AS people across the UK brace for a year of huge uncertainty it looks like Christmas has come early for shareholders in a smart meter firm.

Directors of Calisen announced earlier this month that they were recommending a bid for the business from a consortium of buyers that valued the firm at £1.4 billion.

The 261p per share cash offer for Manchester-based Calisen sent shares in the firm surging 25 per cent higher, to 257.6p on the day it was announced – two weeks before Christmas Day.

The offer is pitched at a near ten per cent premium to the 240p that investors paid for shares in Calisen when the company completed an initial public offering in February. It joined Glasgow’s Smart Metering Systems on the stock market that month.

The offer for Calisen will allow investors to net big gains on investments they may have held for just 10 months, during which stock markets have been buffeted by the fallout from the coronavirus crisis.

The proposed acquisition values the 73 per cent stake in Calisen held by US private equity heavyweight KKR at around £1bn.

It provides further evidence of just how much wealth has been generated for some investors amid the official drive to ensure all UK households and small businesses are supplied with smart meters.

The theory goes that these will play an important role in the drive to net zero by giving consumers near real time information on their energy consumption.

As it does not take a rocket scientist to work out that a household’s energy consumption rises when things like electric showers and irons are used or central heating systems are left on at full blast, some people may be sceptical about how valuable the insights smart meters can provide may be.

But a range of sophisticated investors have decided that smart meter firms have very attractive prospects.

The bid for Calisen has been made by funds managed by US investment giant Blackrock and by Goldman Sachs investment bank. A subsidiary of Abu Dhabi government-owned Mubadala Investment Company also belongs to the bid consortium.

The bid comes soon after the flotation of Calisen appeared to allow KKR to realise a return on the investment it made in the firm.

The flotation valued Calisen at £1.3bn. KKR bought the business from Infracapital in 2016 at a reported valuation of around £1bn.

In the announcement of the recommended offer for Calisen the commercial rationale for investing in a smart meter business is spelled out. These rent meters and supply related services to energy companies that are obliged to provide them to their customers. The costs are paid ultimately by consumers through their bills.

Millions of meters have been installed across the country. Millions more have to be fitted by June 30 2025 to meet the Government’s target. The original deadline was 2020.

The offer announcement highlights the long-term contracted nature of the smart meter business.

It notes that with “contractual and regulatory protections in place and underpinned by strong contractual arrangements with utility customers” this “translates into strong defensive characteristics”.

Furthermore, it continues: “Bidco believes that Calisen continues to benefit from revenue security against the risk of early removal of meters, either through bilateral contracts or by virtue of regulatory, commercial and practical reasons for an incoming supplier to continue to use the existing meter.”

Calisen is already a very profitable business. The company made £17m operating profit on sales of £117m in the six months to June 30.

The company’s portfolio included 5.7m smart meters at September 30. That number is on course to grow to 13.2m in 2025 based on contracts awarded and those for which the company has won preferred bidder status.

Calisen employs around 1,750 people and provides valuable engineering jobs in the areas in which it operates.

However, with take up of Smart Meters running well below the hoped-for levels there are real questions to be asked about the value of a scheme that allows private sector operators to make so much money.

It should be remembered that investors in other smart meter firms have made significant gains.

Smart Metering Systems is increasing annual dividends to 25p per share for the current financial year, up from 6.88p in 2019, after selling a portfoilio of meters to the Equitix investment business for £291m in April.

Last week SMS said it expected 2020 profits to be marginally ahead of its board’s expectations.

The company acknowledged the current macroeconomic uncertainty but said it remained confident of meeting consensus expectations for 2021.

Perth-based energy giant SSE booked a £72m profit on the disposal of a stake in the MapleCo smart meter business to funds managed by Equitix in the first half.

Significantly, bidders for Calisen think the drive to achieve net zero will create other opportunities for the firm.

The bid announcement states: “Bidco believes that there is a longer term opportunity to utilise Calisen’s integrated platform and IT capability to expand into adjacent energy efficiency investment opportunities including electric vehicle charging, batteries, heat pumps and water meters in the UK given the increasing sustainability focus of Governments and consumers, as seen by the recent UK Green Investment Scheme.”

In designing schemes that are intended to support the energy transition, minsters must ensure that they are not in such a rush to be seen to be doing something that they launch other initiatives that seem as badly-designed as the smart meter programme.

Regulators must ensure that the returns generated by private sector players are reasonable and are proportionate to the risks they take on.

A recent windfarm announcement provided a further sign of how other big players are capitalising on the green energy drive.

Amazon announced a deal to buy power from the Kennoxhead windfarm in Lanarkshire, which it said would help advance its goal to be net-zero carbon emissions across its business by 2040.

On the same day oil and gas major BP highlighted that its trading arm had struck a deal to sell the power from Kennoxhead to Amazon.

The 35-turbine Kennoxhead windfarm is being developed by the UK arm of US private equity operation Brookfield Renewable Partners.

This is one of a range of investors that have seen attractive opportunities in the windfarm sector in Scotland. Some private equity houses are sitting on huge amounts of cash that they need to put to work.

Kennoxhead is expected to operate without the benefit of the kind of subsidies that champions of renewable energy have claimed are essential to encourage investment in windfarms.

Against that backdrop signs that the UK regulator Ofgem is prepared to limit the returns on offer for investment are welcome.

Ofgem was berated by energy firms in July after it proposed to nearly halve the rate of return they could generate on investment in networks to around 4%.

Earlier this month Ofgem made a limited concession when it said the return allowed would be set at 4.30%. It said this would contribute to a £10 saving on the average domestic bill.