Manufacturers

Siemens to exit solar business; build new plant in South Carolina

Siemens said today it
will exit its unprofitable solar business because it has not met profitability
goals and is already in talks with potential unidentified buyers. This news
comes just days after Siemens announced that another of the company’s
divisions, Siemens
Industry, Inc., a manufacturer of mechanical and electrical drive equipment, will
build a new assembly and manufacturing facility in Mauldin, South Carolina.

The 45,600 square-foot plant
is expected to cost more than $2 million and create more than 30 new jobs.

But the decision to exit solar power
created a buzz around the energy sector yesterday. Many analysts were not
surprised, however, based on statements made earlier this month by company
executives that they would be concentrating on core profitable businesses.

In a statement released yesterday, the
Munich-based Siemens said, “Due to the changed framework conditions, lower
growth and strong price pressure in the solar markets, the company’s
expectations for its solar energy activities have not been met.”

Siemens’ solar business only makes up a
small portion of the company’s overall sales with revenues last fiscal year of
about $409 million or 300 million Euros. Siemens had sales of EUR73.52 billion.

Siemens will focus its renewable energy
activities on wind energy and hydro power. More than 7,000 of its employees
work in the wind power division and another 2,000 work in the related service
business. Even in the wind sector, however, Siemens recently reduced its workforce in three states.

Siemens is active in solar thermal energy
generation, using technology that converts sunlight to heat, which drives a
heat engine. Siemens expanded in this field three years ago with the
acquisition of Israel-based Solel Solar Systems for EUR284 million.

The engineering company will continue to sell related products
including steam turbines, generators, and control systems to customers
operating solar power plants, it said.

Siemens said this month it would review
underperforming businesses as part of its new savings plan, to catch up with
the profits of peers such as Swiss group ABB or U.S.-based General Electric,
news reports said.

The businesses up for sale are solar thermal power
plant maker Solel, whose former chief said he was considering buying back the
business, and the photovoltaics unit, according to the Reuters news agency.

At Siemens, the sale of the solar businesses puts an
end to decades of investment in the sector. It was part of a pilot photovoltaic
project on the Greek island of Kythnos in the early 1980s, and in the 1990s it
built up one of the world’s biggest makers of solar panels, which it later sold
to Shell, Reuters reported.

In 2009, it paid $418 million for Solel, anticipating
almost 20% market growth by 2020, but later suffered impairment losses as the
business failed to generate profits.

Meanwhile, Siemens
continues its expansion in South Carolina. The new facility announced last week
will produce new gear motors and  be part of the company’s Drives Technologies
Division, Mechanical Drives Business Unit, the GreenvilleOnline web site
reported.

Doug Keith, president of the
Siemens Drive Technologies Division, said the new geared motor facility will
place the company and its products manufactured in South Carolina closer to
machine builders and manufacturers in the Southeastern United States

The company will be building-out
an existing building at 25H Brookfield Oaks Drive to house its new Mauldin
plant, a company spokesman said.  The facility will support production of
Simogear, a new geared motor from Siemens.

“The announcement of this
plant adds to Siemens’ ability to be a single-source provider of integrated
drive train solutions for industry. Our portfolio of gears, motors, drives and
automation is helping to lead a global transformation of the industrial and
manufacturing sector, by increasing productivity and energy efficiency to levels
never experienced before,” Keith said, according to the Aiken, S.C. Leader
newspaper.

 “Our portfolio of gears,
motors, drives and automation is helping to lead a global transformation of the
industrial and manufacturing sector by increasing productivity and energy
efficiency to levels never experienced before,” he added.

Company officials said the site combined
all of the necessary elements Siemens was seeking in a location, including
proximity to transportation infrastructure, such as interstates and ports and a
highly-skilled workforce with reputable educational institutions nearby.

With a global workforce of more than
100,000 employees, the Industry Sector comprises the Industry Automation, Drive
Technologies and Customer Services Divisions as well as the Metals Technologies
Business Unit.

In July Siemens Industry, Inc. began shipping drives to support a
multi-million dollar contract with Abengoa, an international developer of
renewable energy solutions, supplying integrated drive technology solutions for
Solana, a 280MW (net) facility near Gila Bend, Ariz. Upon completion Solana will be the world’s largest
concentrating solar power (CSP) plant, according to altenergy.com

Earlier this month, Siemens said it may cut jobs
and close offices
to stop a profit slide because customers have put of
ordering engineering equipment because of Europe’s economic crisis.

The company said at the time, according to Reuters,
that Siemens Chief Executive Peter Loescher may be forced to tackle a gap
between a handful of Siemens’ handful of market leading businesses and its
underperforming units-wind and solar power as well as the new infrastructure
and Cities unit-possibly by divestiture.

Also,
another Siemens division, Siemens Energy, a wind energy equipment manufacturer,
said it would lay off more
than 600 employees
in three states because of a downturn in orders. The
company said that the drop off in orders is partially due to uncertainty about
the federal Production Tax Credit, which is due to expire Dec. 31. The
credit helps to finance wind turbine installations, and industry advocates say
new wind projects have nearly ground to a halt because of its potential
expiration.

In a prepared statement, Siemens said that
uncertainty and “the current trend toward more natural gas based power
generation due to record low natural gas prices and still lingering recession
impacts on energy demand growth, are casting a shadow on the short-term future
of the entire U.S. wind power industry.”

Over the
past five years, Siemens has invested $100 million in building its wind power
production facilities in the United States.

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