Germany mulls plans to extend a massive lifeline to ailing power giant Siemens Energy | DW Business

Will the German government come to the rescue of Siemens Energy? Negotiations for a €16 billion loan guarantee are underway after the company posted massive losses in its wind turbine unit. The company – a spin-off of former parent Siemens – has faced significant repair bills due to flaws discovered in its turbines. High borrowing rates – increasing the cost of construction – have added to its woes. Potentially at stake: Germany’s energy security and climate goals. We speak to Clemens Fuest at the Ifo Research Institute.

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The German government is considering plans to extend a massive Lifeline to alien power company Zan’s energy a potential 16 billion EUR in loan guarantees is on the table aimed at enabling the company to meet a massive backlog in deliveries at its Gesa wind turbine division the company a spin-off

Of former parent zans has faced significant repair bills due to flaws discovered in its turbines High borrow rates increasing the cost of construction have added to its Wes let’s bring in Clemens fuss president of the eepo research institute and a Critic of plans for the German government to rescue Seaman’s energy Mr

F why do you think this is such a bad idea well it’s a very bad idea because it is primarily the responsibility of zman’s energy uh its banks maybe also its parent zens uh to to finance these guarantees uh and certainly not of the government the trouble is when companies

Have issues have difficulties they turn to the government and when they make profits they privatize those profits uh that is unfair and it also sets the wrong incentives for management inviting them to uh act in a very risky way so there’s no reason why the taxpayer uh should help

Zman’s energy in this situation the banks can do that the parent company can and should do it what about the idea of a Level Playing Field though seans is facing competitions from China which provides massive subsidies to its Renewables companies surely letting the company languish is in nobody’s interest

Including that of the German people well there are ways to deal with foreign subsidies if they are unfair the WTO allows countries to Levy import tariffs so if the EU thinks uh when turbines from China are subsidized in an unfair manner uh it can raise tariffs uh here um this is not so

Much about uh competition being too tough this is about a big order lock in fact the company has uh where it needs financing to process that order log and U it seems that Banks and the parent company don’t want to finance this because they are concerned about mismanagement uh in the subsidiary Gesa

The zens energy subsidiary Gesa and it is not the taxpayer’s job to pay for management errors so this is not so much about Chinese competition it’s about management errors at zens energy uh and they should fix these things on their own I want to talk about those management errors though because Gesa

Has a huge backlog of orders what has gone wrong here yes with with with a large backlog of orders uh it is important to have enough financing to get those orders going to process those orders and it’s standard to deal with this it’s a management question to make sure how do

You make sure if you take on orders how do you make sure you have the financing to actually carry out and and process these orders and for that you need to talk to your clients you need to talk to your Banks it’s a standard management job that went wrong and now um zens

Energy returns to the government um that’s really uh unfair they should fix it on their own but there are external factors when it comes to financing High borrowing rates have made construction much more expensive absolutely and uh it is the job of management to adjust to those

High interest rates maybe take on fewer orders maybe focus on the most profitable orders something like that um but uh it’s certainly not I mean the respon resp to high interest rates is not to get the money uh from the government the high interest rates set

By the central banks are a signal maybe not to carry out all investment projects but to put to the side some the less profitable ones and that’s exactly what the management should do I think it’s fair to say though that Seaman energy is not alone here though Swedish company vattenfall has halted

Work on an offshore Wind Farm off the norfol coast this Danish Wind Farm giant orad it’s also run into problems in the US doesn’t this point to a wider problem in the renewable sector it certainly poses to the fact that we do have Rising interest rates at

The moment and we have them because we have inflation and the natural reaction to inflation is to Halt some projects it may very well be that the Renewables sector has particular issues but it’s not the task of of the German government to fix those issues by giving guarantees

To zens energy if there are issues like slow planning procedures those should be fixed uh but the answer to those problems is not giving money to zens energy to correct or to fix management problems If zens energy were to write off its Gesa unit though what would that

Mean for Germany’s energy security as well as its ability to meet its clean energy targets uh the clean energy targets can also be met by buying wind turbines from other suppliers there are many as you said there are many suppliers in the world we can very well import wind

Turbines we don’t depend on zman’s energy and if zman’s energy gets into difficulties has to shrink a little bit this doesn’t mean its production stops uh maybe someone else will take over some of that production there is large demand for wind turbines in the world as

A whole and on top of that wind turbines are not like uh key drugs uh that very important drugs you need in an emergency if for two or three months you are cut off from win turbine Imports that’s not a big problem so the security issues are

Not as large as with critical drugs or with let’s say gas so uh security arguments are are not applicable easily to the wind turbine business if we look at the bigger picture then the German economy as a whole is not doing very well the latest data is far from saying GDP shrunk in

The last quarter how worried are you about the health of Europe’s largest economy uh Germany faces short-term issues like uh High interest rates High Energy prices and so on uh but on top of that Germany faces some structural questions what is the future of its energy intensive industry what is the

Future of its car industry these structural issues uh weigh on the German economy and explain why it is perform performing worse than other comparable economy and what the government needs to do in this situation is push for reforms that improve energy Supply that reduce a bureaucratic and tax burdens reform um

That allow for uh for more infrastructure investment so we need a growth agenda in Germany a broad growth agenda uh to address these issues kman F president of the eepa research institute thank you very much thank you