Wärtsilä enters rail market through joint venture with Transmashholding in Russia

Wärtsilä Corporation
  • Stock exchange release
27 May 2010 at 5:45 PM E. Europe Standard Time

The joint venture between Wärtsilä and Transmashholding is a strategically important step for Wärtsilä to broaden its business into the rail market and gives Wärtsilä a stronger industrial foothold in Russia.

Wärtsilä has signed a joint venture agreement with the Russian company Transmashholding (TMH) to manufacture modern and multipurpose diesel engines in Russia. The engines, including a new and technically advanced version of the Wärtsilä 20 -engine, will be used in shunter locomotives and for various marine and power applications. The two companies will jointly engineer the railway application. Wärtsilä and TMH will also evaluate broadening the activities of the joint venture to include the development and manufacturing of other diesel engine models in the future.

The value of Wärtsilä’s investment in the joint venture is approximately EUR 30 million and production of the engines is planned to start in 2012. The closing of the agreement is subject to the relevant regulatory approvals, which are expected during the coming months.

The agreement was signed in Lappeenranta, Finland, in the presence of the Prime Minister of the Russian Federation, Mr Vladimir Putin, and Finland’s Prime Minister, Mr Matti Vanhanen.

“This joint venture between Wärtsilä and Transmashholding is a strategically important step for Wärtsilä to broaden its business into the rail market. It offers Wärtsilä a promising opportunity to leverage its high competence and expertise in advanced engine and modern manufacturing technology. This creates the potential to increase sales of Wärtsilä’s products and services beyond our traditional marine and energy markets,” says Mr Ole Johansson, President and CEO of Wärtsilä Corporation.

“Wärtsilä has strong experience and a proven track record for implementing and developing advanced diesel engine and modern manufacturing technology,” says Andrey Andreev, General Director of Transmashholding.

According to the agreement, Wärtsilä and TMH will set up a 50/50 holding company to establish and operate a new engine factory in Penza, Russia for assembling and testing engines, and for the production of certain larger engine components. Annual production is estimated to reach 250-300 engines and will serve the rail, marine and power plant markets. A large share of the production will be targeted toward the Russian market, with a smaller share likely to be exported outside Russia.

A new version of the Wärtsilä 20-engine, which is being especially developed for shunter locomotives, will be manufactured in the new factory. Shunter locomotives are used in rail yards to assemble and disassemble trains, and to move train cars.

The joint venture gives Wärtsilä a stronger industrial foothold in Russia, which offers significant opportunities for engine sales to the railway market, with Russian Railways, one of the biggest railway companies in the world, currently planning a modernisation of its locomotive fleet. There are also opportunities in the offshore, marine and power plant markets, while the growth prospects in the services market are also of interest to Wärtsilä.

The joint venture is the latest step in the co-operation between the two companies. In 2007, Wärtsilä and Bryansk Engineering Works (BMZ), a manufacturing subsidiary of Transmashholding, signed a licence agreement for BMZ to manufacture Wärtsilä low-speed marine diesel engines.

For further information, please contact:

Mr Ole Johansson
President & CEO
Wärtsilä Corporation
Tel: +358 10 709 5601
ole.johansson@wartsila.com

Mr Per Hansson
Vice President, Corporate Planning
Wärtsilä Corporation
Tel: +358 10 709 5668
per.hansson@wartsila.com

Mr Atte Palomäki
Group Vice President, Communications & Branding
Wärtsilä Corporation
Tel: +358 40 547 6390
atte.palomaki@wartsila.com

For investor information, please contact:

Josephine Mickwitz
Director, Investor Relations
Wärtsilä Corporation
Tel: +358 400784889
josephine.mickwitz@wartsila.com

Transmashholding in brief
Transmashholding is Russia’s leading rolling stock manufacturer.  Its products also include marine engines and small modular power plants. In 2009, net sales were EUR 1.9 billion. Transmashholding has its headquarters in Moscow and is a privately owned company whose major shareholders include Russian Railways. Alstom has agreed to acquire 25 per cent of TMH in a transaction to be closed during 2010. www.tmholding.ru

Wärtsilä in brief
Wärtsilä is a global leader in complete lifecycle power solutions for the marine and energy markets. By emphasising technological innovation and total efficiency, Wärtsilä maximises the environmental and economic performance of the vessels and power plants of its customers. In 2009, Wärtsilä’s net sales totalled EUR 5.3 billion with more than 18,000 employees. The company has operations in 160 locations in 70 countries around the world. Wärtsilä is listed on the NASDAQ OMX Helsinki, Finland. www.wartsila.com

Wärtsilä in Russia
Wärtsilä Vostok is an official representative office of Wärtsilä Corporation in Russia that offers its customers complete lifecycle power solutions and services for the marine and energy markets. The first representative office was opened in 1979 in Moscow. Currently, Wärtsilä in Russia employs 132 people and has operations in four locations; Moscow, Vladivostok, Murmansk, and St. Petersburg where the headquarters are located.

 

Photos

Picture of the new version of the Wärtsilä 20 engine
This new version of the Wärtsilä 20 -engine is being especially developed for shunter locomotives. The engines will be manufactured in Penza, Russia, in a new factory, to be established and operated by a holding company. The holding company is jointly owned by Wärtsilä and Transmashholding. Production of the engines is planned to start in 2012.

Signing of the agreement on 27 May 2010

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In these photos: Mr Andrey Andreev, General Director of Transmashholding; Prime Minister of the Russian Federation, Mr Vladimir Putin; Finland’s Prime Minister, Mr Matti Vanhanen; Mr Ole Johansson, President and CEO of Wärtsilä Corporation