Activity Report

Fiscal year 2021

October-September 2021 results

5 November 2021

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Contents

Introduction.......................................................................................................

3

Main consolidated figures for FY21...........................................................................

5

Markets and orders ..........................................................................................

6

Key financial performance metrics .................................................................

9

WTG .......................................................................................................................

11

Operation and Maintenance Service .......................................................................

13

Sustainability ..................................................................................................

14

Outlook ............................................................................................................

16

Economic situation..................................................................................................

16

Short-, medium- and long-term prospects for wind worldwide .................................

16

FY22 Guidance, outlook and long-term vision.........................................................

21

Annex ..............................................................................................................

25

Financial Statements October 2020 - September 2021 ..........................................

25

Alternative Performance Measures .........................................................................

29

Glossary & Definitions for Alternative Performance Measures..................

48

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Introduction

Fiscal year 2021 (FY21), from October 2020 to September 2021, was a complex one. We are seeing the first signs of economic recovery after COVID-19; however, the effects of the pandemic on supply chains, manufacturing and travel are lasting longer than expected. With supply only partly recovered, the rebound in demand has led to major imbalances: shortages of certain components, longer delivery times, and a sharp increase in commodity prices, plus record-high transportation costs. The impact of these imbalances, which are persisting, was particularly intense during the second half of the year (H2 21) and on the Wind Turbine (WTG) business, which was also affected by higher ramp-up costs for the Siemens Gamesa 5.X platform. The company has already launched an action plan to address both the challenges derived from the supply chain imbalances and the ramp-up of the Siemens Gamesa 5.X platform. As a result, following solid performance in the first half (H1 21), Siemens Gamesa1 ended fiscal year 2021 with Group revenue amounting to €10,198m (+8% y/y) and an EBIT margin pre PPA and before integration and restructuring costs of -0.9%, both in line with the low end of the guidance range announced in July 2021. EBIT pre PPA and before integration and restructuring costs includes in the second half of FY21 provisions for onerous contracts in the Onshore business in the amount of c. -€298m2. Including integration and restructuring costs (-€197m in FY21) and the impact of the PPA on amortization of intangibles (-€230m in FY21), reported EBIT in FY21 amounted to -€522m and net income attributable to SGRE equity-holders amounted to -€627m.

Revenue in the fourth quarter of FY21 (Q4 21) amounted to €2,863m (0% y/y) and the EBIT margin pre PPA and before integration and restructuring costs was -6.2%. Returns in Q4 21 were affected by an increase of provisions for onerous contracts of the Siemens Gamesa 5.X platform amounting to c. -€69m (equivalent to c. -2.4% of revenue in Q4 21), mainly related to the impact of the capacity bottlenecks and the higher transportation costs on the projects in Northern Europe pipeline. Additionally, as planned, Q4 21 EBIT pre PPA and before integration and restructuring costs includes the costs related to the successful ramp-up of the Offshore SG 11.0-200 DD platform, whose first projects will begin execution in fiscal year 2022. Reported EBIT in Q4 21 amounted to -€279m, including the impact of integration and restructuring costs (-€48m) and of the PPA on amortization of intangibles (-€55m). Reported net income in Q4 21 amounted to -€258m.

The Group ended FY21 with a solid balance sheet and ample access to funding. As of 30 September 2021, the Group's net debt position stood at -€207m, while working capital amounted to -€2,496m, equivalent to -24% of revenue LTM. One of the main factors contributing to higher debt was the increase in lease liabilities 3. As of September 30, 2021, Siemens Gamesa had €4,443m in committed funding lines, against which it had drawn €1,346m, and total available liquidity amounted to €5,058m, including cash on the balance sheet at year-end of €1,961m. Siemens Gamesa maintains an investment grade credit rating: BBB from S&P (outlook stable) and BBB- from Fitch (outlook negative).

Apart from the supply chain imbalances, which were exacerbated in the last six months, FY21 was characterized by a clear increase in global commitments to combating climate change, as decarbonization objectives account for 71% of world emissions. These commitments, which in some cases are accompanied by specific targets for wind power facilities, especially Offshore, represent the basis for wind energy's strong potential in the medium and long term. In this context, Siemens Gamesa's commercial activity in FY21 resulted in orders totaling €12,185m, having signed €2,884m in Q4 21, and an order book of €32,542m. It should be noted that, despite the pace of adoption of commitments to the 2050 decarbonization target, the commitments made to date and the implicit renewable energy installations do not guarantee that decarbonization will be achieved by 2050. To achieve this, as stated by the International Energy Agency (IEA) in its latest World Energy Outlook (October 2021), it would be necessary to double the pace of wind and solar installations through 2030 with respect to the pace dictated by the current targets. As the report also indicates, the market opportunity for manufacturers of wind turbines, solar panels, lithium-ion

1Siemens Gamesa Renewable Energy (Siemens Gamesa or SGRE) is the result of merging Siemens Wind Power, which was the wind power division of Siemens AG, with Gamesa Corporación Tecnológica (Gamesa). The Group engages in wind turbine development, manufacture and sale (Wind Turbine business) and provides operation and maintenance services (Service business).

2These provisions for onerous contracts reflect mainly the impact of higher commodity and transport prices and the ramp-up cost of the Siemens Gamesa 5.X platform on the returns on contracts with that platform that are in the backlog and scheduled for execution in fiscal year 2022 (FY22) and fiscal year 2023 (FY23).

3As of 30 September 2021, lease liabilities amounted to €829m. As of 30 September 2020, lease liabilities amounted to €611m.

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batteries, electrolyzers and fuel cells to meet the global decarbonization target amounts to over USD 1 trillion per year by 2050, which is comparable in size to the current global oil market.

In FY21, Siemens Gamesa completed the first year of LEAP and of the new integration and restructuring plan

2021-2023, which will help the company to realize its long-term vision. Actions undertaken include notably:

  • Technology innovation with Siemens Gamesa 5.X and SG 14-222 products.
  • Within the productivity and asset management pillar:
    1. Simplification of the Onshore organization by optimizing resources and enhancing their allocation.
    1. Consolidation of operational capacity in EMEA with the closure of the Somozas and Cuenca plants.
    1. FY21 productivity target met through rigorous cost control measures.
    1. Working capital control, reaching a ratio of -24% over revenue.
  • Within the operation excellence pillar:
    1. Enhancement and harmonization of project management processes in all regions, promoting the exchange of operating best practices between businesses, and reinforcing quality criteria both internally and for contractors.
  1. Ramp-upof the Vagos blade plant reducing reliance on China as a global supply cluster.
    1. Improvement of the supplier management process through a global IT tool that allows monitoring the status of each supplier, executing audits and verifying health and safety standards.
  • Restructuring in India with Halol closure and adapting capacity to the new market size, ceasing new development and solar activities, and launching in that country of the SG 3.4-145 wind turbine, with contracts for 623 MW signed in July 2021.

In addition to executing the LEAP program and the restructuring activities, Siemens Gamesa took additional actions to protect the Group's performance in the current complex supply environment and to strengthen the competitive position of the Siemens Gamesa 5.X platform:

  • Strengthening of the procurement strategy by increasing financial and physical hedges and through better alignment with suppliers.
  • Improvement of measures (indexation, reopener or renegotiation clauses, and exit clauses) to reduce the risk associated with commercial contracts in the face of transport and commodity price volatility.
  • Product cost savings programs and technology improvements to reduce the impact of higher supply costs on the cost of energy in the various platforms, especially focused on the Siemens Gamesa 5.X platform.

Related to sustainability, the company launched the sustainability strategy through 2030, and the introduction of the first fully recyclable blade (RecyclableBlade) in line with the sustainability strategy commitment to have a fully recyclable wind turbine by 2040.

Siemens Gamesa continues to occupy the top positions in industry league tables and has obtained high ESG ratings from the agencies in this field: best score in the industry from FTSE Russell and ISS ESG, and #2 from Vigeo Eiris. It also attained the 97th percentile in the industry according to Sustainalytics and S&P Global (Corporate Sustainability Assessment and Dow Jones Sustainability Index) and an A rating from MSCI. SGRE is the first wind turbine manufacturer to obtain an ESG rating (84 out of 100) from S&P.

SGRE maintains its presence in sustainability indexes: Dow Jones Sustainability (World and Europe), FTSE4Good, Euronext Vigeo, Ethibel Sustainability, STOXX ESG Leaders, STOXX SRI, EURO STOXX Sustainability, etc. It also improved its score in the Bloomberg Gender-Equality Index from 69% in 2020 to 75%.

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Main consolidated figures for FY21

  • Revenue: €10,198m (+8% y/y)
  • EBIT pre PPA and before integration and restructuring costs4: -€96m (N.A.)
  • Net income: -€627m (N.A.)
  • Net cash/(Net financial debt - NFD)5: -€207m
  • MWe sold: 10,995 MWe (+10% y/y)
  • Order book: €32,542m (+8% y/y)
  • Firm order intake in Q4: €2,884m (+13% y/y)
  • Firm order intake in the last twelve months: €12,185 (-17% y/y)
  • WTG firm order intake in Q4: 2,223 MW (-18% y/y)
  • WTG firm order intake in the last twelve months: 10,679 MW (-13% y/y)
  • Installed fleet: 117,666 MW
  • Fleet under maintenance: 79,199 MW

4EBIT pre PPA and before integration and restructuring costs excludes integration and restructuring costs in the amount of -€197m and the impact on fair value amortization of intangible assets as a result of the PPA (purchase price allocation) in the amount of -€230m.

5Cash / (Net financial debt) is defined as cash and cash equivalents less long-term and short-term financial debt, including lease liabilities. The Siemens Gamesa Group adopted IFRS 16 effective October 1, 2019. As of September 30, 2021, lease liabilities amounted to €829m.

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Siemens Gamesa Renewable Energy SA published this content on 05 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 November 2021 16:57:07 UTC.