Demand for Wind Energy Soaring as AREVA Counters for REpower

Summary

AREVA’s counter bid against India-based Suzlon Energy, Ltd., for wind turbine maker REpower, may set off a bidding war that will echo beyond the acquisition of the small German company. Regardless of whether Suzlon counters, the rising price of the turbine manufacturer is a sign of wind energy’s rising demand and share of the energy market.

Analysis

AREVA, a French nuclear powerhouse and part-owner of REpower, was originally lined up to acquire REpower before wind turbine manufacturer Suzlon Energy, Ltd., teamed up with Portugal-based Martifer to put in a surprise bid for the turbine manufacturer valued at $1.3 billion (US). AREVA originally denied a desire to counter bid Suzlon’s offer, saying the bid, which was 20 percent higher than AREVA’s original offer, was overpriced. But it turned out AREVA was bluffing. REpower’s share in the electronic trading system XETRA of the Frankfurt Stock Exchange quickly rose above Suzlon’s bid, and AREVA counter bid March 15 at 11.1 percent higher than the Indian turbine manufacturer. Rumors are circulating of a counter bid by Suzlon that would value REpower at $1.7 billion (US), although the company denies those reports. Rumors of a third party joining the bidding are also circulating. 

 

REpower has issued an approval of the AREVA offer, saying the French company would be a good partner for the expanding wind industry. Previously, REpower’s board had issued a statement after Suzlon’s bid implying they preferred AREVA strategically. REpower is more strategic for Suzlon than the other way around — the German turbine manufacturer offers an avenue into markets beyond India for Suzlon, as well as a technology base that includes the small-but-growing sector of offshore wind farms. Both have been publicly expressed as goals for Suzlon. Do not be surprised if Suzlon does indeed counter AREVA’s bid.
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The bidding war for REpower has implications across the wind energy industry. Look for M&A activity within the wind energy sector. Manufacturers such as Gamesa, Vestas, Nordex and Enercon may be targets of future acquisitions by companies like GE Wind or Mitsubishi, or there may be further consolidation among “pure-play” wind turbine manufacturers. Either way, the price, as well as the demand, will be high.  The rising price of REpower demonstrates that the market for wind energy turbines is strong and expected to be strong for the foreseeable future.  The strong growth and rosy prospects for the wind industry may drive other multinational industrial companies to look to enter the market — oil companies BP and Shell Oil, Inc., have already made significant investments into the field.