Siemens partner biggest loser in nuclear exit

FRANKFURT, Sept 19 Mon Sep 19, 2011 10:51am EDT

Related Topics

FRANKFURT, Sept 19 (Reuters) - Siemens' (SIEGn.DE) exit from its nuclear partnership with Rosatom robs the Russian player of a famous brand name it badly needs to compete with the likes of Areva NP , General Electric and Toshiba .

Siemens Chief Executive Peter Loescher said on Sunday the company was giving up its nuclear power business including a planned partnership with Rosatom in response to the German government's decision to quit the energy source.

"The (nuclear) chapter is closed for us," Loescher told German weekly magazine Der Spiegel, declaring Siemens' official position for the first time since the Fukushima crisis in Japan.

Siemens had kept mum about its nuclear ambitions and on Rosatom, the Russian state nuclear corporation with which it signed a memorandum of understanding in March 2009 to form a nuclear joint venture.

"They (Rosatom's rivals) are all probably happy because the credibility of Rosatom in the international market would have been reinforced if they had Siemens as a partner," analyst Bernd Laux of Cheuvreux said.

"Rosatom is now on its own against Areva, the Americans and the Japanese," he said.

"The reputation of Siemens is outstanding and is recognised world wide. It would have helped Rosatom." he added.

The Russian company said it was aware of the reasons for Siemens' decision. "We understand the logic...It is clear it is not a slight against Rosatom," spokesman Sergey Novikov told Reuters in Moscow.

"Siemens has to follow the line of the German government which decided a total shutdown of nuclear assets...Rosatom and Siemens will continue to work together in other fields, including nuclear medicine," he added.

He declined to comment on the potential search for new partners.

RUSSIAN ALLIANCE

Siemens and Rosatom had initially planned to form a joint venture through Rosatom subsidiary Atomenergoprom in March 2010.

According to analysts, there were indications Siemens would not just be involved in supplying the conventional island equipment , as it did with its Areva partnership, but would also be involved in the main nuclear plant business.

A nuclear power plant has two main parts. The conventional island houses equipment to convert into electricity the steam from the nuclear island, where the nuclear fuel is located.

"From the Siemens point of view nothing has changed. They are not moving into the active nuclear part of the business -- the bad part, everything that has to do with uranium," analyst Thomas Langer of WestLB said.

"Some interviews pointed to Siemens going into that part and whenever I asked around, I never really got an answer," Langer said.

"One competitor less is a good thing for the rest (of the industry rivals). But for sure, Siemens will now move very, very aggressively into other segments of the market, such as gas and renewables," Langer said.

Atomenergoprom was created by Vladimir Putin, while he was Russian president, to merge all of Russia's civilian nuclear assets and help them compete in the global market.

Russia, one of the world's biggest sellers of uranium enrichment services, has been trying to break into the prosperous nuclear markets of the United States and the European union.

Rosatom has a number of existing joint building projects with other countries that did not involve Siemens, including China, India, Ukraine, Turkey and Bangladesh.

Competitors include Areva NP, a unit of Areva S.A. CEPFi.PA; Japan`s Toshiba Corp, which owns U.S.-based Westinghouse; and GE Hitachi, the nuclear venture of U.S. conglomerate General Electric and Japan`s Hitachi .

Siemens left its joint venture with Areva NP in early 2009, unhappy with the fact that it had no say as a junior partner.

At the time, Siemens expected the nuclear market to have a renaissance as governments sought to cut carbon emissions worldwide.

But the divorce from Areva was marked by bitter legal battles, with the French partner suing Siemens and declaring the latter's partnership with Rosatom violated a non-compete clause.

A court ruled in May that Siemens flouted the joint venture agreement and told the German conglomerate to pay Areva 648 million euros ($893 million).

The court also banned Siemens from competing with Areva for four years until 2013, dealing another blow to Siemens' ambitions in the nuclear field after the Fukushima crisis forced a sea-change in Germany's nuclear policy. ($1 = 0.725 Euros) (Additional reporting by John Bowker in Moscow; Editing by David Cowell)

FILED UNDER: