Medupi
Photo by: Duane Daws
Alstom on Wednesday said it was considering a binding offer from General Electric (GE) to acquire its energy assets, leaving the France-headquartered company to expand its transport sector activities.
The deal, representing an equity value of €12.35-billion and an enterprise value of €11.4-billion, comprised Alstom’s thermal, renewable and grid power sectors, as well as its related corporate and shared services.
“The combination of the very complementary energy businesses of Alstom and GE would create a more competitive entity to better service customer needs,” Alstom CEO and chairperson Patrick Kron said, noting that, collectively, the energy units posted sales of €14.8-billion in the 2012/13 financial year.
The proceeds of the sale would be used to cement its transport unit as an ambitious standalone business, pay down its debt, return cash to its shareholders and leave the company with a strong balance sheet able to capitalise on opportunities in the dynamic rail transport market.
“[The buy-out] will provide Alstom Transport the financial strength to accelerate its development [in] a growing market with solid fundamentals driven by economic growth, increasing urbanisation and environmental concerns,” Kron pointed out.
Alstom, which would remain a Paris-listed company focused on transport and headquartered in St Ouen, reported that its transport business generated €5.5-billion in sales during 2012/13.
The unit, which focused on rail transport equipment, systems, services and signalling for urban, suburban, regional, main line and freight transportation, was present in 60 countries and boasted 27 000 employees, including 9 000 in France.
This comes as Alstom South Africa, in conjunction with Gibela, secured the largest contract signed in Alstom’s history – the supply of 600 X’Trapolis Mega commuter trains with 3 600 cars over the next ten years to the Passenger Rail Agency of South Africa.
The €4-billion contract, signed in October, followed by financial close on Tuesday, included the construction of a local manufacturing facility in Dunnottar, 50 km east of Johannesburg, Gauteng.
Gibela was tasked with providing technical support and supply of spare parts over an 18-year period.
Meanwhile, a committee of independent directors, led by Jean-Martin Folz, would be established to review the proposed transaction with GE, with a decision expected by the end of May.
The completion of the transaction, which would see 65 000 Alstom employees transferred to a “well-known, global player capable of supporting energy customers worldwide over the long term", would be subject to merger control and other regulatory clearances, including shareholder approval.
However, Alstom pointed out that the combination of the energy activities of Alstom and GE would provide customers with the “most complete and advanced” range of solutions, generating significant synergies and an increased capacity to invest in technology.
Alstom currently had several major projects under way in South Africa, including the supply of the full turbine islands, air-cooled condensers and the full plant control and instrumentation systems for State-owned power utility Eskom’s Medupi power plant, in Limpopo.
The Alstom turnkey engineering procurement construction contract for the six turbine islands and condensers included engineering, procurement, logistics and construction, as well as the associated erection services and commissioning.
At the Kusile power station, near Emalahleni, in Mpumalanga, Alstom was tasked with the full installation of turbine islands, air-cooled condensers, full plant control and an instrumentation system, wet flue gas desulphurisation technology and an air quality-control system.
Alstom had also recently completed repowering contracts at the Koeberg nuclear power station, near Cape Town, in the Western Cape, the Gariep hydropower station, in the Free State, and the Arnot power station, in Middelburg, Mpumalanga.