Siemens Energy Engages in Discussions with German Government Regarding Financial Assistance.

27 Oct, 2023

Siemens Energy Engages in Discussions with German Government Regarding Financial Assistance.

Siemens Energy, a prominent European manufacturer specializing in wind farms, power grids, and natural gas turbines, announced its ongoing discussions with the German government to obtain financial guarantees facilitating the continuation of large-scale projects.

The company's board is actively assessing multiple strategies to reinforce its balance sheet, with preliminary dialogues initiated involving both financial institutions and government entities.

The revelation of Siemens Energy's quest for support had a significant impact on investors, causing a 35 percent decline in its stock price.

These challenges faced by Siemens Energy could serve as a warning sign, suggesting that the financial difficulties encountered by renewable energy equipment manufacturers may be deepening. These enterprises play a pivotal role in aiding the transition to cleaner energy sources, yet many are grappling with the need to expand rapidly to meet demand. Siemens Energy has taken the decision not to enter new contracts for specific land-based wind turbines "for the time being" and will exercise greater selectivity in offshore turbine sales, despite their historical market leadership.

The company anticipates that its net losses and cash outflows for the upcoming 2024 fiscal year will surpass initial estimates. In the fiscal year that concluded on September 30, Siemens Energy had already projected a loss of approximately 4.5 billion euros ($4.8 billion), with financial results set to be disclosed on November 15.

Siemens Energy, established as a distinct entity from Germany's Siemens conglomerate in 2020, attributes its predicament to its remarkable growth. The surge in orders for equipment required to construct modern electrical systems in lieu of fossil fuels has strained its financial resources. While it seeks governmental assistance, Siemens Energy currently holds orders worth €110 billion.

As a consequence of this expansion, the company no longer possesses the financial strength to provide the customary performance guarantees, sometimes essential to reassure customers about the delivery of power plants or wind farms. The company clarified, "The enormous speed of the energy transition is creating high demand for our technologies," and thus, the need for issuing guarantees has intensified.

Siemens Energy has also encountered substantial difficulties with one of its subsidiaries, Siemens Gamesa, a wind turbine manufacturer. This formerly independent unit has encountered severe quality issues with its equipment, particularly the large blades, which have led to significant projected repair costs extending over several years.

Furthermore, like other companies in the industry, Siemens Gamesa entered into deals for offshore wind turbines at prices that are now expected to result in losses due to high inflation.