Siemens Gamesa Sees Way Out with Siemens Energy Integration, US and EU Clean Energy Commitments
As reported last month, Siemens Gamesa Renewable Energy posted a significant net loss for its Q1 2023 (October–December 2022), mainly due to specific components’ failure rates, and its net financial debt totalled EUR 1.9 billion as of 31 December 2022. However, looking long-term, the company sees a light at the end of the tunnel driven by, among other things, the potential integration into Siemens Energy, as well as the Inflation Reduction Act (IRA) in the US and the EU’s REPowerEU.
In the first three months of its fiscal year 2023, the wind turbine manufacturer recorded revenue of EUR 2 billion, 9.8 per cent more than in the first quarter of its fiscal year 2022, and EBIT pre-PPA and before integration and restructuring costs amounted to EUR -760 million, as reported in its preliminary results.
In its final results for Q1 2023, Siemens Gamesa reported a net loss of EUR 884 million in the first quarter and said that as of 31 December 2022, its net financial debt totalled EUR 1.9 billion.
“The negative development in our service business underscores that we have much work ahead of us to stabilize our business and return to profitability. However, despite the extremely challenging macroeconomic and geopolitical context in which we find ourselves, we have seen progress in other areas, such as with our Siemens Gamesa 5.X platform, thanks to our Mistral program”, said Siemens Gamesa’s CEO Jochen Eickholt.
The company’s Mistral strategy programme was launched last year with an aim to overhaul its operating model to make the organisation simpler and leaner, which would lead to stabilising the business.
As part of this programme, Siemens Gamesa announced last November that it planned a workforce reduction with around 2,900 jobs cut by its fiscal year 2025, out of which 1,900 will be in Europe.
The company is deploying the Mistral programme in three phases, from 2022 to 2025, and beyond.
The short-term goals include achieving product maturity in the Siemens Gamesa 5.X onshore platform coupled with cost assurance, while in the medium term, the company plans to achieve a lean structure in all target markets. Under the Mistral programme, by 2025, Siemens Gamesa aims to have streamlined its platform strategy and achieved a scalable, cross-application operating model for Offshore, Onshore, and Service.
Mistral Strategy, Siemens Energy Integration and US and EU Commitments to Lead to Better Days
According to the wind turbine manufacturer, its new organisational setup, effective from 1 January, which integrates onshore and offshore manufacturing and technology activities, will result in cost and quality improvements.
“Progress has also been made with the restructuring, and a pre-agreement has been reached with employee representatives in Spain”, Siemens Gamesa states in a press release issued on 2 February.
Looking ahead, Siemens Energy says that despite its financial performance in the first quarter, the Mistral strategy programme is advancing in its goal of stabilising operations.
The new operating model is also expected to enable Siemens Gamesa to reap significant cost synergies through the potential integration into Siemens Energy, which was cleared to acquire the wind turbine manufacturer at the end of last year. In mid-January, Siemens Gamesa’s shareholders approved the delisting of the company.
The company, whose order intake for the first quarter of 2023 stood at EUR 1.6 billion and order backlog at EUR 33.7 billion, said the new orders it signed had much greater protection against inflation, volatility in product costs and logistics disruptions than those signed in the past.
Furthermore, Siemens Gamesa sees solid ground for its business in the years ahead as wind energy targets are growing and government commitments are backing further deployment.
“The beginning of the fiscal year 2023 saw a further increase in global wind demand prospects for the next ten years, but further governmental action is needed to close the gap between ambitious targets and actual installations”, the company said.
As solidifying factors for the market, Siemens Gamesa referred to the Inflation Reduction Act (IRA) in the US and the REPowerEU programme in the European Union, for which the wind turbine OEM says “strengthen the good outlook for future growth in demand and the wind industry’s potential”.
The US passed the IRA in August 2022. The legislative package, among other things, mobilises USD 369 billion to be invested in clean energy, energy security, energy transition, and climate change programmes over ten years with an aim to reduce greenhouse emissions by 40 per cent until 2030. It also set the stage for comprehensive permitting reform legislation to unlock domestic energy and transmission projects, which includes offshore wind development and transmission projects related to this energy infrastructure, including interconnections.
The European Union’s REPowerEU plan, launched in May 2022, came as a result of Russia’s invasion of Ukraine, highlighting the risks involved with being reliant on Russian fossil fuels, given that Russia produces and exports large amounts of oil and gas to the European states. The REPowerEU measures include energy savings, diversification of energy supplies, and accelerated roll-out of renewable energy to replace fossil fuels in homes, industry, and power generation.
According to the offshore wind industry in Europe, the cross-bored agreements signed on joint commitments for offshore wind deployment, such as the Esbjerg Declaration, will power the REPowerEU plan, both by adding significant energy capacity to power European households and by securing enough renewable electricity for green hydrogen production.