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. Last Updated: 07/27/2016

Siemens Signs Plant Deal

Siemens AG has signed a $600 million deal for a high-technology gas-turbine power station in St. Petersburg which will rely on Russian as much as German know-how, Peter Schwegmann, Siemens head representative in Moscow, said Wednesday.

Schwegmann, who has been working on the deal for the last three years, said in an interview that the key to the deal, signed over the weekend, is Siemen's agreement to transfer significant technology to Russia.

"It's no use expecting that Russia will import 100 percent of its technology", he said. "It will cost them more and it won't bring employment".

Siemens will receive $300 million from the sale of its gas-turbine technologies, making it one of the biggest infrastructure deals concluded in Russia in the last year. Much of the money will be earned through four joint ventures with Russian companies, producing Siemens technology under license.

Schwegmann said that Siemens has already set up the first technology joint venture with the Leningrad Metal Factory, Russia's biggest gas-turbine manufacturer.

He said another joint venture will soon be established, also in St. Petersburg, to construct turbine blades, the most technologically advanced part of the process, under license from the German-firm Thyssen AG. Siemens also plans joint ventures for power-station engineering and for the construction of automation and control systems.

Schwegmann said the plan is to include more and more Russian technology in power stations that Siemens hopes to build across Russia. Siemens is already using the joint venture with the Leningrad Metal Factory to produce turbine casings which will be exported to other markets.

"If we want to get really established in the local market, we will need local manufacturing", said Schwegmann, noting that local production of medical equipment and automation systems were also being planned.

Siemens is working on the project in a consortium with the Russian Fuel and Energy Ministry and two Finnish companies, IVO and Polar Oy. Because local Russian energy prices are low, financing for the project will come from selling electricity to Finnish utility companies.

Schwegmann said details of the financing package are still being worked out, but he expects interim financing will be needed from a consortium of banks, backed by a Russian government guarantee.