Power Engineering - Bouygues to takeover state interest in Alstom

27 April 2006 - Engineering group Alstom yesterday signed a framework agreement with fellow French company Bouygues in respect of operational and commercial cooperation. Construction group Bouygues plans to strengthen this partnership by buying the stake of 21.03 per cent held by the French government since July 2004.

The French government assumed the stake in Alstom as part of a recovery package for the then ailing Alstom but is required by the EC to relinquish it by 2008. This sale is subject to the approval of European Commission antitrust authorities and to the closing of Alstom Marine disposal, which is planned to occur in the coming weeks.

At the commercial level, the two companies are planning cooperation of their sales networks to maximize their strengths on the markets and develop together integrated projects as opportunities arise.

Bouygues and Alstom said they could provide a joint response to market demands by offering solutions that combine Bouygues' civil engineering with Alstom's equipment. The cooperation agreement between Bouygues and Alstom will not be exclusive so that the two companies will be able to continue to work with the most suitable partners and suppliers for each project if it is in customers' interest.

Exchanges at the operational level will involve the improvement of project execution by sharing best practices in organization and project management, setting up joint training programmes for project directors and optimizing costs on common projects.

Bouygues also intends to take a 50 per cent equity share in Alstom's hydropower equipment business, the terms for which are under discussion. This operation would allow Alstom to fulfill the commitment made to the European Commission to set up a joint venture in this sector. Alstom is the world's number one hydropower equipment supplier and service provider.

Alstom had previously confirmed to the French State and Bouygues that the results for fiscal year 2005/2006 which will be published on 17 May would be in line with the objectives set, i.e. increase in orders of more than 5 per cent on a comparable basis, increase in sales of more than 7 per cent on a comparable basis, an operating margin of more than 5 per cent, positive free cash flow and net income, after taking into account the disposal of the Marine activity, of more than €150m. Alstom also confirmed its objective of achieving an operating margin between 6 per cent and 7 per cent in March 2008 and indicated it should exceed these levels in March 2009.

Patrick Kron, Chairman and CEO of ALSTOM, stressed that "Bouygues' investment in ALSTOM fully meets my objective of associating a reference shareholder with a long term view, which will contribute to the stability of our capital structure. Bouygues is a great company that shares our conviction that our energy and transport markets have a very bright outlook for the future and considers ALSTOM as ideally positioned to fully benefit from this growth. The envisaged cooperation with Bouygues will strongly support our strategy focused on improvement of performance and profitable

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