The Spanish government is in talks with banks to provide financial support to Siemens Gamesa, the world’s largest wind turbine maker, which is facing a severe crisis due to technical problems and rising costs.
Siemens Gamesa warns of losses and cuts outlook
Siemens Gamesa, a joint venture between Germany’s Siemens and Spain’s Gamesa, issued a profit warning on Tuesday, saying it expects to post a negative EBIT margin of 1% to 3% for the fiscal year 2023, down from a previous forecast of 3% to 5%. The company also said it will take a charge of 230 million euros ($260 million) in the fourth quarter due to the costs of repairing faulty blades and other issues.
The company blamed the poor performance on the low profitability of its onshore wind business, which has been hit by delays, higher raw material prices, and increased competition. The company also said it faces challenges in its offshore wind business, where it has to deal with complex projects and technical difficulties.
The profit warning sent Siemens Gamesa’s shares tumbling by more than 14% on Tuesday, wiping out about 1.6 billion euros ($1.8 billion) of its market value. The company’s shares have fallen by more than 40% since the start of the year, making it one of the worst performers in the European renewable energy sector.
Spain to offer guarantees and loans to Siemens Gamesa
The Spanish government, which owns a 8.1% stake in Siemens Gamesa through its state-owned industrial holding company SEPI, is concerned about the impact of the crisis on the company’s 4,500 employees in Spain and its role as a global leader in the green energy transition.
According to Reuters, the government is in talks with banks to offer guarantees and loans to Siemens Gamesa, which has a net debt of 918 million euros ($1 billion) as of June 30. The government is also considering other measures, such as increasing its stake in the company or facilitating a merger with another player in the industry.
The government has not disclosed the amount or the terms of the financial aid, but sources told Reuters that it could be similar to the 1 billion euros ($1.1 billion) package that the government granted to airline Iberia in June. The government has also set up a 10 billion euro ($11.3 billion) fund to rescue strategic companies affected by the COVID-19 pandemic, which could be used to help Siemens Gamesa.
The government’s intervention is seen as a sign of support for Siemens Gamesa, which is considered a key player in Spain’s plan to achieve carbon neutrality by 2050. The company has a strong presence in Spain, where it has 15 factories, four research and development centers, and more than 1,000 suppliers. The company also contributes to Spain’s exports, as it sells its wind turbines to more than 90 countries.
Siemens Gamesa faces tough competition and regulatory hurdles
Siemens Gamesa’s troubles come at a time when the global wind power market is undergoing a rapid transformation, driven by the growing demand for clean energy and the falling costs of renewable technologies. According to the Global Wind Energy Council, the global wind power capacity grew by 53% in 2022, reaching 743 gigawatts (GW), and is expected to reach 1,000 GW by 2025.
However, Siemens Gamesa faces stiff competition from other wind turbine makers, such as Denmark’s Vestas, China’s Goldwind, and General Electric. The company also has to deal with regulatory hurdles, such as the uncertainty over the extension of the U.S. production tax credit, which is a key incentive for wind power development in the country.
Siemens Gamesa’s CEO Andreas Nauen, who took over the helm in June 2020, has been trying to turn around the company by cutting costs, improving operational efficiency, and focusing on innovation. The company has launched new products, such as the SG 14-222 DD offshore wind turbine, which has a capacity of 14 megawatts (MW) and a rotor diameter of 222 meters, making it the largest and most powerful wind turbine in the world.
The company has also secured several contracts, such as the 1.4 GW Sofia offshore wind farm in the UK, the 1.1 GW Hai Long offshore wind farm in Taiwan, and the 465 MW Ventika III onshore wind farm in Mexico. The company has a record order backlog of 35.6 billion euros ($40.2 billion) as of June 30, which gives it some visibility for the future.
However, the company’s recovery will depend on its ability to resolve its technical issues, restore its profitability, and regain the confidence of its customers, investors, and employees. The company’s management has said that it expects to return to positive EBIT margin in the fiscal year 2024, and to achieve a double-digit EBIT margin in the medium term.
