DCNS SA, the French maker of Barracuda submarines part owned by Thales SA, is considering the takeover of a tidal-power business as it looks to diversify into more resilient consumer-orientated markets, according to Chief Executive Officer Patrick Boissier.

DCNS this year boosted its stake in OpenHydro Group Ltd. to 11 percent after an initial investment in 2011. The Dublin-based company has partnered with Electricite de France SA to roll out its turbine technology driven by tidal flows.

“We are considering increasing our share and taking control of the company,” Boissier said in an interview yesterday.

Declines in European defense spending are creating pressure on military suppliers in France and neighboring countries to adapt their business. Companies are trying to stem declines through exports of military equipment into Asia and the Middle East and by diversifying into more resilient civil markets.

The main question for DCNS is when the energy market will start generating significant sales, Boissier said.

“I am sure that at the 2020 horizon, the market will mature,” he said. “I am totally unable to tell you whether that market will materialize in two years or four years or five years.”

Energy activities accounted for 100 million euros ($130 million) out of last year’s 2.6 billion euros in sales, though they should reach more than 1 billion euros by 2020, Boissier said.

The company, in which Thales holds 35 percent, in 2009 announced plans to double sales and Boissier said progress remains “on track.” While most of the growth will come from DCNS’s existing businesses, its energy unit will look for opportunities to take over some small companies to access technologies and markets, Boissier said.

European Slowdown

Boissier said the company has “strong” prospects overseas amid the current slowdown in European defense spending, It has already booked sales of its Scorpene attack submarines to Chile, Malaysia, Brazil and India and of the BPC command ships to Russia.

“Even if the European market is decreasing, we are in a growing market,” he said during the Euronaval warship symposium in Le Bourget outside Paris.

In France, the defense ministry said this month it would slow spending on Barracuda submarines that can launch the country’s nuclear ballistic missiles. The French government has ordered three of the submarines, with plans for a fleet of six.

Boissier said that schedule adjustments for the follow-on orders are possible. The main issue is to assure there are no funding gaps that could risk a loss of industrial design and construction capabilities, he said.

Copyright 2012 Bloomberg

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