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Siemens inks deal with Chinese company to revive gas turbine business

Siemens AG entered into a partnership with Chinese power generator State Power Investment Corp. Ltd. to expand their existing cooperation in power generation and jointly develop gas-to-power projects worldwide.

The partnership would create a China-based supplier ecosystem and allow the two companies to collaborate on digitizing power plants or in hydrogen utilization projects and smart energy management for a decentralized energy system, according to a March 26 news release.

The companies did not disclose the financial details of the partnership framework agreement, which follows a technology collaboration agreement on heavy-duty gas turbines between the German company and State Power Investment unit China United Heavy-duty Gas Turbine Co.

Reuters sees the cooperation agreement as Siemens' latest move to revive its troubled gas turbines business. The company was said to be exploring options for the business, which has been "witnessing a steep decline."

Siemens' power and gas division recorded a 50% year-over-year drop in fiscal first-quarter 2019 adjusted EBITA to €119 million, from €238 million in the comparable quarter of fiscal 2018.

"I assume after all ... I heard that we most likely will not see more than 80 large gas turbines in the market for [2019]. So this is figures that are not yet helping the capacities to be filled that are existing in that field," Siemens CFO Ralf Peter Thomas said during the company's fiscal first-quarter 2019 conference call on March 20.

The agreements also come as China expects growth in electricity demand and plans coal-to-gas switching in its energy mix to improve air quality. "With this agreement, both parties are set to benefit from the expected structural growth in China's electricity generation market," Siemens President and CEO Joe Kaeser said.