Exclusive: Siemens Energy considers factory, office closures at wind division -sources - Reuters
Exclusive: Siemens Energy considers factory, office closures at wind division -sources | Reuters
Exclusive: Siemens Energy considers factory, office closures at wind division -sources
The Siemens Gamesa sign is displayed at the renewable energy company's headquarters in Zamudio, Spain, April 28, 2022. REUTERS/Vincent West Acquire Licensing Rights
- Summary
- Companies
- Siemens Energy reviews Siemens Gamesa sites -sources
- Blade production could be partly outsourced - sources
- Shares gain +2.5%
FRANKFURT, Oct 9 (Reuters) - Siemens Energy (ENR1n.DE) is considering shutting down Siemens Gamesa factories and sales offices as part of a review aimed at reducing losses at the wind turbine business, three people familiar with the matter said.
The German power equipment supplier is struggling with far-reaching quality issues at its onshore wind turbine division as well as potentially loss-making offshore contracts, which have caused its shares to more than halve since June.
The measures, which are likely to cause fresh layoffs, are aimed at providing long-term relief for Siemens Gamesa by outsourcing production of some key components, such as blades, in order to raise margins, the people said.
Shares in Siemens Energy, which was spun off from Siemens AG (SIEGn.DE) in 2020, rose as much as 2.5% after the report.
"The story is positive ... anything to lift profitability and cut costs at loss-making Gamesa is seen as positive," one Frankfurt-based trader said of the share price move.
Siemens Energy Chief Executive Christian Bruch is under pressure to present a convincing turnaround plan for Siemens Gamesa after detailing far-reaching problems just a few months after assuming full ownership of the division.
Bruch said in August that Siemens Gamesa would prioritise profitability and stability over growth, suggesting a brimming order book needed to lead to healthy profits.
Details of the division's restructuring could be unveiled in November, when Siemens Energy is scheduled to release annual results and hold a capital markets day, the people said.
No final decisions have been taken and details of the restructuring programme could still change, they said.
A spokesperson referred to comments from Bruch in August, who said the most important thing was to stabilise Siemens Gamesa and that Siemens Energy was looking at all options.
So far, Siemens Energy has booked 2.2 billion euros ($2.3 billion) in charges related to the problems, which include wrinkles in rotor blades and faulty gears in newer onshore wind turbines.
Globally, Siemens Gamesa, the world's largest maker of offshore wind turbines, operates 79 sites, including sales and service offices, R&D centres as well as 15 factories to produce blades and nacelles.
Some of those could be closed or put under temporary hibernation as Siemens Gamesa aims to rid itself of production of parts its suppliers can make more cheaply, the people said.
Siemens Gamesa's troubles have put the spotlight on a sector suffering the consequences of super-short production cycles, which have come at the expense of quality.
While drawing the ire of anchor investor Siemens AG, Siemens Energy's issues have not resulted in management changes or attracted activist funds.
According to two separate sources familiar with the matter, removing the leadership would not necessarily fix the problems and a sale of Siemens Gamesa's problematic onshore division is currently seen as a major challenge.
($1 = 0.9510 euros)
Reporting by Christoph Steitz; Additional reporting by Alexander Huebner and Danilo Masoni; Editing by Alexander Smith
Our Standards: The Thomson Reuters Trust Principles.
Related Knowledge Center: Offshore wind energy
Over the next decade, U.S. offshore wind power is expected to grow from a single 30-megawatt wind farm off Rhode Island to more than 2,000 MW of capacity along the Atlantic Seaboard. There are contracts for wind power off the coasts of Massachusetts, Connecticut, New York, Maryland, New Jersey, Rhode Island, and Virginia.
The National Renewable Energy Laboratory has estimated the United States has over 4,000 gigawatts (GW) of offshore wind potential, enough to power the country four times over.
The growth in part being spurred by state solicitations, including in New York, where then-Gov. Andrew Cuomo (D) set a commitment of 9,000 MW of offshore wind by 2035, and in Connecticut, where in June 2021, Gov. Ned Lamont (D) signed legislation authorizing the construction of 2,000 MW of offshore wind by 2030.
The offshore development is also being driven by an investment tax credit set to end in December 2019 and is equal to 12 percent of expenditures. U.S. Sens. Susan Collins (R-Maine) and Tom Carper (D-Del.) have introduced a bill to extend the tax credit for up to eight years.
The Interior Department has held eight competitive lease sales that resulted in 15 offshore wind leases over 1.7 million acres that has the potential for 21 GW of capacity. In February 2022, the Bureau of Ocean Energy Management completed a bidding process that realized $4.37 billion for 488,000 acres across six lease areas in federal waters off New York and New Jersey.
Projects have also been proposed off the Southeast coast, off California and Hawaii, and for the Great Lakes.