German power bonanza energizes big players and small specialists

BERLIN Wed Jan 23, 2013 10:28am EST

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BERLIN (Reuters) - Germany's impending energy shift has set a host of companies, from conglomerates to niche specialists, jostling for position to capitalize on the country's most ambitious infrastructure project in recent history.

"This is the most exciting time in Germany's energy sector since the end of the 1960s, when we saw the last wave of big grid investments," says PSI AG (PSAGn.DE) Chief Executive Harald Schrimpf.

Through its software, PSI helps to control and optimize power generation and transmission, a service in high demand given Germany's need for smart power grids able to manage the inflow of conventional energy and renewable power.

It is one of many companies at this year's Handelsblatt energy conference that are banking on Germany's landmark decision to pull out of nuclear power, a move triggered by the Fukushima nuclear disaster in Japan nearly two years ago.

Germany estimates that up to 550 billion euros ($731 billion) - more than a fifth of its 2011 GDP - will be needed to upgrade its energy system and ensure that the country's power will be 80 percent green by 2050.

The project's complexity offers a rich hunting ground for large conglomerates as well as myriad little-known specialist companies active in construction, engineering, software and energy efficiency.

"The energy shift can certainly help some companies increase their profits," said Bjoern Glueck, fund manager at German asset management firm Lupus Alpha.

PSI, which employs about 1,600 and targets about 180 million euros in revenues for 2012, is among the best-placed. That has not gone unnoticed by larger companies in the energy sector, including Germany's No.2 utility RWE (RWEG.DE), which holds a near-18 percent stake in the company.

Energy agency Dena suggested that up to 42.5 billion euros of investment is required up to 2030 in distribution infrastructure and equipment such as cables and converters to ensure the success of Germany's switch from nuclear to renewables.

CABLES AND PYLONS

This will also offer opportunities to lesser-known companies such as Italian cable maker Prysmian (PRY.MI) and Japan's NGK Insulators (5333.T), a maker of ceramic insulators for high-voltage pylons, said Nektarios Kessidis, fund manager at Deutsche Bank's (DBKGn.DE) asset management arm DWS.

Investors are already jumping on the bandwagon.

Shares in Prysmian, which makes cables that help to connect offshore wind parks with the mainland, have soared nearly 60 percent since the beginning of 2012.

Kessidis added that companies such as Germany's Siemens (SIEGn.DE) and Swiss peer ABB (ABBN.VX) are also involved in expanding power grids and offer indirect exposure to Germany's energy shift because of their extensive activities in other sectors.

Analysts and fund managers also point to the area of energy efficiency as one of the main beneficiaries of Germany's energy plans.

The government expects that nearly 90 percent of the country's residential areas need to be made more energy-efficient by 2050, requiring investment of 300 billion euros for private households alone.

Centrotec Sustainable (CEVG.DE), a supplier of energy-saving technology, is well-placed to benefit from this trend, Lupus Alpha's Glueck said.

The company says it is particularly buoyant about decade-old heating technology that needs to be replaced with more energy-efficient products such as condensing boilers.

Then there's the energy-focused refurbishment of buildings, an area that secured or created 382,000 jobs in 2011 and in which Hochtief (HOTG.DE), Germany's biggest builder, is active.

Additional areas expected to grow include green power storage and the management of large volumes of renewable energy, said Stefan Grasmann, head of the energy business at software and consulting company Zuehlke Engineering.

PSI's Schrimpf, meanwhile, is already thinking outside the box, expecting his company's software to be an export success story once the German market has been satisfied.

"The big fluctuations in power grids will increase the interest in our software from countries bordering Germany, including the Benelux countries, Denmark and eastern Europe," he said. ($1 = 0.7526 euros)

(Additional reporting by Daniela Pegna in Frankfurt; Editing by David Goodman)

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