German Government and Siemens Energy in Intensive Talks Over State Guarantees

This comes as Siemens Energy's shares, which had plummeted due to news of the company seeking state support, showed signs of stabilization.

German Chancellor Olaf Scholz has emphasized the significance of Siemens Energy, labeling it a “very important” company during a period of intense talks regarding state guarantees.

The economy ministry has also confirmed the ongoing discussions without revealing specific details or a timeline.

This comes as Siemens Energy’s shares, which had plummeted due to news of the company seeking state support, showed signs of stabilization.

Siemens Energy, a major player in the power engineering sector, has encountered significant challenges within its wind unit, the world’s largest of its kind.

Quality issues have arisen, particularly concerning rotor blades and gears in newer onshore wind turbines operated by Siemens Gamesa, leading to substantial losses.

This situation has drawn criticism from Siemens AG, a prominent shareholder and former parent company of Siemens Gamesa. Christian Bruch, the CEO of Siemens Energy, has faced mounting pressure to present a viable turnaround plan for Siemens Gamesa since taking full ownership of the division just a few months ago.

As part of efforts to reduce losses, Siemens Energy has contemplated the closure of certain Siemens Gamesa facilities and sales offices.

The German government acknowledges the strategic importance of Siemens Energy for the country’s business landscape. This recognition underscores the significance of the ongoing discussions.

Following a sharp decline of over 35% in Siemens Energy’s share price on the previous day, the stock rebounded by 9.6% at 1325 GMT.

This substantial decline had wiped approximately 3 billion euros ($3.17 billion) off the company’s market capitalization.

However, not everyone is in favor of state aid for Siemens Energy. Clemens Fuest, the president of the Ifo economic institute, criticized the prospects of such assistance, arguing that there is no compelling justification for it.

Fuest believes that any support would effectively transfer taxpayers’ money to the company’s creditors and shareholders, who should bear responsibility for restructuring the company.

Furthermore, Juergen Molnar, an analyst at broker RoboMarkets, advised investors to steer clear of Siemens Energy shares, whether or not government aid is provided.

He pointed out that financing challenges are currently a major concern for investors, particularly in light of rising interest rates, which can quickly affect even sound business models.

In summary, Siemens Energy’s discussions with the German government for potential state guarantees have sparked mixed reactions, with Chancellor Scholz emphasizing the company’s importance while experts and analysts express doubts about the necessity and efficacy of such aid.