Wärtsilä Corporation Interim Report q3 2014

Strategic projects, acquisitions, joint ventures, and expansion of the network

Wärtsilä Yuchai Engine Co., Ltd, the 50/50 joint venture between Wärtsilä and Yuchai Marine Power Co., Ltd, inaugurated its new factory in Zhuhai, China in September. The new factory site covers a total area of 266,700 square meters. The factory will be used for the assembly and testing of Wärtsilä 20, Wärtsilä 26 and Wärtsilä 32 medium-speed engines. The plant is expected to be in full production before the end of 2016. The inauguration ceremony for Wärtsilä’s new fully-owned manufacturing facility in Brazil is expected to take place in the fourth quarter of 2014.

In July, Wärtsilä and China State Shipbuilding Corporation (CSSC) signed an agreement to establish a joint venture for the manufacturing of medium and large bore medium-speed diesel and dual-fuel engines. Wärtsilä’s share of the joint venture will be 49%. The size of Wärtsilä's equity investment is approximately EUR 12 million. The CSSC Wärtsilä Engine (Shanghai) Co. Ltd factory will be located in Lingang, Shanghai and is expected to have its first engine ready for delivery by the end of 2015. The joint venture will target the growing offshore and LNG markets, as well as the auxiliary engine market for very large container vessels.

The divestment of Wärtsilä’s 50% share in the joint venture Wärtsilä TMH Diesel Engine Company LLC to Transmashholding, the other joint venture party, was completed in July. The joint venture was established for the manufacture of modern and multipurpose diesel engines to be used in shunter locomotives, as well as in various marine and power applications. The value of the agreement is approximately EUR 12 million and the transaction does not have a significant impact on Wärtsilä’s operating result.

Discontinued operations

Due to the reorganisation of its two-stroke operations, Wärtsilä has commenced reporting the two-stroke business as discontinued operations.

In July, Wärtsilä and China State Shipbuilding Corporation (CSSC) signed an agreement to establish a joint venture, which will take over Wärtsilä's two-stroke engine business. Following the closure of the transaction CSSC will own 70% of the business and Wärtsilä’s ownership will be 30%. Responsibility for servicing Wärtsilä's two-stroke engines will remain with Wärtsilä Services. The value of the transaction is approximately EUR 46 million. The closing of the transaction is subject to the required regulatory approvals, which are expected in the first quarter of 2015. In August, Wärtsilä divested its shares in the joint venture Qingdao Qiyao Wärtsilä MHI Linshan Marine Diesel Co. Ltd. The joint venture company was established for manufacturing large, low-speed marine diesel engines. Wärtsilä’s shares in the joint venture were transferred to the majority shareholder, Qingdao Qiyao Linshan Power Development Co Ltd, a company fully owned by China Shipbuilding Industry Corporation. The transaction price is not significant.

The financial impact of the reorganisation of the two-stroke business is dependent on the timing of the closing of the transactions and certain related mechanisms. The effect on Wärtsilä’s continuing operations is positive. Further financial information can be found in the discontinued operations table included in the condensed interim financial statements.


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