Smart meters, a collective con job!
Business Day Report THE introduction of smart meters in Victoria in 2012 has been a costly exercise
for consumers but it has proven an impressive money spinner for a handful of
Australian entrepreneurs, with NSW targeted next.
Cameron O'Reilly, the scion of the Heinz food empire and former chief of media
group APN, along with John B. Fairfax, the Smorgon family and Kerry Stokes are a
few of the high-profile names to have made a killing from the sale of smart
meters. They were major shareholders of Landis + Gyr, the company that amassed
about 56 per cent of the market in deals to supply the electricity distributors
in Victoria.
Their big payday came in 2011 when O'Reilly sold Landis + Gyr to Toshiba for
$US2.3 billion.
An investigation by Business Day has found Australians have been paying about twice the amount for smart meters than consumers in the US and Europe. And there has been poor transparency even though the metering devices had been mandated by the government.
That the costs of the
implementation in Victoria have already blown out from $800 million to $2.3
billion presents a salutary warning to New South Wales, which is now
deliberating on a rollout of its own, albeit optional.
The success of Landis + Gyr has confirmed Cameron O'Reilly as one of the most
savvy businessmen 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'Reilly was already moving deftly into a new space.
He started with Bayard Capital in 2002, garnering seed money from friends and
business acquaintances. Kerry Stokes and J.B. Fairfax pitched in $20 million
apiece, and the Smorgon family another $5 million. O'Reilly soon sold two-thirds
of his APN shares and chipped in a further $5 million.
He raised $100 million in
seed capital, then Bayard went on a $1.5 billion spending spree, acquiring Swiss
metering company and industry leader Landis + Gyr. The Toshiba sale for $2.3
billion made Bayard's seed investors a handsome multiple of their investment,
although it is only possible to piece together estimates of profits from the
public materials.
The Fairfax family would make about $203 million, through Marinya Holdings, and
the Smorgon family's Escor Investments, $36 million.
John Curtis, the chairman of St George Bank made $24 million and the private
equity group 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 the Singapore government, the former Lion Nathan chairman Doug Myers and
fashion designer Carla Zampatti. Once O'Reilly had acquired Email Metering, the
Enermet Group of Finland, Hunt Technologies and Cellnet Technologies in the US,
and Europe's Landis + Gyr, Bayard was the No. 1 player in the world market.
Not only did Landis + Gyr, to
which Bayard then changed its name, dominate Victoria but 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 prices and
contracts have fallen on deaf ears. ''Commercial in confidence'' has been the
response. 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, the average 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 the Victorian distribution companies paid an average of $346 to their
suppliers. Powercor paid the highest at $423.
Landis + Gyr meters are widely used across the US and Europe. It is the sole
supplier of the E350 model to SP AusNet and has a contract to supply 80 per cent
of CitiPower and Powercor's E350 smart meters. A spokesman for CitiPower and
Powercor said that there were at least 32 respondents to the tenders. It was a
''highly competitive process'' with 16 detailed proposals lodged, according to
CitiPower and Powercor. Landis + Gyr's PR company said the prices negotiated in
Victoria could not be compared with those overseas as specifications changed
from country to country.
''The Landis + Gyr smart meters sold in Victoria are manufactured in Australia
to meet the custom specifications of local utilities,'' he said. ''The model
numbers we use, in this case the E350, specify a generic nomenclature within
Landis + Gyr globally, however, between each region, the form factor,
functionality, communications type, network provider and feature set vary
widely, meaning the same model number meters are not the same regional devices
at all.''
Although Landis + Gyr could
hardly be expected to divulge commercial information, the government should
disclose. The public is footing the bill, after all. Yet there was no response
from the AER, or the distributors.
The other major supplier of smart meters in Victoria is Secure Meters previously
known as PRI Australasia. Secure Meters supplies the i-Credit 500 model. It is
headquartered in India.
The high price of a meter in Victoria and the paucity of proper information
about their cost serves as a warning to consumers in NSW. Last month, the
O'Farrell government announced 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.
As crunch time approaches for weary power consumers in NSW, the state would do
well to deliver a more transparent outcome - and a lower price, seeing it is the
customer who has to pick up the cost while the greater benefits, according to
most independent observers, fall to the distributors rather than the customers.