* Turbine market outlook slow as energy crisis bites
* Top players bid for Alstom shows long-term view
* Alstom leader in steam turbine market, small in gas
* Graphic-Alstom's sales and employees in transport and
By Geert De Clercq
PARIS, June 16 In a world where power generation
capacity growth is driven by solar and wind, the bidding war for
France's Alstom SA shows big players believe turbines
connected to coal, gas and nuclear plants will be spinning for
decades to come.
With the growth of coal plants limited by emission concerns,
the nuclear industry in a funk following the 2011 Fukushima
disaster, and dozens of gas plants around Europe mothballed as
power demand stagnates, suppliers of the outsized turbines that
generate power in traditional thermal power stations have
suffered along with their clients, the utilities.
Even so, Siemens AG and Mitsubishi Heavy
Industries Ltd on Monday presented a bid to rival that
from General Electric Co (GE), showing they take a
long-term view on its prospects regardless of recent woes.
"The battle for Alstom is about where utilities are going to
be spending money five years from now, not where they will be
spending in Q3 or Q4," said a London-based sector analyst who
declined to be identified.
With 43 percent of Alstom's sales made in Europe and 8
percent in the United States, a bet on Alstom is not just a bet
on emerging markets, but on a recovery of European demand,
In a study last month, Deutsche Bank estimated European
utilities will have capital spending of 60 billion euros ($81.7
billion) this year, with a significant share of this going to
new electrical equipment - both generation and grids - and on
maintaining existing machinery.
While demand for new power plants is low, Alstom's huge
installed base - it claims more than 20 percent of the world's
installed steam turbine capacity, or 580 gigawatt - brings
lucrative service contracts that made up more than half of the 9
billion euros worth of orders of Alstom's thermal power division
in the financial year through March 2014.
Steam turbines - a technology more than a century old and
which led to the development of the jet engine - use steam
generated by thermal plants to drive an electricity generator.
The global steam turbine business is highly fragmented -
Alstom and Siemens each have a market share of just 4 percent in
terms of annual sales, and GE 3 percent, SocGen estimates show.
The bigger players in steam are India's Bharat Heavy
Electricals (BHEL) with 18 percent, Japan's Toshiba
Corp with 10 percent and China's Harbin Electric
with 7 percent.
A GE-Alstom or Siemens-Alstom tie-up would only become the
fourth-biggest player by sales, but would be a technology
leader. Alstom builds the world's largest steam turbine
generators, with output of more than 1.1 gigawatts (the
equivalent of one medium-sized nuclear plant) and claims to have
supplied the world's seven largest fossil fuel plants.
More than 30 percent of the world's nuclear power plants use
Alstom steam turbine generator sets and the world's four largest
operating nuclear units use Alstom's "Arabelle" turbines, which
have capacity up to 1,900 megawatts.
Alstom's smallest steam turbines have capacities of between
5 and 60 MW and are often used in biomass plants.
In gas turbines - which operate like a jet engine by burning
gas - Alstom is a small player, with a global market share of
just 4 percent, compared with GE's 39 percent, 28 percent for
Siemens and 16 percent for Mitsubishi Heavy, SocGen estimates.
The implication is that there are likely to be few
regulatory obstacles to a combination. So are there any
Sources familiar with Alstom's organisation say it could be
tricky to separate the firm's steam turbines from the gas
turbines business, as proposed by Siemens and Mitsubishi Heavy.
While the steam turbines are made mainly in Belfort, eastern
France, and the gas turbines made mostly in Switzerland and
Germany, there are about 15,000 Alstom service workers worldwide
paid to carry out maintenance on both kinds of turbines.
Another possible negative is the impact on the utilities who
are Alstom's customers, such as EDF and GDF,
and who have also been victims of the industry trends which help
propel Alstom shares to a 14-year low earlier this year.
Yet Deutsche Bank's Martin Brough - who co-authored a study
about whether utilities should care about what happens to Alstom
- said utilities have relatively little to fear about the
outcome of the bidding war on equipment supply costs, given the
broader trends already outlined.
Ultimately it is long-term developments in the energy sector
which are most significant for the utilities, just as they are
for the likes of Alstom and its future owners.
"The threats to utilities are energy efficiency,
decentralised solar energy and the weak economy in Europe,"
Brough said, "rather than market shares of their equipment
($1 = 0.7345 Euros)
(Additional reporting by Natalie Huet; Editing by David Holmes)