German government’s billion-euro support boosts Siemens Energy shares

Shares in the energy company climbed after three sources said the group will present a deal on Wednesday for billions of euros in project-related guarantees backed by the German government.

Last month, the firm reported talks with the German government, banks and former parent company Siemens AG over what sources told Reuters were €15 billion in guarantees for project and warranty bonds needed to safeguard the company’s €109 billion order book.

Of the €15 billion, banks will bear around €12 billion, of which the government would backstop €7.5 billion. The three people familiar with the matter said that a solution had also been found for the remaining €3 billion, without specifying.

“The aim is to have an agreement ready by Wednesday,” Reuters reported one of the sources said, adding that final details would be determined following a Siemens AG board meeting on Tuesday.

Shares in Siemens Energy rose as much as 4.7% on the details of the agreement, which were first reported by German business newspaper Handelsblatt on Monday afternoon.

The German energy firm makes gas and wind turbines as well as large converter stations, vital equipment for the country’s efforts to gradually phase out fossil fuels, prompting Berlin to seek backing for what it considers a systemically relevant company. 

Deepening problems at the wind turbine unit and a subsequent cut by S&P in July on Siemens Energy’s long-term credit rating to BBB-, just one notch above junk, had made banks more reluctant to provide the guarantees.

Siemens AG, which spun off Siemens Energy in 2020, will also provide support by buying most of the 24% stake that Siemens Energy owns in Siemens Ltd, the two group’s Indian joint venture.

Sources said Siemens AG will pay more than €2 billion for around 18% of Siemens Ltd, which would bring its stake in the joint venture to around 70%.