just talk holistically about how you think about this modernization process, I know you said you're going to divest it, but what goes into the factors for either IPO in it or actually our right selling it. And then a follow-up question is with respect to your business.

How should we think about Ecova relative to say a tango or an O power and some of the groups they are getting out of there and why you not may not be getting the similar type of growth?

Well. A couple of things with our process, we evaluate all those opportunities as Scott said and we felt that this was opportunity to pursue the sale and we are looking at what we have again, we don’t reach agreement.

We don’t reach agreement. It’s got to be right deal and make economic sense for us and our shareholders.

So that’s what we would look at with respect to the other market transactions. There are businesses that are in and I have different components, Ecova is a very unique business and we don’t see a direct comp in the market to that they have strong pace with their client list or customer list 0.4%, of the Fortune 500 and they’re continuing to growth at on the energy management business and the expansion data management kind of they’re starting where we started.

so there’s companies that do those businesses out there, and then they have like as you mentioned tango, the telecom site that’s a component of it, while we also have the whole utility side of the business where they’re serving utilities to do, energy management and demand side management part. So their business is unique, there are a number of public companies out there, but none of them are the same.

so we don’t look at it. We look at it as how are their growth prospects and how are they going to continue to grow.

We’re still very excited about that, so really we want to see strong value for that to have it go away.

I know the Washington construct or the corporate construct out there is a lot different than any other states. Do you need any regulatory approval, if you go ahead and divest it?

This is Kelly. It’s been kept as an unregulated sub and it’s been completely independent.

so there is no need for a specific regulatory approval.

Okay. Thank you.

Thank you, guys.

Thank you, Jim.

Hi. Good morning.

Hi, Brain.

Maybe we could just give a little bit more about Ecova, why announced that you’re pursuing strategic alternatives that may or may not materialize why not announced a transaction when it’s actually signed?

Well, that’s a good question, Brian, because typically that’s what we would do. But with respect to again, with the Alaska transaction as Scott mentioned, we’re looking to move forward and that as a stock transaction, where we have to file a registration statement.

so there to issue that stock in their shareholders agreement or shareholders meeting is set up for June 10, and they need that registration statement 30 days prior, so their shareholders can have a full amount of information to evaluate whether they want to take a Avista stock in that transaction. So we felt and looking at it that we had come out and say, we were enough along in the process and looking at opportunities here that we had to at least mention that we were doing that.

so we were giving them the full story of what they could expect with our stock. so that’s the reason for the timing, typically we would wait and we would have preferred to have just announced the deal, but given the timing of that transaction in stock deal, we needed to put this out there.

Okay. That makes sense, understood.

and then just if we – as investors as and analysts were trying to figure out the tax basis with the tax leakage in an outright sale, should we use that the investment value that you pointed to in your 10-K and Qs?

I’m not. We haven’t disclosed the tax basis when we come out, it will have if it is the sale and that’s what we end up doing, they will have some tax leakage, and we believe the value will be greater than what we could have gotten in the other alternative.

so we recognized that and that’s all part of our valuation as we whether we would expect to do this or not.

Okay. and just on pure comps, you pretty much have two sides of the business, you’ve kind of like building solutions side, which I would imagine we could comp with BDP, an then you’ve got the energy efficiency and management solutions business, which have different comps.

could you maybe talk about on that side of the business, would you think it closes probably connoisseur?

I think there are a number of public companies that provide services like that, but I don’t know again, I wouldn’t say that there are particular comps specific to us. There are companies, EnerNOC, Ameresco world energy solutions.

Our companies that are public that provide energy management services, and then as you mentioned, there’s ADP and maybe a paychecks on the processing, our payment processing, those are public companies, but there’s not, Ecova is unique and you’re missing – the other part of that is, it doesn’t even have the utility part of their business. So, I would say you’ll have to make your own judgments on that what we are looking at is what we believe is, a good value if we receive that, we’ll transact, if we don’t, we’ll come and say, you know what, we’re excited about this business going forward and we didn’t get a value we thought will make sense, or going to continue to run.

And until we make that decision and determination then we’ll come out and tell you where we are. I know that may be a little frustrating, but that’s really how we have to do this.

And what would you say the organic growth rate is in the business?

Again we went from 10 to 14, to 12 to 16, in that’s in our guidance from 2013 to 2014. So that, would be the only thing that we given on what an expected growth rate is.

Is that a percentage growth rate or is that the earnings estimates?

Those are the rest of sense for share (indiscernible).

Okay. Yes, okay, got it.

And are you guys going to file an AERC rate case or is AERC file a rate case prior to the deal closure?

This is Kelly. If they file we would like to wait until after the close of the transaction.

ELMC is putting some numbers together today. And so, we’ll continue to look at that.

Okay, great. Thank you.

Thanks, Brian.

Hi, good morning.

Hi, Paul.

Hi, Paul.

I wish I could ask another Ecova question, if you are all exhausted.

Thank you, Paul.

You mentioned the CNG and LNG opportunities, could you just elaborate a little bit more that please?

Paul, we’ve said in the past that we’re looking at this, we continue to look at it. So, as part of the potential transaction or the pending transactions in Alaska, they said can you look at that for Alaska.

So, we have a group looking in that there, we’ve said before we’ve looked at it , Hawaii has been public on that . We just announced earlier an investment in Plum Energy and Plum is looking at smaller scale LNGs.

So, we are looking at different opportunities, when we have a transaction we’ll be ready and an announcement will come out. So, we are continuing to look at that.

We’re continuing to be excited about the opportunities there, but we don’t know where that’s going to take us. We don’t have deal for these yet.

So this is, we’ll just continue to look at that. And on the CNG side, largely that’s been more internal and we continue to look at possibilities there externally, but we haven’t done as much there.

It’s mostly Ecova not utility.

Okay. And also on the strategic initiative to kind of investigating, was there anything outside of CNG, LNG that you have been exploring for the company.

Not really.

Okay. And going back to the LNG, what kind of strategic advantage do you have, what would make partner verse s some of the large larger companies in this space.

I don’t know. I don’t want to say that.

That would give away our secrets, right. So, I think, there’s a lot of companies doing it, we look at it and if we can come up with unique ideas, we bring them forward.

And if that works for us that’s great, and if it is doesn’t then we won’t have those transactions. We think that we do have some unique ideas and ways to work that part of the business and we continue to work that.

Okay. Thank you very much.

Thank you, Paul.

I do have another Ecova question.

Hey, Andy.

Yes.

So, it wasn’t like you were offered, or maybe you were, but there was some crazy number on the table and you just kind of wanted to give a little teaser, I guess a better way to put it. You truly are evaluating various different offers, and have you gotten offers in the past, like last year or this was kind of a new phenomenon?

Andy, what we’ve always said was people have always been very interested in the business and we weren’t actively shopping it at all.

Right.

So people have always been out kind of playing in a weekend, I think Mark gets a call every week about the business. So, but we decided to do a formal process, I guess.

Okay.

I guess, how I would put it.

Okay. So they have like various rounds and things like that going on, is that fair?

Round one , round two

We’re evaluating the offers I’m not going to say anymore. You can go around in circles on that.

We’re evaluating offers, if they make sense, even if they don’t value.

Okay. Again the main thing is the reason you disclosed once because of the registration that you have to.

Exactly.

That’s perfect. Thank you very much.

Thank you.

There are more clever questions to ask, sorry guys. In the event that you sell that how do you think about special dividend?

Is that something out of number of possibilities?

Yes, we’ll have to look at in the event that we sell it, what’s the proceeds are and what to do with those proceeds. So, that would be a something to consider as we look at what our options are.

Okay. And then on the flip side, let’s say you can’t that you don’t sell it because you don’t think anybody wants to give you the value.

Do you need to commit any incremental OpEx or CapEx to the business?

Just to run their business, it’s all within what our expectations are for the guidance for 2014 and when we give over guidance for 2015 and 2016 would include that. We never include acquisitions in our guidance unless they’re committed or done.

So that would add the ability to continue to work for that is, we’d look at as if it was added to what they could do already in our expectations.

Super, thanks guys.

Thanks Jim.

Have you engaged in prices?

Yes.

Thank you.

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

Have a great day.