EditorialEnergy sector

The state has to help

State guarantees for Siemens Energy are questionable from a regulatory point of view. In this case, however, the federal government must still provide assistance.

The state has to help

Siemens Energy is calling upon the federal government, and preferably, one would like to provide a clear economic policy response. State aid? Absolutely out of the question. Otherwise, taxpayers' money would be thrown down the drain to benefit shareholders. Moreover, wind turbines can be purchased on other continents. And if the government unequivocally says no, the banks might reconsider their refusal to take on more extensive risks. The bottom line: From the financial crisis to pandemic response, a full-coverage mentality has become entrenched, and it should not be further encouraged in yet another case. Period.

Really? Everything sounds correct and intellectually understandable. It gives you the satisfying feeling of upholding the banner of righteousness. But unfortunately, the pure doctrine does not fit in this case.

Too big to fail

Firstly, Siemens Energy is a giant in the industry. While we have certainly had bad experiences with "too big to fail," the decision to keep production and jobs in a large manufacturing company in Europe holds intrinsic value. Siemens Energy employs more than 90,000 people worldwide, including over 5,000 in research and development.

Secondly, semi-state actors are significant energy customers. They purchase wind farms or gas power plants. Therefore, it is in the government's interest to support a key player in the market to maintain high competitive pressure.

In the long term, the industry will be booming

This leads directly to the third point: The renewable energy sector may currently be in a catastrophic state. Wind project developers like Orsted are canceling mega-projects, and even Chinese providers report nearly obliterated profits. However, in the medium to long term, there can be no doubt: the industry will boom. Additionally, Siemens Energy stands to benefit from the European Commission's plans to give more weight to the local value creation of wind turbine manufacturers in tenders. This, in turn, improves profit potentials. So, the money is well invested from a long-term perspective. Unlike banks, the government can afford this viewpoint beyond the annual balance sheet.

This – in the fourth place – would still not be reason enough to release government guarantees without rhyme or reason. But it can't be emphasized enough: This is not about financial injections, but solely guarantees. Siemens Energy must pay a fee for them, just as it would with any bank. More importantly, the default rates of such guarantees are historically minimal.

Climate transition only possible with wind power

The last point: Anyone who wants to achieve the climate transition cannot bypass wind power. This transformation is not only a central task for the economy but also for society, making it right to deviate from the pure doctrine in view of the low risk of default.

This does not mean that the government can be generous. It is absolutely correct that the federal government is involving Siemens AG. The former sole owner is resisting with all its might. However, Siemens AG also released its Energy subsidiary into independence because the margins did not meet its own expectations, and the industry upheaval posed too many risks. Because the corporation still holds around 25% of the shares and because the groundwork for the current operational problems of the wind energy company Siemens Gamesa was laid during the times of sole ownership, it company has a certain duty here.

It is good that Siemens AG wants to purchase part of the package of the Indian Siemens Ltd. from Energy. This way, fresh capital will flow into the company, which cannot currently be obtained through the stock market due to the low share price. The challenges of this transaction are enormous; for example, there are tax aspects to consider. Whether exchanging the asset for money is sufficient from the government's point of view without participating in the guarantees is highly questionable, if only for reasons of appearance.