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Before use: Will Siemens be involved in the rescue of Siemens Energy?

Photo: Sebastian Kahnert / dpa

With the spin-off of Siemens Energy, former Siemens CEO Joe Kaeser wanted to create an all-purpose weapon for the energy transition: Whether in the expansion of power grids, the construction of new wind farms or the construction of gas turbines as a transitional technology - the energy technology group Siemens Energy is involved in all these billion-dollar projects. But the ambitious project failed due to design flaws in Siemens Energy's construction plan: The wind power division with the acquired Spanish wind power subsidiary Gamesa is now burning so much money that it is eating up the profits in the gas turbine division and endangering the future of the group.

After all, the expansion of power grids is a billion-dollar business: major orders worth several billion euros can only be accepted by those who can secure them with appropriate guarantees. In other words, if you want to get involved in this multi-billion dollar business, you need a thick liquidity cushion yourself. Although Siemens Energy has orders worth around 100 billion euros on its books, the high losses in the wind power division mean that the company is hardly able to accept new major orders.

Siemens to get rid of its stake in Siemens Energy soon

This means that unless major shareholder Siemens or the German taxpayer provide billions of euros in guarantees, things could get tight for a key player in the energy transition in Germany. This is not in the interest of German politicians, who are reluctant to provide state aid as long as Siemens Energy still has a potent partner at its side in the form of its parent company, Siemens. Siemens, on the other hand, which still holds 25.1 percent of the shares in Siemens Energy, would like to get rid of its stake in the energy technology group quickly.

The discussion about the possible need for state aid triggered a fall in the share price of Siemens Energy last week. On Monday, they started a recovery attempt and rose by around 8 percent to 8 euros. But this countermovement is hardly significant: On Thursday, the shares had slumped by almost 40 percent after the group confirmed talks with the federal government about guarantees for major orders.

The Federal Ministry for Economic Affairs and Energy recently announced that the negotiations with Siemens would also be continued over the weekend. Siemens is still reluctant to participate in the guarantees, two insiders said. Siemens declined to comment.

Critics had previously pointed to the responsibility of shareholders such as Siemens for the difficulties of its subsidiary Siemens Energy. "There is no convincing justification for the state to support Siemens Energy financially or with guarantees," said Ifo President Clemens Fuest (55). "The support means a transfer of taxpayers' money to Siemens Energy's creditors and shareholders, who should actually be liable. It is the task of the creditors and shareholders to restructure the company and waive any claims."

"Siemens cannot shift the responsibility of a spin-off entirely to the state"

SPD economic politician Sebastian Roloff

Siemens is at least partly responsible, said Daniela Bergdolt, managing director of the German Association for the Protection of Securities Ownership, according to Handelsblatt. "Were mistakes made in the secession?" The company will probably have to make a contribution, if only because its own reputation is at stake. "There's also the name Siemens in there," says Bergdolt.

Social Democratic Party (SPD) economic politician Sebastian Roloff also said: "Siemens cannot shift the responsibility of a spin-off entirely to the state – its own participation is necessary here." If the state gets involved, Siemens Energy will also have to do its part. "Bonus payments, for example, are of course off the table for the time being."

At least €15 billion in guarantees needed

Meanwhile, the German government is apparently stepping up the pace in the negotiations. The talks were very good and based on trust, said Chancellor Olaf Scholz (65) on Friday. The company is very important. He did not give details. "We are in intensive talks on this," said a spokeswoman for the Ministry of Economic Affairs.

Meanwhile, the need for guarantees at Siemens Energy is growing steadily, mainly due to the increasing number of orders for gas turbines and power grids. According to media reports, a volume of up to 15 billion euros is at stake.

Joe Kaeser, chairman of the Siemens Energy supervisory board, had tried to dispel the worries in the "Welt am Sonntag". The talks with the federal government are not about state aid. It is merely a matter of guarantees that support Siemens Energy's growth. "The company clearly doesn't need any money from the state."

cr/dpa-afx, Reuters