"It has been decided to combine the assets of GE and Alstom in the renewable energy sector into a single group, reporting directly to [GE] CEO Jeff Immelt," said Mark Hutchinson, who is in charge of the merger plans.
The group will be headed by Jérôme Pécresse, currently Alstom's vice-president responsible for renewable energies.
In what sounds like a complicated set-up, the new group will include Alstom's offshore wind assets, plus hydropower and all other renewable energies, combined in a joint venture in which GE will have operational control. The offshore wind business will be headquartered in France, under a leader to be named in the coming months.
The renewable energy group will also be responsible for top-level management of the onshore wind assets of both Alstom and GE, which will therefore be integrated under GE control. Operational running of the combined onshore wind business will be headquartered in New York under GE's current renewables CEO, Anne McEntee.
How this will work on a daily basis remains to be seen, but it is still very early days. Until the deal is closed, there are very strict regulations governing what information the two companies can share, so for the moment they are working somewhat in the dark.
GE decided to put onshore wind into the new Paris-based group to give it "a European footprint", said James Healy, communications director at GE Energy. The company has been trying to gain a foothold in a number of European markets but without any great success, noted David Hostert, head of European wind analysis at Bloomberg New Energy Finance (BNEF). "Having a base in France may be one way to set themselves up in Europe," he added.
This may be increasingly important as GE's home market for onshore wind looks likely to contract significantly after 2016. BNEF forecasts the US will add 8.9GW of new capacity in 2016, dropping to 1.9GW in 2017 if the production tax credit (PTC) – the main market driver – is not extended.
As the "bread-and-butter market" of GE is crumbling away, "maybe [GE] feel they will have to look for greener pastures", Hostert said. While the European onshore market may not be expanding, at least it is fairly stable.
Leaving some of the business in French hands was also a key demand of the French government, and especially important regarding offshore wind, where Alstom is committed to supplying nearly 1.5GW to French projects.
Given GE's former aversion to offshore wind, which in 2014 McEntee said "does not make economic sense", putting the offshore business into a joint venture at least has the benefit of sharing the costs and risks in what is undoubtedly a challenging sector.
GE still needs to secure regulatory approval in Europe and various other jurisdictions for its €12.35 billion offer. In Mid-March the European Union said it will extend its investigation to 6 August, largely because of concerns over the large-gas-turbine market. However, GE is confident the deal will be closed sometime this summer.
Analysis: A complicated future for Alstom Wind
FRANCE: GE will include its onshore wind activities in a global renewable energy business group headquartered in Paris, assuming the merger with Alstom goes ahead.
.png)
.png)
.jpg)
