ALSTOM announced on September 23 that it had reached an agreement with its banks and the European Commission on a package to meet the company’s financial needs. The proposals were developed following the EC’s decision that a previous rescue deal announced on August 6 was inconsistent with its procedures for approving state aid and risked distorting the market (RG 10.03 p609).
Under the terms of the new agreement, the total financial package will be increased from €2·8bn to €3·2bn. Equity increases and loans over 15 years will total more than €1·7bn. The company’s ordinary and extraordinary general meetings scheduled for September 24 were cancelled, and the revised package is to be submitted to Alstom’s shareholders on November 18.
A €300m capital increase will be carried out either with preferential subscription rights for existing shareholders or through the issuance of warrants to existing shareholders giving them equivalent rights. The subscription price will be €1·25 per share, and the operation is guaranteed by a syndicate of banks.
Instead of taking a stake in a capital increase, the French state is now to provide a total of €800m, of which €300m will be convertible to shares if EC approval is obtained; another €300m will be in the form of a 20-year bond reserved for the French state, reimbursable with shares upon approval of the EC, and the other €200m will come as a 15-year bond reserved for the state. €1·2bn in subordinated loans will come from the banks. Bonds worth €900m mandatorily reimbursable with shares will be issued, fully guaranteed by the banks, and the total may be increased to €1bn.
To cover liquidity requirements until the new financing package is fully implemented, Alstom’s short-term facilities will be increased, with €1·2bn provided by the state and €300m from the banks. As in the previous plan, a syndicate of banks will provide a contract bonds and guarantees facility of €3·5bn, 65% of which is counter-guaranteed by the state, to allow Alstom to cover its normal level of business activity.
’Strong base’
Alstom Chairman & CEO Patrick Kron said the agreement ’provides a strong base from which to move ahead. It meets our fundamental objectives: a substantial increase in our equity base, with the prospect of the French state becoming a shareholder if the European Commission, following its review, grants approval; adequate medium- to long-term refinancing; and coverage of on-going liquidity and bonding needs.
’Unfortunately, the past period of uncertainty has had a negative impact on our order intake, which coupled with losses identified on contracts, leads us to expect disappointing financial results for the first half of the current fiscal year.’
On November 13 Alstom will publish its results for the first half of the 2004 financial year. Orders received in the first half are expected to be around €7bn, about 25% down from the same period in 2003 on a comparable basis. A previously-announced review of projects managed by Alstom’s US transport business has identified additional costs of approximately €100m. Overall, Alstom forecasts an operating margin of just over 1% for the first half of the 2004 fiscal year, and combined with restructuring costs, expects a net loss of around €500m.
In January Alstom expects to reach closure of the sale of the Transmission & Distribution business to Areva for €950m, bringing total proceeds from disposals to €2·5bn. Other sales are currently underway, and by March 31 2004 secured proceeds are expected to be around €2·7bn.
The Paris, London and New York stock exchanges resumed trading in Alstom shares from 9.00 CET on September 23.
- On October 8 the president of Alstom Canada, Pierre Gauthier, confirmed that the company would be closing its Pointe St Charles rolling stock plant in Montréal by the end of the month, and transferring residual work to a smaller unit at Sorel-Tracy,Québec. The company’s lease on the former CN workshops expires next June.
CAPTION: Taking shape at Valenciennes is the first of 20 six-car trains for Nanjing metro Line 1; the rest will be assembled in China, Deliveries are due to run from May 2004 until June 2006
Restructuring aims to restore confidence
ON OCTOBER 7 Alstom Transport announced a plan to reorganise its activities and adopt ’a single culture’ across the business. Admitting that ’our management of contracts has not always been irreproachable’, Alstom Transport President Philippe Mellier said that there would be a new ’planetary’ organisation offering customers a simpler interface to the company.
Alstom has divided the world into four geographical markets, each of which will be managed as a ’regional profit centre’. The profit centres will manage relationships with customers and all projects within the region, a move which Mellier said would generate economies of scale. North and South America is designated as one region with headquarters in New York. A second, based in Singapore, will cover parts of Asia and Australasia. Paris is to be the headquarters for the third and fourth regions. One will deal with northern Europe, including Germany, Britain, Scandinavia and Russia, plus English-speaking Africa. The other will cover southern Europe, French-speaking Africa and parts of the Middle East.
The four profit centres will work with a single ’operations group’ which will handle all design, production and deliveries. This structure will be backed by seven ’support groups’, ranging from legal affairs to communications, which will be set up as a new directorate.
Alstom Transport employs around 30000 staff in 50 countries, and Mellier said that with a turnover of €5bn it accounted for around one-third of the group’s business, with a three-year order book at the start of 2003. There were currently around 260 contracts in hand.
To questions about factory closures and redundancies, Mellier responded that the company had already made adjustments, although it was likely that people would be moved between different locations. Workloads would be adjusted to suit demand, he said. Some factories are to be designated as ’centres of excellence’: La Rochelle for TGVs and trams, Valenciennes for metro and double-deck stock, Savigliano in Italy for tilting trains, Salzgitter in Germany for regional trains for northern Europe, Reichshoffen for regional trains for southern Europe, Belfort for locomotives, and Meudon for signalling. Paris would handle maintenance business.
Mellier had visited ’nearly all customers’ in the last two months, and he saw ’very encouraging signs’. Confidence in the company was still there, he said, and he enumerated a number of contracts signed in recent weeks or due to be signed shortly.
These included 28 six-car trainsets for the 23·4 km Yangpu line in Shanghai, supply of Atlas-200 ERTMS train control equipment to ProRail for the Betuwe route in the Netherlands. Paris operator RATP had also chosen Alstom’s Citadis trams for the Boulevard des Maréchaux route, with an order for 70 cars plus an option for 49 more. The company had also been selected to supply a package of electrical and mechanical equipment worth €75m to CMSP for Line 4 of the São Paulo metro.
