Share price collapse: Siemens Gamesa Renewable Energy CA (GAM)
Siemens Gamesa is to cut 6,000 of its 27,000-strong workforce as part of a restructuring plan “to consolidate its position as a market leader”, the company said on Monday. Since Siemens took full control earlier this year, the wind company’s shares have fallen 46 per cent.
The world’s second-largest maker of wind turbines announced the job cuts as it released disappointing earnings and a 2018 outlook that was below forecasts.
“The guidance for next year is 14 per cent lower than the street had expected,” said Gurpreet Gujral, analyst at Macquarie, referring to operating profits.
Gamesa, the Spanish wind and renewable energy group acquired by Siemens this year, projected 2018 revenues of between €9bn and €9.6bn — about €1bn lower than the median consensus — while operating margins were targeted at between 7 per cent and 8 per cent, a modest projection relative to forecasts of 7.9 per cent.
Mr Gujral said the projections implied an underlying operating profit next year of €698m, well below forecasts of €814m.
The second half of the year, including the six months since April when Siemens completed its takeover, was hampered by a downturn in India and an inventory impairment in the US and South Africa. Sales in the six months declined 12 per cent, while underlying operating profit fell 63 per cent to €192m.
Management problems at Gamesa emerged in April when Ignacio Martín, chief executive, abruptly indicated he would not be staying on once the deal was complete. Siemens’ embarrassment over its inability to retain senior management was exacerbated by two profit warnings this year.
Climate Policies Now Account For 35% Of Electricity Bills
By Paul Homewood
h/t Mark Rogers
Mark came across this chart on the website of LSI Energy, a company involved in energy procurement and management:
It tells us that environmental costs (RO, FIT, CfD, CM and CCL) now account for 35% of electricity prices.
According to BEIS figures, domestic users consume 108 TWh a year, which based on 26.7 million households works out at 4000 KWh.
I pay 13.2p/KWh for my electricity, including standing charges, so the average annual bill must be around £528. Environmental costs would therefore account for £185pa.
OBR figures suggest a cost of £10.1bn this year, which on a pro-rata basis work out at £132 per household.
Either way, bills are set to rise higher, as LSI note:
Contributing to the rise of non-commodity costs is Renewables Obligations, which are set to continue to rise significantly between now and 2020. It is also estimated that there will be a steep rise for FiT Contracts for Difference (CfD), which will contribute to the increase in non-commodity costs.
Green Energy Crash: Vestas Shares Dive 17% On Concerns Over US Subsidy Cuts
By Paul Homewood
Following news of job cuts at Siemens, problems for Vestas as well, as GWPF report:
The wind industry has been unsettled by parts of the US House of Representatives’ proposal on tax reform that could make renewable energy projects significantly more expensive.
Marika Fredriksson, Vestas’ chief financial officer, told the Financial Times that uncertainty over the future of the so-called production tax credit led the Danish group to trim its guidance for the year. Its underlying operating profit margin this year should be 12-13 per cent, down from a range of 12-14 per cent.
“We don’t know what the Senate will decide. What is clear is that if it is approved in its current shape and form it will have an impact on the PTC . . . and that is reflected in the guidance,” she added.
Investors, already rattled by the outlook in the US with shares down 10 per cent this month before the guidance change, sent Vestas down 17.3 per cent to DKr436.1 on Thursday morning. It was the biggest fall in its shares since 2012, when there were fears over its financial collapse.
Vestas has recovered strongly from a previous crisis in 2010-13 that also involved worries about the continuation of US government support for the wind industry. Its share price has risen more than 20-fold since the end of 2012.
As a sign of the uncertainty, the Danish group changed its guidance for free cash flow for 2017 from at least €700m to a range of €450m-€900m due to a lack of visibility on US orders in the crucial fourth quarter for turbine manufacturers.
Ms Fredriksson argued that activity level was still high and that wind turbine makers could now compete in most of the world without subsidies.
“The wind industry is participating on its own merits . . . We are competitive in the US without the subsidies. We are on a par with oil and gas. But exactly how the US market will pan out, we can’t say at the moment,” she said.