Rolls-Royce has signed an agreement to sell its energy production arm to Siemens for £785 million.

The British engineering firm will also receive a further £200 million for a 25-year licensing agreement once the transaction for the gas turbine and compressor business has been completed.

John Rishton, CEO of Rolls-Royce said: “This agreement will give the Energy business greater opportunities as part of a much larger energy company and allows Rolls-Royce to concentrate on the areas of business where we can add most value.”

Rolls-Royce’s energy arm, which made a profit of £72 million on sales of £871 million last year, employs around 2,400 employees. Its customers include oil and gas companies and those in the electricity generation sector.

The transaction “excludes certain smaller Power Generation sector assets”, the company said in a statement.