Australia's QIC acquires 50% stake in smart meter business

QIC first approached the company in mid-2022 and confirmed the acquisition terms last December, when Vector named the investor its preferred partner. Rival bidders reportedly included BlackRock, Keppel Capital, Morgan Stanley Infrastructure Partners, and Morrison & Co.

Shares in Vector, which have mostly traded around the NZD 4.00 mark for the past three years, climbed as high as NZD 4.46 in January, before resettling in their previous price range in February. The stock has gained 2% since the sale agreement was formalised this week and closed on NZD 4.07 on April 6, giving the company a market capitalisation of about NZD 4.1bn.

QIC has identified the advent of smart grids as a key trend in the broader theme of technological disruption of traditional infrastructure along with driverless cars, ride-hailing, solar power, and cloud computing via data centres. It claims to have invested AUD 5bn (USD 3.3bn) in energy transition to date and has committed to investing a further AUD 15bn over the next five years.

“Smart meters have a critical role to play in the decarbonisation of electricity supply in both Australia and New Zealand. Their role is rapidly evolving from data processing for timely billing purposes,” Ross Israel, QIC’s head of infrastructure, said in a statement.

“They are an enabler for electricity networks to manage an ever-increasing volume and volatility of electricity supply due to the broader energy transition and increasing penetration of renewable generation.”

The Vector transaction also highlights a vanishing divide between private equity and infrastructure strategies in terms of approaching digital-enabled utilities and communications suppliers. In some cases, assets graduate from one asset class to the other when investors regard them to be suitably de-risked.

This phenomenon was demonstrated in Australasia’s smart metering niche as recently as late 2021 when Pacific Equity Partners (PEP) sold a 50% stake in Intellihub to infrastructure-focused Brookfield Asset Management at an enterprise valuation of AUD 3.2bn.

Intellihub was created in 2018 through the carve-out of Origin Energ’s Acumen smart meters unit, which was led by PEP's hybrid private equity-and-infrastructure secured assets strategy. PEP secured a 5.2x gross multiple on exit, having expanded the company's smart meter footprint from 750,000 to 2m units, thereby increasing market share from 20% to 50%.

QIC had tried to acquire Intellihub in a bilateral deal with PEP in late 2021, according to The Australian Financial Review. QIC did not appear to have participated in the subsequent auction.

Vector claims to be the largest player of its kind across Australia and New Zealand, providing smart meter data services for 2.3m electricity and gas meters. The business is better established in New Zealand and sees Australia as a growth market.

Revenue increased 8.3% during the 2022 financial year to NZD 831.5m, while EBITDA declined 0.7% to NZD 510m. Net profit fell 17% to NZD 160.9m due significantly to a NZD 40.2m impairment charge related to a liquefied petroleum gas business. This reflected price fluctuations for the fuel and a weaker New Zealand dollar.

QIC had AUD 99bn in assets under management under various alternative asset classes as of end-2022. Its infrastructure business manages more than AUD 29bn across 23 direct investments and has generated more than AUD 14.7bn in realisations to date.

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• Topics
• Australasia
• Infrastructure
• Technology
• Buyouts
• Cleantech
• Australia
• New Zealand
• QIC
• energy