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Siemens Energy is in talks with the German government to secure billions of euros of guarantees for long-term projects after warning that losses at its troubled wind turbine business would be higher than forecast.
The Dax-listed company said on Thursday that it was in need of backstops for projects as the financial picture at its wind turbine business deteriorates. In June, the group said that overhauling the division, which has been beset by technical mishaps, would cost €1bn.
Without the guarantees, a €110bn portfolio of clean energy projects planned by the company will be in jeopardy, according to executives at the Munich-based company.
In a statement, Siemens Energy said that it was also evaluating measures to “strengthen its balance sheet”, without giving further details, and was in talks with both banks and the government.
Siemens Energy shares plunged 35 per cent, extending their steep decline since June, when the full scale of the technical problems affecting the bearings and rotors in the turbines were first disclosed.
“Their business in wind is in utter disarray,” said William Mackie, head of capital goods research at Kepler Cheuvreux. “Against that backdrop, the company’s opportunity set for financing is impaired due to a crisis of confidence in parts of the business outlook financially.”
Siemens Energy’s disclosure that it is looking at fortifying its balance sheet “opens the door to the speculation they will seek multiple potential measures to strengthen capital, which naturally creates a violent response in the equity market,” Mackie added.
The crisis at the wind business, known as Siemens Gamesa and that Siemens Energy only took full ownership of in June, comes as the broader wind industry confronts the drag of higher interest rates and increased costs.
While Siemens Energy has disclosed few details of the technical flaws that have bedevilled the turbines, people familiar with the matter have said the problems were related to the company’s flagship 5.X turbine, along with its predecessor, the 4.X, that entered the market between 2017 and 2019.
In August, Siemens Energy warned that it expected to slump a loss of €4.5bn this year. The wind business has suspended taking orders for some onshore turbines and is being more selective in taking on offshore contracts, the company said.
Chief executive Christian Bruch described as a “bitter” moment the company’s June disclosure of the severity of the crisis.
A person familiar with the matter said on Thursday that the worsening picture at the wind business had concerned lenders. A spokesperson for the German ministry of economic affairs said the government was in “close discussions” with the company.
The group said on Thursday that its gas and power businesses were on track to meet targets this year, thanks to “excellent performance”. Siemens Energy also makes turbines for gas-fired power plants, electricity grid transformers and electrolysers.
But Siemens Gamesa has proved a calamitous inheritance. Siemens Energy was spun out of the German industrial conglomerate Siemens in 2020, a transaction that handed it a 67 per cent stake in Siemens Gamesa.
In May last year, Siemens Energy bought out the minority shareholders in the wind business, taking full control the next month. Siemens still has a 25 per cent stake in Siemens Energy.
The deepening crisis at Siemens Energy comes after EU president Ursula von der Leyen last month identified access to adequate financial guarantees as a major problem for the entire wind energy sector in her annual “state of the union” speech.
Earlier this week, the EU commission unveiled its new “wind power package” of measures which includes measures to ease access to finance.
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