After months of internal debate and consideration of proposals from GE and Toshiba, Areva’s top tier of executives have decided to keep the $7 billion-plus T&D business under French control. AREVA’s Supervisory Board met on November 30, 2009 to examine the bids. After review, the Supervisory Board asked the Executive Board to begin exclusive negotiations with Alstom/Schneider.
The consortium offered 2.29 billion Euros in equity value, i.e. 4.09 billion Euros in enterprise value. The bid does not include any requirement for a seller’s warranty but includes a buyer’s commitment to maintain all European sites for a 3-year period.
To ensure that all AREVA T&D team members are integrated properly, Alstom/Schneider have also agreed to offer to all European employees a similar position in the same geographic area, at an equivalent qualification level and without loss of compensation or seniority.
Finally, unless the economic environment deteriorates significantly, the buyers made a commitment not to implement any layoff program except for voluntary terminations. There are still many unresolved issues including these:
- Employee Discontent with the “closed” nature of the negotiations between the French corporate executives involved in the decision-making for the business. The European employee union will be taking its case before the EU in Brussels this week, demanding assurances related to job security and existing work contracts.
- Decisions on which units of Areva T&D will go to Schneider Electric and which will go to Alstom. While this may already have been decided by the buyer consortium, it is not yet clear to Areva T&D staff or to any “outside observers” at this time how the company’s assets will be re-allocated.
We hope the morale of the outstanding Areva T&D first level management and technical and sales staff will improve once things are settled. There is some likelihood that a common language was one factor in the decision to retain French control. Keep in mind that this company had successfully doubled its sales bookings in an era when other global players were struggling to hold their own or minimize losses. Areva T&D is a major share-holder in a number of T&D automation market segments, including control center systems and power market management systems IT (with its e-Terra line), substation automation (MiCom and PACIS offerings), protection and control (MiCOM line), and similar offerings for the industrial market (especially strong in oil and gas operations and in rail transport).
High voltage equipment offerings are on a par with those offered by any other market participant. Areva T&D has been a strong competitor in high-voltage equipment for years, with scores of the world’s largest utilities relying on its HV equipment for electric power transmission. When it comes to FACTS, gas insulated switchgear, HVDC equipment and the like, Areva will be among the finalists for contracts along with ABB and Siemens and a growing number of Asian suppliers.
In the medium voltage (power distribution networks) business, Areva T&D is extremely competitive internationally, somewhat less so in North America. The company provides a full range of equipment for both overhead and underground distribution networks.
Power generation activities have become a growing source of revenue over the past three years for Areva T&D. In Europe, the company has been successful in launching systems to control renewables integration with power grids for both wind and solar farms. Globally, Areva T&D has been a major provider of generator circuit breakers and related disconnect switches with hundreds of installations of this equipment in power plants around the world.
Areva T&D’s oil and gas industry offerings encompass customized electrical solutions for offshore and onshore applications. We are your trusted partner for successful offshore platforms, topside electrification of Floating Production, Storage and Offshore Loading (FPSO), Liquefied Natural Gas (LNG) trains, refineries and petrochemical plants.
Areva’s T&D product packages and turnkey solutions cover main receiving substations, MV switching substations, power and distribution transformers, LV panels, monitoring & control centers and automation systems. Specifically for the mining sector, we provide you with explosion-proof switchgear and transformers, as well as mobile substations, in addition to our standard portfolio.
The company’s steel industry solutions include EAF transformers, SVCs and special MV switchgear. For the aluminum industry, we deliver transformer-rectifier and power electronic solutions.
AREVA T&D offers a wide range of equipment and engineering solutions for track power supply of trains, metros and light rail. The company provides fully compliant protection relays, plus SCADA supervision devices for railway networks throughout the world. AREVA T&D also designs and manufactures on-board transformers for rolling stock equipments and uses well trained service teams to maintain the highest reliability of these power installations
By year-end 2007, operating income was up very sharply in the Transmission & Distribution division, to €397 million (9.2% of sales revenue) from €191 million in 2006 (5.1% of sales revenue). Rising labor costs, higher commodity prices and price pressures – particularly in medium voltage – were more than offset by profitable external growth and the positive impact of the optimization plans. All business units contributed to this performance. Through 2008, the company continued to increase its bookings, and had only a few project cancellations with which to contend.
For the first half of 2009, T&D’s backlog had climbed to nearly $9 billion. Revenue had reached $3.9 billion, up significantly year-over-year, and on a track to exceed $7.5 billion for calendar 2009. Major new awards made this year to Areva T&D recently have included these:
- $150 million with State Grid of China for HVDC systems for interconnection projects (Northeast China-Three Gorges).
- $120 Million in awards from South Korea’s KEPCO for 400MW conversion substaitons – also for HVDC links between Jeju Island and the mainland.
- $75 Million for 4 UHV units for PowerGrid India.
- $180 million for Indonesia’s national electric power utility PT PLN.
- $100+ million from Bahrain’s EWA for large power transformers and 29 66kv substations.
While no one yet knows how the business units within Areva T&D will be allocated between Alstom and Schneider, or whether the two firms may simply keep the business intact and operating as an autonomous new entity, here are some initial thoughts on how it may eventually play out.
Regarding Alstom’s potential interest we believe the following units are of special interest: Certainly most, if not all, of the high-voltage equipment, possibly the automation systems business (with transferability of the e-Terra technology for power plant control systems) as well as portions of the industrial side of Areva T&D (rail transport, oil and gas) and certainly the renewables power generation portfolio of control systems recently launched. Alstom is already the current leader in the development and marketing of a complete range of systems, equipment and service in the railway market. Alstom relies on company-operated, product knowledgeable sales organizations in its marketing efforts.
Schneider Electric can certainly benefit and gain synergy with the following Areva T&D business units: Medium voltage equipment – which can complement the offerings currently available from Square D and M-G; low voltage panels and some of the industrial offerings geared to switchgear and small power transformers also serve as line extensions. Schneider’s successful multi-partner channel strategy, so successful in the low voltage and lower MV ranges, would remain comfortable with these additional products. The company has a strong presence within electric utilities, and equally impressive is the regard with which it is held within the industrial and construction sectors of the economy, both of which are expected to rebound by mid-2011.
“Vive la France!?!?!?”
summary reviews and highlights from completed studies
