The German government is putting €7.5 billion ($8 billion) of taxpayer cash on the table to secure the rescue of troubled wind turbine-maker Siemens Energy, a company of vital importance to the country’s energy transition.
The sum is part of a €15 billion ($16.3 billion) package of guarantees, with the remainder provided by private banks and other stakeholders, Germany’s ministry for economic affairs and climate protection said in a statement Tuesday.
The package is contingent on Siemens Energy pausing dividend payments to shareholders and bonuses for company board members, and the government will only provide its guarantee if all other stakeholders honor their commitments, according to the statement.
The bailout underscores the financial difficulties facing countries as they shift away from fossil fuels, as well as the importance Berlin places on Siemens Energy — a spin-off firm of iconic German electronics-maker Siemens — in facilitating that transition. Siemens holds a majority 32% stake in the wind turbine maker.
The deal to “secure the company” has been in the works for several weeks, the ministry said, noting that the federal government had been “in intensive contact” with Siemens Energy, Siemens and private lenders.
The firm, which had revenue of about €29 billion ($32 billion) in its last fiscal year, also makes gas-powered turbines and electrolyzers for hydrogen energy production, among a raft of other products. Its technologies underpin an estimated one-sixth of the electricity generated globally, and it employs 94,000 people in more than 90 countries.
It needs the financial guarantees to deliver on its €110 billion ($119 billion) pipeline of orders, according to the ministry.
“We are pleased with the German government’s clear support for Siemens Energy and the commitment to the rapid implementation of projects to make the energy transition a success,” a spokesperson for Siemens Energy told CNN.
The company, which is involved in both conventional and renewable energy, has faced a series of problems in the manufacture of some of its wind turbine models this year, and said in August that it expected to post a €4.5 billion ($4.9 billion) loss for the current financial year.
Shares in the company plummeted almost 40% late last month after it announced that it was seeking a government bailout, Reuters reported. The firm’s stock closed 3% higher Tuesday following news of the support package.
The ministry described Siemens Energy as “highly relevant to the entire value chain of the provision of energy systems” and “an important employer in the industries of the future.”
Germany, Europe’s biggest economy, has faced an uphill — and expensive — battle to replace Russia as its main supplier of natural gas since Moscow launched its full-scale invasion of Ukraine in February last year.
Finding cheaper, cleaner sources of energy is of vital importance to German manufacturers, which have struggled to shoulder the exorbitant cost of gas over the past two years. A weak Chinese economy and painful interest rate hikes have also weighed on the sector.
German manufacturers are shedding jobs at the fastest rate in three years, as new orders decline and confidence remains “deeply negative,” according to survey data for October.
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