Avista Corporation Q1 2008 Earnings Call Transcript

Apr.30.08 | About: Avista Corporation (AVA)

Avista Corporation (NYSE:AVA)

Q1 2008 Earnings Call

April 30, 2008 10:30 am ET

Executives

Scott Morris – Chairman, Chief Executive Officer, President

Malyn Malquist – Chief Financial Officer, Executive Vice President

Ann Wilson – Vice President of Finance & Treasurer

[Kristie Bermeister Smith] – Principal Accounting Officer

Jason Lang – Investor Relations Manager

Analysts

James Bellessa – D.A. Davidson & Company

Paul Latta – Keybanc Capital Markets

Brian Russo – Ladenburg Thalmann & Company

Paul Ridzon – Keybanc Capital Markets

[John Alley – Zimmer Lucas]

Operator

Good day ladies and gentlemen and welcome to the first quarter 2008 Avista Corporation earnings conference call. (Operator Instructions) I will now like to turn the presentation over to the host of today’s conference Mr. Jason Lang, Investor Relations Manager, please proceed.

Jason Lang

Thank you Gracie, good morning everyone and welcome to Avista’s first quarter 2008 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 Corporation Chairman of the Board, President and CEO Scott Morris, Executive Vice President and CFO Malyn Malquist, Vice President of Finance & Treasurer, Ann Wilson and Vice President, Controller and Principal Accounting Officer, Chris D, Bermeister Smith.

Before we begin, I would like to remind you that some of the statements that will be made today are forward-looking statements that involve risk 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, I would direct you to our form 10K for 2007, which is available on our website.

To begin this presentation, I would like to briefly recap the financial results presented to today’s press release. Our consolidated results for the first quarter of 2008 were net income of $0.47 per diluted share compared with earnings of $0.26 per diluted share for the first quarter of 2007.

I will turn the discussion over to Avista’s Chairman of the Board, President and Chief Executive Officer, Scott Morris.

Scott Morris

Thank you Jason and good morning everyone.

Overall, we are pleased with our results for the first quarter of 2008. Our quarterly results represented significant improvement over results for the first quarter of 2007.

In Washington, we received some much needed rate relief effective at the beginning of 2008. This was the primary driver for the improvement in our utility result.

In addition to our improved utility result, the primary reason for the improvement in our consolidated results was the $7.6 million net loss that Avista Energy in the first quarter of 2007. With the sale of that business behind us, we now have greater stability in our earnings and although our earnings were slight less than we originally planned, we are confident that we will meet our earnings forecast for the year.

Despite shortfall in earnings, relative to our expectations for the first quarter 2008, was largely due to higher than expected electric resource cost and the absorption of $3.4 million of costs under the energy recovery mechanism in Washington.

This is primarily due to colder than normal weather and as a result is partially offset by higher than anticipated natural gas margins. While we have good snow pack conditions, the temperatures remained cool so that run off during the first quarter was well below normal. As such, we needed to purchase power and fuel for generation to meet higher than expected retail demand. Based on the current snowpack conditions, we are hopeful that we will have favorable hydroelectric generation conditions during the current period May through July.

In terms of snow water equivalent, which is what we focus on, the Spokane River Basin is about 150% of normal for this time of year. The Clark Park River Basin was about 125% of normal snow water equivalent.

However, I will offer some words of caution about these figures. The high percentages are largely driven by the fact that the snow has not been melting. The value of the snowpack, in terms of electric generation, depends on when the snow melts and due to the cold spring we have experienced, we are hopeful that the strong runoff conditions will support hydroelectric generation further into the summer than normal.

However, if we experience above normal temperatures for extended periods, the snow could melt off rapidly and we would not be able to capture the value. In addition, if we do not receive at least normal amounts of rain this spring, the amount of available water could be negatively affected.

We are pleased with the position that we are in; but we are cautious about predicting the ultimate benefits of the snowpack.

Actual hydroelectric generation will depend on precipitation temperatures and other variables during the remainder of the year. It is important to know that the amounts recognized under the ERM can vary significantly from quarter to quarter due to a variety of factors including the level of hydroelectric generation as well as changes in purchase power and fuel costs.

As approved by the Washington Utility and Transportation Commission, electric rates for Washington customers increased by an average of 9.4%, which is intended to increase annual revenues by $30.2 million.

Also, natural gas rates increased by an average 1.7%, which is intended increase revenues by 3.3 million.

As approved by the Public Utility Commission of Oregon, annual revenues from our Oregon natural gas business increased by $900,000 beginning April 1 and are expected increase an additional $1.4 million on November 1. The November increase is related to placing into service a natural gas construction project and the allocation of the natural gas storage asset to our Oregon operations and maybe adjusted downward of actual costs or lower than currently estimated.

We recently filed general rate cases in both Washington and Idaho. The filings are designed to recover increases in fuel and purchase power costs and any growing customer demand, if the structure investments to increase capacity and reliability for licensing costs for our Spokane River Hydroelectric Project and expanding the storage and delivery capacity at the Jackson Quarry Natural Gas Storage Project.

Our request in Washington is for base rate increases averaging 10.3% for electric and 3.3% for natural gas. Combined, this is designed to increase annual revenues by $43.2 million. This request is based on a proposed rate of return of 8.43% for the common equity ratio of 46.3% and a 10.8% return on equity.

Our request in Idaho is for base rate increases averaging 16.7% for electric and 5.8% for natural gas. Combined, this is designed to increase annual revenues by $36.9 million. This request is based on a proposed rate of return of 8.74%, with a common equity ratio of 47.9% and a 10.8% return on equity.

Any rate adjustments ever approved by the Washington and Idaho Commission will likely become effective in 2009.

Over the next few years, we are planning for significant investment in our utility infrastructure.

For the first quarter of 2008, our capital expenditures were approximately $48 million. For the full year 2008, our capital budget is approximately $200 million; we are expecting our capital budgets to exceed $200 million in 2009 and 2010. The future investments are traditionally utility plant and that will be used to provide service to our retail customers.

We anticipate upgrading certain hydro projects and will continue to reinforce and expand our natural gas and electric distribution system.

We are close to completing the acquisition of a wind generation site. We expect to construct a 50 megawatt generation facility at an estimated cost of $120 million. This amount is not included in our estimate of future capital expenditures.

Finally, I would like to comment about the economy in our service territory. Our regional economy, taken as a whole, continues to grow faster than the national average when measured by job and population growth.

Our service territory appears to be fairing better than certain other parts of the country because of our job growth and has kept the housing market in balance and foreclosures in check.

The agriculture, mining, healthcare and manufacturing sectors, which are primary industries in our service territory, are performing well.

In particularly, strong prices for wheat and metal have lead to a resurgence of those industries.

Housing prices for 2007 increased in the majority of our service area and have remained stable in early 2008. The primary exception to this was the Medford, Oregon, area, which has experienced a modest decline in housing prices. This area did experience a large run up in prices and was more vulnerable to declines especially due to its proximity to California. Recently, the unemployment rate has drifted upward to near the national average but is still remarkably low by historical standards.

I will turn this presentation over to Malyn Malquist for an update on the financial results for each segment of our business, our financing activities and our earnings guidance.

Malyn Malquist

Thanks Scott and good morning everyone. Avista Utilities contributed $0.44 per diluted share for the first quarter of 2008 compared to $0.37 per diluted share for the first quarter of last year.

As Scott mentioned, the improvement in results was primarily due to the Washington General Rate Case implementation.

Also contributing to the improvement in utility results was a decrease in interest expense primarily due to our redemption of preferred stock and the maturity of long term debt in 2007.

The positive effects of the general rate increase and the decrease in interest expense were partially offset by expected increases in other operating expenses, depreciation and amortization and taxes other than income taxes.

Turning to Advantage IQ, Company’s net income for the first quarter of 2008 was slightly higher than the first quarter of 2007, due to an increase in operating revenues as a result of customer growth partially offset by a decrease in interest revenue on funds held for customers and increased operating costs.

Total revenues increased 14% driven by service revenues that increased 23% partially offset by a 22% decrease in interest revenue.

Results were very good for the first quarter at Advantage and we fully expect its service revenue to continue to grow; but, if we see lower Fed funds rates, this will further dampen our solid growth in this subsidiary that is why we have guidance at $0.10 to $0.12 per share for this segment instead of what looks to be more positive results based upon annualizing first quarter numbers.

The business is solid; it’s showing excellent and profitable customer growth and at some point one would expect an increase in interest rate levels, which would provide further upside of this business.

In our Other businesses, our results improved over the prior year primarily because of the net loss from Avista Energy in the first quarter of 2007. The remaining activities of Avista Engergy are no longer a reportable business segment and are included in Other for segment reporting purposes.

Over time, as opportunities arise, we plan to dispose of assets and phase out operations that do not fit with our overall corporate strategy. However, we may invest incremental funds to protect our existing investments and to invest in new businesses that fit with our overall corporate strategy.

With respect to cash flows during the first quarter of 2008, positive cash flows from operating activities and borrowings under our committed line of credit were used to fund our cash requirements. These cash requirements included utility capital expenditures of $48 million and dividends of $8.8 million.

We have long term debt maturities of $318 million in 2008. This includes the $273 million of 9.75% notes that mature on June 1, 2008.

A few weeks ago, we issued $250 million of 5.95% first mortgage bonds due in 2018 for the purpose of funding the majority of this high cost obligation.

We are currently planning to issue additional long term debt during the second half of 2008, to fund other maturing debt as well as to provide additional funding for capital expenditures and other corporate purposes.

As we have indicated in past calls, management intends to recommend that the Board consider gradually increasing the dividend payout ratio to become more in line with the average payout ratio for the utility industry, which is currently approximately 60 to 70% of earnings. Based upon our current annualized dividend rate of $0.66 per share and our current earnings guidance for 2008, our payout ratio would be about 42 to 49%.

As you will recall, the Board raised the quarterly dividend by 10% from $0.15 to $0.165 per share in February. Management intends to recommend that the Board further review our dividend level during the second half of 2008. The Board considers the level of dividends on a regular basis taking into account numerous factors including financial results, business strategies and economic and competitive conditions. The declaration of dividends is within the sole discretion of the Board.

In December of 2006, we entered into a sale agency agreement to issue up to two million shares of our common stock from time to time. We are currently planning to begin issuing common stock under this sales agency agreement during the second half of 2008, in order to maintain our equity ratio at an appropriate level.

The issuance of common stock should also help us maintain or improve upon certain financial matrix necessary to maintain or improve our credit ratings. These planned issuances were incorporated into our 2008 earnings guidance.

We are confirming guidance for 2008, consolidated earnings to be in the range of $1.35 to $1.55 per diluted share. The Company expects of Avista Utilities to contribute in the range of $1.20 to $1.40 per diluted share for 2008.

The outlook for the Utility assumes, among other variables, normal precipitation, temperatures and hydroelectric generation for the remainder of the year.

We are confirming our guidance for Advantage IQ in the range of $0.10 to $0.12 per diluted share and we expect the Other businesses to be between break even and a loss of $0.03 per diluted share.

I will turn the call back to Jason.

Jason Lang

Thanks Malyn and now we will open this call for questions.

Question-and-Answer Session

Operator

(Operator Instructions)

Your first call is from the line of James Bellessa of D.A. Davidson & Company.

James Bellessa – D.A. Davidson & Company

Good morning, on the balance sheet, it says that the current portion of long term debt is $179.7 million; but you are telling us that $273 million is maturing on June 1. How come that 273 is not in the third potion of long term debt?

Malyn Malquist

I am going to ask Kristie Bermeister Smith, our controller, to answer that question.

Kristie Bermeister Smith

Hi Jim, I really hate to say this but it is tricky accounting. Due to the fact that we have already financed that debt, we were allowed to put it into long-term. The refinancing is already in place.

James Bellessa – D.A. Davidson & Company

The 273 has been taken off your balance sheet and the new financing for 250 million is on your balance sheet?

Kristie Bermeister Smith

No, the old financing is there, but it is in long term. The new financing is not there yet because it occurred in April.

James Bellessa – D.A. Davidson & Company

I see. In your release today, you indicated favorable hydro generation conditions during the period of May through July. Do I have to assume that April was not normal hydro generation, herein?

Scott Morris

Jim, that is correct; we continue to see our spring flow, our temperatures were colder than normal. I would expect, we haven’t closed books on April, but I would expect that we would see gas margins up; but, I also would expect to see that we would eat further into the ERM balance because our hydro conditions were well below normal for the month.

James Bellessa – D.A. Davidson & Company

In your guidance statement, you say that you are assuming, among other things, normal hydroelectric generation, heretofore, you’ve been assuming slightly above. What happened?

Malyn Malquist

I think what is happened is that we have seen the first four months of the year be below average and now even though the snowpack looks very good and we do expect to have a bit longer runoff period, we are not sure that will fully make up for the below normal that we had. In other words, we think that it is going to be pretty close to normal by the end of the year. We don’t think we will necessarily be above normal now because we will end up spilling some of that hydro and not be able to generate power with it.

Scott Morris

Jim, as you know, it is just hard to predict how the shape of the hydro is going to come off and you know we are sitting in great shape from snow-water equivalent perspective, but you and I both can’t predict the weather so we don’t know how warm it is going to get, how fast. If it comes off perfectly, we will be in great shape; if it doesn’t come off perfectly then you know, we can’t predict the shape.

James Bellessa – D.A. Davidson & Company

I am assuming that in your previous guidance up to today, you were telling us that you were going to get a slight ERM benefit this year. Has that now changed?

Malyn Malquist

Yes, it has. We were making that prediction today, but I think we see a negative balance in there by the end of the year that will be at least partially offset by better than expected gas margins for the first four months of the year.

James Bellessa – D.A. Davidson & Company

Advantage IQ from time to time, you tell us the number of build sites and how much and how they have increased and the total build sites, what can you tell us there?

Malyn Malquist

We are going to look that up. It will take us just a minute to find that.

Scott Morris

Jim, Advantage IQ had an excellent Q4 of last year; a lot of those new accounts came into billing during the first quarter of 2008.

James Bellessa – D.A. Davidson & Company

Are you saying the build sites then for the quarter didn’t grow much?

Malyn Malquist

I actually believe that they did, but I am having a hard time putting my hands on the number. We signed a significant account that came online largely in the first quarter that was seven eleven and I am sure that the sites increased. I just can’t put my hands on the number right away.

Scott Morris

Can Jason call you with that number?

James Bellessa – D.A. Davidson & Company

Jason can do that, thanks.

Malyn Malquist

It will be in the 10Q too, that number.

James Bellessa – D.A. Davidson & Company

That won’t be filed for a few days is that right?

Malyn Malquist

Correct.

James Bellessa – D.A. Davidson & Company

Can you tell us some more about the 50 megawatt wind project that you are talking about?

Scott Morris

As you know Jim, we are looking at adding some renewables to our portfolio. If you look at our integrated resource plan, we have some wind and some other renewables that we had planned on adding throughout the next ten years. What we are looking at, we are looking at some wind sites that are in our service territory close to our transmission. There has been such a rush on wind sites in the Pacific Northwest; we didn’t feel comfortable waiting until the latter part of the next decade to make wind investments. We have moved up some of those investments and have had the opportunity to purchase the site in the middle of our service territory with our transmission and will make that announcement soon. There will be 50 megawatts and it will cost about $120 million. We will continue to look at sites in our service territory; we are hopeful we can find a couple more sites, at least, to develop that are close to our current transmission system.

James Bellessa – D.A. Davidson & Company

What is your best guess to when you will go operational with this project?

Scott Morris

2012.

Malyn Malquist

Jim, I am going to come back to the Advantage question.

The number of sites bills at the end of the first quarter was 214,000 sites versus 199,000 sites at year end. Remember, sites versus builds processed can be very different. For most of those sites we do electric and gas. For some of them, we do telecom and they may have multiple meters at each site. I think the number of bills processed is much higher than this number that I just gave you and I don’t have that number right in hand. You can see 15,000 sites was the growth for the quarter. That is good solid growth.

James Bellessa – D.A. Davidson & Company

You don’t have the year ago figure, do you?

Malyn Malquist

I don’t have the year ago figure; I just have the year end versus the quarter end.

James Bellessa – D.A. Davidson & Company

Thank you very much.

Operator

Your next call is from the line of Brian Russo of Ladenburg Thalmann.

Brian Russo – Ladenburg Thalmann

Good morning, can you just remind us of the mechanics of the ERM? How much has the total debt been?

Malyn Malquist

Sure, the first $4 million of additional cost or benefit is 100% absorbed or kept by the Company. The next $4 million is shared 50/50 and then anything beyond that is 90/10 sharing. So 90% picked up by the customers and 10% by the Company.

Brian Russo – Ladenburg Thalmann

Okay and I am just curious; I would imagine a favorable hydro year may have created an earnings profile up near the top end of your range and a weak hydro year toward the bottom end of the range. I think you are assuming normal hydro; does that imply kind of a middle of the range, just curious why there was no revision in the range of earnings.

Malyn Malquist

Brian, I want to go back to my previous answer. I am sorry I misspoke myself. My colleagues here caught me. It is $4 million, 100% and then it is $6 million on top of that it is 50/50. I apologize for that. Basically there is 10 million before you hit the 90/10 sharing.

Scott Morris

We are not revising our guidance because as I mentioned in my response to Jim, we have actually seen some improvement in gas margin as a result of colder than normal weather for the first three plus months of the year. There was an offset there and I do believe we are going to eat some of the ERM. That is my best guess at this point versus capturing some benefit from the ERM as we put into our guidance. We are still very comfortable with the guidance and I think with normal hydro, one would expect that we would be fairly close to the middle of the range that really can vary as we go through the year.

Brian Russo – Ladenburg Thalmann

Which should we be looking for in terms of weather patterns in the Northwest to keep close track of the runoff? Is it just going three days above normal?

Scott Morris

Brian, I guess a couple of things I would look at is precipitation patterns in the Northwest that is always the key for us and also temperature and right now prediction is for the spring to continue to be normal precipitation and kind of normal temperatures, nothing out of the ordinary. Once we get into the summer, we expect probably be warmer and a little dryer than normal once we get into the July, August range. That is the latest long term forecast; but I wouldn’t go to the bank on that either. It is just a forecast.

I think if you were to see a period of well above normal temperatures that would be a bad thing for us. If you continue to see below normal temperatures, which we have had for the last couple of months and if that pattern were to continue that actually would be a pretty good thing for us because, it would help the snow melt come off over a longer period of time.

Brian Russo – Ladenburg Thalmann

I read recently that PERC approved a transmission line by Pacific Gas & Electric. I think it runs through your service territory or you may have an opportunity to get involved in that project and can you just comment on that, please?

Scott Morris

Sure, we continue to look at transmission opportunities in and around our service territory in the Pacific Gas & Electric line is one that its preferred route is right through the heart of our service territory so we are continuing to work with Pacific Gas & Electric and other partners to study the feasibility of that line and our investment opportunity. In a very preliminary process, it is really a phase one study, we call it, and we’ll continue to look at it and if we have opportunities to invest in it and we think it is in our best interest, we will do that.

Brian Russo – Ladenburg Thalmann

Any timeline in terms of when it could possibly be commercially available?

Scott Morris

I think the best case scenario was sometime in the middle of the next decade. It is a very long term project.

Brian Russo – Ladenburg Thalmann

I also noticed on the balance sheet, accounts and notes receivable were up quite a bit and if you could just comment on that.

Ann Wilson

This is Suzanne (inaudible) the last year at this time, we had outstanding borrowings on our accounts receivable line, which nets against the accounts receivable. This year because we didn’t have any borrowings on our accounts receivable line, the accounts receivable is higher. Let me check on the exact amounts that were outstanding at the end of last year at this time.

Brian Russo – Ladenburg Thalmann

Okay, thank you very much.

Operator

Your next call is from the line of Paul Ridzon of Keybanc Capital Market.

Paul Ridzon - Keybanc Capital Market

Good morning, how big could the wind get and what would you need to do to get to where Washington wants you?

Scott Morris

In our integrated resource plan, we have 300 megawatts of wind over the next ten years plus if you look at our IRP that we shared, there is a category called Other Renewables and right now some of those Other Renewables just aren’t cost effective. They might be Other Renewables they might turn into wind. We are looking at that overall renewable package. We had predicted that the wind would come in later in the next decade, but what we have been seeing is again the cost of those sites really has made us think that we might want to move some of that construction up a little closer and that is why we are going to make some very targeted investments, probably earlier rather than later.

To meet the renewable portfolio standard law that was passed in Washington, by 2012 we need roughly between 8 and 10 megawatts of energy. As you know, most wind sites are about one third of what you build; 50 megawatts would be a little over what we need but not that much.

Paul Ridzon - Keybanc Capital Market

Do you have options on these turbines for the 50 megawatts?

Scott Morris

We haven’t finalized those; but we are confident we will be able to have them here and be able to construct and have them serve us by 2012.

Paul Ridzon - Keybanc Capital Market

I know it is a hard question to answer because there are so many moving pieces; but was cold weather a hurt or help in the first quarter?

Malyn Malquist

Paul, this is Malyn.

It was a bit of a hurt; as Scott mentioned, we were slightly below where we thought we would be at the end of the first quarter and that was entirely weather driven. Fortunately, there was an offset in improved gas sales to the negative ERM balance. But, it cost us $0.02 to $0.03 per share.

Scott Morris

Simply put Paul, the snow just didn’t melt; it just stayed in the mountains. We just had below normal stream flow and we weren’t getting the hydro that we would normally expect.

Paul Ridzon - Keybanc Capital Market

Then having to burn more expensive gas, what gas is embedded in rates?

Malyn Malquist

It is a little bit less than eight and today it is a little over ten that was the other kind of negative factor that impacted that ERM balance.

Paul Ridzon - Keybanc Capital Market

Thank you.

Operator

Your next call is from the line of Paul Latta of McAdams Wright Ragen.

Paul Latta – McAdams Wright Ragen

Good morning, thanks for taking my questions.

Scott, you talked a little about CapEx 200 million and perhaps greater in subsequent years. Can you give a breakdown or a little more colour? Are there any big lumps in the capital budget for this year or the next year or any particular areas that are drawing marginal dollars within that budget?

Malyn Malquist

Probably the largest portion for this year is our continued expansion and at our Jackson Prairie Natural Gas Storage Facility in Washington. That is going to be roughly $15 million this year. We continue to invest in Knocks and Rapids which those numbers are in the 4 to $6 million range depending on how we upgrade those turbans and then after that the numbers are just a lot of smaller projects. There is nothing really huge that we are planning on. Probably the largest investment that is not included is that wind investment we plan on making. We will have to start making some capital expenditures maybe by the end of this year or early next as we put auctions on the turbines that Paul Ridzon was talking about and we will have to start making some payments on those as we take out those options, but that is about it.

Paul Latta – McAdams Wright Ragen

Is there any way that you could give a qualitative statement about within the capital budget, the plans that you would regard as sort of upgrades to the system versus perhaps growth oriented upgrades.

Malyn Malquist

Replacements?

Paul Latta – McAdams Wright Ragen

Yes, replacing aging equipment versus…

Malyn Malquist

Sure, in our CapEx budget, we have about $40 million set aside for growth and then we have the rest is really upgrades to the liability and safety and capacity. That is really the break down.

Paul Latta – McAdams Wright Ragen

Okay, great, thanks for taking my questions.

Operator

(Operator Instructions)

Your next call is from the line of John Alley of Zimmer Lucas.

John Alley – Zimmer Lucas

Good morning, just a quick question regarding the wind (inaudible). When do you think the timing would be to pick up the site this year and then build in another year or two or would it kind of be rolled in all at once?

Scott Morris

The one we are speaking of we will finalize purchasing the site this year; we will have finalized permitting for it soon and then the idea would be that we would start the construction development of that, auction the turbines and then start the construction to have in service late 2011 early 2012. In the meantime, we are going to continue to search for other wind sites in our service territory that we can auction and be able to make sure that the wind speeds are correct, there wouldn’t be an permitting problems, it is close to our transmission and if we continue to invest in some of those sites with the idea that after this first 50 megawatt site, we would have some other investments moving past 2011, 2012.

John Alley – Zimmer Lucas

This would only be in Washington in this project?

Scott Morris

Yes, the current project is in the state of Washington, in the middle of our service territory.

John Alley – Zimmer Lucas

This is around $2400 of kw? Approximately, how much of that is land; how much is turbines?

Malyn Malquist

It’s land, it’s turbines and it’s the lease cost as part of the remittance to the land owner. I don’t have the breakdown but a large majority of it is in the turbine and the site.

John Alley – Zimmer Lucas

Kind of a ball park in terms of the planning and when the cash is coming in and out, is there anyway you can just make a guess, you know 400 and 2400 is land and the other 2,000 is turbines? Is that a good way to think about it?

Malyn Malquist

We can get back to you on the turbine cost; I don’t have it off the top of my head. I can have Jason give you a call; but, we know that the turbine cost is expensive, but I had just better not guess. I would like to give you a call back and we can give you that number. That is an easy number to give you.

John Alley – Zimmer Lucas

I would appreciate that, thank you.

Operator

Your next call is a follow up call from the line of Brian Russo of Ladenburg Thalmann.

Brian Russo - Ladenburg Thalmann

Hi, could you just update us on the hydro relicensing progress.

Scott Morris

We are pleased with the progress we are making; we’ve continue to work, I think, with our stake holders. We currently have made some good progress in the state of Idaho and our are going to the State of Washington process, so what I can say is that we are optimistic and we continue to reach settlement with different interest group and are hopeful that we could have it licensed by the end of this year or some time early next.

Brian Russo- Ladenburg Thalmann

Great, also lastly on the capital IQ, have you identified any opportunities that the demand side management marketplace.

Malyn Malquist

On Advantage IQ, absolutely, we have a business segment that is really focused on helping our customers with those kinds of activities. It is a fairly small piece of our business. I think last year that was somewhere between 2 and $3 million of total revenue come from consulting services is what we put that under. We do think that is going to expand very greatly as we see the whole green footprint carbon issues that our customers are struggling to deal with. We have great tools to help them. I think we are going to see that business grow pretty significantly over the next couple of years.

Before we lose you, Ann has the answer to your earlier question.

Ann Wilson

Brian, the reason that increase in the accounts receivable balance that I was talking about, our borrowings on our accounts receivable facility at the end of March were 15 million versus 85 million at the end of December. That is the 70 million of that delta is just due to the outstanding borrowing under the accounts receivable program.

Brian Russo- Ladenburg Thalmann

Okay, thank you.

Operator

We now have a follow up question from the line of Paul Ridzon of Keybanc Capital Market.

Paul Ridzon - Keybanc Capital Market

What are you thinking from a regulatory stand point of investment in the wind, certainly on the land piece before it is operational and the ability to get a return on that?

Malyn Malquist

We would have to ask for an order to do that, Paul. We do believe that we are really following state regulation here and I would like to think that we have a fairly high probability of getting that; but we do have to ask for it. I think that the initial cost of acquiring the site is going to be fairly minimal as a percentage of that $120 million. It is not a real significant amount for us to need to earn a return but we think it is justified. I do think we will start spending some dollars quickly on the development itself and that would earn allowance for funds used during construction on it. The land component is a small component, frankly.

Paul Ridzon - Keybanc Capital Market

Have you gotten your accounting order on the Montana River Beds?

Scott Morris

Yes.

Paul Ridzon - Keybanc Capital Market

That was favorable?

Scott Morris

Yes, it was.

Paul Ridzon - Keybanc Capital Market

Okay, thank you again.

Operator

You have no questions as this time; I would now like to turn the call back over to management for closing remarks.

Scott Morris

I want to thank you for joining us today; we certainly appreciate your interest in our Company. Have a great day.

Operator

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

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