IBM banks on China for growth in energy div

HONG KONG: IBM sees strong market potential for 'smart grids' power distribution systems in China as the country seeks ways to use energy more efficiently.

Technology giants including Google Inc, Cisco and Microsoft are investing heavily in smart grids, intelligent power-distribution systems designed to be more responsive and interactive than today's traditional power grids.

In terms of countries, China, the world's biggest greenhouse-gas emitter, is investing the most. Beijing plans to invest $7.3 billion in smart grid projects in 2010, more than the United States, according to Zpryme, a market research firm in Austin, Texas.

China is far behind the United States and Japan in terms of its smart grid development.

"China is pursuing smart grids as aggressively or more aggressively than any other country in the world right now," Brad Gammons, vice-president of IBM's Global Energy & Utilities Industry, told Reuters in an embargoed interview last week.

"They're very focused and have a very strong commitment to move in that direction," he said.

IBM - which counts State Grid Corp. of China, the nation's leading power grid operator, as one of its customers - unveiled its Energy & Utilities Solutions Lab in Beijing this week.

Smart grids include computerised monitoring of the electricity flowing though a power grid and allow utilities to manage electricity usage automatically.

IBM's products span the range of smart grid systems, including the automation of power stations and electricity distribution networks with the use of digital sensors and communication networks.

China growth

China's smart grid could take five to 10 years to fully develop, said Wendy Wang, an analyst with Yuanta Securities, adding the nation is still trailing the United States and Japan.

"China offers huge growth opportunities for investors in smart grids given increased spending in the sector," she said.

"Investors will benefit from the transformation of the country's grid infrastructure and we will see opportunities from the building of the ultra high-voltage grid down to the development of meters and software."

IBM expects the China revenues of its energy and utilities division to grow by $400 million from now until 2014 as Beijing banks on "smart grids" to make the country more energy-efficient, Gammons said.

While the company gave no detailed breakdown, a report from Macquarie Equities Research puts IBM's China revenue at $2.6 billion in 2008. IBM saw total revenue of $95.76 billion for all of 2009.

"We're looking at $400 million in incremental revenue over our base revenue in China over the next four years," he said. "We're making investments in China based on the grid opportunities we see."

IBM is eying partnerships with local companies as it seeks to expand its business in China, Gammons added.