Power Machines’ Director General Boris Vainzikher is still unable to persuade the Germans to give the most profitable portion of turbine servicing contracts to the Russians.
Photo: Nikita Infantyev
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Siemens and Power Machines' JV in Jeopardy
Power Machines may decide to pull out of a joint turbine production project with Siemens. The two companies are still unable to decide who should get profits from lucrative service contracts. The Russian company risks losing $125 million of investments if it walks out on the partnership deal.
The Interfax news agency on Friday quoted a source close to Power Machines as saying that the Russian concern may decide not to buy a license to produce 278 MWt-strong gas turbines from Siemens. The parties cannot agree who will be responsible for serving the turbines in Russia. Should Siemens decline to give Power Machines the right to service the turbines, the Russians will enter talks with other potential partners like General Electric, Interfax reported. The final decision is due within two months.
Power Machines confirmed it in an interview with Kommersant that talks with Siemens on the gas turbine production and their servicing are “tough”. The company said, however, that it will not make it break with Siemens.
Last January, Siemens spent more than $90 million to buy a stake in the machine-building company, hoping that partnership with RAO UES will make Power Machines the market’s leader.
The profit margin in turbine sales is 10 percent compared to 30 percent in their servicing. Siemens gains about 0.18 ¢ from every kWt/hr their turbines produce around the globe. The Germans are determined to control service profits, a Kommersant source informed on the course of talks says.
The situation is all the more tangled as Siemens is not sure who will own Power Machines in the future. Its largest shareholder Interros, now busy dividing assets between co-owners Vladimir Potanin and Mikhail Prokhorov, may soon reduce its holding in the company. Meanwhile, another major shareholder, RAO UES which is getting ready for major restructuring still has no definite plans about its stake in Power Machines.
The company now risks losing $125 million which is the price of stocks which Siemens planned to buy in Power Machines’ addition share issue, according to sources of Kommersant.
www.kommersant.com
All the Article in Russian as of Mar. 19, 2007
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