IP/99/367
Brussels, 3rd June 1999
Commission authorises ABB and ALSTOM to enter
into a joint venture on power generation equipment
The European Commission has decided not to oppose the creation of a joint
venture by which ALSTOM (France) and ABB Handels- und Verwaltungs AG,
belonging to the Swiss-Swedish ABB Asea Brown Boveri Ltd. Group (“ABB”)
create a joint venture on power generation equipment, ABB ALSTOM Power
NV (“JV”). ALSTOM and ABB will contribute their world-wide activities on
gas, steam and hydro turbines, hydro generators, heat recovery steam
generators, boilers, environmental control products and district heating to
the JV. Although this operation leads to the elimination of an important
competitor, the Commission has concluded that no dominant position is
created given the fact that large players such as Siemens (Germany), General
Electric (GE) (US), Mitsubishi Heavy Industries (MHI) (Japan), Ansaldo (Italy)
and also smaller competitors remain active on these markets. However,
given the consolidation that has taken place in this industry in recent years,
any further consolidation is likely to be scrutinised very carefully by the
Commission.
The Commission has examined a number of power generation equipment markets.
With regard to their geographic scope the market investigation has shown that
these markets are not yet global, but that there appear to be 3 areas : Europe/EEA
(European Economic Area), America and the rest of the world. This is due to
customer preferences in Europe and America for “home based” suppliers which are
able to offer a speedy repair in case of a breakdown. However, the precise
definition of the relevant geographic market has been left open, since in all
alternative definitions the operation would not lead to the creation or strengthening
of a dominant position.
This operation has little impact on the gas turbine markets as such. Only ALSTOM
is present on the market for small industrial gas turbines. On the market for large
heavy duty gas turbines, ALSTOM is selling its business to GE1, one of the 4 gas
turbine technology providers (the others being ABB, Siemens and MHI).
Gas turbines are an essential part of a gas plant. An increasing number of
customers and in particular IPPs (Independent Power Producers) order turnkey
gas plants. The latter encompass the supply of the power generation equipment –
gas turbine, steam turbine, heat recovery steam generator, …- and related
activities as services and financing. These turnkey gas plants can be simple cycle
plants or combined cycle plants, where a steam turbine is added to the gas turbine
in order to increase the efficiency of the plant. For turnkey gas plants the JV will
become the largest supplier in the EEA and in the world, the main competitor being
Siemens.
1
Case N° IV/M.1404 – GE/ALSTOM, notified on 26/04/1999.
However, the Commission has concluded that the JV will not be in a position to
behave independently of its competitors and customers for the following reasons :
the presence of other turnkey gas plant providers (Fiat, Raytheon and
architect/engineers as Stone & Webster, Bechtel, …), the fact that there are other
suppliers of components for turnkey gas plants (i.e. gas turbines, steam turbines,
heat recovery steam generators, etc. ) and therefore no foreclosure of the access
to components for architect/engineers.
The market investigation has shown that gas plants are becoming increasingly
popular (more environmental friendly, higher efficiency) in the EEA and that
therefore there is a major trend away from steam plants. As a result thereof the
orders for steam turbines have dropped significantly in the EEA. However, steam
turbines are used in CC plants and by industrial customers.
Both parties are active in the market for steam turbines up to 70 MW and over 70
MW leading to a combined market share between 40 and 50% in the EEA and
between 20 and 30% in the world. The JV will be faced with competitors such as
Siemens, Ansaldo, GE and MHI.
With regard to the small steam turbines the increment is small and is likely to be
even smaller. This is due to the fact that ALSTOM is selling its large heavy duty
gas turbine business to GE and that the choice of the steam turbine in a CC plant
is driven by the choice of the gas turbine, whereby the supplier of the gas turbine
will in general also supply the steam turbine.
With regard to the large steam turbines, the Commission took into account the fact
that not all of ALSTOM’s sales would accrue to the JV since part of these steam
turbines will be used in a CC plant. Moreover, for other applications the orders
have decreased significantly and only account for a small part of the JV’s turnover
for these products in the EEA.
With regard to hydro generators it has to be noted that less than 10% of all hydro
generators are supplied in the EEA and that therefore the geographic scope of this
market is likely to be wider. On this market ABB already had a market share of
more than 50% in the EEA, but the increment in market share in the EEA is very
small. On a global basis the JV will have between 30 and 40% facing competitors
such as Siemens and Ansaldo.
On the market for fossil boilers the JV will become the second largest supplier in
the EEA (between 30 and 40%) and will have a market share between 10 and 20%
on a global basis. The main competitors are D. BK and Foster & Wheeler, but there
are also a large number of smaller suppliers.
The combined market shares of the parties for heat recovery steam generators
(between 10 and 20% in the EEA and in the world) and for flue gas cleaning
equipment (market share between 20 and 30%) did not give rise to any problem of
dominance.
On the basis of the above, the Commission has decided not to oppose this
operation and to declare it compatible with the common market and with the EEA
Agreement.
2