You know those couples, the ones where the partners are so different you can’t imagine how they fit together. And yet, despite their differences, it seems to work.
Like those couples, manufacturing giants Areva and Gamesa will hope their €475m joint venture goes the distance. The French and Spanish firms confirmed the plan in January and binding contracts were signed this week. They may both be manufacturers, but the different business cultures in France and Spain mean it won’t be a straightforward match-up.
They hope they can outweigh this by bringing different strengths to the venture.
The assets going into the venture appear to complement each other quite nicely.
Areva is putting in assets worth €280m, of which €70m is working capital. Its other assets include its operational 5MW turbine M5000, the 8MW cousin it has in development, and a pipeline of 2.8GW of offshore projects including 1GW in two offshore projects in France.
Gamesa doesn’t have the same offshore expertise in the €195m of assets that it is putting in. Its 5GW and 8GW offshore turbines are still in development. But it makes up for this with far more experience of research and development in onshore wind technology, and a large amount of experience of gaining a foothold in markets in Asia and South America.
The combination of their assets means that the tie-up starts life with no debt on its balance sheet and no need to raise funding from third parties. The pieces appear to jigsaw together nicely, and both parties have important expertise to bring.
Their plan will be to optimise a 5MW turbine based on Areva’s M5000; and develop an 8GW platform to supply to developments including the 1GW of offshore projects in France, made up of the 500MW Treport and 500MW Yeu and Noirmoutier schemes.
Establishing itself as a global leader in offshore wind will be more of a challenge.
The venture is seeking to maintain the 20% market share that Areva has already achieved in Europe. This will be tough given that there are no opportunities in the UK at present; the German market is sewn up by Siemens; and they will face competition from MHI Vestas. If France steps up its offshore wind ambitions then this looks ready-made for Areva.
Even more difficult will be making an impact in Asia-Pacific, as China and India aren’t short of indigenous manufacturers. This is where Gamesa will be vital, as it has a knack for developing long-term relationships in key markets. It has also built a compelling model of building kit and then developing sites before selling them on, which can work offshore.
Areva has the established offshore wind technology, and Gamesa has more experience of tapping into emerging markets. If cultural differences don’t get in the way then it looks like it could be a good coupling. But, as with all relationships, we’ll only know how strong it is when it hits a rocky patch.
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