EU heat metering rules open new markets for Germany's Ista
* New EU rule wants individual heat meters in apartments
* German player Ista banks on growth abroad
* Ista valued at 3.1 bln euros in recent CVC deal
* Awareness of individual use reduces bills, pollution
By Vera Eckert
FRANKFURT, June 5 (Reuters) - New EU regulations imposing individualised charges for heating in apartment buildings are a boon for meter specialist Ista, which hopes to build on its strong presence in Germany to win European market share.
German apartment dwellers have long taken for granted they will be billed only for the heat they actually use, determined by accurate meter readings. Yet elsewhere across the continent, landlords usually charge flat fees for heating, based on surface area or family size.
That practice looks set to change.
The 2012 European Energy Efficiency directive wants all multi-apartment housing to have sub-metering by 2016. It hopes that telling citizens exactly how much energy they use will reduce heating bills and pollution.
Smart investors smell the opportunity. CVC Capital Partners for instance, one of the world's top private equity firms, said in April it was buying the 76 percent in Ista that it did not already own in a deal valuing Ista at 3.1 billion euros and backed by more than 2 billion euros in debt financing.
CVC partner Marc Strobel said at the time the firm saw international growth opportunities for Ista, with energy efficiency becoming a huge issue.
Essen-based Ista has been selling metering technology and consumption-based billing for decades.
Since 1981, Germany has required landlords to provide individual annual heating bills, driving growth at Ista and rival Techem, which together control half the metering market whose other players include Brunata and Minol.
Apart from Germany, only Denmark, Austria and parts of Italy so far demand specific usage accounts. But Ista has already spread out into 25 other countries and expects the new EU rules will boost its growth.
"We are in a perfect position to benefit from the EU directives as we have subsidiaries in most EU countries that have nurtured links to local property markets," Ista Chief Executive Walter Schmidt told Reuters.
Some 40 percent of European energy usage goes into heating and studies show heat use falls by an average of 20 percent once consumers are made aware of their individual spending.
Ista's systems work by sensor readings in each apartment being read remotely via radio technology. It makes, installs and maintains the equipment and charges landlords a service fee.
Ista has 450,000 customers and its equipment is used at 11 million sites. Its 2012 core earnings rose 9 percent to 204 million euros ($264 million) on sales of 701 million euros.
The group's growth prospects aren't its only positive attribute. Asset management firm Zantke & Cie said in a research note Ista's contracts lasting between seven and nine years provide an attractive steady cash flow.
"Their business model appears extremely stable given the long contract durations and the lack of new competitors," said Martin Seitz, a fund manager at Zantke.
Ista is now experimenting with monthly billing, which it expects could lead to savings of another 14 percent or more as consumers, aware of their usage, lower thermostats further.
"Germany has a green history," said Schmidt. "And Brussels is looking to Germany how to shape the metering sector."
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