Fitch lifts Avista view to positive

Fitch Ratings said it affirmed Avista Corp.'s issuer default rating at BB, senior secured debt at BBB-, senior unsecured debt at BB+ and trust preferred and preferred stock at BB.

At the same time, Fitch revised the outlook to positive from stable to reflect its expectation that Avista's credit quality measures will trend upward beginning in 2007, largely due to the improvement in cash flow and reduction in deferred power costs balances that results from a return to more normal water conditions, lowering the company reliance on higher cost thermal and purchased power resources.

The agency said the ratings and positive outlook also recognize the balanced regulatory outcomes in recent filings in Washington, Idaho and Oregon and assume a continuation of reasonable regulation.

The ratings also consider Avista's high debt leverage, the negative effects of poor water conditions and high natural gas prices in recent years on utility cash flows and the higher business risk profile of Avista Energy, its unregulated energy marketing and resource management subsidiary, Fitch said.

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