European Firms Bid to Turn on Lights in U.S. | Business| Economy and finance news from a German perspective | DW | 21.08.2003
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European Firms Bid to Turn on Lights in U.S.

After North America suffered the worst power outage in its history last week, European companies Siemens and ABB say they have the technology it takes to make sure the lights stay on.


European energy providers might be able to shed light on the outdated power grid.

When the lights finally went back on in the eastern parts of the United States and Canada, blame was quickly passed around among the electricity providers until the real culprit was found: an outdated and overloaded power grid ill-suited for today’s electrical needs. And now U.S. President George W. Bush has taken it upon himself to ensure that the neglected network receives high-profile attention and that last week’s blackouts – the worst in the country’s history – never happen again.

Speaking to the country earlier in the week, Bush said the power outage, which caused darkness to descend over a large part of the northeastern United States from Michigan to New York and up into Ottawa, Canada, was a "wake-up call" to modernize the power grid. Since its introduction in 1951, hardly anything substantial has changed in the network’s structure, and the beleaguered system has only received half the investment required to cope with a ten-fold increase in energy demand in the last 50 years.

This could all change in the near future, if two European firms manage to secure a foothold on the U.S. energy market. German electrical giant Siemens and Swedish-Swiss electricity provider ABB have both said they intend to bid for upcoming contracts to take the neglected power grid into the 21st century.

"We assume we will soon be able to offer the affected (U.S.) energy providers a reform package," Siemens' manager Tom Garrity told Financial Times Deutschland. Siemens USA spokesperson Bud Grebey added that in the face of mounting pressure on Washington to modernize the network, "enormous possibilities" would open up for the firm to get involved in restructuring America's national grid to meet future energy demands.

Contracts worth billions

The company headquarters in Munich is slightly more cautious with such predictions. Company spokesman Thomas Weber says it’s still too early to say Siemens has pocketed contracts worth $25 billion. But that hasn’t stopped analysts from pondering what could happen if such lucrative contracts go up for bidding.

Both Siemens, which controls 12 percent of the world’s market for energy applications, and ABB with 18 percent are well placed to take on the contracts which, should they be made available, are said to be worth billions.

"We are very well positioned in the U.S. to serve the American market," ABB member of the governing board Joachim Schneider told Deutsche Welle. "We have large production and business units (there) and we are certainly one of the most important energy partners for the United States." By comparison, the U.S. company General Electric is ranked fourth on the world market behind the French firm Alstrom.

Schneider is also convinced ABB can come up with the estimated $50 billion initial investment the grid's modernization will require. "When I look at the $50 billion against our delivery and performance rating, then we are in the position to provide everything, with the exception of the primary technology at individual power stations," he says.

Although ABB and Siemens are not American firms, Schneider believes there is no reason why they would be prevented from bidding for the contracts. As it is, there are very few U.S. domestic firms who can offer the technology modernizing America's aging power lines -- most of which are at least 13 years old -- will require.

"Certainly there are electricity transfer specialists in the United States," Schneider concedes, but "power networks have not received the attention they have in Europe and that has led to the fact that there are very few American companies who can offer that kind of expertise."

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