French transport and power engineering company Alstom played down speculation that it has plans to buy wind turbine makers, saying it would not pursue risky deals.
Chief Executive Patrick Kron said he would not undertake risky deals after speculation that Alstom was seeking targets to expand its wind power business, following press reports it was looking at wind turbine makers Gamesa of Spain, Vestas of Denmark and REpower of Germany.
“I will not harm our shareholders with adventurous deals that would imply raising equity in unfavourable conditions,” Kron told an investor meeting.
“Let’s be clear there is nothing more to report on REpower, on Vestas, on Gamesa, Nordex and a number of others,” he added.
Alstom — along with French utility EDF’s unit EDF Energies Nouvelles — is part of one of three consortiums bidding to build France’s first offshore wind parks, which are massive projects with as many as 600 turbines and three gigawatts of capacity in a 10 billion euro first phase off the Normandy and Brittany coasts.
The other consortiums are led by French utility group GDF Suez and Spain’s Iberdrola.
“I’m not surprised that we are mentioned as I repeatedly have said we will evaluate our strategy in wind and in renewable in general,” Kron said.
But he also reiterated the company’s strategy of developing its own offshore products as it seeks to gain a foothold in the fast-growing sector.
“For wind, we have an organic growth strategy. We know that by starting small we will remain small” but it won’t be a disaster if we are a profitable small player,” he said.
Kron told investors that Alstom would consider small-sized opportunistic takeover deals of a few hundred million euros. “I am not ruling out acquisitions, but again the fact we cannot move substantially without equity instruments makes us overcautious in any type of decision in this field,” Kron said.
Vestas shares closed up more than 5 per cent on Thursday.
Analyst Martin Prozesky at brokerage Bernstein said Alstom wants to make it clear it would not raise capital to pursue reckless deals.
“Alstom clearly wants wind exposure and is likely to get French offshore orders, but they are developing their own technology and can build a plant for 200 to 300 million euros,” he said. “There is no need to go and spend 1.5 billion.”
According to a report in FT Deutschland, REpower could fetch 1.5 billion euros ($2 billion), prompting concerns of a potential rights issue by Alstom in case of a deal.
Vestas’s chairman also dismissed takeover rumours on Thursday, saying he was not aware of any interest on the part of Alstom. Analyst Jacob Pedersen at Danish bank Sydbank said the likelihood of Alstom or other companies acquiring Vestas was very low, noting the stock had been cheap for a long time.
“If Vestas was going to be taken over, it would have happened already,” Pedersen said. “On the other hand, one should never say never, because this is a sector where consolidation is under way.”
Shares of wind turbine makers and other renewable energy equipment manufacturers are near multi-year lows, fuelling speculation their low valuations could make them takeover targets.
Vestas shares have fallen sharply from their 2008 highs, taking the company’s market capitalisation down to just $2.07 billion.
Hit by two profit warnings in just over three months, in late October and again in early January, Vestas stock now trades at a severely depressed price-to-book ratio of just 0.6. Suzlon and Gamesa trade at 0.78 and 0.37 respectively.
With a market value of $12.2 billion, Alstom is six times larger than Vestas and its shares trade at a price/book of 2.4, meaning an eventual takeover would not be far fetched. The other, smaller turbine makers would be even easier to swallow.
Wind turbines are a new business for Alstom, which produces TGV and Eurostar trains, builds turbines for power stations and has built the Queen Mary 2, the world’s largest ocean liner.
At Sept.30 2011, Alstom had cash resources of 1.3 billion euros, as well as an undrawn available credit line of 1 billion euros, according to its half-year financial report.