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Siemens Energy Support: Germany’s €15 Billion Pledge to Boost Green Energy Transition

In a significant development reflecting the global energy trends, the German government has announced a major financial package to Siemens Energy Support, a Munich-based leader in wind farm manufacturing. As part of a comprehensive €15 billion effort, this initiative demonstrates Germany’s dedication to bolstering Siemens Energy’s participation in renewable energy projects. This substantial support, amounting to €7.5 billion in guarantees, comes at a crucial time for Siemens Energy, which has been grappling with challenges in its wind turbine unit, Siemens Gamesa.

The government’s intervention underscores the strategic importance of Siemens Energy in Germany’s transition from fossil fuels to renewable energy sources. Siemens Energy, known for manufacturing gas and wind turbines as well as large converter stations, plays a vital role in this transition, making it a systemically relevant company in Germany’s energy landscape. The financial backing is part of a larger package involving private banks and other stakeholders, signifying a collective effort to ensure Siemens Energy’s stability and success in the renewable energy sector​.

Extensive Financial Guarantees for Siemens Energy

The German government, along with private banks and other stakeholders, has committed to providing substantial financial backing to Siemens Energy Support, amounting to €7.5 billion in guarantees. This move is pivotal for the company to manage its expansive €110 billion order book, especially considering the challenges at its wind turbine unit, Siemens Gamesa. The financial difficulties of Siemens Energy were exacerbated by the decline in its wind turbine unit and a downgrade in credit rating by S&P. About 20%-30% of Siemens Energy’s order book consists of down payments, necessitating these guarantees to ensure the company’s financial stability and project viability.

The agreement also imposes specific conditions on Siemens Energy, such as suspending dividends and higher-level bonuses. These measures reflect a focused approach to stabilize and advance the company’s renewable energy ventures. Additionally, Siemens AG, holding a 25.1% stake in Siemens Energy, has been involved in the discussions and is expected to provide some of the necessary guarantees. Siemens Energy is also exploring other measures to strengthen its finances, including a potential capital increase and other strategic financial decisions.

This support is not just a bailout but a strategic move to ensure Siemens Energy can continue to play a crucial role in large-scale renewable energy projects. It underscores the German government’s commitment to supporting key industrial players pivotal to the country’s energy transition from fossil fuels to renewable sources

Strategic Importance of Siemens Energy Support in Germany’s Energy Landscape

The German government’s provision of €7.5 billion in guarantees, as part of the Siemens Energy support package, is crucial to sustain the company’s substantial €110 billion order book. This Siemens Energy support comes amidst significant challenges faced by the company’s wind turbine unit, Siemens Gamesa, and involves specific conditions like halting dividends and higher-level bonuses. The Siemens Energy support strategy is not merely financial assistance but a targeted approach to stabilize and advance Siemens Energy’s role in renewable energy projects, reinforcing Germany’s commitment to its green energy transition.

Future Outlook and Market Response

As Siemens Energy prepares to unveil its fiscal earnings, a significant loss is expected, reflecting the challenges the company has faced. However, the market has responded positively to the news of the government’s support, with shares in Siemens Energy and Siemens AG experiencing notable gains. This market response underscores the confidence in the German government’s decision to back a company deemed systemically relevant to the country’s energy goals. The final agreement details are still under discussion, with Siemens AG, the top shareholder of Siemens Energy, playing a key role in providing guarantees​​​​​​​​​​.

Conclusion: The German government’s €15 billion support package for Siemens Energy marks a significant step in bolstering the country’s green energy ambitions. This move not only aids a key industrial player in overcoming current challenges but also reinforces Germany’s commitment to a sustainable and renewable energy future. The continued support and collaboration among government, private banks, and corporate stakeholders are crucial for the successful implementation of this initiative.

Feel free to contact the Energy Transition Centre today with questions. 

·  Julius Moerder, Head of Energy Transition Centre julius.moerder@centurionlg.com

·  Oneyka Ojogbo, Head of Energy Transition Centre, Nigeria & West Africa oneyka.ojogbo@centurionlg.com

·  Leon van Der Merwe, Head of Energy Transition Centre, South Africa leon.vdmerwe@centurionlg.com

Author: Memoona Tawfiq