Siemens bets over $1billion on continued gas turbine growth

• 12 years ago (2012-01-20)
• David Flin

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Siemens AG has earmarked over €1 billion ($1.3 billion) to expand its production of gas turbines and fend off GE as they compete for larger shares of the expanding gas turbine market.

A gas turbine boom is under way in some regions, with the market growing more than 9 per cent annually in the Commonwealth of Independent States (CIS) alone, according to Roland Fischer,  head of Siemens’ Fossil Power Division. The division generated 14 per cent of Siemens’s total €74 billion in revenue last year.

Siemens is betting on rising US shale gas output and its consequent focus on gas turbines will keep it ahead of both GE and Alstom SA, which focus more on steam turbines. US spending on upgrading power plants, due to tighter emission rules,  may touch $100 billion, and falling gas prices will likely tempt utilities away from coal, said Deutsche Bank analyst Peter Reilly.

“We believe our technology is two to three years ahead of the competition,” Fischer said in an interview. “Competition is tough. It’s been hard work to get where we are today. Our rivals are surely not happy. We will do our utmost not to allow anyone to take that position from us.” His unit added 3,000 employees in the past 1 1/2 years, Fischer said.

Chief Executive Officer Peter Loescher is banking on energy products helping Siemens push sales past €100 billion. The company is expanding gas turbine factories in Charlotte, North Carolina and Berlin, as well as building new facilities in Saudi Arabia and St. Petersburg, Russia. Northeast Asia, including China, and the Middle East will also show above-average growth in gas turbines going forward, Fischer predicted.

Fossil power generation is the largest of Siemens’ 10 main divisions and its success has long been an offset to the sluggish demand in other areas, such as health care equipment. Under Fischer, sales last year rose 6.8 per cent to €10.2 billion and earnings jumped 85 per cent to €2.83 billion.

“Over the next decade, unconventional gas is going to become a major source of fuel around the world,” explains Paul Browning, president of thermal products at GE’s energy division. “That’s a near enough timeframe that customers are going to start betting on it now.”