Fitch Upgrades Avista Corp's IDR to 'BBB-'; Outlook Stable

NEW YORK--(Business Wire)--
Fitch Ratings has upgraded Avista Corporation (Avista) and its subsidiary Avista
Capital II's Issuer Default Ratings (IDRs) and debt ratings as follows:

Avista

--Long-term IDR to 'BBB-' from 'BB+';

--Senior secured debt to 'BBB+' from 'BBB';

--Secured bank facility to 'BBB+' from 'BBB';

--Senior unsecured debt to 'BBB' from 'BBB-';

--Short-term IDR to 'F3' from 'B';

Avista Capital II

--Preferred securities to 'BBB-' from 'BB+'.

The Rating Outlook is Stable.

The upgrades and Stable Outlook mainly reflect Avista's more balanced regulatory
environment, an improved financial profile, and management focus on the core
utility business. Avista has begun filing general rate cases on a more frequent
basis, which has reduced regulatory lag and enhanced the company's relationship
with the various regulatory commissions. The company's Purchased Cost Adjustment
mechanism in Idaho and Energy Recovery Mechanism in Washington limit the
downside to Avista of increased electric power supply expenses, and Purchased
Gas Adjustment clauses in Washington, Idaho, and Oregon offer a fair amount of
support for Avista's natural gas utility operations.

Avista's financial profile improved significantly in 2008, primarily as a result
of rate increases in Washington effective Jan. 1, 2008. Lower interest expense,
as well as an increase in wholesale natural gas sales and other resource
optimization activities also provided some benefit. Cash flows are expected to
strengthen in 2009 due to recent rate increases effective toward the end of last
year in Idaho and Oregon and additional rate increases in Washington effective
Jan. 1, 2009. EBITDA interest coverage and FFO interest coverage of more than
4.0 times (x) are expected in 2009, with debt to EBITDA likely to be well below
4.0x going forward. These metrics are consistent with the 'BBB-' long-term IDR
rating category.

In addition, the December 2008 settlement with the Coeur d'Alene Tribe over
water storage issues resolved a long-time dispute and resulted in a 50-year
agreement, clearing a hurdle that will allow for a long-term license renewal
with the FERC for the company's Spokane River Project hydroelectric generation
facilities.

Following the company's June 2007 sale of substantially all of its Energy
Marketing and Resource Management segment's contracts and operations to Shell
Energy, Avista has remained focused on its core, regulated utility operations,
which account for 94% of operating revenues and 95% of earnings. Its main
unregulated business is Advantage IQ, Inc., which is a fee-based business that
processes bills and provides facility information and utility cost management
services for large customers in North America.

Credit concerns include the seasonal and annual volatility of generation from
Avista's hydroelectric generation facilities, which typically account for more
than 50% of company-owned generation. During periods of lighter snowpack and
lower streamflow, Avista must make up the difference in reduced hydroelectric
generation by either purchasing power in the spot market or increasing output
from its natural gas generating facilities, increasing net power supply costs
above amounts reflected in rates. However, Fitch notes that the negative effect
of below normal hydro conditions is mitigated by the aforementioned regulatory
mechanisms authorized by Washington and Idaho regulators.

Avista Corp. is an integrated electric and natural gas utility with operations
in eastern Washington, northern Idaho, and northeast and southwest Oregon. The
company serves 355,000 retail electric and 315,000 natural gas distribution
customers. Subsidiary Avista Capital, Inc. is an intermediate holding company
and parent of Avista's non-utility operations, including Advantage IQ.

Fitch's rating definitions and the terms of use of such ratings are available on
the agency's public site, www.fitchratings.com. Published ratings, criteria and
methodologies are available from this site at all times. Fitch's code of
conduct, confidentiality, conflicts of interest, affiliate firewall, compliance
and other relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings, New York
Kevin L. Beicke, CFA, +1-212-908-9112
Philip Smyth, CFA, +1-212-908-0531
Media Relations:
Cindy Stoller, +1-212-908-0526
cindy.stoller@fitchratings.com

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