Consolidations could signal a shift in the energy sector
Two major consolidations in the energy efficiency sector and a stock market listing could signal a shift in the way value in the sector is perceived.
On Wednesday, listed Queensland-based power company ERM Power Ltd told the Australian Stock Exchange it had paid $5.35 million to acquire Perth-based software company Greensense, which produces data analytics and energy and resource management software.
And last week French based ENGIE, previously GDF Suez, added to the growing portfolio of its subsidiary Cofely with the purchase of energy services company DESA Australia, which adds 340 people to its books, and taking its total staff to just under 1000. It also appointed a former legal head of the company Corinne Ong as chief executive.
On Thursday, another energy data analytics company, Building IQ, announced it had listed on the Australian Stock Exchange after an initial public offering that raised $20 million.
Maybe it’s the Paris effect, after the COP21 climate talks swung the arc lamp around to the property world, its huge share of emissions production and the fact that if we want to slash carbon then energy savings is the cheapest, fastest and easiest way to do this.
Maybe it’s just economics – a maturing market and the giants swallowing the minnows as margins tighten and competition equalises on a global scale. Either way, market sources say the cogs are moving.
“This region is pretty immature,” one source said. “It’s a maturing market. And the industry is very competitive. People need to go upstream and downstream.”
In the related facilities management space, the Spotless acquisition of the Utilities Services group in July this year was an example of a downstream move, he said.
Another sign of change, incidental or not, is that a woman has been appointed to head up the Australian operations for ENGIE – Corinne Ong, a former business development chief and former head of legal in the group.
There’s a third element, potentially – disruption and innovation in the energy sector and a recognition by the challenger to the status quo that it has to be nimble, innovative and demand-focused if it’s going to satisfy customers who may want wind or solar solutions instead of whatever is available on the regular grid.
At least that’s the view of Fabian Le Gay Brereton, chief executive of Greensense and co-founder of the company along with Pete Tickler.
Le Gay Brereton told The Fifth Estate on Wednesday that the disruption story was central to the deal and in particular to ERM’s recognition that the property industry is key to capturing the unfolding opportunities.
Part of what the purchase is about, he said, was “How do they engage with property owners?”
With solar and batteries coming online, he said, the utilities industry was more disrupted than the building space.
“They’re the ones having to innovate and they’re looking at technology innovation,” he said.
That’s where his company can come in – with a suite of data analytic tools to work out how energy is used in a building, where it’s being used and how savings can be delivered.
It’s how utilities sector is changing, or needs to change, he said.
Using less was one focus, but so too was that “you need to provide new energy solutions; it’s not just about selling electricity with a margin, it’s about delivering new energy solutions.”
Among the biggest changes, he said, was the shift to distributed energy instead of centralised coal-fired systems.
It fits into where the building industry is focused, he said, with organisations such as the Green Building Council of Australia looking to include a net zero certification for impact in energy, carbon and water.
- See our article Buildings Day: GBCA commits to net zero certification
The new model is also “more agile” and more innovative, big on staff empowerment and customer focus, on which Brereton said both ERM and his team were in synch.
For Le Gay Brereton, the focus will now be on “how is the energy used, where does it come from, local generation and efficiency and managing demand and we are the right partner to help with that”.
He said he hoped COP21 was a turning point in global sentiment and focus on energy efficiency. But the change of prime minister in Australia was also significant. When he and co-founder Pete Tickler started the company in 2009, the big driver for the business was climate change and carbon reduction.
Cost control was also important, but “we’re interested in climate change and carbon reduction is very much the problem we wanted to solve”, he said.
“Carbon was our big driver for the business. And then it became about cost and efficiency. What Paris does is bring the focus back to carbon.
“I do think there is a change. There is a change of the PM and the announcement of Paris and I hope the narrative matures around that.”
ERM started out as a single consultancy, based in Queensland, and has now grown to be the second-largest supplier of power to business and government customers in Australia.
Chief executive and managing director Jon Stretch said bringing Greensense into the ERM Power family was part of the company’s strategy and growth plans.
“Efficient capital management allows us to invest in next-generation innovation and technology, which goes beyond energy supply to smart visualisation of resource consumption,” he said.
He said the company supplied energy to one in five governments, businesses and industrials in Australia.
“Greensense is the next step in providing a real-time, in-depth view on resource consumption, beyond a customer’s ERM Power energy usage, to help our government, commercial and industrial customers better manage energy, water and waste.”
The move would be earnings accretive from FY17, with the customer solutions portfolio expected to provide about eight per cent of earnings by 2018. ERM has more than 300 staff and Greensense, which will continue under its own identity, had 13 staff, all of which will remain in the business.
ENGIE now a major player in Australia
The ENGIE acquisition of the Melbourne based DESA company comes after announcing in September it had acquired TSC Group Holdings with 600 mainly highly skilled technical staff. DESA which provides communications, electrical and energy efficiency solutions has about 340 staff and will take total staff numbers at ENGIE to just under 1000.
At the start of the year former managing director of the company’s Australian operations Vaughan Furniss now head of strategy and business development, could count total staff numbers on two hands.
- See our report, Cofely expansion will ramp up competition in energy efficiency
A statement from ENGIE said the strategy was to provide customers with a “one-stop shop” for multi-technical services, asset-based energy performance and environmental solutions.
Executive vice president in charge of the energy services business line Jérôme Tolot said DESA was a “top tier provider in the country and counts among its customers some of Australia’s biggest companies”.
“With our expertise and our other businesses in power generation and retail, we have the opportunity to grow the business even further.”
In the ASX listing for BuildingIQ, the company offered about 20 million Chess Depository Receipts in the company at $1.00 each, with an indicative market capitalisation of approximately $85 million (on a fully-diluted basis), a company statement said.
The company’s base “predictive energy optimisation” technology, initially developed by the CSIRO, works with a facility’s Building Management System and makes real-time changes to heating and cooling based on a range of characteristics.
President and chief executive Michael Nark said there was growing requirement for efficiency and sustainability, and that building owners and managers were increasing their focus on controllable operating costs, such as energy.
Chair and on-executive director Alan Cameron said the technology offered by the company could offer a fast rate of return on investment.
The company was currently working on more than 3.25 million square metres of space in utilities, hospitals, universities, office buildings, casinos, hotels and government facilities.
This article originally appeared in the Fifth Estate on 17 December 2015 as