Siemens Energy Shares Recover Further as Guarantee Talks Continue

Credit: Timon/AdobeStock
Credit: Timon/AdobeStock

Shares in Siemens Energy continued their recovery on Monday, topping Germany's blue-chip index as concerns over the group's ability to post guarantees for big industrial projects eased.

Shares in the company, the world's largest maker offshore wind turbines as well as a producer of gas turbines and power transmission equipment, were up 5.2 at 1135 GMT, off earlier gains of as much as 16.7%. Siemens, which owns a 25.1% stake in Siemens Energy, was up 1.6%.

Talks 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.

On Monday, a spokesperson for the German Economy Ministry said "close discussions" with the company were ongoing.

News of the talks pushed Siemens Energy's shares to a record low last week on concerns the issue around guarantees could have an impact on the group's balance sheet.

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 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)

(Reuters - Reporting by Christoph Steitz and Markus Wacket; Editing by Rachel More and Mark Potter)

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