Siemens Energy bond yields see significant shifts due to uncertainties surrounding the company's financial stability and a need for state guarantees to secure its future projects.
The bond under the spotlight is SIENFI 4.000 04-APR-2026 EUR (XS2601458602), and it has experienced a significant shift in its yield, surging by 86 basis points to 5.9% over the past week. This sudden spike in yield has raised concerns in the financial market.
Siemens Energy AG, a separate entity from Siemens AG, has encountered a series of significant challenges in recent times. The company is currently facing financial and operational difficulties that have garnered attention in the financial world.
Siemens Energy's financial struggles are a central concern. The company has projected a substantial loss of €4.5 billion for fiscal 2024. This forecast has raised doubts about the company's financial stability and resulted in a downgrade of its credit rating by S&P to BBB- with a stable outlook.
A major factor contributing to these financial difficulties is the substantial losses incurred in its wind-turbine unit, particularly the Gamesa division. These losses are a result of quality issues in onshore wind turbine platforms, specifically the 4.X and 5.X models, with estimated repair costs of 1.6 billion euros in fiscal years 2024 and 2025. In the offshore sector, challenges include production delays, supply chain issues, and potential losses from legacy contracts. These issues have led to a 600 million euro charge in the third quarter, compounding Siemens Energy's financial troubles.
In response to its financial challenges, Siemens Energy has entered into discussions with the German government to secure state guarantees, seeking as much as €16 billion ($16.9 billion). These guarantees are crucial for the company to secure funding for future large-scale projects, particularly in its gas and power division.
The severe financial situation and credit rating downgrade have prompted a significant market reaction. Siemens Energy's shares experienced a sharp decline, dropping by 40%. This decline has not only eroded investor confidence but has also had repercussions on the company's bond yields.
The German government's involvement in discussions with Siemens Energy signifies its recognition of the company as a strategic asset in the energy sector. These talks may play a pivotal role in the company's ability to secure support for its future projects and operations.
As part of its efforts to strengthen its balance sheet, Siemens Energy is considering divesting a substantial portion of its stake in its Indian affiliate to its former parent, Siemens AG.
In summary, Siemens Energy is currently grappling with a complex set of challenges, including financial losses, credit rating downgrades, and the need for state guarantees. The company's ability to navigate these difficulties and restore market confidence will be crucial for its future success in the energy sector.
Siemens Energy AG is a German energy technology company specializing in renewable energy solutions, including wind power plants, along with various other products and services related to power generation, transmission, and industrial applications. The company offers a wide range of solutions, from turbines and generators to digital technology and water treatment solutions. An estimated one-sixth of the electricity generated worldwide is based on technologies from Siemens Energy. Siemens Energy employs around 92,000 people worldwide in more than 90 countries and generated revenue of €29 billion in fiscal year 2022.