[Article] France bails out Alstom

Victor

http://www.thepost.ie/web/DocumentView/did-786823064-pageUrl--2FThe-Newspaper-2FSundays-Paper.asp

French state bails out Luas builder Alstom
11/07/04 00:00
By Tina-Marie O'Neill

Alstom, the troubled French engineering giant which built the Dublin Luas trams, has approved a Brussels-backed bail-out package worth €2.5 billion.

The deal will force the company to shed businesses and will give the French government a 31.5 per cent holding in the firm, saving Alstom from near-bankruptcy.

The state has agreed to exit within four years, or before that if Alstom achieves an investment-grade credit rating.

Alstom's stock has fallen 30 per cent this year and has plunged 95 per cent since the company first sold shares to the public in 1998. It racked up losses of €1.84 billion last year from its operations making power stations, trains and ships around the world.

Fiscal first-quarter orders have fallen by over 2 per cent, in part because Alstom sold its industrial-turbines division and a power unit to raise cash last year. Orders booked in the period ended June 30 fell to €3.94 billion, down from €4.04 billion last year. Sales were also down, falling 24 per cent to €3.3 billion.

With two major disposals behind it, Alstom is confident that the bail-out will buoy market confidence and that further asset sales will not have a negative effect.

New contracts this year include the French state railway SNCF, a train maintenance contract in Australia, power plants in India, Turkey and North Africa, a coal plant in Germany and two hydro plants in China.

A design fault on a power turbine threatened the company with collapse last year, prompting chief executive Patrick Kron to approach the French government to orchestrate a rescue plan.

Best known for building the French high speed TGV trains, Alstom has built railway cars for the Paris Metro, London Underground and New York Subway.

Company-built power plants supply 20 per cent of the world's power capacity and company-built ships include the recently completed Queen Mary 2, the world's largest cruise liner.

The latest deal is the fourth plan to raise funds for Alstom since March 2002.Under the terms of the year-long rescue drive, France will take on up to €500 million of Alstom's debts in exchange for shares in the company and will become Alstom's single largest shareholder.

Alstom has also asked shareholders to approve the sale of €1.7 billion in new shares. Kron said he expected the share sale to go ahead next month. The €1.7 billion figure was revised and increased from a previous limit of €1.2 billion earlier last week.

European Commission competition regulators agreed the bail-out plan on condition that Alstom dispose of 10 per cent of its businesses with annual sales of €1.6 billion and form strategic partnerships in key transport and energy sectors within four years.

The company will be virtually unable to make any new transport and energy acquisitions up to 2008.

The Commission insisted that it had to see “clear commitments” concerning those partnerships within an agreed time frame as a “precondition both to ensure Alstom's viability and to provide the necessary balance to resolve competition distortions created by state aid”.