GE's moment of truth on €12.4bn Alstom deal

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Richard Heap
November 6, 2015
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GE's moment of truth on €12.4bn Alstom deal

It has been 18 months in the making but this week, finally, General Electric completed its €12.4bn acquisition of French firm Alstom’s energy business.

GE is set to pay a purchase price of €9.7bn, with the rest of the value in the deal coming from Alstom’s investments in overhauling its operations and forming joint ventures, including the firms’ 50:50 tie-up to take a major share of the offshore market.

Even a casual observer should know that this deal is not all about wind. It also covers oil, gas, coal and nuclear, as well as grids. But it does have the potential to shake up wind by giving GE a foothold in markets where it is either absent or underrepresented.

In the onshore market, the most obvious impact is that this gives GE more of a foothold in Europe, and a platform from which it can try to take market share from European giants, like Vestas and Siemens. This fits with its strengths in the US, Canada and Brazil.

But this is not simply about empire-building. Expanding in Europe also reduces the risks to GE of a prolonged downturn in the US market, which is precariously balanced. The cost of wind energy may be falling in many US states, but the market is still reliant on support like the production tax credit, which expired at the end of 2014 and has not been reinstated.

There is no guarantee that GE will be able to take a major slice of the highly competitive European market, although its strong track record surely means it will make some inroads. Whatever it does in Europe should help it if there is a prolonged slowdown in US wind.

The most interesting aspect of the deal for the onshore is in the one market where the two companies both have a major presence: Brazil. Last year, GE had a market share in Brazil of 22% and Alstom just over 14%, with the latter opening is third factory in the country this year. This deal enables GE to bolster its operations in Brazil, and the company will also be setting its sights on becoming a leading turbine maker across South America.

Meanwhile, in offshore, the joint venture with Alstom has enabled GE to move into offshore without the risk of developing its own turbines, and there is the potential for a strong pipeline of projects in the waters off France and beyond, including in the US.

GE has traditionally avoided the offshore wind sector due to the high costs and the number of existing players, including Siemens, MHI Vestas and Adwen, but it clearly sees value in a joint venture. It makes sense to team up with Alstom, which has already developed the 6MW Haliade turbine and secured a pipeline of 1.5GW projects in French waters.

And it also helps GE on its own doorstep. The Haliade turbine is being deployed at the first offshore wind farm in US waters, the 30MW Block Island that could pave the way for a 1GW scheme. This makes Alstom a frontrunner in the US offshore market.

That is the theory, and there has been plenty of time for GE to work out how this deal will work in practise. The transaction was agreed in June 2014, and discussions were ongoing before that. But now the time for planning is over. Now, it is time to deliver.

It has been 18 months in the making but this week, finally, General Electric completed its €12.4bn acquisition of French firm Alstom’s energy business.

GE is set to pay a purchase price of €9.7bn, with the rest of the value in the deal coming from Alstom’s investments in overhauling its operations and forming joint ventures, including the firms’ 50:50 tie-up to take a major share of the offshore market.

Even a casual observer should know that this deal is not all about wind. It also covers oil, gas, coal and nuclear, as well as grids. But it does have the potential to shake up wind by giving GE a foothold in markets where it is either absent or underrepresented.

In the onshore market, the most obvious impact is that this gives GE more of a foothold in Europe, and a platform from which it can try to take market share from European giants, like Vestas and Siemens. This fits with its strengths in the US, Canada and Brazil.

But this is not simply about empire-building. Expanding in Europe also reduces the risks to GE of a prolonged downturn in the US market, which is precariously balanced. The cost of wind energy may be falling in many US states, but the market is still reliant on support like the production tax credit, which expired at the end of 2014 and has not been reinstated.

There is no guarantee that GE will be able to take a major slice of the highly competitive European market, although its strong track record surely means it will make some inroads. Whatever it does in Europe should help it if there is a prolonged slowdown in US wind.

The most interesting aspect of the deal for the onshore is in the one market where the two companies both have a major presence: Brazil. Last year, GE had a market share in Brazil of 22% and Alstom just over 14%, with the latter opening is third factory in the country this year. This deal enables GE to bolster its operations in Brazil, and the company will also be setting its sights on becoming a leading turbine maker across South America.

Meanwhile, in offshore, the joint venture with Alstom has enabled GE to move into offshore without the risk of developing its own turbines, and there is the potential for a strong pipeline of projects in the waters off France and beyond, including in the US.

GE has traditionally avoided the offshore wind sector due to the high costs and the number of existing players, including Siemens, MHI Vestas and Adwen, but it clearly sees value in a joint venture. It makes sense to team up with Alstom, which has already developed the 6MW Haliade turbine and secured a pipeline of 1.5GW projects in French waters.

And it also helps GE on its own doorstep. The Haliade turbine is being deployed at the first offshore wind farm in US waters, the 30MW Block Island that could pave the way for a 1GW scheme. This makes Alstom a frontrunner in the US offshore market.

That is the theory, and there has been plenty of time for GE to work out how this deal will work in practise. The transaction was agreed in June 2014, and discussions were ongoing before that. But now the time for planning is over. Now, it is time to deliver.

It has been 18 months in the making but this week, finally, General Electric completed its €12.4bn acquisition of French firm Alstom’s energy business.

GE is set to pay a purchase price of €9.7bn, with the rest of the value in the deal coming from Alstom’s investments in overhauling its operations and forming joint ventures, including the firms’ 50:50 tie-up to take a major share of the offshore market.

Even a casual observer should know that this deal is not all about wind. It also covers oil, gas, coal and nuclear, as well as grids. But it does have the potential to shake up wind by giving GE a foothold in markets where it is either absent or underrepresented.

In the onshore market, the most obvious impact is that this gives GE more of a foothold in Europe, and a platform from which it can try to take market share from European giants, like Vestas and Siemens. This fits with its strengths in the US, Canada and Brazil.

But this is not simply about empire-building. Expanding in Europe also reduces the risks to GE of a prolonged downturn in the US market, which is precariously balanced. The cost of wind energy may be falling in many US states, but the market is still reliant on support like the production tax credit, which expired at the end of 2014 and has not been reinstated.

There is no guarantee that GE will be able to take a major slice of the highly competitive European market, although its strong track record surely means it will make some inroads. Whatever it does in Europe should help it if there is a prolonged slowdown in US wind.

The most interesting aspect of the deal for the onshore is in the one market where the two companies both have a major presence: Brazil. Last year, GE had a market share in Brazil of 22% and Alstom just over 14%, with the latter opening is third factory in the country this year. This deal enables GE to bolster its operations in Brazil, and the company will also be setting its sights on becoming a leading turbine maker across South America.

Meanwhile, in offshore, the joint venture with Alstom has enabled GE to move into offshore without the risk of developing its own turbines, and there is the potential for a strong pipeline of projects in the waters off France and beyond, including in the US.

GE has traditionally avoided the offshore wind sector due to the high costs and the number of existing players, including Siemens, MHI Vestas and Adwen, but it clearly sees value in a joint venture. It makes sense to team up with Alstom, which has already developed the 6MW Haliade turbine and secured a pipeline of 1.5GW projects in French waters.

And it also helps GE on its own doorstep. The Haliade turbine is being deployed at the first offshore wind farm in US waters, the 30MW Block Island that could pave the way for a 1GW scheme. This makes Alstom a frontrunner in the US offshore market.

That is the theory, and there has been plenty of time for GE to work out how this deal will work in practise. The transaction was agreed in June 2014, and discussions were ongoing before that. But now the time for planning is over. Now, it is time to deliver.

It has been 18 months in the making but this week, finally, General Electric completed its €12.4bn acquisition of French firm Alstom’s energy business.

GE is set to pay a purchase price of €9.7bn, with the rest of the value in the deal coming from Alstom’s investments in overhauling its operations and forming joint ventures, including the firms’ 50:50 tie-up to take a major share of the offshore market.

Even a casual observer should know that this deal is not all about wind. It also covers oil, gas, coal and nuclear, as well as grids. But it does have the potential to shake up wind by giving GE a foothold in markets where it is either absent or underrepresented.

In the onshore market, the most obvious impact is that this gives GE more of a foothold in Europe, and a platform from which it can try to take market share from European giants, like Vestas and Siemens. This fits with its strengths in the US, Canada and Brazil.

But this is not simply about empire-building. Expanding in Europe also reduces the risks to GE of a prolonged downturn in the US market, which is precariously balanced. The cost of wind energy may be falling in many US states, but the market is still reliant on support like the production tax credit, which expired at the end of 2014 and has not been reinstated.

There is no guarantee that GE will be able to take a major slice of the highly competitive European market, although its strong track record surely means it will make some inroads. Whatever it does in Europe should help it if there is a prolonged slowdown in US wind.

The most interesting aspect of the deal for the onshore is in the one market where the two companies both have a major presence: Brazil. Last year, GE had a market share in Brazil of 22% and Alstom just over 14%, with the latter opening is third factory in the country this year. This deal enables GE to bolster its operations in Brazil, and the company will also be setting its sights on becoming a leading turbine maker across South America.

Meanwhile, in offshore, the joint venture with Alstom has enabled GE to move into offshore without the risk of developing its own turbines, and there is the potential for a strong pipeline of projects in the waters off France and beyond, including in the US.

GE has traditionally avoided the offshore wind sector due to the high costs and the number of existing players, including Siemens, MHI Vestas and Adwen, but it clearly sees value in a joint venture. It makes sense to team up with Alstom, which has already developed the 6MW Haliade turbine and secured a pipeline of 1.5GW projects in French waters.

And it also helps GE on its own doorstep. The Haliade turbine is being deployed at the first offshore wind farm in US waters, the 30MW Block Island that could pave the way for a 1GW scheme. This makes Alstom a frontrunner in the US offshore market.

That is the theory, and there has been plenty of time for GE to work out how this deal will work in practise. The transaction was agreed in June 2014, and discussions were ongoing before that. But now the time for planning is over. Now, it is time to deliver.

It has been 18 months in the making but this week, finally, General Electric completed its €12.4bn acquisition of French firm Alstom’s energy business.

GE is set to pay a purchase price of €9.7bn, with the rest of the value in the deal coming from Alstom’s investments in overhauling its operations and forming joint ventures, including the firms’ 50:50 tie-up to take a major share of the offshore market.

Even a casual observer should know that this deal is not all about wind. It also covers oil, gas, coal and nuclear, as well as grids. But it does have the potential to shake up wind by giving GE a foothold in markets where it is either absent or underrepresented.

In the onshore market, the most obvious impact is that this gives GE more of a foothold in Europe, and a platform from which it can try to take market share from European giants, like Vestas and Siemens. This fits with its strengths in the US, Canada and Brazil.

But this is not simply about empire-building. Expanding in Europe also reduces the risks to GE of a prolonged downturn in the US market, which is precariously balanced. The cost of wind energy may be falling in many US states, but the market is still reliant on support like the production tax credit, which expired at the end of 2014 and has not been reinstated.

There is no guarantee that GE will be able to take a major slice of the highly competitive European market, although its strong track record surely means it will make some inroads. Whatever it does in Europe should help it if there is a prolonged slowdown in US wind.

The most interesting aspect of the deal for the onshore is in the one market where the two companies both have a major presence: Brazil. Last year, GE had a market share in Brazil of 22% and Alstom just over 14%, with the latter opening is third factory in the country this year. This deal enables GE to bolster its operations in Brazil, and the company will also be setting its sights on becoming a leading turbine maker across South America.

Meanwhile, in offshore, the joint venture with Alstom has enabled GE to move into offshore without the risk of developing its own turbines, and there is the potential for a strong pipeline of projects in the waters off France and beyond, including in the US.

GE has traditionally avoided the offshore wind sector due to the high costs and the number of existing players, including Siemens, MHI Vestas and Adwen, but it clearly sees value in a joint venture. It makes sense to team up with Alstom, which has already developed the 6MW Haliade turbine and secured a pipeline of 1.5GW projects in French waters.

And it also helps GE on its own doorstep. The Haliade turbine is being deployed at the first offshore wind farm in US waters, the 30MW Block Island that could pave the way for a 1GW scheme. This makes Alstom a frontrunner in the US offshore market.

That is the theory, and there has been plenty of time for GE to work out how this deal will work in practise. The transaction was agreed in June 2014, and discussions were ongoing before that. But now the time for planning is over. Now, it is time to deliver.

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Become a member of the 6,500-strong A Word About Wind community today, and gain access to our premium content, exclusive lead generation and investment opportunities.