25 November, 2009
UPDATE 2-Alstom-Schneider seen strongest bid for T&D-analysts
* Executives state case in letter to Les Echos
* Suggest creation of world power leader
* Analyst says Alstom-Schneider have strengthened bid (Adds comment from Economy Minister Lagarde)
By Nina Sovich and Marcel Michelson
PARIS, Nov 25 (Reuters) - The Alstom-Schneider consortium remains in pole position to win Areva's <CEPFi.PA) transmission and distribution (T&D) business despite a plea from Areva executives to create a national T&D champion, analysts say.
Areva, 92 percent owned by the French government, is selling its T&D business as part of an 11 billion euro ($16.6 billion) funding plan to boost its global expansion in the nuclear power sector.
However, Areva's chief Anne Lauvergeon has long opposed the sale of her company's most profitable unit. On Wednesday the T&D executive committee at Areva also voiced its opposition, targeting in particular the Alstom-Schneider bid.
Economy Minister Christine Lagarde said late on Wednesday a decision would be taken soon but she did not indicate which way the state was leaning.
"It's a process that's following its course and which should be decided in the next few days," she told Reuters on the sidelines of a meeting of the ruling UMP party.
Alstom (ALSO.PA) and Schneider Electric (SCHN.PA) hope to split the business between them, with Alstom taking transmission and Schneider distribution.
Toshiba (6502.T) and GE (GE.N) also have submitted bids.
"Alstom-Schneider's bid is still the strongest to my mind, said Kepler analyst Pierre Boucheny. "Any talk of creating a national T&D champion at this stage seems unlikely."
The Areva executives said in a letter published in newspaper Les Echos this move would hurt a profitable business unit just as global competition for electricity services surges, thereby helping rivals ABB AG (ABBN.VX) and Siemens AG (SIEGn.DE).
Instead the French state should back the creation of a vertically integrated electricity giant around Schneider Electric, the T&D executives said.
T&D activities are key for the power industry with high-tech products such as so-called smart grids that are better able to balance the needs of customers and deal with technical incidents as well as potentially cutting CO2 emissions.
ALSTOM-SCHNEIDER SEEN FAVOURED
But many analysts say that Areva's plea to keep the business together will fall on deaf ears, and in recent days Alstom-Schneider's bid has actually been strengthened.
Alstom-Schneider agreed on Monday to remove from its offer a variable clause, which would have tied the payment of 400 million euros of the bid price to the T&D's performance.
By dropping the condition, the French pair effectively brought its offer in line with GE, which bid 4 billion euros for the T&D unit, a source close to the situation told Reuters.
Japan's Toshiba Electric also put in a bid for 4.2 billion euros, a second source told Reuters, although several analysts said that Toshiba's bid was in trouble, because the French government had concerns over Toshiba's financing.
It has been widely believed that the government backs the French bid in part because Alstom once owned T&D and sold it to Areva for a mere 920 million in 2004 to pay down heavy debt.
France also has a long history of manoeuvring to keep French businesses in domestic hands. [ID:nLK630671]
Still some analysts pointed out that the open letter in Les Echos exposed the fissures in the sales process, throwing a question mark over an already unpredictable auction.
One analyst, who asked not to be named, said France may simply look for a way to back out of the T&D deal altogether.
"I've never seen so little clarity on an issue before," he said. "I wouldn't be surprised if they stopped the whole thing. I think they didn't realize the consequences when they started this auction."
The three bidders filed binding offers on Monday, but against expectations, the French state and Areva did not make a short list, keeping all three in the race. [ID:nGEE5AN1VY]
The French government is facing a difficult set of options as all three bidders hurt French interests in one way or another: General Electric and Toshiba compete directly with Areva and Schneider, whilst Alstom-Schneider may cut jobs.
The bids expire on Dec. 9 so the government is likely to make a decision by then. But some analysts said the bids could also be renewed and the process could drag on through Christmas. (Editing by David Holmes and Carol Bishopric) ((marcel.michelson@thomsonreuters.com; +33 1 4949 5130; Reuters Messaging: marcel.michelson.reuters.com@reuters.net)) ($1=.6643 Euro)
Source: http://www.reuters.com
UPDATE 2-Alstom-Schneider seen strongest bid for T&D-analysts Added: (25.11.2009)
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