The combination of a huge order backlog and problems in the wind power division is causing problems for Siemens Energy. Now the state could help with guarantees worth billions. The stock market reacts in panic.
The ailing energy technology group Siemens Energy could receive billions in guarantees from the federal government. The company said on Thursday that preliminary discussions were being held with various parties, including partner banks and the federal government, thereby confirming corresponding reports.
The aim is to “ensure access to a growing volume of guarantees that enable the strong growth expected”. The Ministry of Economic Affairs also confirmed discussions.
According to “Wirtschaftswoche”, it will involve guarantees of up to 15 billion euros. The magazine relies on financial circles. The “Spiegel” also reported on the process, but mentioned different sums. Siemens Energy did not comment on the figures.
Losses worth billions
In principle, guarantees are not uncommon for expensive and long-term large-scale projects. For example, they protect advance payments already made by customers or risks of default. This is usually done through banks. A huge order backlog has now accumulated at Siemens Energy. This also makes a large guarantee volume necessary. In addition, the group has been suffering from massive problems in its wind power business for years, which also caused billions in losses in the past financial year.
“The enormous pace of the energy transition ensures high demand for our technologies; our order backlog is 110 billion euros,” said a company spokesman. “This positive development means that we have to issue more guarantees to our customers. This is a challenge for all companies.” They therefore want to take measures to strengthen their own balance sheet. In addition, “discussions are being held with the federal government about how we can ensure guarantee structures in the rapidly growing energy market.”
A spokesman for the Ministry of Economic Affairs said the federal government was “in close and trusting discussions” with the company, but could not provide any details.
Price fall
The stock market reacted with a massive crash in Siemens Energy shares. The stock fell by more than a third to an all-time low, but was able to reduce its losses somewhat by the afternoon. It was the second huge fall for Energy shares this year. The last time it fell similarly was in June after the quality problems became known.
Speculation by analysts that there could be a capital increase may also have contributed to the current price fall. Energy also warned that business at its troubled wind power subsidiary could continue to be worse than the market expected in the coming year.
In the past financial year, this Energy has already suffered a loss of several billion. The exact figures for 2023 are not expected until November. However, Energy emphasized on Thursday that they were expected to be fully in line with the forecast.
Red numbers and quality problems
Siemens Energy has been struggling for years with problems in its wind power division, which repeatedly causes profit warnings and red numbers, most recently due to quality problems with onshore wind turbines. Energy is therefore not accepting any further orders for certain onshore systems for the time being.
Other business areas, on the other hand, are going well, including recent orders worth billions for the transmission of electricity over long distances. Siemens Energy supplies huge converters that convert alternating current into high-voltage direct current for low-loss transport over long distances – and then back into alternating current for the common high-voltage networks.
Source: Stern
