Germany Allocates $8 Billion to Salvage Enormous Renewable Energy Firm
Germany commits €75 billion ($8 billion) of taxpayer funds to save Siemens Energy, a crucial player in the country's green energy shift
The German government is offering €7.5 billion ($8 billion) of public funds to ensure the rescue of Siemens Energy, a troubled wind turbine manufacturer that plays a crucial role in the country's energy transition. This amount is a component of a €15 billion ($16.3 billion) package of guarantees, with the remaining portion being provided by private banks and other stakeholders, according to a statement released on Tuesday by Germany's ministry for economic affairs and climate protection.
Siemens Energy must halt dividend payments and board member bonuses for the package to proceed. The government will only guarantee it if all stakeholders meet their commitments. This bailout highlights the financial challenges countries face while transitioning away from fossil fuels. It also emphasizes Berlin's recognition of Siemens Energy, a spin-off of renowned German electronics manufacturer Siemens, in facilitating this transition. Siemens maintains a majority 32% stake in the wind turbine maker.
The ministry confirmed that the agreement to "protect the company" has been in progress for several weeks. They highlighted that the federal government has had extensive communication with Siemens Energy, Siemens, and private lenders.
Additionally, the company, which generated approximately â¬29 billion ($32 billion) in revenue during its previous fiscal year, manufactures gas-powered turbines, electrolyzers for hydrogen energy production, and various other products. Its technologies serve as the foundation for approximately one-sixth of the world's electricity generation and it operates in over 90 countries, employing 94,000 individuals.
The ministry stated that in order to fulfill its €110 billion ($119 billion) order pipeline, financial guarantees are required. Siemens Energy expressed their satisfaction with the clear support from the German government and their dedication to promptly executing projects to ensure the success of the energy transition.
The company, engaged in both conventional and renewable energy, encountered a range of issues in the production of certain wind turbine models this year. In August, it projected a loss of €4.5 billion ($4.9 billion) for the ongoing fiscal year. Following its announcement of seeking a government bailout, the company saw a significant drop of nearly 40% in its shares last month. However, there was a 3% increase in stock value on Tuesday after news of the support package was released.
Siemens Energy is crucial to the entire energy systems value chain and serves as a significant employer in emerging industries. Germany, the largest economy in Europe, has encountered a challenging and costly task of finding an alternative to Russia as its primary natural gas supplier following the extensive invasion of Ukraine by Moscow in February of the previous year.
German manufacturers are facing significant challenges due to the high cost of gas, prompting them to seek cheaper and cleaner energy sources. The sector has also been impacted by a weakened Chinese economy and painful interest rate hikes. As a result, German manufacturers are experiencing the fastest job losses in three years, with declining new orders and a deeply negative level of confidence, as indicated by October survey data.
