Avista Energy, Avista Corp.’s trading and marketing affiliate,has decided to head west to find its fortune. The unit announced achange of corporate direction yesterday and will now embark on awestern-region based energy marketing and trading effort, asopposed to its former national focus.

The company is presently evaluating a number of optionsincluding the sale of its Boston and Houston trading floors. Coststo effect the transition are estimated to be between $10 millionand $15 million and will be reflected in normal expenses during thenext six months. Avista Corp. CEO T.M. Matthews said it will takebetween three and six months to transition the business to awestern regional focus.

“Because of the risks inherent in the evolving market, we haveconcluded we must refocus Avista Energy to the western UnitedStates where we can back our business with physical assets andbuild on our strengths gained from our direct knowledge of andexperience with markets and facilities within the region,” saidMatthews. Avista is based in Spokane, WA, and its utilitysubsidiaries serve more than 550,000 electric and natural gascustomers in Washington, Idaho, Oregon, and California.

Avista bought Boston-based Vitol in December of 1998 (see DailyGPI, Dec. 18, 1998), saying the movestrengthened its presence in regions east of the Rockies. Yesterday,however, Matthews said the Vitol pickup had more to do with personnelthan with asset location. “Our acquisition of Vitol Gas & Electricearlier this year allowed Avista Energy to assemble one of thestrongest and fastest-growing energy trading and marketing teams inthe United States. This team has been successful and we will continueto benefit from the knowledge and systems acquired.”

A total of 75 employees work at both the Boston and Houstonoffices. Avista said it did not know how they would be affected,but did say that shifts associated with back-office accounting andother support functions will result in a modest increase inpositions in the Spokane offices.

The refocus follows significant changes in the overall energytrading and marketing industry that have created low margins whilerequiring higher levels of investment, credit commitments and risklimits, the company said. Mergers and consolidations have alsocreated a small number of large players and a marketplace whereliquidity has decreased and volatility has risen.

“The credit requirements needed to be a major player in the Eastwere simply too steep for us to justify continued operationsthere,” said Steve Becker, an Avista spokesman. “As a result we’recondensing our operations around areas we have a strong presence inalready, as opposed to a presence we hope to grow. Our salesvolumes in both gas and electricity will be less, but so will ouroperating costs.”

Matthews added that a factor in the decision to refocus was thegrowing success of Avista Advantage, an Internet-based service thatprovides analytical tools such as energy analysis, load profilingand aggregation, and facility and commodity management formulti-site business customers across the nation.

“As the analytic services available to businesses through AvistaAdvantage’s Internet-based product continue to grow and evolve, wehave determined that its success is no longer dependent on theability to provide Avista Energy’s national energycommodity-management services,” said Matthews.

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