On Friday, Siemens Energy suffered a substantial decline in market value, losing approximately one-third of its worth. The decline directly resulted from the company’s cautionary statement, revealing the substantial financial impact stemming from quality problems in Siemens Gamesa’s wind turbine business.
The estimated cost to rectify these problems exceeds 1 billion euros ($1.09 billion), and the resolution process is expected to extend over several years.
What happened?
Siemens Energy AG, through its subsidiary Siemens Gamesa Renewable Energy SA, reported the discovery of major “quality problems” across its onshore wind turbine fleets.
Apparently, the company detected the said problems after conducting a thorough review of its “failure rates of wind turbine components.’
“The result of the current review will be much worse than even I would have thought possible.
The quality problems go well beyond what had been known hitherto, in particular in onshore.
We are tackling the topic but it is time consuming and it comes at a cost.
Even though it should be clear to everyone, I would like to emphasise again how bitter this is for all of us.”
Siemens Gamesa CEO Jochen Eickholt told the media today
Siemens Gamesa’s Spanish division found that its onshore wind turbines exhibited quality flaws beyond initial expectations. The company now faces the task of addressing problems with rotor blades, bearings, and component failures, including small cracks. Though specifics regarding the “legacy turbines” were not disclosed, their resolution is also on the agenda.
Potential impact of the quality issues
The scale of the problem is formidable, with Reuters reporting that Siemens Gamesa is facing issues that affect approximately 15-30% of the global wind turbine capacity, amounting to more than 132 gigawatts. Notably, this substantial figure is equivalent to the power generated by approximately 132 nuclear plants.
In response, the German-Spanish wind turbine powerhouse has taken the responsible step of revising its annual profit guidance. It acknowledged the potential need for additional investments surpassing $1.1 billion to rectify the situation. Consequently, Siemens Energy shares experienced a substantial decline of 37% in Frankfurt.
Nonetheless, Siemens Energy CEO Christian Bruch expressed his determination to utilize the company’s future full ownership of Siemens Gamesa to address these challenges and ensure its reliable contribution to Siemens Energy’s results.
See Also:
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While financial implications are significant, the focus should be on the implications for clean energy development. The world heavily relies on Siemens Gamesa’s wind turbines, and any disruption to the supply chain could have severe consequences.
Government and private wind projects globally have committed to utilizing Siemens Gamesa turbines, making this setback a significant hurdle.
Siemens Gamesa’s wind achievements have been notable, and this news is disappointing. Swift resolution and recovery are essential to meet the overwhelming demand for wind energy and advance the clean energy transition.
