Discontinued Operations Discontinued Operations (Notes)

9 Months Ended

Sep. 30, 2015

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations, Disclosure

DISCONTINUED OPERATIONS

On June 30, 2014, Avista Capital, completed the sale of its interest in Ecova to Cofely USA Inc., an indirect subsidiary of GDF SUEZ, a French multinational utility company, and an unrelated party to Avista Corp. The sale price was $335.0 million in cash, less the payment of debt and other customary closing adjustments. At the closing of the transaction on June 30, 2014, Ecova became a wholly-owned subsidiary of Cofely USA Inc. and the Company has not had and will not have any further involvement with Ecova after such date.

Avista Capital and Cofely USA Inc. agreed to make an election under Section 338(h)(10) of the Internal Revenue Code (Code) of 1986, as amended, with respect to the purchase and sale of Ecova to allocate the merger consideration among the assets of Ecova deemed to have been acquired in the merger.

The purchase price of $335.0 million, as adjusted, was divided among the security holders of Ecova, including minority shareholders, option holders and a warrant holder, pro rata based on ownership. Approximately $16.8 million (5 percent of the purchase price) was held in escrow for 15 months from the closing of the transaction to satisfy certain indemnification obligations under the merger agreement (Escrow). An additional $1.0 million was held in escrow pending resolution of adjustments to working capital. The indemnification escrow and the working capital adjustment escrow amounts above represent the full amounts to be divided among all security holders pro rata based on ownership.

As expected, no claims were made against the Escrow as of September 30, 2015 (the end of the claims period) and accordingly, all Escrow amounts were released in October 2015 and the Company received its full portion of the Escrow proceeds together with the remainder of the working capital adjustment escrow for a total amount of $13.8 million. After consideration of the escrow amounts received, the sales transaction provided cash proceeds to Avista Corp., net of debt, payment to option and minority holders, income taxes and transaction expenses, of $143.9 million and resulted in a net gain of $70.2 million. Almost all of the net gain was recognized in 2014 with some minor true-ups during 2015.

Prior to the completion of the sale, Ecova was a reportable business segment. Amounts reported in discontinued operations for 2014 and 2015 relate solely to the Ecova business segment. The following table presents amounts that were included in discontinued operations for the three and nine months ended September 30 (dollars in thousands):

	Three months ended September 30,					Nine months ended September 30,
	2015		2014			2015		2014
Revenues	$	—	$	—		$	—	$	87,534
Gain on sale of Ecova (1)	547		—			710		161,100
Transaction expenses and accelerated employee benefits (2)	24		86			24		9,062
Gain on sale of Ecova, net of transaction expenses	523		(86		)	686		152,038
Income (loss) before income taxes	523		(86		)	686		156,513
Income tax expense (benefit) (3)	234		(31		)	201		85,741
Net income (loss) from discontinued operations	289		(55		)	485		70,772
Net income attributable to noncontrolling interests	—		—			—		(187		)
Net income (loss) from discontinued operations attributable to Avista Corp. shareholders	$	289	$	(55	)	$	485	$	70,585

(1) The gain recognized during 2015 relates to the resolution of the working capital adjustment, as well as a gain associated with the favorable settlement of outstanding litigation at Ecova that was shared between the Cofely USA, Inc. and the former shareholders and option holders of Ecova.

(2) Avista Corp.'s portion of the total transaction expenses was $9.1 million (including amounts which were withheld from the transaction net proceeds) and this was recognized during the second and third quarters of 2014 and the third quarter of 2015. All transaction expenses paid on the Ecova sale (including Avista Corp.'s portion and the portion attributable to the minority interest holders of Ecova) were $11.0 million, and of this amount, $5.4 million was withheld from the net proceeds and the remainder was paid during the second and third quarters of 2014 and the third quarter of 2015. The transaction expenses were for legal, accounting and other consulting fees, and the accelerated employee benefits related to employee stock options which were settled in accordance with the Ecova equity plan.

(3) The tax expense during 2015 resulted from a state tax true-up, partially offset by tax expense associated with the gain on sale and the final true-up of 2014 federal tax payments.