Alstom chooses GE alliance

23 June 2014

Alstom's board has unanimously recommended its shareholders accept a revised offer for its power and grid businesses from GE that will see Alstom retain a 50% interest in its nuclear steam turbine business. The French state has also agreed to acquire up to 20% of Alstom.

GE initially submitted its offer to acquire Alstom's power and grid businesses in April, but revised it to include three joint ventures - including nuclear services - after discussions with the French government to address state concerns about overseas ownership of the company's strategically important nuclear interests. A rival proposal was also submitted by Siemens and Mitsubishi Heavy Industries, but that bid has now been judged by Alstom's board not to "adequately address the interests" of the company or its shareholders.

GE's revised offer still sees it acquiring Alstom Energy, comprising the company's thermal, renewable and grid sectors, for an equity value of €12.4 billion ($16.9 billion). Alstom's nuclear steam technology services are to be included in a 50:50 joint venture, Global Nuclear & French Steam Alliance, with another alliance covering Alstom's off-shore wind and hydro, and a third combining the two companies' grid businesses. GE will invest a total of about €2.5 billion ($3.4 billion) in the three energy joint ventures, although it has not provided a breakdown of how that will be split.

According to GE, the French state has confirmed its willingness to grant the required foreign investment authorisation for the deal, subject to the execution of the joint ventures and an agreement to purchase a stake in Alstom.

The nuclear steam joint venture will include the production and servicing of Alstom's Arabelle steam turbine equipment for nuclear power plants, as well as Alstom's steam turbine equipment and servicing for applications in France with anticipated annual sales of around €1.4 billion ($1.9 billion).

Government buy-in

The French government will hold a share in the Global Nuclear & French Steam Alliance, giving it various rights over issues relating to French security and nuclear plant technology. Intellectual property related to the Arabelle technology will be transferred to a special purpose vehicle, wholly owned by the French government, to allow the government to ensure the technology can always be made available to any French nuclear projects. GE says it has also made a long-term commitment to the ongoing development of the technology and to the servicing of EDF's installed nuclear base. 

The French state will take up a share of Alstom by purchasing up to 20% of the company which is currently owned by civil engineering company Bouygues, under an agreement announced by Bouygues on 22 June. As well as allowing the government to exercise voting rights, this will also entitle the French government to nominate two board members.

GE CEO Jeff Immelt said that his company looked forward to its new "alliance", which he described as "good for France, GE and Alstom." The joint ventures are expected to lower GE's projected earnings from the transaction slightly, but as far as GE is concerned "the overall economics of the deal remain intact," Immelt noted.

The deal is expected to close in 2015 following the necessary consultations, regulatory and shareholder approvals.

Researched and written
by World Nuclear News