Siemens to invest $1.4 billion in Russia; energy, transport

Siemens will invest $1.4 billion in Russia's energy and transportation industries over the next three years. Will it awaken the sleeping giant?
Written by Andrew Nusca, Contributor

Siemens CEO Peter Löscher said on Monday that his company would invest €1 billion (approx. $1.4 billion USD) in Russia over the next three years in an effort to expand its presence in the country.

Speaking at the annual meeting of the Foreign Investment Advisory Council in Moscow, Löscher said the company would primarily focus on power generation and transmission, mobility and urban infrastructure, including transportation.

Among the company's plans:

  • New construction or expansion of locations for production, research and development and services in the Yekaterinburg, Perm, St. Petersburg and Voronezh regions.
  • New production facilities for efficient gas turbines and expansion of the service business; cost: €400 million. Siemens entered a joint venture for turbines with Russia's Power Machines in August.
  • Construction of a new production plant for wind turbines and a rotor blade manufacturing facility; cost: €120 million.
  • A local manufacturing plant for transformers and production facilities for high-voltage products and gas-insolated switchgear in Voronezh; cost: €115 million.
  • A production plant in Perm to manufacture pipeline compressors for Russia's oil and gas industry; cost: €60 million.
  • Expansion of local manufacturing capacity for the production of regional trains; cost: "several hundred million euros." The company established a joint venture for trains and locomotives with Russia's Sinara Group in 2010.
  • Expansion of Siemens' Power Machines joint venture for the production of drives systems for trains; cost: €20 million.
  • An R&D center in the future Skolkovo Innovation City; cost: €40 million.

Siemens says it sees Russia as a "strategic core market" and has about 4,000 employees posted in the country across 30 cities. Last year it generated about €1.2 billion ($1.65 million USD) in revenue from the country from orders of about €2.6 billion, or about $3.6 billion USD.

The stakes are high: As the world's fourth-largest producer of electricity (behind the U.S., China and Japan), Russia is a priority for any multinational conglomerate, particularly one so heavily invested in the energy sector. It's also a good bet for transportation; the continent-spanning country has the world's second longest rail network.

The question is whether Russia's new administration -- whoever runs it, though prime minister Vladimir Putin is a favorite to reclaim the presidency -- will be welcoming to business. Russia's grid operator the Federal Grid Company has plans to invest €12 billion in grid upgrades and Russian Railways announced plans to invest €300 billion for new trains through 2030; is there room for the German giant?

Photo: Siemens

This post was originally published on Smartplanet.com

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