Siemens Energy Stock Loses 35% as Review of Issues at Subsidiary Shows Wind Turbine Problems Could Last for Years
“A lot of things have been covered up” regarding Siemens Gamesa, said Christian Bruch, CEO of Siemens Energy.
Shares of Siemens Energy fell 35% earlier today as the company dropped its earnings forecast and mentioned perpetual wind turbine issues. After reviewing concerns at its subsidiary Siemens Gamesa, the company announced its findings of a “significant increase in failure rates of wind turbine components”. However, its shares fell as the market responded to the unpleasant update.
Siemens wind turbine issues linger
Thursday’s report shows that Siemens Gamesa’s board of directors has initiated an “extensive technical review” to raise product quality. Meanwhile, the parent company noted that the cost of the revision is now “significantly higher” than expected earlier. The current estimate is more than 1 billion euros, as well as $1.09 billion. As for Siemens Energy, it is currently impossible to obtain an accurate estimate of the upcoming financial impacts of quality issues given the issues. It is also too early to calculate the outcome of revising its assumptions in its business plans. Speaking of wind turbine issues, Siemens Energy male:
“However, based on our preliminary assessment as of today, the potential magnitude of the impact leads us to withdraw the profit assumptions for Siemens Gamesa and therefore the earnings guidance for Siemens Energy Group for fiscal year 2023.”
According to Reuters, Christian Broch, CEO of Siemens Energy, said that “a lot of things have been kept secret” regarding Siemens Gamesa. The CEO added that there were more quality issues in the company than he had imagined. For Alliance Bernstein senior research analyst, although Siemens Energy can recover from its fall, the market has been completely shocked by the latest developments. It is to explain:
“There’s a €17 billion service order book, servicing on installed wind farms and on wind turbines for quite a few years ahead – the next five years, sometimes 10-year contracts – and only to find out that a handful of your components no longer work as you planned.” You’ll probably need to go in and replace those components, that’s a very big responsibility to have.”
In addition, Green questioned Siemens Energy’s assessment of its component failures. The company said component failures could occur in between 15% and 30% of its fleet of installed turbines. On the other hand, the research analyst said there was still “a slight question mark as to where this responsibility ends”.
Fingers crossed waiting for another update coming in August. Green mentioned that the company may have an accurate estimate by then. He noted that Siemens Energy may have dealt with the problems in its subsidiary – Siemens Gamesa. “It sure is an alarmingly big hit and has caught the market by surprise,” he concluded.
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Ibukun is a crypto/financial writer interested in passing on relevant information, using uncomplicated words to reach all types of audiences. Apart from writing, she loves watching movies, cooking, and exploring restaurants in the city of Lagos where she is staying.
