The parent of Siemens Energy on May 26 provided details of the planned spinoff of the company’s energy business, saying 55% of Siemens Energy will be spun off to Siemens’ shareholders. The company said Siemens shareholders would automatically receive one share of Siemens Energy AG for every two shares they own of the parent, Siemens AG.
The company in its news release Tuesday said Siemens AG plans to further reduce its stake in the new business within 12 to 18 months of the effective date of the spinoff. The company, like others in the power generation business such as General Electric and ABB, has been restructuring its operations as the global energy landscape continues to evolve, with an increased emphasis on renewable power and a lessening of dependence on fossil fuels. ABB in late 2018 announced Hitachi would acquire more than 80% of the company’s Power Grids unit in an $11 billion deal.
Revenue targets for several energy companies, including Siemens, have taken a hit during the COVID-19 pandemic. Siemens Gamesa Renewable Energy (SGRE), the company’s wind turbine arm, on May 6 reported disruptions from the coronavirus had a “direct negative impact” of more than $60 million on the company’s fiscal second-quarter earnings.
Shareholders Meeting Set
Siemens AG also Tuesday issued the invitation to an “Extraordinary Shareholders’ Meeting” on July 9. The company will seek approval of the spinoff at that meeting, with hopes of completing the planned spinoff by the end of September, with an initial listing of stock planned for September 28.
“Turning Siemens’ energy business into an independent company is a key milestone in the successful execution of our Vision 2020+ strategy program,” said Joe Kaeser, president and CEO of Siemens AG, in a statement Tuesday. “The considerable increase in the value of our healthcare business shows the huge potential we can tap by further sharpening the focus of our company. This applies to both, Siemens Energy and the ‘New Siemens AG,’ which is concentrating on our Industrial Businesses. We’ve now reached a major milestone in the overall realignment that is preparing the Siemens companies for the massive technological transformations that we are anticipating.”
The parent Siemens’ company on Tuesday said it has formulated a contractual obligation—a so-called deconsolidation agreement—“to refrain from exercising a controlling influence over the new company in the future.” The deal requires that the board of Siemens Energy AG have no more than three representatives of Siemens AG. The Siemens Energy supervisory board will have 20 members, including 10 representing shareholders and 10 representing workers.
Kaeser, Ralf P. Thomas—Siemens AG’s chief financial officer—and Matthias Rebellius, the chief operating officer of the company’s Smart Infrastructure division, will serve as Siemens’ representatives on the board, with Kaeser serving as chairman.
‘Entire Energy Value Chain’
Siemens on Tuesday said it wants to “create a strong, focused, global company with operations spanning the entire energy value chain, including the service business” with the spinoff, in part to more quickly react to an energy landscape that needs more power generation, but is moving away from fossil fuels across much of the world.
The spinoff of the energy business will allow Siemens AG to concentrate on its digital products for industry, across its Digital Industries, Smart Infrastructure, and Siemens Mobility divisions. Siemens AG in March 2018 spun off its healthcare business, Siemens Healthineers, which has now operated as a separately managed company for more than two years.
The company on Tuesday said the new Siemens Energy will have about 91,000 workers, which includes the company’s global energy workforce as of the end of March. Siemens Energy’s products will include the company’s combined cycle turbines, generators, transformers, and compressors. The new company also will have a 67% stake in SGRE, a global leader in wind turbine technology.
Siemens AG on Tuesday said that as of Sept. 30, 2019, Siemens Energy’s order backlog stood at €77 billion (about $84.5 billion). Siemens Energy in fiscal 2019 generated revenue of about €29 billion ($31.8 billion).
Thomas, Siemens’ CFO, on Tuesday said, “Siemens Energy is excellently positioned, not only operationally and strategically, but also financially. The company will rigorously drive its strategy independently of Siemens AG and secure its own financing on the market. The spin-off will enable our shareholders to profit directly from the new company’s future successes. At the same time, we’re confident that the conglomerate discount on the Siemens AG share will also be reduced.”
Christian Bruch, CEO of the new Siemens Energy AG, said, “Global energy markets are undergoing a fundamental change. The need for affordable and reliable energy continues to grow. Today, some 850 million people still lack access to electricity. While demand is constantly rising, we need to cut carbon emissions radically. This is a challenge, but above all an opportunity. With Siemens Energy, we’re creating an integrated energy company that offers solutions and can support customers in all segments of the value chain.”