Siemens Energy, in an effort to restore profitability to Siemens Gamesa, its struggling wind turbine business, has announced plans to potentially exit certain markets and products.
This move comes after Siemens Gamesa contributed to the group’s annual net loss of 4.6 billion euros ($5.0 billion).
To address financial concerns, Siemens Energy secured a 12-billion euro credit line with backing from private banks and the German government.
Siemens Energy plays a crucial role in Germany’s transition from fossil fuels to renewable energy, producing essential equipment like gas turbines, converter stations, and wind turbines.
However, Siemens Gamesa, once seen as a growth driver for Siemens Energy, has become a burden due to quality issues with its wind turbines revealed in June.
The business is expected to incur a 2 billion euro operating loss in 2024. Siemens Energy, which spun off from Siemens AG in 2020, made no further provisions for onshore turbine issues but intends to review the scope of Siemens Gamesa’s activities, which include blade and turbine manufacturing.
Detailed information will be provided at the group’s capital markets day on Nov. 21.
Siemens Energy CEO Christian Bruch emphasized the need to focus on products and markets moving forward. Siemens Energy’s shares rose by 4.8% following this announcement.
Bruch expressed encouragement that the review of Siemens Energy’s installed onshore wind turbines has not revealed additional problems thus far. Siemens Gamesa is now expected to break even in the fiscal year 2026, delayed by two years from previous projections.
There are discussions about potentially shutting down Siemens Gamesa factories and sales offices and outsourcing the production of certain components to third parties.
Bruch mentioned ongoing talks about selling parts of the company that sell specific products in particular markets, without providing specific details.
Germany’s powerful union, IG Metall, welcomed the financial guarantees for Siemens Energy, crediting German Chancellor Olaf Scholz and Economy Minister Robert Habeck for their intervention.
As part of the agreement with stakeholders, Siemens Energy will sell an 18% stake in Indian firm Siemens Ltd at a 15% discount to Siemens AG.
When asked about the potential need for a capital raise, Chief Financial Officer Maria Ferraro stated that the group had several options to strengthen its balance sheet.
Analysts noted that the risks of a share sale appear to have decreased in the near term, and the situation at Siemens Gamesa has not worsened following this update.