Titled: Siemens Energy Secures Major Support from State and Banks
Insiders reveal that a solution has emerged during the protracted negotiations around guarantees worth billions for energy tech giant Siemens Energy. Three sources privy to the plans reveal that banks will provide 12 billion euros, with the German government promising to cover a maximum of 7.5 billion euros, should the need arise.
The news follows Siemens AG's agreement to buy an 18% stake in a joint Indian subsidiary from Siemens Energy for over 2 billion euros, thereby bolstering the Munich-based company's financial position. One insider comments that this move allows others to supply the guarantees required.
Initially, there had been plans to involve the banks and the federal government equally in providing the first ten billion euros in guarantees, with Siemens AG contributing the remaining five billion. However, as of now, the precise details regarding the source of the remaining three billion euros remain unclear.
Siemens Energy sought state support due to the banks' reluctance to bear the risks associated with major projects worth over a hundred billion euros since the company's credit rating had deteriorated. The company argued that their foreign competitors received similar state support, according to sources. However, Siemens AG has been hesitant to become involved once again in this area following the separation of their energy tech business three years ago.
Earlier, Siemens Energy had reduced the guarantees for energy projects from joint times to a seven-billion-euro cap. Now they support the former subsidiary indirectly while also benefiting financially. For example, they plan to increase their stake in the Indian joint venture from 51% to 69%, and they will defer annual brand rights usage fees worth 250 million euros in exchange for interest.
The Federal Ministry of Economics was reportedly involved in negotiations to provide up to 7.5 billion euros in state guarantees for Siemens Energy, given its challenges in securing financing due to its financial instability. Despite its deteriorating creditworthiness, Siemens Energy's financial position appears to be relatively robust, with substantial revenue, profit, and liquidity growth.
Source:
Insight: During their first-quarter earnings call for FY2025, Siemens Energy showcased a strong financial foundation with substantial revenue and profit growth, a significant improvement in free cash flow, a return of bond yield spreads to 2022 levels, and a credit rating upgrade. However, the details surrounding the €15 billion euros in guarantees mentioned in news reports were not explicitly discussed at the call.
