Areva: seizing the nettle

Whilst the UK Prime Minister David Cameron was touring China last week in an attempt to drum up investment for British infrastructure projects and future trade deals, the French, it appeared, weren’t about to let ‘les rosbifs’ come away with all the cards.

On Monday, French state-backed energy group, Areva, announced that it had signed a commercial partnership in renewable energy with China General Nuclear Power – widely trumpeted by the UK Government as an investor into UK nuclear facility, Hinkley Point C.

Under the terms of the deal, Areva will provide commercial expertise as an offshore wind turbine manufacturer, and CGN will contribute to future projects as an investor, developer, and operator of wind farms in China and Europe, according to a joint statement.

Additionally, Areva, in a partnership with Siemens, has agreed to provide instrumentation and control systems for two Chinese nuclear facilities that will begin construction in 2014 and 2015, respectively.

From the outside, it certainly looks like a good deal for both parties. Areva secures a finance and developer partner to use its equipment in the traditionally tough-to-crack Chinese market, as well as new sites in Europe.

The Chinese, commensurately, get to take advantage of Areva’s strong heritage and technical advancement in the nuclear and offshore wind industries.

It’s a pretty good example of a deal that should pay dividends for both sides. As European finance for wind projects drags, Areva already has a partner ready to deploy capital and provide orders in two markets for its turbines.

The firm also gets to hit the ground running for Chinese offshore wind projects, which, whilst still some way off, are bound to be an energy source Beijing considers for the future.

Whilst not a deal that received huge amounts of attention, it’s another blueprint for how European original equipment manufacturers can make use of Chinese capital and secure a foothold in the all-important Chinese market.

Let’s be clear, the Chinese are not in the habit of giving away market entry for free. In the automotive sector, joint ventures have historically involved the sharing or co-development of intellectual property. And so it’s the same for the wind industry.

Yes, there are, unfortunately, examples of deals that have turned sour and ended up in the courtroom over IP – see AMSC for further detail.

But that shouldn’t deter the wider wind industry. There is always a risk involved with seizing the nettle, but if the wind sector is to really become a global industry, it’s these kinds of challenges that it will have to confront head on.

And this week, it looks like Areva might have just managed it.