Areva T&D: Going for growth in the Middle East

09 November 2005
In March 2004, a new name burst onto the Middle East transmission and distribution (T&D) scene. Just months after coming into being, France's Areva T&D clinched what was at the time one of the biggest substation contracts ever placed by Dubai Electricity & Water Authority (DEWA), a $155 million order to build two 400-kV substations. Many outside the industry wondered who this new player was. They shouldn't have. For while the name was unfamiliar, the business most certainly was not, being the successor to Alstom T&D.

The French nuclear energy giant Areva, formed in 2001 through the merger of Cogema and Framatome, purchased Alstom's T&D business two years ago. 'In 2003, the decision was made to add a new business to the company,' says Areva T&D's president and chief executive officer Philippe Guillemot. 'We wanted a business that would enhance our position as a global energy player, complement our nuclear energy activities and have potential for growth.'

Alstom T&D fitted the bill. It had a wide geographical spread, employing 25,000 people in 70 countries, and a market leading position in an energy segment Areva was not directly involved in, but which complemented its existing carbon dioxide-free energy base. Parent company Alstom was also in financial trouble, and had made clear that if a suitable offer came along, it would dispose of its T&D division.

Areva paid Eur 950 million ($1,139 million) for Alstom T&D. Following the deal's closure in early 2004, it went about integrating the new acquisition into its existing business and reorganising its new T&D business into divisions, made up of products, systems, automation and services. 'The integration went more smoothly than expected and in six months it was completed,' says Guillemot. 'I think one of the reasons why it went so smoothly was that for the ex-Alstom team, the acquisition came as a relief: they were back in an environment where they could do business without any financial handicap. The financial stability - we have no debt - and the fact we are a young company also motivated people.'

At the time, the DEWA 400-kV substation award was viewed as a statement of Areva T&D's intent and confidence in its new acquisition. In particular, the company agreed to execute the project in an almost unheard of timeframe, with commissioning set for just 19 months.

The award underlined the importance of the Middle East to the new company. 'Everyone talks about China and India, but for us there is another region, which has a very high priority - the Middle East,' says Guillemot. 'In this region, we have a high presence, high turnover and high growth potential.'

Alstom T&D had an extensive regional network, with a presence in 14 countries and a staff of about 500. Since 2001, annual order intake had been rising by 27 per cent a year. In 2004, Areva's first yearin charge, the region represented 15 per cent of Areva T&D's total sales of Eur 3,200 million ($3,835 million), generating orders of Eur 445 million ($533 million). This year, it is again forecasting double-digit growth, as governments, buoyed by record oil revenues and strong economic growth, seek to meet surging power demand.

That potential has been highlighted in the last couple of months. In September, Areva T&D was selected for an estimated $220 million-worth of work on the GCC electricity grid, winning the high-voltage direct current (HVDC) converter station at Fadhili in Saudi Arabia and the control centre and telecommunications package. In late October, it was awarded two lots on the West Bay substation programme in Qatar in a deal worth an estimated Eur 150 million ($180 million).

The company's regional growth strategy involves expanding its four core areas. On systems, it is aiming to boost its position in the substation market and increase its presence i

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