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Germany Blocks MAN’s Sale of Gas Turbine Business to China

MAN Energy Solutions
MAN Energy Solutions' agreement to sell its gas turbine business to China is being blocked by the German goverment (MAN)

Published Jul 3, 2024 12:57 PM by The Maritime Executive

 

Citing national security concerns, Germany plans to block the proposed sale of MAN Energy Solutions’ gas turbine business to a subsidiary of China’s state-owned shipbuilding company CSSC. MAN had announced the deal in June 2023 saying that the product area was no longer central to the company’s growth and divesting of the business was in keeping with the strategy to focus on offering for decarbonization.

MAN produced and serviced gas turbines of up to 8 MW in size with applications as mechanical drives or for power generation. The engines are also used in offshore applications. The shipping sector filtered with gas turbines as an early step to reduce emissions and improve efficiency. However, the engines proved costly in the maritime sector. For example, cruise lines including Cunard and Princess Cruises added gas turbines as adjuncts to the diesel motors on ships built in the early 2000s. Princess later removed them from at least one ship while Cunard stopped using them to reduce fuel costs. Royal Caribbean International and Celebrity Cruises also installed GE’s gas turbines on ships built around the same time.

The acquisition called for the unit including production centers in Germany and Switzerland, R&D, service and sales, and all related businesses to be acquired by Longjiang Guanghan, an affiliate of China Shipbuilding Industry Corporation and a subsidiary of China State Shipbuilding Corporation (CSSC). The company is a provider of small and medium-sized gas turbines in a 5 to 50 MW range as well as other combustion technologies. MAN was providing a five-year guarantee for the production sites in Oberhausen, Germany, and Zurich, Switzerland. 

MAN Energy Solutions had already taken the decision prior to 2023 to separate from the gas turbine product area and called the acquisition and means of providing for the future development of the gas turbine series. They said it would also preserve approximately 100 jobs associated with the unit.

The company launched a business strategy plan in 2020 that calls for the transformation of the business into a solutions provider for sustainable energy. Acquired in 2011 by Volkswagen AG, MAN has been working to enhance its business performance. In December 2020, Volkswagen committed to maintaining its position for at least four more years as part of union contract negotiations.

Germany’s Economy Minister Robert Habeck announced the decision to reject the acquisition deal citing national security concerns. Last September Germany had said it would be taking a close look at the planned sale of the assets to China. Unconfirmed media reports cited close ties between Longjiang and the Chinese military. Under German law the government has the right to review and approve deals where assets are being sold outside the European Union. In 2022/2023, the government used the same powers to force a reduction of the size of the investment COSCO planned to make in a Hamburg container terminal.

Reuters is reporting that MAN is expected to wind down gas turbine development and product after today’s decision.