Siemens and Gamesa Combine Turbine Manufacturing – 6/22/16

In wind energy news, Siemens AG and Gamesa Corp. Tecnologica SA agreed to combine their wind-turbine manufacturing businesses.

The agreement comes at a time when worldwide installations are booming, but margins for making turbines are narrowing on increased competition. Xinjiang Goldwind Science & Technology Co. of China took the largest market share in manufacturing of wind power related machinery last year.

After Goldwind took the place as top supplier by market share last year after beating out Vestas and GE, the global rankings of suppliers were already shown to be fluid. Now Siemens and Gamesa, each having 5.3% of total installations last year will have a combined 10.6% share. At just that share, the new entity would only be surpassed by Goldwind and Vestas. Time will tell if the whole does better or worse than its parts.

Synergy was a large part of the argument for the deal. The two firms identified cost savings of 230 million euros expected within four years of the deal and hold most of their installations in different parts of the market.

Siemens and Gamesa have 69 GW of turbines installed worldwide, a measure that is typically used to estimate the revenue they may get from servicing machines. Vestas currently claims to have 75 GW of installed turbines.

“The combination of our wind business with Gamesa follows a clear and compelling industrial logic in an attractive growth industry, in which scale is a key to making renewable energy more cost-effective,” Siemens Chief Executive Officer Joe Kaeser said in a statement.

“As a leading wind power player especially in emerging markets, Gamesa is a perfect partner for us,” said Lisa Davis, member of the managing board of Siemens. “Teaming up will enable Siemens and Gamesa to offer a much broader range of products. The move will put Siemens and Gamesa in the best position to shape the industry for lower cost of renewable energy to the consumers.”

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