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Siemens Energy shares recover as guarantee talks continue

by Jessica Weisman-Pitts
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2023 10 30T082353Z 1 LYNXMPEJ9T07B RTROPTP 4 SIEMENSENERGY GUARANTEES EXPLAINER

Siemens Energy shares recover as guarantee talks continue

By Christoph Steitz and Alexander Hübner

FRANKFURT/MUNICH (Reuters) -Siemens Energy shares rose to the top of Germany’s blue-chip index on Monday on hopes that talks with the government, banks and top shareholder Siemens to help with billions of euros in project-related guarantees will bear fruit.

The world’s largest maker of offshore wind turbines, which also makes gas turbines and power transmission equipment, spooked investors last week when it disclosed the talks, causing its shares to fall to a record low.

Discussions with the government over 15 billion euros ($15.9 billion) in guarantees for performance and warrant bonds – which large industrial firms usually make available to safeguard their projects – continued over the weekend and on Monday.

A spokesperson for the German Economy Ministry said on Monday that “close discussions” with the company were ongoing.

Siemens, which has a 25.1% stake in Siemens Energy following the former division’s spin-off in 2020, is hesitant to agree to a deal for now, two people familiar with the matter told Reuters, while adding it was eventually expected to pitch in.

The impasse has fuelled speculation of a possible capital increase to shore up Siemens Energy’s balance sheet, with sources saying that while there were routine considerations over such a move these were preliminary and no decisions had been made.

Shares in Siemens Energy were up 3.6% at 1521 GMT, after earlier surging as much as 16.7%, while Siemens shares were 1% higher.

The guarantees are normally provided by companies and their banks, but rising interest rates, problems at Siemens Energy’s wind turbine business and a downgrade in its credit rating have made banks warier of committing funds, sources have told Reuters, at a time when the firm’s order book has also surged – meaning it needs to provide more guarantees.

Its supervisory board chair Joe Kaeser, who also previously served as the CEO of Siemens, late on Friday sought to allay market fears, saying that discussions were not around state aid and that Siemens Energy was not in need of equity.

“When shareholders read ‘state aid’, panic is pre-programmed … the company clearly does not need any money from the state,” Kaeser told weekly Welt am Sonntag.

Siemens Energy is seeking government guarantees to help realise its pipeline of large industrial projects, mainly in its former gas and power division, which builds and services gas turbines and manufactures large power converter stations.

Siemens Energy’s order book was a record 109 billion euros at the end of June, 20%-30% of which is in downpayments from clients, which is the share that needs to be backstopped by guarantees, two other people familiar with the matter said on Sunday.

Around half of that, or about 15 billion euros, needs to be covered by the government, banks and Siemens, the sources said.

($1 = 0.9479 euros)

(Additional reporting by Markus Wacket; Editing by Rachel More and Mark Potter)