Landis+GYR On Acquisition Warpath In Smart Meter Race

BMI View : The announcement by Landis+Gyr to double its revenue through an ambitious acquisition plan highlights the strong growth prospects for the global smart meter and smart grid sectors. The majority of developed countries have already introduced some form of smart meter rollout programmes, with the EU alone poised to install some 200mn meters by 2020.

On May 27, Switzerland-based Landis+Gyr announced its intention to more than double its revenue to USD4bn by 2020 through a series of takeovers. The company is the largest maker of power meters for utilities, and is looking to acquire companies specialising in power metering and networks as it seeks to benefit from a global investment drive in smart meters. Landis+Gyr recorded revenues of USD1.5bn in 2013, and was acquired by Japan's Toshiba in 2011 for USD2.3bn (1.5 times of sales).

The announcement by Landis+Gyr highlights the strong growth prospects for the smart meter and grid sectors. Technological advances have greatly increased the functionalities of electricity meters, and smart meters offer a number of key advantages over conventional electromechanical meters. For consumers, smart meters are able to provide real-time consumption data and in some cases, electricity prices, which allow consumers to moderate and plan their consumption patterns. Meanwhile, smart meters help to reduce the operational costs for utilities as they eliminate the need for costly meter reading visits. These features are extremely valuable, and the majority of developed countries have already introduced some form of smart meter roll-out programmes. Some of the more noteworthy programmes include:

  • Europe: A European Union (EU) directive introduced in 2009 requires 80% of households to have smart meters installed by 2020, representing around 200mn smart meters (see 'Smart Meter Global Update', July 23 2012). We estimate that only 50mn smart meters were installed across the region at the end of 2013, meaning that there is significant room for growth. Key markets will be the UK (50mn smart meters to be installed between 2015 and 2020) and France (35mn meters to be installed between 2016 and 2020). In fact, the French government has already opened a tender for the first 3mn smart meters, and several suppliers, including Landis+Gyr, Itron and Britain's Iskraemeco are in the running.

  • Japan: The Japanese government has called for a full smart meter roll-out to be completed in the early 2020s. The country's 10 regional electricity utilities are proposing to complete the rollout by the end of FY2024/25 (April-March), and have said that the number of smart meters for households and small-scale companies nationwide is expected to reach a total of about 80mn ( see 'Acceleration Of Smart Meters Rollout A Plus For Most', March 19 2014).

  • US: The US currently does not have a target for smart meter installations at a federal level, but programmes have been initiated in at least 11 states across the country. The country had around 43mn smart meters installed at end-2012, representing a penetration rate of 24%. This is expected to increase as President Obama is an advocate of energy efficiency and grid modernisation, having introduced the USD3.4bn Smart Grid Investment Grant and a USD2bn initiative to improve energy efficiency in federal buildings.

  • China: China is potentially the single largest market in the world for smart meters, with the government targeting to install 300mn smart meters by end-2015. While the market is relatively inaccessible to foreign companies, a number of international service providers such as US-based Echelon have made inroads into the sector via joint ventures ( see 'Echelon-Holley JV Signals Consolidation Of Resources And Fiercer Competition', April 11 2012).

Landis+GYR On Acquisition Warpath In Smart Meter Race

BMI View : The announcement by Landis+Gyr to double its revenue through an ambitious acquisition plan highlights the strong growth prospects for the global smart meter and smart grid sectors. The majority of developed countries have already introduced some form of smart meter rollout programmes, with the EU alone poised to install some 200mn meters by 2020.

On May 27, Switzerland-based Landis+Gyr announced its intention to more than double its revenue to USD4bn by 2020 through a series of takeovers. The company is the largest maker of power meters for utilities, and is looking to acquire companies specialising in power metering and networks as it seeks to benefit from a global investment drive in smart meters. Landis+Gyr recorded revenues of USD1.5bn in 2013, and was acquired by Japan's Toshiba in 2011 for USD2.3bn (1.5 times of sales).

The announcement by Landis+Gyr highlights the strong growth prospects for the smart meter and grid sectors. Technological advances have greatly increased the functionalities of electricity meters, and smart meters offer a number of key advantages over conventional electromechanical meters. For consumers, smart meters are able to provide real-time consumption data and in some cases, electricity prices, which allow consumers to moderate and plan their consumption patterns. Meanwhile, smart meters help to reduce the operational costs for utilities as they eliminate the need for costly meter reading visits. These features are extremely valuable, and the majority of developed countries have already introduced some form of smart meter roll-out programmes. Some of the more noteworthy programmes include:

  • Europe: A European Union (EU) directive introduced in 2009 requires 80% of households to have smart meters installed by 2020, representing around 200mn smart meters (see 'Smart Meter Global Update', July 23 2012). We estimate that only 50mn smart meters were installed across the region at the end of 2013, meaning that there is significant room for growth. Key markets will be the UK (50mn smart meters to be installed between 2015 and 2020) and France (35mn meters to be installed between 2016 and 2020). In fact, the French government has already opened a tender for the first 3mn smart meters, and several suppliers, including Landis+Gyr, Itron and Britain's Iskraemeco are in the running.

  • Japan: The Japanese government has called for a full smart meter roll-out to be completed in the early 2020s. The country's 10 regional electricity utilities are proposing to complete the rollout by the end of FY2024/25 (April-March), and have said that the number of smart meters for households and small-scale companies nationwide is expected to reach a total of about 80mn ( see 'Acceleration Of Smart Meters Rollout A Plus For Most', March 19 2014).

Fact Box: PROPOSED SMART METER ROLLOUT DEADLINES, JAPAN
Proposed deadline Utility
2020 Tokyo Electric
2022 Chubu Electric, Kansai Electric
2023 Hokkaido Electric, Tohoku Electric, Hokuriku Electric, Chugoku Electric, Shikoku Electric, Kyushu Electric
2024 Okinawa Electric
Source: Japanese Government
  • US: The US currently does not have a target for smart meter installations at a federal level, but programmes have been initiated in at least 11 states across the country. The country had around 43mn smart meters installed at end-2012, representing a penetration rate of 24%. This is expected to increase as President Obama is an advocate of energy efficiency and grid modernisation, having introduced the USD3.4bn Smart Grid Investment Grant and a USD2bn initiative to improve energy efficiency in federal buildings.

  • China: China is potentially the single largest market in the world for smart meters, with the government targeting to install 300mn smart meters by end-2015. While the market is relatively inaccessible to foreign companies, a number of international service providers such as US-based Echelon have made inroads into the sector via joint ventures ( see 'Echelon-Holley JV Signals Consolidation Of Resources And Fiercer Competition', April 11 2012).

Technology Transfers The Priority

We note that technology transfers will be the main priority for acquisitions undertaken by Landis+Gyr, and that the company is strengthening its product offerings to compete in the smart meter race. The company's Chief Operating Officer Richard Mora said that Landis+Gyr had 'the market penetration', and what it was 'looking to buy is technology'. Earlier this month, the company had acquired smart grid sensor and monitoring company PowerSense from Denmark's Dong Energy for an undisclosed sum, and said it was an example of the kind of acquisitions it is seeking. PowerSense's products allow utilities to inspect power cables and measure things like drops in voltage, and help to fill a gap in Landis+Gyr's current product line.

Not All Positive

While the outlook for smart meters appears positive, there are still a number of key obstacles and issues that dampen the sector's growth potential. These include:

  • Burden of cost: Smart meters are significantly more expensive than conventional meters, and most users are unwilling to bear the costs - it generally costs between USD50-200 to build and install a meter. As a result, it could require lengthy legal proceedings to determine which party pays for the meter - the utility, the consumer, or the government.

  • Costs could exceed savings: The costs of installing and operating a smart meter are quite significant, and the costs of the smart meter would exceed savings for households with low electricity consumption patterns. This was a major reason for the German government's decision in August 2013 not to adopt the EU recommendations on smart meters ( see 'Smart Meters On The Backburner', August 7 2013). Smart meters are also likely to incur data charges due to the need for two-way communication, which could be an issue for households that do not have broadband plans ( see 'TDF M2M Placements Boost Smart Meter Market', June 12 2013).

  • Privacy concerns: Smart meters allow utilities to monitor energy usage of consumers remotely, and data can be used to determine the working hours and the types of appliances used by consumers.

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