Siemens Gamesa to fix onshore wind turbine unit in 2022

FILE PHOTO: A model of a wind turbine with the Siemens Gamesa logo is displayed outside the annual general shareholders meeting in Zamudio

By Isla Binnie and Christoph Steitz

MADRID/FRANKFURT (Reuters) -Siemens Gamesa aims to fix major issues with its flagship onshore wind turbine model over the next three months, its chief executive said, warning that 10 to 15 related loss-making projects would stay a drag until 2024.

The world's largest producer of offshore turbines, Siemens Gamesa has issued a string of profit warnings as it battles to iron out complex internal procedures in the production of a new onshore turbine, the 5.X.

The effort has piled pressure on a business model already challenged by the rising costs of raw material, such as steel.

"The biggest thing really for us is to stabilise the 5.X project," Chief Executive Jochen Eickholt told Reuters. "We have given ourselves a target for the end of the calendar year, and that's on track."

Nevertheless, he added: "It remains challenging."

He also said the company aimed to return to profit in 2024.

Turbine makers have struggled to turn a profit despite strong demand for technology that will transform the world's economies to run on renewable energy sources such as the wind and sun.

"The profit warning history ... gives us only little confidence that company will return to a profit path in the near future," said a trader based in Frankfurt.

As far back as 2017, some nations began scrapping generous tariffs for competitive auctions, exposing turbine makers to runaway logistics and metals costs, politically-driven import duties and the fallout from COVID-19 and Russia's invasion of Ukraine.

Competition from newer entrants, particularly Chinese firms, has also squeezed Siemens Gamesa, especially in markets such as Brazil and India, Eickholt said.

Siemens Gamesa has already idled two plants in North America, decided to close a factory in Morocco and is in staff reduction talks with labour representatives, Eickholt said.

He added that 10% to 15% of 100 onerous projects related to the 5.X would stretch into 2024.

Siemens Gamesa's woes prompted parent Siemens Energy to launch a bid in May for the roughly one-third stake in the turbine group it does not already own and take it private to nurse it back to health.

The deal awaits final approval from the market regulator in Madrid, where Siemens Gamesa was listed in 2017.

Siemens Gamesa has seen some success in tough discussions with customers to raise selling prices, Eickholt said.

"We are making ... difficult, step-by-step progress," he said, describing the last three months as having been "kind of solid-ish". He added, "Not too good, not too bad either."

(Reporting by Isla Binnie in Madrid and Christoph Steitz in FrankfurtEditing by Mark Potter and Clarence Fernandez)