Weather Guard Lightning Tech

News Flash: Siemens Energy Struggles While GE Benefits from Cancellations

Siemens Energy reported massive losses in its wind turbine business while GE Vernova avoids over $1B in losses thanks to offshore project cancellations; the two companies face very different futures, with Siemens Energy planning to break even by 2026 and GE Vernova looking to boost profitability ahead of its renewable energy IPO.

Sign up now for Uptime Tech News, our weekly email update on all things wind technology. This episode is sponsored by Weather Guard Lightning Tech. Learn more about Weather Guard’s StrikeTape Wind Turbine LPS retrofit. Follow the show on Facebook, YouTube, Twitter, Linkedin and visit Weather Guard on the web. And subscribe to Rosemary Barnes’ YouTube channel here. Have a question we can answer on the show? Email us!

Pardalote Consulting – https://www.pardaloteconsulting.com
Weather Guard Lightning Tech – www.weatherguardwind.com
Intelstor – https://www.intelstor.com

Allen Hall: I’m Allen Hall, president of Weather Guard Lightning Tech, and I’m here with the founder and CEO of IntelStor, Phil Totaro, and the chief commercial officer of Weather Guard, Joel Saxum. And this is your News Flash. News Flash is brought to you by our friends at IntelStor. If you need actionable information about renewable projects or technologies, check out IntelStor at intelstor.com.

Siemens Energy reported a net loss of 4. 6 billion euros for the full year 2023. This was due to steep losses in its wind turbine business, Siemens Gamesa. The company is restructuring the wind turbine business after it faced unexpected technical problems and inflation eroded margins. Now, Phil, the investor call and the press junket that Siemens Energy held this week was really interesting about what the approach is.

And they didn’t let out a lot about the future of Siemens Gamesa, just saying that they were going to lose a significant amount of money this year.

Philip Totaro: So right now they’re going to end up having to rely on revenue from the offshore wind turbine sales and both the onshore and offshore services business to make up for the lost revenue or lack thereof in terms of onshore sales because they’ve paused sales of the, the 5. x platform. Siemens Energy has already come out and said that they’ve got enough to be able to survive as Siemens Energy, because their other non wind businesses under the Siemens Energy umbrella are profitable. But the question is, how long are they going to let Siemens Gamesa run itself into the ground without substantial top line revenue and profitability?

They’re talking about break even in 2026, but they have not yet really presented a roadmap for how to get there. The other question to address is, okay, if they start… stripping assets, which I don’t necessarily expect they’re going to do. But if they decide to do that, what does that look like then?

Obviously Siemens Energy survives with a kind of Danish German Siemens wind business kind of reconstituted. What happens to Gamesa? And how does that necessarily play out? The Spanish government wants to be able to protect one of its institutions. and there again have been suggestions that they’re separately trying to get some money together, to bolster the company if it is, ends up being spun off.

There’s a lot of uncertainty and we’re anxiously awaiting their capital markets day presentation, next week.

Joel Saxum: While Siemens Energy right now is that it’s a burning fire. Everybody’s watching it and you’re staring at this problem, trying to figure out what’s happening.

They’re saying their outlook looks to break even by 2026, three years down the line. And three years down the line, there could be some massive shifts in the wind industry, right? And one of the things that I, that’s not, was not talked about in any of these reports, is the pressure from the Chinese OEMs.

And there’s an active interest going on right here from the European, basically, Parliament. To possibly want to look into competition and whatnot, where these Chinese OEMs are offering turbines per, at a per megawatt, per megawatt, 50 percent or less than the price of the Western OEMs. You have all of these things going on, internal to Siemens, and all these other issues, and some supplier things as possible, and that is something that everybody’s focused on.

But there’s also this kind of looming, burning, smoldering fire going over here in the background, that could change their landscape of that wind industry before 2026. And there could be another thing that they have to deal with.

Philip Totaro: Which again, Joel raises an interesting point that if they were to divest the Spanish assets of Siemens Gamesa and a Chinese company like Envision Energy, let’s say, or Ming Yang were interested in acquiring it.

Would the competition authorities in Europe even let that happen? Are they gonna weigh the competition versus job protection? How is that gonna, how is that gonna play out?

Allen Hall: Inflation and supply chain issues have led developers to cancel unprofitable offshore wind projects, particularly in the United States.

This is giving GE a chance to exit money losing turbine contracts. Recent cancellations will allow GE to avoid over 1 billion US dollars in unprofitable deals. This includes a one and a half billion dollar contract for the ocean wind one and two that was abandoned by Ørsted GE is currently has around $6 billion in offshore wind contracts that are expected to lose money.

The business has been struggling with profitability lately. Joel, it’s good for GE that some of these offshore projects are being cancelled.

Joel Saxum: I think it’s oddly great. It’s weird, right? If you’re in the financial office at GE and this happened to you, when they saw Ørsted back out, they’re probably like, thank you so much, which is a weird thing, right?

Especially from the sales side, but financially, to understand that on your balance sheet, you’ve got six Billion dollar’s worth of contracts that are already written that are going to lose you money. That’s painful, right? That’s a painful way to go to wake up every morning. if you’re in one of those, financial roles over at GE, so It’s good for the company.

Oddly enough, right? Like you say, hey, we’re losing these orders, but it’s actually better for us profitability wise. It’s an odd juxtaposition of finances, but it, I think it will actually help GE in the long run.

Philip Totaro: Profitability is one thing, but keep in mind the wider context here, which is GE is trying to IPO Vernova. 6 billion in projects that’s not on their books anymore, if they’re unprofitable, okay, that’s a problem. But here’s the thing.

If you’re IPO ing the company, Wall Street likes big companies that are profitable, number one. Number two is big companies that are unprofitable, because presumably they can get back to profitability. And number three, small companies that are profitable. In that order. And what GE Vernova is gonna be, is they’re instead of being a big company that is unprofitable, and with the, the possibility of getting back to being a big company that is profitable, they’re instead going to be a small but profitable, a smaller but profitable version of themselves when they IPO.

And I actually see that as a problem because they, their market cap is not going to be as big. They’re not going to be able to price the IPO the way they want to be able to price it. And profitability is actually easier to fix than getting a ton of new orders, especially orders that were supposed to have happened in the first place.

News Flash: Siemens Energy Struggles While GE Benefits from Cancellations