Alstom Takeover - GE Set to Expand its Power Business

GE’s US$13 billion purchase of Alstom’s energy sector will be optimized by addressing common areas of expertise.
Published: Fri 26 Sep 2014

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US General Electric (GE) has acquired Alstom’s energy sector, a move which may see the creation of a supergroup of smart grid technology, as well as the optimization of existing energy business developments from both sides.

The acquisition of Alstom’s energy operations has enabled GE to gain control of the French concern’s largest business sector. While GE has fully integrated the lucrative gas turbine production, the fields of network technology, renewable energy sources (hydro power stations and offshore wind power facilities) and nuclear energy will be operated as joint ventures.

However, for this integration to be fully optimized, common areas of expertise will need to be addressed.

GE and Alstom hardware and software offerings brought together

From a hardware perspective, GE and Alstom have both complementary and competing offerings in distribution automation, energy storage and microgrid products, as well as on the software side, where both companies provide platforms to control SCADA systems on the grid edge, manage distributed energy resources, and back-end control and analysis.

GTM Research points out how GE and Alstom complement one another and overlap in ways that will need to be addressed in order for the integration to be fully optimized:

  • On the equipment side, the companies have largely complementary portfolios. GE’s distribution automation hardware only competes with Alstom in the substation, where geographical strengths limit overlap.

  • With energy storage, GE has its own battery technology and partnerships on the battery management system (BMS) front, while Alstom can bring some currently outsourced capabilities to the GE table. [Engerati-Energy Storage – General Electric Gets Serious.]

  • Software portfolios overlap significantly and long-term support for various systems from each vendor is questionable. GE has its software embedded throughout the utility industry and is making big investments in asset management, geographic information systems, advanced distribution grid controls and demand response management systems to tie it all together. It also has its GridIQ analytics platform, part of its broader industrial internet push to manage and analyze data from millions of distributed devices. Alstom has substation automation systems, distribution grid control technology, and asset management software. It also has partnerships with Cisco and Itron to network its substation systems via wireless IPv6 technology, and has demonstrated some impressive chops at integrating field equipment with open-standards-based technology through its work with Duke Energy. [Engerati- From Smart Grid Vision to Reality: Leveraging the IPv6 Standard.] With the smart grid market value predicted to reach US$400 billion world-wide by the end of the decade, interest will only continue to rise for smart grid technology.

Alstom will fill GE energy gaps

In addition to GTM’s research, it is also clear that while GE is already a world leader in the production and maintenance of gas turbines, it lacks in the steam turbine space. Alstom will fill this gap well in GE’s portfolio, as its steam turbines are not only highly advanced but also have a large installed base in Europe. Acquisition of Alstom’s steam turbine business (that lies outside of France) will also help GE expand its presence in the coal-fired power plant market, which is growing rapidly in many regions of the world, especially China and Africa. The gas and steam turbine businesses of Alstom will add significant scale to GE’s existing power business. These businesses of Alstom are also profit making and have many existing long term maintenance contracts with power plant operators across the world.

Alstom’s grid business provides equipment and services for the development of power grids and it has huge growth potential as developing countries are likely to continue expanding their grid infrastructures.

The deal also enables GE to gain a hold into the French wind market, and expand their global wind turbine business. GE was number one in the wind turbine market two years ago. However, declines in US wind installations in 2013 pushed it down to fifth last year. France ranked in 2013 eighth in global cumulative wind capacity at 2.6%, showing the potential for GE to expand its wind turbine business.

It is clear that GE has got itself a golden deal but in order to optimise its potential, facets of both businesses will need to be carefully interwoven.