The Saudi Arabian Industrial Investments Company, and Hyundai Heavy Industries (HHI) announced a Memorandum of Understanding (MOU) to jointly collaborate on engines and pumps business development in the Kingdom of Saudi Arabia.
The MOU lays out a comprehensive engine and pump business cooperation framework, through the formation of a joint venture (JV) to manufacture 2-stroke engines, 4-stroke engines, and marine pumps; including sales and aftersales services in the MENA region.
The manufacturing facility will be co-located with the maritime yard in Ras Al-Khair, at the King Salman International Complex for Maritime Industries and services, where it will develop synergies with several complementary ventures.
The new JV will manufacture 4-stroke engines under HHI’s HiMSEN brand licensing, serving as a regional production stronghold to support the growing demand for electricity in the MENA region as well as marine applications for very large and small vessels. The new JV will also operate under a MAN-HHI sublicense for the manufacturing and servicing of 2-stroke engines.
The parties have identified strong economic and strategic levers to the new JV such as the lower costs of production due to the advantaged supply of machine finished steel and iron components for engines and pumps from the casting and forging facility JV in Ras Al-Khair, fixed and variable costs synergies related to the integration of 2 and 4 stroke engines in one shop, competitive advantaged related to the transportation of such engines from other international sources, increasing demand of 4 stroke engines either as complementary or backup power generation systems to support the growing demand for renewable power generation and remotely located new power plants, and the secured demand for engines and pumps in marine applications coming from the maritime yard JV, in addition to a number of other internal advantages related to the contribution of each partner to the deal.
The engine and pump JV is expected to generate over 650 direct jobs, as well as indirect jobs through the development of the supply chain.
The parties are preparing to engage in the development of detailed documentation to reach a final investment decision, with the expectation the facility will commence operation by end of 2019.