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Gamesa Acquisition Spells Uncertainty for Adwen Joint Venture

Jesse Broehl
Jul 25, 2016

Der Rotor wird angesetzt

The Siemens acquisition of wind turbine manufacturer Gamesa has been underway for over a month now. There are predictable synergies between the businesses already summarized by Navigant Research; less predictable is what will come of Adwen, the offshore wind turbine 50/50 joint venture (JV) between Spain-based Gamesa and French industrial conglomerate Areva.

Areva has until September to decide between selling its partial ownership position, buying out Gamesa’s partial ownership, or selling the entire entity to a third party. Gamesa has valued its 50% stake in the JV at $81 million, according to its 2015 annual report. However, the actual valuation in today’s market is likely to be significantly below that due to the challenging nature of the offshore wind market. Areva is unlikely to proceed in the offshore sector on its own since the company has suffered significant financial losses on its nuclear operations and is undergoing restructuring and seeking state aid from France.

Siemens Buying the Stake?

Siemens may end up buying out Areva’s stake, but this is not preferable since it could risk  regulators scuttling the deal due to anti-trust concerns. The German conglomerate already has an unquestionable lead in the offshore wind sector, enjoying roughly 62% global market share of installed capacity by the beginning of 2016, followed by MHI Vestas with 18%. Adwen represents a roughly 6% share according to data from Navigant Research’s Offshore Wind Market Update report.

Siemens also simply doesn’t need Adwen’s technology. Adwen has a well-proven 5 MW offshore wind turbine, with 630 MW of installed capacity, and an 8 MW turbine in very advanced stages of development (both are medium-speed geared drivetrains). However, Siemens has its own highly refined offshore wind turbine technology led by its flagship 7 MW turbine, and the company has an uprated 8 MW unit with a 180-meter rotor coming to market soon. Siemens’ expertise, R&D, and supply chain commitments are tailored specifically to its direct drive turbines (with no gearbox). Siemens is also committed to building its own blades while Adwen outsources to LM Wind Power.

In place of Siemens acquiring Areva’s stake, a more likely scenario is the sale of Adwen to another interested party in the offshore wind sector. U.S.-based GE and Germany-based Senvion are reportedly preparing bids. Adwen was selected for approximately 1,500 MW of offshore wind development in France over the next few years. Therefore, its pipeline of projects where it is the preferred turbine supplier is arguably just as much of an asset as its actual wind turbine technology.

Third-Party Players

Of the known suitors, GE has the strongest financial backing to purchase Adwen, and its earlier acquisition of France-based Alstom shows further synergies, as the acquisition provided GE with a supply chain that dovetails with some of the company’s existing supply chain in France.

The Alstom acquisition also provided GE with approximately 1,500 MW of offshore wind contracts in France. This highlights a GE acquisition’s potential downside to the marketplace, as it would allow the company to monopolize all approximately 3,000 MW of offshore projects in the near-term French pipeline.

A more market-friendly approach would be a Senvion acquisition, which would split the French offshore pipeline to two companies instead of one. Senvion could also leapfrog from its existing 6.2 MW high-speed geared turbine to Adwen’s 8 MW medium-speed turbine (medium-speed is arguably a preferred design for offshore), and would benefit from the 1,500 MW French project pipeline at a time when Senvion is seeking more business outside of its home German market. What is ultimately decided by September is an unknown, but it fits an overall pattern of consolidation among wind turbine OEMs both on and offshore.