IssueAlert Emerging Technologies ~ October,
2004
GFI Energy Ventures to Acquire
SPL WorldGroup
By Jon T. Brock, Chief Operating Officer, UtiliPoint
[News Item from PRNewswire] SPL has announced a tender offer
from GFI Energy Ventures for all of its outstanding shares. Upon
completion of the acquisition, GFI will incorporate another of
its investments, Synergen, Inc., into SPL. The series of transactions
should conclude before the end of the year, pending regulatory
and other approvals. Financial terms were not disclosed.
Analysis: This announcement by GFI Energy Ventures and SPL WorldGroup
puts an exclamation point on the strategy that SPL has been executing
since the arrival of its new CEO Harry Debes less than a year
ago (November 12, 2003) and the vision that it shares with GFI
Energy Ventures. In the last year, Debes has led SPL to acquire
CES International and now will lead a larger company that includes
additional operational functionality for utility clients.
SPL History
The history of SPL was explained to this analyst in a
previous interview with SPL founding member and chairman of the
board Trevor Winer. SPL was originally formed in 1968 in Johannesburg,
South Africa as a software development shop. It consisted of scientists
that solved problems by custom programming services. It was by
no means focused solely on the utility industry. The main motivation
of the founders of SPL was to create a "different kind of
software company" which became SPL's unique culture. Over
the years, spurred by the entrepreneurial sense of adventure,
independent "replicas" of SPL were created in Israel
(1977), Australia (1978), United States (1982) and South East
Asia (1984). All of those SPLs, while independent, were in the
same business of providing software products and solutions and
more importantly, shared the same SPL culture.
In l994, these entrepreneurs came together to explore the idea
of once again becoming a single global entity. It was clear that
joining forces would create an immediate opportunity to share
investment, and its expertise and worldwide markets. In doing
so SPL could add value to customers, shareholders and staff. So
all of the SPLs were merged together to take on a new global dimension,
thus the current SPL WorldGroup was born with headquarters in
the United States.
Also in the same time frame, the SPL software group focused its
attention on a problem that a North American utility was having.
The year was 1994, the utility was Minnesota Power, and the problem
was its customer information system (CIS) and billing system.
The resulting application became the first generation of SPL's
CIS known as CIS Plus.
The original CIS Plus has undergone several revisions and has
actually been re-written into what is today known as CorDaptix.
The effort began in 1998 with a team of fifteen top SPL engineers
being assembled to re-build the core product line. After nine
months of being “locked away”, they emerged with the
first version. In 1999 it took another nine months to design a
front-end for their new creation. The CorDaptix product line had
to be refined, tested, and improved. Once complete in 2001, it
was flexible, scalable, functional, and regulatory compliant with
regulated or deregulated environments globally. In 1999 PeopleSoft
and SPL entered into an agreement that allows PeopleSoft to market
a PeopleTools version of the CIS.
SPL Strategy
As previously mentioned, since the arrival of Debes less
than one year ago, SPL has been executing a new strategy to compliment
its existing product with additional functional applications that
are complimentary to the original offering. Earlier this week
I interviewed SPL CEO Harry Debes, SPL Senior Vice President of
marketing and strategy Guerry Waters, and Synergen CEO Richard
MacDonald.
According to Debes, the formulation of SPL solution strategy
took place about a year ago. The strategy includes offering to
the utility market a full suite of mission critical best-in-breed
applications either stand alone or integrated. To execute this
strategy, SPL will either build, partner, or acquire the required
functionality. Customers of the solution set can either implement
individual applications or the entire set as their business needs
dictate. The proven value of an integrated solution set like SPL's
is the reduction in cost a utility will experience by no longer
having to maintain integration between applications as well as
the benefit of being able to use technology to improve or re-engineer
complete end-to-end business processes. The more of the solution
set a customer uses the higher the business value and return on
investment they will receive. And since each application in the
set is a true product, customers will see even further value increases
as new versions of the product become available. SPL's Vision
can be depicted as follows:
Source: SPL WorldGroup
SPL obviously already owns the customer management and revenue
management functionality via CorDaptix. Debes has added outage
management (OMS) and distribution management (DMS) with the recent
acquisition of CES International. After the acquisition of SPL
is final, GFI Energy Ventures plans to merge Synergy and Mobility
into SPL, which will add the Mobile Workforce, Asset Management,
and Work Management functions to the suite. Waters re-iterated
that SPL will not be looking to add meter reading, GIS, or ERP
functionality to the suite. Instead, it will partner and/or interface
to existing best-of-breed application vendors that currently serve
the utility market. The acquire, schedule, and trade functionality
is currently not filled in the SPL suite and may be looked at
as an opportunity for 2005. Waters further added that SPL will
be releasing the integration for its customer care and billing
and outage management products the latter part of this year. This
in effect is an “out of the box” integration of these
two critical applications. This is evidence of SPL delivering
on its strategic plan to provide its customers and the market
a cost effective integrated environment.
MacDonald added context to the strategy by explaining Synergen.
Synergen was founded 18 years ago and originally focused on the
work management aspect of utilities. According to MacDonald, Synergen
clients are focused on trying to get synergy in the utility-IT
marketplace by going to one vendor to solve problems. This led
Synergen and investor GFI Energy Ventures to acquire the Mobility
assets from Axiom earlier this year. Synergen has chosen to be
flexible and build general interfaces to ESRI, Intergraph, and
AutoDesk as opposed to staying “closed.” The Synergen
products address all aspects of collaborative work management;
asset reliability and maintenance; resource optimization and scheduling;
safety and regulatory compliance; inventory control, purchasing,
and contract management; operational accounting; reporting and
analytics; capital project tracking; and document control. Synergen's
Mobility workforce management solution offers mobile workforce
dispatch and scheduling, automatic vehicle location (AVL), and
customer information systems.
GFI Energy Ventures
Los Angeles-based GFI Energy Ventures is an equity investor
active in the utility and energy industries. It invests in profitable,
growing companies with products and services used in the distribution,
marketing, and end use of gas and electricity. Founded in 1995,
GFI has done 45 transactions. Earlier this week I spoke with the
chairman and founding principal of GFI Energy Ventures Lawrence
Gilson.
According to Gilson, from 1995-1999 GFI raised money deal-by-deal.
At the end of 1999 it raised a fund of committed capital in the
amount of $454 million. Lodestar was a part of that fund receiving
$29 million in 2001. Synergen was also a part of that fund and
now SPL will prospectively be a part of that fund.
GFI has invested in 13 platform companies of which 3 are software.
A pre-fund company that GFI invested in 1998 was Caminus. GFI
created Caminus through 6 transactions and eventually sold it
to SunGard. Caminus provides software to the power and gas trading
industry. While with GFI, Caminus Corporation acquired Caminus
Energy Limited, ZAI*NET Software Inc., Positron Energy Consulting,
DC Systems, Nucleus Corporation and Altra Software Services, Inc.
The creation of Caminus Corporation by GFI was a response to the
need for a new information infrastructure to support competitive,
market-based energy markets. Caminus software provides the portfolio
and risk management capabilities which participants in the volatile
competitive energy markets require.
“What we have in mind here is a similar approach in what
we did in building up Caminus,” said Gilson. “We acquired
Synergen, then acquired through Synergen the utility business
lines of Axiom and now SPL will be a significant step which has
just acquired CES International. I believe that on the basis of
the collection of those transactions we have built a good set
of highly complimentary solutions that will be well received in
the market.”
When asked if we could expect more acquisitions, Gilson commented
that it is highly likely. “We have a vision that extends
beyond what this transaction makes possible—there will probably
be some internal development and further acquisitions to grow
this suite,” added Gilson.
“We are strategic investors focused exclusively in this
sector and therefore we definitely have a strong investment thesis
and ideas of where the opportunities lie,” said Gilson.
“We discuss that with the senior executives of the companies
with which we plan to invest. We confirm that we share a common
view of where we like to go with the management team and we work
together to achieve those goals. We are not going to be management
but we will be active on the board. Debes will be the CEO of the
merged company.”
It appears that the utility-IT scene is changing. Debes used
the Microsoft example as a favorite one. Microsoft took different
applications such as spreadsheet, presentation, word processing,
etc. and made a suite of products (MS-Office). If SPL, Synergen,
and GFI have their way, we may be looking at a new offering in
a couple of years—how about “Utility-Operations In-A-Box”?
