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Several German newspapers report that Siemens Energy is holding talks with the German government about possible state guarantees. Ever since quality problems were discovered in the wind turbines of subsidiary Siemens Gamesa, things have been going downhill.

Siemens Gamesa, a prominent player in the world of wind turbine manufacturers, is struggling. Problems in production have cost the company billions and damaged investor confidence. Meanwhile, European competitors are in a similar, though less serious, situation.

In the news: Siemens Energy applies for state guarantees.

  • Der Spiegel and WirtschaftsWoche report that Siemens Energy has begun negotiations with the German government to obtain state guarantees.

The details: 15 billion euros in guarantees.

  • First confirmed by a spokesman for the Economy Ministry, the news was later confirmed by Siemens Energy itself.
  • "Preliminary talks are being held with various parties, including Siemens Energy's partner banks and the federal government. This is to ensure access to a growing volume of needed guarantees in order to facilitate the expected strong growth," according to a communiqué.
  • The German conglomerate is seeking guarantees for loans of up to 15 billion euros. The plan looks as follows:
  • The first part of 10 billion euros would be covered 80% by the state and 20% by banks.
  • The second part of 5 billion euros would be borne by Siemens AG, the former parent company and still the largest shareholder (25.1%).

Siemens tries to explain why it wants state guarantees

Explanation :

  • According to WirtschaftsWoche, these guarantees are intended to prevent banks from raising costs or even canceling important credit lines for Siemens Energy's projects.
  • According to Siemens Energy, the cause is a sharp increase in the number of orders. This would reinforce the growing need for guarantees for long-term projects.
    • "The rapid transition to clean energy is creating strong demand for our technologies; our order book stands at 110 billion euros," said a spokesperson. "This positive development means that we need to offer more certainty to our customers. This is a challenge for all companies. This is why we are taking measures to strengthen our financial position."
  • The Handelsblatt took the opportunity to recall comments made by Siemens Energy's CEO last August about the possible use of state aid.
  • "We are not there yet," Christian Bruch assured us. "Our balance sheet is good and we are convinced that we can make the company profitable on our own.
  • Although we cannot yet prove him completely wrong, we are increasingly approaching a situation where guarantees are almost equivalent to direct state aid.

Siemens announces 2024 will be worse than expected for its wind turbines

The context: gloomier could hardly be worse.

  • In its press release, Siemens Energy tried to reassure investors. It assured them that financial results for the 2022-2023 fiscal year (ending in September) "should be fully in line with forecasts." The company did not mention that this actually means a loss of €4.5 billion. This figure will be officially announced next month.
  • The German group also stressed that its Gas & Power business is doing extremely well.
  • The problem, of course, lies with wind turbines. Last June, Siemens Energy's leaders had to admit serious design problems. Since then, the company has been working on a solution, but without much success. The company is no longer accepting orders for some onshore wind turbines and is "strictly selective" for offshore equipment.
  • "The order book and revenues are expected to be lower than market expectations for the year 2024. Net profit losses and cash flow deficits are expected to be higher than market projections," the statement read.

Investors reacted immediately. On Thursday afternoon, Siemens Energy shares were 35% lower on the Frankfurt stock exchange. (ddw)

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