By Nina Chestney and Christoph Steitz
LONDON (Reuters) – Siemens Energy had more than a third of its market value wiped out on Friday after warning that the impact of quality problems at its Siemens Gamesa wind turbine business could cost more than 1 billion euros ($1.09 billion) and take years to fix.
Below outlines what Siemens Gamesa does and why it matters.
WHAT DOES SIEMENS GAMESA DO?
Siemens Gamesa is a global company based in Spain which manufactures onshore and offshore turbines for the wind industry and offers services to wind power developers globally, with key markets including Europe and the Americas.
The company has provided more than 132 gigawatts (GW) of wind turbines as of the end of April this year to all global regions: 108 GW of onshore wind and 22 GW of offshore wind.
It generates revenue of 9.8 billion euros a year and has an order backlog worth 34.6 billion euros.
WHAT IS THE PROBLEM WITH ITS TURBINES?
The discovery of faulty components at Siemens Gamesa’s onshore wind turbines had already caused a charge of nearly half a billion euros in January.
The issues, the latest in a long line of operational problems, prompted Siemens Energy to take full control of the business earlier this month after only partially owning it for several years.
On Friday, Siemens Gamesa said that while rotor blades and bearings were partly to blame for the turbine problems, it could not be ruled out that design issues also played a role.
It said the problems could affect as many as 15-30% of its turbine fleet.
The company said quality problems “go beyond what we were previously aware of, and they are directly linked to selected components and a few, but important, suppliers”.
WHO DOES SIEMENS GAMESA SUPPLY WITH TURBINES?
Siemens Gamesa has provided wind turbines to some of the biggest power companies and oil and gas majors worldwide.
In March, it announced an order from Scottish Power Renewables in Britain to supply 95 turbines to the East Anglia 3 wind power project in the North Sea, with a total capacity of 1.4 GW.
This would be enough to power 1.3 million UK homes.
In May, it signed contracts with Spain’s Repsol for the supply of 40 onshore wind turbines which would provide power to around 160,000 homes in Spain.
It has also agreed to tie up with Poland’s PGE Group and Denmark’s Orsted to supply 107 wind turbines for the Baltica 2 offshore wind project in the Baltic Sea.
WHAT IS THE IMPACT?
Siemens Energy’s share price plunge on Friday was the biggest since the group was spun off from Siemens AG and separately listed in 2020.
Shares in European wind turbine producers Nordex and Vestas also fell as confidence in the industry was shaken.
The issues add to woes already felt among many manufacturers which have faced rising costs for raw materials and competition.
Governments across the world are setting even more ambitious climate targets which require the rapid development of renewables, including wind power, which might be difficult to attain within the prescribed timelines.
Many wind power developers have already seen delays in projects due to the availability of components and rising costs.
WHAT IS SIEMEMS GAMESA DOING ABOUT THE AFFECTED TURBINES?
Siemens Gamesa said it has launched a technical review of the installed onshore fleet and product designs, and that Thurday’s announcement includes problems uncovered so far.
The review also includes the role of Siemens Gamesa’s suppliers and whether they can be made accountable for the quality issues.
The company is now evaluating measures to fix the problems and figure out the associated costs.
The company said that it would be able to provide a more accurate estimate of the costs from the problems when it publishes its third-quarter results on Aug. 7, after a full analysis of the situation.
(Reporting by Nina Chestney and Christoph Steitz; Editing by Susan Fenton)
