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Published on : May 11, 2018

Adoption of renewable energy businesses is stirring some significant shake-ups for global players in the overall energy sector. A French multinational manufacturing group Alstom announced on May 10, 2018 that it is exiting joint ventures with General Electric (GE) in consideration for a sum of 2.594 billion euros (approximately US$3.08 billion) it will pay to U.S.-based multinational conglomerate. The joint ventures comprise assets Alstom has in three segments: renewables, grid, and nuclear. GE will get the full ownership of the businesses on October 2 this year as per the agreement. The ventures being sold were formed as part of the sale of Alstom Energy business to GE in November 2015.

Alstom, the company specializing in rail transport markets, stated that the move to offload its joint ventures was made with an aim to focus well on its main portfolio. Of note, it had entered into an agreement with Siemens AG SIEGY which led to merger of their rail operations in September last year, which created a European stalwart.

Exiting Joint Ventures as part of GE’s Business Overhauls and its move to contain Dipping Margins

Initially, the acquisition of businesses under the joint ventures with Alstom has benefitted GE greatly. The acquisition helped GE bolster its position in the area of servicing and maintaining gas turbines. Moreover, it could gain a better hold over renewable energy businesses post the acquisition.

However, acquiring Alstom’s assets didn’t go well further down the line. GE noticed a marked slump in demand for gas turbines, albeit belatedly. Part of the loss of corporate revenues can be attributed to the growing inclination of businesses in various end-use industries toward renewable energy adoption. Lower utilization and overcapacity were other key factors behind the dwindling margin. These factors nudged its CEO to make certain business overhauls, in addition to cutting of costs and slashing of jobs. The Boston-headquartered conglomerate has lost shares considerably in the last year.