Itron says U.S. smart meter projects on track
LOS ANGELES (Reuters) - Itron Inc, which makes meters for the electricity and water industries, said on Wednesday the economic recession has not affected deployment of the company's $1.4 billion in smart meter contracts with four major U.S. utilities.
In an interview, Itron Chief Executive Malcolm Unsworth said projects with Sempra Energy's San Diego Gas & Electric, CenterPoint Energy Inc and Edison International's Southern California Edison "are all on plan according to what they originally proposed."
The San Diego project had been pushed out, prompting investor concerns about other delays, but deployment of the smart meters is now under way, Unsworth said.
Itron has a fourth contract with DTE Energy unit Detroit Edison which is expected to begin in 2010.
So-called smart meters, made by Itron and rivals that include General Electric Co, allow households to monitor their power usage while also sending the data back to their local utility. Utilities can then read meters remotely, saving the cost of a worker, a truck and fuel.
Makers of smart meters are expected to benefit from the U.S. government's push to upgrade the nation's electricity grid, an initiative that received $11 billion from the economic stimulus package.
Itron's Unsworth said, however, that the Department of Energy has not yet made the grant application forms available to utilities and he does not expect to see any benefit from the economic stimulus package in 2009.
"The problem is the DOE are probably now about three weeks late. They were supposed to have this done by March 9th as far as forms are concerned," Unsworth said. "I don't think we're going to see much this year, to be honest with you."
Meanwhile, decisions about new projects are being delayed as utilities grappling with weakened demand for electricity are forced to cut their capital spending budgets.
"We're seeing definitely the pushout into different quarters... it will be a while before it picks up," Unsworth said of utility spending.
Last week, Deutsche Bank analyst Carter Shoop said in a client note that smart meter "adoption may be slower than many investors are currently anticipating" due to a weak economy, uncertainty about the stimulus and concerns about communications standards and security.
Unsworth, however, said transforming the grid would take time, saying utilities by their nature are conservative.
"The speed of the utility conversion is light speed, yet the investment community thinks it's extremely slow," Unsworth said. "Investors think it's going to happen overnight. (Smart meter) projects are quite complicated."
In February, Itron lowered its 2009 revenue and earnings outlook due to the weak North American market. Unsworth declined to comment on that outlook on Wednesday.
Also in February, Itron said its credit agreement called for a tightening of covenants. That tightening would require a maximum debt to EBITDA ratio of four times. As of December 31, Itron's debt to EBITDA ratio was 4.1 times. Continued...
