Siemens Energy receives state guarantees amid annual losses
The Siemens Energy site in Muelheim an der Ruhr, Germany, 3 August 2022.
Wolfgang Rattay | Reuters
Siemens energy received 7.5 billion euros ($8.15 billion) in state guarantees related to a project from the German government, hours before they announced a loss of nearly 5 billion euros for their fiscal year.
Germany’s economy ministry announced late on Tuesday that it had provided the backing as part of a wider package of 15 billion euros in guarantee lines agreed by banks and other stakeholders, following talks with private lender and the company’s largest shareholder, Siemens AG.
Private banks will provide a guarantee line of 12 billion euros, and Siemens Energy will receive another 3 billion from discussions with other stakeholders, the ministry confirmed, according to Google translation. The federal government will provide a 7.5 billion proportional back-up to underwrite a significant portion of these guarantee lines.
Due to problems with manufacturing faults at wind turbine subsidiary Siemens Gamesa, Siemens Energy scrapped its profit forecast earlier this year. The pledges are aimed at insuring the company’s customers about prepayments and contract fulfillment to collect its large order book of 112 billion euros.
On Wednesday, the company reported an annual net loss of 4.6 billion euros for its fiscal year, exacerbated by its net loss in the fourth quarter of 870 million euros. It said it would review the structure of Siemens Gamesa after the managed wind turbine unit worsened this result.
The company denied that the fiscal commitments were “state aid,” with Siemens Energy CEO Christian Bruch telling CNBC on Wednesday that there is no money involved.
The business will “pay money for these reverse commitments, so it’s like an insurance package,” he said.
“These guarantees are meant to protect customers against overpayments, performance of contracts and so on, so it’s a fairly standard instrument in the industry,” Bruch said, adding that Siemens Energy’s 112 billion euro order book scale meant the market was naturally concerned about “cluster risk.”
“That is why this package was needed and we are very grateful to the government for structuring it together with the banks and the support of Siemens AG, but it is also in my opinion. [it is] very important that people understand that this is not money and this is also under European law, this is not state aid or anything like that,” Bruch told “Squawk Box Europe” at CNBC.
“It is important that we continue with the growth and the commitments go mainly to the grid industry, to the other non-wind industries in order to secure this great growth that comes with the energy transition.”