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Released November 14, 2023 | GALWAY, IRELAND
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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--Energy giant Siemens Energy (Munich, Germany) is in talks with the German government for a bailout that could be as high as 15 billion euro (US$16 billion).
The financial rescue package is related to growing problems with its wind division, Siemens Gamesa (Zamudio, Spain), one of the world's largest producers of wind turbines, which has revealed mounting technical issues with some of its leading turbines and is suffering higher costs due to rising inflation. German media reports and government insiders said that the government is being asked to take responsibility for 8 billion euro (US$8.6 billion) of the first portion of a 10 billion-euro (US$10.7 billion) loan, with the banks covering the rest. Parent company Siemens AG has been called on to provide the second tranche of 5 billion euro (US$5.35 billion).
In June, Siemens Energy took a charge of 2.2 billion euro (US$2.4 billion) that related to growing issues affecting both its onshore and offshore wind turbines. Most of the issues are related to quality problems with Siemens Gamesa's most recent onshore wind turbine platforms, the 4.X and 5.X, with regards to certain rotor blades and main bearings. There are almost 3,000 of them deployed. There are separate issues in the offshore turbine part of the business regarding a delay in the proposed 30% ramp-up of production, due to delays in adding new staff and manufacturing halls, as well as supply chain issues and higher material costs. Industrial Info is tracking 70 projects involving Siemens Gamesa turbines worth more than US$52 billion in investment.
Siemens confirmed that talks were underway but not the amounts requested. "The wind business Siemens Gamesa is working through the quality issues and is addressing the offshore ramp up challenges as announced in the third quarter communication for fiscal year 2023," it stated. "As Siemens Gamesa is for the time being not concluding new contracts for certain onshore platforms and is applying strict selectivity in the offshore business, order intake and revenue are expected to be lower than market expectations for fiscal year 2024, and net losses and cash outflow are expected to be higher than market forecasts."
It added: "The strong growth in order intake, particularly in the former Gas and Power business areas, leads to a rising need of guarantees for long-term projects. Considering this requirement, the Executive Board is evaluating various measures to strengthen the balance sheet of Siemens Energy and is in preliminary talks with different stakeholders, including banking partners and the German government, to ensure access to an increasing volume of guarantees necessary to facilitate the anticipated strong growth."
In related news, the world's largest wind energy company, Orsted A/S (Fredericia, Denmark), has run into trouble with its efforts to help jumpstart the U.S. offshore wind market. The company has abandoned two key projects--Ocean Wind 1 and 2 off the coast of New Jersey--alongside announcing a large writedown of its portfolio to the tune of 3.8 billion euro (US$4 billion). Claiming it had "no choice", it blamed supply chain delays, higher interest rates and unfavorable changes regarding tax credits and construction permits. The company said it is in the process of "reconfiguring" its proposed Skipjack offshore wind projects in nearby Maryland.
"Macroeconomic factors have changed dramatically over a short period of time, with high inflation, rising interest rates, and supply chain bottlenecks impacting our long-term capital investments," said David Hardy, Group EVP and CEO Americas at Orsted. "As a result, we have no choice but to cease development of Ocean Wind 1 and Ocean Wind 2. We are extremely disappointed to have to take this decision, particularly because New Jersey is poised to be a U.S. and global hub for offshore wind energy."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
The financial rescue package is related to growing problems with its wind division, Siemens Gamesa (Zamudio, Spain), one of the world's largest producers of wind turbines, which has revealed mounting technical issues with some of its leading turbines and is suffering higher costs due to rising inflation. German media reports and government insiders said that the government is being asked to take responsibility for 8 billion euro (US$8.6 billion) of the first portion of a 10 billion-euro (US$10.7 billion) loan, with the banks covering the rest. Parent company Siemens AG has been called on to provide the second tranche of 5 billion euro (US$5.35 billion).
In June, Siemens Energy took a charge of 2.2 billion euro (US$2.4 billion) that related to growing issues affecting both its onshore and offshore wind turbines. Most of the issues are related to quality problems with Siemens Gamesa's most recent onshore wind turbine platforms, the 4.X and 5.X, with regards to certain rotor blades and main bearings. There are almost 3,000 of them deployed. There are separate issues in the offshore turbine part of the business regarding a delay in the proposed 30% ramp-up of production, due to delays in adding new staff and manufacturing halls, as well as supply chain issues and higher material costs. Industrial Info is tracking 70 projects involving Siemens Gamesa turbines worth more than US$52 billion in investment.
Siemens confirmed that talks were underway but not the amounts requested. "The wind business Siemens Gamesa is working through the quality issues and is addressing the offshore ramp up challenges as announced in the third quarter communication for fiscal year 2023," it stated. "As Siemens Gamesa is for the time being not concluding new contracts for certain onshore platforms and is applying strict selectivity in the offshore business, order intake and revenue are expected to be lower than market expectations for fiscal year 2024, and net losses and cash outflow are expected to be higher than market forecasts."
It added: "The strong growth in order intake, particularly in the former Gas and Power business areas, leads to a rising need of guarantees for long-term projects. Considering this requirement, the Executive Board is evaluating various measures to strengthen the balance sheet of Siemens Energy and is in preliminary talks with different stakeholders, including banking partners and the German government, to ensure access to an increasing volume of guarantees necessary to facilitate the anticipated strong growth."
In related news, the world's largest wind energy company, Orsted A/S (Fredericia, Denmark), has run into trouble with its efforts to help jumpstart the U.S. offshore wind market. The company has abandoned two key projects--Ocean Wind 1 and 2 off the coast of New Jersey--alongside announcing a large writedown of its portfolio to the tune of 3.8 billion euro (US$4 billion). Claiming it had "no choice", it blamed supply chain delays, higher interest rates and unfavorable changes regarding tax credits and construction permits. The company said it is in the process of "reconfiguring" its proposed Skipjack offshore wind projects in nearby Maryland.
"Macroeconomic factors have changed dramatically over a short period of time, with high inflation, rising interest rates, and supply chain bottlenecks impacting our long-term capital investments," said David Hardy, Group EVP and CEO Americas at Orsted. "As a result, we have no choice but to cease development of Ocean Wind 1 and Ocean Wind 2. We are extremely disappointed to have to take this decision, particularly because New Jersey is poised to be a U.S. and global hub for offshore wind energy."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
