GREEN DEALS: Smart money

Cameron O'Reilly's decision to launch the $100 million buyout firm Bayard Capital in 2003 on behalf of some of Australia's wealthiest families, and focus on investments that leveraged off growing shortages of energy and water, looks set to deliver handsome dividends. Bayard is in the process of auctioning the Swiss-based energy efficiency group Landis Gyr, which now forms the rump of its business, and it's attracting the attention of the world's biggest industrial groups, and predictions of a price tags of more than $2.5 billion.

Japanese electronics giant Toshiba is the latest to express an interest, according to reports in Tokyo, joining General Electric, Honeywell Corp and ABB in expressing interest in the tender, along with other private investors. Energy efficiency is considered to be one of the most attractive global green investment themes. Landis Gyr specialises in energy meters, metering devices and IT systems which can be applied to load management and communication systems for smart grid and smart meters. Bayard's backers include John B. Fairfax, Kerry Stokes, the Smorgon family and Doug Myers, as well as the Irish-based O'Reilly family.

The IT crowd

ABB, meanwhile, has continued its aggressive expansion strategy with the purchase of Brisbane-based Mincom, another company that specialises in software solutions for boosting efficiency in the mining and energy efficiency sectors. Mincom, bought from private equity group Francisco Partners, will become part of ABB's energy efficiency offshoot known as Ventyx, which ABB bought a year ago for $1 billion, and later added the Obvient.
In fact, ABB has been on something of a shopping spree in the energy efficiency and electric vehicle space in the past 12 months, also electric motor maker Baldor Electric for $4.2 billion, and making investments in EV charging company Ecotality and data center software vendor PowerAssure. Mincom has nearly 1000 employees and annual revenues of about $186 million.

Zero-sum game

The UK Committee on Climate Change says carbon emissions can be nearly eliminated from its power industry within 20 years. The government's principal climate advisory panel says the UK could source 40 per cent of its electricity production from renewable energy by 2030, another 40 per cent from nuclear, with 15 per cent coming from coal and gas plants fitted with carbon capture and storage and another 5 per cent from unabated gas plants.

According to a Bloomberg report, the UK is currently striving to meet a EU target of deriving 15 per cent of energy for power, heat and transport from renewables in 2020. The committee recommends that renewables provide 40 per cent of electricity by 2030, 35 per cent of heating and 15 per cent of transportation fuels. For the sake of costs, it suggests rolling back some of the targets for offshore wind and replacing them with onshore wind, buying energy from concentrated solar plants in north Africa and ramping up its planned rollout of nuclear power.

"Nuclear, for the foreseeable future, looks like it will be the lowest cost low-carbon technology,” the committee's head David Kennedy, was quoted as saying. “It's only as you get to the end of the 2020s and the beginning of the 2030s that the cost of renewables starts to converge.” The committee estimates the cost of the 2020 targets would add around £50 to domestic energy bills by 2020, but this would be more than compensated by plans to boost the energy efficiency of homes and appliances that would cut those bills by £150 a year.

The latest in lobbying

As we reported last month (deals, april 18), the business lobby is pushing hard for a sectoral approach to a carbon price. The ante was raised on Monday by BHP Billiton chairman Jac Nasser, who wanted a “go slow” policy on tackling carbon emissions, and suggested the electricity sector should take priority, and could be followed by actions centred on the transport sector, then then perhaps the household sector.

Meanwhile, the government has commissioned yet another report to investigate the impacts of a carbon price on the electricity sector. According to the Sydney Morning Herald, the government has asked KPMG, Mallesons and Lazard to re-examine industry fears that high elevels of compensation are needed to prevent the closure of coal-fired power stations. The paper also said a report prepared by Morgan Stanley in 2009 into the impacts of the CPRS on the electricity sector would also be released.