Siemens rethinks nuclear ambitions

German engineering giant Siemens AG is considering whether to abandon its goal of becoming a major player in the atomic-power industry, according to people familiar with the matter, as Japan’s nuclear crisis continues to unfold.

While top executives at Siemens haven’t made any decisions or proposed a pullback to its supervisory board, they have been rethinking the company’s two-year-old plan to form a partnership with the Russian State Atomic Energy Corp., or Rosatom, these people said. That plan has been the centrepiece of Siemens’s nuclear strategy.

The second thoughts at Siemens show how swiftly the accident at the tsunami-stricken Fukushima Daiichi plant in Japan has upended the nuclear-energy revival that the company and its rivals had expected amid rising global energy demand and concerns about global warming.

While others in the nuclear industry, such as General Electric Co. and Toshiba Corp.’s Westinghouse Electric Co. unit, have continued to express confidence in the future of atomic power, Siemens executives have been more guarded in their public comments in recent weeks.

“Fukushima has to be an occasion for taking stock [of nuclear energy],” Siemens finance chief Joe Kaeser told Germany’s Der Tagesspiegel newspaper in an interview this week.

“The world has to do some soul-searching,” he added, but declined to elaborate on Siemens’ own nuclear aims.

Some senior officials at Siemens, whose businesses range from high-speed trains to medical-imaging equipment, were already sceptical about the potential for a so-called nuclear renaissance. Even before the Fukushima crisis, many nuclear-reactor projects around the world were stalled or mired in cost-overruns. Since the crisis, those doubts have grown as many countries have started reviews or frozen plans to build new nuclear plants.

Siemens’s nuclear strategy has always been complicated by antinuclear sentiment in Germany, home to nearly a third of its work force. There, the Fukushima accident sparked massive street protests against a government move to extend the working lives of Germany’s nuclear reactors. In response, Chancellor Angela Merkel ordered the temporary shutdown of seven reactors within days of the first blasts at the Japanese plant.

Some Siemens senior officials and employees also worry the company’s nuclear ambitions appear increasingly at odds with Chief Executive Peter Löscher’s efforts to make it a leader in environmentally friendly infrastructure—from smart electricity grids to wind turbines to solar thermal power plants.

Last month, Siemens unveiled a restructuring aimed at bolstering its position in those markets, particularly “green” urban infrastructure, which it hopes will propel its annual sales past €100 billion ($145 billion) within a few years, up from €76 billion in the fiscal year ended Sept. 30, 2010.

The Fukushima crisis comes just as Siemens, which was involved in the construction of most of Germany’s 17 nuclear plants and was a major force in the industry by the late 1980s, is approaching a crossroads in its nuclear alliances. About a decade ago, after the nuclear industry’s momentum stalled in the wake of the 1986 Chernobyl disaster, the company pooled much of its nuclear business into a joint venture with France’s Areva SA.

But as energy-hungry emerging markets like China and India fuelled demand for reactors, Siemens said in early 2009 that it was pulling out of the Areva venture, complaining that its minority holding limited its managerial influence. Instead, it sought an alliance with Rosatom to build and modernize nuclear-power plants across the globe.

At the time, Mr. Löscher hailed Siemens’s memorandum of understanding with Rosatom as an opportunity “to enlarge our footprint in the nuclear business.” Atomic energy “will play an important role in low-carbon-dioxide power generation,” he said at the signing.

A protracted legal battle over its exit from the Areva NP joint venture has kept Siemens from pursuing the Rosatom partnership. This week, however, the company said it completed the long-planned sale of its 34% stake in the venture to Areva for an initial price of €1.62 billion.

A Paris arbitration court is expected to decide in the coming weeks on the final sale price and whether Siemens breached its contract, as Areva alleges, when it moved to forge the Rosatom partnership. Siemens responded to the allegations in 2009 by seeking to have them dismissed and pushing for a higher price for its venture stake.

Both Siemens and Rosatom officials declined to comment on their partnership plans before the French legal proceedings are over. But they had originally aimed to combine Siemens’s expertise in building steam turbines and generators and large-scale plant projects with the Russian company’s experience in building nuclear reactors.

Heinz Steffen, an analyst at Fairesearch, said that Siemens won’t face a substantial loss of revenue if it abandons the planned Rosatom partnership. But he added that Siemens would be unlikely to pull out of nuclear-plant activities altogether due to its long-term contracts to supply and service nuclear projects around the world.

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