Siemens and Power Machines agree on a strategic partnership in the field of gas turbines

Siemens AG and Power Machines OJSC have signed final documents on the establishment of a joint venture in Russia to manufacture and service gas turbines, as well as on the sale of Power Machines share holding (25% + 1) by Siemens AG to Highstat Ltd whose ultimate beneficiary is Aleksey Mordashov. The documents have been signed by Michael Suess (CEO of Siemens AG Energy Sector), Aleksey Mordashov (Chairman of the board of Directors in Power Machines OJSC), Christoph Wollny [1] and Igor Kostin (DirectorGeneral of Power Machines OJSC). The amount of investments into the joint venture totals €275 million with the creation of 500 jobs. Both deals are closing today, on December 01, 2011. 

Siemens holds a 65% share in this joint venture for the production of high-performance gas turbines. 35% of shares belong to Power Machines OJSC. The project has already been approved by the Federal Antimonopoly Service of Russia, Antimonopoly Committee of Ukraine and antitrust authorities in Germany and Austria, and its implementation begins on December 01, 2011.

The company is established on the basis of Interturbo LLC which has been partners’ joint venture since 1991. It is going to be subsequently renamed to Siemens Gas Turbine Technologies LLC and its activity is to be significantly extended. The company will be engaged in research and development of new gas turbines, production localization in Russia, as well as assembly, sales, project management and gas turbine servicing.

The parties have agreed to keep the production capacities of existing Interturbo LLC at the first stage. This makes it possible to produce E and F class gas turbines with a capacity from 168 to 292 MW. A new world-class production complex to manufacture and service high-performance gas turbines is planned to be built subsequently and launched in 2014.

This project solves the problem of comprehensive upgrade of power plants in Russia basing on the most advanced and innovative technologies. Among potential customers of the joint venture are electric power producers in Russia and the CIS. 

Siemens has recently opened a new gas turbine production facility in Charlotte (North Carolina, USA) in addition to the existing one in Berlin. Establishing of the production facility in Russia is a part of Siemens investment program, according to which the company is to invest €1 billion into localization projects and to create 4,000 jobs. 

The global demand for high-performance gas turbines is growing because of a large amount of available natural gas, obsolescence of existing equipment and requirements to reduce carbon dioxide emissions. "As the leader of global market of advanced gas turbines, Siemens will certainly benefit from this project. We consider Russia and other countries of the CIS as very attractive ones, and the new company will contribute to meeting the growing needs in electricity, from both economical and ecological points of view," - said Michael Suess.

"We hope that our joint venture will play a leading role in supporting the upgrade of Russian electric power industry through the development and production of modern gas turbines of various capacity classes. In return, by extending the range of gas turbines manufactured by Power Machines, we gain a further opportunity to increase our orders portfolio for related combined cycle equipment such as steam turbines and turbine generators,"- noted Igor Kostin, the Director General of Power Machines OJSC.

At present the total installed capacity of all power plants in the CIS amounts to approximately 370 gigawatts (GW), which is more than twice higher than similar indicator in Germany. According to the rating of 2010, Russia is the fourth largest electric power producer in the world after the USA, China and Japan.

Almost half of the CIS power plants being over 30 years old and having the average efficiency of less than 37% determines the need to replace them with modern, more efficient power plants. Compared to the gas turbine units currently used in Russia, Siemens gas turbines of the last generation used in combined cycle plants together with steam turbines reduce the carbon dioxide (CO2) emission, as well as gas consumption on average by one third. In comparison with coal-burning power stations they have an even higher reduction of emission rate. 

The total production of electricity in the CIS is expected to continue to grow by 2% per year that is to rise from the current 1470 terawatt-hours (TW/h) to 1,800 TW/h in 2020. The gas turbine power plants will play the major role in this growth: in 2010 the total installed capacity of the gas turbine power plants, taking into account those under construction, exceeded 30 GW. By 2020, as it has been estimated by Siemens, their share may rise up to 100 GW.

[1] Product Sales Manager of Fossil Power Generation Department in Siemens AG Energy Sector.