Siemens Energy Shares Plunge after Technical Trouble

Siemens Energy shares plummeted by over 37% after the company heavily revised its profit forecast and issued a warning that the troubles plaguing its wind turbine unit could persist for several years, causing significant financial strain.

Siemens Energy came into existence after the gas and power division of the German conglomerate Siemens was spun off. Late on Wednesday, the company revealed that a thorough examination of its subsidiary, Siemens Gamesa, uncovered a worrying surge in the failure rates of wind turbine components.

To address this problem and enhance the quality of its products, the Siemens Gamesa board has initiated an extensive technical review. Unfortunately, this review will incur much higher costs than previously anticipated, and could possibly exceed $1 billion.

The magnitude of the challenges has resulted in a profit guidance being issued for the entire Siemens Energy Group for the fiscal year 2023.

Leading international conglomerates like Siemens have been investing heavily in green energy as the world transitions away from fossil fuels. However, carving out revenue streams from emerging technology is not without its challenges.

Siemens Gamesa has been a source of frustration for its parent company ever since the complete takeover last year. According to Siemens Energy's estimates, these component failures may be affecting anywhere between 15% and 30% of their installed fleet of turbines. The severity of the problems has come as a shock to the market, leading to a sharp drop in share price.