British Gas Trading has announced the country's biggest deployment of new in-home energy technology.

The project involves using radio-based technology to read meters in up to 100,000 homes and raises the question of whether all electricity and gas meters could soon be read without the need for a visit from the meter reader.

However, according to Mark Robson of Deloitte and Touche Corporate Finance in Cambridge, the economics of a full-scale British Gas roll-out are far from proven. Following his recent involvement in the sale of TXU Europe's metering activities Mark has been in contact with many of the other owners of metering businesses.

'The sale of TXU Europe's metering business to German giant Siemens has created much industry interest - not just because of the buyer's strong technological background.'

'Whilst many players believe that Automated Meter Reading ('AMR') will be a feature of the industry in the future, there are a few signs that full-scale adoption is imminent. At present the long payback of AMR is seen as being uneconomic.'

'The TXU transaction, which is the first in the newly deregulated electricity metering industry, may well herald a wave of consolidation. The question for many of these businesses is whether the potential uncertainty generated by putting up the 'for sale' sign will be balanced with a strategic premium for the business'.

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Mr Robson argues that there are good reasons for a buyers to pay strategic premiums. 'In the short-term buyers of metering businesses are looking for synergies in IT systems and overheads. In the longer term they have the opportunity to expand their metering business in the UK and, as the pace of deregulation quickens, across Europe and the rest of the world.'

'For many buyers, the opportunity to provide out-sourced services to large utilities is enough of a reason to pay a premium. That leaves technology upside for the long-term'.

Although TXU Europe has been the first electricity company to sell its metering business, Mr Robson's view is that the next year will see other electricity companies putting their metering businesses up for sale.

He concluded: 'With outsourcing specialists and technology providers keen to get into this market, electricity companies should seriously question whether metering is a core activity and, if not, whether they should exit. Timing an exit is likely to be key - will new entrants be willing to pay a strategic premium for their second or third acquisitions?'



The Deloitte Cambridge office comprises 8 Partners and over 250 staff who deliver a full range of professional services to the East Anglian region. As well as focussing on the life sciences and technology sectors for which the region has become so renowned, the office has long standing specialisms in other sectors including the professions, consumer business, food and agribusiness.

Deloitte LLP