Siemens AG (SI) recently bought a 40% stake in Israel-based Areva Power Co. for $15 million. Areva develops, builds and operates photovoltaic plants. This is another significant step in strengthening green and sustainable technology initiative by Siemens. Due to intensive sunlight and steadily growing demand for energy, Israel is an ideal location for developing solar energy business.

It will now be possible for Siemens to build Israel’s first commercial solar farm in the region between the Dead Sea and the Red Sea. The company will handle project management including engineering and construction of the photovoltaic plants. It has signed a framework agreement to build plants with a total output of 40 megawatts (MW). The first project will be construction of a plant with an output of up to 4.9 MW at Kibbutz Ketura, in the southern desert of Israel.

Areva Power was founded in 2006 and is headquartered at Kibbutz Ketura/Eilat. This subsidiary of Global Sun Power Ltd. has 20 employees. The equity investment in Areva is aimed at strengthening the Siemens’ environmental portfolio. Last year, Siemens’ environmental technologies generated sales of 19 billion Euros, roughly one-fourth of the company’s total revenue.

By 2010, Siemens plans to increase the share of environmental technologies to around 25 billion Euros. It is investing in Areva through its equity investment company Siemens Project Ventures GmbH (SPV).

Together with its partners, SPV has been involved worldwide in the development of infrastructure projects, particularly in the energy, transport and telecommunication sectors. SPV is a Group company of Siemens Financial Services GmbH (SFS), an international provider of financial solutions in the business-to-business area.

Major competitors of Siemens include ABB Ltd. (ABB) and General Electric Co. (GE). We currently have a Neutral Recommendation on the stock.

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