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Another major force joins wind business -- British multi-national enters on heels of General Electric

Following in the footsteps of General Electric Co, another major international engineering conglomerate has entered the wind industry through the purchase of a wind turbine manufacturer. Like GE, British based FKI plc will not be an owner or developer of wind farms, but a wind turbine manufacturer and wind station operator. It has moved into the wind energy business by acquiring north German wind turbine manufacturer DeWind. FKI paid EUR 34.5 million for the company, EUR 18.5 million in cash, plus debt of about EUR 16 million.

FKI has bought 100% of all shares in DeWind -- including the stakes of major shareholders MVV Energie, a Mannheim municipal utility and a Berlin-based venture capital company, BMP. The FKI group, which has a turnover of £1.74 billion (EUR 2.68 billion), manufactures industrial plant and components and specialises in energy technology products. It has operations in over 30 countries, with around 60% of its business in the United States and the rest mostly in Europe. Nearly all FKI companies operate under their own brand names, which is why the FKI name is not as well known as its size would merit.

The change in ownership transforms DeWind from an independent stockholding company into a division of FKI's Energy Technology group. With a turnover of £415 million, and also with 60% of its business in the US, it is the world's leading independent supplier of turbogenerators. The takeover is expected to be completed within two months once the European Cartel Authority has approved the deal.

DeWind chief executive Hugo Schippmann says the relatively small German company has taken an important step. "With this partner, DeWind has created excellent conditions for retaining its technology leadership and significantly expanding its market position," he says. Over the next few years the company will be able to expand its production capacity, strengthen exports, invest heavily in the structure and quality of its service and continue to develop its technology -- and all of this at full tilt, he says. One thing is clear, adds Schippmann, DeWind can only become a leader in its field with a partner of international presence and extensive reserves.

Sales goal

Bob Beeston, FKI plc's chief executive says he is delighted to have succeeded in acquiring DeWind. "The wind sector is forecast to grow substantially and rapidly during the next ten years and by utilising FKI's financial and manufacturing strengths, we expect to triple DeWind's current sales of over EUR 100 million by 2007," he says.

The acquisition fits in with FKI Energy Technology's on-going growth strategy, adds Reg Gott, managing director of FKI Energy Technology. "Complementing our existing position as the world's largest independent manufacturer of turbogenerators [brush], DeWind will bring substantial benefits to other energy technology units through provision of generators, motors, drives, controls and manufacturing/assembly facilities."

How quickly DeWind will benefit from synergies with its parent by sourcing components and assembly from the FKI group remains a big question. Gott points out that other companies within the group can manufacture and assemble all the elements that make up a wind turbine. The same point is made by GE with its purchase of Enron Wind. But, unlike GE's hands-on management of GE Wind, Gott stresses that DeWind will be run as a separate business unit with a separate balance sheet. FKI will integrate DeWind as best it can into the activities of the group, but it will not shackle it, he says.

British focus

From its headquarters in Lubeck, DeWind has sold nearly 400 wind turbines with a combined capacity of 270 MW of rated power. Currently, it sells three types of variable speed pitch regulated turbines -- the D4 (600 kW), the D6 (1 MW or 1.25 MW), and the D8 (2 MW). A prototype 2 MW was installed earlier this year. The company also plans new product launches of 3.5 MW and 5 MW turbines. According to Gott, it expects to expand strongly into the UK market where until now, there has been no British-owned established wind turbine technology to compete with (mostly Danish) imports. The company also aims to be a major player in the offshore market. He explains that FKI already has offshore experience and has installed generating control equipment on 80% of all North Sea platforms.

Gott confirms that DeWind will continue to operate under its own name. "We have grown through acquisition of quality brand names with a pedigree. We do not want to throw that pedigree away," he explains. "DeWind has a good position in the market place and a good reputation. ... Certainly in the German market it is best to leave the company with its own separate identity because they have a respected product." Under its new ownership, DeWind will continue to retain control of operating and maintaining its turbines.

DeWind was converted to a stockholding company in March 2002 when MVV Energie raised its stake from 10% to 33.3%, but plans to go public were not realised. When MVV first became involved with DeWind, its aim was to support the company with multi-utility services like power engineering and project management, and to open new markets for wind -- particularly the Iberian peninsula. But little of this materialised since MVV was at that time rethinking its own strategic focus, explains DeWind's Walter Delabar. MVV eventually decided it wanted to concentrate on project development, not turbine manufacture.

DeWind has been holding talks with potential strategic partners for the last two years. Confusingly, it seemed to strengthen its ties with MVV when the utility chairman Roland Hartung became chairman of DeWind's supervisory board. But at the same time MVV shifted its DeWind stake into its venture capital subsidiary MVV Innovationsportfolio, in hindsight seen to be a preparatory move to shedding the stake.

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