When Siemens floated its energy division on the stock exchange under the name “Siemens Energy” last September, many agreed on what was really interesting about this industrial giant: the German-Spanish wind turbine maker Siemens Gamesa. The other part of the Siemens spin-off, the central “Gas & Power” division, with its activities around coal-fired power plants, was not really connected and turned towards the future. Some people were already talking about bad banks. Renewable energy using wind turbines sounds much better.
This is one of the reasons why Christian Bruch, CEO of Siemens Energy, promised a bright future in independence. Independent, because you were now independent and listed on the stock exchange. And the thing with the good future could actually only be about wind power. The share of the former energy division of Siemens with around 90,000 employees and 29 billion euros in turnover – for its part a member of Dax-30 – was listed at 22 euros on the first day of listing. Today, a good ten months later, the newspaper is almost back after a short flight – at a good 23 euros. A disappointing development, not just for many shareholders.
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This week Bruch will present quarterly figures from Siemens Energy, the news he has should not be too promising. Because the wind industry, of all things, is weakening tremendously. The Spanish listed subsidiary Siemens Gamesa, surprisingly and for the second time in a short time, had to revise its budget figures significantly downwards in mid-July, and the stock was then in free fall.
This is called the profit warning in the scene. A result warning is bad, a second is even worse. A third, however, would be hard to forgive.
A third profit warning at Siemens Gamesa would be a real problem
There is a whole series of problems at Siemens Gamesa: Sharp rise in the prices of raw materials for steel or copper, but also difficulties in ramping up a new generation of turbines. In Brazil in particular, the corona pandemic is causing supply and execution problems that have required high supplies. Operational problems and loss-making projects are nothing new for Gamesa. In 2019/20, the Spaniards were caught off guard by the onset of winter when setting up five large wind farms in Norway – it would happen, especially in Scandinavia.
Siemens Energy is now annoyed and alarmed, criticism from Siemens Gamesa CEO Andreas Nauen is louder behind closed doors. The former director of Siemens had only been employed as a renovator a year ago. “It’s getting tight for Nauen. He can’t afford something like this again,” say industry circles. Which probably means: A third profit warning would then be a real problem.
Apparently Siemens Energy is counting on the Spaniards to finally get the problems under control, but it’s not certain – some say Gamesa is too far away from headquarters. After all: The figures for parent company Siemens Energy, which relies primarily on conventional power generation, are still surprisingly stable. Siemens Energy pointed out just two weeks ago that everything is going according to plan in the traditional turbine sector for gas and coal-fired power plants as well as in the power transmission division. There, sales will increase by two to six percent, with an operating return on sales of 3.5 to 5.5 percent. It remains to be seen whether the overall objectives will be achieved in the light of the Siemens Gamesa disaster.
Ironically, the business of a clean, green energy future is crooked. And in the traditional fossil fuel business, which is no longer really a concept of the future, things are going pretty well. Bad world.
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Christian Bruch is CEO of Siemens Energy. It came from gas maker Linde last year.
(Photo: Peter Kovalev / Imago)
The current unresolved Siemens Gamesa crisis raises fundamental questions. Should Siemens Energy fully integrate the subsidiary? It shouldn’t be easy, a full takeover of the remaining 33% would cost at least five billion euros – a lot of money for Siemens Energy, even worth 16 billion euros on the stock market. A capital increase is currently unrealistic. It’s also unclear whether Siemens’ energy watchdog, under the leadership of former Siemens boss Joe Kaeser, would even agree with this. Apparently there is skepticism there. Any speculation about it would also drive Gamesa’s rate up and make things even more expensive, they say.
The Spaniards do not allow themselves to be said much about the Germans
The alternative would be for the Germans to gain more influence at Siemens Gamesa in another way. “They are too far away, we have to guide them closer”, explains an insider. But it’s not that easy either. Here the main German shareholder, there the proud Spaniards – no one wants to risk a culture war, which in the end would mainly affect Gamesa’s business.
Siemens Gamesa is headquartered in the Basque Country, where the main shareholder has long been kept at bay, and the Germans would not have learned of the latest problems until late. In early 2020, the biggest critic of Siemens, the Spanish electricity company and majority shareholder Iberdrola, gave up. The Munich-based company bought its 8% package very dearly from Siemens Gamesa, for more than one billion euros. Skepticism towards the Germans remained, however, the company was embarrassing about its independence. Of course, independence is one of those things along with the high share that Siemens Energy has.
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Big system for the big energy transition: This is what it looks like in the production hall of the Siemens Gamesa factory in Cuxhaven.
(Photo: Jörg Sarbach / dpa)
Lobbying the board of directors is also difficult. There are four representatives of Siemens Energy, including Maria Ferraro, CFO of Siemens Energy, but not CEO Bruch. A year ago, he stressed: “I currently have the impression that our influence as a majority shareholder is sufficient. But he is “absolutely not satisfied with the performance”, especially in the onshore field, that is to say with onshore wind turbines. But nothing has improved in twelve months. However: Siemens Gamesa is the world market leader in offshore wind power plants, the so-called offshore sector.
In addition to the wind activity, Siemens Energy has another major problem: the group is practically absent from the solar activity, the second major area of sustainable electricity production. “Wind alone will not be enough, we also need solar,” said one participant. Building a position on your own in this internationally competitive market, however, should hardly be possible. Acquisitions, on the other hand, are expensive and currently difficult to achieve.
The market is booming. Hypovereinsbank analysts point out that the expansion of renewables is on the rise. According to the latest report from the International Energy Agency (IEA), global investments in the energy sector are expected to increase by around ten percent this year, of which 70 percent will be invested in the development of renewable energies. . Siemens Energy could benefit from the help of its wind subsidiary. If it weren’t for these house problems.