Shortly before disclosing a nearly 5 billion euro deficit for its fiscal year, Siemens Energy received state guarantees worth 7.5 billion euros ($8.15 billion) related to the project from the German government.
After discussions with private lenders and Siemens AG, the company’s largest shareholder, the German economy ministry announced late on Tuesday that it had approved the backstop as part of a larger package of 15 billion euros in guarantee lines agreed with banks and other stakeholders.
According to a Google translation, the ministry confirmed that Siemens Energy will secure an additional 3 billion through negotiations with other stakeholders, on top of the 12 billion euros that private banks will provide as a guarantee line. A sizable chunk of those guarantee lines will be backed by a proportionate 7.5 billion dollar backstop from the federal government.
Siemens Energy canceled its profit projection earlier this year due to issues with manufacturing flaws at its wind turbine subsidiary Siemens Gamesa. The purpose of the guarantees is to protect the company’s massive order book, worth 112 billion euros, by providing assurance to its clients regarding contract execution and prepayment.
The business revealed on Wednesday that it had a net loss of 4.6 billion euros for the entire fiscal year, which was exacerbated by a net loss of 870 million euros in the fourth quarter. It declared that after the troubled wind turbine unit made this outcome worse, it would reevaluate Siemens Gamesa’s organizational structure.
Siemens Energy CEO Christian Bruch told on Wednesday that there is no money involved in the fiscal guarantees, and the company denied that they amount to “state aid.”
He emphasized that the company will “pay money for these back guarantees, so it is like an insurance package.”
“These guarantees are meant to back-secure customers in terms of prepayments, contract execution, and so forth, so it’s a relatively normal instrument in the industry,” Bruch stated. The market was naturally concerned about “cluster risk” given the size of Siemens Energy’s order book, which totals 112 billion euros.
“We are extremely appreciative of the government’s efforts in organizing this package with the banks and Siemens AG’s support, but we also think it’s crucial that people realize that this is not state aid or cash, but rather something that falls under European law,” Bruch said on “Squawk Box Europe.”
“To secure this enormous growth that comes with the energy transition, it is important to continue the growth and the guarantees will go to the grid business, to the other non-wind businesses in large amounts.”
