Alstom’s hydro business set for change at the helm

News that two of the world’s biggest energy engineering firms – GE and Siemens – are apparently looking to launch rival bids to take over Alstom’s power business is set to present significant repercussions for the hydropower business.

Alstom has long been one of the leading players in the hydropower turbine manufacturing sector and has an extensive track record of reference projects, for example winning the Renewable Energy World hydro project of the year in 2013 with its Xiangjiaba Power Plant, located on the Jinsha River between Yunnan and Sichuan Provinces in China.

While neither GE nor Siemens has specifically acknowledged the details of takeover talks for Alstom, this week GE’s chairman and chief executive officer Jeff Immelt held a meeting at the Elysee Palace in Paris with French President Francois Hollande and Minister of Economy, Industrial Renewal, and Digital Economy, Arnaud Montebourg. Following the meeting to discuss “potential investments” Immelt issued a statement saying: "The dialogue was open, friendly and productive. It was important to hear in person President Hollande's perspective and to discuss our plans, our successful track record of investing in France, and our long-term commitment to the country. We understand and value his perspective, and we are committed to work together."

Certainly Alstom’s share prices jumped following reports that GE is prepared to part with up to US$13 billion in return for the Alstom power arm. Currently the company’s shares are suspended from trading after it issued a statement saying: “Alstom continues and deepens its strategic reflection.”

However, there is mounting speculation that France is keen to keep ownership of the flagship engineering company in European hands, a suggestion supported by reports that Germany’s Siemens has offered half of its rail and locomotive engineering operation together with some extra cash in exchange for the power turbines arm of Alstom, including the hydropower sector.

Montebourg has been quoted as saying that he would protect French national interests and would study "other solutions and scenarios" for Alstom, apparently adding:  "We are working to improve the offers to make sure that French companies...do not become prey. On the other hand we are open to alliances that help to equip us for globalisation."

It seems that the Siemens proposal does offer the opportunity to create a major European rail engineering company from the Alstom and Siemens units whilst also bolstering the fortunes of the European power turbine play.

Whatever new ownership structure emerges from this round of negotiations it seems likely that Alstom’s hydropower turbine arm will benefit from its absorption into one of the two largest power engineering companies in the world. What’s more with the kind of investment and reach that only a global player like GE or Siemens can deliver, those benefits will foster competition in the hydropower sector and that, ultimately, will be felt by the end users of hydropower.

 

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