Momentum for wind energy growing, despite challenging year

In the three months up to 30 September 2020, Siemens Gamesa reported an ‘earnings before interest and taxes’ (EBIT) pre ‘power purchase agreement’ (PPA) and before integration and restructuring costs of €31 million, a margin of 1.1% on €2868 million in revenues. The company reported a decline in revenues for fiscal year 2020 of 7% y/y to €9483 million, with EBIT pre PPA and before integration and restructuring costs of -€233 million, a margin of -2.5%. Net losses amounted to -€918 million.

The fiscal year 2020 results reflect the continuing slowdown in the Indian market and cost overruns on project execution in Northern Europe, all accentuated by the impact of COVID-19. The global pandemic reduced revenues by circa €1 billion, due to lower commercial activity and delays in project execution, and also impacted EBIT pre PPA and before Integration and Restructuring costs by €181 million.

To address these challenges, the company’s new management team - led by the Chief Executive Officer, Andreas Nauen, who was appointed in June - presented a new business plan for fiscal year 2021 - 2023, with the goals of turning the onshore business around and of maintaining profitable growth in the offshore and service businesses. Siemens Gamesa maintains its commitment to prioritise profitability (over volume), cash flow and sustainability.

Strong foundations for sustainable growth

Despite the impact of the pandemic, the transition towards less-polluting energy remains on the agenda and there are growing calls for the post-COVID-19 recovery to be underpinned by actions driving a ‘green economy’. Additionally, an increasing number of countries and companies have undertaken to achieve net zero emissions by 2050. Attaining this objective worldwide will require wind installations to rise from 60 GW to 280 GW per year by 2030, according to the International Energy Agency.

Siemens Gamesa's results show a resilient company with solid foundations for achieving growth and capturing the full potential of wind power. Together with the geographically diverse order book totalling €30.2 billion (+18.6% y/y), it also has a sound liquidity position, with €4.2 billion in available funding lines, against which it had drawn circa €1.1 billion, and a solid balance sheet at year-end, with net debt at €49 million.

The company remains a leader in the offshore segment, having doubled order intake y/y to 4.1 GW. This boosted the backlog to 6.7 GW, plus 9.3 GW in conditional agreements. This performance is supported by technology leadership, following the launch of the powerful SG 14-222 DD turbine, and a business that is increasingly diversified, having added new markets in Asia and the Americas.

The company signed 2.7 GW in onshore orders in 4Q2020, partly recovering the business it had lost in the previous quarter and enabling total onshore order intake in fiscal year 2020 to reach 8.1 GW (-13.5% y/y). Onshore platforms of over 4 MW continue to gain importance, having accounted for 45% of onshore order intake in the full year. Market reception of the SG 5.X platform was favourable, and 1 GW in orders have been signed to date.

Service was the fastest-growing division in fiscal year 2020, supported by the assets acquired from Senvion. Order intake increased by 53% y/y to €4.1 billion during the year, boosting the fleet under maintenance by 23.7% y/y to 74 240 MW. As a result, service now accounts for half of the company's total backlog. These orders offer visibility as the company has a 70% retention rate and the average contract duration is 8 - 9 years.

Committed to Sustainability

Siemens Gamesa continues to strengthen its commitment to sustainability and reached critical milestones in fiscal year 2020. The company became carbon-neutral ahead of schedule and the Science Based Targets initiative (SBTi) verified that its emission reduction strategy is aligned with what is required to meet the 1.5°C target. Siemens Gamesa also intensified its commitment to environment, social and governance (ESG) principles and introduced sustainability criteria into its entire funding strategy, ranging from the syndicated loan through guarantee lines to currency hedges.

These actions were recognised by ESG rating agencies and by the indices, such as Dow Jones Sustainability Indices^®, FTSE4Good^®, Ethibel Sustainability Index^® and Bloomberg Gender Equality Index^®. The company is included in the MSCI indices with an investment grade rating of A, and in the Euronext indices and Ethibel Sustainability Index-Excellence Europe; it also has a FTSE Russell ESG Rating.

Financial framework and new guidance for fiscal year 2021 - 2023

The financial framework for the strategy to resume value creation for all the company's stakeholders is supported by three lines of action:

1. profitable growth through innovation, productivity and operational excellence
2. focus on cash, with strict control of working capital and capital expenditure
3. efficiency in the use of capital coupled with an attractive dividend policy

Under this umbrella, Siemens Gamesa has set targets for fiscal year 2021 through fiscal year 2023. The company expects to achieve between €10 200 million and €11 200 million in revenues in fiscal year 2021, and faster-than-market growth through fiscal year 2023. The EBIT margin pre PPA and before integration and restructuring costs will be between 3% and 5% in fiscal year 2021, reaching a margin between 8% and 10% in fiscal year 2023.

Read the article online at: https://www.energyglobal.com/wind/06112020/momentum-for-wind-energy-growing-despite-challenging-year/