M&A’s like a lion

by / Tuesday, 31 January 2012 / Published in Smartgrid-CI Blog

As far as M&A’s are concerned 2011 looked like a sheep and 2012 is starting like  a lion.

The announcements the same day yesterday of Ruggedcom’s acquisition by Siemens and of Thomas and Betts’ acquisition by ABB for nearly $4B are a sign that M&A’s are back in the energy sector.  It may be circumstancial; The prey’s valuations are very low where,  at the same time, the predators have huge amounts of cash available. 

It is actually much more than that. The smart grid transformation still has a long way to go and  big players are now ready to speed up the process.

So far this transformation was mainly focused on the smart meters. Thanks to the ARRA initiative launched in 2009,  we are all very happy to celebrate how fast smart metering has pervaded the grid in the past three or four years. But smart meters are only the visible part of the smart grid transformation iceberg and changing the end point is not enough.

Smart meters represent dozen of billions of dollars of investment  and utilities still have hundreds of billions to invest in updating their IT infrastructure, changing their software, implementing new networks and new security systems. This is a lot of money but almost nothing compared to what needs to be accomplished in the transportation and distribution areas which are the most critical parts of the smart grid transformation.

Tomorrow’s infrastructure will be almost entirely different from what it is today. It will be tightly secured, will absorb a diversity of energy sources, will transport power to far away places and will manage energy storage. On top of that, a big part of the US infrastructure has not been updated in the past three or four decades. This transformation will require trillions of dollars of investments and stakeholders with very deep pockets. This is why we will see many more energy M&A’s in the years to come.  

Let the transformation begin.  
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