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Honeywell on notice as upstart company inks big pipeline deal

Yahoo Finance
Yahoo Finance

Can a small company from Portland, Oregon, successfully take on a multinational Goliath like Honeywell (HON)? After inking a deal with Snam Rete, Europe's largest natural gas transmitter, that small company, CUI Global (CUI), has taken the first step in that direction with a game-changing device called GasPTi, according to CEO Bill Clough, “It’s a gas properties transmitter ... it very quickly, very efficiently and very cheaply monitors the quality of gas in a pipeline and does it in a very unique way that really supplants 60-year-old technology.

Clough says there are two main types of customers for his product. Pipeline operators can use the GasPTi system for “fiscal monitoring.” The instrument can give those companies a read on just how much potential energy is in the gas moving through its pipeline. The other kind of customer is a big compressor company or a big engine operator. “[They] would use the device to really control those big machines that are using huge amounts of natural gas and frankly operate much more efficiently if they are operated on a device like ours.”

CUI announced the Snam Rete deal yesterday for 400 of its devices initially. The full project calls for 3,300 gas analyzers across the Italian company’s pipeline system in the coming years.

The sale is big news because last summer Honeywell acquired Elster, a company that makes similar technology but at five times the price of the CUI Gas PTi technology.

“As you see the commodity price, in this case gas, get lower, those infrastructure costs mean something to those operators,” Clough says. “We can put our device in for about a fifth the cost the current technology is and we require almost no maintenance. The current technology is somewhere between $12,000 and $13,000 a year.”

And it’s not just cost that Clough thinks gives his company a leg up. He says the Gas PTi system is faster and more accurate as well. “[Other companies in the space] all had pretty much the same technology for 60 years. It takes [it] minutes to analyze the gas, not seconds, and they simply cannot compete with us on that basis.”

Honeywell responded the Yahoo Finance with the following statement:

"The acquisition of Elster added a strong well-recognized brand and outstanding technologies to the Honeywell portfolio, including leading positions in the well-established markets for gas metering and regulators. Elster technologies also include a new product for this specific gas quality measurement market that is emerging. That new offering is competitive both in terms of cost and performance with other offerings. Honeywell is confident it can maintain and expand its leading positions in existing and emerging natural gas opportunities.”

Clough believes CUI still has a leg up and can win with this product in particular.

“The natural gas industry is like many industries - there’s a school of fish,” he says. “They all tend to move in the same direction. If we can peel off one or two of the right fish, the entire school will turn toward us. The Italians are one of those right fish.” And he hopes this deal in Italy will lead to more multi-million dollar sales in France, Germany, Norway, and yes, the United States.

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