AVISTA CORP

Capital Structure

Our consolidated capital structure, including the current portion of long-term debt and short-term borrowings consisted of the following as of December 31, 2023 and 2022 (dollars in thousands):

Our shareholders’ equity increased $150.7 million during 2023 primarily due to net income and the issuance of common stock, partially offset by dividends paid.

We need to finance capital expenditures and acquire additional funds for operations from time to time. The cash requirements needed to service our indebtedness, both short-term and long-term, reduce the amount of cash flow available to fund capital expenditures, purchased power, fuel and natural gas costs, dividends and other requirements.

Short Term Borrowings

Avista Corp. has a committed line of credit in the total amount of $500 million and an expiration date of June 2028, with the option to extend for an additional one year period (subject to customary conditions). Avista Corp. also has a continuing letter of credit agreement in the aggregate amount of $50 million, and either party may terminate the agreement at any time.

In December 2022, we entered into an additional revolving credit agreement in the amount of $100 million, which was terminated in June 2023.

In December 2022, we entered into a term loan, in the amount of $150 million with a maturity date of March 30, 2023. In March 2023, we repaid the $150 million outstanding balance on the term loan.

The following table summarizes the balances outstanding and available liquidity as of December 31, 2023 (dollars in thousands):

(1)

Letters of credit are not reflected on the Consolidated Balance Sheets. If a letter of credit were drawn upon by the holder, we would have an immediate obligation to reimburse the bank that issued that letter.

The Avista Corp. credit facilities contain customary covenants and default provisions, including a change in control (as defined in the agreements). The events of default under each of the credit facilities also include a cross default from other indebtedness (as defined) and in some cases other obligations. Some of these agreements also include a covenant which does not permit our ratio of “consolidated total debt” to “consolidated total capitalization” to be greater than 65 percent at any time. As of December 31, 2023, we complied with this covenant with a ratio of 55.0 percent.

Balances outstanding and interest rates on borrowings (excluding letters of credit) under Avista Corp.'s lines of credit were as follows as of and for the year ended December 31 (dollars in thousands):

(1)

Amounts for each period are from entering the agreement in December 2022 to the termination in June 2023.

AEL&P

AEL&P has a $25 million committed line of credit with an expiration date in June 2028. As of December 31, 2023, there was $25.0 million of available liquidity under this line of credit.

The AEL&P credit facility contains customary covenants and default provisions including a covenant which does not permit the ratio of “consolidated total debt at AEL&P” to “consolidated total capitalization at AEL&P,” (including the impact of the Snettisham obligation) to be greater than 67.5 percent at any time. As of December 31, 2023, AEL&P complied with this covenant with a ratio of 48.8 percent.

As of December 31, 2023, Avista Corp. and its subsidiaries complied with the covenants of their financing agreements, and none of Avista Corp.'s subsidiaries constituted a “significant subsidiary” as defined in Avista Corp.'s committed line of credit.

Long-Term Debt

In March 2023, Avista Corp. issued and sold $250 million of 5.66 percent first mortgage bonds due in 2053 with institutional investors in the private placement market. A portion of the net proceeds from the sale of these bonds was used for the construction or improvement of utility facilities, and a portion was used to refinance existing indebtedness, including the repayment of Avista Corp.'s $150 million term loan. In connection with the pricing of the first mortgage bonds in March 2023, we cash settled four interest rate swap derivatives (notional aggregate amount of $40 million) and received a net amount of $7.5 million, which will be amortized over the life of the debt. The effective interest cost of the first mortgage bonds is 5.50 percent, including the effects of the settled interest rate swap derivatives and issuance costs.

Common Stock

We issued common stock in 2023 for total net proceeds of $112.3 million. Most of these issuances came through our sales agency agreements under which the sales agents may offer and sell new shares of our common stock from time to time, with the balance related to compensation plans. In 2023, 3.0 million shares were issued under these agreements resulting in total net proceeds of $111.8 million.

2024 Liquidity Expectations

During 2024, we expect to issue up to $85 million of long-term debt and $70 million of common stock to fund planned capital expenditures.

After considering the expected issuances of long-term debt and common stock during 2024, we expect net cash flows from operating activities, together with cash available under our credit facilities, to provide adequate resources to fund capital expenditures, dividends, and other contractual commitments.

Limitations on Issuances of Preferred Stock and First Mortgage Bonds

We are restricted under our Restated Articles of Incorporation, as amended, as to the additional preferred stock we can issue. As of December 31, 2023, we could issue $1.6 billion of preferred stock at an assumed dividend rate of 7.25 percent. We are not planning to issue preferred stock.

Under the Avista Corp. and the AEL&P Mortgages and Deeds of Trust securing Avista Corp.'s and AEL&P's first mortgage bonds (including Secured Medium-Term Notes), respectively, each entity may issue additional first mortgage bonds in an aggregate principal amount equal to the sum of:

•

66-2/3 percent of the cost or fair value to the company (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

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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

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deposit of cash.

However, Avista Corp. 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 the respective Mortgages) 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 that entity's 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, 2023, 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 Corp. and $51.4 million at AEL&P, at an assumed interest rate of 8 percent in each case. We believe that we have adequate capacity to issue first mortgage bonds to meet our financing needs over the next several years.