The ailing energy company Siemens Energy is negotiating with the federal government about state guarantees. The guarantees are intended to protect large projects. The company’s shares plummeted.
Siemens Energy is calling for state aid. The company, which is struggling with billions in losses, today confirmed talks with the federal government about state guarantees. Siemens Energy said the group is holding preliminary discussions with various parties, including partner banks and the federal government, to ensure access to guarantees for large orders.
“The enormous pace of the energy transition ensures high demand for our technologies; our order backlog is 110 billion euros,” emphasized a spokesman. “This positive development in itself means that we have to issue guarantees to our customers to a greater extent. This is a challenge for all companies. We are therefore introducing measures to strengthen our balance sheet and are also holding discussions with the federal government, such as “We can ensure guarantee structures in the rapidly growing energy market.”
“Decision not yet made”
Siemens Energy sells conventional power plants, transmission technology and wind turbines. In industry, it is common for companies to have to secure their services for such projects that last for years with credit lines from banks. This ensures that the company has the necessary financial resources to carry out long-term and costly projects.
It is said that the government has not yet made a decision. “The federal government is in close and trusting discussions with the company,” said a spokesman for the Federal Ministry of Economics, but did not give any details.
The “WirtschaftsWoche” (WiWo) and the “Spiegel” first reported on discussions between Siemens Energy and the federal government. Siemens Energy is seeking guarantees of up to 15 billion euros, according to the “WiWo”. Because of the crisis at the wind turbine subsidiary Siemens Gamesa, the group fears difficulties in discussions with banks about guarantees for large projects.
Losses worth billions at Siemens Gamesa
At its wind turbine subsidiary Siemens Gamesa, one of the largest wind turbine manufacturers in the world, Siemens Energy has been struggling for years with considerable difficulties that are weighing on the balance sheet. After several years as majority owner, Siemens Energy took over the subsidiary completely in 2022 in order to be able to take better action.
For the quarter from April to June, Siemens Energy estimated the costs of correcting quality problems at the wind turbine subsidiary at 1.6 billion euros. The Reuters news agency quotes an insider saying that the burden in the wind power business could be higher than the estimated 1.6 billion euros.
In addition to the specific problems that Gamesa is struggling with, there is a difficult market environment for the European wind power industry in general: despite the growing demand for clean energy, the sector is suffering from higher material prices, ongoing disruptions to supply chains – and, last but not least, strong price pressure from the Competition from China.
Siemens Energy emphasized today that the group’s financial results for 2023 were in line with the forecast. The group expects a loss of 4.5 billion euros for the year as a whole. While the former gas and power businesses were running smoothly, order intake and sales in the wind business in 2024 are expected to be below market expectations. “For the time being, Siemens Gamesa is not concluding any new contracts for certain onshore platforms and is only accepting orders selectively in the offshore business.”
What is Siemens doing?
After the IPO of Siemens Energy, the former parent Siemens AG still holds 25.1 percent of the shares. While Berlin is apparently fundamentally willing to support the company, which is important for the energy transition, Siemens does not want to be held responsible again, according to the “Spiegel”. The federal government is upset about this attitude.
Siemens AG retained a share in Siemens Energy with reference to the billions in guarantees and financing for major energy projects. However, these obligations were reduced more quickly than expected, said CFO Ralf Thomas. This is also why the AG was able to reduce its shareholding from initially 35.1 percent – and wants to reduce it further. The company declined to comment on Siemens Energy’s discussions.
After the company’s announcement, Siemens Energy lost significant value on the stock exchange. The share price collapsed by around a third – price losses of this magnitude are extremely rare for a DAX company. Siemens shares are also losing heavily. “When it comes to new debt and financing problems, stock market investors are currently reacting very allergically and are immediately distancing themselves from the company,” said market expert Andreas Lipkow.