Are you planning to get into the wind business? This has been a question that we technical journalists have put to Alstom a number of times in recent years, particularly with the emergence of arch competitors Siemens and GE as major players in this booming sector, via acquisition of Bonus and Enron Wind, respectively, as well as Areva's purchase of a 30% stake in German wind company REpower.
At a 26 June press conference in Madrid, Philippe Joubert, President of Alstom's Power Systems Sector, was however able to pre-empt the usual question rather dramatically, with the announcement of his company's agreement to buy Barcelona-based Ecotecnia, a developer and supplier of wind turbines, for u350 million.
At the time Siemens and GE were making their wind acquisitions Alstom's attention was of course understandably focused elsewhere, on such matters as averting the financial meltdown of the company and getting the GT24/26 gas turbines to work as intended. But that all seems far behind them now. The GT24/26 units currently seem to be performing well and a respectable flow of new GT24/26 orders around the world has been reported over the past few years, following reintroduction of the modified machine to the marketplace. A number of customers have even come back for more. In July, for example, it was announced that ESB of Ireland, whose GT26 at the Synergen plant in Ringsend, Dublin, was declared commercial in 2002, had placed an order for a GT26-based combined cycle plant to be built at Aghada in Cork, while at Enfield E.On has opted for the compressor upgrade that Alstom now offers for older GT26 units and at the Isle of Grain has embarked on the construction of nothing less than one of the largest cogeneration schemes in the world, employing three GT26-based units in a 1275 MW plant.
Overall, Alstom's financial indicators (sales, order backlog, operating margins, new hires, etc) have been moving pretty strongly in the right direction, with the share price increasing by around 58% between April 2006 and June 2007 (compared with 13% for the CAC40 over the same period). So it was inevitable that major acquisitions would be very much back on the company's agenda.
As Alstom is relatively late in the game (even Siemens admits it was late "but not too late" according to Klaus Voges, president of the German company's power generation group) the number of suitable opportunities for it in the wind business would have been fairly limited and prices relatively high compared with a few years ago, before the wind boom really took off.
Presumably Alstom took a look at German wind turbine company REpower – for control of which its French colleagues at Areva and Suzlon of India have been vying (a takeover tussle eventually won by the Indians, in a deal giving them a shareholding of 33.85% and, due to the complexities of the pooled shareholder voting arrangements, 87.1% of the votes, said to be the third largest overseas takeover bid by any Indian company in recent times, with REpower valued at about 1.34 billion euro). As a consolation prize, Areva, which retains its 30% shareholding in REpower, is now Suzlon's "preferred supplier" for transmission and distribution (ironically, perhaps, a business which the nuclear power plant builder obtained from Alstom, the sale being one of the measures required to keep the company afloat).
An attraction of REpower, in which Areva retains its stake, is its strong technological positioning at the upper end of the unit size range, in particular machines for potential future offshore deployment, with a number of its 5 MWe turbines already operating at sea (notably at Beatrice, see p7). Another, and perhaps more immediate, attraction would be appear to be its order book. According to a 2 July statement, put out in response to "recent speculations in the market," REpower says it is currently "in advanced negotiations about orders with a total volume of up to 1500 MW," which is not inconsequential by the standards of the wind turbine business.
Nevertheless Alstom came to the conclusion – about a year ago – that acquisition of Ecotecnia would be its best route into wind power. The Spanish entity, which is a co-operative (that will need to be transformed into a limited liability company prior to the planned sale), was founded in 1981 and currently ranks itself within the top ten of wind turbine manufacturers. But, with an installed base of about 1500 machines in 72 farms amounting to 1433 MW (out of a total world wind installed capacity of around 73 GW), it is a small player compared with the likes of Vestas, GE, Repower/Suzlon, Enercon, Gamesa and Siemens, with therefore plenty of scope for growth, which is presumably part of its attraction, providing good opportunities for Alstom to bring added value and speed up development. Ecotecnia's current turbines are designed for onshore applications in the power range 640 kW to 2 MW, with a 3 MW machine under development. Around 50 % of its sales have been to the vibrant Spanish wind market, currently ranked second in Europe. It has also recently set up a PV business. Total sales in 2007 are expected to be in the region of u300-350 million, with an EBITDA margin of 7% (which is one percentage point less than that recorded by Alstom power segment for the year to end March 2007, with Power Systems recording 3.5% and Power Service 15.9%).
Finally taking the plunge into wind will enable Alstom to broaden the portfolio of technologies it offers and "capture cross-selling opportunities" for a customer base which it is finding is "increasingly the same" across the fossil and renewables energy sources, says the company.
Similar strategic thinking, you would have thought, might be applied to gasification technology, which is presently noticeably absent from Alstom's areas of expertise – and towards which the company remains negative, even hostile – a position perhaps somewhat reminiscent of its attitude to wind some years ago. Rather analogously to wind, both GE and Siemens have acquired gasification technologies in recent times. And in the interests of maintaining a balanced portfolio one might reasonably expect Alstom to follow suit in the not too distant future, if it can find a gasification technology to acquire.
Twenty years ago – MPS August 1987
"The 300 MWe THTR thorium high temperature gas-cooled nuclear power plant at
Hamn-Uentrop was handed over to the owner and future operator Hochtemperatur Kernkraftwerk..."
"International Power Technology (IPT) has licensed Kawasaki Heavy Industries (KHI) of Japan to manufacture, use and sell Cheng cycle power generation systems."
"A new experimental inshore wave energy project is to be constructed on the Island of Islay in the Hebrides, UK."
"A 12.5 MWe power plant...has been contracted by GE to El Nido Biomass Power Plant Associates...The atmospheric fluidised bed fuel system...will be capable of firing up to six different types of agricultural wastes."
"...on the Island of Corsica, [EdF] has commissioned a converter station that can draw
50 MW from an hvdc link between Italy and Sardinia..."