Strategic steps

• In May, Wärtsilä signed a joint venture agreement with the Russian company Transmashholding (TMH) to manufacture modern multipurpose 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 EUR 30 million and production of the engines is planned to start in 2012.
• Wärtsilä continued to expand its service network with the inauguration of a new office and workshop facility in Panama.

Strategic acquisitions, joint ventures and expansion of the network 2009

• Wärtsilä continued pursuing its strategy of expanding its network with new service facilities in many countries, including Ukraine, Cameroon, Hungary, Chile, Dubai, Russia and Sweden. These facilities provide a good base for future service growth, and expansion the network will continue to be one of Wärtsilä’s strategic focus areas in the future.
• In May, Wärtsilä acquired 60% of the shares of Wärtsilä Navim Diesel of Italy, thus increasing its ownership of the company to 100%. Wärtsilä Navim Diesel, which specialises in marine sales and service, has a strong market position, particularly in the Cruise & Ferry segment. The transaction resulted in EUR 8 million of new goodwill.

• In March, Wärtsilä signed an agreement to acquire the Norwegian company Maritime Service AS, which specialises in ship service, and mechanical and reconditioning services. Maritime Service has its operations in Ålesund, on the west coast of Norway. The annual net sales of Maritime Service were NOK 26 million (EUR 3.2 million) in 2007.
• In April, Wärtsilä acquired the Danish company International Combustion Engineering A/S (I.C.E.) that specialises in project engineering and the service and repair of steam boilers and ancillary burner systems. The company’s annual net sales amounted to DKK 46.8 million (EUR 6.3 million) in 2007.
• In June, Wärtsilä acquired the German company Claus D. Christophel Mess- und Regeltechnik GmbH (CDC), which specialises in the design, delivery and service of automation systems for ship owners and yards. CDC’s annual net sales were EUR 2.1 million in 2007.
• In July, Wärtsilä signed an agreement to acquire the global ship design group Vik-Sandvik, a leading independent group providing design and engineering services to ship owners and the ship building industry worldwide. This acquisition was a major step in Wärtsilä’s strategy to strengthen its position as a total solutions provider and to be the most valued partner for its customers. Wärtsilä’s goal is to become the leading provider of ship design services in various segments. The value of the acquisition was EUR 132 million, with an additional maximum sum of EUR 38 million to be paid based on the performance of the business over the next three years. In 2007, Vik-Sandvik’s net sales were EUR 55 million and the profitability is at a very good level. The number of employees is 410. Vik-Sandvik has been included in the consolidation since August 1, 2008.
• In September, Wärtsilä acquired Navelec SAS, a French company specialising in marine navigation and communication systems, electrical marine services, and control and automation services. Through this acquisition Wärtsilä is able to broaden its service offering and technological knowledge in the areas of navigation and communications. It also strengthens Wärtsilä’s position as the leading service provider within electrical marine and automation services. Navelec’s annual net sales were EUR 7 million in 2007. The company employs 45 people.
• In September Wärtsilä continued to expand within the field of ship design with the signing of an agreement to acquire Conan Wu & Associates Pte Ltd (CWA), a leading naval architecture and ship design company in Singapore. The deal also includes partnership agreements regarding CWA’s businesses in Malaysia and China. The price of the deal is EUR 23 million with an additional amount to be paid based on the performance of the business during the years 2008-2010. In 2007, CWA’s net saleswere EUR 10.7 million and the profitability was at a very good level. CWA has 66 employees in Singapore. The acquisition price was paid and the company consolidated during the fourth quarter.
• In July, Wärtsilä Corporation and the Manara Consortium formed a joint venture, Manara Wartsila Power Ltd (MWP), which aims to become the leading developer of decentralised independent power producer (IPP) projects in Islamic countries. Wärtsilä owns 19.9% of the company.
• In September, Wärtsilä and Metso signed a contract to form a joint venture combining Metso’s Heat & Power business and Wärtsilä’s Biopower business. The new joint venture is one of Europe’s leading providers of medium- and small-scale power and heating plants, focusing on renewable fuel solutions. Metso owns 60% and Wärtsilä 40% of the joint venture. It is estimated that in 2008 the consolidated annual pro forma net sales of the joint venture was approximately EUR 130 million, and the number of employees approximately 200. All regulatory approvals required for the closing of the transaction were received during the fourth quarter of 2008. The order book relating to the Bio-Power business, EUR 116 million, was transferred to the joint venture at the end of the year and was thereby eliminated from Wärtsilä’s order book.
• During the review period, Wärtsilä Services continued the expansion of its network by opening and expanding offices and workshops in Namibia, Chile, Brazil, Madagascar, Azerbaijan, China, Turkey and Dubai. Geographical expansion continues to be part of Wärtsilä’s strategic focus. 

• In January Wärtsilä and Hyundai Heavy Industries Co. Ltd (HHI) signed an agreement to set up a 50/50 -owned joint venture in Korea to manufacture dual-fuel engines for LNG (liquified natural gas) carriers for the Korean, Japanese, Chinese and Taiwanese shipbuilding markets. The first engine will be delivered during the second half of 2008. The joint venture will employ approx. 150 people.
• In February Wärtsilä acquired the Swedish company Senitec AB. The company specializes in environmental technology products for separating waste, such as oily water and sludge, in power plants, harbours and ships. The acquisition added 5 people to our workforce.
• In February we acquired the entire business of Marine Propeller (Pty) Ltd in Cape Town, South Africa. Marine Propeller (Pty) Ltd focuses mainly on repairing propellers. The acquisition added 8 people to our workforce.
• In May we continued extending our service offering in Propulsion services with the acquisition of UK-based propeller repair company McCall Propellers Ltd. The acquisition added 33 people to our workforce.
• In July we finalized the of the marine business of Railko Ltd. in the UK, a company specializing in stern tube bearing technology. The acquisition improves our competitive position in oil-lubricated bearing systems and adds water-lubricated bearings to the product portfolio. The acquisition added 25 people to our workforce.
• In August we acquired the Scottish company, Electrical Power Engineering (Scotland) Ltd. The company specializes in electrical power engineering solutions for marine, offshore, industrial and utilities segments. The acquisition added 31 people to our workforce.

Other strategic issues:

• In January Wärtsilä announced a public offer to the minority shareholders of Wärtsilä India Ltd to acquire 1,240,599 shares, or 10.3% of the share capital. The delisting offer was successful and 8.2% of the total shares were acquired. The shares of Wärtsilä India Ltd were delisted from the Bombay Stock Exchange on 18 June 2007.
• To improve marine customer service in the rapidly growing Chinese markets, we opened a large reconditioning workshop in Shanghai in March. In May a service workshop was also opened close to Saigon port in Ho Chi Minh City and an office in Hanoi to serve the growing Vietnamese shipping, shipbuilding and power industries.
• The demand for training services is steadily rising and Wärtsilä opened a new training centre in South Korea, the world’s largest shipbuilding country, to provide training for customers’ engineers.
• In May Wärtsilä and Vietnam Shipbuilding Industry Corporation (Vinashin) signed a licence agreement for the manufacture and sale of Wärtsilä low-speed marine engines in Vietnam.
• In October Wärtsilä and Bryansk Engineering Works (BMZ) signed a license agreement for the manufacture of Wärtsilä's low-speed marine diesel engines in Russia.
• In November Wärtsilä and V.Ships, specialised in ship management, agreed to cooperate on a provision of a broad spectrum of marine and technical services in the marine market.
• Wärtsilä Ship Power was reorgaised into five Ship Power customer segments: Merchant, Offshore, Cruise& Ferry, Navy and Special vessels. The aim is to better respond to market requirements and technology development, as well as to be prepared for market fluctuations.

• In February Wärtsilä acquired Aker Kvaerner Power and Automation Systems AS (AKPAS) from Aker Kvaerner. The acquisition supports Wärtsilä’s growth strategy and it will enhance Wärtsilä’s product portfolio in electric propulsion, power distribution and automation, especially in the oil and gas and offshore sectors.
• The alliance formed by Wärtsilä Automation Norway and the American Emerson Process Management increases Wärtsilä’s capabilities to offer process automation competence for FPSO vessels.
• In February Wärtsilä announced its acquisition of the entire business of Total Automation Ltd, a Singapore-based public marine automation company, and all Total Automation’s subsidiaries. In addition to general marine automation, Total Automation has a strong foothold within the offshore and LNG sectors. The transaction complements Wärtsilä´s earlier electrical and automation acquisitions.
• In March Wärtsilä and the Estonian BLRT Grupp agreed on establishing a ship service company in Lithuania to serve the Baltic market.
• The Ciserv service group was integrated into Wärtsilä’s Services business in May.
  In May Wärtsilä sold 10 million Assa Abloy AB series B shares, after which Wärtsilä owned 7,270,350 series B shares representing 2.0% of Assa Abloy’s share capital and 1.4% of the votes.
• The German INTEC Injectortechnic GmbH, acquired in July, strengthens Wärtsilä’s capabilities in installation and services for fuel-injected equipment.
• Wärtsilä Qiyao Diesel Company Ltd (Shanghai), a marine generating set factory jointly owned by Wärtsilä and the Chinese Shanghai Marine Diesel Engine Research Institute (SMDERI), was inaugurated at the end of June. The joint venture marks a strategic step for Wärtsilä to be closer to its Asian customers and to raise its market share in marine auxiliary generating sets.
• In September Wärtsilä, China Shipbuilding Industry Corporation and Mitsubishi Heavy Industries announced the establishment of a joint company to manufacture low-speed marine engines in China. This joint venture is part of Wärtsilä’s strategy to better serve the Asian shipbuilding industry and to strengthen its market share in low-speed engines.
• The acquisition in October of the entire business of the Swedish company Stockholms Fartygsreparationer AB gives Wärtsilä a base for further expansion along the Swedish east coast. It also forms part of Wärtsilä’s strategy to expand the business operations of Wärtsilä Services.
• In December Wärtsilä acquired the German ship design company group SCHIFFKO. SCHIFFKO specializes in the planning and design of ships especially in the container, research and offshore vessel segments. The acquisition supports Wärtsilä’s strategic focus to grow as a system integrator and provider of total solutions to the shipping and shipbuilding market.
• In November Wärtsilä, SKF and Rautaruukki sold the operating companies owned by Oy Ovako Ab, thereby concluding Wärtsilä’s plan to focus on its core businesses.
   

Wärtsilä took several steps during 2005 to strengthen the leading positions of its Ship Power and Service businesses globally:

• Production of thrusters in China began in June; the first deliveries were made in September.
• The project to manufacture marine reduction gears in India is making planned progress.
• Construction of a new factory for Wärtsilä Qiyao Diesel Company Ltd (Shanghai), a 50/50-owned joint venture set up with China Shipbuilding Industry Corporation (CSIC). The company will start production of Wärtsilä diesel generating sets, used as auxiliary engines in marine vessels. Production is expected to begin in early summer 2006.
• A strategic alliance with Mitsubishi Heavy Industries Ltd (MHI) in the field of 2-stroke diesel engines.
• Two new Wärtsilä RT-flex engines will be designed in co-operation with Hyundai Heavy Industries Co. Ltd. (HHI) and will be tested in HHI’s production facilities.
• Wärtsilä took a 12.5% stake in Aker Arctic Technology Inc., which offers ship designs for shipyards, shipowners and offshore operators operating in arctic waters.
• The transfer of the DEUTZ marine engine service business from the German company DEUTZ AG to Wärtsilä. Wärtsilä began to provide service and OEM parts for these engines globally from 1 April 2005.
• To expand its Service business Wärtsilä set up a marine service company in Estonia with the Estonian BLRT Grupp to serve the Baltic market early in the year. In the USA, Wärtsilä acquired in November a company specialized in the service of automation and control systems for diesel and gas engines.
• A service company was established in Hong Kong.