Wärtsilä has signed a joint venture agreement with the Russian company Transmashholding (TMH) to manufacture modern and multi-purpose diesel engines in Russia. The engines, including a new and technically advanced version of the Wärtsilä 20-engine, will be used in shunter locomotives and for various marine and power applications. The two companies will jointly engineer the railway application. Wärtsilä and TMH will also evaluate broadening the activities of the joint venture to include the development and manufacturing of other diesel engine models in the future.

The value of Wärtsilä’s investment in the joint venture is approximately €30 million and production of the engines is planned to start in 2012. The closing of the agreement is subject to the relevant regulatory approvals, which are expected during the coming months.

The agreement was signed in Lappeenranta, Finland, in the presence of the prime minister of the Russian Federation, Mr Vladimir Putin, and Finland’s prime minister, Mr Matti Vanhanen.

“This joint venture between Wärtsilä and Transmashholding is a strategically important step for Wärtsilä to broaden its business into the rail market. It offers Wärtsilä a promising opportunity to leverage its high competence and expertise in advanced engine and modern manufacturing technology. This creates the potential to increase sales of Wärtsilä’s products and services beyond our traditional marine and energy markets,” says Mr Ole Johansson, president and CEO of Wärtsilä Corporation.

“Wärtsilä has strong experience and a proven track record for implementing and developing advanced diesel engine and modern manufacturing technology,” says Andrey Andreev, general director of Transmashholding.

According to the agreement, Wärtsilä and TMH will set up a 50/50 holding company to establish and operate a new engine factory in Penza, Russia, for assembling and testing engines, and for the production of certain larger engine components. Annual production is estimated to reach 250-300 engines and will serve the rail, marine and power plant markets. A large share of the production will be targeted toward the Russian market, with a smaller share likely to be exported outside Russia.

A new version of the Wärtsilä 20-engine, which is being specially developed for shunter locomotives, will be manufactured in the new factory. Shunter locomotives are used in rail yards to assemble and disassemble trains, and to move train cars.

The joint venture gives Wärtsilä a stronger industrial foothold in Russia, which offers significant opportunities for engine sales to the railway market, with Russian Railways, one of the biggest railway companies in the world, currently planning a modernisation of its locomotive fleet. There are also opportunities in the offshore, marine and power plant markets, while the growth prospects in the services market are also of interest to Wärtsilä.

The joint venture is the latest step in the co-operation between the two companies. In 2007, Wärtsilä and Bryansk Engineering Works (BMZ), a manufacturing subsidiary of Transmashholding, signed a licence agreement for BMZ to manufacture Wärtsilä low-speed marine diesel engines.