Nuclear bidder a determined opponent -- Suzlon's turn to respond to Areva's counter offer for Repower

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The battle over control of Repower Systems, a publicly traded but small German wind turbine manufacturer, continues. French nuclear giant Areva has upped its offer for Repower to EUR 140/share from its previous bid of EUR 105. The new price is substantially higher than the EUR 126/share put forward by Suzlon Windenergie in a counter offer to Areva's first bid. Suzlon lodged its bid in late February with the support of the Portuguese Martifer group (Windpower Monthly, March 2007). Both Areva and Martifer already have substantial ownership stakes in Repower. The current deadline for further bids is April 20.

Areva is aiming to increase its 30% stake in Repower to 50%, plus one share. Repower's chairman, Fritz Vahrenholt, says he would be happy with either of the bidders as majority owners. He even suggests the rivals could end up co-operating as joint owners. Areva, however, has indicated that it prefers to go-it-alone and is prepared to make a still higher offer should Suzlon stay in the ring and respond with a new bid. This view has fed speculation that the loser in the battle will set its sights on taking over Nordex, a second publicly traded German wind turbine supplier of about the same size as Repower.

As the bidding battle continues, Repower has implemented a capital increase (box), raising the cost of a complete takeover of the company by EUR 110 million. The latest Areva offer values Repower at EUR 1.14 billion. Suzlon says it plans to finance acquisition of Repower largely by borrowing, which would raise its own financial liabilities to EUR 1.74 billion from EUR 669 million. Whether a renewed Suzlon offer to top Areva's was on the way at the end of March was not clear.

Both Repower's management and supervisory boards are recommending acceptance of Areva's second offer. "Areva would be an appropriate strategic partner for the accelerated growth in the international wind energy industry," says Repower. Should Suzlon raise its offer, however, the boards welcome the Indian company's plans to retain Repower intact, create a global technology centre in Hamburg and use its financial power to promote Repower's offshore activities.

American licence

On the negative side, a licence agreement on wind turbine control systems that Repower signed with competitor GE Energy to gain access to the North American market would likely no longer be valid if Suzlon's bid is successful. A clause in the licence agreement allows GE to withdraw the licence should Repower come under new control. An existing American order for 56 Repower 2 MW turbines with an option for a further 19 placed by Enxco, the US subsidiary of EDF Energies Nouvelles, would not be affected. If it lost the licence, Repower says it has a technical solution for gaining access to the American market without infringing GE's patent, but that solution would not necessarily be cheaper than current licence charges. A takeover of Repower by Areva would not trigger the change of control clause because Areva is not a competitor in the wind sector.

Repower North (China), which Repower has majority control of, is also subject to a change of control clause which allows the two minority Chinese owners to terminate the joint venture if Suzlon takes more than 30% of Repower -- and to acquire the shares held by Repower.

Portugal problem

In contrast, Martifer, which owns 25.4% of Repower, says it will not make use of the change of control clause with regard to its Repower Portugal joint venture. But there are implications for bids placed separately by Repower Portugal and Suzlon in the Portuguese government's Phase B tender invitation for 500 MW of wind power contracts. The tender regulations prescribe that a bidder may not have control over another bidder up to a certain point of time in the tender process. "Should Suzlon gain control of Repower, Repower Portugal could be prevented from continuing to participate in the phase B invitation to tender," says Repower's management.

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