Siemens Energy AG is considering selling a substantial part of its 24% stake in a listed Indian affiliate to former parent Siemens AG as part of efforts to shore up its balance sheet, according to people familiar with the matter.
The German turbine maker may announce the divestment of shares in Mumbai-listed Siemens Ltd. as early as this week, some of the people said, asking not to be identified because the information is private. The entire holding is worth about €3.3 billion ($3.5 billion) based on Monday’s closing price, equivalent to around half of Siemens Energy’s market value.
Siemens AG already owns 51% of the Indian business. Shares of the Mumbai-listed affiliate fell as much as 5.4% in Tuesday trading, hitting the lowest level in more than six months. Siemens Energy was down 2.1% at 9:25 a.m. in Frankfurt, giving it a market capitalization of €6.6 billion.
At the same time, Siemens is facing pressure from the government to provide loan guarantees that are critical for Siemens Energy to take on future large projects. The government is now discussing a combination of state-backed guarantees for Siemens Energy flanked by guarantees from Siemens, its largest shareholder, as well as some banks, according to people familiar with the matter.
Last week, Siemens Energy confirmed it’s in talks with the government about loan guarantees. It’s been seeking backing worth as much as €16 billion for future projects after Siemens indicated it was no longer willing to help, Bloomberg News has reported.
The guarantees provided by Siemens could cover several billion euros for future projects if the Munich-based technology giant agrees to a deal despite its previously announced intention to reduce ties with the division it spun off three years ago, the people said.
The government is ready in principle to commit as much as €8 billion in guarantees but expects Siemens and banks to cover the rest, according to the people.
Deliberations are ongoing, and details of the proposals could still change. Spokespeople for Siemens Energy and Siemens declined to comment.
A spokesperson for the Economy Ministry said “the government is in close talks with the company” that are ongoing, declining to provide further details.
Siemens Energy supervisory board chairman Joe Kaeser has pushed back against speculation the company might seek money from the state and sought to clarify the talks are limited to financial guarantees for future projects. Following the comments, shares climbed as much as 17%, the steepest intraday gain since Siemens Energy started trading more than three years ago.
Siemens Energy needs the guarantees to win new large-scale contracts to build transmission networks and gas turbines. While those units are profitable, they’re now threatened by the strain that the string of losses from the Spanish Gamesa wind unit is putting on the company’s balance sheet.
Financial support has become crucial after Siemens Energy earlier this year forecast a €4.5 billion loss for fiscal 2024 despite assurances it had finally come up with a plan to address problems with certain wind turbines at the division. S&P in July downgraded it to BBB- with a stable outlook from BBB with a negative outlook.
(Updates with latest share movement in third paragraph.)
Author: Eyk Henning, Dinesh Nair, Kamil Kowalcze and Wilfried Eckl-Dorna
