Posted on October 30, 2023
Siemens Energy, a major European manufacturer of wind farms, power grids and natural gas turbines, said Thursday that it was in talks with the German government about securing financial guarantees to help it continue to build future large projects.
The company’s board “is evaluating various measures to strengthen the balance sheet,” the company said in a news release. The statement said preliminary talks were underway with banks and the government.
News that the Munich-based company was seeking help spooked investors, sending its stock price down 35 percent.
Siemens Energy’s difficulties could be a warning that financial problems weighing on makers of renewable energy equipment could be growing more severe. These businesses are expected to be integral to helping economies shift to cleaner energy, but many are struggling to grow fast enough.
The company said that “for the time being” it would not enter new contracts for certain land-based wind turbines, and would be “applying strict selectivity” to sales of its offshore turbines, which have been world leaders.
The company said net losses and cash outflows would be greater than expected for its coming 2024 fiscal year. It has already said that it would lose around 4.5 billion euros ($4.8 billion) for the fiscal year that ended Sept. 30. Financial results are expected on Nov. 15.
Siemens Energy, which was carved out of Germany’s Siemens conglomerate in 2020, describes itself as a victim of its own success. Fast-growing orders for equipment needed for the rapid building of new electrical systems to replace fossil fuels have stretched its finances. Even as it seeks government help, the company says there are €110 billion worth of orders on its books.
As a result, the company says it no longer has the credit strength to provide the performance guarantees that are sometimes required to assure customers that new orders for power plants or wind farms will be delivered.
“The enormous speed of the energy transition is creating high demand for our technologies,” the company said in a separate emailed statement on Thursday. “This positive development also means we have to issue guarantees to our customers to a greater extent.”
Siemens Energy has also encountered major problems at one of its subsidiaries, the wind turbine maker Siemens Gamesa. This once independent unit has run into severe quality problems with equipment, including the massive blades. These issues have led to huge projected repair costs that could last for years.
In addition, Siemens Gamesa, like other companies, agreed to deals on offshore wind turbines years ago at prices that will result in losses because of high inflation.
