Document:

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                                                                    EXHIBIT 10.3

                                                                           Ambac

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                             BOND DELIVERY AGREEMENT

                                 --------------

                               AVISTA CORPORATION

                                       TO

                           AMBAC ASSURANCE CORPORATION

                                 ---------------

                             Dated December 15, 2004

                                 ---------------

                                   Relating to
                  First Mortgage Bonds, Collateral Series 2004C

                                 ---------------

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      THIS BOND DELIVERY AGREEMENT, dated December 15, 2004, between AVISTA
CORPORATION, a Washington corporation (the "Company"), and AMBAC ASSURANCE
CORPORATION, a Wisconsin-domiciled stock insurance company ("Ambac");

      WHEREAS, Ambac and the Company have entered into the Insurance Agreement,
dated as of September 1, 1999 (the "1999 Insurance Agreement") as supplemented
by the Insurance Agreement, dated as of January 1, 2002 (the "2002 Insurance
Agreement" and, together with the 1999 Insurance Agreement, the "Insurance
Agreement"), pursuant to which Ambac has issued, among other things, the 1999B
Policy and the 2002B Surety Bond in respect of the 1999B Revenue Bonds (as such
terms are hereinafter defined);

      WHEREAS, the Company has established its First Mortgage Bonds, Collateral
Series 2004C, in the aggregate principal amount of $66,700,000 (the "Bonds"), to
be issued under and in accordance with, and secured by, the Mortgage and Deed of
Trust, dated as of June 1, 1939, of the Company to Citibank, N.A., as successor
trustee, as heretofore amended and supplemented and as further supplemented by
the Thirty-sixth Supplemental Indenture, dated as of December 1, 2004 (the
"Thirty-sixth Supplemental Indenture"), such indenture, as so amended and
supplemented, being hereinafter sometimes called the "Mortgage";

      WHEREAS, the Bonds have been established in the same aggregate principal
amount as the 1999B Revenue Bonds and are to bear interest at the same rate or
rates as the 1999B Revenue Bonds; and the principal of and interest on the Bonds
are to be payable at the same times as the principal of and interest on the
1999B Revenue Bonds;

      NOW, THEREFORE, in consideration of the issuance and sale by the City (as
hereinafter defined) of the 1999B Revenue Bonds and the loan of the proceeds
thereof to the Company as provided in the 1999B Loan Agreement (as hereinafter
defined), of the issuance by Ambac of the 1999B Policy and the 2002B Surety Bond
pursuant to the Insurance Agreement, of the waiver by Ambac of the restrictions
contained in Section 2.02 of the 1999 Insurance Agreement and Section 2.03 of
the 2002 Insurance Agreement pursuant to the terms hereof and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
irrevocably acknowledged, the Company proposes to issue and deliver the Bonds to
Ambac upon the terms and conditions set forth herein.

                                    ARTICLE I

                                      BONDS

SECTION 1.1. DELIVERY OF BONDS.

      The Company hereby delivers to Ambac Bonds in the aggregate principal
amount of $66,700,000, maturing on October 1, 2032 and bearing interest as
provided in the Thirty-sixth Supplemental Indenture. The obligation of the
Company to pay the principal of and interest on the Bonds shall be deemed to
have been satisfied and discharged as and to the extent set forth therein and in
the Thirty-sixth Supplemental Indenture.

      The Bonds are registered in the name of Ambac and shall be owned and held
by Ambac subject to the provisions of this Agreement and the Company shall have
no interest therein.

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Ambac shall be entitled to exercise all rights of bondholders under the Mortgage
with respect to the Bonds.

      Ambac hereby acknowledges receipt of the Bonds.

SECTION 1.2 PAYMENTS ON BONDS.

      Ambac, as the registered owner of the Bonds, shall be entitled to retain
and apply to its own account the proceeds of payments of principal of and
interest on the Bonds; provided, however, that if at the time of any such
payment of principal of or interest on the Bonds the corresponding payment of
principal of or interest on the 1999B Revenue Bonds shall not have been made to
the holders thereof, Ambac shall turn such payment in respect of the Bonds over
to the 1999B Revenue Bond Trustee (as hereinafter defined) for deposit into the
Principal Amount or the Interest Account, as the case may be, within the Bond
Fund under the 1999B Revenue Bond Indenture (as hereinafter defined).

SECTION 1.3 WAIVER.

      In consideration of the delivery of the Bonds as contemplated by Section
1.1 hereof, Ambac hereby consents and agrees that, during the period from and
including the date of this Agreement to and including June 14, 2005, (a) the
Company shall not be required to comply with the provisions of Section 2.02 of
the 1999 Insurance Agreement or Section 2.03 of the 2002 Insurance Agreement and
(b) the non-compliance by the Company with the provisions of Section 2.02 of the
1999 Insurance Agreement or Section 2.03 of the 2002 Insurance Agreement shall
not constitute an Event of Default (as defined in either the 1999 Insurance
Agreement or the 2002 Insurance Agreement), and Ambac hereby waives any such
non-compliance. On and after June 15, 2005, the waiver provided by this Section
1.3 shall cease to be effective, regardless of whether Ambac continues to
possess the Bonds, and the failure of the Company to comply with Section 2.3,
hereof or with Section 2.02 of the 1999 Insurance Agreement and Section 2.03 of
the 2002 Insurance Agreement shall constitute an Event of Default under the
Insurance Agreement, notwithstanding the grace period and notice requirement
provided by Section 3.01(c) thereof; it being understood and agreed that
compliance with Section 2.3 hereof shall be deemed to constitute compliance with
Section 2.02 of the 1999 Insurance Agreement and Section 2.03 of the 2002
Insurance Agreement.

                                   ARTICLE II

                    NO TRANSFER OF BONDS; SURRENDER OF BONDS

SECTION 2.1. NO TRANSFER OF THE BONDS.

      Ambac shall not sell, assign or otherwise transfer any Bonds delivered to
it under this Agreement except to a successor obligor on the 1999B Policy. The
Company may take such actions as it shall deem necessary, desirable or
appropriate to effect compliance with such restrictions on transfer, including
the issuance of stop-transfer instructions to the trustee under the Mortgage or
any other transfer agent thereunder.

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SECTION 2.2. SURRENDER OF BONDS.

      If (a) at any time 1999B Revenue Bonds in any principal amount shall have
ceased to be "outstanding" under the 1999B Revenue Bond Indenture and (b) at
such time or thereafter there shall be no amounts due to Ambac under Section
2.01(a) of the 1999 Insurance Agreement in respect of the redemption or payment
of such 1999B Revenue Bonds, Ambac shall forthwith surrender to, or upon the
order of, the Company an equal principal amount of Bonds.

SECTION 2.3 SUBSTITUTE BONDS

      The Company hereby covenants to issue and deliver to the 1999B Revenue
Bond Trustee, no later than June 15, 2005, First Mortgage Bonds, equal in
principal amount to the 1999B Revenue Bonds and bearing interest at the same
rate or rates, payable at the same times, as the 1999B Revenue Bonds (such First
Mortgage Bonds being hereinafter called the "Substitute Bonds"), in order to
evidence or secure the Company's obligations under Section 4.01 of the 1999B
Loan Agreement. Upon, and as a condition to, the issuance and delivery of the
Substitute Bonds to the 1999B Revenue Bond Trustee, as aforesaid, Ambac shall
surrender the Bonds to, or upon the order of, the Company.

                                   ARTICLE III

                                  MISCELLANEOUS

SECTION 3.1 DEFINITIONS.

      "CITY" means the City of Forsyth, Montana, a political subdivision of the
State of Montana.

      "1999B POLICY" means the municipal bond insurance policy issued by Ambac
in respect of the 1999B Revenue Bonds.

      "1999B LOAN AGREEMENT" means the Loan Agreement, dated as of September 1,
1999, between the City and the Company, relating to the 1999B Revenue Bonds.

      "1999B REVENUE BONDS" means the Pollution Control Revenue Refunding Bonds
(Avista Corporation Colstrip Project) Series 1999B issued by the City.

      "1999B REVENUE BOND INDENTURE" means the Trust Indenture, dated as of
September 1, 1999 between the City and JPMorgan Chase Bank, N.A. (successor by
merger to Chase Manhattan Bank and Trust Company, National Association),
trustee, relating to the 1999B Revenue Bonds".

      "1999B REVENUE BOND TRUSTEE" means the trustee under the Revenue Bond
Indenture.

      "2002B SURETY BOND" means the surety bond issued by Ambac in respect of
the 1999B Revenue Bonds.

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SECTION 3.2 OBLIGATIONS ABSOLUTE AND UNCONDITIONAL

      The obligation of the Company to pay the principal of and interest on the
Bonds, as set forth therein and in the Thirty-sixth Supplemental Indenture,
shall be absolute and unconditional. The Company irrevocably agrees that it
shall not, in any judicial proceeding wherein Ambac shall seek to enforce
payment of the Bonds, take the position that the amount the Company is obligated
to pay in respect of the principal of or interest on the Bonds held by Ambac is
other than the amount or amounts specifically contemplated in the Bonds and the
Thirty-sixth Supplemental Indenture.

SECTION 3.3 THIRD PARTY BENEFICIARY

      The 1999B Revenue Bond Trustee shall be a third-party beneficiary of, and
shall be entitled to enforce, Section 1.2 of this Agreement.

SECTION 3.4. GOVERNING LAW.

      This Agreement shall be governed by and construed in accordance with the
law of the State of New York.

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      IN WITNESS WHEREOF, the Company and Ambac have caused this Agreement to be
executed and delivered as of the date first above written.

                                       AVISTA CORPORATION

                                       By: /s/ Malyn K. Malquist
                                           -------------------------------------
                                           Senior Vice President

                                       AMBAC ASSURANCE CORPORATION

                                       By: /s/ Dennis Pidherny
                                           -------------------------------------
                                           Vice President

                                       5<PAGE>

                                                                    EXHIBIT 10.4

                                                            DEFINITIVE AGREEMENT

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                             Bond Delivery Agreement

                                 --------------

                               AVISTA CORPORATION

                                       TO

                              THE BANK OF NEW YORK,
                             AS ADMINISTRATIVE AGENT

                                 ---------------

                          Dated as of December 17, 2004

                                 ---------------

                                   Relating to
                  First Mortgage Bonds, Collateral Series 2004D

                                 ---------------
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      THIS BOND DELIVERY AGREEMENT, dated as of December 17, 2004, between
AVISTA CORPORATION, a Washington corporation (the "Company"), and The Bank of
New York, as Administrative Agent (the "Agent") under the Credit Agreement,
dated as of December 17, 2004, among the Company, the banks parties thereto,
Bank of America, N.A., as Managing Agent, Keybank National Association, as
Documentation Agent, U.S. Bank, National Association, as Documentation Agent,
Wells Fargo Bank, as Documentation Agent and Issuing Bank, Union Bank of
California, N.A., as Syndication Agent and Issuing Bank, and The Bank of New
York, as Administrative Agent and Issuing Bank, as amended, supplemented or
otherwise modified from time to time (the "Credit Agreement").

      WHEREAS, the Company has entered into the Credit Agreement and may from
time to time borrow and obtain letters of credit thereunder in accordance with
the provisions thereof; and

      WHEREAS, the Company has established its First Mortgage Bonds, Collateral
Series 2004D, in the aggregate principal amount of $350,000,000 (the "Bonds"),
to be issued under and in accordance with, and secured by, the Mortgage and Deed
of Trust, dated as of June 1, 1939, as heretofore amended and supplemented and
as further supplemented by the Thirty-seventh Supplemental Indenture, dated as
of December 1, 2004 (the "Thirty-seventh Supplemental Indenture"), of the
Company to Citibank, N.A., as successor trustee (the "Trustee"), such indenture,
as so amended and supplemented, being hereinafter sometimes called the
"Mortgage" (all capitalized terms used herein without definition having the
meanings assigned to them in the Thirty-seventh Supplemental Indenture); and

      WHEREAS, the Company proposes to issue and deliver to the Agent, for the
benefit of the Banks, the Bonds in order to provide the benefit of the lien of
the Mortgage as security for the obligation of the Company under the Credit
Agreement to pay the Obligations;

      NOW, THEREFORE, in consideration of the premises, of certain agreements of
Banks party to the Credit Agreement, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and the Agent hereby agree as follows:

                                    ARTICLE I

                                    THE BONDS

SECTION 1.1. DELIVERY OF BONDS.

         In order to provide the benefit of the lien of the Mortgage as security
for the obligation of the Company to pay the Obligations, as aforesaid, the
Company hereby delivers to the Agent Bonds in the aggregate principal amount of
$350,000,000, maturing on December 16, 2009 and bearing interest as provided in
the Thirty-seventh Supplemental Indenture. The obligation of the Company to pay
the principal of and interest on the Bonds shall be deemed to have been
satisfied and discharged in full or in part, as the case may be, to the extent
of the payment by the Company of the Obligations, all as set forth in clause (e)
of subsection (II) of Section 1 of Article I of the Supplemental Indenture and
in the Bonds.

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      The Bonds are registered in the name of the Agent and shall be owned and
held by the Agent, subject to the provisions of this Agreement, for the benefit
of the Banks, and the Company shall have no interest therein. The Agent shall be
entitled to exercise all rights of bondholders under the Mortgage with respect
to the Bonds.

      The Agent hereby acknowledges receipt of the Bonds.

SECTION 1.2. CANCELLATION OF PRIOR BONDS.

      Concurrent with the delivery of the Bonds to the Agent on the Closing
Date, the Agent shall surrender to the Trustee the Company's First Mortgage
Bonds, Collateral Series due 2005.

SECTION 1.3. PAYMENTS ON THE BONDS.

      Any payments received by the Agent on account of the principal of or
interest on the Bonds shall be distributed by the Agent in accordance with the
applicable provisions of the Credit Agreement, and the Company hereby consents
to such distribution.

                                   ARTICLE II

                    NO TRANSFER OF BONDS; SURRENDER OF BONDS

SECTION 2.1. NO TRANSFER OF THE BONDS.

      The Agent shall not sell, assign or otherwise transfer any Bonds delivered
to it under this Agreement except to a successor collateral agent under the
Credit Agreement. The Company may take such actions as it shall deem necessary,
desirable or appropriate to effect compliance with such restrictions on
transfer, including the issuance of stop-transfer instructions to the trustee
under the Mortgage or any other transfer agent thereunder.

SECTION 2.2. SURRENDER OF BONDS.

      The Agent shall surrender the Bonds to or upon the order of the Company
when and as provided in Article VIII of the Credit Agreement.

                                   ARTICLE III

                                  MISCELLANEOUS

SECTION 3.1 DEFINITIONS

      "BANKS", "CLOSING DATE", "LETTERS OF CREDIT", "LOAN DOCUMENTS" and "LOANS"
shall have the meanings specified in the Credit Agreement.

      "OBLIGATIONS" shall mean the obligation of the Company for (a) the due and
punctual payment of (i) the principal of and premium, if any, and interest
(including interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding) on the Loans, when and as due, whether at
maturity, by acceleration, upon one or more dates set for prepayment or

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otherwise, (ii) each payment required to be made by the Company under the Credit
Agreement in respect of any Letter of Credit, when and as due, including
payments in respect of reimbursement of disbursements, interest thereon and
obligations to provide cash collateral, and (iii) all other monetary
obligations, including fees, costs, expenses and indemnities, whether primary,
secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), of the Company to the Banks under the Credit
Agreement and the other Loan Documents and (b) the due and punctual performance
of all covenants, agreements, obligations and liabilities of the Company under
or pursuant to the Credit Agreement and the other Loan Documents.

SECTION 3.2. GOVERNING LAW

         This Agreement shall be governed by and construed in accordance with
the law of the State of New York.

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                                       3
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      IN WITNESS WHEREOF, the Company and the Agent have caused this Agreement
to be executed and delivered as of the date first above written.

                                       AVISTA CORPORATION

                                       By /s/
                                          --------------------------------------
                                                      Vice President

                                       THE BANK OF NEW YORK,
                                        as Agent

                                       By /s/ Raymond J. Palmer
                                          --------------------------------------
                                                      Vice President

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