Siemens Energy Reassesses Wind Strategy After 1.9 Billion Setback - OilPrice.com
Siemens Energy Reassesses Wind Strategy After £1.9 Billion Setback | OilPrice.com
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Siemens Energy on Monday said problems recently unveiled at its wind turbine unit would cost it £1.9bn (€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 six-fold in 2023 to £3.9bn (€4.5bn), the company said, as it published third-quarter results showing a record order backlog of £91.3bn (€106bn) euros due to strong demand.
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 per cent lower at 1048 GMT, with Jefferies analysts calling the disclosure “very messy”, with a risk of further costs.
Others however, 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.
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 around a third of its market value, or more than 6 billion euros, 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 currently 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.
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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.
By CityAM
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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.