Do consumers pay too much? Su-Lin Tan and Michael West report.
THE introduction of smart meters in Victoria may have been a costly exercise for consumers but it has proven an impressive money spinner for a handful of Australian entrepreneurs.
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 BusinessDay 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.
Frequently Asked Questions about this Article…
What was the outcome of the Victoria smart meter rollout and why does it matter to everyday investors?
The Victoria smart meter rollout ended up costing consumers and distributors far more than originally projected—rising from about $800 million to roughly $2.3 billion—and became a lucrative opportunity for a few investors. For everyday investors, the episode highlights risks around large mandated technology rollouts: cost blowouts, opaque contracting and winners who can make substantial returns even when consumers ultimately pick up the bill.
Which companies and investors profited from the sale of Landis + Gyr?
Landis + Gyr (owned by Bayard, led by Cameron O'Reilly) was sold to Toshiba in 2011 for US$2.3 billion. Seed investors and backers reportedly received substantial payouts: the Fairfax family about $203 million via Marinya Holdings, Propel Investments about $405 million, the Smorgon family about $36 million, John Curtis about $24 million, and others including Kerry Stokes and Temasek were early backers.
Were Australians paying more for smart meters than customers in the US and Europe?
Yes. Industry data cited in the article shows average meter costs to utilities of about US$221 in the US and US$272 in Europe, while Victorian distributors paid an average of AU$346 per meter (with Powercor paying around AU$423). A BusinessDay investigation found Australians were charged roughly twice what customers in other developed markets paid.
Who were the main smart meter suppliers in Victoria and which models were used?
The dominant supplier in Victoria was Landis + Gyr, supplying the E350 model widely (including most of CitiPower and Powercor E350 meters and SP AusNet). The other major supplier was Secure Meters (formerly PRI Australasia), which supplied the i-Credit 500 model and is headquartered in India.
Why has there been criticism about transparency in smart meter contracting?
The article reports repeated attempts to obtain contract and pricing details were met with 'commercial in confidence' responses from government agencies and distributors. The lack of disclosed pricing and contract terms—despite the public footing the bill—has drawn criticism and limited public scrutiny of whether consumers paid fair prices.
What are the implications for a potential smart meter rollout in New South Wales (NSW)?
NSW was considering a market-led, optional rollout. The Victoria experience serves as a warning: consumers and investors should watch for transparency in procurement, competitive tendering, and clear cost-benefit analysis. The article notes Essential Energy was reviewing Landis + Gyr and Secure Meters as potential suppliers, underscoring the need for a more transparent and lower-cost outcome for consumers.
How did Bayard (Cameron O'Reilly) build Landis + Gyr into a market leader?
Bayard raised about $100 million in seed capital and aggressively acquired metering businesses—Email Metering, Enermet (Finland), Hunt Technologies, Cellnet (US) and Europe’s Landis + Gyr—creating a global market leader. That strategy positioned Bayard to command major supplier contracts and ultimately enabled the profitable sale to Toshiba.
Did consumers receive the main benefits of smart meters according to the article?
No. The article states that, according to most independent observers, the greater benefits of the rollout accrued to distributors rather than customers, while customers bore the cost. This raises investor-relevant concerns about who captures value in regulated infrastructure rollouts.
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