General Electric announced Tuesday that it’s buying a 90-percent stake in Converteam, a French supplier of electrification and automation equipment, for about $3.2 billion. The move is part of a growing trend of finding more ways to use electricity to make industrial processes more efficient, and the technology could also be valuable for integrating more renewable energy into the power grid.
Comverteam specializes in replacing mechanical industrial systems with electric-powered systems, a market that was worth about $30 billion last year. The company’s technology can reduce electricity consumption of rotating motors — found in industries like oil and gas, chemicals, mining and metals and general manufacturing — by one-third, GE said in a Tuesday news release. That’s a big deal, given that rotating machines use up to 25 percent of global electricity.
GE also said it’s looking to Converteam’s expertise to help it sell tech that can better integrate electricity from clean power into the grid. The French company has developed products that convert mechanical power from wind, gas and hydro turbines into electricity, as well as has built solar power inverter frequency control technologies. GE is already a major player in wind turbines, and has announced its intentions to build a solar power business to match its wind power might.
GE isn’t the only big power grid player looking to the efficiencies to be gained by moving from mechanical to electrical power. Swiss grid giant ABB, for one, completed its acquisition of electric motor maker Baldor Electric for $4.2 billion in January, giving it a big chunk of the industrial motors business in North America.
ABB has also invested in plug-in vehicle charging company ECOtality, outlining another key industry segment looking to electricity to make itself more efficient. Transportation is responsible for about one-third of the world’s greenhouse gas emissions, but plug-in hybrid and electric vehicles could upend that equation, if those vehicles charge using clean power, rather than electricity generated from dirty coal-fired power plants. GE, Siemens and Schneider Electric are also making significant investments in electric vehicle charging.
GE’s acquisition of 90 percent of Converteam’s shares is set to close in the third quarter of 2011. GE intends to buy the remaining shares of the company in the next two to five years, at a price close to $480 million, the company announced. Converteam reported 2010 profits of $239 million on revenue of $1.5 billion.
The Converteam acquisition is also the latest in a string of purchases by GE’s energy unit that add up to roughly $11 billion. Recent acquisitions include Nuovo Pignone, Jenbacher, Enron Wind, VetcoGray, Dresser, Wellstream Holdings and the well support unit of John Wood Group, a list that includes a lot of oil and gas industry services as well as wind turbines and natural gas engines.
Hear more about GE’s investments from Kevin Skillern, Managing Director, Venture Capital, GE Energy Financial Services, at our Green:Net 2011 event on April 21 in San Francisco.
Image courtesy of Chris Devers via Creative Commons license.