Chief Executive Officer Christian Bruch faced the ire of Siemens Energy shareholders looking for answers in their first opportunity to directly question the CEO since quality problems at the company’s Gamesa wind-turbine unit spiraled into record losses.
“Siemens Energy’s share price moves were a roller-coaster ride in which many shareholders were thrown off the curve,” Daniela Bergdolt, an executive at Germany’s DSW investor lobby group, said Monday at Siemens Energy’s annual general meeting. “The management board needs to rebuild trust with shareholders and is now on probation in our view.”
For Bruch, the good news was that the company’s share price has doubled since hitting a record low in October, thanks to a €15 billion ($16.2 billion) government-led package to shore up the company’s finances, followed by strong sales in its gas-services and power-grid businesses. The bad news, however, was that Bruch still couldn’t deliver much more clarity about Gamesa’s turnaround progress, only reiterating that fixing the problems will take years.
“The losses we incurred in our wind business and the underlying problems are unacceptable,” Bruch said in a speech. “We will not tolerate them. But we will not run away from them, either.”
Hendrik Schmidt, a corporate governance expert from Deutsche Bank AG’s DWS investment unit, said the quality flaws in Gamesa’s turbines “leaves us with doubts” about the due diligence before Siemens Energy’s (ENR:Xetra) full takeover of Gamesa last year.
Bruch on Monday reiterated comments that if the Spanish unit can’t meet midterm profit targets, then Siemens Energy is “not the right owner” for the troubled onshore wind business. Siemens Energy has said the wind unit should break even by 2026.
While those comments signal to shareholders that he’s holding Gamesa to account, it’s unclear whether a divestment is likely — or even possible — given the depth of issues, including an ongoing production suspension of its 4X and 5X onshore platforms as well as maintenance and repair responsibilities for turbines that were already installed.
Apart from the faulty onshore turbines, Bruch is having to navigate more expensive raw materials, higher borrowing costs, supply-chain issues and regulatory roadblocks in the US that have weighed on the wind industry more broadly. Danish wind-power company Orsted A/S is pausing dividend payments until at least 2025 and recently slashed its target for green power project construction.
Bruch said earlier this month that orders for offshore turbines are currently lower than originally anticipated, but he signaled some optimism in the medium term.
Two institutional investors, Deka Investment and Union Investment, said that they would vote against the supervisory board in a ballot measure evaluating the body’s performance last year.
“Siemens Energy is still not able to offer a competitive product in the crucial onshore market,” Deka’s head of corporate governance, Ingo Speich, said at the meeting. “If they don’t get the poor product quality under control, the share price will remain capped regardless of how well the other business areas perform.”
Deka Investment holds about 0.6% in Siemens Energy, and Union Investment’s share is about 0.1%. While they are likely to be overruled in the supervisory board vote, their stance shows that Bruch still has work ahead to win back shareholder confidence.
“No other company in the wind business has as massive problems as Siemens Gamesa,” Union portfolio manager Arne Rautenberg said at the meeting. “These problems were either not seen in their full extent or sugarcoated.”
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