Germany Backs Loans to Siemens Energy for Green Projects in $16 Billion Rescue Package
The News
The German government has agreed to extend loan guarantees for Siemens Energy, a major manufacturer of wind farms based in Munich, as part of a financial package worth 15 billion euros, or $16.2 billion, aimed at helping the ailing company continue to participate in large renewable energy projects.
Germany’s economy ministry said Tuesday that it would provide €7.5 billion in loan guarantees, with private banks and other stakeholders also participating in the deal. Under the agreement, Siemens Energy will not be allowed to pay out any dividends or higher level bonuses, the ministry said.
“We are pleased with the German government’s clear support for Siemens Energy and the commitment to the rapid implementation of projects to make the energy transition a success,” a spokesman for the company said. The company has said that there are €110 billion worth of orders on its books and that it required help to sustain them.
Siemens Gamesa wind turbines off the coast of Virginia Beach, Va., in 2020.Credit…Steve Helber/Associated Press
Why It Matters: A critical player in the green transition.
Siemens Energy is a key player in Germany’s energy transition and employs some 26,000 people in the country. Last week, Chancellor Olaf Scholz of Germany opened Siemens Energy’s new factory in Berlin, where together with a French company, Air Liquide, it will produce green hydrogen.
The company’s difficulties have served as a warning that financial problems weighing on makers of renewable energy equipment could be growing more severe. These businesses are integral to helping economies shift to cleaner energy, but many are struggling to find the investment funds needed to build the factories and hire the skilled employees needed to meet the ambitious climate goals of governments.
Siemens Energy is the parent company of Siemens Gamesa, one of the world’s leading wind turbine makers. This subsidiary, which has large operations in Denmark and Spain, has run into major problems with some of the turbines it supplies, including failures of the massive blades. These issues have led to huge projected repair costs that could last for years.
Like other renewable equipment makers, Siemens Gamesa agreed to deals on wind turbines years ago at prices that will result in losses because of high inflation.
Earlier this month, Denmark’s Orsted scrapped plans to build two wind farms off the coast of New Jersey, forcing it to write off as much as $5.6 billion. The retreat of the world’s largest offshore wind developer could be a major setback to the renewable energy ambitions of the United States.
What Happens Next: Siemens Energy opens its books.
On Wednesday, Siemens Energy will announce its earnings for the fiscal year that ended on Sept. 30. A large loss is expected.
The company’s shares in Frankfurt rose nearly 3 percent on the news of the loan guarantees, although they remain down more than 40 percent since the start of the year.
