Categorized | Business, Fossil Fuels

Siemens acquires Rolls-Royce power asset

Siemens has agreed a $1.3bn deal to buy Rolls-Royce’ energy aero-derivative gas turbine and compressor business.

The Bavaria-based company is looking to strengthen its position in the power generation and oil and gas industries, and close a profitability gap with rivals GE and ABB.

Rolls-Royce’s Energy gas turbine and compressor business has around 2,400 employees. In 2013, it was reported within the results of the Energy business where it contributed £871m of revenue and £72m of underlying profit.

The transaction excludes certain smaller power generation sector assets. On completion of the transaction, Rolls-Royce’s shareholding in the Rolls Wood Group (RWG) joint venture, that provides maintenance, repair and overhaul services, will be transferred to Siemens.

The transaction has been approved by the boards of directors of Rolls-Royce and Siemens, and is expected to complete before the end of December 2014, subject to closing conditions, including regulatory approvals.

In terms of results, Siemens (NYSE: SI) this week reported quarterly earnings that missed analyst estimates on more charges at Siemens’s power transmission unit.

As part of the Rolls-Royce deal, Siemens will pay the London-based company an additional $340m over 25 years to get exclusive access to aero-turbine technology in the 4- to 85 MW power output range. The turbines with an output below 66 MW fill a gap in Siemens’s product portfolio.

As part of an overall restructuring, chief executive Joe Kaeser has added Royal Dutch Shell Plc (RDSA) executive Lisa Davis to his team. She will join Siemens’s management board on in August with responsibility for power operations. Michael Suess will step down from a similar role “for personal reasons and by mutual consent” and with immediate effect.

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