Ellicott City, Md., November 16, 2009 – As many regular readers of Newton-Evans’ reports already know, there are three major contenders for the $7 billion transmission and distribution business units of Areva Corp. These are the American firm GE, the French corporate combination of Alstom and Schneider Electric and Japanese company, Toshiba.
A successful acquisition by GE would provide the firm with world-leading combined market shares in substation automation, protection and control and T&D control systems (energy management and SCADA).
GE would become a major player in several growing portions of the transmission equipment business, establishing a stronger foothold in the North American and international transmission market segments described below.
Together these segments are worth $25-40 billion on a worldwide basis. Areva T&D earned about $3.5 billion in HV equipment sales in 2008-2009.
FACTS and Reactive Power Compensation: ABB is probably the global leader in flexible AC transmission systems and the related reactive power compensation segment of high voltage equipment for transmission networks.
Siemens Energy is a strong number two supplier with several others (notably Mitsubishi Electric Power Products, and American Superconductor) also active in North America, and around the world.
Areva T&D and GE are also participants that together could challenge the market leading positions of ABB and Siemens within three years of a merger of product lines.
HVDC Equipment: Siemens is the market leader in HVDC, with ABB a reasonably close second place share holder and MEPPI the likely third most important player. However, an integrated Areva T&D-General Electric product grouping would enable the company to attain up to a quarter of the available market shares.
Gas Insulated Substations/Switchgear: The North American market for High Voltage GIS equipment is in excess of a quarter billion dollars. While Areva T&D has only a small share (stronger in Canada than in the US), GE Energy could now present itself as a player in this growing market segment of high voltage switchgear. GE would also play a much more important role in international markets where – unlike in North America – GIS equipment is prevalent. Globally, GIS equipment is a 2-3 billion dollar annual market.
High Voltage Bushings: This relatively small (about $125 million-150 million in annual worldwide sales) market is led by Siemens and ABB. However, the combined Areva T&D and GE offerings could make GE into a formidable player in this segment.
High Voltage Capacitors: GE Energy is already the major participant in the North American market for HV capacitors, but globally, ABB is the leader. Areva T&D, by virtue of its recent acquisition of the Finnish manufacturer, Nokian Capacitors, is also a very strong player in Northern Europe. Together, the product lines could pose a real threat to ABB dominance here (yet another billion dollar global product segment).
High Voltage Circuit Breakers: Areva is already a major player globally, and with GE’s “sales boots on the ground” could increase its share in North America and abroad. ABB and Siemens are both very strong manufacturers in this large annual global market of better than $2 billion.
Disconnect Switches: High voltage disconnect switches are vital components of many transmission systems, and the global market runs to about $500 million annually. GE and Areva are among the six leading suppliers of disconnect switches in North America, but lag behind Hubbell, S&C and Southern States, some of which offer circuit switchers used for disconnect applications.
Instrument Transformers: The market for high voltage instrument transformers had been dominated by specialist “independent” manufacturers until recently. A recent buying spree had Siemens acquiring Trench Electric, Areva acquiring Ritz and ABB acquiring Kuhlman. Currently, the market for HV IT equipment is shared primarily by these three firms, with GE very active in the MV segment. Together, the combined HV/MV instrument transformer offerings of an integrated GE-Areva T&D would change the shape of this market, which in North America alone hovers around $100 million, and close to one-half billion dollars worldwide.
Air Core Reactors: Another component of some transmission network architectures, Siemens-Trench and Areva-Ritz are key players, with GE also strong and MEPPI further behind, but with a growing share. A number of smaller participants account for a rather large share of this $400 million global business.
Surge Arresters: Another sizable market in its own right (about $1 billion per year globally) high voltage surge arresters are manufactured by a number of US-based firms such as Hubbell, Thomas & Betts, and Cooper Power, each of which competes quite successfully against the likes of ABB, Siemens and GE.
Automation Systems: GE’s successful XA/21 EMS platform and Areva’s highly rated E-Terra offerings are both held in high regard around the world, although GE’s systems are mainly installed in the USA. Earlier (1990s era) acquisition efforts have been fraught with initial business unit integration problems (to wit: ABB with its acquisition of the older Ferranti EMS business (Spider v. Ranger offerings) and Siemens-Control Data (Sinault-Spectrum v. Empros).
Protection and Control: Internationally, Areva (with the Stafford, UK-based relay business) holds an estimated 16 percent share of the global protective relay market, estimated by Newton-Evans to be about $1.55 billion-$1.75 billion on an annual basis. GE Multilin, based in Toronto, is also a very strong market participant, especially in the Americas, and is the leader in industrial protection and control markets.
T&D Services: GE is a major participant in T&D equipment repair and services, especially with its transformer repair business, and Areva outside of North America earns about $500 million per year with its array of high voltage equipment services and automation systems maintenance agreements.
Synergies for the Other Contenders: Interestingly, while the combined offerings of GE Energy and Areva T&D are synergistic, neither Alstom nor Schneider currently participate in these HV markets, at least not for transmission and distribution. Clearly, Schneider Electric could conceivably bring a very successful low voltage equipment channel strategy into play with its global allegiance to key electrical distributors and resellers. Alstom, a key global participant in utility and industrial power generation markets, could then move back into transmission and into related T&D automation businesses. At least one current senior Alstom executive, Laurent Demortier, has previously led the highly successful automation business of the old Alsthom Corporation.
For Toshiba Corp., the strong Areva shares of high voltage equipment and automation systems in Western countries, and in Asia (outside of Japan), would present a terrific opportunity to increase its visibility in electric power markets throughout the world.
Many of us in Western Europe and in North America are unaware that Toshiba has a strong presence throughout Asia and in developing nations, and its products are held in high regard, especially its high voltage equipment (switchgear, transformers, insulators, surge arresters) while it is an Asian leader in the supply of protective relays and automation systems including both energy management systems and SCADA systems.