GE turbo charges business with Alstom tech

The acquisition of Alstom’s power and grid business is a major stepping stone for GE

GE reached an agreement with Alstom in 2014 to purchase Alstom’s power and grid businesses for €12.35 billion ($13.56 billion). Following adjustments for the joint ventures announced in June 2014 as they pertain to the entities’ renewables, grid, and nuclear activities, changes in deal structure, and other adjustments, the final purchase price is set at €9.7 billion (approximately $10.6 billion). This includes working capital usage of approximately €0.6 billion ($0.66 billion) in the month of October. GE expected the deal to generate $0.05-0.08 of earnings per share in 2016 and $0.15-0.20 of earnings per share by 2018.

GE is also targeting $3 billion in cost synergies in year five and strong deal returns. The overall economics and strategic rationale remain the same, as GE announced in April 2014.

“The completion of the Alstom power and grid acquisition is another significant step in GE’s transformation,” said Jeff Immelt, chairman and CEO of GE.

“The complementary technology, global capability, installed base, and talent of Alstom will further our core industrial growth. We are open for business and ready to deliver one of the most comprehensive technology offerings in the energy sector for our customers,” Immelt added.

Customers are expected to reap immediate benefits from the combination of GE and Alstom, including for current projects using GE 7HA gas turbines and Alstom’s heat recovery steam generators (HRSGs) or steam turbines. It is also a boon for a number of proposed projects.

In addition, GE and Alstom are both preferred bidders for a combined cycle plant project in Asia that would use two GE 7HA gas turbines, two Alstom HRSGs, and one Alstom steam generator. GE has simultaneously completed the sale of its rail signaling business to Alstom for approximately $800 million.

GE is on track to execute its strategy to become a simpler, more focused company. In addition to the Alstom acquisition, the split-off of Synchrony Financial has commenced. The GE Capital exit strategy is ahead of plan, with $126 billion of signed dispositions.

The recent formation of GE Digital is consolidating all digital capabilities across the company to provide customers with the best industrial solutions and software.