U.K. Prefers Telefonica for Biggest Smart Meter Deal

Spain’s Telefonica SA (TEF) is the preferred bidder for two smart metering communications contracts worth 1.5 billion pounds ($2.33 billion), the U.K. government said, granting the industry’s biggest deal yet.

Telefonica’s unit in Britain is favored to build networks that transmit information about usage from power and gas meters in Wales and southern and central England to data storage sites, the Department of Energy and Climate Change said today on its website. Arqiva Ltd., Capita Plc (CPI), CGI Group Inc. (GIB/A) and Gemserv Ltd were also listed as preferred bidders.

The U.K. is compelling utilities to install more than 53 million power and gas meters by 2020 in a 12-billion pound program to help consumers monitor and cut energy use. Today’s contracts signal progress for a program that ministers in May delayed by a year, citing the “technical challenge” involved.

“The contracts announced today are the largest in the smart-grid industry to date and provide important clarity,” said Colin McKerracher, a smart-grid analyst in London at Bloomberg New Energy Finance. “With the preferred bidders in place and the government firmly committed, the U.K.’s ‘big six’ energy retailers should feel more confident moving ahead with their own roll-out plans.”

In total, the contracts will be worth about 2.4 billion pounds. Arqiva is the government’s choice to set up networks in northern England and Scotland.The government said the Madrid-based Telefonica’s two contracts would run for 15 years, the same as Arqiva’s 625 million-pound deal.

Global Benchmark

“The scope of the Great Britain initiative serves as a benchmark for future projects around the world,” Peter Mainz, chief executive officer of Sensus, which will provide technology for Arqiva, said in an e-mailed statement.

Capita was selected to manage the data and communications contracts for the entire system in a 12-year license valued at 175 million pounds, the energy department said.

CGI’s IT U.K. unit is the preferred bidder to manage the data, store it on servers and pass it back to energy suppliers and grid operators in an 8-year deal valued at 75 million pounds, while Gemserv may win a 4-year, 10 million-pound contract to maintain and update a smart metering code defining the rules and functions of the technology.

“The success of the programme is crucial if Britain is to keep energy bills affordable, continue to benefit from the levels of reliable supply we do today” and meet carbon targets, Tara McGeehan, head of CGI’s U.K. smart energy division said in an e-mailed statement.

The government said it plans to conclude the contracts in early September.

To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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