Gamesa, Siemens join forces to create global wind power leader

Spanish renewable energy group Gamesa said Friday it has agreed combine its wind power business with those of Germany’s Siemens in a deal that will create one of the world’s largest makers of wind turbines.

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.

“Gamesa has given the necessary corporate approval for the potential integration of Siemens’ wind business and the company,” the Spanish group said in a statement sent to Spain’s stock market regulator.

The company said the final terms of the deal still needed to be agreed upon but Bloomberg News said Siemens will pay around one billion dollars (890 million euros) to Gamesa as part of the operation.

Siemens, Europe’s biggest engineering company, will hold 59 percent of the new wind venture, the financial news agency added citing people familiar with the matter.

Iberdrola, Spain’s largest power company and which is currently Gamesa’s biggest shareholder, would have a 20 percent stake in the new firm, Spanish media reported.

Siemens’ wind power assets would 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, daily newspaper El Mundo reported.

Contacted by AFP, both Gamesa and Siemens refused to comment on the reports.

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.

Wind power has up until now been the smallest and least profitable of Siemens’ eight divisions.

Siemens, which in 2014 failed in its bid to buy French rival Alstom, builds a wide variety of products that range from gas turbines to trains to medical equipment.

The German company is dominant in the offshore wind market while Gamesa is strong in the onshore segment.

Gamesa has another strength — it is strong in emerging markets, especially in Spain’s former colonies in Latin America.

The company is also well positioned in Brazil, is the market leader in India and the top non-Chinese wind farm maker in China.

– Return to profit –

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.

After posting a new loss in 2013, the company which is based in Spain’s northern Basque region changed its board and restructured. Last year it posted a net profit of 170 million euros ($191 million).

“Gamesa needs financial support to develop in the offshore sector,” said Angel Perez, an analyst with Spanish brokerage firm Renta 4.

The merger has been expected for months. Gamesa confirmed in January that it was in talks with Siemens to combine their wind activities.

The deal was held up because Gamesa had already set up an offshore wind joint venture with French nuclear engineering giant Areva last year that needed to be renegotiated.

Global wind energy capacity will nearly double in the next five years, largely led by further market growth in China, the Global Wind Energy Council, a Brussels-based industry group, said in April.

Cumulative wind energy capacity will rise to around 792 gigawatts (GW) by the end of 2020 from 433 GW at the end of 2015 as countries develop more renewable energy to comply with emissions cut targets and prices continue to fall, it said in the report.

Last year in Paris, almost 200 countries agreed a landmark deal to cut greenhouse gas emissions from 2020 with the aim of limiting global warming.

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.

General Electric last year boosted its offshore wind turbine portfolio when it completed the purchase of French firm Alstom’s energy business.