Siemens-Rolls Royce gas turbine deal a ‘win-win’

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The deal by Siemens to buy Rolls-Royce’s gas turbine and compressor business for $1.32bn is a win-win for both parties, according to an analyst with research firm GlobalData.

Mamta Saharan, GlobalData’s senior power analyst, said that a joint portfolio “will allow Siemens to pursue significant growth opportunities in the decentralized power generation and oil and gas sectors, while Rolls-Royce will be able to focus on the more profitable branches of its business”.

The deal was signed in May and is expected to be completed in December, when Siemens will gain access to relevant Rolls-Royce aero-derivative technology for use in its 4-85 MW gas turbines.

Saharan said: “This deal will provide an opportunity for Siemens to tap desirable new markets. Aero-derivative gas turbines are an appropriate option in the oil and gas industry, especially for offshore oil platforms with limited space, as they are compact in size and highly efficient.

“These turbines are also a popular choice for decentralized power generation, due to their efficiency and fast start-up capabilities. Their flexibility helps to provide emergency electricity reserves, meet peak power demand and stabilize the power grid.”

GlobalData said that “an enhanced product portfolio will enable Siemens to catch up with competitors, such as General Electric and ABB, while an increased customer base will propel the company towards meeting its profit targets”.

It added that for Rolls-Royce, the sale of its energy division will be the shedding of “a margin-dilutive distraction” which has been the company’s “smallest unit in terms of revenue”.

Saharan added: “As it cannot compete with giants in the market, the acquisition will improve its profit potential by utilizing Siemens’ scale and reach in this sector.”

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