Siemens Energy books €4.5bn charge on faulty wind turbines

Frankfurt/Munich — Siemens Energy on Monday said problems recently unveiled at its wind turbine unit would cost it €2.2bn, well short of worst-case estimates but still casting doubt over whether it will keep the struggling business.

The charges will inflate Siemens Energy’s net loss more than sixfold in 2023 to €4.5bn, the company said, as it published third-quarter results showing a record order backlog of €106bn due to strong demand. It also reported an overall quarterly net loss of €2.9bn after spending €1.6bn to fix technical issues at its onshore wind division.

The group also cut its sales outlook, and issued a new, lower profit outlook after withdrawing it in the wake of the disclosed issues, which include wrinkles in rotor blades and faulty gears at its newer onshore turbines.

The equipment and service provider to the power industry said only some of the 2,900 turbines of its most recent 4.X and 5.X models in the field were affected by the problems, but declined to provide a specific number.

Its shares were 5.6% lower at before midday. A Jefferies analysts called the disclosure “very messy”, with a risk of further costs. But others, including JPMorgan, said the price tag should alleviate fears of an even higher fallout.

Siemens Energy shocked markets in late June when it announced a wide set of problems at Siemens Gamesa, one of the world’s biggest wind turbine makers, just weeks after it managed to fully acquire the business it formerly only partly owned.

‘Massive setback’

While in line with Siemens Energy’s own estimate of more than €1bn, Monday’s cost tally for the issues is below the most pessimistic market estimate of more than €5bn issued by UBS.

Siemens Energy CEO Christian Bruch said while the situation at Siemens Gamesa was a “massive setback”, the performance of the group’s remaining units, including gas turbines and power converter stations, provided a silver lining.

The new set of problems at Siemens Gamesa, which include potentially loss-making contracts for offshore turbines based on lower prices, have cost the company about a third of its market value, or more than €6bn, so far.

Siemens Energy, which has drafted in Alix Partners to help fix quality issues with Siemens Gamesa’s newer onshore models, said it was reviewing its wind strategy and would give a further update at a capital markets day in November.

Bruch, during a call with journalists, said the review was being done with “very open eyes, with all options” when asked whether parts of Siemens Gamesa could be sold or wound down.

He said wind remained a strategically relevant growth market, but added it was paramount that the business was profitable, something that Siemens Gamesa has failed to achieve in recent years.

Reuters