Wartsila Enters Rail Market Through Joint Venture With Transmashholding in Russia

HELSINKI, May 27, 2010 /PRNewswire-FirstCall/ -- Wartsila 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 Wartsila 20 -engine, will be used in shunter locomotives and for various marine and power applications. The two companies will jointly engineer the railway application. Wartsila 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 Wartsila'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 Wartsila and Transmashholding is a strategically important step for Wartsila to broaden its business into the rail market. It offers Wartsila 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 Wartsila's products and services beyond our traditional marine and energy markets," says Mr Ole Johansson, President and CEO of Wartsila Corporation.

"Wartsila 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, Wartsila 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 Wartsila 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 Wartsila 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 Wartsila.

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

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. http://www.tmholding.ru

Wartsila in brief

Wartsila is a global leader in complete lifecycle power solutions for the marine and energy markets. By emphasising technological innovation and total efficiency, Wartsila maximises the environmental and economic performance of the vessels and power plants of its customers. In 2009, Wartsila'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. Wartsila is listed on the NASDAQ OMX Helsinki, Finland. http://www.wartsila.com

Wartsila in Russia

Wartsila Vostok is an official representative office of Wartsila 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, Wartsila in Russia employs 132 people and has operations in four locations; Moscow, Vladivostok, Murmansk, and St. Petersburg where the headquarters are located.

SOURCE Wartsila Corporation