Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The German government has agreed to provide €7.5bn of state guarantees to embattled renewables group Siemens Energy as part of a €15bn rescue package for the group.
The deal is vital to sustaining a €110bn portfolio of clean energy projects planned by the company — a cornerstone of Europe’s green energy transition — which was last month revealed to be in jeopardy amid a lending freeze in the renewables market.
“In the past few weeks, the federal government has been in intensive contact with Siemens Energy, Siemens [Siemens Energy’s largest shareholder] and private banks,” the German ministry for economics and climate change said in a statement on Tuesday.
“The federal government’s prerequisite [for state support] was that all stakeholders participate appropriately in securing the company,” it said.
Dividends at Dax-listed Siemens Energy will be suspended for the duration of the state guarantees. Bonuses for its board of directors will also be scrapped.
The company is due to report its fourth-quarter results on Wednesday. Its shares are down 50 per cent this year. They rose 5 per cent to €10.16 on news of the bailout.
The rescue package involves a complex set of commitments: the German government will backstop €7.5bn of a €11bn credit line provided by a consortium of private banks.
A further €1bn of lending will be provided by banks without a backstop.
Siemens Energy and Siemens will then provide a final €3bn chunk of funding themselves, including €2bn raised from the sale of shares back to Siemens from an Indian joint venture between the two companies.
Siemens will also reduce the fee — currently worth hundreds of millions of euros annually — that it charges Siemens Energy to use the Siemens name.
The Munich-based energy company has been in crisis since revealing huge losses at its wind turbine arm, Siemens Gamesa, in June. It is on course to record a €4.5bn loss for this year.
Engineering problems have beset the latest generation of turbines under production — leading to a suspension of new orders for onshore projects — and costs have spiralled thanks to inflation, causing losses stemming from long-term supply contracts that locked in fixed sale prices.
The steep losses led to a funding crunch for Siemens Energy, as lenders panicked in an already challenging market for renewables financing.
The company revealed on October 26 it was facing a €15bn financial hole that, if not plugged, would lead to the collapse of its project pipeline.
Siemens Energy has repeatedly stressed that the other parts of its business — including gas and power businesses — are in strong financial health.
The company last week unveiled what it says will be Europe’s largest gigafactory for the manufacturing of hydrogen electrolysers in Berlin.
German Chancellor Olaf Scholz formally opened the plant. “The Cassandra calls about the supposed deindustrialisation of Germany and Europe are completely misleading. All the conditions are right,” he said.