Faulty Machines<\/strong><\/p>\nThe company has said that 15% to 30% of turbines were affected by the flaw. It hasn\u2019t specified the number of faulty machines and likely doesn\u2019t yet know.<\/p>\n
In the best case scenario, the recently disclosed faults will have caused only limited damage to critical components. Though even if that\u2019s the case, scores of turbines that sit hundreds of feet in the air will need to be serviced, a costly endeavor that can only be done with specialized equipment.<\/p>\n
JPMorgan analyst Akash Gupta estimates each faulty turbine will cost as much as $1.7 million to repair. And, based on the company\u2019s projections and indications that the defect applies to the newer platforms, roughly 1,000 turbines could be facing issues, bringing the potential cost to $1.7 billion, Gupta estimated. That would include the cost to replace blades and bearings.<\/p>\n
The cost, though, could rise as the company expands its probe to see if the issue is also present in older generations of turbines and its offshore wind business, which is more profitable and has been less afflicted by technical problems.<\/p>\n
On top of the repair costs, Siemens Energy also faces liability for its customers\u2019 lost revenue related to the fault. And a further complication could come if the company needs to make design changes that would trigger an arduous certification process that could take years. In the meantime, Siemens Energy may have little choice other than continuing to deliver machines it knows to be faulty and incur further losses for years to come.<\/p>\n
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Customers have started to worry. Some who already ordered turbines and others who were in talks with Siemens Energy say they\u2019ve been left in the dark about the issues other than what the company said in its statement last week. With only a handful of turbine-makers in the market, wind-power developers don\u2019t necessarily have a simple alternative.<\/p>\n
Among the concerned is Iberdrola SA, one of the world\u2019s biggest developers of renewable power and a former shareholder in Gamesa. The company has purchased 11 of yet-to-be-installed Siemens wind turbines based on the troubled 5.X platform. It\u2019s now conducting a thorough analysis before deciding whether to install the machines at all in Spain, according to a letter that was seen by Bloomberg News and confirmed by an Iberdrola spokesperson.<\/p>\n
But some customers are more optimistic. For Swedish renewable power company Arise AB, one of the biggest purchasers of the 5.X turbines, problems with the turbines have been minor, Chief Executive Officer Per-Erik Eriksson said. The company has had to curtail production at a Swedish wind farm when the wind exceeds a certain speed, but that doesn\u2019t happen very often. Eriksson said he\u2019s received assurances from Siemens Energy and he wouldn\u2019t hesitate to purchase turbines from them again in the future.<\/p>\n
\u201cWe have some issues at our project in Sweden, but I don\u2019t expect it to be a major one,\u201d Eriksson said in an interview. \u201cIn the long run, we believe Siemens will manage this.\u201d<\/p>\n
When Siemens Wind Power merged with Spanish turbine maker Gamesa back in 2017, the new company was troubled from the start as corporate cultures clashed. Profit margins rapidly shrank as the competition raced to cut prices. After announcing losses in 2020 on the back of challenges with its India business, the company got rid of its then CEO Markus Tacke in favor of Andreas Nauen, who had been in charge of Siemens\u2019 wind turbine business, to try and stem the losses.<\/p>\n
\u201cEver since the merger happened they\u2019ve been having an issue integrating the Gamesa and the Siemens,\u201d said Deepa Venkateswaran, an analyst at Bernstein. \u201cThe merger was a cultural and financial failure in that sense.\u201d<\/p>\n
But as Nauen tried to improve the company, the world moved against him. Supply-chain constraints from the pandemic and soaring commodities prices stung the wind-turbine industry broadly and helped Siemens Gamesa notch a loss of about \u20ac626 million in the fiscal year ending September 2021. Nauen promised that things were turning around and that the company would return to profitability.<\/p>\n
Losses mounted the following year. Gamesa replaced its CEO again, bringing in Siemens Energy executive and turnaround specialist Jochen Eickholt. Since then, Eickholt has continued to face turbine flaws and post losses.<\/p>\n
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