EU approves Alstom bailout

7th July 2004, Comments 0 comments

BRUSSELS, July 7 (AFP) - The European Commission cleared on Wednesday a French government bailout for Alstom on condition that the troubled engineering giant seek industrial tie-ups within four years.

BRUSSELS, July 7 (AFP) - The European Commission cleared on Wednesday a French government bailout for Alstom on condition that the troubled engineering giant seek industrial tie-ups within four years.

European Union Competition Commissioner Mario Monti had already in May approved the government plan after intensive talks with French Finance Minister Nicolas Sarkozy.

The plan will provide Alstom with about EUR 2.285 billion (USD 2.75 billion) in state aid coupled with assistance from creditor banks.

"The important divestment, market-opening and restructuring measures allow for the re-establishment of sound competition conditions," Monti said after the formal green light from the rest of the EU executive.

In Paris the price of shares in the company was showing a gain on Wednesday of 4.90 percent to EUR 1.07. The shares have risen steadily from EUR 0.86 on July 1.

The fate of Alstom, which has been seeking ever deeper into the red, has become a test case of the European Commission's determination to stand up to French state intervention to prop up national champions of industry.

Monti's department launched an investigation in September after Paris, without informing Brussels, said it intended to spearhead a rescue plan to prevent the collapse of a group that employs 77,000 people worldwide.

With Monti threatening to veto the plan as running counter to EU competition law, Sarkozy personally intervened soon after taking over as finance minister to win over the tough-minded Italian commissioner.

Brussels said Wednesday the trains-to-turbines group would have to hive off 30 percent of its activities, as agreed with Sarkozy but more than the 20 percent planned by Alstom.

These activities would involve about EUR 1.6 billion in group turnover including industrial boilers, transport units in Australia and New Zealand, and freight locomotives in Spain.

Alstom will also have to divest an addition EUR 800 million in other areas to be specified at a later stage.

In a statement, the commission said Alstom "must, within four years, enter into one or more long-term industrial partnerships in significant sectors in which it operates".

Brussels identified in particular Alstom's transport and energy businesses as being ripe for tie-ups with other groups - which it said must have no involvement with the French state.

It said that it "regards implementation of the partnership commitment as essential to dispel any doubts as to the long-term viability of the firm".

Under the conditions, the French government must report every three months to the commission on the progress being made in the hunt for partnerships.

And the French state must abandon any shareholding in Alstom within a year of the group obtaining an investment-grade rating from credit agencies, and in any event no later than 2008.

The commission spelt out that in the energy sector, Alstom would have to create a 50-50 joint venture for its hydro-power business.

Additionally in the transport sector, Brussels said it had received "substantial commitments" by Paris to open up the French market for railway equipment, which Alstom now dominates.

"So as to ensure that the aid is not used to pursue a policy of expansion, there will be virtually no acquisitions by the company in the transport sector for four years," the commission said.

Few groups are big enough to take over parts of Alstom's business. Siemens is one, but the French group's chief Patrick Kron has ruled out any alliance with its German rival.

That has strained relations between Paris and Berlin, which before Kron's rebuff had been touting joint plans to construct European champions of industry.

For its part, the European Commission says it is up to Alstom to decide who it wants to tie up with.



Subject: French news

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