Siemens Energy is set to unveil a multi-billion euro deal featuring project-related guarantees backed by the German government alongside the release of its annual results this Wednesday.
This development comes as a result of discussions between Siemens Energy, German authorities, banks, and its former parent company, Siemens AG.
These discussions have been centered around securing a total of 15 billion euros ($16 billion) in guarantees aimed at protecting Siemens Energy’s substantial 109 billion euro order book.
Of this 15 billion euro package, banks engaged in the negotiations are expected to shoulder approximately 12 billion euros, with the government offering backing for 7.5 billion euros.
While the remaining 3 billion euros have been addressed, specific details have not been disclosed yet.
A source close to the matter revealed that the parties are working towards finalizing an agreement before Wednesday, with the exact terms to be determined following a Siemens AG board meeting scheduled for Tuesday.
Upon reports of this impending agreement, Siemens Energy’s shares surged by as much as 7%, marking a notable recovery from last month’s record-low stock performance.
The agreement in principle to cover the guarantees, reached by all stakeholders last week as previously reported by Reuters, has played a pivotal role in restoring investor confidence.
Siemens Energy plays a vital role in Germany’s transition away from fossil fuels, manufacturing gas and wind turbines, as well as essential energy equipment like converter stations.
Recognizing its systemic importance, the German government has been actively seeking support for the company.
Problems in Siemens Energy’s wind turbine unit and a subsequent downgrade of the company’s long-term credit rating by S&P in July have made banks more cautious about providing guarantees.
Siemens AG, which spun off Siemens Energy in 2020, has also pledged support by acquiring a majority of the 24% stake that Siemens Energy holds in Siemens Ltd, their joint venture in India.
This strategic move will strengthen Siemens AG’s position in the joint venture, with an expected acquisition cost of more than 2 billion euros, potentially bringing their stake to around 70%.
Furthermore, Siemens Energy’s remaining stake in Siemens Ltd and an annual payment of 250 million euros to Siemens AG for trademark rights will serve as collateral against the guarantees, according to sources familiar with the matter.