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Siemens CEO Gives up on German Fossil Fuel Plants

Posted by May 28, 2015

Joe Kaeser (Photo: Siemens)

Industrial group Siemens (SIEMENS.NS) has resigned itself to never selling another gas turbine in its home country following Germany's switch to renewable energy, its chief executive said.
Joe Kaeser is cutting 1,600 jobs at Siemens' power and gas division, which has been turned upside down by the fallout from Germany's decision to accelerate its nuclear exit and promote renewable energy following Japan's 2011 Fukushima disaster.
"The way in which Germany's energy transition is being handled has made it impossible for us to ever sell our fossil fuel-related products and solutions in Germany," Kaeser said in an interview published in Siemens' staff magazine on Thursday.
Profit at Siemens' power and gas division tumbled by a third last quarter and its profit margin dropped to 12.9 percent from 20.3 percent a year earlier as its large gas turbines in particular were hit by overcapacities and huge price erosion.
The Siemens-built Irsching gas-fired power plant in Bavaria, one of Europe's newest, is to be shut down next year. It is one of many German conventional power stations being pushed out of business by competition from renewable energy.
Kaeser said he was willing to forfeit profits in order to carry out the job cuts - many of which will fall in Germany - in a socially responsible manner. Siemens had an average of 343,000 employees in its last fiscal year to end-September, a third of them in Germany.
"Structural adjustments will be made at all the locations, and we are perfectly willing to sacrifice the few percentage points of our profit margins that we could have perhaps attained by following a different approach," he said.
Siemens is also hiring more than 1,000 employees outside of Germany in countries where demand is strong.
It said in a separate statement on Thursday it had agreed to supply its first two H-class large gas turbines, similar to the ones it built at Irsching, to Mexico.
Siemens expects flat sales this fiscal year to end-September as it battles to fix underperforming businesses with 15 billion euros ($16 billion) in combined revenue as well as the power and gas market conditions.
Kaeser said fiscal 2016 would be a year of "optimisation".
"We will already see growth and operational profit improvements in some areas. However, there will certainly also be some areas that still require careful coordination," he said.
($1 = 0.9168 euros)

(Reporting by Georgina Prodhan and Irene Preisinger; Editing by Alison Williams)

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