Siemens Energy AG: Problems with our wind turbines are more serious than we thought

Shares in Siemens Energy AG plunged by around 40% at the end of last week after it emerged that problems at its subsidiary Siemens Gamesa, a manufacturer and supplier of wind turbines, were more serious than previously thought. According to Siemens' revised estimate, quality issues with the turbines could cost more than EUR 1 billion to fix, and resolving them will take several years.

Repair costs could exceed EUR 1 billion

Siemens Gamesa is one of the world's leading manufacturers and suppliers of wind turbines. The company focuses primarily on the EU and US markets and has supplied wind farms with a total installed capacity of more than 130 GW.

Of this, 108 GW of onshore wind farms and 22 GW of offshore wind farms have been installed. For comparison, as of 31 December 2022, the installed capacity of power plants in Czechia was 20.73 GW, of which the Temelín and Dukovany nuclear power plants had a combined installed capacity of 4.29 GW.

“It is disappointing and a bitter pill to swallow,” said Jochen Eickholt, CEO of Siemens Gamesa. “The quality issues go far beyond what we were aware of, especially in the onshore sector.”

Company representatives said on Friday that while some of the turbines' quality issues could be attributed to individual components (such as blades or bearings) or suppliers, a flaw in the wind turbines' design itself that caused the technical problems could not yet be ruled out.

“Far too much [at Siemens Gamesa] was swept under the rug,” said Christian Bruch, CEO of Siemens Energy AG. He described the quality issues as “more serious than he could have imagined.”

Siemens Gamesa is not the only manufacturer facing similar problems. Manufacturers' drive to develop ever larger and more powerful wind turbines, alongside innovation in the US and Europe, is leading to increasingly frequent failures at these facilities.

Other projects are also at risk

According to Reuters, Gamesa's revenue last year was EUR 9.8 billion and its order backlog stands at EUR 34.6 billion. Given the prevailing uncertainty over the cause of the technical problems, this is causing considerable concern among financial analysts.

Earlier this month, Siemens Energy took full control of Siemens Gamesa, and a more detailed technical assessment of its existing onshore wind farm portfolio has also been launched to provide a clearer estimate of the expected repair costs.

The technical assessment will also seek to identify the responsibility of individual suppliers for the current condition of the turbines and determine any potential consequences. Company representatives are expected to provide further information on 7 August, when they present their quarterly results.