2023-11-15 10:53:18
By Le Figaro with AFP
Published 3 hours ago, Updated now
The wind branch of Siemens Energy is only expected to reach profitability in 2026. DADO RUVIC / REUTERS
The German government came to the industrialist’s aid with bank guarantees worth 7.5 billion euros.
Lead in the wing. German energy company Siemens Energy announced an annual net loss of 4.59 billion euros on Wednesday the day following disclosing a 15 billion euro rescue plan for the struggling company. “Costs related to quality problems» of the group’s wind turbines, but also the increase in the costs of production materials «have seriously impacted the results of the 2023 financial year and will continue to have an impact on the group’s profitability in the short and medium term“, the company said in a press release.
The wind power branch should now only reach profitability in 2026. The group is otherwise active in the construction of gas power plant turbines or hydrogen equipment, as well as transformers. The loss matches what Siemens Energy predicted in August. Last year, the group had already suffered a net loss of 647 million euros. However, its order book has reached a new record at 112 billion euros while Europe is in the midst of an energy transition, from fossil fuels to renewables and electricity.
Failures
But the group’s Spanish subsidiary, Siemens Gamesa, in charge of onshore wind turbines, has been weakened by faults discovered on its products, vibrations in the rotor blades and bearing problems of certain wind turbine models. These difficulties prevented the group from being able to meet demand, leading to a drop in revenues, and causing the company’s stock price to plummet. Especially since they took place in an already very difficult context for wind power players in Europe.
The group sufferedfrom rising interest rates, global supply chain disruption and continued war in Ukraine“, as well as rising raw material costs, the company said. On Tuesday, the German state suddenly came to the aid of the company, strategic for the government’s energy transition projects, with a rescue plan of 15 billion euros in loan guarantees in total, half financed by public funds. The rest comes from private banks and shareholders, including Siemens which still owns 25% of the company.
In addition, the group will sell part of its stake in a joint venture founded in India with the former parent company Siemens, to free up funds.
Strategic business
It announced on Wednesday its intention to acquire 18% of the joint venture for a purchase price of 2.1 billion euros, benefiting from a discount of 15% compared to the average price. This reduces Siemens Energy shares to 6%. The group achieved a turnover of 31 billion euros during its staggered annual financial year, up 7% and expects comparable growth for 2024. Siemens Energy hopes to generate a profit of 1 billion euros. At the end of the morning, the title gained 3.27% on the Frankfurt Stock Exchange.
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The boost from the German government is explained by the importance of the company in the German industrial fabric (26,000 employees in the country) and by that of wind power in the German energy transition: the country has just abandoned the nuclear power and plans to move away from coal if possible in 2030. More broadly, it confirms a trend towards increasing intervention by the German state in the running of companies deemed strategic.
The renewable energy sector in Europe complains of competition often considered unfair from China. We need to solve our problems to be able to beat Chinese competitors on an equal footing,” commented Christian Bruch, CEO of Siemens Energy.
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