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The buzz in the industry is about the impending IPO of Elster, the smart grid company headquartered in Germany that makes meters and comms for electric, gas and water.
My question: Where’s the upside?
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On the technical front, Elster is a middle-of-the-pack provider of quasi-proprietary meters and RF mesh communications. On the customer front, Elster has had only a few small wins recently in the U.S. It seems unlikely to unseat the front-runners for the next round of big deals at large investor-owned utilities. |  |
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There may be some value in Elster’s “triple-play” of electric, gas and water. For those utilities that want smart meters for all three, a smart grid company that offers a single-source approach has its appeal. Elster’s exposure to gas and water should also smooth out some of the electric sector’s lumpiness. And there may also be value to Elster’s German roots as Europe accelerates its smart metering projects.
But even taking those factors into account, it’s hard to see when and how Elster ever gets a big pop. Two years from now, Elster is likely to be a solid but unspectacular performer in a market that is clearly overcrowded.
Despite Elster’s ho-hum long-term prospects, its IPO may do fine in the short term. Institutional investors are eager to find a way to participate in the smart grid’s growth, but there are only a few publicly traded smart grid companies that are “pure plays” (Itron, EnerNOC, Comverge). Perhaps this scarcity will benefit Elster’s stock. Especially since many investors are steering by looking in the rear-view mirror. If you are an SGN reader, then you already know that smart meters have done better than expected… but they will soon do worse. Stock traders – who often have to keep up to speed in many different sectors – may not realize what lies ahead.
Use the Quick Poll to vote on Elster’s IPO prospects. And use the comment form below to give us your opinions of Elster’s upside potential.
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