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Wood Group and Siemens in $1.1 billion joint venture

Staff writer |
Wood Group has formed a $1.1 billion joint venture with Siemens AG to provide services for gas turbines.

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Wood Group, which designs, builds and maintains oil and gas facilities and pipelines, has found it difficult to compete with companies that manufacture their own gas turbines. By teaming up with Siemens, the company hopes to boost the division's competitiveness.

"The risk profile in our project group within gas turbine services was too high with large lump-sum projects," Bob Keiller, chief executive of Wood Group, told analysts on a conference call. Mr. Keiller said the joint venture was the "best option" and offered more long-term value for shareholders than a direct sale.

The Siemens and Wood Group units have combined assets of $1.1 billion. The joint venture is expected to deliver annual cost savings to Wood Group of around $15 million within three years. Margins should improve but revenue will be lower next year.

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