Siemens Energy expects losses in the wind business for at least two more years.
The breakeven at Siemens Gamesa is expected for the 2026 financial year, and a further 2 billion euros loss is expected in the financial year that has just begun, the energy technology group announced when presenting its 2023 annual balance sheet.
Nevertheless, Siemens Energy within the group is planning a surplus of around 1 billion euros for the current year. However, this includes cash inflows of between 2.5 and 3 billion euros from sales and accelerated portfolio restructuring. Siemens Energy is currently earning 2.1 billion euros through the sale of a large stake in Siemens India to the former parent company.
Last year, among other things, quality problems with onshore wind turbines, increased costs and start-up problems for a new offshore turbine from Siemens Gamesa led the entire group deep into the red. There was a net deficit of almost 4.6 (previous year: 0.7) billion euros. The success of the other business areas, which make up 70 percent of Siemens Energy’s annual sales, was overshadowed by the problems in the wind business, according to the statement.
After all, there have recently been no further provisions in the wind business. The technical analysis of the quality problems at two onshore systems has almost been completed and no further problems have emerged. In order to make Siemens Gamesa profitable again, the scope of its business activities will be reviewed. Details will be given at the Capital Markets Day on November 21st.
Overall, Siemens Energy is experiencing strong demand. In the past financial year, new business rose by a good third to 50.4 billion euros, and the group has an order cushion of 112 billion euros. The federal government is providing a guarantee of 7.5 billion euros so that major projects can be realized.
For the new financial year, the group expects a significant decline in the pace of growth in the gas turbine segment. The comparable sales growth in the group will therefore still be 3 to 7 percent – after an increase of 9.9 percent in the past year. Siemens Energy expects the adjusted operating margin to be between minus 2 and plus 1 percent after minus 8.9 percent last year.
Siemens Energy receives guarantees from the federal government and banks
Siemens Energy will receive a billion-dollar guarantee from the federal government to secure future major orders. Banks are providing guarantees for a total of 12 billion euros, with the federal government providing up to 7.5 billion euros, as the Federal Ministry of Economics announced on Tuesday.
As required by the federal government, the former parent company Siemens, which still holds 25.1 percent of the shares in the ailing energy technology company, is also on board. Siemens grants a first loss tranche with a volume of up to 1 billion euros: the banks can have priority access to this in the event of damage.
In return, Siemens has secured itself from Siemens Energy – with a lien over a share package and agreed payment deferrals, as Siemens Energy announced on Wednesday morning.
Siemens is also providing Siemens Energy with a further 2.1 billion euros to strengthen its balance sheet. In return, Siemens Energy is transferring 18 percent of Siemens Ltd, the Indian sales organization, to the major shareholder. As a result, Siemens’ share in Siemens India increases to 69 percent, while that of Siemens Energy falls to 6 percent. The partial sale is “a first step as part of the planned, now accelerated unbundling of Siemens Energy and Siemens AG in India,” it said.
Usually, guarantees are rarely provided by clients for large projects. However, due to the continued high losses at the wind power subsidiary Siemens Energy, banks have recently been hesitant to continue to give Siemens Energy guarantees of this magnitude. “The guarantee providers could face cluster risks in a technologically challenging market,” explained the Federal Ministry of Economics. At the end of September, Siemens Energy had an order backlog of 112 billion euros.
The use of the federal guarantees has consequences for the shareholders: As long as they are running, neither dividends nor bonuses may be paid out to the board of directors. Siemens Energy made a net loss of 4.6 billion euros last year due to problems in the wind power business. As things stand, Siemens Gamesa will be in the red for another two years.
Bruch is confident
“In an extremely challenging year for Siemens Energy, two-thirds of our businesses are growing profitably and have met or exceeded their annual targets,” said Bruch. Demand for Siemens Energy’s products remains high: In the past financial year, incoming orders were a good 50 billion euros, around a third higher than in 2022. The order backlog grew by a good seventh to 112 billion.
The sale of business units is expected to support earnings development in the current financial year. Siemens Energy expects cash inflows of 2.5 billion to 3.0 billion euros from disposals and from accelerated portfolio restructuring. Including this, management expects a profit after taxes of up to one billion euros for 2023/24.
Siemens Energy sees more growth in two segments in the medium term
Siemens Energy is somewhat more optimistic about medium-term growth in the two smaller of its four business segments. Grid Technology, the network technology business, will grow in the low double-digit range in 2026, the energy technology group announced when presenting its annual balance sheet. Until now, the target for 2025 was mid-single-digit growth.
The Transformation of Industries segment, which also includes the new hydrogen business, will show high single-digit growth in the medium term instead of the mid-single-digit growth as previously expected.
This also means higher margin targets for both areas in 2026 compared to 2025, it said. Siemens Energy plans to provide details at the Capital Markets Day next week.
Siemens Energy: Currently not withdrawing from the onshore wind business
Siemens Energy will not withdraw from the onshore wind turbine business for the time being. You won’t be able to say, “We won’t do that anymore,” said CEO Christian Bruch at the annual press conference in Munich. Such a “bang effect” is not to be expected next week at the Capital Markets Day. The priority is to “fix” the quality problems with the onshore turbines. However, the company will limit itself to certain turbines and markets in the future, he announced. “You will have to focus more,” says Bruch.
It is being examined, for example, which turbine can be sold in a standardized manner to which countries. Simplification is a key issue here. The question of which countries Siemens Energy will remain represented in will also be decided by competition. However, Europe and the USA are not available as core regions for Siemens Energy’s wind business.
Siemens Energy only wants to use counter-guarantees from the federal government for a short time
According to CEO Christian Bruch, Siemens Energy only wants to use the counter-guarantees negotiated with the federal government for as short a time as possible, also in view of the announced dividend ban. “It is in our interest and the interest of our shareholders to make this as short as possible. That’s why I’m assuming less than two years,” he said at the annual press conference in Munich. However, the structure negotiated with the federal government allows for secure planning for two years.
Bruch made it clear that the exact terms of the agreement still had to be negotiated with the federal government. In addition to the fees, it will also be about the dividend ban that Berlin wants. Such a regulation is actually “unusual,” said Bruch. This will be discussed with the federal government. “But as long as we make losses and the federal government gives counter-guarantees, I absolutely understand this demand,” he said.
Next year, however, Siemens will be “in a situation where we do not generate any net income, and that is the prerequisite for a dividend.” Bruch said they were negotiating with other countries “where we have jobs” for additional guarantees worth 3 billion euros. In this context he mentioned Spain. There are also discussions with the European Development Bank.
Siemens Energy is talking to other countries about guarantees
After the guarantee from Germany, the energy technology group is also talking to other countries about guarantees. This is part of the guarantees totaling 15 billion euros mentioned on Tuesday. The company said on Wednesday that 3 billion would come from other parties involved. This sum will be secured through a combination of government programs in other countries, the EU and the optimization of guarantees, it said.
According to Spanish media reports, the local government is also involved in these talks. A large part of Siemens Energy’s ailing wind power division, which is at the heart of the current difficulties, is based in Spain.
Help keeps Siemens Energy on the rise
Siemens Energy shares continued their recovery on Wednesday. Further news about help for the ailing energy technology group and positively received statements about business expectations caused the current quarterly figures to fade into the background.
After a price jump of almost nine percent above the 11 euro mark, the shares maintained an increase of 4.6 percent to 10.73 euros via XETRA and occupied one of the top DAX 40 places. There has currently been a recovery of more than two thirds from the record low of 6,402 euros reached in October, when talks with the federal government about state guarantees became known. However, the share price decline since the beginning of the year is still 39 percent, which puts Siemens Energy at the distant bottom of the leading German index.
On Tuesday, shares ultimately reacted positively to a breakthrough in the struggle for financial guarantees. The core is a federal government guarantee of 7.5 billion euros. The former parent company Siemens, private banks and other players are also on board. In total there are guarantees of 15 billion euros. In the middle of the week, reports about the sale of a large part of Siemens Energy’s Indian business to Siemens were also confirmed. The Siemens titles had already gained significantly on Tuesday and have now gained another two percent.
Due to the ongoing problems in the wind power business, Siemens Energy announced a record loss for the past financial year on Wednesday and is expecting further losses. Nevertheless, the Munich-based company expects a profit after taxes of up to one billion euros in the new financial year, which has been running since October – thanks to the well-running other businesses and the proceeds from sales.
Analyst Akash Gupta from the US bank JPMorgan viewed it as positive that the latest news would reduce the risk of a capital increase in the short term. He also praised the high level of incoming orders in the last quarter and the better-than-expected net debt at the end of the financial year.
The proceeds from the sale of activities are likely to be at the upper end of the company’s target range, which would probably eliminate the need for a capital increase, says Philip Buller from the private bank Berenberg. Before the energy technology group’s important capital market day next week, the situation at the wind power subsidiary Gamesa has at least not worsened. The peak of the losses and negative headlines seems to be behind the company.
FRANKFURT / MUNICH (Dow Jones / dpa-AFX)