Smart meters are nearly here. The nationwide mass rollout of smart meters is due to start next year, and by the end of 2019 more than 50 million smart meters will have been installed in properties the length and breadth of Britain. But smart meters alone will have limited value – there needs to be a system and mechanism in place so the information collected by the new meters can be used.
Enter the Data and Communications Company (DCC). The DCC is described by the Department of Energy and Climate Change (Decc) as “a key element” in the rollout of smart meters. Its principal role will be to communicate with smart meters at all domestic gas and electricity consumer premises. The DCC will be responsible for contract managing the services, which it needs to communicate with smart meters. These services will, in turn, be competitively procured by the DCC, with the initial contracts being developed by government as part of the Smart Metering Implementation Programme.
The Decc-led procurement process for the DCC contract is well under way, and there are two contenders left in the running – G4S and Capita. Each company is profiled in the boxes.
William Vanderpump, an analyst at UBS, says: “Capita is coming from an IT technology angle and G4S more from security angle. They are coming at it from different areas of strength.” He refuses to name a favourite for the DCC contract.
Who will Decc pick? We will have to wait until July when the preferred bidder is named.
Capita
While G4S tends to do more visible, “front of house” work – such as tagging and running prisons – Capita tends to offer “back of house” services. The UK-based company operates solely in Britain, with its contracts split roughly 50:50 between the public and private sectors.
Capita had a good 2012. Highlights include the signing of deals with the Ministry of Justice (MoJ) and the UK Border Agency (UKBA). The UKBA deal, under which Capita will provide contract management services, is worth up to £30 million over the next four years. With the MoJ, Capita’s secure information solutions business has been awarded a contract worth around £21 million over three years for the application management and hosting of the Criminal Justice System Exchange.
The company has also secured a contract with the military worth £5 million a year for ten years for the Recruitment Partnering Project. This is a partnership with the Royal Navy, Royal Air Force and the Army, which includes a television recruitment campaign for the Territorial Army featuring live broadcast streams from Afghanistan.
Analysts recognise that Capita has a long-standing relationship with the public sector in the UK – particularly with local government, and is a “strong player” in this space. In the private sector Capita agreed eight customer management contracts in the motor, retail and utilities markets worth in aggregate £124 million over two to five years.
G4S
G4S suffered an annus horribilis in 2012. Its most high profile failure was at the London 2012 Olympics where it failed to meet its security obligations and had to be bailed out by the army.
That mistake cost the company £88 million. It lost £70 million by failing to fulfil its contractual obligations; it donated £11 million to charity; and it also lost a further £7 million in sponsorship. Following the summer debacle, G4S has also swallowed £45 million in restructuring costs.
Away from the Olympics, G4S failed in a takeover bid for the Danish cleaning firm ISS. This, once again, left the company battered and bruised, while investor confidence in it was further dented.
On the security front – an area largely synonymous with G4S – it has mostly been business as usual. There are the usual man-and-a-van cash deliveries you regularly see made to high street banks, which have been going well.
One small blip was the loss of the contract to run the Wolds prison, though this is not attributed to a G4S shortfall in any way.
Despite these problems, G4S is seen by analysts as having a “good track record”, it is “very competitive in this space,” and it has “a wide range of experience”. It is a global company, with about 9 per cent of its business UK based. Half of that is in the public sector, in a variety of areas, including electronic tagging.
With regards to the utility sector, and in particular electricity and gas meters, it has contracts to read more than 50 million meter read per year.
In its 2012 annual results, despite the troubles of the year, it shows “excellent organic growth” of 7 per cent, and profit before interest, tax and amortisation was up 6 per cent to £516 million.
Smart metering contracts
DCC: G4S, Capita
Data Services Provider: HP, IBM, Logica
Communications Services Provider: Telefonica, Airwave*, Cable & Wireless,
Arqiva
*Airwave is only bidding to become the CSP for the Northern region, while the others are bidding for each of the Northern, Central and Southern regions.
This article first appeared in Utility Week’s print edition of 3rd May 2013.
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