European heavyweights Alstom and Siemens could vie to bid for AREVA’s transmission and distribution (T&D) business if the French state-controlled giant puts it up for sale to plug a €12 billion gap and finance its investments, market research group Frost & Sullivan said last week.

The French government in early May told AREVA to explore the potential sale of the AREVA T&D business to fund a major investment program, the buyout of Siemens and AREVA NP following the dissolution of that nuclear joint venture, as well as cost overruns on the Finnish EPR Olkiluoto 3 project. Officials on May 22 confirmed to the Financial Times that a sale was almost certain and would likely be announced in mid-June.

But AREVA T&D is a lucrative business with strong growth, generating revenues of €5.06 billion in 2008—or 38% of AREVA’s total revenues, and the division grew by 17% in 2008 as compared to 2007, Frost & Sullivan Research Manager Malavika Tohani said in a statement to POWERnews. “Given the strong position that the T&D division brings to AREVA’s growth, its sale would not only have a big impact on its top line and bottom line but also affect exploitation of any future opportunity in this market,” she said.

Tohani said that Alstom, Schneider Electric, and Siemens have expressed interest in taking over the business, and if the sale goes through, it would lead to further concentration of the already consolidated European T&D industry.

“AREVA’s T&D business is a good fit with all the three companies,” Tohani said. “Siemens and Schneider are established and well-known names in this market, while for Alstom, T&D nicely compliments its expertise in power generation.”

Alstom and Schneider had the advantage of “being French,” making the transition smoother, she said. “Furthermore, AREVA acquired the T&D business from Alstom in 2004, when the latter was in financial trouble. This factor might act to its advantage as compared to other companies.” Alstom sold the unit for €950 million in 2004; today analysts value AREVA T&D at between €3 billion and €5 billion, according to Reuters.

On the other hand, Siemens was on “bad terms” with AREVA, owing to its abrupt withdrawal from the nuclear joint venture and immediate partnership with Russian nuclear agency Atomenergoprom. Nevertheless, Siemens, which had acquired Austrian firm VA Tech T&D in 2005 and consolidated its position in high-voltage equipment, could make it a “force to contend with in the T&D market” if it acquired AREVA T&D, she said.

“What is interesting to watch is which one of these companies is in a best position to win the deal,” Tohani added.

Sources: Financial Times, Reuters, Frost & Sullivan