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Order had sparked security fears as rivalry with China

intensifies

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Decision removes potential flashpoint for new Chancellor

Merz

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Ming Yang says no longer involved in project

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Merz set to make inaugural trip to China later this year

By Riham Alkousaa and Sarah Marsh

BERLIN, Aug 25 (Reuters) - A German company may scrap a

deal with a Chinese firm to supply turbines for one of its North

Sea offshore wind farms, it said on Monday, citing operational

reasons, although it added improved security was "a positive

side effect".

China's Ming Yang Smart Energy was due to provide turbines

for the 300-megawatt Waterkant wind farm under a deal announced

last year, but Hamburg-based asset manager Luxcara said it had

instead reserved capacity for 19 Siemens Gamesa turbines, a

subsidiary of Germany's Siemens Energy.

It said it was considering the change to ensure operational

efficiencies, given these were the same turbines it used for the

neighbouring 1.5-gigawatt Waterekke project - its largest

offshore wind project to date in the German North Sea.

The Ming Yang deal was announced after the European Commission

last year launched a review of possible market distortions by

Chinese wind turbine makers in five European Union countries, a

move that China called "discriminatory".

Luxcara told Reuters by email the political debate around

the deal with Ming Yang Smart Energy did not play a decisive

role in its considerations.

But "the fact that our approach is also compatible with

political objectives and addresses issues relating to supply

chains, technological dependency, and security aspects is a

positive side effect," it said.

The prospect of using Chinese-made turbines for the project drew

scrutiny from Germany's former economy minister and criticism

from Europe's wind turbine industry, which said the deal would

give China access to critical infrastructure.

"The fact that Luxcara changed its mind before the government

was forced to veto the deal is an optimal solution for

(Chancellor Friedrich) Merz, who would have risked the ire of

Beijing months before his first trip to China if he had blocked

it," said Noah Barkin, senior advisor at Rhodium Group's China

practice, in a LinkedIn post.

Merz is set to make his first visit to China towards the end of

this year with a delegation of senior business executives,

according to a person with direct knowledge of the matter.

The conservative chancellor has so far taken a tough public

line on China, underscoring worries about China's closeness to

Russia and pledging to reduce Germany's reliance on the world's

second largest economy.

A VIABLE EUROPEAN ALTERNATIVE?

In reality, Germany could struggle to reduce its dependency.

Siemens Gamesa has been beset by financial troubles in

recent years, in part due to quality problems with its onshore

wind turbines that led to project delays and heavy repair costs.

"It will be interesting to see whether the company can

deliver on the Waterkant project. That would send a signal that

European companies are a viable alternative to their

increasingly dominant Chinese counterparts," Barkin said

Luxcara said it had informed the relevant authorities and

project partners about the possible switch in turbine supplier.

Siemens Gamesa confirmed the agreement but declined to give

further details.

Ming Yang Smart Energy said in a statement it was no longer

involved in the Waterkant project, but was still exploring

opportunities in Germany.

"Ming Yang will continue to invest in technological innovation,

strengthen local collaboration and explore opportunities to

build a local production base," it said.

Germany's economy ministry said it does not usually comment

on private companies' decisions. It said the Federal Maritime

and Hydrographic Agency will review the turbine planning during

the ongoing planning approval process.

Waterkant, to be built in Germany's North Sea, is scheduled

to connect to the grid by the end of 2028 and is expected to

generate enough power for about 400,000 households.