Power Generation and Distribution Industrials

By pjain      Published July 20, 2020, 3:20 a.m. in blog Invest   

Power Equipment Sector Key Factors

GE take over French Alstom's power & grid business for $13b - 2014 Q1

GE wanted to increase its market share and hence profitability. - Steam turbines - mainly Gas - but weak in nuclear/coal - gas turbines - Generators

Alstom makes power plant equipment - But fills gaps in GE esp. Wind and Grid - Steam Turbines for coal, gas and nuclear power plants - Wind farms - Systems for power transmission and distribution - HRSG, Boiler, BOP

And also this acquisition comes with wide spread manufacturing facilities across teh globe and also engineering centers.

Now ALstom is more concentrated on Transportation business with focused goals and seems they are winning good and other part GE got better goals in industrial sector with bigger portfoli and added Digital stuff.

GE was suffering since 2008 from its financial misadventures. GE has said it wants to increase its earnings contribution from industrial operations relative to its financial activities.

Investment bankers may have sold GE CXOs a potential Alstom deal could allow GE to wring out a lot of cost savings, including through job cuts.

This deal to sell Alstom’s power assets, which accounted for about 70 percent of total group revenue, effectively broke up the engineering group and left Alstom as a pure transport business known for its high-speed TGV trains. By separating Alstom Transport, which may remain an independent French company and national champion, resistance could stay muted.

However it didn't consider the financial health of Alstom, and that it was ALREADY a bad business. - 2004 Alstom was bailed out by the French state after France negotiated a bailout for Alstom with European Competition Commissioner Mario Monti, - Alstom is much smaller than its other main rival, German group Siemens AG (SIEGn.DE) which dominates European sales - 2008 and on its orders have slumped since the 2008 economic crisis depressed demand for power equipment. - In 2012-13, Alstom shares slumped 20 percent in 12 months on concerns over its cash flow - In Feb 2014, its weakening prospects prompted majority controller Bouygues to take a $1.9 billion writedown on its stake.

French labor laws are very stringent, Alstom was one of France’s top private-sector employers. - GE already employs over 10,000 people in France - so it knew the kind of mess it was putting its foot into - Basically GE knew upfront that it had very limited ability to fire or "trim" costs. - Ironically, GE might have been allowed to buy Alstom, so it can add its own lifeblood to keep Alstom bleeding going!

The French government has a history of blocking takeovers by foreign companies. In 2013, Yahoo abandoned its plan to acquire a majority stake in online video website Dailymotion, owned by France-Telecom Orange, because of objections by the French government. Similarly in the energy sector, the government in 2006 brokered a deal to merge Gaz de France and Suez to block a bid for Suez by Italy’s Enel SpA French govt and politicos met GE in advance to stipulate terms of merger. Not just France, even EU was protectionist. In 2001, the European Commission blocked GE’s $42 billion purchase of rival diversified manufacturer Honeywell even though GE/Honeywell were both US based.

National Power Equipment Plays

  • Protect French jobs - Siemens was a potential buyer of Alstom's power arm. In the end, then French president Nicolas Sarkozy balked at the prospect of German ownership and Alstom remained intact.
  • Alstom's relies heavily on orders from national rail operator SNCF and utility EDF (EDF.PA). It employs 18,000 people in France, half of them in the power business, out of 93,000 worldwide. = Alstom had looked at a similar asset swap with Siemens more recently, whereby Alstom would have exchanged its power business against Siemens’ rail business. Siemens declined to comment.

Wind Power Industry

GE screws up Wind Turbine

GE struggles to gain market share in the hyper-competitive offshore wind turbine market.

  • 2020 - GE to focus on larger 12 MW Wind turbines - the Haliade-X, which is more appropriate to wind farms on the drawing board today.

EMF 1 GW loss in offshore wind project

EMF, Eolien Maritime France, which is owned by the French developer EDF and Canadian energy-infrastructure company Enbridge, is hoping to develop a total of almost 1.5 gigawatts of wind capacity across three locations: Fécamp, Courseulles-sur-Mer and Saint-Nazaire.

These French projects were expected to form the bulk of GE's European offshore turbine orders, with the rest of the market being mostly split between SGRE and MHI Vestas. Loss of this approved capacity hurts GE from turning around Alstom Wind.

  • 2012 Wind farm awarded to the French industrial leader Alstom, state-owned utility Électricité de France and Danish Dong Energy, now Ørsted.
  • 2014 Alstom Wind, which was acquired by GE, was due to supply 240 turbines at a cost of €2 billion ($2.6 billion).
  • GE has pumped money into Alstom eg a dedicated engineering office in Nantes and a manufacturing plant in Saint-Nazaire, which has already produced more than 80 turbines for other offshore wind farms in Europe, Asia and North America.
  • But various legal challenges to EMF slowed the progress of the projects. GE claimed delays since 2012 had “significantly impacted the financial characteristics of those projects.
  • June 2018 Income cut. France dealt a further blow to their chances by cutting the tariffs that had been promised from 200 euros ($225 today) to 150 euros ($169) per megawatt.
  • Jan 2019 GE said it remains committed to supplying its Haliade 150 6-megawatt turbines to the first EMF project to clear longstanding authorization hurdles.
  • April 2019, General Electric Renewable Energy has ceded the rights to supply turbines for two French offshore wind farms potentially totaling nearly 1 gigawatt to its rival Siemens Gamesa Renewable Energy. GE said it is giving up its status as exclusive supplier to three offshore wind farms being developed by EMF. EMF, meanwhile, confirmed it had selected Siemens Gamesa to supply turbines “of similar dimensions” to the two remaining projects.

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