(Bloomberg) -- Siemens Energy AG declined after the head of its troubled wind-turbine unit said he couldn’t rule out further potential equipment defects even though the company’s internal review was complete.
“Everything we know of is analyzed,” Gamesa’s Chief Executive Officer Jochen Eickholt said Tuesday in Hamburg during Siemens Energy’s investor day. “Until today we have a limited number of failures. But keep in mind that these are probabilistic assumptions over time. It is not so that I can say I know everything now.”
Eickholt’s comments came as Siemens Energy tried to assuage investors with a more confident message that it was gaining control over the disastrous losses stemming from problems at Gamesa. The Spanish unit plans to cut €400 million ($438 million) in costs by 2026, when Siemens Energy expects it will break even.
Siemens Energy shares fell nearly 12% after Eickholt’s comments. The stock is down roughly 37% this year after hitting lows earlier this month following reports that the government was intervening to help shore up the company’s balance sheet.
Siemens Energy Chief Executive Officer Christian Bruch earlier Tuesday reiterated the core message from the company’s earnings report last week, saying the profitable gas-turbine and power-grid businesses were on track to hit mid-term targets. By 2026, Siemens Energy sees margins of as much as 12% for its gas business and 11% for grid technologies.
But concerns remain that the company will need to raise more capital going forward to compensate for the staggering losses at Gamesa. In question are roughly 2,900 installed onshore turbines of its older 4.X and current generation 5.X platforms that could have flaws.
Gamesa plans to ramp up its offshore production while it fixes the onshore problems. While the company isn’t planning any plant closures currently, it does plan to take efficiency measures at some factories.
The company has had to halt production and sales of the 5.X platform and it’s not yet clear when they’ll resume. Despite it all, Siemens Energy plans to stick it out alongside government assurances wind is a key part of the climate transition.
Next steps will be rolling out corrective and containment measures to repair the onshore product that is set to go on for a couple of years, costing €1.6 billion, and figuring out which markets to focus on to become profitable.
Despite wind’s central role in the energy transition, turbine makers are fighting for survival after soaring raw-materials costs and higher borrowing costs result in project failures and multi-billion dollar writedowns.
There are signs some of the pressure in wind is coming off. Vestas Wind Systems A/S this month announced a big increase in orders and lifted its outlook. At the same time, the reality that getting projects off the ground will cost more and needs more support appears to be getting through with governments in Europe reacting.
At Siemens Energy, things will stay bleak for a while. The company last week warned the problems at Gamesa will lead to another operating loss this fiscal year, despite profit in its other business lines.
It plans some more divestments to reach a total of €3 billion in proceeds, with roughly €2.6 billion already accounted for by the sale of a stake in an Indian joint venture and a high-voltage components unit.
(Updates with Gamesa plans beginning in first paragraph.)
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