Siemens Energy ended its fiscal year last September with a loss of 4,588 million euros, according to information registered this Wednesday with the German markets regulator, with the company in the midst of a rescue process by the German and Spanish governments. .
The main reason for these results is attributed to the negative impact of the wind business area (in which the Spanish company Gamesa was integrated). According to the company itself, in the last financial year, “Siemens Gamesa suffered a serious and unexpected setback.” “The costs associated with quality problems in the onshore business, together with the increase in costs and the challenges in expanding capacity in the offshore business, have seriously affected the results for the 2023 financial year and will continue to impact profitability. of the group in the short and medium term. “Siemens Gamesa hopes to reach break even in fiscal year 2026,” he says.
In the company as a whole, sales increased by 9.9% in comparable terms, up to 31.1 billion euros, and it has an order book of 112 billion euros, which means increasing orders from the “already high level.” from the previous year and increased by 33.8% in comparable terms, up to 50.4 billion euros. Both Siemens Gamesa and Grid Technologies contributed strongly to this growth,” they point out.
Those two divisions, Gas Services, Grid Technologies and Transformation of Industry, exceeded their sales forecasts for fiscal year 2023 and achieved profit margins before special items in line with or above forecasts, and profits in line with the objectives set in Shareholder’s Day 2020.
“Due to the enormous demand for Siemens Energy technologies, all of these businesses are well on their way to achieving their medium-term objectives that were first set in September 2020,” the industrialist confides.
Free cash flow before taxes decreased to €784 million, as a result of this improvement, net financial debt at the end of the year stood at €200 million.
In the communication issued this Wednesday, the company explains that “the wind business represents the greatest challenge. “The technical analysis of the quality problems of the 4.X and 5.X onshore platforms is almost complete and the results so far confirm what was communicated in August 2023. No additional provisions have been made for this matter since the announcement of the third quarter. Corrective measures have been defined and mitigation actions are being developed. Siemens Gamesa has suspended commercial activities on the 5.X platform and is defining the details on how and when to resume them with a design that incorporates the necessary corrective measures,” he details.
Christian Bruch, President and CEO of Siemens Energy, summarizes this fiscal year: “In a year of unprecedented challenges, Siemens Energy has shown that it can turn the situation around, since all businesses, with the exception of wind, have met or exceeded their targets for the year. We are also seeing progress in resolving Siemens Gamesa’s issues, as data from installed onshore turbines confirms the conclusions we already announced. Maintaining a strong balance sheet remains a top priority. “Siemens Energy’s vital role in the energy transition will continue to drive our growth and success in the years to come.”
Overall, Siemens Energy expects comparable sales growth (excluding the effect of currency translation and changes in the scope of the business portfolio) for fiscal year 2024 in a range of 3% to 7% (actual figure fiscal year 2023: 7.3%) and a profit margin before special items of between -2% and 1% (actual figure for fiscal year 2023: – 8.9%).
These results are known in the midst of the rescue process of the energy company led by the German Government and to which at the end of this Tuesday it was learned that the Spanish government has also joined.
This is support, via public guarantees, to facilitate the company’s bank financing. “Guarantees that facilitate the energy transition Driven by the enormous demand for technologies for the energy transition, Siemens Energy’s current order book amounts to 112 billion euros. Due to the long duration of projects in the energy sector, advance payment guarantees, performance guarantees or guarantee bonds are common instruments in the industry,” explains the company.
Specifically, according to the information provided, these are guarantees issued by banks in exchange for a commission and the guarantee usually ranges between 5% and 25% of the value of the order. Although warranties are an established instrument throughout the industry, they are rarely used in practice. According to a study carried out by the International Chamber of Commerce in April 2022, the sector average in terms of non-payment of guarantees is 0.2%.
Following intensive and constructive discussions, the German Government has agreed that it will guarantee €7.5 billion out of a total amount of €12 billion in guarantees, of which €11 billion will be provided to Siemens Energy through a consortium of banks.
In exchange, the federal government will receive a market-standard payment from Siemens Energy. The remaining €1 billion will be provided by an additional consortium led by Deutsche Bank. In addition, Siemens Energy AG and Siemens AG have agreed on a structure that covers the theoretical risk of non-payment of guarantees, giving access to a first loss amount of up to €1 billion, covered by a pledge of shares and by payment deferrals.
The additional €3 billion would be obtained through a combination of state programs from several countries, including the respective support programs of the European Union, as well as through the optimization of contract guarantees.
With this agreement, Siemens Energy’s order growth in key projects for the energy transition can now be secured in the long term, while reducing the risks for the parties involved. All agreements are subject to formal approval by the parties involved.
