Siemens Energy : Annual Report 2021 including Consolidated Financial Statements for the Siemens Energy Group, together with the Combined Management Report of Siemens Energy AG and the Siemens Energy Group, as of September 30, 2021 (IFRS)

Siemens Energy

Annual Report 2021

siemens-energy.com

Siemens Energy Group at a glance

Revenue distribution (location of customer) (in billions of €)

EMEA

14.1

therein Germany 2.4

Americas

8.1

therein U.S. 4.9

Adjusted EBITA margin before Special items

2.3%

Order Backlog (in billions of €)

84

Free cash flow pre tax (in millions of €)

1,358

28.5

Asia, Australia

6.4

therein China 1.6

Adjusted EBITA	Net income (loss)
(in millions of €)	(in millions of €)
(12)	(560)

Orders	Book-to-bill ratio
(in billions of €)
33	1.2

Basic EPS	Employees ∅
(in €)	(in thousands)
(0.63)	92

Content

1. Siemens Energy Group at a glance

1. Letter from theExecutiveBoard

1. Our leadership team
2. About this Report

1 Combined Management Report

9 Business description

13 Financial performance system

1. Business performance in fiscal year 2021

1. Results of operation

1. Net assets, liabilities and equity

1. Financial position

1. Report on expected developments

1. Report on material risks and opportunities

1. Explanations to the Financial Statements of Siemens Energy AG (Holding)

1. Group non-financial statement

1. Takeover-relevantinformation

1. Further information

2 Consolidated Financial Statements

1. Consolidated Statements of Income
2. Consolidated Statements of Comprehensive Income
3. Consolidated Statements of Financial Position
4. Consolidated Statements of Cash Flows
5. Consolidated Statements of Changes in Equity
6. Notes to Consolidated Financial Statements

3 Additional information

1. Responsibility Statement
2. Independent Auditor's Report

134 Independent auditor's limited assurance report on the group non-financial statement

136 Report of the Supervisory Board

142 Corporate Governance pursuant to Sections 289f and 315d of the German Commercial Code

153 Compensation Report pursuant to Section 162 of the Stock Corporation Act of Siemens Energy AG for fiscal year 2021

1. Independent auditor's report on the audit of the compensation report prepared to comply with Sec. 162 AktG ["Aktiengesetz": German Stock
   Corporation Act]
2. TCFD Index

Letter from the Executive Board

4

Letter from the Executive Board

On September 28, 2020, Siemens Energy was listed for the first time on the Frankfurt Stock Exchange. Just a few months later, on March 22, 2021, we joined the ranks of companies listed in Germany's blue-chip index, the former DAX30. Our rapid ascension, achieved so soon after our initial listing, is a remarkable tribute to our company and the dedication of our 92 thousand employees. On behalf of our employees, I would like to thank you for the confidence you have placed in us over the past year.

Siemens Energy is a young company with a long tradition. In 1866, engineer and entrepreneur Werner von Siemens discovered the dynamo-electric principle. With it, he laid the foundation for modern electrical engineering and started the electrification of the world. Today, as a global player, we do business in more than 90 countries. We contribute to more than 16% of global power generation. It is important to bear in mind that more than half of our portfolio is already based on technologies that are relevant in a decarbonized energy world. To expand our leading position and advance sustainable technologies of the future, we invest €1 billion per year in research and development.

We are a reliable partner who actively helps our customers bring about their own energy transition. Our segments Gas and Power, and Siemens Gamesa Renewable Energy (SGRE) use sustainable technologies to carry out projects along the entire energy-supply value chain.

At Gas and Power, this is the responsibility of the Generation, Industrial Applications and Transmission divisions and the New Energy Business unit. Generation is driving power generation with the goal of producing ever lower levels of emissions or even none at all. Industrial Applications serves our customers in the process industry with low-emission industrial applications. Transmission ensures the efficient transmission and storage of electricity. New Energy Business mainly bundles our activities in electrolysis for the purpose of producing hydrogen, among other things.

SGRE is a world leader in wind energy and has installed 107 gigawatts in 75 countries to date. The company, in which we hold a 67% stake, is listed on stock exchanges in Madrid, Barcelona, Valencia and Bilbao.

How successful was Siemens Energy in the past fiscal year?

Development of orders and cash flow was convincing in the past fiscal year. In spite of the challenging business environment we faced, we significantly improved our profitability. I am very proud of our global team and our success for this very reason. We now have a robust order book. I am also confident that the measures we have taken will continue to pay off and that we will make further progress in fiscal year 2022. I am equally confident about our targets for 2023 and beyond as well.

Let's now take a detailed look at our figures: Our incoming orders

declined moderately by 3% to €33.0 billion (2020: €34.0 billion). But they still remained high. On a comparable basis (excluding currency translation and portfolio effects), orders decreased only slightly. The order backlog at the end of the fiscal year increased to €84 billion. Revenue increased moderately by 4% to €28.5 billion (2020: €27.5 billion). Siemens Energy's adjusted EBITA almost reached the profit zone with a €12 million loss (2020: loss of €1,543 million). This was mainly due to a sharp decline in special items and operating improvements. Adjusted EBITA before Special items improved to €661 million (2020: minus €17 million) with a margin of 2.3%.

The loss after tax was €560 million for fiscal year 2021, a very strong improvement from the loss of €1,859 million in the previous year. Basic earnings per share were minus €0.63 (2020: minus €2.21).

We made progress in the Gas and Power segment in the past fiscal year. The measures initiated to increase competitiveness are having an impact, and we are well on our way to achieving our targets for fiscal year 2023. Progress is also evident at Siemens Gamesa Renewable Energy in the offshore and service businesses. We have initiated improvement measures in the onshore area.

Business conditions for our company are good. Global demand for energy is rising. In particular, the increasing electrification of industry and mobility could double global electricity consumption by 2040 - currently more than 750 million people still do not have any access to electricity. At the same time, demand for climate-neutral solutions is growing.

For Siemens Energy, this means excellent growth opportunities. However, it also brings immense challenges. For example, we face risks due to delays in supply chains and rising raw material prices. In addition, the conventional energy business remains challenging. The Energy of Tomorrow strategy that we presented at the Capital Market Day in September 2020 addresses these challenges. It envisages a systematic alignment of our portfolio towards sustainability. It also involves reducing our cost base by more than €300 million by fiscal year 2023. We plan to achieve some of these savings by lowering material costs and streamlining internal processes. Nonetheless, we will also have to cut jobs in our traditional business, a decision we announced at the beginning of February 2021. After extensively carrying out these plans in many countries, we were able to conclude negotiations with employee representatives in Germany in September 2021. The result was an agreement on a reconciliation of interests and a framework social plan.

Siemens Energy - Annual Report 2021

5 Letter from the Executive Board

Siemens Energy - Annual Report 2021

We have thus laid the foundation for long-term reductions in our cost base and improved profitability. Our goal is an adjusted EBITA margin before special items of 6.5% to 8.5% in 2023. Over the medium term, we aim to achieve an adjusted EBITA margin after special items of at least 8%. These gains will enable us to generate the funds we need to develop new business models and technologies, and tap new markets. Or simply: to shape the energy world of tomorrow.

The energy world of tomorrow will be shaped by the development of sustainable technologies. They are the essential aspect of our effort to counter climate change and help decarbonize our energy supply. We are at a turning point in human history. The Intergovernmental Panel on Climate Change's (IPCC) forecast in August 2021 that the average global temperature could rise by more than 1.5 degrees Celsius as early as 2030. The result would be extreme weather events unlike anything we have seen before. Last summer's natural disasters in China, North America, Russia, southern Europe, Germany and many other regions of the world offer a glimpse of what may occur.

We must act now and move "from a decade of thinking about climate change to a decade of implementation," as the initiators of the 26th UN Climate Change Conference in Glasgow (COP26) put it. Declarations of intent alone are no longer enough - no matter how good and appropriate the objectives of more than 130 countries in the world are to become climate-neutral by 2050.

A company that is determined to help lead its customers down the path toward the energy transition must also pursue this goal systematically itself. And that is just what we have done. By 2023, we at Siemens Energy want to increase our use of green power from 78% of our total consumption to 100%. SGRE is already well ahead of us, having achieved this goal in 2020. We at Siemens Energy intend to be climate neutral in our own operations by 2030. SGRE reached this climate neutrality goal in 2019 and aims to be the first energy technology company ever to achieve net zero emissions by 2040. This will then include the emissions of its products and solutions at customer sites.

With these ambitious targets in mind, we are assuming our social responsibility as a global player. But our responsibility extends well beyond our efforts to decarbonize as well. Our ambition is greater: We intend to become the world's leading energy technology company in the areas of environment, social and governance. Leading sustainability agencies have confirmed that we are on the right track.

These efforts include providing our employees with equal opportunities and the best-possible professional growth opportunities. Lifelong learning is a key success factor in an industry that is undergoing and will continue to undergo profound change. At the same time, the safety and health of our employees are a top priority for us. Our goal is to prevent occupational accidents to the greatest degree possible.

In terms of inclusion and diversity, we aim to increase the proportion of women in senior management positions at Gas and Power from 21% to 25% by 2025. We aim to reach 30% by 2030. SGRE is working to increase the proportion of women at the senior management level from 12% to 25% by 2025. At Siemens Energy, we believe that diverse teams are more effective and that inclusion and diversity are reasons why young people choose an employer.

Acting responsibly is the basis of our corporate governance. This includes the highest standards of integrity and compliance in everything we do. If misconduct occurs, we will act swiftly and consistently to address it. Our integrity is the foundation of our business principles.

As you can see, we have set our sights high. And we look forward to having you join us on this journey. Thank you for the trust you have put in Siemens Energy.

Chairman of the Executive Board

Christian Bruch