Siemens to Become One of the Biggest Investor in Russian Economy

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Oct. 19 – German engineering and industrial giant Siemens AG will spend €1 billion (US$1.37 billion) on projects in Russia over the next three years, Peter Löscher, head of the board, said on Monday.

Russia’s energy sector will get the bulk of investment – around €700 million, with €400 million to be invested in a St. Petersburg-based joint venture created between Siemens and Russian firm Power Machines to be spent on gas-fired turbine construction and servicing them. The German company will hold 65 percent in the joint venture.

Some €200 million will be invested in Russia’s railway sector development. Earlier this June, Siemens has formed a joint venture for local production of double-section electric freight locomotives near Yekaterinburg (Urals) with the Russian locomotive producer Sinara Group.

The new company Train Technologies has entered into an agreement with Russian Railways on main terms for delivery of Desiro RUS electric trains, to be known locally as Lastochka, starting in 2013. The preliminary contract covers 240 train sets comprising 1,200 railcars, with a total value of about €2 billion.

“This is the largest contract in all our history in Russia,” Löscher said.

A further €40 million is planned to be allocated in the Skolkovo innovation hub, as Siemens’ commitment to boosting innovation in Russia’s economy, the company said.

Support for the renewable energy sector is another focus for Siemens. It plans to combine forces with Russia’s United Engine Corporation and RusHydro, the world’s second-largest hydropower company, to produce wind turbines and blades for them. Siemens would invest €120 million, hold 51 percent in the venture, and be the first company to use wind-energy technology for production in Russia.

“Siemens will play the role of a pioneer here,” Löscher said.

Siemens President for Russia and Central Asia Dietrich Müller said development of the alternative energy had great growth potential, with annual energy consumption capable of being reduced by more than 40 percent in Yekaterinburg – the area where Siemens conducted its research.

Now present in more than 30 Russian cities, Siemens plans to create new or expand existing businesses in Russian regions. An estimated €60 million will be invested in a joint venture with Iskra-Aviagaz to make compressors for trunk pipelines. Siemens will own 51 percent in the Perm-based venture.

In the Voronezh Region, Siemens will invest €115 million to build factories to manufacture various types of electric equipment, including switches and high-voltage transformers.

Siemens did not say how much it has already invested in Russia, but the new number will make it one of the biggest investors in the country. The plans will strengthen its position in a market where rivals such as France’s Alstom and U.S.-based General Electric also seek opportunities.

“We’ve been here in Russia for 160 years, and we have a deep understanding of the Russian market and its culture. So, we’ll continue to invest.”

The company established its first construction office in St. Petersburg in 1853, which was responsible for building the first Russian state telegraph network. This office formed the basis for the first Russian subsidiary of Siemens & Halske in the then capital city, founded in 1855 and headed by Carl Siemens.

Siemens currently has more than 3,300 employees in Russia and will double that number when it completes these expansion plans. For the last fiscal year, sales to customers in Russia amounted to almost €1.2 billion. New orders, according to the company web site, totaled around €2.6 billion.

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