Ladies and gentlemen, welcome to the Capital Markets Day 2021 conference call and live webcast. I am Moira, the conference call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. Webcast viewers may submit their questions or comments in writing via the relevant field. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Eva Borowski, SVP Investor Relations and Corporate Communications. Please go ahead.
Good afternoon, everyone, and welcome to Landis+Gyr 2021 Capital Markets Day. Thank you all for joining us today from your devices around the globe, while we are hosting this virtual event from our new offices in Cham, Switzerland. As you know, earlier today, we issued a press release and accompanying presentation. You can find these documents on our website. Before we get started, I'd like to emphasize that some of the information discussed today contains forward-looking statements. For more information, refer to page two of the presentation and our press release issued today, and we ask you to interpret all information provided today in the context of this disclaimer. Please also note that the guest speaker contributions shown today were pre-recorded in advance. Today's CMD should last about three and a half hours, and there'll be a coffee break about halfway through.
We've left plenty of time for questions at the end of the event. With that said, let's kick off with a quick video of Landis+Gyr, and then I will hand over to our Chief Executive Officer, Werner Lieberherr.
[Presentation]
Thank you, Eva, and welcome everyone. The last few months have been unexpected and dominated by more change than I ever anticipated. When the pandemic hit, it completely changed the way we do business, the way we work, and the way we interact. The first 10 months in office since I joined Landis+Gyr turned out to be a little different than I might have initially imagined. For a start, revenue in the first half of fiscal year 2020 declined by almost 30%. That's a huge shock for any business. However, due to prudent cash management, we were still able to produce a solid free cash flow, and we traded profitably with an 8% adjusted EBITDA margin. We also took immediate action to proactively initiate a restructuring program.
This is well on track to be completed by the end of the fiscal year and will result in a 12% reduction of our global workforce. I have initiated a lot of change from the start and realigned the organization. While our three strategic pillars, smart metering, grid edge intelligence, and smart infrastructure remain unchanged, we have also recalibrated our strategic direction. Today, we want to dive a little deeper into our strategic direction and also give you an update on our midterm guidance and dividend policy going forward. Elodie, who joined us as our new CFO in November, will add a little more color to the financials. Our regional heads, Susanne, PV, and Steve will talk about the opportunities we are pursuing in the regions. As a special highlight, we have three guest speakers. Sharon Johnson is in charge of portfolio decisions at British Gas.
She will tell us more about her view on smart metering and the journey British Gas is on to drive consumer empowerment and future-proof technologies. You'll hear from Carlos Nouel, VP of Smart Solutions at National Grid in the U.S. He's going to talk about the benefits of Grid Edge Intelligence, their experience of the regulatory approval journey, and how National Grid is shaping the energy industry on its way to decarbonization. Most of you probably have heard that we have joined forces with Google to form a strategic partnership. Later today, you will have a chance to listen to conversations I have had with Rob Enslin, President of Google Cloud, about what this means and how we will shape smart infrastructure together. Let me give you a brief overview of the highlights we also published this morning in our press release.
The key messages of today's CMD are that our partnership with Google will enhance our digitalization and software offerings. The acquisition of Rhebo adds to our cybersecurity capabilities, and several utilities in the U.S. have obtained regulatory approval. We'll talk about midterm guidance and dividend policy, and our guidance for fiscal year 2020 remains unchanged. R&D investment and M&A activities are supported by a solid balance sheet. As are our businesses and our strategy as a whole by the global mega trends we are seeing, and we'll talk about our efforts and future plans for ESG. You can see that there's a lot of change happening, and as I like to say to our teams, change is inevitable, success is optional. We are embracing change, and as the slide says, we are embracing change for a greener tomorrow. Let's dive right in.
I would like to begin by saying a few words about sustainability. Sustainability is part of our DNA, and we are passionate about contributing to the 17 UN Sustainable Development Goals as we help manage energy better. On October 28th, we published our sustainability report 19/20, and I encourage you to take a look. We are very proud of the progress we have made, and on this slide, you can see our achievements in relation to the seven of the UN Sustainable Development Goals. In addition, for 2020, we have introduced sustainability component in our short-term incentive for all our eligible employees with a weight of 10%. We know there's still more to be done. As part of our increased efforts, we have signed up to the UN Global Compact and Global Reporting Initiative. Looking ahead, our products and services offer unique opportunities for environmental and social benefits.
We are committed to create a more sustainable world and more empowered energy consumers. For a start, we entered the smart water business by developing a smart water meter. In addition to our engagement related to the UN Sustainable Development Goals, you can see on this slide, there is another factor tied to sustainability that is closely related to our business and became much more visible by the changes to everyday life we saw in 2020, and that still challenges utilities today. Last year, energy consumption patterns changed virtually overnight. Especially smart metering and grid edge intelligence will continue to be critical tools for utilities as they serve customers transitioning to this new normal. Additionally, these technologies will grow in importance to consumers as well, providing them with greater awareness and control to make flexible and sustainable energy choices.
This is what consumers want, it is what the regulators want, and it is what our customers have to deliver. Our ability to support them in this is a key competitive advantage. Our close relationships with our customers and also our newly formed partnership with Google will allow us to drive these efforts forward to manage energy better together. To incentivize our employees even further, we are discussing to increase the sustainability component in our short-term incentive for all eligible employees to 20%. What I would like to do now is to give you an overview of Landis+Gyr. If there's one concept that sums up our business, then I think it is fostering a culture of excellence. We are proud to look back on 125 years of excellence, serving our customers around the globe and being a partner that is committed to actively shaping the future of energy.
Let me touch just on a few of those points briefly. As a leading global provider in AMI solutions, we have been selected by Frost & Sullivan as the Global AMI Company of the Year for five consecutive years. We manage the world's largest IoT utility network in Japan with more than 1.3 billion reads per day, with 99.99% accuracy. It is just the beginning of our journey to becoming a leading smart infrastructure provider. We are about to take a giant leap forward through our first of its kind in the industry strategic partnership with Google. The foundation for our advances in Grid Edge Intelligence and smart infrastructure is our leading position in smart metering with an installed base of more than 300 devices deployed globally. 125 million of those are intelligent devices. We have more than 15 million meter points under managed services.
We are proud to say that we have provided 125 years of service to over 3,500 customers worldwide as a trusted partner. We are even more excited about what's to come. One of the first things I did when I arrived was to renew the global leadership team. I wanted to make sure it was an impactful team, motivated to drive the change needed to position us well for the future. Since I arrived in March, Jeff has joined as CTO. Bodo has been promoted internally as Head of Strategy. Sean joined as Head of Supply Chain and Operations. Eva as Head of Investor Relations and Corporate Communications, and Holger as General Counsel. This past November, Elodie has joined us as CFO, and Kevin will join us shortly as the new Head of HR.
Our global leadership team is committed to delivering strategic and operational results to motivate our global workforce of 5,500 passionate and talented people to execute our strategic initiatives. As change happens from within, we have also put some thought into the way we define ourselves and the motivation that drives us to do our best work for our customers and shareholders every day. We are passionate about creating a greener tomorrow through leading smart metering, grid edge intelligence, and smart infrastructure. We believe that as partners, we can empower customers and consumers to utilize resources in a more informed and sustainable way. Together, we manage energy better. It is through that we will continue to build a profitable, successful business with good returns for our shareholders. Our focus is defined by our values.
These are much more tangible now. We have gone through so much change internally that we needed to realign everyone in the same direction. First, customer intimacy. We are a trusted partner and deliver on our commitments. Second, innovative technology. We passionately innovate to differentiate for our customers. Third, entrepreneurial spirit. We empower teams to drive results with a can-do attitude. Fourth, uncompromising performance. We strive to deliver high quality on time, every time. Last but not least, sustainable impact. We manage energy better for a more sustainable world. On this slide, you can see the progress we have made since I arrived in April of last year. First, and as I mentioned at the beginning, it's about business resilience despite COVID-19.
We have produced a solid free cash flow, excluding M&A, of $45.3 million and traded profitably with an 8% adjusted EBITDA margin, despite almost 30% revenue decline in H1 fiscal year 2020. This is a result of prudent cash and cost management. The fiscal year 2020 guidance is currently on target. Although there have been temporary delays in rollouts and regulatory approvals, we have had no major project cancellations. All of our factories are currently operational, we have seen no major impact on our supply chain and manufacturing. Second, we have realigned the organization. The resilience I've just mentioned is a direct result of driving more empowerment and accountability throughout the organization, starting at the very top with the new global leadership team. The goal was to increase transparency and predictability, we can see the first results of our efforts. Third, proactive cost management.
Given the current situation, it's crucial to position us well for the future. Part of that was right-sizing the organization. As we announced in August of last year, we initiated the restructuring streamlining initiative, resulting in a reduction of 12% of our global workforce. We are aggressively driving product cost out initiatives and inventory reductions to strengthen our competitive position. We are seeing progress on all fronts, not just internally. Regulatory approvals have been granted to several utilities in the U.S. That is very exciting news for utilities and also confirms that the benefit of smart metering and grid edge intelligence centers are being recognized. Utilities put a lot of effort into proving the benefits of the investment through up to 60 use cases for the filings for a new rollout. Seeing these approvals move forward is a very positive signal.
We also see our decision in terms of strategy validation confirmed. The executive management team, the board, also the broader team, spent a good amount of time evaluating, calibrating, and validating our strategic priorities. One of the results, I'm very pleased to announce that, is that we will expand our efforts in smart water and smart gas. Next, R&D. One of my first actions after being appointed CEO was redesigning our R&D organization by empowering our local teams, while at the same time centrally driving technology strategies and global platforms. We've already seen good results with respect to customer intimacy and speed to market. We have enhanced technology roadmaps with emphasis on digital transformation to ensure we develop and deliver leading-edge innovation for our customers.
The focus here is increasingly on grid edge intelligence and smart infrastructure. Throughout the day, you will hear more about how exactly we want to push forward in these two areas. Expanding our offerings in software and services. The focus is on grid edge intelligence and smart infrastructure. This will come through our recently announced strategic partnership with Google. Together, we will elevate the customer experience and truly enable smart cities. We will do that by leveraging our leading expertise in smart metering and grid edge intelligence with Google's know-how in data analytics, artificial intelligence, and machine learning to transform the future of the energy industry. Rob and I will dive a little deeper here later today, as I mentioned earlier. The more complexity is added to the grid, the greater the need for security becomes.
Part of our answer to that is our fresh off the press acquisition of Rhebo. Rhebo adds cybersecurity monitoring capabilities down to critical endpoints at the grid edge to our portfolio, and is therefore a perfect fit. More about that later. You see, we have been pretty busy over the last few months, and we have actively initiated a lot of change. One of our greatest strengths has always been our balance sheet. We are creating the future on a solid foundation. We do have a solid foundation for the midterm. Our balance sheet, with significant investment capacity, allows for sizable acquisitions. We are a strong cash generative business with an asset-light business model and substantial dividend capacity. Our industry-leading technology, large installed base, and excellent and longstanding relationships with customers around the world are valuable assets to drive future successes.
We are passionate about the environment, social and governance aspects of our business and industry. We believe in playing our part in becoming a better company and having a meaningful impact by empowering utilities and communities to manage energy better. Our foundation for the midterm is solid and will enable us to drive forward a longer-term vision for growth. I believe we are perfectly positioned to benefit from global megatrends. There's a shift towards renewables and a more complex grid, and we are leveraging our partnerships to accelerate digitalization, as well as pursuing higher growth technology adjacencies, both organically and inorganically. Additionally, data-driven solutions will enable a sustainable and empowered utilization of energy and water, all of which will allow us to transform the business for longer-term growth. Let's talk about our technology roadmap.
Technology is at the heart of our company, and we continue to invest. On an annual basis, we expect to spend approximately 9% of our revenue in technology developments of our products, software and services, and the expansion of our portfolio. Today, the majority of our spend is centered around Smart Electricity as well as associated software and services. In the future, Smart Electricity will continue to be a cornerstone of our business, but will branch out into adjacent and complementary fields. Revelo, our grid edge intelligence center, is the leading technology in its field, and deployment will start in 2023. This technology is also the foundation to capture the market transition into grid edge intelligence as part of the second wave rollout. Enabled by cloud-ready software solutions developed together with Google, we are putting together a world-class offering.
The platforms, analytics, and applications which we will develop for the grid have the flexibility to be leveraged in adjacent markets. Therefore, our strategic partnership with Google and our most recent cybersecurity acquisition of Rhebo will be beneficial for our entire product offerings. Of course, this will increase R&D spend to some degree as we build out these solutions. Next to our renewed investment in smart gas and our market entry into smart water, we will also be focusing on smart infrastructure, especially street lighting and potentially e-mobility. This will leverage our market and technology leadership in the U.K. and France and expand our product offerings into these non-regulated growth markets. Our technology investments shift towards grid edge intelligence and smart infrastructure. Let's now turn to the midterm guidance for fiscal year 2023.
We are guiding for a compound annual revenue growth of low single digits in line with total market growth. Adjusted EBITDA of 12%-13%. Free cash flow, excluding M&A, of around $120 million USD. The midterm guidance reflects the recent roll-offs of large projects that have not been replaced by new business and delays of regulatory project approvals in the U.S. This outlook also underpins the $400 million impairment, which we expect to book in H2 in respect of goodwill in the Americas region. All that said, in the long term, we are confident that investments which we are making and the alliances which we are forming with the likes of Google will get the Americas region back towards the level of profitability which we have experienced in the past.
For the dividend, we are targeting a progressive dividend going forward based on the fiscal year 2019 amount of CHF 2.0 Per share, or about $64 million. With that, I would like to turn over the call to Elodie to talk a little bit more about our financial performance. Elodie, please.
Thanks, Werner, hello, everyone. I joined the company about two months ago now. I'd like to start by saying that I'm very proud to be part of the team of Landis+Gyr. I'm also looking forward to meeting all of you when the circumstances will allow. Today, I will walk you through our current financial performance, our midterm guidance, and our capital allocation plans. First of all, as our financial year closes by March 31st, all indicators for this year are estimates. If we look back at our H1 2020 performance, we can see that we had a serious COVID impact on our deployments and on our new volumes. This impacted our regions in Americas and EMEA, particularly in the U.K. For H1, our revenue declined to $ 623 million, down 27% versus prior year. This lower revenue impacted also our profitability.
Adjusted EBITDA came down to 8% due to reduced operating leverage, which was in part compensated by cost savings. Now looking forward in H2 2020, we see an improved trend, and our guidance for 2020 full year remains unchanged. We expect a revenue range between $1.3 billion-$1.4 billion, with an adjusted EBITDA margin higher than 8%. This implies recovery in our H2 revenue and EBITDA margin compared to H1, driven by COVID-19 recovery and deployment timing. With regards to the U.K., we are closely monitoring the Brexit implications and the COVID-19 development recently in Q4. Whilst we have seen some slowdown in the rate of meter installation, this rate remains significantly higher than during the first lockdown. Whilst this may have some impact on revenue in the next few months, we so far have seen no significant downturn compared to our estimates. Now moving on to operational financial management.
With the impact of COVID-19, we took early action to preserve cash and control our costs at all level of the organization. We took short-term actions as well as longer-term structural programs. In August, we announced a 12% reduction of workforce as part of a global restructuring program. We benefited in the first half of strict cost controls, as I just mentioned, and from government schemes. Our OpEx overall declined by $33 million versus prior year. While some of those will be non-recurring in nature, we are going to benefit from the structural effects of our global restructuring in H2 and in the coming year. We expect, as was announced in the H1 earning, that we will save overall $30 million with this program, of which $16 million will be on the OpEx side. This project is well on track so far according to our expectation.
When we look at the rest of our CapEx and working capital, we continue to benefit from a shift to asset light business model, which means a lower CapEx spend and reduced need in working capital. We expect to further reduce our working capital needs in the second half as we continue to focus on inventory management. If I now turn to cash generation and balance sheet. First of all, despite top line weakness in H1, we saw very strong cash flow generation of $ 45 million, which was 37% higher than H1 2019. This clearly shows the resiliency of our operating model and also displays a strong focus on cost and our commitment to optimize operation. Looking forward to H2 2020, we expect to continue strength in cash flow generation from operation. That being said, we will have a couple of one-off headwinds.
One is the cash out restructuring, due to our global restructuring initiative, which we had already announced as part of the H1 earnings to be $ 18 million. The second one is a sales tax assessment for the Washington State for $ 20 million. As you know, this case we strongly disagreed with, but we had to make a payment in November to be able to file this in appeal. We expect, though, that we can compensate these headwinds for a good part by the positive developments we see in our cash generation from operation in the second half. Turning to our balance sheet. We here have a very strong foundation in terms of balance sheet with a positive net cash position of $ 12 million as end of H1, and a cash balance of $ 369 million.
On this basis, we paid a dividend of $64 million in November, and we have CHF 200 million of credit facilities that are established but remain undrawn to date. As part of our upcoming annual closing cycle, we are currently performing an assessment of the fair value of our assets. We have reviewed all associated parameters, and in this context, we plan an impairment charge in the range of $400 million for the legacy Toshiba goodwill for Americas. This will be a one-time non-cash item to be recognized in FY 2020. We believe it is a prudent approach that reposition our balance sheet strongly for the future. If I now turn to mid-term projection. As was said in the guidance, in terms of top line, we estimate to grow with low single-digit CAGR compared to 2019. This is in line with the AMI market growth expectation.
This means we expect to recover from the COVID-19 impact by 2023. With that, we estimate our adjusted EBITDA range to be between 12% and 13%. If I now look at the different regions. First, for Americas. It will require time to recover due to the lumpiness of order intake and the dependence on regulatory approvals in key states. Recently, we have seen developments on regulatory approvals that are positive, and we expect to revitalize our order intake. However, the revenue conversion cycle takes time, and in the interim, we expect a margin pressure due to lack of operating leverage. We expect, however, that the renewal orders will drive revenue growth in the longer term and associated margin recovery. Now looking at EMEA.
We expect market recovery in the U.K. in the relatively short term, and the medium-term growth will be driven by second wave rollout in Northern, Central, and Eastern Europe. With the streamlining initiatives undertaken in the recent years, we are expecting to continue to improve EBITDA margin above current level and in line with our targets. Looking at our APAC region, we expect to further grow in key markets, Australia, New Zealand and India, in the back of AMI deployment program. Hong Kong will remain a significant contributor post strong deployments in 2019, 2020, and for the rest of the APAC region, we expect to grow double digits. Moving on to our capital allocation plans. Looking at our mid-term plans, we expect sustained cash conversion translating into continued strong cash generation from operations. This will support our capital allocation plan.
We are committed to support our technological development with significant organic and inorganic investments. This means we will continue our R&D investment in Smart Electricity and put more emphasis on Grid Edge as our latest hardware innovation, Revelo, is being deployed. With Google, the complementary co-investment and development partnership will enable cloud readiness for software solution and extend our SaaS offering. With our low leverage position on our balance sheet, we have significant investment capacity that we can use to extend our portfolio through M&A. As shown recently with the acquisition of Rhebo, if the valuation and the strategic fit makes sense, we will use acquisition opportunities to expand in new markets and acquire technology. With all this, we are committed to continuing to offer an attractive shareholder return.
We are able to fund our R&D developments and support the transformation of the portfolio by expanding the software and service pool, while at the same time paying a cash return to our shareholders. November 2020, we paid a dividend of CHF 2.0 A share, which we expect to grow progressively in line with market condition over the coming years. In parallel, we have decided to keep our share buyback program suspended for the time being. This being said, I'll now turn over back to Werner.
Thank you, Elodie. You see that we are transforming the business, and now we will talk more about driving future growth with leading-edge innovation. If you look at the mega trends, we see that we really are in a sweet spot. The global population is estimated to grow to 8 billion by 2024, 8.5 billion by 2030, and to a staggering 9.7 billion by 2050. With that comes an increased need to manage our resources in a better way. At the same time, we are seeing a rapid trend towards urbanization. Current projections say that by 2050, more than 2/3 of the world population will live in urban areas, and that will increase the need for technology to enable smart resource management in smart cities.
As part of that, decarbonization is a huge factor, and digitalization and new technologies will increase, empower consumers to drive control over how they use energy and other resources. These services will also use a lot more energy than ever before. We need to make them smarter and more efficient. In order to cope with the development of an increasing population, increasing reliability on tech, and limited amounts of resources, there are numerous initiatives in place, globally and locally, to drive sustainable actions forward. At Landis+Gyr, we support these sustainable actions just mentioned while benefiting from the mega trends and policies at the same time. For one, in the way how we run our day-to-day operations with sustainability in mind and the desire to do what we can to preserve resources for future generations, we actively support sustainable initiatives.
Through our expanding portfolio of products and services, we address the current and future needs these mega trends bring to light. Already today, our smart metering Grid Edge intelligence technology allows utilities and consumers to control the way energy is used in a safe, secure and reliable way, driving efficiencies and allowing for increased cost control and data utilization. Going forward, we will shape the way resources are being managed through smart infrastructure technology even more effectively and efficiently, creating value for utilities, consumers, and ultimately our shareholders and employees. On the next slide, you can see that the global smart meter markets continue to grow with a CAGR of approximately 1% between 2019 and 2023, driven by first and second wave deployments globally.
We did see an impact by COVID in 2020, leading to temporary delays of rollouts and tender activities. We expect markets to recover in 2021 back to 2019 deployment levels. From 2021 to 2023, we expect a CAGR of approximately 4%. The Smart Electricity residential growth is driven by large ongoing and new rollouts in Europe and steady growth in North America. Looking past 2023, we see new first wave deployments in other EMEA regions such as Central and Eastern Europe and Russia and the Middle East, as well as Asia Pacific, mainly Southeast Asia and India, but also South America, for example. The second wave has started already in selective markets. This will increase in the second half of this decade. Global smart gas is declining as large European rollouts in the U.K., the Netherlands, France, and Italy reach their peaks.
We see growth potential in new markets, which is driven by a technology shift to ultrasonic measurement to enable advanced applications such as leakage detection. This is one of our core competencies. We are the number one vendor of ultrasonic gas meters with our deployments in the U.K. and the Netherlands. A rising global focus on leakage and water loss management will drive steady growth of water metering and transition to smart ultrasonic water metering to enable advanced applications such as leakage detection. Ultrasonic measurement will become increasingly more important. Here, we will leverage our technology expertise to expand our reach in smart water and smart gas markets. In general, we see fundamental change in the utility energy industry. Global trends, regulation, and improved profitability will drive rapid growth of distributed energy resources, including wind, solar, batteries, and EVs, to name just a few.
At the same time, we see increased demand for automation, communication, monitoring devices, and digital technologies in the grid and utility industry. As a result, this leads to new challenges, but also offers a wide range of opportunities for utilities to better manage the grid and improve customer interaction, providing higher levels of service. The large deployments of smart metering technology over the last few years are the foundation to address these challenges. Utility hardware, such as sensors and meters, provide utility operators with grid data, but the addition of IT solutions make that data actionable. Utilities have access to mountains of new data, for example, on consumption patterns, device health and stresses, power quality, stability metrics, and so on, and have started to invest in IT solutions, sophisticated software, and analytics to leverage the data. This market is expected to grow with around 10% CAGR.
We see a tremendous potential for Landis+Gyr to grow and develop new services, leveraging our metering expertise in combination with Google's data analytics, AI, and ML. Analytics are expected to grow with a 15% CAGR, and this is massive growth in data. It is leading to a re-evaluation of data analytics practices. Utility analytics comes in many forms, used by many operating segments within the utility, such as asset performance management, grid operation, demand side, and customer operations analytics. Looking at the customer operation side, we see use cases that support meter data analytics, utility billing, customer service, and call center operations, such as fraud detection and pricing optimization, for example. In terms of grid operations, applications range from outage detection and prevention to system modeling, power quality optimization, real-time network operations, and grid balancing, and distributed energy resources integration.
If we look at energy cybersecurity, we see an expected growth rate of approximately 7%. The security of utility IT systems has been of increasing importance to utilities. Today, utility cybersecurity has been underutilized and underfunded, with a lack of education and awareness to the criticality of the emerging threat landscape, as cyberattacks are a top disaster concern for utilities around the globe. This is also exactly where our newly acquired Rhebo comes into play, providing anomaly and threat detection down to the grid edge and adding to our cybersecurity capabilities. We will dive a little deeper on Rhebo's unique capabilities in a little bit. Our large installed base of connected devices around the globe gives us a very competitive position to drive these future developments forward and push new technologies. Turning now to the global pipeline for technology deployment.
In 2020, we have seen a continuation of the deployment of smart metering markets. The combination of global early stage, first wave, and second wave deployments create a continuous flow of smart meter deployments worldwide. As trusted partner of some of the largest first wave deployments, we are well positioned to capture growth in newly early-stage deployments as well as upcoming second wave projects, which will take full advantage of next-generation metering technology and grid edge intelligence. Let's take a look at this by stage. I will walk you through the way we look at the different stages, and Susanne, PV, and Steve will talk in more detail about the different countries you see represented here by the flags. Let's take a look at the curve. On the left side, you can see the early stage. Here, regulation is usually in place.
We see pilot activities or start of roll-outs. These markets are very diverse with different drivers, reflecting the versatile nature of smart metering, where digitalization can be used in different ways. In markets such as India, Bangladesh, and South America, revenue protection is a big issue for utilities, and smart metering has a key role to play. We are really pleased to have won projects in all these geographies. In European markets, the drivers are generally different, but we are excited some of the upcoming projects in Central and Eastern Europe. Moving on to the first-wave deployments, which you can see here in the middle.
These are progressing well with Landis+Gyr as a delivering partner to several large utilities such as China Light & Power and Hong Kong Electric, Intellihub in Australia, British Gas in the U.K., Enedis in France, Stedin and Alliander in the Netherlands, and TEPCO in Japan. Many of the first-wave deployments will turn into second waves. In the next couple of years or so, Japan will start to replace its meter park, and even the U.K. will not be far to behind. If you look all the way over to the right, you can see the second-wave deployments. This is the phase where we are enabling several utilities in the U.S., for example, and also E.ON in Sweden to replace and migrate technology towards grid edge intelligence.
What you also see on the slide is what we call the technology evolution, the migration from smart metering to AMI to grid edge intelligence. Many early-stage pilots start as basic smart metering projects. Countries moving to first-wave mass deployments deploy AMI, advanced metering infrastructure systems, end-to-end solutions, including software and central systems. Countries with already high penetration of AMI move their focus to leveraging meter data and develop new use cases. France, the U.K., and the Netherlands are some examples. Lastly, we have second-wave deployment with a strong focus on use cases using meter data to enhance consumer engagement and improve grid operations. This is driving the need for grid edge intelligence. This is happening in the U.S. and also in Sweden. Of course, some late adopters just jump straight to the latest use case, and we would expect to see more of this.
I'm proud to say that we are well-positioned to capture future growth, and we will continue to leverage our expertise in smart metering to drive forward grid edge intelligence and smart infrastructure. With that, I will hand over to PV in the U.S. to tell you a little bit more about the opportunities he and his team are pursuing in the Americas. PV, please.
Thank you, Werner. Good morning and good afternoon, everyone. I am very excited to share with you our highlights on market dynamics in Americas. Let us start with our largest markets in the U.S., Canada, and Japan, which continue to be the most active and well-established deployments. Each of these markets are completing the first-wave rollouts, and in the U.S., the first wave and the second wave overlap. First-wave AMI requirements were more about operational benefits, and the second wave being specifically related to how the meter data enhances consumer engagement and improves grid operations. Regulators have increased their scrutiny on utility AMI filings, which has driven the convergence of these requirements. We are well-positioned in all of these established markets. First, our technology leadership and networking standards and new metering products that enhance consumer and grid benefits. Secondly, our unique go-to-market for distribution and our exemplary service delivery.
Lastly, our regulatory experience. We are very excited in the recent approvals of several utilities in the U.S. This has been a long and complex process for us. We've had a challenging year in 2020. Recent large project roll-offs have not yet been replaced by new business. We are pleased that the recent regulatory approvals are now coming through. They're significantly delayed compared to our previous expectations. Of course, there is significant lag between contract awards and project deployments. Putting this all together, we will have a revenue headwind until fiscal year 2023. Our focus will be to continue our aggressive cost savings and operations and product cost out initiatives to manage the revenue and margin pressure.
In the longer term, we see these measures result in recovery in both revenues and margins so that we can get back towards the traditional margins which we have seen in the past. In Japan, we've completed the deployment of 27 million meters as originally planned and completing the expanded scope of 29 million meters for the first wave of smart meters that started in 2013. In Japan, the regulatory requirement requires utilities to replace all electric meters every 10 years. We're very excited as we plan and prepare for the next wave to start around 2024. We continue to deliver exemplary technical performance at TEPCO, the world's largest utility IoT platform, with daily meter reads of 1.3 billion reads per day and an accuracy of over 99.95%.
TEPCO proves scale, flexibility, and autonomy for combining sensors, ubiquitous communications networks, and software to provide utilities with transformational data at the grid edge. In the developing markets of Brazil and the rest of Latin America, we're in various stages of market development. The market dynamics and regulations continue to be challenging where AMI is evolving and new entrants emerging in this area. Our positioning here is on product differentiation, open standards and interoperability, software and analytics, and our exemplary service. We're well-positioned in the markets in the U.S., Canada, and Japan, and have superior technology to take up advantage of the upcoming deployments. In Latin America, we're streamlining our operations to focus on market segments where we're going to be the most competitive. In the next slide, we will have a deeper look at the U.S. market.
With about 150 million meters, the U.S. is by far the largest market in the Americas, where we have 1/3 of the market share. If you look at the pie chart on the left, AMI penetration is very high, roughly at 95 million meters deployed. Of the remaining 50+ million, half are already in deployment and most of the remaining have RFPs that are in progress, and regulatory approvals being issued, as can be recently seen in the U.S. Certainly, these landmark approvals are exciting for the industry as they confirm the acknowledgment of the benefit of smart metering and grid edge intelligence technology. Now let's look at the chart on the right that says yearly AMI deployment. Of the 100 million that have been deployed, the first wave early adopters have deployed greater than 45 million meters.
Second wave has begun in the U.S. as these early AMI systems reach greater than 10 years old. We're currently deploying the second wave movers in Arizona, Midwest, and other parts of the country as we see this as a strong tailwind for our business as we roll out our next-generation metering technology. Second wave business cases will need to go far beyond meter-to-cash operations to how well meter data is used to improve consumer experience and grid operations. Our efforts with grid edge technology and enhancing our cloud offering with Google should position us well to take advantage of this huge opportunity using our new metering platform, Revelo. Let's talk about our exciting new technology, Revelo, that we are bringing to the market.
In today's increasingly decentralized system, as consumers become prosumers of energy for adoption of EVs, solar panels, and battery storage, utilities need real-time insights into energy flows at the grid edge. Revelo is more than a meter. It is an Internet-connected IoT sensor with unique edge computing and high-resolution waveform data capabilities that enhances all aspects of utility operations. Because the meter sits at the customer utility interface, Revelo enables utilities to develop real-time pattern recognition of energy delivery. Over time, machine learning in the meter will provide immediate feedback to quickly identify fault conditions and provide safety alerts. Ultimately, this will support the growth and integration of otherwise disruptive distributed energy resources. Using Revelo's rich data, consumers can gain unprecedented insights into home energy use. We strongly believe that an Internet-connected meter like this will unlock opportunities for energy efficiency with consumers, utilities, and other players in this ecosystem.
We strongly believe that Revelo is highly differentiated and an industry first milestone in bringing intelligence to the grid edge. Our partnership with Google can open up new possibilities for Landis+Gyr and help utilities, consumers, and communities to dramatically reduce their carbon footprint. With that, I'm handing over to Susanne. Susanne?
Thank you, Prasanna, and welcome everyone from snow in Switzerland. Let's start off with the EMEA market, which to a large extent is driven by mandated smart meter rollouts. As you can see on this slide, there are a number of rollouts ongoing and quite a few about to be launched. COVID-19 has caused delays in various countries, either due to slowing down of the installations or the postponing of the tenders. We estimate the installed base to expand by 59 million meters until 2023. This is a year later than we projected last year. The upcoming second wave rollout should bring around 27 million replacements. This means there is quite some market potential for us to tap into. Let me start off with the UK and France. Both countries are in the midst of their rollouts and starting to plan how to further leverage their smart meter infrastructure.
Due to COVID-19, the smart meter program in Great Britain has been extended until June 2025. 17 million electricity and 12 million gas meters still need to be installed. After that, we expect to see the replacement of the 18 million SMETS1 generation meters. U.K.'s ambition is to be carbon zero by 2050. There is a unique opportunity in leveraging the SMETS infrastructure to support these targets. Together with government and industry bodies, we are developing the requirements for EV smart charging and potentially also for solar and batteries. Our grid edge expertise, combined with our strong market presence in the U.K., will allow us to capitalize on this market opportunity. The rollout in France is also in full swing, with still 11 million Linky meters to be deployed until 2026. Enedis has selected Landis+Gyr as a partner for the strategic projects Pinky and Blueky.
Enedis wants to remotely monitor around 750,000 low-voltage distribution stations with Pinky, and they plan to equip all end customers with e-vehicles or solar with Blueky meters. Both Pinky and Blueky are based on Linky technology and are important steps towards a smart grid. Looking ahead, we see a number of countries set to start their smart meter rollouts. I will highlight only a few. In Switzerland, many utilities initiated procurement activities for their AMI rollouts. Especially small and medium-sized ones are signaling their interest in software-as-a-service model. In Germany, four smart meter gateway providers have been certified, and the rollout should now pick up speed. Apart from having a very cost-competitive meter portfolio, we also introduced infrastructure as a service targeted at smaller utilities. In Central and Eastern Europe, countries are in the final step of defining the regulatory framework and technical specifications.
The Czech Republic is planning a selective rollout with mandated installations for consumers above 6,000 kilowatt hours. We believe, however, that the utilities will plan to go beyond those minimum requirements. In Poland, the latest draft of smart meter regulations foresees a 15% penetration by 2023, and 65% by 2027. We've been present in these markets for 20 years. Our strong product and software offering, technical support, and close cooperation with these customers are key success factors for winning our fair share in these markets. In the Middle East, Qatar started its rollout last year with the goal to install 1 million smart meters by 2025. Cellular is the preferred communication technology, giving us the possibility to play a major role with our flagship E360 residential meter. It goes without saying that our sales team is fully focused on capturing these opportunities and building our backlog.
Let's talk about our key driver for growth, our strong portfolio. Let's not forget that all grid edge use cases start with intelligent endpoints. We cover electricity, gas, and heat, and we plan to add water. Last year, we launched the first two electricity meters based on the Picasso platform. E360 is geared towards the residential space. It is optimized around the total cost of ownership and provides DLMS high-level security. This meter leverages the latest cellular technologies, LTE-M and NB-IoT. It is designed as a fair meter with low self-consumption, minimizing the impact on the environment. E660 is a modular device that can serve both as a certified industrial billing meter and as a network sensor. Functionalities like demand response, power quality, near real-time mains network monitoring, and power flow calculations are becoming more and more relevant with the increase of distributed energy resources in the grid.
With meters going smart, communication technology gains more and more importance. Landis+Gyr is known for supporting a wide range of communication technologies in EMEA, and our portfolio just became even stronger. Last September, we proudly announced our global partnership with Vodafone, and shortly thereafter, we launched our IoT connectivity service offering. Cellular IoT technology has made big strides, and we see high adoption rates in the market. Landis+Gyr is the first and only provider in the industry to deliver cellular devices with embedded connectivity and a premium quality of service over the lifetime of our end-to-end solutions. We've simplified the setup and operation of connectivity, and going forward, we're also able to offer additional services to the utilities. Our latest software releases focus on the ease of use for operators. For example, our operational data panel provides insights on power quality, communication quality, and also displays practical SLA dashboards.
We also improved the deployment of our applications in a software-as-a-service business model. Going forward, we will leverage the Google partnership to transform our software platform and accelerate the deployment of new functionalities. While a strong portfolio is key to driving growth, the market in EMEA is very competitive, and cost control is just as important. Organizational realignment and restructuring delivered approximately EUR 5 million annualized OpEx savings and helped us cope with the downturn of business due to COVID-19. We will see the benefits of our platform strategy and continue to deliver on product cost down programs. In summary, EMEA is well-positioned to reach the 10% EBITDA target by 2023. With that, I'm handing over to Steve, who manages our APAC business.
Thank you, Susanne. Good morning, good afternoon, everyone, from here in Brisbane, Australia. It's my pleasure to be with you today to share some insights into our current dynamics of our business in Asia Pacific. Here we see the state of the smart meter deployments in various countries across Asia Pacific. I'd say last year, I would call it a year with a holding pattern due to COVID. Markets with existing deployments continued, but in a number of markets, we also saw a slowdown in tender activity, and there were a number of tenders that we expected but were delayed. Despite the slower 2020, the installed smart meter base in our target markets will grow from around 14 million last year to more than 25 million by 2023. There's growth opportunities for us, and that's good news.
The energy sector challenges associated with revenue protection, demand management, improved consumer engagement, and the impact of renewables on the grid edge all play a role in Asia Pacific. Solving these challenges is what will drive the uptake of smart metering across the region. We continue to be well-positioned. Our technology offering and our deployment experience is second to none in this region. Australia, India, Hong Kong, and Malaysia continue to deploy. These countries are driving the current growth in smart metering in Asia Pacific. In Australia, the gradual transition to smart metering continues, led by retailers. About 6 million meters are yet to be deployed over the next few years. India, of course, remains an important growth market for us, given our presence there and the very large accessible market.
In 2020, we were particularly pleased to see a strengthening of the central government commitment to move the 250 million installed meter base to smart. Momentum is beginning to grow on the back of funds being available to drive deployments, and towards the very end of last year, we saw a little bit of a pickup in tender activity. We certainly expect the opportunity pipeline in India to continue to grow. In Hong Kong, China Light & Power and Hongkong Electric are progressing deployments with us. There'll be some 3 million meters deployed by 2025. TNB in Malaysia is deploying 1.5 million smart meters in their first phase of a project, and we'll deliver meters to that project this year also. In addition, we see a number of countries in the early stages of smart metering.
Many of them, and they're sort of in the middle group on the slide, many of them, as I said, have done trials or small pilots. Some examples are Indonesia, Thailand, and more recently, Bangladesh. In fact, in Bangladesh, we moved forward last year with the first project in that country. Moving on to the next slide. I think it's important to realize that the Asia Pacific region works very closely with the Americas and EMEA. Many of the things that PV and Susanne have talked about equally apply to Asia Pacific. Our market offering leverages technology and products from those two regions. Our software solutions come from North America, and we work very closely to ensure the suitability of those offerings for various markets in Asia Pacific.
In addition, last year, we established our initial software-as-a-service environment, and we see the delivery of software moving more and more in this direction. In that context, the Google partnership is an important aspect for us also. We also work with a variety of communications technologies, again, aligned with both Americas and EMEA. I'd say to date, our RF or radio frequency communications technology has dominated our end-to-end solution offerings, and that's been the technology of choice in North America, and we've been able to leverage that very well. We collaborate with our colleagues there to adapt that particular technology to various countries in our region. We've deployed RF in Australia, India, and Hong Kong, and will soon do so in Bangladesh also. We've also trialed it in Indonesia, and we expect uptake there as Indonesia moves forward with their program later this year. That said, we see communication, sorry.
We see cellular communications becoming more important. The smart meter uptake in Australia under the Power of Choice regime, it's the one led by retailers, is cellular. We see it becoming more important in India as India moves forward. Our foray or our initial work with smart gas and smart water in Australia has also been based on cellular communications technology, in particular, NB-IoT. In fact, recently, we ran a trial project utilizing that technology in Singapore, and we're exploring the same in Thailand. In that context for us also, this recent announcement of our partnership with Vodafone will be important. On the smart meter front itself, we'll also introduce EMEA's E660 to our region this year, and we are developing our own E360 variant. It'll be relevant to a number of our markets and takes from and builds on the work EMEA is doing.
It will deliver more data monitoring and load control capability at the grid edge. It supports the emerging grid edge applications that have been mentioned earlier today. To wrap up, many Asia Pacific markets continue to transition to smart metering. We have a huge population in this region, and that gives us a lot of faith in our ability to grow, and we're definitely well-positioned to capture our share of this transition. That's it for now. I trust this gives you a short but insightful look at my region. Thank you now. I'll hand you back to Werner.
Thank you, Steve, and thank you also to Susanne and PV. Speaking about the regions just a moment ago, we will now talk about unlocking value with a clear strategic vision. Looking at the value drivers that we have going for us, we have already touched on today, we are proud to say that our technology investments, supported by global mega trends, a strong strategic vision, passionate people, and a solid balance sheet, drive our business transformation for longer-term growth and sustainable impact. Let's dive a little deeper on what that means for our three strategic pillars.
Starting with smart metering and the strategic priorities, we are pushing to leverage our E360, E660 smart meters, which will increasingly enable grid edge intelligence use. As part of our journey into the cloud, we will unify our headend system in the cloud, which will enable us to provide state-of-the-art, secure, reliable, and safe offerings to our customers. We will expand our reach in our software and service portfolio and expand our smart gas metering offering globally, as well as enter into smart water metering markets. This will allow us to drive growth in current and new markets, which we will complement by M&A opportunities offering new market entry options or portfolio enhancements.
Our strategic priorities in Grid Edge Intelligence include leveraging our Revelo sensor to enable smart infrastructure use cases, driving advanced load management, grid analytics, and distribution automation solutions, and empowering energy consumers through home analytics, real-time high energy usage, and safety alerts. Rhebo is only the first acquisition. We'll keep you informed as we go along the path. The targets in Grid Edge Intelligence include new technology for current verticals, for example. I'm pleased to announce that we have acquired Rhebo, which will allow to expand us in our cybersecurity offerings. Rhebo's cybersecurity monitoring technology is able to detect anomalies and threats down to the critical endpoints at the grid edge and record those in real-time, making networks safer and meeting the demands of a more complex grid.
Rhebo has made very good traction on the sales side and receives excellent feedback from their existing customers out of the utility and industrial sector. I'm very pleased to welcome Rhebo's talented team to the Landis+Gyr family. As we have discussed earlier, when looking at the global mega trends, we are uniquely positioned to managing the increasing challenges we are facing due to growing population, limited resources. We have to ensure that we utilize energy and other resources in the smartest way possible going forward. One way that we are doing it is by leveraging our newly formed strategic partnership with Google to become the leading partner for integrated energy and resource management solutions and smart infrastructure by utilizing cloud-based technologies and combining our leading smart metering and grid edge intelligence expertise with Google's know-how in AI, ML, and data analytics.
With all that, the need for cybersecurity increases. Therefore, our newly acquired Rhebo also plays a vital role in smart infrastructure. Additionally, we are looking into potential expansion of EV pilots in market where the EV framework is closely aligned with smart meter infrastructure. Currently, we are involved in pilots in the U.K. and proof-of-concept activities in France to support our customers in the development of future-proof technology. In North America, PV and his team have already celebrated notable success with smart street lighting, and we plan to build on that going forward. Smart cities go beyond the regulated environment that we have historically operated in. We will keep you posted on an expansion in non-regulated markets, also with M&A. The themes here are being smart cities and sustainability.
Throughout the day, we have talked about our strategic partnership with Google, and I'm sure you are all curious to hear what this means for our customers and us going forward. For one, we will focus on customer benefits such as data analytics, outage predictability, and data management in real-time while ensuring they are able to improve the experience for their customers. Another major focus is driving efficiencies. We will ensure speed, security, updates without disruption, protection of investments already made by offering choices, providing native cloud services, and enabling multi-cloud strategies. Lastly, we have joined forces to co-innovate the next generation of smart infrastructure technology to access new revenue streams and markets, accelerate M&A opportunities, and offer our customers groundbreaking applications. This partnership is about making our customers successful, helping them transform, make sense of data, and offering them choices.
I have talked about this with Rob Enslin, President of Google Cloud, at length. We will share some of those thoughts with you during the little bit. With that, I will turn back over to you, Eva.
Thank you, Werner. I now have the great pleasure of introducing our first guest speaker. British Gas has an impressive track record of deploying large-scale energy infrastructure systems to provide energy consumers with reliable and safe energy service, while at the same time leading the way in sustainable initiatives. Sharon Johnson, Head of Portfolio at British Gas, plays an instrumental role in shaping the way British Gas transforms the energy infrastructure as we know it today to empower consumers and support the ambitious net-zero goals of the U.K. with more interconnected and sustainable energy supply. I'm delighted to introduce Sharon today to learn more about their vision and strategy, as well as the impact they are making on the way we use energy today and tomorrow. Sharon, please.
My name is Sharon Johnson. I'm the Portfolio Director for energy at British Gas. L+G have kindly asked me to speak to you as part of their Capital Markets Day about the partnership we have in our smart meter rollout. British Gas and L+G have been working together for a long time, since about 2010, on the smart meter rollout. British Gas took a decision at the outset that we were going to go early, that we were going to try to get the benefits to our customers as early as possible. We needed a technology partner who was also willing to adopt a bit of a speculative approach, and who would be willing to work with us and learn with us. It's a pretty complex market in G.B. We have dual fuel metering systems. The rollout is supplier-led.
We have the concept of prepayment and that the rollout is competitive, so that means that meters need to be able to switch between suppliers and still interoperate. Pretty complex context. From 2010, L+G and British Gas have worked in partnership to develop a really integrated and effective end-to-end stack of meters, and that was definitely not without its challenges for both companies. I think we were both at the edges of our capabilities initially. My reflections on it was, it was definitely bleeding edge. We were both building new capabilities as we went. We had to work incredibly closely with the technology providers involved in the stack. These meters are more mobile phones and on a mobile phone network in many ways than they are the concept of traditional metering. This was a real industry change.
I think on reflection, and I hope L+G would agree with me on this, that our investment and our effort has paid off. We were able to shape the GB spec for the meter. We've got a series of firsts that we have achieved together, including the first SMETS2 meter installation, the first 868 meter installations, and we have about 7.3 million meters on the wall now, L+G sets in GB, which is amazing. A huge achievement. We shouldn't forget that our customers are actually happier with their smart meters. They're saving money. They're making about a 3.5% reduction in the energy they're using and saving money on their bills. The net promoter score that we see with customers with smart meters is higher.
Customers who are on pay-as-you-go meters in particular have a huge improvement in their experience, particularly with COVID, where we're seeing that customers don't have to go to the shops to vend. As supplier, we are very pleased to say that customers generally stay with us if they have a smart meter, which is fantastic. I think, at the end of the current phase of where we've got to on the smart rollout, this is a massive achievement for both companies and one where we wouldn't have got where we are today unless we had worked so closely together. I think we've reached a bit of a turning point now. It feels like a big milestone, but really, we're all starting to recognize that really this rollout is just laying down the foundations for net zero.
These are the building blocks for microgeneration, for smart grid, for flexibility and all manner of stuff we probably don't even know about, which is going to emerge in the next few years. The bottom line is that the data that we get from the meters is absolutely key. All of the investment that the customers make in energy management type activities will show up on their energy bill. British Gas, what does that mean for the next period for us? British Gas is looking really closely at the collection of things that we call home energy management. We're thinking about how heating will evolve. We are thinking about the future of gas, obviously, and the potential for hydrogen. We're thinking about microgeneration and storage and how that can deliver benefits to our customers. We're also thinking about the part that EVs play in this picture.
One of the challenges we can see here is there is a bit of an all of the colors and all of the sizes type challenge. It's difficult to know how this market is going to evolve. I do come back to that initial comment that the data is absolutely key, and I think that we, British Gas and also L+G, are uniquely positioned to think about how we can adapt to this market and how we can develop new propositions for our customers. I'm really pleased that we are working together with L+G, and I really have high hopes that we will continue to do that and continue to bring forward new things which can benefit both companies. Thanks.
Thank you, Sharon, for sharing your insights and vision with us. That was very informative as well as entertaining. We wish you all the best for these very exciting projects. Have a good afternoon. Now, I would like to welcome Carlos Nouel, Vice President of smart solutions at National Grid. Carlos is responsible for enabling the transformation of the electric distribution business through multi-year investments in areas such as advanced metering and grid modernization functionality. In his role, Carlos is responsible for deploying the field technologies as well as modifying internal processes to unlock the value from the new solutions. He's also responsible for managing all demonstration projects and new technologies related to advanced metering and grid modernization.
National Grid is driving forward on an exciting journey that will transform the energy distribution system and become a model for other utilities by setting a new standard for safe, reliable and customer-focused energy delivery. Digital transformation is disrupting the traditional utility model. IoT connectivity and grid edge intelligence have ushered in a new era of energy solutions. In the U.S., National Grid is leading the way with a progressive vision for addressing current and emerging industry challenges. Today, Carlos will share his view on how utilities will leverage intelligent grid sensing to create dynamic distribution networks, serving customers with a more reliable grid and enabling a sustainable energy future. Carlos, we are so glad to have you. Would you mind telling us a little bit more about National Grid?
Eva, thanks for the introduction and the invitation to speak at this event. It's a great opportunity for us, and for myself, to really tell you a little bit about what National Grid is up to, what we're trying to do, and why do we believe that this work is so important for the future of our customers, our stakeholders, our regulators, and the overall company. Before we do that, let me tell you a little bit about National Grid, who we are and what we do. We are an international utility with presence in the U.S. and the U.K. We have slightly different models in the U.S. and in the U.K. In my current role, I'm more responsible for the U.S., so a lot of the work, a lot of the things that I'm going to be talking about are related to the U.S. business.
I also wanted to give everyone a view into what National Grid looks like overall, because there's some really important items that we bring from the U.K. into the U.S. market. In the U.K., we play more in the transmission space as well as the system operator, where we ensure the stability and performance of the overall electric network. We also participate in the gas business. In the U.S., we are a transmission and distribution and retail utility. We operate in the Northeast, more specifically in three states, Massachusetts, New York, and Rhode Island. We roughly serve around 6- 7 million accounts. That translates to roughly 20 million people that we serve and touch every single day. We provide both gas and electricity to those customers, and we also have clean energy generation that we have in parts of the U.S.
but also in the service area where we provide, where we own storage, and we own solar, which are important elements that I'll talk a little bit more into later today. We are one of the largest utilities, and it is important for us to share our story so people understand where we're heading and why we're heading in the direction we are.
From what I understand, National Grid is embarking on an exciting journey. What is Pathway 80x 50?
It's a great question, Eva. As you think about the states that I referenced, Massachusetts, Rhode Island, and New York, those are some of the most leading edge states in terms of environmental policies. All of our states have committed to achieve 80% reduction in CO2 by 2050. That means that they're expecting the utilities within their states and all the players in the industry in their states to perform an active role in changing the way things have been going for hundreds of years to ultimately achieve those goals. I would say a big commitment in terms of what it means to get to 80x 50 in the states where we operate, I would say that it falls into three buckets. I think the first one, it's around cleaning up the generation.
It's not only cleaning up the central generation, but it's also thinking about how do we introduce more distributed generation and make the most out of it. You probably would've seen that in the states like Massachusetts, Rhode Island, and New York, several projects related to large scale wind, larger solar, and storage. All those things are now being connected into the electric grid that we have to run every day to provide electricity to customers. The same way it's happening at the distributed level. We see more and more customers getting solar for their home, getting storage for their homes, and that's also making the way we run the system pretty different to the way we've done it in the past. The second element of it is cleaning the transportation sector. Transportation represents a significant percentage of the emissions we have in our states.
As we think about the shift we have to make in transformation, we believe that shifting from gasoline and diesel vehicles to electric vehicles, it will help significantly in achieving those goals. I'll talk a little bit more about how National Grid is really thinking about getting to that point and enabling the market and the customers to make sure that that transition from gasoline and diesel to electricity, it's a feasible and an easy one for them to do. The last one, and for those of you that have had the pleasure to visit New York, Boston, or Providence, you would know that in this area, the winters tend to be really cold. Heating tends to be one of those areas that equally generates a significant amount of CO2 into the environment.
As a company, we believe that while gas still plays an important role, and we do need to, as a company, think about how do we clean up our gas supply, there's also opportunities for us to think about how do we transition some of the delivered fuels that currently customers use today, like propane or wood and oil, into more cleaner fuels. A good way to do that is by electrifying the heating sources for a lot of the homes. Equally to what we're doing in transportation, National Grid is actively working with the states and policy makers to make sure that we provide the incentives, the tools, and the mechanisms for those customers to make that transition as seamless as possible.
Thank you. This is really exciting. Recently, you received a landmark decision from your regulators. Congratulations. Can you tell us what was approved and the impact to National Grid and your customers?
Sure. Let me take a step back before I talk about kind of the process we got to getting the approval. As you mentioned, we recently received an approval to advance the full scale deployment of AMI across our New York jurisdiction. What is really AMI for us? When you think about AMI plays a significant role in unlocking a lot of the value streams and the things that we need to do to make sure that all those things that I talked about of getting people to switch from gasoline vehicles to electric vehicles, getting people to switch from delivered fuels for heating to electric heating, or integrating a lot of those distributed resources, AMI plays a significant role in it.
As you can imagine, getting to an investment of this size and getting approval to go ahead and invest this much amount of money on this space, it's something that took a significant amount of effort and time, and rightly so, because it is something that it's not only important for National Grid, but the investment in AMI is something that is important for regulators, for policymakers, and for stakeholders in the industry, because it really unlocks the opportunity to do a lot of the things we all talk about and makes it real.
This was a pretty lengthy process. It took us two years from the time we actually make the filing to the moment we got the approval. A big part of that time was actually doing collaboration with stakeholders. One of the things that as a company we believe is that to create a future, you cannot create the future on a silo. You cannot create a future on your own. You actually have to work with stakeholders to understand what needs do they have and how the solutions that you're proposing will actually help them to achieve those goals. We also needed to do a lot of internal work to really understand all the different things that it would change once this technology would be deployed, and how would that affect the way we run our operations every day.
While it was a process that took a lot of time, we do believe that it is an important process for us to follow because it ensures from the beginning of the process that all stakeholders are aligned with the vision that we're trying to achieve, and they're also aligned with the process we're going to go through to get to that vision. One of the things that I think it's important, Eva, to talk about is when you think about the regulatory space, and I talked that we played in three different states. As a regulated utility in the U.S., each of our states operates pretty much independently. Each of our regulators has their own structure, their own governance, and they have their own processes to give us those approvals that are required for us to go ahead and make the investments.
As I mentioned before, in New York, we've completed that process, which means that we now have an approval from the regulators to proceed. That doesn't mean that we're ready and we're done with the regulatory process. That means that in New York, we can proceed with the implementation. We are also in the process of filing similar proposals in the states of Rhode Island and Massachusetts because we do believe that we need to make this transition across all the states we operate. We will do them, again, following the regulatory process and working with the stakeholders in each of those states to make sure that the solution that we're delivering in that specific state meets the needs and the goals of that specific state.
The regulatory process, it's a complex one, it's a lengthy one, but it is one that once you go through it, as I said before, you do have that buy-in from all your stakeholders to go ahead, which sets us up as a company, but also as a broader state, to be successful in the deployment of the technology and the solution that we're anticipating.
Clearly, this has already been quite a journey. Why is AMI 2.0 important to National Grid, and why is now the time?
Let's start by answering the question on why AMI now. I'll break it into a couple of boxes. I think the first one is it's an operational reality. We, as National Grid, we're one of the first companies that actually adopted the AMR technology, which is the technology we currently use for metering, which essentially, in the most simplest term, it allows us to communicate with a meter through radio frequencies between the meter and a van that drives a van every single customer home on a monthly basis to get the read so we can bill those customers. That technology was deployed across all three states, for the most part, on the early 2000s, which means that at this point, in all of our three states, we are facing an operational reality, which means that we have to start replacing those meters.
Those meters have a defined life, we are approaching that end of life. For us as a company, the meter itself is a critical element of how do we engage with customers, how do we build customers. We need to make sure that we have an infrastructure that is safe, secure, and robust that allow us to perform all the things we have to do for customers. That's one of the reasons. Second reason, as I talked about, our regulators are expecting a lot more from us. Our current fleet of meters, it's not capable of actually delivering a lot of the functionalities that customers and regulators are expecting us to do. I always give the simple example of visibility into the usage.
Utilities are one of the few industries that today you pay your bill after you've used the service, and you really have no visibility as you're using the service until you get your bill. One of the things that regulators and customers are saying is, "I want to be able to see how much energy I'm using at any given time, the same way I can see in my bank account every time I use my credit card, I go into the website a few minutes after and I can see that transaction posted and I can manage my budget better." Electricity and gas are different than that. We want to make sure that we're empowering customers to do that. It also means that regulators want us to do rates that are perhaps friendlier to the adoption of distributed energy resources.
For example, rates that are able to do incentives for electric vehicle owners or incentives that are valuable for people that own solar and storage. The current metering fleet, it's not capable of delivering those functionalities. For us, making this shift from where we are today, it's important. I would say the third thing is around our business model. Utilities, it has happened already in Europe, specifically in the U.K., and it happens more and more in the U.S., how utilities are shifting their business model. Many of you would know that utilities are structured in a way that recovers cost of service, meaning we provide the work we are supposed to provide to ensure safe, reliable power for customers, and utilities get compensated for that cost.
One of the things that regulators and stakeholders are continuing to push for is to have performance-based regulation that incentivizes the utility to achieve the state goals, whether it's clean energy goals, performance goals, satisfaction goals. That means that the utility actually have to change the way they do things to start hitting some of those incentives that become available. One of the interesting elements in those incentives is a lot of those incentives require customers to make different choices. I'll give you an example. It means that a customer needs to choose to get a smart thermostat for their home and participate in a demand response program. It means that a customer needs to choose an electric vehicle over a gasoline car when they make the decision of purchasing a new vehicle.
What that means for the utility is we need to be able to understand who are those customers that potentially might be interested in getting an EV, or who are those customers that have a load that might be great candidates to participate in a demand response program. Understanding the customers to a different level so we can influence and educate them as they make choices, it's a critically important piece for us. I would say the last piece, and I would say probably not less important, is what we're seeing in the demographic shift in our areas. We tend to have a customer base that is probably older than other utilities in the U.S. One of the things we're seeing over the next 5-10 years is that those demographics are going to change fundamentally.
We're going to have more customers that are digitally native, that are comfortable doing operations online, that are comfortable looking at things on their phones. As a company, we need to make sure that we can keep up with those growing demands from those customers that are becoming homeowners now, that are becoming our customers now. You could say, "Fine, you can do all of that." You can just put AMI. The reality is, when you think about the expectations that both regulators, customers, and stakeholders have, and that we have as a company, there's a great level of uncertainty, right? We don't necessarily know what this future is going to look like. We have some good guesses of what are the things that are going to change, but we don't know for sure.
One of the things that utilities face is that once we put an asset in the ground, that asset stays there for a long period of time. For us as a utility, one of the things that we've been pushing for, it's really try to make sure that we can get the most flexible platform in place from a metering infrastructure and back office systems that would allow us, ultimately, to make sure that as those needs come up, we already have assets and an infrastructure that allow us to effectively respond to the customer and regulators' needs. That is something that we and our regulators have been pushing really, really hard for because they are believers that there's things that are going to be needed in the future that we just don't know yet.
We need to be committed to make this investment at this point, without that knowledge, but making sure that it is something that's flexible, robust, and it gives us the ability to do a lot more than what we're capable of today. That's just a kind of quick overview of why AMI and why AMI 2.0.
Carlos, what are some of the key benefits and use cases National Grid expects will develop from this AMI 2.0 project?
I'll give you a sense of kind of at a high level what we think the benefits are, and I would bucket them in three areas. I would say there's customer benefits, there's grid benefits, and then there's societal benefits. I'll start on the customer side. I talked a little bit about the example which I love about just knowing what's going on in your home, right? I would say we know about what's happening in every other facet of our lives, but we don't know what's happening on our electricity or gas bill, and those are important bills in a lot of places for a lot of people.
Kind of providing that transparency has demonstrated in the pilot programs that we've conducted, that if you give people the information about how and when they use energy, they can actually take actions for their best to save energy and to save money. I think we want to take that one step further. It's not just to say how and when you're using energy, but we want to be in a position where we can actually tell customers what within their homes is what's driving the energy usage. One of the things, and I found myself in this boat, where you look at your energy bill and you say, "I'm trying to be efficient. I'm trying my best to save energy, but I cannot do it." It's like trying to lose weight, you don't know what's going on.
You try and try and try, but you don't see a different outcome. One of the things we do believe is we need to try to personalize the experience for customers as much as we can. That means telling customers, for example, that it is their pool pump, that they might not know that it's running overnight, or they might not know that it's running different times of the day, but it is what is driving their bills. It might be that they have an HVAC unit that is not as efficient as they thought. It might be that they didn't realize that it was their electric vehicle that is using energy, and they thought it was going to be a different amount. Providing that transparency for customers and empowering customers to make their own decisions in a more informed way, for us, is critical.
I think the second piece from a customer perspective, it's really give them nudges and alerts to improve their experience overall with the company, right? Whether it's things like, "By the way, based on the information we see, you're trending for a high bill, so you might want to start looking at how you use energy for the rest of the month," if you're someone that is on a tight and fixed budget, right? Even if you're not, you still want to make sure that you're controlling how you use energy. Other things could be around outages, right? In a COVID world, we see how important and how dependent we are of energy. We are connected every day to our computer, to a phone. That needs to be charged.
For us, understanding when outages happen, being able to respond and proactively talk to those customers, being able to pinpoint where outages are located, it is critical. AMI, coupled with some of the grid modernization investments we're doing, will set us up to make sure that we can continue to deliver the reliability we've traditionally delivered for years, but even get it to a next level. Again, the expectations of those customers are changing. Again, from a customer perspective, you'll have a broad array of opportunities that we can explore, we believe we can explore, and actually deliver for those customers with this new technology. I would say the second piece of that is around the grid side of it.
This technology is not just a great opportunity for customers to take control, but it's also an opportunity for us as a utility to take control. I'll give you a couple of examples. I think one of the things we as a company have been committed to, it's a program called volt-VAR optimization and conservation voltage reduction. They're affectionately called VVO and CVR. Those programs really helped us to reduce the amount of energy that as a utility we have to push through the system to make sure that customers ultimately have the right voltage level in their homes when the energy gets to their homes. The way we do it, in simple terms, is we try to compensate in a smarter way how the voltage drops or increases throughout a distribution feeder.
With this technology, and the fact that we'll know specifically in every part of the feeder what the voltage level is at any given customer home, we can fine-tune the way we think about this algorithm to optimize the voltage we push from the substations through the feeders, ultimately to the customer's home, in a more effective way. It allows us to give us more flexibility. It allows us to give us more visibility into what's happening in real time. If we have a violation, we'll know. We'll know quickly. The second piece, which is an important piece, COVID has made this even more important, right? When customers move in and out from our facilities, right, or from their homes into a different area, one of the things we have to do is we actually have to send a physical crew to connect and disconnect that service.
As you can imagine, in today's world, customers and our employees, we're trying to protect everyone to be safe and healthy. To try to avoid some of that, this technology will allow us to make sure that we can do those connections and disconnections for people that are moving in and out remotely from a control room. Not only makes it safer, but also makes it more efficient, right? Right now, it might take us perhaps a day or two to get someone to turn off a service. In the future, we'll be able to do that instantaneously because we'll be able to do it from our offices and say, "We have all the proper documentation. We validate everything. We can shut off service at this point." From a grid perspective, there's also a number of opportunities that we envision this technology will deliver for us.
I would say the last piece, on a more societal side, I think the first one I would say is this level of data and this level of technology will help us to animate the market. We today work with a lot of great companies that are doing a lot of great things for customers, whether they're thermostat companies, whether they're electric vehicle companies, whether they're solar companies. They all have technologies that they provide to customers. This platform will only enhance the value and the services that they can provide to the customers, and it will make it more powerful for those companies themselves, but it will make it even more powerful for the companies and the utility to really get to this future state of a clean energy future. From a market perspective, we believe that this will help us to animate the market.
As I said before, there's a lot of societal things that politicians, stakeholders, and regulators want to achieve, and a lot of that can be helped with nudges around using things like rates or using different mechanisms to shift load. We believe this technology will also help us to provide those signals to customers and stakeholders to say, "Now is the time to shift. Now is the time to do something different." We believe that this is a small subset of the things we believe we can do. I am confident that because we have such a robust idea of what this technology needs to look like, we believe, and I'm confident, that we will be able to do a lot more in the future once we deploy this technology.
Can you talk about some of the innovative technologies that will improve the customer experience and grid operations?
Let's get into a bit more detail. We've talked a lot about AMI as an element. AMI is just an element of the broader picture, right? We want to make sure that we're not just having data, and that's one of the things I continuously remind the teams is, having the data and making the data available to the systems doesn't do any good. Right? How do we present that data? How do we make that data as easily accessible to all customers? Right? For those that have the technology at home, for those that don't have as much technology at home. How do we make it in their hands?
How do we use apps on their phones that they use every single day to really making sure that we're making it as simpler as possible for those customers to really get the value from all of this. The other piece that I think is important is, as you think about all this data that is being generated, I would say the traditional way to think about it is you'll bring all that data back into a central room. You'll think about all that data. You'll process it, analyze it, and then take actions. Right? That takes time. It takes cost because you have to move a lot of data from one side to the other.
One of the things that we believe is going to be critically important in the future, same way that things that are advancing in other areas, is to try to process and generate insights and data that it's relevant to customers as close to the customer as possible. We believe that processing capabilities down to the meter level is going to be fundamental for us to think about things like voltage optimization, theft detection, outage management, power quality, you name it. It's going to be a long list of things, and I think what is important for us as a company, and as an overall industry, it's really to start saying, how much can I do in the meter rather than having to backhaul that data back and forth, which takes time and costs money.
How much can I actually do just right there, and make the actions and make the recommendations right there in the meter, and then send the signal to any other devices that need to be activated or modified to achieve the outcome that we desire. To me, I think those are fundamental changes that we're going to see as an industry and that National Grid is really excited about because we do believe, as I said at the beginning, having that ability to process a lot more locally rather than having to send it to other places, it's great. That's why you see, for example, in the phone industry, you see your iPhone doing a lot on your phone, right? Some of it goes back and forth from the cloud, but a lot of it also comes through what you do on your phone.
We're trying to make sure that we're looking at parallels in other industries to say, how can we start to take best practices to minimize and optimize the cost for our customers and increase the value that we deliver for them, whether it's through grid operations or whether it's directly for value to them.
What are the next steps for National Grid in this exciting project? What are you personally most excited about?
I saw firsthand how powerful this technology can be for customers. It can make a difference for the customers that have a lot of resources, but more importantly, for those that are really having a hard time affording their energy bills. It can make a difference. It can help them to plan better, to control their budget better, and it also gives them opportunity to see this is an area where I can change and I can save long term. Part of the reason why it excites me, what excites me about this program is the view that this actually will make a difference for customers. It will matter. It will deliver a great experience for all of them. Being part of a program like that, you don't get that opportunity all the time.
It is exciting for me personally, to be part of that and being able to have the opportunity to influence what that program looks like. I think as a company, when you think about, I go back to where I started, which is our clean energy goals and increasing the satisfaction for customers. You cannot achieve all of those things without modernizing the grid, whether it's grid modernization or whether it's investments in AMI infrastructure. For us, this has been a long journey, but it is a journey that aligns nicely with where we want to go as a company. This is a really important initiative for us within the U.S. business. Even at the global level, it is a really important opportunity for us to not just talk the talk, but really walk the talk, as a corporation. It is exciting.
We have been working on the readiness of kind of getting us ready for launching this program. Later this year, we will start to get into the nitty-gritty of the implementation, working on all the back office systems that will be touched by AMI, which I can tell you there's many of them within the company. Ultimately starting to actually physically deploy meters for customers so they can start to realize the value that we foresee for them.
Thank you, Carlos, for sharing your vision of creating a brighter energy future. The importance of grid edge intelligence is evident, and it's impressive to hear you talk about the future National Grid is shaping. We wish you good luck for all the exciting things ahead. Thank you. We will now take a 20-minute break and continue afterwards with the deep dive on the strategic partnership with Google. For that, Rob Enslin, President of Google Cloud, will join Werner for a fireside chat. Right after, we will start with our Q&A session before we wrap up the day. Thank you and see you in 20 minutes.
[Break]
Welcome back, everyone. As you have heard throughout the day, our strategy is designed to elevate our core offering of smart metering and further expand our reach in grid edge intelligence and smart infrastructure.
We've recently announced a seven-year strategic partnership with Google to combine their leading capabilities in data analytics, artificial intelligence, and machine learning with our leading expertise in smart metering and grid edge intelligence to transform the future of the energy industry. By enabling utilities to manage grid operations with increased visibility, while empowering energy consumers to utilize energy in a more informed and sustainable way, this partnership will advance our efforts in smart infrastructure, enabling smart cities and doing so in a secure and reliable way. By joining forces with Google Cloud, this groundbreaking endeavor will drive our mission forward to manage energy better together. Now, I have the great pleasure of introducing Rob Enslin, President of Google Cloud, who will join Werner today to talk about what this partnership means and what we have in store for you in the future. Rob, thank you for joining us today.
Werner, Rob, over to you.
Hi, Rob. It's great to have you with us. I'm telling you, it's been an exciting and busy few months. We are so ready to come with you on this journey.
Well, thank you, Werner. It's been such a pleasure to meet you and to work with you and the whole team at Landis+Gyr. I joined Google Cloud to help companies be successful. You and the culture and energy that we've connected with is just perfect. I'm looking forward to shaping this with you together and making it a true success. Our teams have worked extremely hard to make this happen, and I'm just so excited about what this means to the future of energy, and I'm certain you are, too.
Absolutely. Rob, what does this mean for the future of energy from your perspective?
That's a great question, Werner. It's about making our customers successful and how we can help them make sense of change and transformation. People use the word transformation. I like to think about digitization of the industry. Industries are digitizing at speed, and that means data has become so important. I think about Google's big data technology innovations and foundation, plus the next generation breakthrough services and frameworks for cloud, data warehousing, big data, machine learning, and AI. All of these solutions coming together will provide stunning visual analytics and will help Landis+Gyr digitize, transform your business, your clients' businesses, and we can actually really shape where energy will go in the future. We will have amazing, powerful insights into this.
This is very powerful. When we first announced our partnership in December, I got asked multiple times by a business partner, by friends, why Google chose Landis+Gyr as a partner. After all, you only have a few of these strategic partnerships across different industries. Why us, Rob?
Yeah, very good question. I get asked that quite a few times, right? How do we do this? Look, Google has been on the forefront of energy use for many years and a provider of solutions into the specific markets. When we look for partnerships, we looked for companies where the board or the company is committed to a vision. A vision of where they want to go, how they want to shape that industry, how they want to disrupt that industry, and how they want to bring value to their customers. I felt when we met, Werner, that your vision for Landis+Gyr met completely with where Google wanted to go in the future with energy.
our data centers have been carbon-free since 2007. We run our data centers at 50% of the power that other data centers run, and we set the goal to be carbon-free by 2030. That is amazing. I think that connects us. You're right. You are one of only a few that we've strategically partnered with in an energy industry. You're the only one today. For us, it's a big deal because we believe that Landis+Gyr, which is an established company, 125 years old, and is clearly a leader in smart metering and advanced meter infrastructure. We realize the uniqueness that you bring to the market. I think you understand the uniqueness that Google Cloud brings to this kind of market, whether it be public cloud, multi-cloud, private cloud, hybrid cloud. We provide options for you and for your customers.
We believe GCP and Google Cloud in particular is a perfect solution for Landis+Gyr. Then, as I said, the vision, your vision, your executive's vision, just ties into how we want to partner with companies, and that's very important. When cultures align, we think we can make a difference, and that's what we want to do. We want to make a difference with our customers and be successful with our customers.
I think there's a very good fit, which starts between the two of us. I also think when I look at our customer base, Rob, our customers want to have choices, and I think what you offer in terms of private cloud, public cloud, hybrid cloud, I think it's just perfect. It was, for us, really one of the main drivers because, and you probably know it much better than we do, but we see in many companies there's a multi-cloud environment, and I think that's what you are able to offer. We want to shift also as a company more into software and service-centric revenue models. How do you think you can help us there?
Yeah. I think that's really important for the future. I think software becomes so much more relevant, and software together with equipment and devices becomes much more important. I do believe that Landis+Gyr really provides the smartest and most innovative devices and solutions in the industry. If you think about it, together, as we move to a more digital world, cloud-based architectures, Landis+Gyr will provide their traditional, and with new market solutions that are Software as a Service, Platform as a Service, Data as a Service. We'll be able to provide so much more innovative ideas, more data, more personalization, understanding what's happening with energy, how to distribute it. I truly believe this will move the industry forward amazingly. I think that's what Software as a Service, bringing devices and solutions together are going to make a huge difference.
I think Landis+Gyr, together with Google, are providing these options. Whether Google Cloud provides data analytics solutions, they are serverless. They reside in the cloud, thereby removing complexity of buildings and maintaining data analytics systems. We and our clients are now able to accelerate time to insights, whether it be multi-cloud, a multi-environment, private, public, hybrid, SaaS, platform as a service, et cetera. Outcomes will be by design. You'll be able to create cloud-based architectures that are super flexible, super ability to move around the globe to any environment because of the kinds of services we provide. Together, that'll be amazing. New solutions for non-regulated markets and companies as well.
I think that sounds very exciting. I couldn't agree more. As we unify our tenant system, all our customers will benefit from cloud services native to Google Cloud Platform, such as security, user experience, as you mentioned, artificial intelligence, machine learning. Really, I think perfectly on target. In your view, what are the benefits to utilities to have the data from smart meters and grid edge sensors in the cloud? How do you deal with the requirement that many of our customers require data to be stored in their home country?
Look, Google has the most secure, widest, deepest managed network and regional structure in the world. We have amazing trust team that is not only aware of all the regulation, but is heavily involved in policy, global data security requirements, sovereignty concerns, and regional consortiums. If you look at things like the data sovereignty, U.S. CLOUD Act, Schrems, Gaia-X, and so on. More importantly, we understand that we need to provide data in a public cloud. We need to provide data in a private cloud. We need to provide data in a hybrid cloud, and we need to provide it in the markets where companies exist. You own your data. You own the data. You manage the data. It's not for us to manage the data.
We clearly have built that, and we do think regulation will continue to change, and it will be shaped in the future. Our technology is ready to deliver that in whatever shape and form it takes place in the future.
Very good. Shifting gears here for a moment. Traditionally, our markets are regulated market, long lead times, long development cycles. We also believe that this partnership will greatly increase our speed to market, cutting product testing times from years to months, by significantly reducing the cost of delivering new products and services. Are you seeing these kind of benefits in your strategic partnerships?
Yeah. This is very clear for us, right? In different industries, but if you get some examples, massive disruption happening in the travel industry, not only because of the pandemic, but where it's headed in the future. AI and ML is going to play a much bigger role in how we travel, where we travel, the kinds of disruption we see. We see the personalization of financial services, specifically banking, where our interaction with a bank will no longer be in a building, but it'll be very clear that it'll be digitally managed in the future. We've got to cater for all kinds of consumers, young consumers, older consumers, totally digitally enabled consumers, and some that are not. We provide massive levels of personalization to make that happen. We can see it with things like adaptive controls.
We've built incredible adaptive controls with AI and ML to help shape how devices operate, what kind of energy get powered in those devices, et cetera. We see that with satellite technology, the ability to understand geo-positioning, roads that are open, whether it be drone technology in terms of understanding how to map, and so on. We see an incredible amount of opportunity in many ways to bring innovation that was in the consumer space to the enterprise, and I think, Werner, what we're doing together, that's a classic example of what we're going to do in energy.
No, we can't wait. You just, most recently, I think, signed a strategic partnership like ours with Deutsche Bank, and I think it'd be also very interesting to hear, actually, because I think there's a lot which can be translated actually even from one industry to the other.
Absolutely.
What do you think we and our customers can learn from Google?
Yeah. I think when you look at the customers and what we can learn from Google, I would say our ability to innovate at speed, bring thought leadership, how to actually change direction, know that digitally, what we're doing is going to change and shape the world by different industries. We bring into bear areas that we spent many, many years around, AI and ML with DeepMind and some of that technology. Probably the most important is how we can shape innovation inside Landis+Gyr, together with your colleagues, and show how innovation can happen at speed, and can be flexible even in an industry which is regulated. I am certain that the future of that will change dramatically. I think that's one of the big things that we can learn from how Google operates. We would love to continue and show you how that happens.
Yeah, I think you have great examples. Just when I think about Sidewalk Labs, what they're doing, or us mapping the electrical grid together, I think there are plenty of opportunities. Looking into your crystal ball, can you share your views on how we will co-innovate next generation of cloud-based energy management solutions together to enable smart infrastructure?
Yeah. Landis+Gyr's products touch every major grid in the world, and Google touches everyone in the world. My view is together, the opportunities, they are completely endless, right? The possibilities are completely endless. Whether you look at consumer to energy provider connections, smart cities, new homes, cars, and rooms, and you just think about us as individuals in our homes today, we have Nest everywhere, right? When we start connecting Nest to the grid and how we can actually map the grid, and you could almost see, is it not possible to map the grid completely? If you think about how Google mapped Earth, and today, we can actually determine traffic patterns. The possibilities are endless, even for distributed energy resources, whether it's solar, wind, or traditional. We could absolutely do that at Google speed. I think there's smart cities, there's homes, there's connected ecosystems.
I think our opportunities are endless. With our private network, Google has the world's largest private global fiber network, which uses advanced software-defined networking to deliver fast and consistent and massive scalable performance. Our clients can actually demand a level of performance, especially in the cloud. I also think environmentally friendly is in line with where Landis+Gyr's sustainability and visioning.
Yeah.
That's a big deal for all of us. It's a big deal for Google. I think it's going to become more important in the world, and you'll start to see this socially responsible energy be pushed further and further. That's why we really have set the stage for 2030, we will be carbon-free, and we run our data centers at 100% renewable energy wherever it's possible. Intelligence at the start, different outcomes as a result, and that even means we may map the grid. We know how to map things.
Rob, after this discussion, I really already feel like a real Googler. I think let's get to work. Let's deliver results. I really thank you for being with us today. I think it was very insightful, and I can't wait to go on this journey together.
Werner, thank you, and I really appreciate the partnership, the trust, and the friendship we've created with the group. I know everybody at Google from the board is excited to see what we can do in energy management. I'm personally excited, and I look forward to getting to work with you.
Thank you very much. Thank you.
Thank you.
Thank you, Rob. Thank you, Werner. That was very insightful, and we are all excited to see what's to come next. With that said, I would like to turn over the call to the operator to give you some brief instructions on the upcoming Q&A session. Werner, Elodie, Susanne, Prasanna, and Steve look forward to your questions. Thank you.
We will now begin the question and answer session. Anyone who wishes to ask a question or make a comment may press star and one on their touchtone telephone. You will hear a tone to confirm that you've entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Web participants may submit their questions or comments in writing via the relevant field. Anyone who has a question or a comment may press star and one at this time. The first question is from Andreas Willi from JPMorgan. Please go ahead.
Good afternoon, everybody, and thank you for the time and presentations today. I've got three questions, please. The first one is just a follow-up from the Google discussion we just had. Could you please try to quantify the revenue opportunity for Landis+Gyr from this partnership? Maybe a little bit more around the timing of that as well, what it is. To position you also better to sell more meters, or is this mainly about additional sales that are not directly connected to the meter sales? Basically, what I'm asking for is how you monetize this strategic initiative. The second question is on financial year 2021. Next year, you should see a bounce back in revenues in the places where we had the lockdowns and we go back to more or less normal.
Maybe you could talk a little bit about how you see profitability develop between where we are at the end of the current financial year and then the 12%-13% target. Should that be a linear improvement over time, or should we also see a step up in 2021 similar to what we probably get on the revenues? On the same metric, maybe in terms of second half this year, you today reiterated that we should see an improving margin over the first half. Can you quantify that a bit in terms of, or qualify it, improvement versus return to normal? Where are we for the second half? Thank you very much.
Yeah. Good. Andreas, thank you very much for asking this question. The first question in terms of Google. We signed the agreement on the 17th. For us at the moment to quantify, let's say, revenues and so on, I think that will be difficult. Definitely as you and I will talk more, I think I will be able to give more insights. When I think about Google, I think there are two, three things which are important. One is definitely the operational piece, which you heard, that IT into the cloud, headend system into the cloud. I think co-innovation, and that's what I think it's important piece. It's not just an operational thing. That's why this multi-year partnership, first of its kind in our industry.
How can we co-innovate in terms of grid edge and smart infrastructure, where we not only look then in the current field, but also how could we, for example, create additional revenues for our customers, utilities, for their end customers, meaning consumers, but also even in non-regulated areas. I think we have one echo somewhere, but I think you hear me, Andreas. Revenue profitability 2021. You said it rightly. We look a little bit at the big landscape, we see Europe actually bouncing back pretty quickly because we have, obviously, the COVID impact, actually coming back, as you heard, pretty quickly. We have actually the Americas, which obviously has more compression due to these regulatory delays. It takes longer that actually the Americas come back. When you look then from a profitability perspective, I would say, yeah, it does improve.
You also need to keep in mind, at the moment, we are really investing for the future. What I mean with that is smart gas, smart water, and Google. These are pretty sizable investment, but I think it's exactly the right thing to do, which we need to do for the next year, really to position us for longer term profitable growth. The last question, H2. What I can say to that, Andreas, is H2 will be better than H1 in terms of revenue, in terms of profitability. We will be within guidance. I think that's very positive. You remember we had in the U.K. in particular, a shutdown March 16th, and then only coming back or locked down, I have to say, and then coming back beginning of July. Despite the current developments in the U.K., we don't see this this time.
It has been declared an essential service, and that's really positive. We see a little bit slowing down, but not to a larger degree. Our clear expectation is that H2 will be stronger than H1, and we stay within current guidance for full year 2020.
Thank you very much.
Thank you, Andreas.
The next question is from Jeff Osborne from Cowen and Company. Please go ahead.
Good afternoon, and thanks for hosting the event. I have two questions. One, you alluded to M&A several times, but also adjacent areas of growth in water and smart cities and others. Can you just talk about, between the new initiatives, what requires M&A versus what is seeing accelerated internal development?
Yeah. Hi, Jeff. I think we are really good in terms of smart metering, and we also have a solid position in some areas of grid edge intelligence. To give you an example, what we do with the new Revelo meter in the U.S., which I think it's really, really strong. However, when it comes then to some aspects which we want to do in grid edge and in also smart infrastructure, that would require more actually than an acquisition. When we talk about acquisition, I think we see this pretty opportunistic. You have seen now Rhebo, that's a startup, very interesting for our portfolio. We could also see, obviously, larger acquisitions or it could be also one large one, but then we need to be clear that it would be one.
I think together with the board, these discussions are taking place and we stay very pragmatic. If the right opportunities are coming, I think we would definitely evaluate that. I think, what is also important to say, we do have the balance sheet for that. We have really a strong balance sheet, which allows us to do that, actually, to strengthen our portfolio.
Excellent. My last question was just, in the past, you've alluded to delays in the regulatory approval and even the National Grid presentation highlighted that. Can you just give us a sense of perspective of where we stand in terms of what's been approved, what hasn't been approved, just from a magnitude? In the past, I think you had highlighted over $1 billion worth of business was awaiting approval. Where are we in that journey?
Sure. The way to think about it is, you remember, I think, at the half year result on October 12th, I said, well, I expect the approval somewhere to come between end of the year, end of March. I'm really happy, Jeff, to say that actually we saw regulatory approvals moving forward from several utilities in different states. I think that's very, very important. It shows actually, it's a testimony to the second wave, especially given when you think about the U.S. at the moment with COVID and the unemployment rate and so on. I think it's a really strong signal to the market. Jeff, what does that mean for us? At the moment, nothing. These utilities got the regulatory approvals, and they are now in the internal approval process. That means they actually now go and look at it.
Generally speaking, these are multi-supplier awards, and we expect somewhere between March, May that actually these awards will be made. We talked in the past, Jeff, that we said the projects under regulatory approval in excess of $1 billion. That's unchanged. Expectations are unchanged, which is positive.
Great. Thank you.
Thank you, Jeff.
The next question is from Lucie Carrier from Morgan Stanley. Please go ahead.
Hi. Good afternoon, everyone, and thanks for taking my question. I have a few of them. The first one, I was hoping I could follow up on the previous question on the U.S. contract. Just to kind of maybe clarify in terms of the timing. Is it fair to assume that you've just indicated that you expect kind of this contract to come to you basically between March and May 2021 for roughly a value of $1 billion? More than that, I guess, when do you expect this contract to be executed so we have a sense of kind of when the top line in North America can start to pick up?
I think Lucie, very good question. The way we think is, these awards will be made, as I said, the first award somewhere between March, May. Then actually the way to think about this is we need about 18 to 24 months until we actually can start the deployments. That means until we can recognize revenue. In other words, we will see actually first revenue recognition in 2023. When you think about the U.S. versus 2019 level, we will come back around to the same level to around second half 2024. That's the way to think. Why is that? Because it's regulatory approvals which are supposed to happen in Q4 2019, calendar year 2019, happens now in Q1 2021. Then you see obviously the time we need in terms of deploying these contracts.
Thank you very much for the color. My second question was around the European business and the pipeline of rollout. Obviously, France, Netherlands, and the U.K. are going to be fading, let's say, in a large proportion in the medium term. When we think about the second wave, it seems that they are only really partial for the moment in Nordics, which obviously also have a much lower size in terms of rollout. What is really the relay of growth, I would say, in Europe once France, Netherlands, and the U.K. are coming down considering the size that they had? Is it Germany? When I was looking at your slide, Germany was for rollout until 2032. Are you expecting a similar type of penetration than U.K. or France, which is 100% target? Are we still looking at a much more lower target for that?
Yeah. Lucie, we also have with us Susanne, Head of EMEA. Susanne, why don't you take this question?
Yes. Thank you, Lucie. First of all, I think U.K. and France are not going to go down as fast as we originally thought. U.K. is peaking in 2022. As I mentioned before, SMETS1 generation meters will be replaced following that. They went in about 10 years ago. Also in France, we also see the additional potential with Pinky and Blueky. Coming to the other markets, which is a fair question, we see a range of markets coming up. You mentioned Nordics, CEE, and Switzerland. We also, by the way, Netherlands will go into replacement as well due to the change in their communication technology. Good questions also around Germany. Currently the regulation is still as we presented also a year ago. The total market is around 45 million meters. As you said, it's a very slow rollout.
Let me give a bit of color to that. The customers having more than 6,000 kilowatt hours are required to have a smart meter gateway, and there the penetration plan is rather low, admittedly. In the next three years, I think the regulation says it's 10%, and in eight years it's 80%. However, we do see in parallel that, especially in the range below the 6,000 kW hours, that utilities are starting to test alternative solutions where we're also engaging there, because they also believe that there will be a significant input from the range below that will contribute to their climate, let's say, proposal to reach their targets. While the regulation is not really there showing an accelerated rollout, what you see on our slide is what the regulation actually says. We do believe that there will be a higher adoption going forward.
Again, we think CEE, Nordics, and Switzerland are the markets that we see will have a significant share going forward.
Thank you very much. I wanted to touch a little bit on the second wave and also the opportunity on software and services. First of all, I was hoping to understand what is now your share of revenue in the software and services business at the group level, and if you can give some granularity on the region, that would be also helpful. Also to understand how this has grown as a share of group revenue since the IPO and how does that compare in terms of the growth you have seen in what I would call the smart devices?
Yeah. Lucie, the software and services, managed services, around 15%. When you look back IP to now, it didn't shift much. It was maybe 17, now 15. It's about the same number. You heard today, we would like obviously to push that piece more in terms of software, because we think it's an interesting area and that's why we make these efforts.
Just related to that, I guess when we talk about second wave, more technology and a more uptake of software and services, clearly the growth rate of that business over the last kind of nearly four years hasn't exceeded the growth in devices. How should we think about that? When you are seeing the second waves, are you really seeing more advanced application? Maybe as an example, we can look at Italy and Spain or even in the U.S., because this is not necessarily obvious that we see that and that's not very visible, for example, in Spain or Italy. I guess I'm just trying to understand when this is effectively kicking in, this growth in software and services. Even in the second wave that have started, it doesn't seem to have had a lot of impact on your business.
Yeah, I think that's right. Having said this, where do we actually see the second wave? We see it in the U.S. and there it's just started actually as we sit here, these regulatory approvals have been given a few weeks ago. We see it in Sweden. It's another country. We see it in Italy. Italy, we are not much involved in that because that's really Enel territory. These are the areas we are seeing and clearly where we have expectations actually to participate in that.
Thank you. I go back in the queue.
Thank you very much, Lucie.
There's a follow-up question from Andreas Willi from JPMorgan. Please go ahead.
Yeah. Thanks for the additional time. I've got a couple of short questions. One on M&A. Do you have any specific acquisition criteria that you are looking at? You mentioned the strong balance sheet. If it's a larger deal, would you also consider equity? The second question is around price development. If we compare the new meters now being sold in the second wave, and we compare them to the price per unit we had five or 10 years ago on first wave product. Obviously it may be very difficult to compare. It's all specific and country specific, but maybe if you give some kind of indication, is there a mixed benefit as we go to second wave products?
Good. The first question, M&A, I think most important is, Andreas, it needs to be a really strategic fit. I think that's most important. I think after that, clearly, it depends on the size, and I think it depends on what criteria, hurdle rates like growth rate, like profitability, cash flow and so on, which then also triggers actually our thinking in terms of whether we would do a deal like this or not. When it comes, you ask the question, second in terms of equity. Obviously it's a broad question, but if it's strategically a really good fit, then there will definitely be that discussion will take place in the boardroom. I'm absolutely convinced, if it's a strong strategic fit. In terms of metering, the way to think a little bit, first generation meter, second generation meter.
Second generation meter, I think the Revelo it's a very good example. Revelo is actually really a meter. When you think about the grids nowadays, the grids are, especially when you look in the U.S., they are more dated, the grids. The grid's becoming much more dynamic. In terms of EVs, in terms of microgrids, photovoltaics and so on. That means actually the utility needs more intelligence at the end of the grid. Revelo is a perfect example, which has tremendous capabilities in terms of detecting anomalies, power flow, power quality, which allows the utility actually really to be more efficient and also to be more secure, for example, in terms of cybersecurity, that type of thing. Then on the other hand, you also have an end consumer, which obviously with these larger rollouts, pays a little bit more and therefore also wants to see a benefit.
He has much more visibility. He is much more empowered to actually really manage his appliances accordingly. I think these are the benefits, Andreas. Obviously, this is what the regulators look at. Before they approve a case, they say, since the cost for this CapEx investment, they go to the end user, to the end consumer. So regulator looks very carefully, does this make sense for the utility? Not only, does it also make sense for the end user?
In terms of the price you get, if you look at the unit price of Revelo and you compare that to what you typically sell in the U.S. now, is there a meaningful difference in the unit price that you would expect to get?
I couldn't now give you the exact numbers, but I would say, Andreas, it's comparable. Obviously, when you look at the meter, you're much further down the cost curve, the traditional meter. When you do the Revelo type, it's really leading-edge technology. As you know, when you push it into the market, I would say it's comparable.
That's fair.
The next question is a follow-up question from Lucie Carrier from Morgan Stanley. Please go ahead.
Yeah, Lucie.
Hi, and thanks for taking my follow-up. One question, I think you've mentioned that in your comments, but I was wondering if you could maybe explain how you see your position as we think about electric vehicle transition. Where does the smart meter comes in? Why do we need a smart meter for that? Generally speaking, you've been talking about grid edge management. I was just curious to understand, again, how you position yourself versus other companies like Schneider Electric or Siemens, which are obviously also quite present in grid automation and grid management. We can understand a little bit kind of where you sit in this schematic.
Very good question. EV charging, I think, as you know, Lucie, that's a pretty crowded field, and I think as we said, we looked at proof of concepts, which we think what could make sense and not make sense. We think, for example, in the U.K., it could go in the direction of SMETS2, no decisions have been made. Enedis is also looking at the pilot, I think that's interesting. When they go with the SMETS2 technology for EV charge with the ABBs and the likes, that would make sense. In terms of grid edge, you're absolutely right. There are the big guys in it, I was part of that in my previous life, the ABBs, the Siemens, the Schneider Electric. Generally speaking, they are more positioned in the high voltage, medium voltage, we are actually on the low voltage side.
I'm not saying we cannot change the landscape, but generally speaking, it's not the crowd we compete against, in general. Obviously, as you well know, this competitive landscape can change over time. That's how we see it.
Thank you very much. The second question I wanted to ask is about, this is to some extent kind of linked with the partnership maybe with Google and how you see the uptake of smart metering and the functionalities of smart metering from final users. Because I think a lot of different press report or are reporting that a lot of users actually, people in their home, are not really leveraging the capabilities of their smart meter and don't necessarily seem hugely interested. I appreciate British Gas had made some comments around how it was a clear benefit for their customer, but they're also the energy provider in the U.K., which have seen an enormous amount of customer leave British Gas because of the cost of energy.
I'm just trying to kind of put all this together also with Google was talking about personalized and Google touching everyone around the world. Those are very conceptual kind of thoughts, but in practice, do you have any data on how final users are really using the smart meters and whether they actually want all of those features, whether they are ready to pay to some extent for all of those upgrades?
Yeah. Although I couldn't give you now just data on top of the head, but what I can say, I think it's a process. Lucie, when you look a little bit from a mega trend perspective, the growing population and the urbanization and the amount of actually resources available, I do think more and more actually, users want to be empowered and users want to have choices. I think that's really important. When you think about the U.S. in particular, here, I don't know what you pay for your electric bill, but maybe I pay CHF 1,200 per year. In the U.S., I lived there for 20 years, it's pretty different. You pay pretty quickly $300, $600 a month, the incentive becomes much bigger.
The consumer really wants to know, "Hey, what can I do to actually lower my bill in terms of when do I use which appliance or automate that?" I think these type of things. What excites us about Google, Lucie, and I don't want to overplay it. Obviously, we need to clearly develop these use cases. We need to evaluate it together. Where I think Google is very good, they really know the human being. They know the people, and we know the electrical grid very well. I think there are synergies which we can explore together. That's what we are looking for.
Thank you. Maybe lastly on the upcoming kind of Japanese or second wave deployment, can you remind us maybe how you see the difference between what you had done in the past, on which I think we know was a very attractive contract back then with TEPCO and the differences with this new deployment, just to maybe have a sense on how we should factor that into earnings from 2023 onwards.
Sure. We have actually PV with us, Head of Americas. PV, why don't you talk about TEPCO, where we are and where we are going?
Yeah. Thank you, Lucie. The second wave, as you know, in Japan, the regulators mandate that electric meters get replaced every 10 years. Our first contract started, give or take 2013. We'll complete it, give or take in 2023 or even sooner because the population of the meters increased from 27 million to 29 million now. In the new, call it replacement upgrade of the network, they want a much more standardized network communication technology that we have developed in the U.S. called Wi-SUN, which gives you the flexibility to run everything on an open interoperable standard above and beyond just the AMI network. It actually extends into the ecosystem for IoT devices. Some of the features that we talked about in Revelo are required in the new meter to manage voltage, which becomes a very critical criteria that they have to measure.
You know very well that Japan is very worried about hurricanes and earthquakes. They are looking for a system that can not only take care of their needs related to the electric grid, but also extend into smart cities and smart sensors so that they can have complete awareness and have proactive alerts sent, because they clearly worry about communities and safety of their people. It goes into the resiliency piece, which Japan is extremely concerned about, above and beyond all the benefits that they seek from Revelo and all the things that we discussed today.
Yeah. Maybe PV, just to add, what is interesting in Japan, it is really mandatory that they actually change the meters every 10 years, that they have latest technology, which obviously with our market position is excellent to be in.
Thank you both.
Thank you, Lucie. Good.
The next question is from Daniel Koenig, from Mirabaud Securities. Please go ahead.
Yes. Hello, good afternoon. I have two questions. First, on Germany, it's not going very fast, and now on the 26th of September, there are elections in Germany. Can you make a diplomatic answer what you would expect that election to change in terms of rollout? The second question is, on the EBITDA margin guidance of 12%-13% of net revenues. The previous guidance was 13.5%-14.5%. I was wondering what the reasons are for the lower EBITDA margin guidance change. Thanks.
Yeah. Very good, Daniel. Yeah. As the first question, Germany, we do have two Germans sitting with us, Eva, who is the head of corporate communications, and we have Holger, our general counsel. Maybe I'll let you start first, Susanne, from a market perspective, and then you give a bit color on what we think about the 26th.
I think somebody was asking for the diplomatic answer. I'm not sure if I'm the person to give that one. Let me take a shot. Look, in general, we know that the Green are gaining importance. I think in general, it's important to understand that climate change is becoming more and more prevalent. As I mentioned before, there is the official rollout program, a quite complicated architecture for this whole thing, and we definitely see that there is an interest by the utilities for going below these 6,000 kW hours. We do believe that this will be an acceleration. Again, we do understand that the utilities are very sensitive with regard to the economic viability of this whole, I would say, technical architecture that has been chosen for Germany.
We do believe that again, seeing the next generation becoming stronger and gaining political influence, combined with also the Green, we see that as a positive trend, but I wouldn't want to put numbers to that.
Yeah. Good. You should actually know more since your husband is German, but fine. Good. We go to the second question, Daniel, which is EBITDA. You're actually right. Previous guidance was 13.5-14.5, and now 12-13. Why is that? As we said, when we look into the U.S., we see actually two things. We see on one hand, we see project roll-offs, which we are not able to replace two, three years ago. To that, we see these regulatory approvals delays. That gives us a compression on top line, and with that also on the mix, because obviously the margins in the U.S. are different than in other regions like Europe, like Asia. That actually drives this.
Having said this, Daniel, we feel definitely we have a little bit this period we go through until these deployments happen. I can tell you, when I look a little bit longer-term growth, I feel really strong about the U.S.
Okay.
Yeah.
That means that your previous guidance of 18-21 in the U.S., that is no longer valid, or is this just postponed into the medium term, or?
Yeah. Good. We also have with us our CFO, new CFO, Elodie. Why don't you talk a little bit about that?
Yeah, sure. Hello, Daniel. Basically for the U.S., as we explained, we have in the time where we give our guidance, we have pressure on the revenue with the regulatory developments that we see. Obviously, this is positive, we expect that the revenue conversion cycle will take time, as we explained. With this, we expect some margin pressure. Within the timeframe that we are looking at by 2023, we do not expect that the Americas will be in the 18%-21% range. However, beyond this timeframe, as we see the renewal of orders, that will drive more revenue growth in the longer term. We also see associated margin recovery in the longer term.
Exactly. Yeah. Thank you, Daniel. We have quite a few questions in the chat. While you maybe think about other questions, why don't we go to the chat and then actually can anytime come back actually to online questions. Eva?
Yeah. We'll start with a question from Anil Sherwan, and I hope I pronounced that correctly. At which L+G locations are water meters being developed?
Right. Yeah. That's actually our Nuremberg facility. I think the positive thing to that is really, we already have actually heat meters there, so there are a lot of commonalities in terms of ultrasonic technology, and we want to leverage that.
Yeah. We have another question from [Anil Sherwan] from Microchip. Landis+Gyr secures a major contract with partner EDF to deliver 650,000 SMETS2 meters. Is this new additional business?
Susanne?
Is it new additional business? Yes, it is.
meaning, but it's a full on-
Yeah, exactly. That I don't want to say it's new business, so it's a new contract, but we've had EDF, we've already had as a customer for a while.
Exactly.
EDF is an existing customer. This is new contract.
Exactly, yeah.
Okay, wonderful. Moving on. We had another question from Anil Sherwan. Do you see smart water meter deployment following the same trend as electricity and gas meters?
A smart water meter, they do grow faster. It's about 4%. We think water as a precious resource, we definitely think that will be the case. They do grow faster than what you see in electricity and on gas.
All right. Thank you very much. We have a question from Oliver Knobloch from Pictet. How has the acquisition of Elster by Honeywell changed the competitive environment?
PV, you sit very close to them. Why don't you talk?
Yep. Honeywell is still active in our markets. They are more a gas player than traditionally what we see them. However, our focus has been, as you know, Revelo and the new meters that we have developed and working with regulators. We continue to focus on our side of the business and do the things that we have to do to increase our market share and focus on our customer base. They're still active in our market.
Okay. Thank you very much, Prasanna. We have a question from Patrick Laager from Credit Suisse. Could the revenue breakdown in 2023 look like the R&D split you showed on slide 18? If not, can you share more insights on how the sales split could look like by then?
Yeah. Patrick, when we think about R&D, there's always a little bit a time lag when we do R&D and when we actually recognize revenue. I would say directionally about right, there could be a time delay when we do this type of doughnut, which we have shown you that there's a delay then until we recognize revenue. I would say directionally definitely what we're pushing for.
Thank you very much, Werner. We have a question from Jose Garza from Gabelli. The pace of electrification appears to be accelerating at the expense of gas distribution. Are you seeing this, and how is Landis+Gyr adopting its operations in this context? What additional actions might be necessary?
The pace of electrification appears to be accelerating. Yeah. We do see gas, as we said, that's right. When you think about gas, we have different type of gas. We have ultrasonic gas and we have the mechanical gas. We see there are clear opportunities. It's not that we think now we need to make an adjustment in terms of operationally or so. You heard from Susanne earlier that we have 80% market share in the U.K. with ultrasonic gas. Ultrasonic gas is very interesting, obviously opportunities in the U.S., Australia, New Zealand, and that's something we want to leverage.
Thank you very much. We have a follow-up question from Patrick Laager from Credit Suisse. Smart water metering is part of your growth initiatives. How do you intend to enter this field, which looks quite crowded? Through acquisitions or allocating more R&D?
Asia.
Excuse me?
Sorry, which question did I miss?
Smart water metering.
Smart water metering is part of your growth initiative.
Initiative. How do you intend to enter this field, which looks quite crowded, through acquisitions or allocating more R&D?
Sorry, Patrick. It's through allocating more R&D. We think we can do it organically because we do have technology for heat already. We want to leverage this for water. What I also would like to say is, we have a lot of the customers, we already know them, and we want to leverage actually that type of expertise.
Thank you very much. We have another question from Patrick Laager. Asia seems to have significantly more sales potential. What exactly is the strategy here? Which countries, besides Australia, New Zealand, India and Hong Kong, are particularly interesting, and how will you expand there, through acquisitions or organically?
We have Steve with us, in Sydney. It's about two o'clock in the morning. Steve, I assume you're still awake. Why don't you take this question?
Yes, I am still awake. All right. Okay. It's a good question. Look, we see beyond the countries mentioned there. Certainly, we see in countries like Bangladesh, where we won our first project, Indonesia, where we've done trials, Thailand, where we're in conversations, moving forward, and that will help drive growth. We need to do more in Malaysia. Look, I think whilst it's not moving yet outside of Meralco, Philippines also in time, but I think it's outside our current planning period, to be honest. We'll move forward as well. Yes, there is the potential there. History and experience tells us that these things don't move as fast as we would sometimes like. We know that it will take a number of years to get real momentum into some of these markets.
That said, in terms of our approach, I'll say it's organic, our business models need to be different, and we take a market-by-market approach. We find ourselves, for example, having to work in some countries with system integrators on specific projects. We may be working with other meter vendors because of local content rules and ownership rules that, for example, you find in Malaysia, in which case we may need to work in consortium arrangements. We provide the technology stack, software, communications technology. Someone else provides the meters. It's country by country. Yes, largely organic, but in quite different go-to-market models, depending on the sort of project at hand. I hope that answers the question.
Yes.
Thanks, Steve.
Very good, Steve.
Okay, we have another question from Patrick Laager. The Middle East seems to be an interesting market. Does Landis+Gyr have any plans to expand in this market? If so, how do the timelines look like?
Yep. Patrick, we definitely would like to have a stronger presence. You heard from Susanne. We won a good order in Qatar, which I think is great. They are interesting market like Bahrain, like UAE. We like the Middle East. Saudi Arabia, very strong position by the Chinese. I do think from our perspective, in the next, I would say one to two years, we would like to see a further enhancement in these markets.
Thank you very much, Werner. Moving on to a question from Patrick Rafaisz with UBS. Technology roadmap. About 50% of R&D spend will be in adjacencies. How quickly would you expect that to show in your revenue mix, and how much incremental growth are you building into the 2023 targets from this?
Yeah. Patrick, similar question to what Patrick Laager asked. You're absolutely right in terms of shifting the R&D spend, and I want to be very clear. For us, metering remains the baseload engine of our company, and will be like that. The way we think, for example, we developed a firmware platform, like a library, which we actually can use to start more efficiently. Metering remains the base of the engine, and then we would like to go into these adjacencies, which you have seen on the slide 23. Now, in terms of revenues, to which degree, Patrick, that's still in the works, where we actually now really develop these plans, how could it look like, and we look at use cases internally, but then also with the likes like Google.
Thank you. We have a follow-up question from Patrick Rafaisz. Rhebo with no material near-term financial impact. When would you expect Rhebo to make an imprint on your financials?
Yeah, maybe Elodie, if you take that.
Yeah, sure. As we discussed, Rhebo is a startup company in cybersecurity. We see this as a very interesting addition to our portfolio. Obviously, startup means it takes some time for revenue to build up. We see some very limited impact in the financials within the period of the guidance, and we see some stronger contribution post the 2023 guidance.
Thank you very much, Elodie. We have another question from Patrick Rafaisz. Your growth outlook is in line with the AMI outlook. Does this therefore assume no market share gain near term?
I think, Patrick, it really depends a little bit on the market. Obviously, we are on a low level in the U.S. Not that we are losing market share, that's not what I'm saying, but just from a deployment perspective with this delay. We have some markets where we actually, for example, like in Asia, what you heard from Steve, we would like to market inroads. In summary, it's low single digits, but obviously it depends on the specific market.
Okay. Thank you very much, Werner. We have a follow-up question from Jose Garza with Gabelli. What geographies will be of focus in your smart water metering strategy?
Susanne?
In the first phase, we are looking at EMEA, and we're also looking at ANZ. We are currently not planning to focus on the U.S.
Yeah, that's right.
Thank you very much, Sir. This is from the chat queue, so we will be going back to the telephone queue. I am going to hand it back over to Moira for some additional questions on the telephone line.
Thank you. We have a follow-up question from Daniel Koenig from Mirabaud Securities. Please go ahead.
Yes. The market share question was already answered. I had another question on the dividend, this word progressive dividend. Can you give a little bit more granularity on this? How much progression we can expect from the CHF 2.0 upwards, hopefully.
Sure, Daniel, actually we did on purpose actually define it like that. I'm just kidding.
Yes, please. I guess.
Exactly. It's a good question. Obviously, when you look into our company, we are really making quite some sizable investments, and I'm really grateful that the board actually gives us the support to do that, which I think it's very important and to position us very well for long-term growth. In terms of when you look at our cash flows, we gave 120 in 2023. In between, obviously we make some investments in Smart Gas, Smart Water. We invest in Google. We have a lower top line. Due to that, we thought we want to give a floor, which is pretty clear. These CHF 2 or around 2019 figures, around CHF 64 million, it's pretty clear. We see this as a floor.
Depending, Daniel, how things are going, it allows us then actually, as a board, to make a decision that we add a little bit as we go.
Okay. Thanks a lot.
Yeah. I thank you.
Question is a follow-up question from Andreas Willi from JPMorgan. Please go ahead.
Yeah, thanks for the time. I just wanted to follow up on the question on the gas meter business. Maybe you gave us some indication how important gas meters are for you, particularly in EMEA or Europe, given that the EU wants to phase out basically the use of gas and heating and cooking and so on in Europe in the long term and in the short term in new construction.
Yeah. What I did say, Andreas, as I said, global smart gas declining as large European rollouts in the U.K., Netherlands, France and Italy, they reached their peaks. We see growth potential in new markets. When we think about that, it's really U.S., very strong market. Australia, New Zealand, these are clearly target markets which we want to approach first. Japan would be an interesting market, but their technology is a little bit different, so that really will be then a second or third mover advantage.
Size of EMEA. Is it meaningful or not? Is it 5% of your business or 20%?
The gas business, I couldn't give a number. No. Sorry, Andreas, we couldn't give you a number right now. No. Obviously, the U.K. is a very important market, about 40% of EMEA revenues, and then gas obviously considerably smaller, but I would not be in a position to give a number, yeah.
Thank you.
Sorry, Andreas.
We have a follow-up question from Jeff Osborne from Cowen and Company. Please go ahead.
Yeah, thanks. I just had one quick one. On the U.S. utilities and the commentary about getting regulatory approval now but not spending until 2023. Most utilities want to get their regulated rate of return and spend as quickly as possible. I just wanted to understand, are you being conservative there? I thought the past delays were typically in the 9-12 month range. Is there a delay because of increased software content then from an accounting standpoint, you can't record revenue until?
No, Jeff. We don't want to be, let's say, conservative or something like that. It's generally speaking, the time we need, 18-24 months, and it not only depends on us. Obviously, there are pilots going. Then we have also then testing and so, which we do with the customer, and that actually drives the timeline. As you can imagine, Jeff, it's a pretty regulated business, and as part of that, these are really the timelines which we frankly speaking, Jeff, if we could do it fast, I would be the first one to push it because that would be nice. These are really realistic timelines.
Got it. Thank you.
Yeah.
All right. I just see that we have another question coming in on the chat line. Neil Choi from Electron Capital Partners is asking, "Are the new deployments that recently received regulatory approvals in the U.S. embedded fully in the midterm guidance?
What we can say, Neil, is that these new deployments, obviously, which have been actually granted to the utilities, I think that's very positive. It doesn't mean anything to us at the moment because no awards took place. I want to be very clear. Obviously, we do make certain assumptions what we think in terms of future revenues coming down. As I mentioned before, there's a time lag of this 2023, of this recognized revenues starting in 2023.
Okay. Well, thank you very much then. I think that was it from the question queue. Werner, I hand the work back over to you to just wrap up today for us then.
Yeah. From my side, I just want to say, first of all, thank you very much for all the questions. I think we really appreciate it, and we highly value it. I speak to quite a lot of you pretty often. These insights which you bring us really also shape our thinking and help us actually in defining our strategy and operational strategic initiatives. Look, we do have some headwinds when we look into it, but as I said, we are positioning ourselves for long-term profitable growth. The key takeaways from today, clearly regulatory approvals are coming through. Super important. Remember we said in May, we said it in October. Here they are. I think very positive, and obviously, we will see in the next few weeks and months what it means for Landis+Gyr. We do invest quite a bit in R&D.
That's important to position us actually right for the future in terms of our core business, but then also push more into higher growth areas, grid edge, smart infrastructure. You heard today about the partnership with Google, where we want to co-innovate and clearly also see this as a potential transformation of our business in terms of revenue, but also culturally because it's a very different breed. A strong balance sheet. We should never forget it, especially in these times. We do have the capacity for M&A, which is important. Last but not least, also when I think about the 5,500 passionate people who really want to drive the business forward every day, I can see this high performance culture which really starts actually with our team, the senior leadership team, and then really actually goes down to many levels within the organization.
That said, thank you for joining us today. We look forward to speaking with you very soon. Until then, all the best, and stay healthy. Thank you.