Siemens Energy shares plunged nearly 40% on Thursday, wiping 3 billion euros ($3.16 billion) off its market value, after the group said it was in talks with the German government about state guarantees following big setbacks at its wind unit.
A spokesperson for the German economy ministry also confirmed the talks, describing them as "close and trustworthy".
Siemens Energy shares slid to all-time lows on the news, implying a 3.3 billion euro loss in market value to 5.3 billion euros since Wednesday, and were down more than 32% at 7.20 euros by 1359 GMT.
Quality problems emerged this year at the power engineering company's wind unit Siemens Gamesa centred on rotor blades and gears in newer onshore wind turbines, drawing the ire of top shareholder and former parent Siemens AG.
Siemens Gamesa has booked billions in related losses.
As a result, Siemens Energy fears it will struggle to secure guarantees from banks, and has approached the government and Siemens to obtain a guarantee framework, business news weekly WirtschaftsWoche said.
The weekly, which first reported the talks along with Spiegel magazine, said Siemens Energy is seeking up to 15 billion euros in guarantees.
The German state would assume liability for 80% of an initial 10 billion euro funding tranche, while banks would be liable for the remaining 20%, WirtschaftsWoche said.
A spokesperson for Siemens AG, which according to the report was being asked to guarantee a second tranche of the remaining 5 billion euros, said that the company was awaiting more details.
"Siemens is now in close and continuous talks with all parties involved," the spokesperson added. Siemens remains an anchor investor in Siemens Energy, retaining a 25.1% stake.
In a statement confirming the talks, Siemens Energy said this year's financial results are expected to be fully in line with previous guidance, and that Siemens Gamesa is working through its quality issues.
Siemens Energy is scheduled to release annual results on Nov. 15 and to hold a capital markets day on Nov. 21, its website showed.
It did not comment on the financial details of a targeted package. Siemens Energy's budgeting process is still ongoing and no decisions on the 2024 annual budget or any specific financing measures have yet been taken by the executive board, it said.
Government sources in Berlin declined to comment on the size of a possible package. The government was ready to help Siemens Energy, and stakeholders will also have to play their role, they said.
Germany's Economy Ministry on Tuesday pledged to support industry as it moves towards a low-carbon economy, and the European Commission has also released an action plan for Europe's wind industry.
The Free Democrats, junior partner in the German government coalition, criticised the prospect of state aid.
"The German state cannot give guarantees for companies on a weekly basis. That is the responsibility of the owners," Michael Kruse, energy policy spokesperson for the party's parliamentary group, told newspaper Die Welt.
In August, Siemens Energy said the problems at Gamesa would be the main factor inflating its year-on-year loss six-fold in 2023 to 4.5 billion euros.
Spiegel magazine cited sources close to the company as saying the losses might turn out to be higher.
Top managers at Siemens Gamesa, the world's largest maker of offshore wind turbines, have been replaced without resulting improvements in profitability.
JPMorgan said in a note that the energy transition will require substantially higher rates of investments, which will bring commercial opportunities for Siemens Energy and sector peers.
Lending guarantees given as an insurance to customers needed to rise accordingly, a development JPMorgan sees also applying to Vestas Prysmian, Nexans, and NKT.
The possibility of a capital increase has also risen, it said.
($1 = 0.9493 euros)
Siemens Energy shares https://tmsnrt.rs/3Qyna18
(Reuters - Reporting by Matthias Inverardi, Christian Kraemer and Alexander Huebner; Writing by Vera Eckert, Friederike Heine and Miranda Murray; Editing by Sabine Wollrab, Rachel More, Jan Harvey and Susan Fenton)
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