French power and transportation equipment major Alstom has signed a preliminary agreement with Shanghai Electric Group to pool their boiler production operations.
Together, based on last year's combined sales of Euro2.5 billion (HK$28 billion), they would be the largest boiler maker in the world.
The two firms have signed a letter of intent to set up Alstom-Shanghai Electric Boilers, a 50-50 joint venture that will combine both firms' 'activities in the boiler market for power plants', Alstom said in a statement.
Boilers are key to power plants. Water heated from the burning of coal, oil or natural gas makes steam, which turns the turbine that powers the generator to make electricity.
Shareholding and the venture's scope are subject to further talks, the Shanghai Electric spokesman said.
The joint venture would benefit from Shanghai Electric's 'excellent competitiveness' and strong positioning in China, the world's largest market for coal-fired power equipment, as well as Alstom's close relationship with utilities worldwide and technology leadership, Alstom said.
The proposed joint venture will be registered in Shanghai with operational headquarters in Singapore.