Siemens Energy CEO Christian Bruch said that “too much had been swept under the carpet” concerning Siemens Gamesa.
Shares of Siemens Energy declined 35% earlier today as the company discarded its profit prediction and mentioned lasting wind turbine issues. Following a review of concerns at its subsidiary Siemens Gamesa, the company announced its findings of a “substantial increase in failure rates of wind turbine components”. However, its shares plunged as the market reacts to the unpleasant update.
Siemens Energy Wind Turbine Issues Linger
The Thursday report shows that the Siemens Gamesa board has started an “extended technical review” to upscale product quality. Meanwhile, the parent company noted that the review cost is now “significantly higher” than earlier predicted. The current estimation is over 1 billion euros, also $1.09 billion. As for Siemens Energy, it is currently impossible to have a precise estimate of the incoming financial impacts of the quality subjects considering the issues. It is also too early to calculate the result of the review of its assumption on its business plans. Speaking on the wind turbine issues, Siemens Energy noted:
“However, based on our initial assessment as of today, the potential magnitude of the impact leads us to withdraw the profit assumptions for Siemens Gamesa and consequently the profit guidance for Siemens Energy Group for fiscal year 2023.”
According to Reuters, Siemens Energy CEO Christian Bruch said that “too much had been swept under the carpet” concerning Siemens Gamesa. The chief executive added that the quality issues at the company were more than he envisaged. As for the senior research analyst at Alliance Bernstein, although Siemens Energy can recover from its fall, the market is utterly shocked by the recent developments. He explained:
“There’s a 17 billion euros service order book and that is delivering service on installed wind farms and in wind turbines for quite a number of years ahead – five years ahead, sometimes 10-year contracts – and to discover that a handful of your components aren’t working as you planned, that maybe you’ll need to go in and replace those components, that is a very large liability that you’re taking on.”
Additionally, Green questioned Siemens Energy’s estimate of its component failures. The company said the component failures may occur in between 15% and 30% of its installed fleet of turbines. On the other hand, the research analyst said there is still a “slight question mark about where that liability ends”.
Fingers are crossed in expectation of another update come August. Green stated that the company may have precise estimates by then. He noted that Siemens Energy may have handled the issues at its subsidiary – Siemens Gamesa. He concluded that “certainly it is an alarmingly large hit and it’s taken the market by surprise.”