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Wednesday, June 7, 2023

Siemens Energy warns on wind prices forward of Gamesa acquisition

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A surge in uncooked materials prices is threatening hopes that wind vitality will keep a less expensive various to energy generated by fossil fuels, the top of Siemens Energy has warned.

Renewable vitality would “get more expensive and must reflect the volatility in the market”, mentioned Christian Bruch, stressing predictions that the worth of wind vitality would preserve falling predated the availability chain disaster gripping the business.

“If oil stays at $100 [a barrel], then OK, I think it gives you enough headroom,” mentioned Bruch. “But don’t forget the assumption two years ago . . . was that offshore wind in 2030 will probably be half the price compared to 2021 or 2020,” he added.

“That is a logic which doesn’t prevail if your material costs double.”

Wind costs have been climbing since 2019 as provide chain disruptions and better uncooked materials prices shake up the sector.

The gloomier outlook from Bruch got here as Siemens Energy introduced on Saturday its long-expected €4bn provide to purchase the remaining 33 per cent of Siemens Gamesa, the world’s largest offshore wind turbine maker.

Shares of Siemens Gamesa, which has been affected by successive revenue warnings, climbed 6 per cent to €17.79 on Monday, simply shy of the €18.05 provided by Siemens Energy.

Like opponents reminiscent of Vestas and Nordex, Siemens Gamesa has suffered from sharp will increase in the price of metal, copper and uncommon earths utilized in generators, which it’s usually unable to go on to clients due to long-term contracts signed when commodity costs have been cheaper.

Siemens Gamesa has additionally cycled by chief executives because it grappled with operational issues, reminiscent of delays to the manufacture and set up of its new 5x onshore platforms, forcing Siemens Energy to put in writing down the worth of its stake by about €800mn

Acquiring the remainder of Gamesa would give Siemens Energy extra management over the struggling firm, mentioned Bruch, however cautioned that it might take till the center of the last decade for the turbine maker to ship constant earnings.

The wind vitality market was “in dire straits at the moment”, he mentioned, predicting that “we might see some consolidation further in the industry”.

The IEA warned this month that the rollout of wind and photo voltaic was “set to lose momentum next year” after rising quickly, citing provide chain and logistics challenges as a constraint on the business.

However, in the long term, Bruch emphasised that “there is no solution without wind”.

“The question is whether it will double until 2030 or will it quadruple until 2030,” he mentioned, however warned that the wind sector wanted “to find a business model which reflects on the one hand the supply chain volatility, and on the other hand allows companies like ours . . . to earn enough money to also invest in research and development”, for greater generators.

That would necessitate Gamesa clients sharing extra threat, Bruch mentioned.

Siemens Energy’s provide to Gamesa shareholders represents roughly an 8 per cent premium on the Madrid-listed group’s closing worth on Friday final week. Siemens Energy would delist Gamesa if the acquisition — absolutely underwritten by Bank of America and JPMorgan Chase — was profitable, the corporate mentioned.

Siemens Energy will finance as much as €2.5bn of the transaction with fairness, and the rest with a mix of debt and money. It hopes to shut the transaction within the second half of the 12 months.

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