In a bold move to safeguard its energy transition efforts, the German government has pledged €7.5 billion (approximately $8 billion) of taxpayer funds to support the troubled wind turbine manufacturer, Siemens Energy. The company plays a pivotal role in Germany’s transition to green energy, and this financial infusion aims to ensure its stability and continued contributions to the nation’s renewable energy goals.
This substantial financial commitment is part of a larger €15 billion ($16.3 billion) package of guarantees. The remaining portion of this package will be contributed by private banks and other stakeholders, as announced by Germany’s Ministry for Economic Affairs and Climate Protection in a recent statement.
However, the German government’s support comes with certain conditions. Siemens Energy must halt dividend payments to shareholders and bonuses for company board members for this bailout to proceed. The government’s guarantee is contingent on all other stakeholders honoring their commitments as well, underscoring the seriousness of the situation.
This rescue operation not only sheds light on the financial challenges faced by nations transitioning away from fossil fuels but also underscores the significance of Siemens Energy in facilitating this transition. A spin-off from the iconic German electronics-maker Siemens, the company holds a majority 32% stake in the wind turbine manufacturer.
The effort to secure the company’s future has been underway for several weeks, with the federal government engaging in intensive discussions with Siemens Energy, Siemens, and private lenders.
Siemens Energy, a company with approximately €29 billion ($32 billion) in revenue in its last fiscal year, produces not only wind turbines but also gas-powered turbines and electrolyzers for hydrogen energy production, among various other products. Its technologies are responsible for approximately one-sixth of the electricity generated globally, and it employs a workforce of 94,000 people spread across more than 90 countries.
The company urgently requires these financial guarantees to fulfill its pipeline of orders, valued at a staggering €110 billion ($119 billion), as stated by the Ministry. A spokesperson for Siemens Energy expressed their satisfaction with the German government’s clear support, emphasizing the importance of swift project implementation for the energy transition’s success.
Siemens Energy is actively involved in both conventional and renewable energy sectors but has faced challenges in manufacturing some of its wind turbine models this year. In August, it announced an expected loss of €4.5 billion ($4.9 billion) for the current financial year. Following this announcement, the company’s stock plummeted by nearly 40% late last month when it sought a government bailout, as reported by Reuters. However, the news of the support package led to a 3% increase in the firm’s stock value on Tuesday.
The Ministry described Siemens Energy as “highly relevant to the entire value chain of the provision of energy systems” and “an important employer in the industries of the future.”
Germany, being Europe’s largest economy, has been grappling with the challenge of replacing Russia as its primary natural gas supplier, especially since Moscow’s full-scale invasion of Ukraine in February last year. Finding more affordable and sustainable energy sources has become critical for German manufacturers who have been burdened by the soaring gas prices of the past two years. Additionally, a sluggish Chinese economy and significant interest rate hikes have added to the sector’s difficulties.
The consequences of these challenges are evident in the recent data for October, which reveals that German manufacturers are shedding jobs at the fastest rate in three years. New orders are declining, and confidence remains “deeply negative,” according to surveys.
Germany’s substantial financial commitment to rescue Siemens Energy reflects the nation’s dedication to its energy transition objectives. This support ensures the continued stability and growth of Siemens Energy, a key player in the green energy sector. The conditions attached to this bailout highlight the government’s seriousness in holding all stakeholders accountable.