Alstom plays to strengths in GE tie-up

Alstom CEO Patrick Kron said offshore wind and grid joint ventures planned with GE recognise the French group’s “specific strengths” in those fields – but confirmed its onshore wind unit is destined for outright US ownership.

Kron fielded questions from financial analysts this morning after a dramatic weekend in the battle for control of the French group that saw the Alstom board approve GE’s revised plan over a counter-offer from Siemens and Mitsubishi Heavy Industries.

That proposal foresees the setting up of three 50/50 joint ventures, including one in renewables that features Alstom’s offshore wind, hydro and tidal energy assets, and a second in grid.

The renewables JV will have some 8,200 employees and sales of €1.3bn ($1.76bn) – and Alstom said part of the agreement will allow it to buy up to 100% of GE’s share later.

Kron said the JVs “are in areas in which Alstom has specific strengths” and positions that are generally larger than GE’s, including “offshore wind where GE is not present”.

He added: “In my modest view our positions are recognised as stronger than our American colleagues."

But Kron confirmed Alstom’s onshore wind operation is not included in the package of JVs and alliances hammered out since GE’s original offer for the entire Alstom energy division.

He said GE’s existing position in onshore wind is “an order of magnitude greater” than Alstom’s. “They are much, much larger than us in that area.”

Kron claimed the overall deal makes “strategic sense” for both partners, and said he was relaxed about the decision by the French state to take a 20% stake in the new-look Alstom.

He said he had not been party to discussions about the investment, which was the government’s call.

Alstom will now begin the exhaustive process of securing shareholder and regulatory approval for the deal with GE, Kron said. Closing of the deal is expected in the first half of 2015.

Director of Recharge Insight, Robert Clover, said: "As Insight noted in May, Renewables was never the driver of any potential deal between Alstom and any of its suitors, but the fit across the board between GE and Alstom, including in renewables, looked much stronger than any other of the mooted combinations. 

"It seems that the proposed JV in renewables between GE and Alstom (excluding onshore wind) was in the end one of the sweeteners proposed by GE to appease French government concerns about ceding control of strategic technologies, like offshore wind, which will remain based in France."

Clover added: "With GE as a partner, and its strong balance sheet, the offshore wind position of Alstom now looks to have been strengthened.

"In onshore wind, Alstom's business is far smaller than GE's and also not as strategically important to France, focused as it is mostly on the Brazil market.

"The GE/Alstom combined onshore wind businesses in Brazil will give it a very strong number one position, raising the possibility of anti-trust issues."

Note: Update adds comments from Recharge Insight