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Siemens and Gamesa merger to create wind energy giant
 Jun 20, 2016|View:769

In a note to the Spanish stock market regulator on Friday, Gamesa said it had reached the necessary "corporate approval for the potential integration of Siemens' wind business," with the final terms of the deal still needing to be agreed upon.

The announcement followed months of negotiations between the two companies and it comes as demand for wind power surges as countries develop more renewable energy to comply with emissions cut targets.

Although no price tag has so far been put to the merger, financial news agency Bloomberg reported that Siemens would pay around one billion dollars (890 million euros) to Gamesa as part of the operation.

The German engineering group would hold a majority stake of 59 percent of the new wind venture, Bloomberg said, citing people familiar with the matter. Gamesa's biggest shareholder, Spain's biggest power company Iberdrola, would have a 20 percent stake in the new firm, according to Spanish media reports.

Under the merger plan, Siemens' wind power assets will be absorbed by Gamesa, which would keep its headquarters in Zamudia in Spain's northern Basque region and as well as its chairman Ignacio Martin.

Gamesa shares were suspended Friday from trading on the Spanish stock exchange. Siemens shares rose 1.62 percent to 92.36 euros in late morning trade in Frankfurt.

Huge growth potential

Wind power has up until now been the smallest and least profitable of Siemens' eight divisions, which also includes a variety of products ranging from gas turbines to high-speed trains and medical equipment.

Nevertheless, the German company is a major global player in the offshore wind market while Gamesa is strong in the onshore segment. Moreover, the Spanish firm is going strong in emerging markets, especially in Spain's former colonies in Latin America. In addition, it is market leader in India the biggest non-Chinese wind farm maker in China.

However, Gamesa was hit hard by deep cuts to Spanish government subsidies for electricity produced from renewable sources after the country's economy slumped when the decade-long property bubble popped in 2008.

In 2013, it posted a huge loss, but rebounded to growth in the years thereafter to garner a net profit of 170 million euros last year.

"Gamesa needs financial support to develop in the offshore sector," Angel Perez, an analyst with Spanish brokerage firm Renta 4, told the news agency AFP.

Global wind energy capacity will nearly double in the next five years, largely led by further market growth in China, according to a survey made by the Global Wind Energy Council, a Brussels-based industry group. Cumulative wind energy capacity would rise to around 792 gigawatts (GW) by the end of 2020 from 433 GW at the end of 2015, it said in the report released in April.

The Gamesa-Siemens deal is the latest in a string of tie-ups in the wind power sector. Last year, German turbine maker Nordex bought the wind power business of Spain's Acciona. Also, US engineering giant General Electric boosted its offshore wind turbine portfolio when it completed the purchase of French firm Alstom's energy business last year.

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