Market Watch: Canadian grid modernization company joins the index

General Market Commentary

 The Bank of Canada maintained its target for the policy rate at 2.75 per cent on June 4, 2025. Since the previous edition, the U.S. administration has continued to increase and decrease various tariffs. Bilateral trade negotiations have begun with a number of countries, including Canada. However, the Bank cautions that “the outcomes of these negotiations are highly uncertain, tariff rates are well above their levels at the beginning of 2025, and new trade actions are still being threatened. Uncertainty remains high.”

While the global economy has shown resilience in recent months, the Bank states this partly reflects a temporary surge in activity to get ahead of tariffs. In Canada, economic growth in the first quarter came in at 2.2 per cent, slightly stronger than the Bank had forecast, while the composition of GDP growth was largely as expected.

With regard to the environment and clean energy sector, Tim Hodgson is the new energy and natural resources minister. “Energy is Canada’s superpower,” stated Hodgson recently at the Calgary Chamber of Commerce. “It gives us an opportunity to build the strongest economy in the G7, guide the world in the right direction and be strong when we show up at a negotiation table.”

With this new leadership—which is powered by a combination of tax credits, nation-building infrastructure funding and carbon pricing—communities across the country are poised to introduce new cleantech and clean energy projects.

Hot Sector News

One of the companies riding the power grid modernization movement is Tantalus Systems (TSX: GRID), a Burnaby, B.C.-based technology company dedicated to helping utilities modernize their distribution grids by harnessing the power of data.

The company’s Q1 data included an increase in revenue by 27 per cent year-over-year to $11.9 million. The stock is trading near 52-week highs.

“Our team at Tantalus got off to a solid start in 2025 by delivering a new milestone for revenue generated in the first quarter of a calendar year, and we are encouraged by the continued growth in our software and services segment as utilities embrace our data-centric approach to grid modernization,” said Peter Londa, President & CEO of Tantalus. “Our data-driven platform offers utilities a secure, flexible and affordable path to make sustained progress with their modernization efforts amid the current economic uncertainty. Tantalus is helping utilities generate additional value from existing infrastructure to improve efficiency, reliability and resiliency regardless of the current economic headwinds.”

We asked Gianluca Tucci, Research Analyst at Haywood Securities Inc. to provide his expert opinion on the value proposition of Tantalus in light of market turmoil.

What are your thoughts on Tantalus Systems and its role in the clean energy and grid modernization sector in Canada?

Tantalus Systems is a key player in the clean energy and grid modernization sector, particularly across the U.S. and the Caribbean Basin. Their focus is on helping utilities transition aging, one-way grids into intelligent, multi-directional systems by “harnessing the power of data.” Tantalus is one of the very few Canadian headquartered grid modernization companies and among a handful of publicly traded companies in North America focused on grid modernization. As Canadian utilities seek to “buy Canadian,” Tantalus could increase its presence across Canadian utilities.

The Tantalus Grid Modernization Platform (TGMP) provides a comprehensive suite of solutions, including intelligent connected devices, communication networks, data management and analytics, and enterprise applications.

Key strengths in the Canadian context and broader grid modernization include addressing critical needs such as supply/demand imbalance, power outage risk, and the challenges of managing increasing grid data, all of which are pertinent to modernizing energy infrastructure for clean energy integration.

Overall, Tantalus is well-positioned to benefit from the significant investment in grid modernization driven by the need for clean energy, reliability, and resilience.

How would you describe the value proposition for prospective Tantalus investors and shareholders?

The value proposition for prospective Tantalus investors and shareholders is rooted in several key areas:

• Large and growing market opportunity: The North American electrical grid is aging, with a significant portion past its life expectancy, leading to a massive projected spend by utilities (estimated $2T by 2030) on modernization. Tantalus’ solutions are directly aligned with this market need, including substantial government stimulus programs.
• Strong secular growth drivers: The demand for grid modernization is driven by long-term trends like EV adoption, data center growth, and decarbonization, making their business less susceptible to cyclical economic swings.
• Differentiated technology and competitive advantage: They offer a platform approach that prioritizes data interoperability, which is crucial for integrating various devices and systems.
• Recurring revenue streams: A significant portion of their revenue comes from software and services (+35 per cent contribution), with strong growth in Annual Recurring Revenue (ARR), providing a more predictable and high-margin revenue base.
• High customer retention: The 99 per cent customer retention rate indicates a sticky customer base and a strong product-market fit, leading to consistent revenue.
• Experienced management team: The company offers an experienced management team with deep industry understanding and an independent board, indicating strong leadership and governance.
• ESG alignment: Their solutions enable utilities to become more resilient, reliable, secure, affordable, flexible, and sustainable, aligning with Environmental, Social, and Governance (ESG) initiatives.

In essence, investors are looking at a company addressing a critical, well-funded, and growing market with a differentiated technology, strong customer relationships, and a scalable business model with increasing recurring revenue.

Any predictions in terms of impacts from the tariff turmoil, with regard to the clean energy market in general and Tantalus in particular?

 Tariffs, particularly those on imported clean energy components and related manufacturing inputs, are expected to have several negative impacts on the clean energy market:

• Increased Costs: Tariffs directly increase the price of clean energy technologies (e.g., solar panels, inverters, transformers) and the materials needed to manufacture them (e.g., steel, electronic components). This makes deploying clean energy more expensive.
• Delayed Deployment: Higher costs and potential difficulties in sourcing components due to tariffs can delay the deployment of clean energy technologies and the expansion of the grid.
• Reduced Competitiveness of Clean Energy: If tariffs make clean energy sources (like Canadian hydroelectricity) more expensive than fossil fuels, the market may opt for less costly, dirtier alternatives, hindering the clean energy transition.
• Supply Chain Disruptions: Tariffs can disrupt established supply chains, leading to uncertainty and potential shortages of critical components like transformers, which are already facing supply issues.
• Economic Downturn Risks: Prolonged and reciprocal tariffs could lead to broader economic slowdowns, impacting business and consumer sentiment, which in turn could affect investment in energy infrastructure.

Tantalus acknowledges the potential impact of tariffs:

• Direct Cost Increases: Tantalus has already indicated that potential tariff impacts could affect their 2025 Adjusted EBITDA by $700,000 to $800,000. This suggests they anticipate higher costs for components or raw materials.
• Transformer Sourcing Challenges: Tantalus notes that tariffs, particularly on components like grain-oriented electrical steel (GOES) used in transformers, will make it more challenging and expensive for utilities to source, purchase, and install new transformers.
• Increased Value of Analytics Solutions: Interestingly, Tantalus sees an increased value for tools that help utilities optimize existing infrastructure and prioritize investments, which becomes even more critical when new equipment is scarce and expensive.
• Potential for Domestic Sourcing Alternatives: The discussion around tariffs also highlights the push for domestic alternatives and different transformer designs that bypass tariff-vulnerable components. As a North American company, Tantalus might be able to leverage this shift if they can integrate with or benefit from these domestic solutions.

While tariffs present a headwind for the clean energy market generally, Tantalus, being an enabler of grid modernization, might experience some direct cost impacts. However, their focus on data analytics and optimizing existing infrastructure could become even more valuable to utilities facing higher equipment costs and supply chain constraints.

With these data points in mind, we are adding Tantalus to the Stocks to Watch index.

Stocks to Watch

Here is a list of Canadian cleantech stocks that we are monitoring for this column so far. We are open to suggestions from our advisors and readers.

*The authors of this column own equity. It is not meant to be an endorsement, but simply a statement of this fact.

James Sbrolla is a veteran of the financial and environmental industries.

Connie Vitello is editor of Environment Journal.

Featured image credit: Getty Images