Siemens looking at small wind power takeovers

FRANKFURT, GERMANY - Siemens, Europe's biggest engineering group, could target component makers for takeovers in its drive to become one of the top three players in the wind energy sector.

Acquiring parts suppliers would accelerate the growth it expects from its own business making wind turbines. Siemens wants to increase revenues from its environmental portfolio to 25 billion euros by next year from 19 billion in 2008.

Speculation about consolidation in the wind sector is not new: talk often swirls that German players may be prey for large conglomerates or utilities eager to expand in the sector, which is set to be a goldmine in the energy market.

Analysts said that Siemens, a world leader in offshore turbines, would likely use an acquisition to integrate backwards.

"They may buy (something) more like the components suppliers to the turbine industry, which are relatively small companies," said JP Morgan analyst Andreas Willi, adding that he did not see Siemens bidding for another turbine maker.

Companies such as California-based Power One, Germany's SMA Solar Technology, or unlisted German group Kaco — all with average annual sales of 200-300 million euros — could be potential targets for Siemens.

According to the Global Wind Energy Council, the market for wind turbine installations was worth about 45 billion euros (US $61.43 billion) in 2009, reaching 158 gigawatts. BTM Consult estimates global installed capacity will more than double to 340 gigawatts by 2013.

Siemens does not disclose figures for its wind power unit, saying only its order backlog as of December stood at 6 billion euros.

Rivals have already started to expand their reach.

General Electric, the U.S. top onshore power player and a Siemens rival in healthcare and energy, last year bought Sweden's ScanWind. Schneider Electric, which competes with Siemens industrial products, bought Canada's Xantrex, maker of inverters and other power electronics products, in 2008.

A Siemens source said: "While the focus is on organic growth, one should never say never. One should not rule it (acquisition) out altogether" though there is nothing concrete at the moment.

Siemens is building a plant to make nacelles — structures that house components — in Kansas and will start making rotor blades and nacelles in China. It also plans to produce in India.

The company is the leader in offshore wind turbines in terms of installed capacity — currently 10,000 megawatts — and the sixth-biggest supplier to the wind market behind Denmark's Vestas, General Electric, Spains's Gamesa, Germany's Enercon and India's Suzlon.

"It would not be a big problem for big utilities to acquire us, particularly in light of their size compared to ours," said Martin Billhardt, chief executive of German wind park builder PNE Wind.

PNE shares gained in mid-2009 on talk E.ON may be interested in acquiring the company.

Societe Generale analyst Gael de Bray said Siemens already enjoyed quite a high market share as a turbine maker, with a strong franchise in the offshore wind market.

"I don't see them going further on to the onshore wind turbine market by making some acquisitions. Maybe if there were a few small players emerging with strong technologies for offshore, why not," de Bray said.

One such company is Clipper Windpower, in which United Technologies Corp acquired a 49.5 percent in December to enter the global wind power market.

Ben Warren, head of renewables energy at Ernst & Young, said the emerging offshore sector may be "a particular driver of merger and acquisition (M&A) activity as suppliers and contractors gear up to deliver these truly industrial-scale projects".

Jon Sigurdsen, manager of the Renewable Energy fund at Carlson, a unit of Norwegian DnB Nor Group, says partnerships were a more likely outcome than full-fledged takeovers.

"For Siemens, big M&A activity wouldn't make a lot of sense as the wind sector is pretty much consolidated already and few companies are left but I wouldn't be surprised if they enter partnerships as part of their growth strategy," he said.

Still, Siemens has an M&A track record in the renewables sector, most notably last year's takeover of solar thermal player Solel Solar Systems for $418 million.