Siemens, John Wood seek South African approval of joint venture
Two global players in energy and electrical engineering, Siemens and John Wood Group, want to form a joint venture and are asking the approval of the South African competition authorities to continue with the deal.
It appears that the Kendrum joint venture, which is still to be formed, would not operate in South Africa, but given the global nature of the transaction and the presence of both companies in South Africa, the transaction meets the monetary threshold for a notification in South Africa.
The Competition Commission has recommended that the Competition Tribunal approve the deal without conditions. The tribunal hearing takes place on Friday.
John Wood is an international energy services company and its South African subsidiary, Wood Group, is involved through its gas-turbine business in the construction of the Hitachi boilers at the Medupi and Kusile power stations, being built by Eskom.
Final delivery on the boilers was delayed by contractual disputes between Eskom and Hitachi.
Eskom confirmed in December that a second contractor had been "engaged" to design and install the control and instrumentation boiler protection system software for its Medupi plant.
Eskom said French multinational company Alstom had failed to deliver on the contract. There has been speculation that Siemens could replace Alstom.
An Alstom-designed software operating system, without which boilers cannot be operated, has failed numerous tests. The software should have been ready by December 2012, but by about November last year it was still not functional.
Siemens and John Wood Group said the information they had provided to the Competition Commission regarding the effect of the transaction on the contracts was confidential.
As part of the transaction Siemens will contribute its global TurboCare business to the joint venture and John Wood Group will contribute its gas turbine services business. This will give John Wood Group a controlling stake of 51% in the newly formed entity.
TurboCare provides services relating to non-Siemens manufactured gas turbines. These services include modifications, upgrades and replacements. TurboCare is not active in South Africa. The commission has assessed the competitive effect of the transaction on the South African market and found that it was unlikely to substantially lessen competition.
It recommended that the Competition Tribunal approve the deal without conditions.
The Competition Tribunal will hear the matter on Friday and decide whether to accept the commission’s recommendation, or to approve it with conditions or even prohibit it.