The Germany government is offering €7.5 billion ($8 billion) in taxpayer funds to save the financially troubled Siemens Energy, a company that is essential to the nation’s energy transition.
The amount is a portion of a guarantee package worth €15 billion ($16.3 billion), with private banks and other stakeholders contributing the remaining sum, according to a statement released by Germany’s Ministry of Economic Affairs and Climate Protection on Tuesday.
The package is only guaranteed by the government if all other stakeholders fulfill their obligations, and it is contingent on Siemens Energy stopping dividend payments to shareholders and board member bonuses.
The bailout highlights the economic challenges that nations face as they move away from fossil fuels and the significance Berlin places on Siemens Energy, a spin-off company of renowned German electronics manufacturer Siemens, in helping that transition. Siemens owns 32% of the company that makes wind turbines.
The ministry stated that the federal government has been “in intensive contact” with Siemens Energy, Siemens, and private lenders, and that a deal to “secure the company” has been in the works for a few weeks.
Along with a wide range of other products, the company, which generated revenue of roughly €29 billion ($32 billion) in its most recent fiscal year, also manufactures gas-powered turbines and electrolyzers for the production of hydrogen energy. Approximately one-sixth of the world’s electricity is produced thanks to its technologies, which support 94,000 jobs across more than 90 countries.
The ministry claims that in order to fulfill its €110 billion ($119 billion) pipeline of orders, it needs the financial guarantees.
A Siemens Energy representative told Media Outlet, “We are happy with the German government’s clear support for Siemens Energy and the commitment to the rapid implementation of projects to make the energy transition a success.”
The company, which produces both conventional and renewable energy, stated in August that it anticipated to report a €4.5 billion ($4.9 billion) loss for the current financial year due to a number of issues with the manufacturing of some of its wind turbine models this year.
Siemens Energy was deemed by the ministry to be “an important employer in the industries of the future” and “highly relevant to the entire value chain of the provision of energy systems.”
The largest economy in Europe, Germany, has been fighting a difficult and costly battle to displace Russia as its primary natural gas supplier ever since Moscow began its full-scale invasion of Ukraine in February of last year.
German manufacturers, who have suffered to pay for the outrageous price of gas for the last two years, need to find cheaper, cleaner energy sources. The sector has also been negatively impacted by painful interest rate hikes and a faltering Chinese economy.
According to survey data for October, German manufacturers are laying off workers at their fastest rate in three years as new orders are declining and confidence is still “deeply negative.”