Last week Warren Buffett bought the rest of Burlington Northern Santa Fe
(Symbol BNI) in part because of railroads' inherent ability to
transport goods more energy efficiently than trucks. Meanwhile, for a
still-to-be-published magazine article, I interviewed a noted
information technology consultant who said there will be a number of
mergers and acquisitions among IT firms engaged in improving the energy
efficiency of America's electrical power system, to the benefit of both
utilities and their many millions of residential and business customers.
Could the theme of energy efficiency spark an M&A boom? It's at
least worth thinking about with regard to companies that seem to occupy
the sweet spot of being pure plays that aren't yet very big which might
easily attract the eye of a corporate behemoth.
Let me emphasize: this is all speculation.
While you probably have your own, here are three of my top "logicals" – Itron Inc. (Symbol ITRI), EnerNOC Inc. (Symbol ENOC) and MYR Group Inc. (Symbol MYRG).
Why Itron? There is a worldwide surge in smart meter installations
that is only going to grow over the next several years. Pike Research
just forecast that 250 million smart meters will be installed by 2015,
creating a market worth nearly $4 billion. As one of the world's
leading smart meter firms, Itron would seem perfectly positioned to
ride this boom.
Why EnerNOC? "Demand response" is expected to be the smart grid's
first killer app, turning energy efficiency and conservation into a new
low-cost, non-polluting, base-load power source (negawatts as opposed
to megawatts). The Cleantech Group recently forecast that demand
response will generate $8 billion a year in revenue by 2014, compared
with $1.8 billion in 2008. EnerNOC appears to be as well positioned in
demand response as Itron is in smart metering.
MYR Group, meanwhile, is a nuts-and-bolts play on the pressing
trillion-dollar need to repair and upgrade transmission and
distribution systems all over the world. MYR walks among the industry's
giants, such as Siemens AG (Symbol SIE) and ABB Ltd. (Symbol ABB), who might well want more manpower as they aggressively pursue t&d upgrade projects all over the world.
