23 November 2015
ROLLS-ROYCE ANNOUNCES TRENT SERVICE NETWORK CHANGES AND
NEW AGREEMENTS WITH APPROVED MAINTENANCE CENTRE JOINT VENTURES
Rolls-Royce has announced changes to three Approved Maintenance Centre joint ventures, simplifying the structure of two, and introducing a more competitive business model that will improve customer service.
Approved Maintenance Centres (AMCs) support Rolls-Royce's strategy to develop a competitive, capable and flexible Trent Service Network to meet the changing needs of customers across the lifecycle of engines and to support the growing Trent engine fleet.
The changes relate to three existing AMC joint ventures: Hong Kong Aero Engine Services Limited ("HAESL"), Singapore Aero Engine Services Pte Ltd ("SAESL") and N3 Engine Overhaul Services GmbH and Co. KG ("N3").
HAESL is currently a joint venture with Hong Kong Aircraft Engineering Company Limited and SIA Engineering Company Limited; SAESL is currently a joint venture with SIA Engineering Company Limited and Hong Kong Aero Engine Services Limited; and N3 a joint venture with Lufthansa Technik AG.
Under the agreements announced today these joint ventures will now operate under a new business model where the existing geographic territory-based arrangements used by Rolls-Royce to direct maintenance, repair and overhaul (MRO) work to each AMC will be replaced with a competitive model where each AMC will need to compete to secure their Trent TotalCare® engine overhauls. Rolls-Royce believes that this competitive model will encourage greater capability and flexibility across the Trent Service Network. The AMCs are also able to compete globally for MRO services under "time and material" business terms.
These new agreements will also simplify the shareholding structure and management of HAESL and SAESL with each becoming 50/50 joint ventures with two shareholders (from three today). To support this change Rolls-Royce will increase its equity stake in HAESL and SAESL to 50 per cent in return for an incremental investment of $206.5m, details of which are included in the notes below. The transactions are subject to certain closing conditions, including regulatory approvals.
The shareholding arrangements with Lufthansa Technik AG for N3 remain unchanged at 50/50 ownership.
These changes to create a competitive, capable and flexible Trent Service Network complement the recent announcement that Delta TechOps will be joining the Trent Service Network as an independent AMC. Additional AMCs to further enhance the Trent Service Network will be announced at the appropriate time.
Eric Schulz, Rolls-Royce, President - Civil Large Engines, said: "This announcement demonstrates our determination to work closely with our joint venture partners to build an even more competitive, capable and flexible Trent Service Network and to further improve our TotalCare services for our customers. The joint venture shareholding changes will also help to simplify our business."
Mr Png Kim Chiang, SIAEC, Chief Executive Officer, said: "The combined strengths of the SIAEC Group and the strategic partnerships with Rolls-Royce will support the entire life-cycle of the engine - from build, to flight and to servicing. We will continue to position SAESL to compete on a wider scale for the global Trent engine aftermarket business."
Dr Johannes Bussmann, Lufthansa Technik, Chairman of the Executive Board, said: "This is a very positive new development in our partnership with Rolls-Royce. It Introduces new engine types, namely the Trent XWB, and at the same time opens up the market for global competition. I see it as a great business opportunity for LHT. Our joint venture company N3 is a world-class facility and I am looking forward to seeing N3 demonstrate this on a global scale as the market grows."
Augustus Tang, HAECO, Chief Executive Officer, said: "We welcome this decision and look forward to the opportunities it brings for HAESL. The Trent engine family has had tremendous success in the marketplace and we have the capabilities to benefit from the growing requirements for repair and overhaul services globally."
In addition to SAESL, Rolls-Royce and SIAEC have a second joint venture in Singapore, International Engine Component Overhaul Pte Ltd ("IECO"), which overhauls and repairs aero engine components. As part of these new agreements, and to further simplify our joint venture structures, Rolls-Royce and SIAEC also intend to take the opportunity to amalgamate the business and operations of SAESL and IECO into a single entity, enabling them to compete more effectively for global component repair business.
Notes on the transaction
Under the shareholding changes in SAESL, Rolls-Royce will acquire HAESL's current 20 per cent shareholding in the business, taking its shareholding to 50 per cent, with SIAEC continuing to hold the other 50 per cent. HAESL will distribute the US$270m cash consideration for its stake in SAESL to its shareholders, HAECO, Rolls-Royce and SIAEC.
Under the shareholding changes in HAESL, SIAEC will divest its entire 10 per cent shareholding in the business for US$116m, with Rolls-Royce and HAECO each taking 5 per cent, increasing their shareholdings to 50 per cent each.
About Rolls-Royce Holdings plc
1. Rolls-Royce's vision is to create better power for a changing world via two main business divisions, Aerospace and Land & Sea. These business divisions address markets with two strong technology platforms, gas turbines and reciprocating engines. Aerospace comprises Civil Aerospace and Defence Aerospace. Land & Sea comprises Marine, Nuclear and Power Systems.
2. Rolls-Royce has customers in more than 120 countries, comprising more than 380 airlines and leasing customers, 160 armed forces, 4,000 marine customers including 70 navies, and more than 5,000 power and nuclear customers.
3. Our business is focused on the 4Cs:
· Customer - placing the customer at the heart of our business
· Concentration - deciding where to grow and where not to
· Cost - continually looking to increase efficiency
· Cash - improving financial performance.
4. Annual underlying revenue was £14.6 billion in 2014, around half of which came from the provision of aftermarket services. The firm and announced order book stood at £76.5 billion at 30 June 2015.
5. In 2014, Rolls-Royce invested £1.2 billion on research and development. We also support a global network of 31 University Technology Centres, which position Rolls-Royce engineers at the forefront of scientific research.
6. Rolls-Royce employs over 54,000 people in more than 50 countries. Over 15,500 of these are engineers.
7. The Group has a strong commitment to apprentice and graduate recruitment and to further developing employee skills. In 2014 we employed 354 graduates and 357 apprentices through our worldwide training programmes. Globally we have over 1,000 Rolls-Royce STEM ambassadors who are actively involved in education programmes and activities; we have set ourselves a target to reach 6 million people through our STEM outreach activities by 2020.
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Rolls-Royce plc
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Richard Wray
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Rolls-Royce plc
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www.Rolls-Royce.com
