Siemens Gamesa in $629 million sale of south European assets to SSE

Siemens Gamesa Renewable Energy has agreed to sell assets in southern Europe to Scotland-headquartered energy firm SSE for 580 million euros (around $628 million), with around 40 of the turbine maker’s employees moving to SSE as part of the deal.

In a statement released on Tuesday, SGRE said the sale included “a pipeline of onshore wind projects” in Greece, Spain, France and Italy.

The capacity of these projects — which Siemens Gamesa said were “in various stages of development” — comes to 3.9 gigawatts. There is also the potential to develop co-located solar photovoltaic projects with a capacity of up to 1 GW.

Jochen Eickholt, the CEO of Siemens Gamesa, said the announcement demonstrated his company’s “capacity to optimize its portfolio of assets and maximize value.”

SSE Renewables’ Managing Director, Stephen Wheeler, said the project portfolio would “provide a real springboard for our expansion plans in Europe across wind, solar, batteries and hydrogen.”

Commenting on the sale, Laura Hoy, equity analyst at Hargreaves Lansdown, said: “SSE’s doubling down on its renewables efforts, and today’s announcement of a €580m bet on Southern European wind projects is evidence of management’s conviction.”

“On the surface this looks like the right play — transitioning toward cleaner energy is the clear direction of travel and the group’s seen output improve steadily over the past few months.”

However, “having more wind in the sails doesn’t guarantee smoother seas,” she added.

“Performance in SSE’s renewables division has left something to be desired so far this year, and though it seems things are improving, output is still well below targets.”

“Pouring money into a yet unproven part of the business is a risky move to be sure — but at present it seems like the only way forward if growth is eventually on the menu.”

Details of the agreement between SSE and SGRE were announced on the same day the latter released preliminary results for the second quarterreporting revenue of around 2.2 billion euros and an operating loss of roughly 304 million euros.

The company said its performance had been “severely impacted by product and execution related issues,” going on to add that previous guidance for the 2022 financial year was “no longer valid” and “under review.”

It has been a challenging period for Siemens Gamesa. In February, it said it expected revenue for the 2022 fiscal year to shrink by between 9% and 2% year-over-year, having previously earmarked a contraction of between 7% and 2%.

The company also revised its operating profit margin, or EBIT margin before purchase price allocation and integration and restructuring costs, to between -4% and 1%, having earlier forecast growth between 1% and 4%.

On Tuesday, the company said it would “continue to work to achieve revenue within our year-on-year revenue growth range of -9% and -2%, and towards the low end of our previously communicated EBIT pre PPA and I&R costs margin guidance range of -4%, including for both now the positive impact of the Asset Disposal.” The Asset Disposal refers to the newly announced deal with SSE.

Meanwhile, SSE said at the end of March that it expected “full-year 2021/22 adjusted earnings per share to be in a range of between 92 and 97 pence compared to previous guidance of at least 90 pence.”

Siemens Energy, which has a 67% stake in Siemens Gamesa, said on Tuesday that it was also reassessing its guidance for the 2022 fiscal year as a result of SGRE’s announcement.

The company also pointed to other headwinds. “Because of the war against Ukraine and the sanctions imposed on Russia the operating environment for Siemens Energy has become more challenging,” it said, confirming it was “complying with all sanctions and has stopped any new business in Russia.”

Due to the war, Siemens Energy said it had “started to see an impact on revenue and profitability” and was also “experiencing an aggravation of existing supply chain constraints.”

“Due to the dynamic development of the sanctions regime, management is not able to fully assess the potential impact for the remainder of the fiscal year at this point in time and can therefore not rule out further negative effects on revenue and profitability,” it said .

Shares of Siemens Energy were down by around 1.5% on Wednesday at midday London time. Siemens Gamesa’s shares were up by 5.4% after a lower open. If all goes to plan, the deal between SGRE and SSE is slated for completion by the end of September.