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Business deals

Siemens inks gas turbine deal with Chinese power group

Partnership covers technology also used in advanced fighter jet engines, experts say

A Siemens employee works on a gas turbine in Berlin. The industrial group's turbines are found in many of Germany's gas power plants.   © Reuters

HAMBURG, Germany -- German industrial group Siemens on Tuesday announced a partnership with China's State Power Investment Corp. to develop heavy-duty gas turbines for power plants.

Siemens and SPIC, one of China's biggest electric companies, will also jointly develop gas-to-power projects worldwide  and collaborate in digitalization of power plants, hydrogen projects and smart energy management for decentralized energy systems.

The announcement, which does not include financial details of the deal, comes amid increasing scrutiny in Europe over technology deals with China.

It was unclear from the announcement what, if any, Siemens technology would be transferred to the Chinese side, but industry watchers saw the deal as another example of China seeking to acquire critical German designs and know-how.

Germany's gas power plants are reputed to be the most efficient in the world, with almost all of them running on Siemens turbines.

"Siemens has mastered technology that makes the blades withstand extremely high temperatures of around 1,400 C," Hermann-Josef Wagner, a professor of energy systems at Ruhr University Bochum, told the Nikkei Asian Review.

"It is owing to this technology that the efficiency of gas power plants has increased greatly in recent years, and it is unthinkable that the new partnership would not lead to a transfer of this technology to China," he added.

Wagner said the technology in question also is used in modern fighter jet engines -- a view echoed by a second German engineering expert who spoke with Nikkei. China's defense industry has struggled to master turbofan technology, which allows for more efficient engines on par with those used in Western and Russian jets, analysts say.

German daily Handelsblatt cited unnamed Siemens insiders as saying the company will share only software design tools and other auxiliary means with its Chinese counterpart, not the blueprints of the turbines.

The insiders added that Siemens will withhold software design tools used for the company's newest turbines, according to the Handelsblatt report.

While gas-fired power plants are increasingly popular in China as they produce less air pollution than coal, demand for gas turbines has been on the decrease in Europe amid the continent's transition away from fossil fuels. Siemens has slashed thousands of jobs in the power and gas sectors since 2017.

Under the partnership, Siemens will work with China United Heavy-duty Gas Turbine Co., or UGTC, a joint venture in which SPIC holds a majority stake.

According to German media, the partners aim to complete the first gas turbine prototype around 2023, with Siemens hoping to distribute its own gas turbines in China until then.

"With this agreement, both parties are set to benefit from the expected structural growth in China's electricity generation market," said Joe Kaeser, president and CEO of Siemens.

"This agreement marks a further important milestone following our successful technology collaborations with Chinese enterprises over the last decades," he added.

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