Siemens Energy shares dive on German guarantee talks, profit warning

By Steve Goldstein

Siemens Energy shares slumped as much as 40% on Thursday after the company said it was seeking German government guarantees and delivered a profit warning.

The company confirmed a report in German magazine Spiegel that it was looking for the guarantees, as it warned that in its wind business Siemens Gamesa, order intake and revenue will be lower than market expectations, and net losses and cash outflow higher than expected.

Siemens Energy had warned this summer about the failure rates for the onshore wind turbines it produces.

It confirmed reports it was seeking government guarantees. "The strong growth in order intake, particularly in the former gas and power business areas, leads to a rising need of guarantees for long-term projects."

Analysts at Citi led by Vivek Midha say the wind turbine issues are making banks reluctant to provide the guarantees -- at least at reasonable prices -- that it needs on these big infrastructure projects.

"When suppliers such as Siemens Energy book large orders, typically they provide guarantees for customers around these projects, which are supported by credit lines from banks. This is common for large projects in cap goods, whether in the wind industry or Siemens Energy's other product lines such as transmission or gas turbine," he said.

"Most likely, the cost of these guarantees from banks may have risen for Siemens Energy, making it difficult to book large orders, in our view," he said.

Siemens Energy shares (XE:ENR) fell 31% in recent trade. Siemens (XE:SIE), which holds a quarter of the company, saw its stock drop by 5%.

Another Citi analyst, Matthew Wilkie, said the market fears that the parent group may have to inject equity into Siemens Energy.

-Steve Goldstein

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10-26-23 1007ET

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