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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Avista knew how to read the market

Bert Caldwell The Spokesman-Review

Itron Inc., once little more than an infant idea, Monday outgrew its parent.

Thanks to a 1.5 million-share secondary stock offering that closed Friday, Itron was worth $841.7 million at the close of trading Monday as measured by market capitalization — its share price multiplied by the number of shares outstanding.

Avista Corp., by comparison, was worth $828.9 million.

In 1977, Avista helped bring Itron into the world by investing roughly $250,000 in the idea utility meters could be read electronically instead of manually, the way information had been gathered since the flood canceled Noah’s water bill.

Wendell Satre was chairman of Avista — then called Washington Water Power Co. — when the utility decided to take Itron under its wing. Avista already had a few non-utility subsidiaries, he says, and executives were looking for other ways to grow the company. As a utility, Avista was subject to regulatory oversight and confined by geographical boundaries.

He recalls telling Avista directors that Itron, free of those constraints, would someday make a bigger return on assets than its parent utility. “With a company like Itron, the world is the market,” Satre says.

And over the last 28 years, Itron has made that world its own. The company has sold its meter-reading devices to 3,000 electricity, natural gas or water utilities. Readings can be radioed to passing vans equipped to pick up the signal, or relayed to a central office. A new generation of meters Avista will introduce in Idaho provides a digital readout customers can check against results reported on their bills.

Satre chuckles remembering how little anyone imagined computers would change the world in less than a generation. All Avista officials wanted to do was modernize their own industry, he says.

Satre chaired Itron’s board early on, served on its board until the late 1980s, and continues to be a shareholder.

“Since it’s kind of my baby, I watch it carefully,” he says.

Former Avista Chief Financial Officer Jon Eliassen wrote many of the checks that kept Itron going in its early years, when it consistently lost money. He credits the leadership of Johnny Humphreys and LeRoy Nosbaum, past and present CEOs, respectively, with perpetuating the spirit of innovation that was the foundation of Itron, and making acquisitions that have been critical to the company’s growth.

Last July, for example, Itron purchased Schlumberger Electricity Metering, a subsidiary of oil fields-services giant Schlumberger Ltd. The deal helped Itron boost first-quarter revenues to more than $116 million, almost double those of a year ago.

Itron had reduced its debt by $55 million since Jan. 1. Proceeds from last week’s offering will cut the total again by a similar amount, says Nosbaum, who is taking the overtaking of Avista market capitalization in stride.

“It’s not of consequence,” he says. “I’m not jumping up and down.”

He attributes Itron’s growth to its people — the company employs 2,000, 500 of those in Spokane — and its reputation in the marketplace.

Eliassen notes Itron is not only a child of Avista, but a parent as well. Two other Spokane companies, Servatron and Itronix, were spun off from Itron. Servatron, a contract electronics manufacturer, employs about 160 in Spokane Valley. Itron is a part-owner of Servatron.

Itronix, which makes ruggedized computers, employs 550 and is building a new headquarters, also in Spokane Valley.

“I think it’s just a neat success story,” says Eliassen, who has been on Itron’s board of directors since 1987.

He adds that Avista Advantage, an Avista subsidiary that manages energy use and billing for major corporate clients, and ReliOn, a fuel cell maker spun off by Avista, have benefited from the same entrepreneurial spirit that launched Itron.

Avista, meanwhile, has long since sold its once-substantial ownership position in Itron. Proceeds from those sales helped the company maintain its dividend in the early 1990s despite lean earnings from its utility operations. Avista stock has traded in a narrow range for more than a year, which helped Itron overtake its parent, at least on Wall Street.

By other measures, such as revenue, Itron still has some catching up to do.

Note to Avista: Don’t look back.