The German government is currently negotiating a bailout worth billions of euros for Siemens Energy, an engineering company facing financial challenges due to issues within its wind turbine division.
The value of stocks for this company, which is a major producer of wind turbines, dropped by approximately 40% to record lows on the German stock market. This resulted in a loss of €3 billion in its overall market worth. The decrease in value was due to news that the company was negotiating with the government for financial support as part of a €15 billion rescue plan.
According to reports in German media, a bailout may lead to the German government assuming 80% of the initial €10 billion funding, with banks being responsible for the remaining 20%.
Siemens, the parent company of the engineering group, has been requested to provide assurance for an additional €5bn.
A representative from the German government confirmed the discussions and characterized them as “intimate and reliable.”
The stock of Siemens Energy has dropped by approximately 70% since June after disclosing increasing difficulties in its wind turbine division, Siemens Gamesa. These issues were caused by a series of technical complications and rising expenses due to inflation.
The company is anticipating a loss of €4.5bn this year due to the expenses of fixing technical issues in its latest onshore wind turbines. There are concerns that these losses may make it difficult to obtain necessary support from its usual banking partners to fulfill its increasing order book.
Siemens Energy announced that they are looking into different ways to improve their financial situation and are currently engaging in initial discussions with stakeholders, such as banks and the German government.
The company stated that the wind division was addressing and resolving any quality concerns.
The company anticipates a decrease in its order intake and revenue for the 2024 fiscal year, falling below market expectations. This is due to the decision to temporarily halt new onshore wind orders and carefully consider offshore wind orders. Additionally, net losses and cash outflow are projected to exceed market forecasts.
The wind power industry has experienced financial difficulties due to the steep upfront expenses caused by increased energy costs and the rising prices of manufacturing materials and components.
In the beginning of this year, Vattenfall, a Swedish company, announced that they would discontinue the construction of the Norfolk Boreas windfarm, located off the east coast of the UK. This decision was made due to a 40% increase in costs, making the project no longer financially viable.