Combinded Management Report (excluded: Group non-financial statement) for the Siemens Energy Group and the Siemens Energy AG

Combined Management Report

2.1	Business description	9
2.2	Financial performance system	12
2.3	Business performance in fiscal year 2024	14
2.4	Results of operation	18
2.5	Net assets, liabilities and equity	26
2.6	Financial position	28
2.7	Report on expected developments	32
2.8	Report on the internal control and risk	35
	management system and material risks and
	opportunities
2.9	Explanations to the Financial Statements of	45
	Siemens Energy AG (Holding)
2.10	Group non-financial statement	49
2.11	Takeover-relevant information	82
2.12	Further information	85

9 Combined Management Report

2.1 Business description

2.1.1 Organization and reporting structure

Siemens Energy AG, parent company of the Siemens Energy Group ('Siemens Energy', 'the Group', 'the Company', or 'we') and registered in Munich, is a Stock Corporation (Aktiengesellschaft) in accordance with German law. The Executive Board of Siemens Energy AG is the body with overall responsibility for the management of the business in accordance with the German Stock Corporation Act (Aktiengesetz).

Siemens Energy's reporting structure in fiscal year 2024 comprises four Business Areas: Gas Services (GS), Grid Technologies (GT), Transformation of Industry (TI) and our Wind Power business Siemens Gamesa (SG). GS, GT and SG are reportable segments; TI will report voluntarily as if it were a reportable segment despite some differences in its economic characteristics (all the aforementioned are hereinafter referred to as segments).

Reconciliation to Consolidated Financial Statements includes items which management does not consider to be indicative of the segments' performance, mainly group management costs (management and corporate functions), other central items, treasury activities as well as eliminations. Other central items include Siemens brand fees, corporate services (e.g., management of the Group's real estate portfolio except SG), corporate projects, centrally held equity interests and other items. For further information, see Note 25 Segment information in 3.6 Notes to Consolidated Financial Statements.

Siemens Energy supports its customers around the globe. The regional breakdown used for reporting purposes by Siemens Energy is EMEA (Europe, Commonwealth of Independent States (C.I.S), the Middle East and Africa), Americas (Canada, the United States as well as Central and South America), and Asia, Australia (the remaining countries of the Asian continent, as well as Australia and New Zealand).

2.1.2 Business model

Siemens Energy is active along the entire energy technology and service value chain with comprehensive and differentiated products, solutions and service offerings. Our broad product portfolio, comprising efficient conventional as well as renewable energies, enables us to meet the increasing demand for energy and support efforts to reduce greenhouse gas emissions at the same time. We also offer digital b usiness and intelligent service models to our customers. We consider ourselves well positioned to shape the energy transition toward decarbonized energy technologies and promptly react to customer needs worldwide thanks to our global footprint.

Siemens Energy has not participated in any new tenders for pure coal-fired power plants since November 2020. Siemens Energy will still fulfill existing commitments for coal-fired power plant projects and the associated service contracts. The carbon-reducing service and solutions businesses, as well as combined heat and power (CHP) projects will also be continued.

A significant share of our business is executed via high-volume projects and characterized by multi-year customer orders, especially in our service and solutions businesses. While orders for large projects may lead to volatility in order intake from one reporting period to the next, revenue is generally less affected by such volatility. Large projects typically have longer development and construction phases. This, coupled with our often long-term service contracts, leads to stable and recurring revenue recognition over several reporting periods. Hence, our order backlog gives us a high degree of transparency regarding future revenues.

Our profitability level differs among our portfolio elements. Therefore, our results of operations are affected by the portfo lio mix sold in each segment. Our service business typically has higher margins than the product and solutions businesses. Hence, our results of operations and margins depend on our ability to generate revenue from servicing our large installed fleet by modernization and upgrades as it becomes subject to wear and tear, in particular the rotating equipment. We aim to maintain and expand the long lifespan of our installed fleet to secure orders for service contracts, primarily focusing on long-term service programs. We see the service business as a major pillar of the sustainable business success of Siemens Energy and are seeking to enlarge and leverage this further in the future.

Gas Services

The Gas Services Business Area consolidates all the business activities relating to gas and large steam turbines, large generators, and heat p umps, as well as the associated control technology. The GS portfolio includes products, solutions, and services for central and distributed power generation. The business is focused on producing new gas and steam turbines as well as servicing the installed fleet. The wide-ranging service portfolio includes maintenance, performance enhancements, digitalization, and professional consulting.

GS supports a wide range of customers, from utilities, independent power producers, municipal energy producers, EPC (engineering, procurement, and construction) companies to industrial customers and customers in the oil and gas industry. Data centers are increasingly becoming key customers for GS' products and services across its entire portfolio of gas and steam turbines.

Reliable, efficient, and low-emission turbines enable the integration of renewable energy into grids by delivering fast dispatchable power supplementing the fluctuating supplies from renewable energy sources. GS is contributing to the decarbonization of power generation and supporting the achievement of its customers' net zero targets. To this end, the capabilities of the gas turbine portfolio for burning hydrogen and other green fuels are continuously being expanded. Individual types of gas turbines have already been approved for burning up to 75% hydrogen. As part of an EU-funded project, the combustion of 100% renewable hydrogen was successfully demonstrated in a pilot plant in the calendar year 2023 and

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marks an important step on the way to the gradual decarbonization of the gas turbine portfolio. At the same time, carbon capture applications are being addressed via partnerships with key technology partners. The portfolio also includes other decarbonization technologies, such as heat pumps for industrial heat generation and district heating applications.

GS' competitors include a small number of multinational original equipment manufacturers (OEMs), some of which hold strong market positions in their home markets.

Grid Technologies

The Grid Technologies Business Area focuses its business activities on the most important market trends: demand growth of electricity, electrification, decarbonization, and digitalization. With the products, systems, solutions and services it offers, GT solves the challenges posed by the increasing complexity of grid infrastructure resulting from the integration of renewable energies and the trend towards decentralized energy generation. The product portfolio includes, among others, high-voltage direct current (HVDC) transmission systems, grid connections for offshore wind farms, flexible alternating current transmission systems (FACTS), high-voltage substations, air- and gas-insulated switchgear, transformers and storage solutions, as well as digital grid solutions, components and cyber security.

The GT Business Area serves a wide range of customers, including transmission and distribution system operators, independent power producers as well as industrial and infrastructure customers from sectors such as chemicals, mining, oil and gas, data center and airpo rt operators, railroad companies and hydrogen producers. GT supports its customers on the path to decarbonization with a high level of technological expertise, a global production network, its own sales organization and sales partners.

GT's competitors mainly include a small number of large multinational companies as well as manufacturers from China, South Korea, and Japan, which are currently more focused on individual regions, but are increasingly positioning themselves globally.

Transformation of Industry

The Transformation of Industry Business Area comprises four operating but non-reportable segments (Sustainable Energy Systems (SES); Electrification, Automation, Digitalization (EAD); Industrial Steam Turbines & Generators (STG); and Compression (CP)), which are presented voluntarily as if they were a single reportable segment, despite some differences in their economic characteristics. The Business Area's activities are focused primarily on reducing energy consumption and greenhouse gas emissions in industrial processes. TI supports industrial customers in reducing their carbon footprint and achieving their individual decarbonization targets. The Business Area offers products, integrated systems and solutions as well as services for various process industries (e.g., oil and gas, chemicals, petrochemicals, mining, steel, pulp and paper), hydrogen and power generation as well as for the offshore and maritime industry.

TI contributes to reducing energy consumption and greenhouse gas emissions of the industrial sector by focusing on increasing the energy efficiency of existing assets, electrifying industrial processes to enable conversion from fossil fuels to electricity, and by providing solutions to produce and transport green hydrogen and clean fuels. The TI portfolio includes electrolyzers, industrial steam turbines, industrial generators, turbo and reciprocating compressors, compressor trains, drive systems and solutions, batteries and fuel cells, as well as service and digital offerings for the entire portfolio. TI's service offerings seek to extend the lifespan and availability of products, especially of steam turbines and compressors. TI is also scaling several novel decarbonization technologies, such as heat recovery solutions, compressed air energy storage, special hydrogen compressors, and CO₂ compressors for separating, using, and storing carbon.

Overall, TI benefits from the rising demand for carbon-optimized energy technologies, the transition towards a hydrogen-based economy, as well as the electrification, automation, and digitalization of industry. Reducing industrial emissions requires investment in decarbonization solutions, the optimization, improvement, and modification of processes, and the reduction and use of volatile emissions.

TI's main competitors are OEMs, EPC suppliers, as well as entities of industrial enterprises and start -ups that focus on Cleantech and hydrogen solutions.

Siemens Gamesa

Our Wind Power business Siemens Gamesa focuses on the design, development, manufacturing, and installation of products, as well as on the provision of technologically advanced services in the renewable energy sector, with a focus on onshore and offshore wind turb ines for various wind conditions. Depending on customer requirements, the scope of involvement may include delivering either a full EPC project or, in some cases, just the supply of components for wind turbines. SG comprises the Wind Turbines (Onshore and Offshore) as well as Operation and Maintenance (Service) business fields.

SG offers the design, engineering, manufacturing, and installation of wind turbines based on both geared and direct drive technology. In addition, SG provides services for the operation and maintenance of windfarms by offering a comprehensive and flexible portfolio for the maintenance and optimization of wind turbines, thus covering the entire lifecycle. Complete asset management as well as technical support are offered for SG's wind turbines and expanded for third-party platforms.

Primary customers of SG are large utilities and independent power producers, as well as project developers. The onshore wind farm market is characterized by many different providers without a single company currently holding a dominant market share. The markets for offshore wind farms are served by a few experienced market players and are mainly driven by scale, technology as well as market access challenges.

SG's competitors are mainly a small number of large multinational companies, as well as manufacturers from China, which are b ecoming increasingly global.

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2.1.3 Research and development

In fiscal year 2024, we reported research and development (R&D) expenses of €1,209 million (2023: €1,123 million). The resulting R&D intensity

(ratio of R&D expenses to revenue) was 3.5 % (2023: 3.6%). In the past fiscal year, additions to capitalized development expenses amounted to

€173 million (2023: €190 million), while amortization of capitalized development expenses amounted to €142 million (2023: €142 million). As of

September 30, 2024, Siemens Energy held approximately 19,200 granted patents worldwide in its continuing operations (2023: around 18,700). In fiscal year 2024, Siemens Energy employed an average number of around 4,200 people in the area of R&D.

The success of the company is driven by our ability to deliver innovative products, integrated systems, solutions, and services, and to develop deep relationships with customers and partner companies. We are convinced that sustainable economic value is created through continuous innovation and that investment in R&D is fundamental to our success.

Siemens Energy steers the R&D activities based on a clearly defined strategy. R&D expenses are subject to regular reviews in line with Business Area requirements. We seek to develop our portfolio with a clear focus on decarbonized energy technologies, service, and new growth fields. Another key objective is the optimized use of our extensive service potential, and the increased competitiveness of our current products based on strict quality criteria. In addition, we continue to develop our fields of action focusing on energy transformation and decarbonization:

• Decarbonized heat and industrial processes
• Carbon and product circularity
• Resilient grids and reliability
• Condition-basedservice interventions
• 24/7 carbon-free energy

The R&D activities are aimed at best addressing the challenges posed by the market-defining mega trends: growing electricity demand, decarbonization, digitalization, and decentralization.

In the GT business, R&D activities are focused on accelerating the development of the SF6 (sulfur hexafluoride)-free blue portfolio, technologies for future direct current grids, as well as digital products, systems, and solutions for resilient grids and battery energy storage to better support the energy transition. The GS business' R&D activities are focused on transitioning to a carbon-neutral portfolio by developing new services, distributed power generation applications, and carbon-neutral products and solutions. In the traditional GS businesses and in the TI business, R&D activities are strongly focused on decarbonization to support our customers in the changed market environment. Here, the main levers are increasing the efficiency, availability, and flexibility of the equipment used, and reducing greenhouse gas emissions, including increasing the use of hydrogen. At SG, our R&D activities focus on developing the next generation of technologies that will lead to improved and more cost-effective products, solutions, and services. SG aims to develop reliable and efficient wind turbines for both onshore and offshore applications a nd enable seamless integration into the power grid. This is intended to help utility companies optimize the use of renewable energy. An example of this is the commencement of production of the SG14-236. This new turbine, based on the proven DirectDrive design, targets global offshore markets and delivers 30% more power than its predecessor.

A number of major projects are evidence of the success of our R&D activities in the areas of energy transition and carbon -neutral technologies. Siemens Energy has entered into a joint development agreement with Saudi Aramco to develop a Direct Air Capture (DAC) demonstration unit that was delivered in fiscal year 2024 and shall be commissioned in Dhahran, Saudi Arabia, in the first quarter of fiscal year 2025. In addition, a FEED study (Front-End Engineering and Design Study) for a larger DAC pilot facility in Saudi Arabia is planned, which shall be realized in fiscal year 2025. DAC technology involves the extraction of carbon dioxide (CO2) directly from ambient air using chemical processes, which can then be stored or utilized to combat climate change.

Industrial process heating is responsible for over 10% of global greenhouse gas emissions. Siemens Energy is developing a low-cost, highly efficient alternative for process heat that produces zero local emissions. Concurrently, the team is designing a full -scale, 7.5MW pilot heater to operate with molten salt. This pilot project, developed in collaboration with our partner AES, is slated to begin testing in summer 2025 and will validate the conversion of a 500MW AES coal power plant to 100% green electricity.

In accordance with our R&D strategy, we allocate our R&D resources selectively towards products and services in market growth segments. Siemens Energy focusses its R&D activities on innovative materials and advanced manufacturing methods. Furthermore, innovations also concentrate on product digitalization, power electronics, software-driven power control, environmentally friendly products and systems, and grid stabilization. Additive manufacturing is another innovation field in which Siemens Energy has long been active. As of September 30, 2024, we can look back on more than 15 years of user experience and development cooperation with, among others, Werner -von-Siemens Centre for Industry and Science e.V., Göteborg Energi and Equinor.

Siemens Energy works with other industry participants and research institutions to advance research projects. Prominent partners include the International Renewable Energy Agency (IRENA), DTU Copenhagen, the Karlsruhe Institute of Technology, the Georgia Institute of Technology, Khalifa University, the University of Sheffield, AGTurbo, and EUTurbines. The four global innovation centers in Berlin, Orlando, Abu Dhabi, and Shenzhen, whose aim is to nurture innovation and accelerate the energy transition, also work with both academic and industrial partners within the framework of a partnership model. About 230 customers from 25 countries and 170 companies have visited the Experience Days in the Innovation Center Berlin in June 2024 showcasing cutting-edge technology and innovative solutions.

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2.2 Financial performance system

2.2.1 Financial Framework

Siemens Energy's Financial Framework includes performance indicators (PIs) and targets that we aim to achieve over a three-year period or beyond (mid-term).

The reporting and analysis of PIs are related to our strategic goals. The PIs are designed to help achieve these goals on an operational level and aim to strike a balance between the factors of growth, profitability, and liquidity. They serve as a measure of target attainment for manager s and thus can influence Executive Board remuneration. The most important of these PIs (key performance indicators, KPIs) are forecast for the next fiscal year. For more details see 2.7 Report on expected developments.

Some of the PIs described below are alternative performance measures (APMs), which are not defined or listed in IFRS (non-GAAP measures). We believe that our APMs offer additional and useful information for our stakeholders helping them to assess the business perfor mance of Siemens Energy. Other companies may report similarly named indicators, but they are not always comparable due to possibly different calculation methods.

2.2.2 Growth

Siemens Energy measures, manages, and controls the development of its business volume using comparable growth figures for orders and revenue. The KPI comparable revenue growth shows the development of revenue net of currency translation effects that result from the external environment outside of our control and portfolio effects that relate to business activities that are either new to our business or no longer a part of it.

Currency translation effects are the difference between revenue for the current period calculated using the exchange rates of the current period and revenue for the current period calculated using the exchange rates of the comparative period. To calculate the percentage change year-on- year, this absolute difference is divided by revenue for the comparative period.

A portfolio effect arises in the case of an acquisition or a disposal and is calculated as the year-on-year change in revenue resulting specifically from the transaction. To calculate the percentage change, the absolute change is divided by revenue for the comparative period.

At Group level, Siemens Energy focuses on profitable growth and aims to achieve a compound annual growth rate for revenue (based on fiscal year 2024, excluding currency translation and portfolio effects) in the high-single-digit or low-double-digit percentage range by fiscal year 2028.

For orders, we apply the same approach to the calculation of currency translation and portfolio effects as described above. The order backlog is calculated by adding the new orders from the current reporting period to the order backlog at the end of the previous reporting period and then subtracting the revenues realized in the current reporting period. Direct order value adjustments such as modifications, currency translations and portfolio effects are also considered. The book-to-bill ratio is the ratio of orders to revenue.

2.2.3 Profitability

We use the KPI Profit margin before Special items to measure the profitability of operating activities of Siemens Energy. To calculate the Profit margin before Special items, Profit before Special items is divided by total revenue.

Profit is defined as income (loss) before income taxes, interest income and expenses, and other financial income (expenses), net, adjusted for amortization of intangible assets acquired in business combinations and goodwill impairments.

To increase comparability year-on-year, we use Profit before Special items. Special items refer to the following topics:

• Restructuring and integration costs: Restructuring costs refer to personnel measures leading to severance charges, including costs for terminating service contracts with Siemens Group (Siemens AG and its subsidiaries). Integration costs that occur at SG are related to the integration of companies as well as in the course of the integration of SG into the Group and the corresponding transaction costs.
• Stand-alonecosts relate to the separation from Siemens Group and the formation of Siemens Energy as an independent enterprise.
• Starting with fiscal year 2024, the definition of strategic portfolio decisions was specified more precisely. As a result, Special items relating to strategic portfolio decisions include significant expenses and income in connection with the acquisition, disposal or discontinuation of businesses.

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13 Combined Management Report

Profit margin before Special items is one of the targets used in determining the short-term variable compensation of the Executive Board.

We aim to achieve a Profit margin for the Group of 10 - 12% for fiscal year 2028. For our Business Areas we aim to achieve Profit margin ranges for fiscal year 2028 as shown below:

Profit margin ranges for fiscal year 2028

Gas Services

Grid Technologies

Transformation of Industry

Siemens Gamesa

12 - 14%

13 - 15%

10 - 12%

3 - 5%

For the purposes of managing and controlling profitability at Group level, we also use Net income as a KPI. This KPI is the main driver of Basic earnings per share (Basic EPS), which is defined as net income attributable to shareholders of Siemens Energy AG divided by the weighted average number of shares outstanding without any dilution. Basic earnings per share also influence the long-term variable compensation of the Executive Board.

2.2.4 Liquidity

To provide an assessment of the Group's ability to generate cash we use Free cash flow pre tax as a KPI. Free cash flow pre tax of the Group is defined as cash flows from operating activities before income taxes paid, less additions to intangible assets and property, p lant and equipment. Free cash flow of the segments constitutes cash flows from operating activities less additions to intangible assets and property, plant and equipment. It excludes financing interest, except for cases where interest on qualifying assets is capitalized or classified as contract costs; it also excludes income taxes and certain other payments and proceeds. Consequently, Free cash flow pre tax demonstrates the extent to which we are able to meet both recurring and specific cash outflows, such as payments for acquisitions, dividends, debt servicing or taxes, etc.

Free cash flow pre tax is one of the targets used in determining the short-term variable compensation of the Executive Board.

2.2.5 Other financial performance indicators

An important aspect of liquidity management is the thorough management of Operating net working capital, which is defined as the sum of Trade and other receivables, Contract assets, and Inventories, reduced by the sum of Trade and other payables and Contract liabilities.

To provide an assessment of our ability to generate cash, we use the operational Cash conversion rate (CCR) as an ancillary measure. This is defined as the ratio of Free cash flow pre tax to Profit.

Siemens Energy aims for a capital structure according to an investment grade profile, in line with its financial policy. The PI used to assess our capital structure is Adjusted net debt/ (net cash), which is shown in 2.6.3 Financing and liquidity analysis. We also use the ratio Adjusted net debt to EBITDA. This ratio indicates the approximate number of years that would be needed to cover the Adjusted net debt through EBITDA. The EBITDA measure represents income (loss) before income taxes, before financial result and before amortization, depreciation and impairments.

We aim to provide an attractive return to our shareholders. Under the Siemens Energy Financial Framework, our intention is to propose a dividend equal to 40 to 60 % of the Group's Net income attributable to shareholders of Siemens Energy AG. For this purpose, the Net income may be adjusted for extraordinary non-cash effects.

In the mid-term, we use Return on capital employed (ROCE) to manage our capital efficiency. ROCE is calculated as operating income (loss) after tax divided by average capital employed. Average capital employed, as the sum of Adjusted net debt and total equity, is defined as a five -point average of capital employed at the beginning of the reporting period, the respective balances on the quarterly reporting dates and the capital employed at the end of the reporting period. At Group level, we aim to achieve a ROCE of more than 15% for the fiscal year 2028.

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2.3 Business performance in fiscal year 2024

2.3.1 Overall assessment by the Executive Board of the current economic situation

Siemens Energy Group can look back on a good performance in fiscal year 2024. We achieved or even exceeded all the financial targets originally set or raised during the year. The key to our success was the focus of our activities on three priorities: delivering on profitable growth, fixing the wind business and maintaining our solid financial foundation.

We have seized the opportunities presented by a positive market environment. The fast-growing electricity market needs a wide range of our products. In the past fiscal year, this benefited our grid technology (GT) and gas turbine (GS) businesses in particular. This has resulted in an unexpectedly strong order intake, which led to a record order backlog of €123 billion for Siemens Energy at the end of the fiscal year. The successful processing of our order backlog, coupled with a dynamic market demand contributed to the significant growth in revenue. Profit before Special items was positive amounting to €0.3 billion (2023: negative €2.8 billion) and Net income was over €1.3 billion (2023: Net loss of €4.6 billion).

We progressed as scheduled with the integration of SG as part of the continuing strategic development of Siemens Energy. We are also on track with the restructuring of our wind power business and committed to achieving the break-even in fiscal year 2026. Following the quality issues in the onshore activities in the prior fiscal year, ongoing analysis revealed no new technical findings. With respect to the ramp-up of our offshore activities, we were able to significantly increase productivity over the course of the past fiscal year.

Siemens Energy has again demonstrated and strengthened its financial foundation with the strong development of Free cash flow pre tax, as well as the progress made with disposals and the accelerated portfolio transformation. This is confirmed by our investment grade rating. Siemens Energy was able to report adjusted net cash again, after adjusted net debt in the prior year.

In the past fiscal year we achieved important progress on our path to becoming a profitable and value-creating company. Going forward, we will continue to focus consistently on the three priorities mentioned above. In the years ahead, we will invest significant funds in our growing power grid business to enable us to benefit from the strong momentum in the electricity sector and achieve market-leading profitability with our core business. Thanks to the substantial order backlog, adjusted net liquidity of Siemens Energy and the positive performance of the past fiscal year, we are continuing along our chosen path with confidence.

Siemens Energy's business performance

As in the prior year, business performance benefited from the ongoing strength in the energy market. The development was driven by the continuing transition of the energy market and, therefore, the increase in demand for electricity. This had a positive effect on the order intake and revenue as well as the Profit development.

At €50 billion, orders at Siemens Energy matched the high level of the prior year. With a book-to-bill ratio of 1.46, the prior-year record for the order backlog was exceeded once more and even clearly. At year end, the order backlog stood at €123 billion. On a comparable basis, revenue of Siemens Energy increased significantly to €34 billion. GS maintained the high level of the prior year, while all other segments improved, led by GT with a substantial increase. The growth in revenue in the Siemens Energy service business followed the overall trend for revenue. Following a loss in the prior year, Profit before Special items of Siemens Energy was again positive at €345 million. The prior-year value of negative €2,776 million was caused by a loss at SG, mainly due to quality issues with certain onshore wind turbines. The increase in Profit in the past fiscal year resulted mainly from a sharp reduction in the loss at SG and from the strong operating performance of the other segments. In the past fiscal year, Siemens Energy reported positive Special items of €2,038 million, mainly due to disposals and the accelerated portfolio transformation. As a result, Profit grew substantially more than Profit before Special items and amounted to €2,383 million, compared with negative €2,960 million a year earlier.

This resulted in a Net profit for Siemens Energy Group of €1,335 million (2023: Net loss of €4,588 million) and correspondingly Basic earnings per share of €1.37. See 2.4 Results of operation for further information.

Due to the Net profit and despite negative Other comprehensive income, equity increased clearly compared with the end of fiscal year 2023. Due to strong execution of backlog, total assets have also increased clearly. The equity ratio at the end of the past fiscal year amounted to 18% (2023: 18%). See 2.5 Net assets, liabilities and equity for further information.

Free cash flow pre tax at Siemens Energy was €1,859 million in the past fiscal year, compared to €784 million in the prior year. Here, the substantially higher negative contribution of SG was offset by in part sharp increases in the other segments. The development of liquidity, which was substantially influenced not only by the higher Free cash flow pre tax but also by cash inflows from disposals and the accelerated portfolio transformation, and the year-on-year decrease in debt resulted in adjusted net liquidity of €1,951 million at the end of fiscal year 2024 (2023: net debt of €759 million). See 2.6 Financial position for further information.

Comparison between the actual and forecast course of business

On May 8, 2024, we raised the outlook for comparable revenue growth, the Profit margin before Special items and Free cash flow pre tax for fiscal year 2024 due to the business performance in the first half of the year. The updated outlook was based on adjusted assumptions for revenue

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growth in all segments and a higher Profit assumption for GT. In the first half of the fiscal year, the product and service businesses of the GT and TI segments developed better than expected due to the strong market demand. We also anticipated that the revenue of SG would increase substantially more in the second half of the fiscal year than in the first half, especially due to the continuous ramp-up of the offshore activities. We assumed that all segments, with the exception of SG, would exceed the original expectations for Free cash flow pre tax. This was particularly the case for GS and GT, both of which were predicted to incur substantial cash inflows due to customer payments in connection with the continuing order momentum.

On August 7, 2024, the outlook for Free cash flow pre tax was adjusted again due to the good development in the first nine months of the fiscal year and the outlook was raised.

For all targets, we met or exceeded the raised outlook. The main factor that enabled us to exceed the targets for comparable revenue growth, Net profit and Free cash flow pre tax was the persistently favorable market environment for Siemens Energy, which supported growth of both order intake and revenue. This resulted in unexpectedly high advance payments from customers, which had a positive impact on the development of Free cash flow pre tax, while higher volume effects positively influenced the increase in Net profit.

Target achievement 2024

Comparable revenue growth Siemens Energy

Profit margin before Special items Siemens Energy

Net income (loss)

Siemens Energy

Free cash flow pre tax

Siemens Energy

		Expected		Target
Initial position		development		achievement
Fiscal year				Fiscal year
2023	2024	2024
9.9%		3% to 7%
		from May 8, 2024:
		10% to 12%	12.8%
(8.9)%		(2)% to 1%
		from May 8, 2024:
		(1)% to 1%	1.0%
€(4,588) million		Net income up to €1 billion		€1,335 million
		negative Free Cashflow pre tax
€784 million		of around €1.0 billion
		from May 8, 2024:
		positive up to €1.0 billion
		from August 7, 2024:
		positive between €1.0 billion and €1.5 billion		€1,859 million

Evaluation

overachieved/ updated

overachieved

achieved/ updated

achieved

overachieved

overachieved/ updated

overachieved/ updated

overachieved

Dividend

Our dividend policy is to distribute 40% to 60% of our Net income attributable to shareholders of Siemens Energy AG. The Executive Board and Supervisory Board have decided not to propose a dividend distribution at the Shareholders' Meeting. This proposal takes account of the conditions of the counter-guarantee agreement made with the German government in December 2023, which stipulate that no dividend may be distributed in fiscal years in which guarantees provided by a consortium of banks and secured by the counter-guarantee have been issued. For fiscal year 2023, no dividend was paid due to the loss reported.

2.3.2 Events and developments responsible for the course of business

2.3.2.1 Macroeconomic development

Gross domestic product and inflation

Global economic activity and trade recovered in fiscal year 2024, with trade boosted by substantial exports from Asia, especially in the technology sector. Additionally, consumer spending, global export activities, government spending, and easing fiscal and monetary policies are k ey drivers of gross domestic product (GDP) growth in calendar year 2024. However, the global economy remained affected by geopolitical uncertainties caused by the Ukraine war, the conflicts in the Middle East and tensions between China and Taiwan.

Whereas global GDP was 3.3% in calendar year 2023, the forecast for calendar year 2024 is slightly lower at 3.2%. Industrial nations are expected to achieve a growth rate of 1.8%, while emerging and developing economies are projected to grow at a rate of 4.2%.

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As a result of the interest rate hikes by central banks in calendar year 2023, inflation in calendar year 2024 is likely to decline to 2.4% in the Eurozone and 3.0% in the United States. However, this would still mean that it remains above the long-term average. For calendar year 2024, global inflation is expected to be around 5.8%, compared with 6.7% a year earlier.

These inflation and GDP growth rates are based on data published by the International Monetary Fund in its World Economic Outlook in October 2024.

Energy market

The growth in demand for electricity increased at a sharply higher rate than in the prior year. Alongside the development of t he economy, the transition of the energy market was the main factor in this because replacing fossil fuels with renewable energy is pushing up the demand for installed power generation capacity, despite greater energy efficiency and savings. The accelerated transition of the energy market continued, buoyed by various political and institutional measures such as the U.S. Inflation Reduction Act and the updates to the existing European REPowerEU initiative. These measures are mainly driving investment in clean energy and the necessary transmission systems.

Supply market conditions

In the past fiscal year, the aforementioned geopolitical uncertainties and tensions also impacted global supply chains, influencing prices especially and, to a lesser extent, the availability of materials. Additional pressure came from the ever increasing economic and political tension between the United States and China. Different supply markets were affected to a varying extent.

We continued to observe above-average inflation in the prices for services, while the prices for the different material categories trended both upward and downward. After a tense phase caused by product shortages and long lead times, electronic industry supply chains were characterized by a certain degree of stability. Compared with fiscal year 2023, the prices for steel raw materials such as iron ore and coking coal and for scrap were relatively stable. In the first half of the year, the prices for base materials such as aluminum, copper and nickel rose, peaking at the end of May 2024, but subsequently eased in some cases. After a substantial decline in the prices of critical materials in 2023 because the increase in supply outpaced demand, following a very strong increase in prices in the preceding two years, the fast-growing markets for critical materials remained turbulent in 2024.

Global logistics costs of air, land and sea freight have shown an upward trend after previously being at very low levels. This was partly due to rising demand, and in addition, attacks by Houthi rebels on ships in the Red Sea drove up freight rates and also caused delays in maritime traffic.

The information on the energy and supply markets are based primarily on the data published by the International Energy Agency in its World Energy Outlook Report 2024.

Impact on business performance at Siemens Energy

Similar to the prior year, the general development of the global economy had less impact on business performance at Siemens Energy than the specific situation in the energy market. In fiscal year 2024, our sales markets continued their positive development due to the accelerated transition of the energy market. In particular, our grid business benefited due to orders for grid connections and grid stabilization measures, as did our gas turbines business, among others with orders for efficient gas and steam turbine power plants.

Moreover, Siemens Energy profited from a better overall situation on the supply markets, despite the geopolitical risk situation. Apart from individual cases, there were no significant supply bottlenecks or we were able to restrict the effects of individual material shortages by taking suitable countermeasures. For the most part, increases in materials prices were passed on to customers in new contracts.

We continue to take account of the prevailing risk situation - in addition to the risks from political tensions, the relative scarcity of special raw materials (e.g., rare earths) as well as cybersecurity incidents remain among the biggest supply market risks - and challenges in supply markets through a wide range of monitoring and assessment programs which allow timely countermeasures. A wide range of instruments ar e used in risk mitigation: long-term supply contracts for standard materials, demand pooling, increasingly consistent risk sharing in supplier and customer contracts through indexing, supplier switching and balanced supplier portfolios with procurement sources in several regions, commodity hedging, etc.

2.3.2.2 Other events influencing the course of business

Continuing strategic development of Siemens Energy and complete integration of Siemens Gamesa

In fiscal year 2024, we pressed ahead with the complete integration of SG as part of the continuing strategic development of Siemens Energy by implementing the following measures:

• As of January 1, 2024, the central and global functions Accounting, Taxes, Treasury and Corporate Finance and parts of Human Resources at SG were integrated into the Siemens Energy structures and processes.
• As of June 1, 2024, this was followed by the integration of the central and global functions Assurance, Communication, Customs, Cybersecurity, EQS (Environment Health and Safety, Quality and Security), Human Resources (remaining parts), IT, Intellectual Property, Legal & Compliance, Logistics, Mergers & Acquisitions, Procurement, and Real Estate.
• We also dissolved the SG Board of Directors as of July 1, 2024.

Siemens Energy - Annual Report 2024

17 Combined Management Report

• On August 1, 2024, the business allocation for SG passed from Christian Bruch to Vinod Philip, who assumed responsibility for the wind power business on the same date.
• Also as of August 1, 2024, we internally placed SG as the fourth Business Area of Siemens Energy, under the name Wind Power, on par with our other Business Areas. In order to create uniform internal reporting structures across all our Business Areas, the finance organization of the Wind Power business - which, unlike the central and global finance functions, served only this business - was integrated into the central Corporate Finance structure.
• In parallel with the changes made at Group level, we are moving ahead step by step with harmonizing regional structures. This envisages the legal combination of SG and Siemens Energy companies worldwide over a period of several years. Local characteristics will be observed, which will affect the duration of implementation. We successfully completed the first legal combination in Canada as of July 1, 2024.

With the aforementioned steps, we are continuing to streamline the structure of Siemens Energy and create the foundation for a holistic market approach. Thanks to the integration measures, synergies were already realized in various areas in the past fiscal year. In addition, SG is receiving additional support to overcome the current challenges described below, in its efforts to return the business to an economically successful path.

Quality issues, higher product costs and ramp-up challenges at Siemens Gamesa

In the previous year, Profit at SG had been affected by substantial negative impacts in connection with quality issues specifically relating to the 4.X and 5.X onshore wind turbines. In addition, there were increased product costs and ramp-up challenges in the offshore area of activities. As expected, SG's Profit was also negatively impacted by these issues in fiscal year 2024. The main reason for this was the effect of higher planned costs on project margins resulting from the quality issues with onshore wind turbines. Added to this were higher expenses in connection with the offshore ramp-up activities.

A group-wide task force with members from all functions and external technical experts was already deployed in the previous year to resolve the quality issues with the 4.X and 5.X platforms. Sales activities were suspended for both onshore platforms. As well as performing technical analyses of the quality issues and implementing remedial measures, further damage limitation and rectification measures were developed during the past fiscal year. In fiscal year 2024, the comprehensive root cause analysis of all the issues reported in the installed fleet revealed no new technical findings. Negative impacts resulted from the regular annual update of the statistical models used to evaluate the entire wind turbine fleet. In contrast, the adjustments to estimates in connection with new and existing customer contracts for large projects had an opposite effect. For the 4.X platform, all necessary steps were completed with the root cause analysis and the validation of solutions for serial production, so that the 4.X platform could be brought back to the market in September 2024. Sales activities for the revised 4.X platform and in future for the 5.X platform will focus on the core markets of Europe and the United States with opportunistic efforts in other countries. SG also concentrated on continuing to optimize the production network for the onshore activities.

In the offshore area, SG is significantly expanding its production facilities in view of the market growth in renewable energies. In this connection, due to the situation on the supply markets (including the personnel market) there were delays in ramping up new and modified capacities in the prior year, among others in France, Germany, Denmark and the United Kingdom. In fiscal year 2024, SG concentrated mainly on overcoming the bottlenecks on the supply markets and ramping up its factories. In addition, the development of a new offshore product generation was concluded; the new SG 14 MW turbine is already on the market.

Optimization of operational structures and processes at Siemens Gamesa

In fiscal year 2024, SG implemented the "Masterplan" for restructuring the wind power business. This plan builds on the Mistral program introduced in 2022. It is a general corporate program and the focal points of its activities are largely influenced by the quality issues at SG described above:

• Diligent clarification and elimination of the quality defects identified in parts of the installed onshore fleet; the findings will also be used as the basis for developing new products.
• Development of a suitable cost structure to restore competitiveness, improvement of product maturity by extending the portfolio cycle, and implementation of an optimized make-or-buy approach.
• Amendment of customer contracts to increase the profitability of new projects and reducing SG's risk exposure on existing projects; in the future, use of a selective bidder process to deliver an order backlog that ensures profitability.
• Serving a smaller number of markets and the corresponding implementation of measures to optimize production, concentrate on core technologies and adjust capacities, which depend on the individual business situations (i.e., expansion in offshore growth areas and reduction in onshore areas outside the core business).
• Support for change with a corporate culture program to improve the collaboration between the business units and departments on the one hand and to push forward with the integration of SG and Siemens Energy on the other hand.

A series of measures were already initiated in the past fiscal year to make progress in these areas. They include redesigning development processes, rules and regulations for a more selective bidder process, price adjustment clauses in customer contracts to reflect changes in the cost of raw materials, and higher margin requirements. In addition, at the start of fiscal year 2025, all service activities will be merged with the other activities of the onshore and offshore business to simplify communication with customers and accelerate the execution of projects.

Siemens Energy - Annual Report 2024