GE dices $17B deal
Smaller joint ventures made to satisfy French national security fears
By Larry Rulison


Schenectady

General Electric Co. has restructured its $17 billion deal with French energy and transportation conglomerate Alstom SA into a series of joint ventures.

The action is designed to address concerns the French government had that the acquisition would jeopardize national security and lead to the demise of one of the country's most important companies.

Two months ago, GE surprised the French government with the announcement that it was acquiring the energy assets of Alstom, including its nuclear power unit that supplies France's large number of nuclear power plants.

The deal has been described by GE as a perfect match for the company's Power & Water unit headquartered in Schenectady.

While GE is strong in supplying turbines and generators for natural gas plants, Alstom's strength lies in supplying nuclear and coal plants. The deal is expected to grow the Power & Water unit's annual revenue from $24 billion to $43 billion.

Alstom also has a large power plant service contract backlog of $40 billion that will allow GE to take advantage of the scale of its service operations. GE has a $50 billion service backlog.

Alstom also has a strong renewable energy unit that GE would acquire. GE's renewable energy division is also based in Schenectady.

Facing a rival bid from German competitor Siemens, GE on Thursday revealed a new offer to Alstom that creates joint ventures out of the renewable energy and electric grid businesses of Alstom, with each company owning a 50 percent stake.

As for the nuclear business, GE and Alstom would create an "alliance" that would be structured as a joint venture, with the French government owning a preferred share that would give it veto power over decisions made by the unit related to security and technology. The plan would also protect Alstom's steam turbine business for French coal plants.

It appears that all of Alstom's steam turbine business outside of France — one of the most valuable parts of the deal — will be acquired by GE as the sole operator.

France was also worried the deal would weaken Alstom's main remaining asset —its TGV high-speed train business. GE has decided to sell Alstom its railroad signaling business to address that issue as well.

"The alliance will retain and strengthen France's presence in the energy business and reinforce Alstom Transport," GE chief executive Jeff Immelt said in a statement. "It creates jobs, establishes headquarters decision-making in France and ensures that the Alstom name will endure."

GE spokeswoman Chris Horne said the revised deal will not negatively impact jobs in Schenectady, where GE also makes steam turbines and generators sold mostly for combined-cycle natural gas plants.

The Wall Street Journal reported GE may lower the bid for Alstom, although the "valuation" of the deal in terms of its impact on the company's bottom line and future earnings growth will remain the same.

The railway signaling business is part of GE's locomotive business, which is headquartered in Erie, Pa.