BERLIN–The German government on Tuesday said it had decided to backstop Siemens Energy with guarantees worth 7.5 billion euros ($8.1 billion) as part of a deal with other stakeholders to help the troubled turbine maker fulfil its order book.
Deepening problems at the company and a subsequent move by S&P to cut the group’s long-term credit rating to BBB-, just one notch above junk, in July had made banks more reluctant to provide guarantees.
Siemens Energy in October disclosed talks with the government, banks and former parent Siemens AG over what sources said were guarantees for project and warranty bonds needed to safeguard the firm’s 109 billion euro order book.
Berlin’s decision to step in reflects its view of Siemens Energy, which makes gas and wind turbines as well as large converter states, as a maker of vital equipment for the country’s transition away from polluting fossil fuels.
The guarantees are part of a package totalling 15 billion euros agreed with private banks and other stakeholders and would also impose a pause on dividends and higher level bonuses, the economy ministry said in a statement.
Private banks were expected to provide Siemens Energy with guarantees worth 12 billion euros while Siemens Energy would seek another 3 billion from other sources, the statement said, adding it was conditional on the final sign-off of all parties.
“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,” Siemens Energy said in a statement.
“We will provide further details at our annual press conference on November 15.”
In a separate statement, Siemens AG said it had been working to find a solution and would share further details at a later stage.
Shares in Siemens AG rose 2.7% at 1517 GMT on the deal while Siemens Energy shares were up 0.3%.
Reuters first reported last week that all stakeholders had reached an agreement in principle to cover the guarantees, helping the group’s shares to recover after news of the discussions pushed the stock to a record low last month.
Siemens AG, which spun off Siemens Energy in 2020, is also expected to provide support by buying most of the 24% stake Siemens Energy owns in Siemens Ltd, an Indian joint venture, sources have told Reuters.
Siemens AG will pay more than 2 billion euros for around 18% of Siemens Ltd, which would bring its own stake in the joint venture to around 70%, the sources said.
Justice Minister Marco Buschmann had defended the deal ahead of the announcement.
“It’s not about the state somehow saving a company without a business model, a broken company,” said Buschmann in an interview with RTL and ntv. Buschmann stressed the deal did not involve subsidies. “It’s not about cash, it’s about guarantees.”
($1 = 0.9240 euros)
(Reporting by Christian Kraemer, Alexander Hübner, Christoph Steitz, Linda Pasquini; Writing by Madeline Chambers and Matthias Williams, editing by Kirsti Knolle and David Evans)
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