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Smart meters, but at whose expense?Su-lin Tan and Michael
West
Published: December 24, 2012 - 3:00AM
THE introduction of smart meters in Victoriamay have been a
costly exercise forconsumers but it has proven an impressivemoney
spinner for a handful of Australianentrepreneurs.
Cameron O'Reilly, the scion of the Heinz food
empire and former chief of media group APN,along with John B.
Fairfax, the Smorgonfamily and Kerry Stokes are a few of
thehigh-profile names to have made a killing fromthe sale of smart
meters. They were majorshareholders of Landis + Gyr, the
companythat amassed about 56 per cent of the marketin deals to
supply the electricity distributorsin Victoria.
Their big payday came in 2011 when O'Reilly sold Landis + Gyr to
Toshiba for $US2.3billion.
An investigation by BusinessDay has found Australians have been
paying about twicethe amount for smart meters than consumers in the
US and Europe. And there has beenpoor transparency even though the
metering devices had been mandated by thegovernment.
That the costs of the implementation in Victoria have already
blown out from $800million to $2.3 billion presents a salutary
warning to New South Wales, which is nowdeliberating on a rollout
of its own, albeit optional.
The success of Landis + Gyr has confirmed Cameron O'Reilly as
one of the most savvybusinessmen in Australia. The O'Reilly family
had controlled regional media group APN
and just as the fortunes of old media were about to take a
battering last decade, O'Reillywas already moving deftly into a new
space.
He started with Bayard Capital in 2002, garnering seed money
from friends andbusiness acquaintances. Kerry Stokes and J.B.
Fairfax pitched in $20 million apiece, andthe Smorgon family
another $5 million. O'Reilly soon sold two-thirds of his APN
sharesand chipped in a further $5 million.
He raised $100 million in seed capital, then Bayard went on a
$1.5 billion spendingspree, acquiring Swiss metering company and
industry leader Landis + Gyr. The Toshibasale for $2.3 billion made
Bayard's seed investors a handsome multiple of theirinvestment,
although it is only possible to piece together estimates of profits
from the
public materials.
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The Fairfax family would make about $203 million, through
Marinya Holdings, and theSmorgon family's Escor Investments, $36
million.
John Curtis, the chairman of St George Bank made $24 million and
the private equitygroup Propel Investments about $405 million.
Propel and Curtis came on board through a series of capital
raisings before the Toshiba
sale. Other shareholders in Bayard were Temasek Holdings, the
investment arm of theSingapore government, the former Lion Nathan
chairman Doug Myers and fashiondesigner Carla Zampatti. Once
O'Reilly had acquired Email Metering, the EnermetGroup of Finland,
Hunt Technologies and Cellnet Technologies in the US, and
Europe'sLandis + Gyr, Bayard was the No. 1 player in the world
market.
Not only did Landis + Gyr, to which Bayard then changed its
name, dominate Victoriabut it also managed to fetch high prices for
its devices, perhaps the highest in the world.Repeated efforts by
BusinessDay to find relevant information about smart meter
pricesand contracts have fallen on deaf ears. ''Commercial in
confidence'' has been theresponse. Both government agencies and
distributors refused to provide details,although industry sources
said Australians have been charged twice as much as
customers in other developed markets.
According to eMeter Corporation, a meter data intelligence
department of Siemens, theaverage cost of smart meters sold to
utility companies in the US is $221, and in Europe$272. A
spokesperson for the Australian Energy Regulator (AER) confirmed
theVictorian distribution companies paid an average of $346 to
their suppliers. Powercorpaid the highest at $423.
Landis + Gyr meters are widely used across the US and Europe. It
is the sole supplier ofthe E350 model to SP AusNet and has a
contract to supply 80 per cent of CitiPower andPowercor's E350
smart meters. A spokesman for CitiPower and Powercor said that
therewere at least 32 respondents to the tenders. It was a ''highly
competitive process'' with16 detailed proposals lodged, according
to CitiPower and Powercor. Landis + Gyr's PRcompany said the prices
negotiated in Victoria could not be compared with thoseoverseas as
specifications changed from country to country.
''The Landis + Gyr smart meters sold in Victoria are
manufactured in Australia to meetthe custom specifications of local
utilities,'' he said. ''The model numbers we use, in thiscase the
E350, specify a generic nomenclature within Landis + Gyr globally,
however,between each region, the form factor, functionality,
communications type, networkprovider and feature set vary widely,
meaning the same model number meters are notthe same regional
devices at all.''
Although Landis + Gyr could hardly be expected to divulge
commercial information, thegovernment should disclose. The public
is footing the bill, after all. Yet there was noresponse from the
AER, or the distributors.
The other major supplier of smart meters in Victoria is Secure
Meters previously knownas PRI Australasia. Secure Meters supplies
the i-Credit 500 model. It is headquarteredin India.
The high price of a meter in Victoria and the paucity of proper
information about theircost serves as a warning to consumers in
NSW. Last month, the O'Farrell governmentannounced plans for a
market-led rollout of smart meters for NSW. One
distributor,Essential Energy, said it had been reviewing Landis +
Gyr and Secure Meters as
potential suppliers.
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