Avista launches subsidiary Salix to study natural gas

Avista Corp. is exploring how it might profit from the nation’s rapidly growing use of natural gas.

The company launched a subsidiary this week to explore domestic markets for liquefied natural gas, primarily in the Pacific Northwest and other Western states.

Company officials gave few business details for Salix, the new subsidiary to be led by Robert Lafferty, a 30-year Avista veteran. And they declined to indicate when more information might be forthcoming.

“We don’t have a timetable,” said Jessie Wuerst, an Avista spokeswoman. “We’re doing a lot of talking with folks. We hope to have some more announcements coming down the pike.”

“We know they’re looking at Alaska and Hawaii,” said Chris Ellinghaus, an analyst with Williams Capital Group in New York who follows Avista. But, “they haven’t announced any projects.”

Both states would be logical markets for the subsidiary, which will operate independently of Avista’s utility business, Ellinghaus said.

Neither Alaska nor Hawaii has much access to natural gas supplies, relying instead on other fuels, including expensive heating oil, he said. In Hawaii, the military has expressed interest in diversifying its fuels mix and would be a potential customer, Ellinghaus said. Hawaiian utilities also want access to natural gas for their customers, he said.

Avista is gaining a foothold in the Alaska market with the pending purchase of a Juneau electric utility. Even with shipping costs, both markets could be profitable, Ellinghaus said.

Avista has been mulling new business opportunities in natural gas for several years, Wuerst said.

U.S. consumption of natural gas has risen by 10 percent in the past five years, according to the federal Energy Information Administration. Some sectors are growing even faster. Natural gas use in vehicles has risen 26 percent during that time, and 19 percent in gas-fired electrical generation.

Booming production from U.S. shale-gas deposits has kept natural gas prices low, which is partly responsible for the growth in consumption, Wuerst said. Natural gas also emits less carbon than coal or diesel when it’s burned, which is another factor in rising demand.

Salix is working to identify potential customers in transportation, manufacturing, agriculture and other sectors that would benefit by converting to a cheaper, cleaner burning fuel, she said.

Salix’s plan includes studying the possibility of building a liquefied natural gas plant, Wuerst said.

Natural gas condenses when it’s cooled to minus 260 degrees. In liquid form, it occupies about one-six-hundredth of the former space, making it easier to store and transport. Liquefied natural gas is converted back into a gas form before it is burned.

Salix would access U.S. and Canadian gas supplies for sale to the domestic market, Wuerst said. The company will not export gas, she said.

Wuerst said Avista is looking for ways to grow its business because the number of utility customers is relatively static, with about 1 percent growth per year.

Avista recently announced the $335 million sale of Ecova, the utility’s energy, expense and data management subsidiary, to Cofely USA. The company expects cash proceeds of $136 million from the sale, which is expected to close next week.