Commodities

Siemens spins off its gas turbine and wind power business

By Oliver Sachgau on 7/9/2020

MUNICH (Bloomberg) – Siemens AG shareholders approved a spinoff of the company’s energy business, one of CEO Joe Kaeser’s last major moves to reshape the German industrial stalwart.

More than 99% of shareholders approved the motion to create an independent Siemens Energy AG at an extraordinary shareholder meeting on Thursday. The company, with almost 29 billion euros ($33 billion) in annual revenue, is scheduled to begin trading on Sept. 28.

Kaeser had advocated that Siemens must drive ahead with the planned breakup as it’s the best way to refocus and boost the share price. He’s betting he can drum up investor interest despite the coronavirus pandemic that’s forced delays and cancellations of other transactions.

“The single biggest potential on that move, which is hopefully going to be approved today, will be a rerating of Siemens AG,” Kaeser said in an interview with Bloomberg TV ahead of the meeting. “This is not about bringing Siemens Energy to the market, it’s also about de-risking” the parent company, he added.

The planned spinoff is one of the last big moves by Kaeser to transform Siemens before he steps down as CEO in February. Since he took the helm in 2013, he has dismantled large parts of what was once one of Europe’s largest conglomerates, most notably with the initial public offering of Siemens Healthineers in 2018.

Siemens stock traded 1.5% higher at 107.34 euros as of 2:02 p.m. in Frankfurt.

Siemens Energy AG is a mix of the gas-and-power business and its stake in wind power company Siemens Gamesa Renewable Energy SA. Once spun off, it will face a market that has turned hostile to both its main businesses.

The Covid-19 epidemic, coupled with a historic drop in oil prices in April, shut down large swaths of the oil and gas industry, which Siemens supplies with equipment ranging from compressors to massive gas turbines.

The company’s wind business hasn’t fared much better. Siemens Energy owns about two-thirds of that unit, which ousted its CEO in June. The Spanish wind-farm supplier is expecting a loss in the third quarter as the pandemic shuttered work across the world, especially in the already troublesome India market.

Kaeser has repeatedly said he believes the energy business is depressing what he sees as the true value of Siemens, a view shared by some analysts.

“Siemens looks mispriced,” Morgan Stanley analyst Ben Uglow said in a note in May. “The debate is whether the market will pay more attention now than in the past.”

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