In a surprising turn of events, Siemens Energy, a major player in the energy sector, has secured a substantial 7.5 billion euros ($8.15 billion) in project-related state guarantees from the German government. This financial lifeline was extended just hours before the company announced a significant loss of nearly 5 billion euros for its fiscal year.
The German economy ministry revealed late on Tuesday that the state guarantees were part of a broader package totaling 15 billion euros in guarantee lines. The agreement was reached after extensive discussions with private lenders and Siemens AG, the company’s largest shareholder. Private banks are set to contribute 12 billion euros to the guarantee line, while Siemens Energy will secure an additional 3 billion euros from negotiations with other stakeholders. The federal government, in a proportional move, will provide a backstop of 7.5 billion euros to underwrite a substantial portion of these guarantee lines.
The need for such financial support arose from manufacturing faults within Siemens Energy’s wind turbine subsidiary, Siemens Gamesa, prompting the company to abandon its profit forecast earlier this year. These guarantees are strategically designed to safeguard the company’s customers on prepayments and execution of contracts, reinforcing its colossal 112 billion euro order book.
On Wednesday, Siemens Energy reported an annual net loss of 4.6 billion euros for its fiscal year, compounded by a fourth-quarter net loss of 870 million euros. The company announced plans to review the structure of Siemens Gamesa, acknowledging the challenges faced by the beleaguered wind turbine unit.
Siemens Energy CEO, Christian Bruch, emphatically denied that the fiscal guarantees constituted as a state aid. He clarified that there is no cash involved in this support, describing it as an insurance package. Bruch emphasized that the guarantees are intended to back-secure customers in terms of prepayments and contract execution, characterizing it as a relatively normal instrument in the industry.
“These guarantees are meant to back-secure customers in terms of prepayments, execution of contracts, and so forth, so it’s a relatively normal instrument in the industry,” Bruch stated. He added that the guarantees would primarily support the grid business and other non-wind businesses to ensure sustainable growth amid the ongoing energy transition.
While Siemens Energy expresses gratitude to the government, banks, and Siemens AG for their collaborative effort in structuring this financial support, the company aims to emphasize that, under European law, this is not considered state aid. The intricacies of this financial package underscore the challenges faced by Siemens Energy but also highlight the importance of such measures to ensure the stability and growth of the company during a critical juncture in the energy sector.
(Source: Elliot Smith | CNBC | Melissa Eddy | Stanley Reed | NYT)
