Siemens Energy Braces for First Investor Encounter Since Crisis - Hindustan Times
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Siemens Energy Braces for First Investor Encounter Since Crisis

Bloomberg |
Feb 26, 2024 02:28 PM IST

Chief Executive Officer Christian Bruch will face the ire of Siemens Energy AG shareholders on Monday for the first time since quality problems at the company’s Gamesa wind-turbine unit spiraled into record losses.

(Bloomberg) -- Chief Executive Officer Christian Bruch will face the ire of Siemens Energy AG shareholders on Monday for the first time since quality problems at the company’s Gamesa wind-turbine unit spiraled into record losses. 

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The good news is that the share price has doubled since hitting a record low in October, thanks to a €15 billion ($16.2 billion) government-led package to shore up the company’s finances, followed by strong sales in its gas-services and power-grid businesses.

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The bad news, however, is that Bruch still can’t deliver much more clarity about Gamesa’s turnaround progress. On Friday, he said that if Spanish the unit can’t meet the target of breaking even by 2026, then Siemens Energy is “not the right owner” for the troubled onshore wind business.

While his comments signal to shareholders that he’s holding Gamesa to account, it’s unclear whether a divestment is likely — or even possible — given the depth of issues, including an ongoing production suspension of its 4X and 5X onshore platforms as well as maintenance and repair responsibilities for turbines that were already installed.

“The losses we incurred in our wind business and the underlying problems are unacceptable,” Bruch said in prepared remarks released ahead of the annual shareholder meeting. “We will not tolerate them. But we will not run away from them, either.”

Apart from the faulty onshore turbines, Bruch is having to navigate more expensive raw materials, higher borrowing costs, supply-chain issues and regulatory roadblocks in the US that have weighed on the wind industry more broadly. Danish wind-power company Orsted A/S is pausing dividend payments until at least 2025 and recently slashed its target for green power project construction.

Bruch said earlier this month that orders for offshore turbines are currently lower than originally anticipated, but he signaled some optimism in the medium term. 

Two institutional investors, Deka Investment and Union Investment, have said that they will vote against the supervisory board in a ballot measure evaluating the body’s performance last year. 

“Siemens Energy is still not able to offer a competitive product in the crucial onshore market,” Deka’s head of corporate governance, Ingo Speich, said in an advance copy of a speech to be delivered Monday. “If they don’t get the poor product quality under control, the share price will remain capped regardless of how well the other business areas perform.”

Deka Investment holds about 0.6% in Siemens Energy, and Union Investment’s share is about 0.1%. While they are likely to be overruled in the supervisory board vote, their stance shows that Bruch still has work ahead to win back shareholder confidence. 

“No other company in the wind business has as massive problems as Siemens Gamesa,” Union portfolio manager Arne Rautenberg said in prepared remarks ahead of the meeting. “These problems were either not seen in their full extent or sugarcoated.”

More stories like this are available on bloomberg.com

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