Siemens Energy German Rescue Plan: Details of Bank Guarantees and State Support

Finance

The German energy group will benefit from a rescue plan with bank guarantees, financed partly by the state and partly by private banks

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The German energy group Siemens Energy, in serious financial difficulty, will benefit from a rescue plan worth 15 billion euros in bank guarantees, financed partly by the state and partly by private banks. The German Ministry of Economy has confirmed its commitment to the maxi support plan for the energy group, after the rumors that have circulated in the last few hours. However, the “precondition” imposed by Olaf Scholz’s executive is “that all interested parties participate adequately in the protection of the company”.

Siemens Energy is facing a delicate moment due to financial difficulties, particularly in the wind sector, and has asked for the support of public institutions in recent weeks. After discussions that began in October, the agreement reached by Siemens Energy with the German government provides for the aid to come partly with guarantees from banks and partly in the form of cash flow from a joint venture set up with Siemens in India.

The public-private rescue plan

More specifically, the German executive will intervene personally with a guarantee of 7.5 billion euros. However, the money will only be disbursed on condition that banks, among others, also support the company. The government’s contribution is part of an overall guarantee line of 15 billion euros in total. In particular, private banks grant Siemens Energy guarantees for a total of 12 billion euros, partially guaranteed by the federal government itself. Another 3 billion euros should then arrive from further interested parties. Finally, Siemens Energy could then raise another 2 billion euros through the sale of shares in a joint venture with Siemens which, according to various sources, could be Siemens India.

The executive justified his intervention by underlining the strategic role of the group in the energy transition, but also in the German industrial fabric, with 26,000 employees hired. However, the company “is currently experiencing difficulties in obtaining the guarantees required on the financial market”.

Objective: wind power

After abandoning nuclear power and plans to eliminate coal mining, Germany is banking on wind power to reduce its net emissions by 2030. Like the sector as a whole, Siemens Energy also suffers from unfavorable conditions, such as rising costs of building materials, interest rates and Chinese competition. Furthermore, the Group is having problems fulfilling orders, due to quality problems with the turbines produced by the German subsidiary Siemens Gamesa.

Siemens Energy distributes gas and electricity and specializes in wind turbines. The group operates in 90 countries with over 90,000 employees globally. The request for guarantees from the institutions, the group announced in recent days, was made necessary to support the most expensive long-term projects, “on an order portfolio of 110 billion” which, without public help, will not be able to go ahead after you. More generally, Siemens Energy has long been a special watchdog on the stock exchange: in the fiscal year 2023-2024, the group expects a loss of 4.5 billion, largely due to the problems of Siemens Gamesa, a 98% subsidiary which builds wind turbines.

Siemens Energy is 25% owned by the energy giant Siemens, which recently reduced its stake from the previous 31.91% and which, according to the German press, would like to leave to wash its hands of it.

The request for help from the federal government has instead rekindled the ties between Siemens Energy and Siemens: Berlin would in fact like to share the financial effort and risk with the private company that still holds a significant share of Siemens Energy.

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2023-11-14 19:02:41
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