GE Energy announced an agreement today to buy approximately 90 percent of Converteam, a leading provider of electrification and automation equipment and systems, for approximately $3.2 billion — with a deal to buy the remaining shares over the next two to five years.
At its heart, electrification is all about industries replacing or improving their more traditional mechanical processes with advanced electric alternatives. For example, the machinery humming in a steel mill can have higher reliability, lower maintenance, and use energy more efficiently by using electric motors — and by also integrating them with advanced generators and controls. In other industries, such as the energy sector, electrification can make gas compression more efficient — which is especially critical for equipment that sends gas through pipelines.
The technology is also essential to integrating the massive amounts of renewable energy expected to soon join power grids around the world. (The renewables industry is forecast to grow from 46 gigawatts in annual installations in 2010 to 56 GW in 2013.) For example, the technology can be used to precisely adjust the electrical frequency of solar energy when it connects to the grid — which is needed since solar is not only intermittent, but it must be converted from direct to alternating current.
Click to enlarge: The deal is the latest in approximately $11 billion of acquisitions that have expanded GE Energy’s portfolio by targeting infrastructure segments that add value to GE’s core technologies. These include the acquisition of: Nuovo Pignone (Oil and Gas), Jenbacher (Gas Engines), Enron Wind and VetcoGray (Drilling and Production).With approximately 25 percent of global electricity used to power rotating machines in a wide range of industries and applications, the opportunities are immense. Converteam’s solutions are able to reduce the electricity consumption of motors by nearly one third — which saves money and energy and reduces greenhouse gas emissions.
The multi-sector, global electrification and automation industry was valued at over $30 billion in 2010 and is growing at rates above global GDP growth. It’s what GE Energy CEO John Krenicki has called “a mega-trend across the global energy landscape.”
Building on more than 100 years of expertise in electrification and automation technologies, Massey-France-based Converteam operates across six key vertical sectors: offshore and onshore oil and gas, power generation, wind and solar renewables, industrial, marine, and services.
They are also key sectors in which GE already plays a large role. For example, in addition to a natural fit with GE’s oil and gas portfolio, the acquisition is easily tied to GE’s wind and solar business and complements GE’s existing line of solar inverters and wind power converters. The technologies are especially critical for solar power, as the global demand for solar — especially utility-scale solar — is expected to grow by 112GW over the next five years.
* Read today’s announcement
