Siemens Energy weighs new turbine design after billions lost

The shock prediction dealt a major setback to turnaround efforts for its Spanish onshore wind unit that’s been loss-making for years.

Siemens Energy AG is considering designing a new turbine to replace a system responsible for billions of euros in losses as one option to shore up its beleaguered wind energy business, people familiar with the matter said.

The new equipment could be ready in about two years, the people said, declining to be named discussing internal deliberations. At the same time, the company’s struggling Gamesa unit is focusing on salvaging the 5.X, its latest turbine, with a pivot to a new model implying a costly absence from the market, the people said.

Munich-based Siemens Energy is struggling to get on top of what has turned into one of Germany’s biggest industrial debacles. In August, the company said mounting issues with malfunctioning turbines and unprofitable contracts are set to push the company to a €4.5 billion ($4.8 billion) net loss this year. The shock prediction dealt a major setback to turnaround efforts for its Spanish onshore wind unit that’s been loss-making for years.

A spokesperson for Siemens Energy declined to comment on plans for new turbine designs when contacted by Bloomberg News.

As part of a wide-ranging review, Siemens Energy is also weighing factory and sales offices closures to cut costs, Reuters reported earlier this month. The company declined to comment. Gamesa currently employs about 26,000 people, of which 4,600 are in Spain across nine plants in the country making parts like gearbox units and electrical components such as generators and converters.

The problems at Gamesa center on the rushed development of the 5.X wind turbine, which has proven prone to breaking down because a main piece on the frame of the component can move or twist over time, potentially damaging other critical components. The wind business, like the rest of the industry, is also weighed down by unprofitable contracts because of ballooning raw material costs and tough competition.

Siemens Energy remains in the process of working out the extent of necessary repairs and has stopped taking orders for the 5.X, one person said. The company is due to update investors on its plans on Nov. 15, though final findings on fixes may take until the end of the year to be ready, the person said.

The deliberations on the future of the business are the culmination of years of mismanagement leading to a revolving door of leaders unable to overcome deep-seated cultural issues.

Siemens AG, which still holds a 25.1% stake in Siemens Energy after hiving off the business in 2020, merged its long-standing offshore Siemens Wind Power unit with Gamesa in 2017, creating the world’s biggest wind-turbine maker measured by installations at the time.

But the new company was troubled from the start as corporate cultures clashed. Profit margins rapidly shrank as the competition raced to cut prices. After a string of profit warnings and mounting losses, Siemens Energy last year moved to fully control Gamesa with a roughly €4 billion offer to accelerate measures to fix the business. The efforts have so far fallen short.