Siemens Energy is asking the German government for billions of euros in support for its loss-making wind turbine business. The German energy technology company confirmed this on Thursday. The company wants guarantees to keep subsidiary Siemens Gamesa afloat.
It has been clear for some time that Siemens Energy is struggling with the originally Spanish-German Gamesa. This summer, Siemens reduced the book value of the subsidiary by 2.7 billion euros. The company, acquired in 2022, and fully owned by Siemens since May, experienced setbacks in the development of new wind turbines. Rotor blades and motors in already installed turbines were found not to function properly, causing the company to incur additional costs. The price of materials also continues to rise.
The application for support from the German state shows that the problems at Gamesa also have an effect on other sections within Siemens Energy. Although the company is not in immediate financial problems and has a large number of orders for the construction of electricity networks and power plants, it is more difficult to obtain bank guarantees for these projects due to the problems at its wind turbine subsidiary.
In total, according to the German weekly, Siemens Energy Der Spiegel are looking for 15 billion euros in guarantees, of which 8 billion euros from the German state. According to the magazine, banks must provide 2 billion euros in coverage, while parent company Siemens has been asked for 5 billion. The group has a 25.1 percent stake in Siemens Energy.
‘Important company in Germany’
Investors responded on the Frankfurt stock exchange by offering their shares for sale en masse. The share price of Siemens Energy fell by more than thirty percent on Thursday. There was a slight recovery of more than six percent on Friday. Over the past two and a half years, the share has lost more than 60 percent in value.
Parent company Siemens and the German government do not comment substantively on the situation at Siemens Energy. The German Ministry of Economic Affairs does confirm the discussions with the energy group. A government spokesperson told the Reuters news agency on Friday that Siemens Energy is “an important company” for Germany.
Siemens Gamesa is not the only wind turbine manufacturer that is having a hard time. Although wind turbines must play an important role in the transition to clean energy worldwide, rising costs and bureaucracy are a major hurdle. For example, the Danish market leader Vestas has suffered large losses in recent years because, after the corona crisis, it had to get rid of older orders that are now unprofitable due to more expensive materials. In August, the company also warned that the slow granting of permits for new parks could lead to fewer orders.
Currently, European companies control approximately 85 percent of the European market and four of the ten most important wind turbine manufacturers come from Europe. By 2030, 34 percent of European energy production must come from wind energy (currently 16 percent), but that target is under pressure due to the industry’s loss-making nature. To continue “the success story” of the European wind industry, Slovak EU Commissioner Maros Sefcovic announced an action plan on Tuesday. The EU wants licensing procedures to be shortened and is making funding available to national licensing authorities. Brussels also encourages member states to provide more state aid to support companies.
In addition, better tendering procedures for wind projects should not only lead to faster completion, but also give European producers a fairer chance. The European wind industry has recently expressed concerns about competition from China in particular, where wind turbine production is strongly supported by government subsidies. Chinese manufacturers would therefore price European parties out of the market.
At the beginning of October the Financial Times that Brussels would like to intervene more firmly against the Chinese wind industry, for example through trade barriers or an investigation into unfair competition. Those interventions did not take place last week.