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Siemens Energy Receives Financing, Orsted Restructures Management, Vestas and Nordex Report Positive Earnings

Big news from Siemens Energy and Ørsted pushed the Uptime crew to record this special episode. Siemens Energy scored €15B financial backing from the government, banks, and industry to propel the company. Ørsted replaced their CFO and COO as the Danish energy leader looks to address the effects of Ocean Wind 1&2. Vestas and Nordex reported a positive Q3 with improved orders and financial statements.

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Allen Hall: Today’s episode of the Uptime Wind Energy podcast is a special episode because we have seen so many quarter three results coming in and the changes at Ørsted. We thought we’d put together the special episode. So this is unique. There is a lot going on at Siemens and energy and Siemens and Gamesa, and there seems to be a rift between the two companies and Ørsted is shuffling the deck chairs a little bit.

The CFO and COO are out and they’re bringing interim people into those slots. But we do feel like Ørsted is going to be heading in the right direction. It’s just going to take a little bit of time to recover. So in this episode, we talk to all those things. We also talk about Vestas having a really great quarter and Nordex doing fairly well for themselves.

So there’s some good news on the wind turbine OEM front. So stay tuned. There’s a lot ahead.

Siemens Energy has provisionally secured about 15 billion euros for financing various projects. The German government has agreed to provide about seven and a half billion euros of that in guarantees of the total of 15 billion that’s headed towards Siemens Energy. It’s a weird breakdown how this happens, Phil.

So banks are providing about 12 billion euros. The government is backing the banks for about seven and a half billion of that. Siemens, the mothership, is providing about two billion Euros to the sale of a joint venture shares to Siemens Energy. Siemens Energy is also putting up a 3 billion first loss tranche.

So there’s a, obviously a couple of players in the middle of this. There’s gonna be some restrictions on Siemens Energy where the management does not get dividends or bonuses during this guarantee period. This is probably good news for Siemens Energy, but it doesn’t really bode well going forward, right?

It just seems like there’s gonna be more tough times ahead.

Philip Totaro: Yeah, actually, it’s probably better than you think, Allen, because this provides investors confidence. It brings some closure and some certainty to what was an open issue. The government, it’s important to also note, the government in Germany is not actually putting up any actual cash at this point.

Joel Saxum: Just backing.

Philip Totaro: Yeah, it’s a backstop. So similar to what some financial institutions and other companies that were quote unquote too big to fail in the U. S. going back to the, the Lehman Brothers collapse and all that in 2008, 2009. You’ve got a situation where it’s a move that provides investors confidence.

They were, Siemens Energy and Siemens Gamesa came out and said we don’t actually need the cash per se anyway. We, what we need are it’s a mechanism to be able to provide the customers who are demanding the backstop a way to, to achieve that. Because of Siemens Energy’s financial results and reporting earlier this year, they had their credit rating lowered.

Which precluded the banks from wanting to be able to provide any kind of a backstop absent this government intervention. So again, I think this is, in general, a good thing and provides them with a glimmer of hope and a path forward. But overall, keep in mind what we talked about over the course of several weeks on the show before.

You have a scenario now where… The company either has to sell off assets to bolster their cash, they’re not selling any, new product and new projects. They’re talking about building a whole brand new wind turbine, which is at least a 18 month to two year endeavor. At this stage, they’ve either got to invest their way out of this.

Or they’ve got to sell assets and asset strip their way out of it. So this looks like the government got them to agree and got Siemens AG, the parent company, to also agree to invest their way out of it. Which is probably the better it’s certainly the safer path for the employees of the company and, helps protect jobs and, lots of other things, provides investors confidence, et cetera, et cetera.

So generally, I see this as a good thing.

Joel Saxum: I think one thing for listeners, viewers of the show right now it’s November 14th tonight. So we’re also looking at the financial calendar for Siemens Energy saying November 15th, which is tomorrow when we’re recording this, is when they’re going to release their fiscal year 20 or Q4 financial reports for this year. So press conference, analyst conference, all of that is going to happen in the next 12 hours to 18 hours as we record this right now. So this, the details of what we’re saying some ideas about what they’re actually going to do or how this money is going to help them in the future or whether how they’re going to invest, what they’re going to do to climb out of this hole.

Some of those questions may be answered in the general news here in the next 12 to 14 hours.

Allen Hall: And on other news on Siemens, they decided to not go forward with a blade plant in Virginia. So I think if you start connecting the dots here, Siemens Energy is hoarding cash and rightly they’re not going to expend any cash on a factory where they don’t have defined output. And there’s a lot of concern down in Spain at the moment with the unions about the Gamesa division. And there’s, if you read the Spanish press, there’s a lot of going back and forth between what they’re calling Siemens and Gamesa. Like they’re treating like there’s two separate entities instead of one combined company.

There seems to be a big disconnect at the moment. There’s a lot of moving pieces at the moment. And yeah, Joel, you’re right. When the financial numbers come out tomorrow and the plan, I assume we’re going to get a plan, then a lot will change for sure. Plus they’re not selling turbines either, right?

The onshore turbines, they essentially stopped selling them for the time being.

Joel Saxum: Yeah, financial guidance is one part of of, releasing quarterly results, of course, but the guidance that we’re really looking for is what’s the qualitative approach that you’re doing here? Like where are you going?

What are your plans? And as far as, we see we can watch. We can watch all the things happen out in the world and the moves they’re making, but nobody has come forward and said, boom. All right, guys, we know we’re in trouble. This is the plan going forward. And I would expect to see actually a little bit more detail on the issues that they’re having with the turbines that we know we need at the four and a half or 5 billion euro right down there.

I think we’re going to see a little bit more. I hope to see a little bit more detail on what those exact problems are and how they’re going to tackle them tomorrow during that investor call.

Allen Hall: Going back to companies that are having issues at the moment, Ørsted’s CFO and COO stepped down and Mads Nipper is saying they needed, uh, some new capabilities among challenging times, essentially. Obviously Ørsted scrapped the OceanWind 1 and 2 projects off the coast of New Jersey, and they’re planning on taking about 5. 6 billion in losses. So there is a lot of reshuffling happening. Now, They have put a couple of people into those positions temporarily as interims and are still sticking with their financial guidance at the moment, including uh, dividends, but boy oh boy Ørsted is also in a mode of trying to protect their assets at the moment. And I think rightly right?

But, the weird thing is, all this started with Ocean Wind 1 and 2. It really did. And it’s cascaded into a much bigger problem.

Joel Saxum: Do you think that these heads are rolling a little bit based on some of the reports we were listening to? Like last week we talked about this, the New Jersey governor saying Oh, they don’t know what they’re doing and this and that.

But if you really look into that, okay, that’s one person’s statement and opinion. But when you look into it, they’re like saying, These hundred, this 300 million loss of the 100 million guarantee and stuff just weeks before they ended up losing it and rescinding their path forward. Ugh, that’s like a hard thing to stomach if you’re the board from Ørsted.

That could be why this happened.

Allen Hall: But, Phil, I don’t think that happened, right? There’s a lot of discussion in the industry of whether that 100 million was actually deposited in New Jersey. There’s some discussion of that was on its way, but wasn’t done, and that maybe Ørsted cut that off before the money was deposited.

Are you hearing the same thing?

Philip Totaro: Yes, and it also seems Ørsted’s claiming that their board of directors never really ratified that agreement. To be able to provide that deposit which is the legal claim that and legal standing that Ørsted has to be able to say that, if that money hasn’t already been sent and already been committed they’re not going to send it.

So this is gonna end up being decided by courts, probably absent calmer heads, which is almost never the way things like this get resolved. That say, you know what? Come back to the table. We are willing to renegotiate. We are willing to work with you in a collaborative fashion. I think this is, an American state local federal government saying, you know what europeans? You were the ones to come in and invest in, all these BOEM lease auctions. But at the end of the day, I think we want some more American blood in here building these projects. So go back to Europe. I, it’s just, that’s the feeling I get from some of this.

Joel Saxum: Yeah, we talked about that when these auctions went.

We were looking at, remember when we looked at the California auction, Allen? We watched it live. We were watching it, watching, it’s like, there is not one company in here that is American owned. It was, the closest was Invenergy, but Invenergy is actually 51 plus percent owned by the Canadian pension fund, so they’re technically a Canadian company.

But it was all of these auctions there’s… Nobody from the U. S. involved in most of them.

Allen Hall: Who’s going to do it? I still go back to, who’s going to do it?

Philip Totaro: Allen, it’s interesting too, because in this past week, Dominion Energy in Virginia came out and said, because they’ve gotten approval now for the Coastal Virginia Offshore Wind phase one, their 2. 6 gigawatt phase of this project. And they’re, with a preposterously expensive budget of 9. 8 billion for gigawatt project, they’re saying, hey, we don’t have any financial problems, but that’s because they baked in all these potential, increases because of inflation or whatever else.

It was already baked into their budget, so now they look like geniuses because they don’t have anything to renegotiate, plus they are the power offtaker, they don’t have a problem there. It’s just the situation where, you know, in New York and New Jersey, nobody wanted to play ball. If New Jersey hadn’t held up these tax credits and tax breaks that were supposed to go to Ørsted in the first place, if there was more certainty provided about everything.

Then these projects would have had the opportunity to move forward and probably should have. Ocean Wind 1 was already supposed to be under construction right now, as we speak. And it never, it never happened because they didn’t get all the development and permitting approved.

And we talked about this also last week on the show that, Ørsted said, Oh it wasn’t really New Jersey’s fault. But I think that’s just them being a little polite. And I’ll say it’s New Jersey’s fault because I feel like what else was it supposed to be? We’ve said repeatedly that if you have something like inflation and you have to raise electricity rates to pay for natural gas or some other type of electricity based on, alternative brown power or whatever you get, you don’t see people running through the streets screaming with their hair on fire that, Oh my God, my rates are going up.

People complained about it, of course anytime the rates go up, but you don’t see the same kind of reaction, visceral reaction. And I don’t know why offshore wind has been, like, vilified at this point into this, national evil thing.

Joel Saxum: It’s the same thing as any other wind project, though.

It’s the, you right now, Phil, are having a fantastic technical conversation with us. The majority of the United States doesn’t give a about the technical side of things they care about, it’s a political argument. It’s the same thing, right? I’m in northern Wisconsin right now and I have regularly have conversations with people about the future of electric vehicles versus internal combustion engines.

And there’s no technical conversation to be had, it’s a political conversation. Ah, get them damn things out of here, blah, blah, blah, blah, blah, it’s this big government agenda and green this, green that, it’s garbage, it’s not, that’s not a technical conversation about why things, a pragmatic look at it.

It’s political. And that’s what the problem is with offshore wind. It’s, has purely political in reason when you have a conversation about it.

Allen Hall: New Jersey returned the 300 million if they have it back to Ørsted. Or the DOE put pressure on the state of New Jersey to, to provide that money back because that’s their only move to heal some of this wound.

If they don’t, I think the other non U. S. players in offshore wind are going to be really scared to dip their toe into the waters there, right? There’s just too much damage being done. You’re going to burn this marketplace for a good five to ten years.

Philip Totaro: Potentially, but two comments on that. One is, if you know anything about New Jersey, they ain’t giving the money back.

Number two, if. If Ørsted signed better contracts in the first place, which is I think, part of what happened with their COO and CFO, the investors were the ones that pressured them to step down. Ultimately, they were given an opportunity to leave without being fired. But at the end of the day, it’s the investors.

If you, if we go back to again the Ørsted investor call from last week, the investors were completely clueless. We just talked about this with Siemens. There was the investor call was basically Ørsted for 20 minutes, basically said a list of like facts. And here’s what’s going on. We’re pulling out of the projects impairments and write downs, et cetera.

They didn’t provide any meaningful road map for okay what comes next? Other than now, we know a week later, they’re canceling projects in Norway that they can’t afford to participate in their, they’re pulling back from all these kind of pioneer frontier markets where they wanted to be. They’re reevaluating South Korea at this point, they’re re evaluating projects in Europe. The only things that seem to be continuing to move forward are obviously operational projects that they’ve already got throughout Europe and Taiwan which is a great market for them, but it’s because they can move forward in those kind of markets where there is certainty.

If governments, and this isn’t just a New Jersey or a New York or a US thing, but if governments aren’t going to provide certainty, we go back to that comment you just made about Siemens also cancelling their factory in Virginia. If you’re not going to provide people certainty, you’re not going to get them to invest.

They need to know that if they’re going to invest a billion dollars today, it’s going to turn into two billion dollars three years from now. Okay? That’s the kind of certainty that they need to be able to plow that kind of money into building a project, setting up a factory, creating jobs.

Joel Saxum: Is Mads Nipper in a hot seat?

Philip Totaro: Yes, but it seems if they wanted to get rid of him, Joel they already would have. The word coming out of Denmark is that the investors are still willing to stick by him at this point. But if this gets any worse then he might not survive it.

Allen Hall: I don’t know if that’s going to be the outcome here, right?

I know there’s, on the behalf of the shareholders, there’s a tendency to keep… The leadership in place, the top leadership in place, because they feel like they’re the best people to undo what has been done, right? When you bring somebody else in it’s going to take them six months to a year to figure out what’s all happened and then to implement whatever change they’re going to do.

Keeping Mads Nipper there is the best way to get out of this hole as quickly as you can. You may do something to him a year from now, but right now I think he stays.

Joel Saxum: Some continuity and someone who knows the organization, knows the people, knows the players. Someone that can, if there’s a roadmap that’s laid out, someone that can drive it.

Allen Hall: Yeah, I think the only thing you may hear over the next couple of months is that they’ve defined a successor and they’re going to bring that person in to be the right hand person from Mad s and off they go. Boy, right now, it seems like the best move is to keep him in place and to get out of this hole.

Otherwise, it could get a lot worse. Vestas returned to profitability in Q3 with revenue growth of 11 percent year over year to 4. 4 billion euros, driven by higher turbine pricing and double digit service growth. So the service business is really successful for Vestas at the moment. Order intake more than doubled to four and a half gigawatts.

Driven by some offshore orders and increased onshore activity in the United States and Europe. The average selling price increased to just a little over a million euros per megawatt so they’re getting, they’re able to ask a little bit more for each turbine. And looking at some of the challenges ahead and where they’re going to be putting their influence. Henrik Andersen, who’s the head of Vestas talked about the different marketplaces and he said, Australia is a great marketplace, US is a great marketplace, and he plans to be traveling there in Q4 to see customers. So that means usually there’s going to be some signings taking place. You don’t send the CEO somewhere without him signing a document.

And Canada is starting to look a little more positive because Canada has been quiet for four or five, six years, at least. And Vestas thought, Oh, there seems to be more activity happening in Canada, and maybe we’ll take a detour up into Canada, whether we’re in the U. S. That’s my interpretation of what was being said there.

There’s some good numbers from Vestas, unlike what’s happening at Siemens. I guess it really has been a good fortune for Vestas just to stay put and keep selling turbines.

Joel Saxum: Swinging back to your comment on them going to Canada, possibly. I do know that a lot of the installations that have been going into Canada have been Siemens turbines.

So if Siemens turbines have been getting installed in Canada, now there’s going to be a little bit of a market gap there. So Vestas, smart to take the tour north while they’re over here in the North America.

Philip Totaro: But in the meantime, they’re, the fact that they’re, everybody’s suffering, let’s put it that way.

Vestas is just suffering less because they’ve got a stable product portfolio that, has been based on, proven technology and an evolution of a proven design. They’ve got gigawatts and gigawatts of orders for all the, preexisting, the two megawatt, three megawatt and four megawatt platforms.

And now with the, six megawatt technology. They’re starting to get it. They don’t have, 10 gigawatts plus of orders, but they’re starting to get some traction. They even actually just recently signed the first formal deal for the seven megawatt platform in Germany.

It’s not a very big project, but it’s it’s a good kickoff. And what they’re, I think, looking forward to in the U. S. is confirmation and firming up of some offshore orders that were pre announced and until, the way Vestas operates, until the order is actually firmed, they don’t formally announce it or formally confirm it publicly.

But Australia is also an interesting market to pay attention to because… They are actually part of a number of projects down there where they are expecting something that could be, 20 to 30 gigawatts worth of orders. Not all at once, but they’ve got the the Asian hub that they’re, I think it’s in Western Australia, I want to say, I wish Rosemary was here to confirm it for us.

But the, there’s a number of projects that they’re involved in down there that are also trying to look at hydrogen production. They’re going to co locate solar with some of these projects, but you, you’re literally talking about. Some of these large, six, seven megawatt turbines with literally thousands, if not close to tens of thousands of units that, that could eventually be installed.

So they’re absolutely taking markets like Australia seriously.

Joel Saxum: One of the things to touch on here too, and they, in their statement, revenue grew by 11 percent year over year, this quarter at 4. 4 billion driven by higher turbine pricing. And this one double digit service growth. I do know that when they’re selling turbines, they’re signing up as many AOM contracts as they call them, AOM 3, 000, 4, 000, 5, 000. Although we did see one not too long ago that was a 30 year agreement, I think it was up in Finland, and that was a Vestas service contract. I think they’re, and what they’re doing a lot, so if you don’t know this model that much, Vestas does have a lot of their own people.

But when they get to a certain point where they can’t basically fulfill all of their service agreements, they will supplement that with ISPs. So that’s good for Vestas to have this service growth, but it’s also good for the whole industry when you’re talking revenue growth and jobs for people, because there is a lot of ISPs that will backfill some of those service positions as well, whether it’s blades or uptower oil changes, this kind of thing, like all of the people that we know out in the industry, a lot of them.

Have nice big MSAs with Vestas and are supporting them through that as well.

Allen Hall: Over at Nordex, they’re having a good year also. Nordex received orders for 365 wind turbines, totaling 2. 2 gigawatts in Q3 from 277 turbines last year. The average selling price, and there’s different ways to measure this, Phil, as you well know, but it roughly is 850, 000 euros per megawatt, which is much less than what Vestas is getting for their turbines.

Orders received from 11 countries. That’s good. A broad market base. The largest markets are in Turkey, Chile, Germany. And Canada of all places, right? So Canada is an active wind turbine market right now, just like Vestas pointed out. So there is some momentum at Nordex and even though the average selling price is less than what Vestas is able to get, Nordex is just entering into different markets Phil?

That’s where the pricing difference comes about is. The price to get in the door in some of these places is a little bit lower.

Philip Totaro: Yeah, absolutely, Allen. So if you look at like China, for instance, the average turbine selling price per megawatt is, something around like 400, 000, a little less than 400, 000 dollars per megawatt.

This is 850, 000 euro per megawatt versus 1 million euro per megawatt that Vestas is talking about. So yes it basically depends on the markets that you’re talking about going into. A couple of things come to mind about Nordex, though. One is the fact that they’re also targeting Canada plays into this whole idea that, if Siemens isn’t going to be fulfilling some of the orders for the, five megawatt platform up there, Nordex has a proven turbine platform, the 149 and the 163 that could that could also step in.

And, so they’re targeting markets where uh, they’re actually getting a fairly good profitability. Again, going back to this a little bit, Turkey is a market where because of the the currency devaluation that you’ve seen over the past few years between the Turkish lira and the Euro, for instance, or the dollar.

I’m not surprised that they’re getting prices that are on average a little lower. The one other comment, however, that I’ll make is based on markets that are actually publishing annual energy production data, we’ve actually at Intelstor have started looking at turbine price versus megawatt hours produced.

Now, this is basically a metric if you’re looking at, I don’t know, an electric vehicle or something else. If you can go a thousand miles on something that costs like 5, 000, is that better than something that costs 5, 000 but it only goes 400 miles? And this is the equivalency there.

Nordex is having to lower their turbine price to basically get an equivalent price per megawatt hour that’s being produced to the bigger companies. GE and Vestas are leading the market in this. With products that are extremely efficient. Nordex has had a little bit of a gap there. And so in order for them to actually make orders, they’ve had to lower their price in a way that also helps compel some of the customers to, to take a Nordex Turbine, which they might not otherwise do.

Joel Saxum: Another thing not to be missed here, we’ve talked about Canada a few times. Canada in their budget 2023 passed their own version of the ITC credits. So there’s a 30 percent tax credit in Canada right now as well. So then there is some, red seal trades to, things to qualify to get, more jobs and things out there.

So they’ve put their own version of some tax credits in play to get them up there. So I would imagine anybody that is, has carte blanche in a business development role or sales role at these OEMs is going to be taking some trips to Canada to sell turbines.

Allen Hall: But isn’t the issue with Nordex the support?

That what I’m hearing from different parts of the world is, yeah, they’re having a hard time on the service side and a lot of self maintaining is taking place because Nordex can’t keep up with all the the turbine problems, which are normal, and this is not anything with the design. It’s just that just the average maintenance on some of these turbines, they just don’t have the people to support it at the moment, which is a drawback, right?

That’s, if you’re going to make a decision between a Nordex turbine and a say, a Vestas turbine, you see the different levels of service and you see the different performance numbers. I guess it forces Nordex into a lower price. It seems like they could rapidly increase their price if they had a little bit better service offerings.

Because that seems to be where all the operators want to be is they want to have a good service contracted by the sheer quantity that Vestas has sold over the last 12 months, it’s indicative of where the market has headed.

Joel Saxum: Me, like I play more in the ISP world. That’s my people.

That’s who I know in the industry. When you talk to them, most all of them here in the U. S. I’m going to speak of, U. S. and North America. They’re chasing towards, I want to get that MSA with Vestas, I want to get that MSA with Siemens, I want to get that MSA with GE. Nobody says, I can’t wait to get that MSA with Nordex.

And that might be, in part in due to the rates they want to pay for help and these different kinds of things, right? But that’s that’s just reality of what’s going on in the marketplace when you’re talking with the colleagues.

Philip Totaro: Although similar to what we talk about with supply chain and kind of volume discounts for certain components, it’s a similar type of effect with service providers.

If the, companies like GE and Vestas have partnerships already with some of the best independent service providers, and they’re locked into this kind of master agreement it could potentially preclude them from providing service to other OEMs. Which may be a deliberate strategy on their part to, to try and lock up the best people and the best companies.

Allen Hall: That’s going to do it for this week’s Uptime Wind Energy podcast. Thanks for listening. Please give us a five star rating on your podcast platform and subscribe in the show notes below to Uptime Tech News, our weekly newsletter. And check out Rosemary’s YouTube channel, Engineering with Rosie. And we’ll see you here next week on the Uptime Wind Energy podcast.

Siemens Energy Receives Financing, Orsted Restructures Management, Vestas and Nordex Report Positive Earnings