Siemens Energy AG
XETRA:ENR
Earnings Call Analysis
Q4-2023 Analysis
Siemens Energy AG
Navigating through a year marred by notable challenges in its wind business, Siemens Energy has wrapped up its financial report with mixed sentiments. The wind business issues led to dimmed results juxtaposed against an excellent performance in other domains such as gas services and grid technologies. As the incoming orders grew significantly by more than 33% to EUR 50.4 billion, the company saw a record high backlog of orders amounting to EUR 112 billion, signaling potential future growth. Profits, however, were affected particularly due to Siemens Gamesa, with income before special items falling to minus EUR 2.776 billion and a margin before special items of minus 8.9%. The free cash flow also witnessed a decline to EUR 784 million, partially attributed to the same ailing wind segment.
Despite the difficulties, Siemens Energy is on a path to profitability, noting that its right of the portfolio—gas services, grid technologies, and industry transformation—achieved an impressive adjusted EBITA margin before special items of 7.1%, nearing the company's midterm target. These divisions' success exemplifies the effective handling of the pandemic's impacts, supply chain disruptions, lack of raw materials, and geopolitical tensions. However, the wind business, initially expected to break even by 2024, is now slated for 2026. The delay is accredited to quality issues and ramp-up challenges, especially with the 4x and 5x turbine platforms.
Financial resilience remains a spotlight in this year's report. Siemens Energy retains a substantial liquidity standpoint with EUR 4.6 billion in cash and is taking definitive steps to maintain its financial health. The balance sheet reveals a net debt position of EUR 193 million, lower than earlier quarters, and thanks to better-than-expected cash flow in the last quarter. Capital markets will soon receive a detailed briefing on future targets, including revenue boosts and margin adjustments for 2026, which remain undisclosed in the immediate report.
Looking ahead, Siemens Energy projects a comparable revenue growth of 3% to 7% for FY2024, with a profit margin expectation ranging from negative 2% to positive 1%. There's an anticipation of a net income up to EUR 1 billion, backed by expected positive cash proceeds ranging from EUR 2.5 billion to EUR 3 billion from asset disposals and portfolio transformation acceleration. It is outlined that operations, particularly in the wind segment, may continue to incur losses in 2024, pending a slated breakeven point in 2026.
You don't have any saved screeners yet
[Interpreted] Good morning, and welcome to the Siemens Energy Annual press conference from the [indiscernible] in Munich. Lovely that you're all here this morning, and welcome to all of our viewers who are following us on the live stream. Ladies and gentlemen, we published our figures for fiscal 2023 at 7:00 this morning. We'll be going into more detail on in just a minute. For the first time, we'll be including Siemens Gamesa in this financial press conference and that is why we'd also like to welcome the representatives from the Spanish media in the webcast and on the telephone line as well. And of course, we're also offering interpretation into Spanish. Up on stage with me, we have our CEO, Christian Bruch; and our CFO, Maria Ferraro. Both of them will be giving us an overview, first of all, as usual, and they will be talking about the strategic issues of fiscal '23 and then they'll be answering your questions. Christian Bruch will be speaking, German and Maria Ferraro will be speaking English. As always, the presentations can be downloaded from our website after today's conference. And just for information, this conference is being recorded as usual, and it will be broadcast live on the Internet. The conference can also be followed either in the original sound, German and English. We are also offering an English language channel as well as Spanish channel and you can switch between the 2 at any time. First of all, I'd like to draw your attention to our safe harbor statement, and this can be found in the quarterly presentation. And you can see this also here on the screen. And now the Q&A after the presentation. [Operator Instructions]. I would like to hand over now to our CEO, Christian. Go ahead.
[Interpreted] Thank you, Rob. I didn't know you are adding Spanish. Well, I have been in [indiscernible]. Welcome everyone to what is now the fourth annual press conference. I'm delighted that so many of you have found your way here and that also so many are present online and order to discuss our results. I'd particularly like to welcome the [ presence ] to the press from Spain. I'm going to offer you a brief overview of our development in the past financial year and then I'll talk about the quality problems an onshore wind business, and we'll talk about the ramp-up, which has been something we've looked at a lot. Subsequently, I will, of course, talk about guarantees and agreements with the German federal government and banks. That has been talked much in the press before Maria then offers you forecast and numbers for 2022. So perhaps begin to summarize as follows: the difficulties that we've experienced in our wins business unfortunately totally overshadowed or otherwise excellent business in other areas. The market in which we were working was extremely strong in 2023, incoming orders of Siemens Energy exceeded the already high level of the previous year of more than 33% in total [ 333.8 billion ] and it increased to EUR 50.4 billion, both wind and grid technology contributed significantly to this group. However, it must be said that we are extremely satisfied with our 2023 incoming orders. The backlog at the end of the financial year 2023 was EUR 112 billion meaning that we achieved new record value. The consequences of this [ for ] guarantee is something that I will come to in just a moment. The revenue increased by approximately 10% to EUR 31.1 billion. In all divisions, once again, except for wind. contributed to this growth. Gas services, we technologies and transformation of industry exceeded their revenue targets for the financial year, and therefore, played a decisive role in the group fulfilling its forecast in its [indiscernible]. The profitability of Siemens Energy was impaired by the enormous loss of Siemens Gamesa which offered significantly difficult which led to a problem of income before special items minus EUR 2.776 billion. And the margin before special items was minus 8.9%. Free cash flow pretax decreased to EUR 784 million, mostly due to Siemens Gamesa. However, the cash inflow last year was particularly high EUR 1.5 million. That means it was more or less a half. It was, however, far higher than expected and so cash inflow in the last quarter of 2023 was actually higher than we had expected. Our net loss, Siemen Energy's net loss was EUR 4.588 billion. On the 30th of September, which means that we were within our expected range after our announcement of the third quarter. So this means that there are no additional quality costs that were incurred in Siemens Gamesa, but of course, this result is a massive disappointment. The positive news, gas services, great technologies and transformation of industry, these on the right path to achieving their middle term target. We forecasted at the IPO, if you remember, Siemens Energy, with all of its 3 divisions in [indiscernible] 2023, had an adjusted EBITA margin before special items between 6% and 8%. That was the forecast. However, we started at 1.4% and we're currently at 7.1%. And this means that we have achieved our own target despite COVID despite supply chain chaos, lack of raw materials and the war in Ukraine. We are so proud of this, and we would like to thank all of our employees. We are so grateful. This success story is proof that in the company's Siemens Energy, we're able to move towards profit and transform our divisions. With this focus and discipline, we have to also work on making our wind business with more profitable and restructuring. Due to quality issues in Siemens Gamesa and the offshore area will require more time to break even. If you remember, we originally aimed for 2024 for wind business. We now assume that this will be 2026 this breakeven. The reasons for this are quality costs and the challenges of the 4x and 5x areas. And of course, the new plants in the offshore area, we've already talked about this in the third quarter. We've now finished most of our technical analysis. So all of the critical areas have been analyzed. We're now looking at this with a team of experts from Gamesa energy [indiscernible] and other individual partners, Alex partners. So we are now planning implementation and necessary measures. As you know, this measure will take many years. It's like a recall for automotive, the automotive vendors, some things can be done. Immediately, some things will take longer. We are planning this at the moment. And of course, we're doing this with the fact in mind that these turbines have to be resold. In the final quarter, we found no errors and the provisions that we've established for the 2 problems have not been changed since the third quarter. We have firstly paused the sales of the 5x turbine until we have defined our solutions. We're currently checking when and how we can these corrective measures. As I've said, we're planning this at the moment and will define it in the future. In offshore, we are focusing on productivity increases for the ramp-up of 4 factories. So this is for longer wind blades in the fiscal year 2022 production was already significantly increased. So that's a question of how many blades could be produced in the plants and what that type of nacelles we were able to [indiscernible] we were able to produce and increase these, in particular, in [ Cuxhaven], [ in Hull and in Albot], we have been able to find employees and train them in order to achieve this level of productivity. So in this area, we are a large employer in Europe, and we aim to expand this. This is a process that cost us much time, of course, and was more complex than we would have hoped and than we planned for. Offshore has a record backlog at EUR 17 billion. And for new orders, we have become very selective. So we checked that the risk return ratio is positive for new contracts that we conclude. However, we also see in the offshore area that individual project assignments have been delayed. We -- as you've seen from the press, you've seen customer opinions, we have zero actions without bids for tenders, and they therefore have to be retendered, we therefore, expect that financial year in 2024, that incoming orders will be very low in the offshore area. That is not such an issue because we have many orders on the books, but we will be very selective in the future. In the onshore area, we expect lower incoming order volume because of the interruptions in operating phases. This will certainly have an impact on our order books in 2024. However, I think that it is certainly sensible given our restructuring D.espite the progress that we've made in the wind area this time around is to cost us time. We therefore assume that we'll achieve breakeven in the wind area in 2026. So that's 2 years later than we had originally planned. That is very painful. It means for us that we need to check our strategy in the wind areas to which products are we using and selling in which areas, what are long-term profitable markets? And how can we further optimize and reduce costs. Those are questions, for example, like make versus buy in which we are excellently placed. This is being carried out. Now it's going to take some time. It won't happen overnight. As any other areas, it's a question of focusing on the most important things and then working on them with discipline. Industry is currently at a watershed moment. Many things have been paused, many wind projects have been paused. We need adjustments in tender conditions and requirements if we want to expand wind energy generation fast. The EU Commission launched this wind power package recently that is very encouraging. It's encouraging to see how we can make the wind energy industry successful and a huge growth which can be realized across the whole value creation chain. The other businesses of Siemens Energy ensure the survival of Siemens Wind business area. And we need to come to a positive result as quickly as possible. We took over Siemens Gamesa 100% because we are convinced that it's a company that will have an impact on the transformation to green energy, and we'll cover this in the area of renewable energies. We have to face up to criticisms as regards to the strategic decision knowing better after the fact we solve our problems today. We are working on individual topics part by part. And of course, this is something we'll talk about at our Capital Markets Day next week. An energy market without wind is not viable. So perhaps I can now come to the topic which we've been focused on, particularly in recent weeks guarantees. As you know along with the federal government, our bank partners in Siemens AG has achieved an agreement for reinsurance. Over the recent weeks and days, it is important to me now to clarify how this guarantee instrument actually works because it is rather complex, and I think it is often misunderstood. The demand for our technologies and products is huge. Our backlog, as I've already said, is EUR 112 billion. It is industry practice to ensure -- offer guarantees to ensure potential customer requirements are met. These are to protect down payments, performance or warranty claims. This is an industry standard. This security is normally provided by banks in the form of a guarantee, which is also known as an [ Aval]. These [ avals ] are provided by banks for a fee, which is paid by us. This is an established industry instrument, but practical relevance is actually quite minor. They are very seldom realized, approximately 0.2% across the industry worldwide. Should [ emobile ] happen, we will be covered. We are interested in this or we want to make sure that is that we're able to use it if absolutely necessary. If Guarantee is provided, no money actually moves past its hands. It is not a loan, it is a guarantee, which is extremely valuable. We pay money for it but it is not a loan according to EU law, I wanted to stress this. It is an instrument, which is important in order to be able to cover our huge incoming orders, in particular, in the wind area. As I said, it's a complex instrument. But I want to make sure that we all understand why it is necessary. Why does the federal -- why do we need the federal government? Well, our backlog is so high -- the Minister of Justice actually referred to it as a comp risk because we have the largest backlog in energy technology in Europe. This guarantee volume is challenge for our corporate bank, this EUR 7.5 billion is a significant amount of money. We had EUR 20 billion of guarantees. So of course, it is a question of keeping pace with our consistently increasing business. So the federal government has now offered us an instrument and our banks that will allow us to have the safety net for the next 2 years. This is linked to growth in a difficult phase. Our wind energy area is, of course, problematic but this offers us coverage and safety net you may not have had. Similar discussion has been held for the past 2 years on the EU level. So how is it possible to offer guarantees in the wind energy area? You probably heard Commission President [ Orsula ] on the line, talking about the wind power package. She talked about guarantees, and that's exactly what she meant. There are industries but there are instruments for the whole industry to offer counter guarantees. These structures are currently being developed because we see that with these high investments in the transformation to green energy, there are structural problems that must be resolved and remedied. So for the amount that is being issued, we've been able to come to an agreement with the federal government banking consortium and Siemens AG, which is approximately EUR 12 billion. The federal government has now issued the banking consortium counter guarantee of EUR 7.5 billion, meaning that both the banks and the federal government received a fee for us. The taxpayer is not burdened. And this means that the federal government receives income as per usual, even if the wind energy area -- if it had been successful and we wouldn't need to talk about this. We would want to solve the problems with which we are confronted as quickly as possible. We want to make a wind energy area as successful as possible. We don't want to overstrain this instrument, but at the moment, it's very helpful. And I'm very thankful to all parties for the constructive discussions we've had in this regard. In addition, we agreed on our product structure with Siemens AG which offers what is known as a share pledge. So this is a pause of payments, and it is a security of EUR 1 billion and this is what is known as an insurance in this particular case, it offers this insurance as a structure, given that there is a low default risk. It leads to a total structure in which all parties are involved, and we believe it is a very good agreement in order to ensure growth of Siemens Energy in the long term. The federal government issuing guarantees is the norm. I'm sure that we're all aware of it in the export business with what is known as [ Hermes ] guarantees. These have been promoting for trade for decades, and I would like to specifically thank the federal government for all of the work that they've done and for the constructive discussion over the past weeks. And I'd particularly like to thank our colleagues from the banks who have worked night and day. Also like to thank Siemens AG, [ Roland Busch], who accompanied our discussions very constructively. Unfortunately, this is often being represented in the press in different ways differently. I always found our discussions, however, to be very constructive and expedient though they weren't always easy. Our contribution to the transformation to green energy is what I'd like to talk about now, and I'll offer you some examples at a way Siemens Energy is relevant for the transformation to Green Energy. The first project that you can see bridges of fossil fuel wells to the new well a project in France, it's a gas turbine. It's the high flex power project which can be powered by hydrogen and natural gas. This has already been demonstrated. It has an electrolyzer which is a plant to produce hydrogen as a plan that shows how the hydrogen molecule can be used as a storage energy via a gas turbine. Operation has now successfully launched the second project with 1.5 gigawatts is the largest European [ offer ] wind project with 139 of our 11-megawatt wind turbines having placed in Holland. The Holland [indiscernible] was launched recently. This can power 1.5 million homes with renewable energy. The second image from the right is in China bridge in Ireland. It's a product with which we are building a great connection to improve grid stabilizing and to also use large-scale battery storage. This is a question how can access renewable energy be captured and transported, stored. On the other hand, there's a question of stabilizing the grid, it's able to power approximately 9,500 homes for a day is something that the transformation to green energy needs. I'm very proud that we're making progress in hydrogen. Many of you were in Berlin last week when we opened our factory with our partner [ Air Liquide], so we have 200 megawatts capacity, which is being delivered to [ Normandie ] from 2026, [ Air Liquide ] will be able to produce 28,000 tonnes of green hydrogen year for the mobility sector. So you now see what we're aiming for. Renewable energy. The energy has to be transported. Grid, therefore, has to be stabilized. We have to manufacture green hydrogen for industry, and transitional technologies will be required in order to support the grid. Existing gas turbines can be used for this purpose. If they're converted is, therefore, proof that in terms of structure, this can work. In addition to ensuring guarantees and growth, we've also pursued other goals. So for example, strengthening our balance sheet. That is an absolute priority for us. First transactions of parts of the companies have already been initiated lease not belonging to the core company, for example, in our high-voltage branch to the investor Triton. Further divestments of this type are also planned so that we can focus even more on our core business. Furthermore, we have agreed with Siemens AG to sell 18% of its interest to [ Siemens, India Limited ]. Given that Siemens India is a listed company is an aim to separate the 2 companies. This is a process we aim to accelerate. Now we currently hold 24% of this company. And step by step, we will separate the 2. This is the first of these steps. It's not a question of how we operate in India. India is a key market for us, and it will remain so. It is a key market also for workforce, and we will expand into this market intensively. However, this enables us to separate the companies as quickly as possible. It also means that we have the cash inflow of EUR 2.1 billion. In total, we expect cash inflows [indiscernible] higher between EUR 2.5 billion and EUR 3 billion in 2024. So I'd now like to pass the floor to Maria.
Thank you. Hello, everybody. Hello to those of you who are with us here in the room. Warm welcome from my side and hello to everybody who's joining on the web today. It's my pleasure to take you through our fourth quarter results and, of course, our annual results as well, and I'll take you through. And of course, happy to take your questions afterwards.
If we can please start, yes, on the next page, starting with an overview on the Siemens Energy Group performance for fiscal year 2023. As Christian said, we had an excellent performance of the Gas and Power businesses for the fiscal year '23. Looking at gas services, grid technologies and transformation of industry. This was characterized by strong orders, so very strong top line, rigorous project execution and operational improvements. These improvements we've been working on for many years to ensure that we increase accordingly our profitability. This was overshadowed by the challenges that persist at Siemens Gamesa, where we continue to deal with, as Christian mentioned, the onshore issues, looking at increased product costs and the offshore ramp-up challenges. However, our market overall remains strong. As a group, we managed to increase orders by 34% comparable to just over EUR 50 billion with a very strong quarter 4 of last year. We see large orders across all businesses and particularly at our Grid Technologies business including major HVDC orders and a significant offshore order at Siemens Gamesa helped that increase. Our order backlog hit a new high of EUR 112 billion. Revenue grew across all segments, excluding Siemens Gamesa. On a comparable basis, it was up by just shy of 10%, which brings us comparably and comfortably to the midpoint of our revenue growth guidance of 9% to 11%. Profit before special items was negative minus EUR 2.8 billion due to the loss at Siemens Gamesa. And therefore, our corresponding profit margin was minus 8.9%. Free cash flow pretax decreased year-over-year to EUR 784 million after an exceptionally strong prior year quarter. However, it was much better than anticipated across all businesses here, including Siemens Gamesa. It was a very strong finish to the year with respect to free cash flow. Now looking at the next slide, something that I think is a very important slide to always make sure that we understand what's in our backlog. And I think it is super important for that transparency that you see in front of us because it underpins our business plans for the future. And you can see this in our order backlog. All of our businesses had a book-to-bill ratio greater than one in the last 12 months. And of course, as mentioned, this backlog provides visibility on revenue well beyond a 12-month time frame. A large majority of our revenue for fiscal year 2024 has been already secured in our backlog. And looking at the quantum of the backlog, it covers almost 3x our annual revenue. The mix here, as you can see, is quite favorable as well. Gas Services, for example, has a very resilient backlog, thanks to its long-term service business. And importantly, all of our former Gas & Power businesses have an order to book profile that supports the midterm targets, which is more than 2/3 of our backlog. Now let's turn to liquidity, the next slide. Thank you. This is where I do want to perhaps clarify any misunderstanding. A lot has been said about our financial situation in the past week. So I really want to ensure that this is clear. First and foremost, Siemens Energy is committed to maintaining a strong balance sheet, consistent with a conservative financial risk profile and also a profile of an investment-grade rating. And this provides a very strong foundation for our continued growth as we execute through the EUR 112 billion of order backlog. As you can see on this slide, despite headwinds, we continue to have a very strong liquidity position. Looking at our cash and cash equivalents, we have EUR 4.6 billion of cash and cash equivalents, of which there was financial debt, EUR 3.2 billion is long term. This result taking into consideration our financial debt, a sat net debt position of EUR 193 million. This is lower than our previous quarter. This is also materially lower than expected. This is thanks to a stronger-than-expected free cash flow in the fourth quarter, as I mentioned. Now looking at our liquidity position. At the end of Q4, Siemens Energy had a total available liquidity of EUR 9.6 billion of which, as I just mentioned, the EUR 4.6 billion are cash and cash equivalent and EUR 5 billion of undrawn credit lines. As mentioned, we have a very strong balance sheet, and we will continue to endeavor to ensure this stays as is for the years to come. We're also doing everything we can, as you can see, with proactive measures to continue to strengthen our balance sheet. We're also in the final stages, as you know, as Christian mentioned a few other noncore disposals, which we will continue to finalize soon. So in the next slides, I'll quickly go through the business area quarterly figures and also highlight some of the annual achievements. So looking at gas services, again, a very solid quarter for gas services against a pretty strong prior year quarter with comparable increases in all areas. Overall, Gas Services had an exceptionally strong fiscal year 2023. Over 18% in revenue growth year-over-year. Now the fourth quarter of GS always has a different revenue mix. As you know, this has happened in all of the Q4s prior, where we have a lower portion of the service business. Therefore, this has a mix issue, so therefore, a correspondingly lower margin. However, for the full year, the profit margin came in on guidance at 9.3%, well within the guidance. Looking at Grid Technologies on the next slide, please. Overall, as mentioned, we had a successful year with tremendous order growth year-over-year just over 50% on a comparable basis, revenue at plus 17% and a profit margin of 7.5%, close to the upper range of the guidance for our Grid Technologies business. So really an exceptionally strong performance, well done to the GT team for just an outstanding fiscal year 2023. Now looking at the quarter, we saw a sharp improvement in profitability, thanks to the higher volume but also due to project cost improvements. And also, if you recall, the prior year quarter was burdened by strong headwinds from supply chain constraints. Orders were down year-over-year just due to a high basis of comparison. Last year, we booked 3 major orders in the last quarter. So nothing to be concerned about. Again, the year overall was very successful for GT. Moving on to transformation of industry, also showing very promising orders and revenue growth as well as a strong book-to-bill of 1.37, really paving the way for the future for this business. Like in GS, they also have a seasonality factor where the last quarter, Q4 TI is seasonally the weakest quarter. But the full year profit margin before special items came in at just over 5% above our margin guidance of 3% to 5%. This demonstrates the hard work that was put in by many to create the turnaround plan that we still now see -- the focus is paying off, and we're reaping the rewards across all the businesses within TI, well done. Now going into the next slide, Siemens Gamesa. I think Christian provided you with quite an update on the situation at our wind business and the progress that we are making. In the fourth quarter, we see a moderate comparable order growth. This is driven by the offshore and service business. This was supported by a large order in Taiwan in total worth more than EUR 2 billion. Onshore orders decreased, which, as mentioned, reflects the fact that we're pausing commercial activities for now until we are comfortable with the quality issues. Revenue declined significantly by just shy of 20% due to the known quality issues in the onshore business. And of course, we continue to have our factory load plan changes in the offshore business. As a reminder, though, we do have a tough basis of comparison in Q4 of last year. We had the sale of the wind farm development portfolio that positively impacted both revenue and profit. And just as a reminder, that was EUR 0.6 billion from the sale. Profit came in negative at the EUR 664 million mark, in line with our indication that we gave at the Q3 results. So overall, to summarize, really excellent performance of our gas services, grid technologies and transformation of industry businesses and well on track to meet the midterm targets. Of course, the financial performance of Siemens Gamesa was disappointing to us and marks a setback, but as mentioned by Christian, comprehensive measures are being taken to stabilize the operations there. Now moving on to our financial outlook and guidance. So we have our outlook for fiscal year '24, and we also have provided you with targets for fiscal year '26, a little sneak preview of what we will discuss more at the Capital Market Day next week. So for fiscal year 2024, we expect for Siemens Energy, a comparable revenue growth in the range of 3% to 7% and a profit margin before special items between negative 2% and positive 1%. We expect a net income of up to EUR 1 billion. This includes impacts from disposals and the acceleration of our portfolio transformation. We assume negative free cash flow pretax of around EUR 1 billion. And in addition, as mentioned, we expect proceeds in a range of positive EUR 2.5 billion to EUR 3 billion from disposals and the acceleration of the portfolio transformation. As mentioned on the right-hand side, you see the fiscal year '26 targets, which we will present in much more detail at the CMD next week. When it comes to revenue, we are now much more positive on the growth outlook, for example, for Grid Technology and Transformation of Industries, which is then also reflected, of course, in the higher margin targets for those 2 businesses as well for fiscal year '26. On our Capital Markets Day next week, we will give you more insights into these midterm targets for all our businesses. So with that, thank you for listening, and I'll hand back to Christian.
[Interpreted] Thank you very much, Maria. So let me move to summing up the priorities for the current financial year. Siemens Gamesa needs to be stabilized, and the quality problems in the onshore area must be resolved. The ramp-up in offshore must take place, and we will continue to work on improving the cost structure. Despite the focus on when it's necessary to utilize the market opportunities offered to us by other divisions that 70% of the 3 business areas. We also need to work on getting this backlog results and ensuring new business so that we can achieve and exceed our mid-term targets. Finally, we'll further focus, as Marie has already said, from strengthening our balance sheet by doing so, separating ourselves from the business that doesn't belong to the core business. And just a week, we will host our Capital Market Day, and we'll discuss this there. Also talk about our midterm targets in more detail. We have everything we need to make our future successful. Market prospects are excellent. Our customers trust us, and we have 96,000 employees who are passionate about the company and give the best day in, day out. The past weeks in particular, have demonstrated one thing, the success of the transformation to green energy needs Siemens Energy, and we are ready to assume this responsibility. This will make us even more successful. And we will continue working on this at full seam. And I'd now like to pass the floor back to you, Robin.
[Interpreted] Thank you very much, Maria and Christian. You have the possibility to ask your questions. As I said before, you have 2 possibilities to do so. Let me go through the instructions. Once again, it's not all that easy with 3 different languages. So let me take a minute to [indiscernible] with you. [Operator Instructions]. I'd like to begin with the Q&A around, and let's begin with Mr. [ Hobden]. Go ahead.
[Interpreted] Can you hear me okay? Great. I would like to begin with 3 questions. And the first one is very simple. Did I calculate things correctly? If you take the divestments or parts of the company that have been divested, then in the current fiscal year, you would still have a net loss. Is that correct? And you also said that up until now, you have not set up any additional provisions for the problems at Siemens Gamesa. Do I interpreting too much into that? When you say does that mean that there might be more coming? Or would you rule that out? And when we're talking about ruling things out, then we're found anticipating next week, it didn't sound as if there's going to be any major steps plan. So can you rule out the possibility of divesting a business area, for example, onshore.
[Interpreted] Let me answer the question immediately. For the current fiscal year, I think I can give back but with the other 2 questions, if that's okay with you. And then Mary, you can take the other one. When it comes to quality issues, what I said was in the last quarter, we saw no further root causes that we investigated everything. I feel comfortable with these investigations on the 4x and the 5x. I think that this is a question, well can something else happen? That's a bit difficult. The logic behind all of this is that you have maintenance repairs and something like -- but here and there -- it's like in your car, it's perfectly normal. But in Q3, we said that it's too much when it came to probability and the costs related. So that's why we deducted this analysis there more detail than ever before. So I think we have a good basis here. At this point in time, I see no other issue. And we're working all throughout this. But of course, look into the future, I do feel that we have a good base line when it comes to implementation. And I think we can then carry out these directional measures as to next week. I think you heard me right. Say that a business that is lost make like offshore, it has to be our responsibility to fix it. That's the only way I can put it. I'm not going to say anymore and I think that, as I said, we have found the right measures. In Wind, moving forward, we will have to ask what products will I have in which market. How broadly based do I want to be. And I think I said that in the last quarter as well, we'll have to focus more, both in terms of the regions and in terms of product. But I think yes, we believe in wind and [ b], we think that we can turn things around and we simply have to work through these issues -- on these issues. Of course, these are existing contractual obligations also in onshore and offshore. And our name is attached to all of this. We're certainly not going to run away from these things. It's painful yes. but it will be wrong to really expect something very spectacular next year. Maria, would you like to ask -- answer the next question?
Yes, of course. Regarding the net income for the year. So as we mentioned, we have EUR 2.5 billion to EUR 3 billion of proceeds from disposals coming in, in cash proceeds for the year. That does have an impact on the net income. So we now see that we have up to EUR 1 billion of positive net income, including the gains from these disposals.
[Interpreted] That means in operations, yes, business with wind would continue to be loss making that applies. In other words, this is the loss that we still see for wind in 2024 because we assume that it won't be until '26 that we will be breakeven in wind.
[Interpreted] I think you have a follow-up question. EUR 2.5 billion to EUR 3 billion. This is from the share package to that. Is that correct?
Yes, that's correct.
[Interpreted] The next question is [ Ms. Meyer]. Go ahead.
[Interpreted] Yes. Thank you. I'm a bit surprised. You keep talking about the balance sheet, and you want to strengthen it because you have a large amount of liquidity. So my question is, what about equity? If you take a look at the balance sheet, the equity was cut in half last year by EUR 5 billion. You had EUR 17 million in the previous year. So it's less than the goodwill of EUR 10 billion. If you take a look at the balance sheet, I'd simply be interested to see maybe the CFO can answer that for us. So I'd be interested in seeing what you have in terms of equity? What are your plans there? And then another question, I'd also be interested in more details of the device divestment in India. What is the fair value of the India share, the 24% or maybe 18%. What is the value of this in the balance sheet? And what profit do you expect as a result of this transaction. With Siemens and I'd also like to talk about the 15% discount you will be selling it at that amount. Could that perhaps have been issued on the market? I think it's quite common for large packages to have a discount, but I think that 15% is a large amount. Why such a hard discount? I think we could have put it on the market. And of course, if you consider 5%, that would also be something for a large shareholder. So maybe other Siemens Energy shareholders and you have assets to the large shareholder and then you have the discount. I find that a bit odd. Maybe you could explain that to us.
[Interpreted] I'll explain the structure and then you can do the other one when it comes to equity. Let me say something about this strategy. Why are we granting this discount? If you take a look at the Indian share market. They have very high multiples. I think [ 7], if I recall correctly. You would see this in a Western stock exchange. So they're not really liquid in that sense when we talk about the Indian share. And there was no possibility for us to do this in any other way. And that is why this is a very positive aspect. The fact that [ SBSA ] was willing to convert this to cash was a cash [ hit ] not so much a question of profit. We're talking about cash and that is the structure. The 5% you mentioned -- this is different. It's not going to Siemens AG. It's going to a security pool, so to speak. And this would be EUR 1 billion. First of all, from this shares from Siemens Energy to India, this is a separate company that was set up for this. And then we will have payments claims business agreements between Siemens Energy and [ CSAG]. These will also be entered into this. And then we will come up with EUR 1 billion. This pool is a type of reinsurance with the banks, first of all, and the federal government would have access if the guarantee is strong. This is very improbable 0.2% that I mentioned in my presentation. And if there is no agreement between the customer and Siemens Energy has to deliver then, of course, we could have access to this pool. But that is the logic behind this, but it will not be going to Siemens AG but it's this company is basically a fund for banks and also insurance companies. That's how it should be understood. I hope I explained that a bit better this time. Thank you.
Okay. Then it's a perfect segue into your question regarding [ CIL ] and the profit from [ Sal ] because, of course, there is a book value Angola. And the value that we've put forward as the proceeds is the market value as of yesterday, I believe, just to make sure we have a placeholder. But of course, this transaction will be completed in December. So it would be the market value, of course, at that time and the market value less our book value will create again. Now just to do a bit of the reverse math in [ Angola ]I've indicated that we have net income of up to EUR 1 billion in -- including gains from disposals. And as we mentioned before, there is part of the business that continues to make losses, then this profit from the disposal goes against that and hence, why we're able to guide to a positive net income of up to EUR 1 billion. Equity [ Angola, ] you're right, your math is correct. Yes. I mean if we have losses, of course, this is an impact on equity. And that's -- what we're trying to do right now is ensure that we have a solid balance sheet as you saw with a very slight or depending upon how you see a 0.2 or 0.8 net debt as of the end of fiscal year, and we're continuing to strengthen our balance sheet as we get through the slump because then as we mentioned, in fiscal year '26, we see [ SGRs ] at breakeven. The other businesses continued to contribute positively, and we're able to say we have a net income of EUR 1 billion to EUR 1.5 billion, therefore, continuing to contribute to equity. So this is exactly what I could provide as an answer. Hopefully, that helps.
[Interpreted] And then we'll move to the questions in the chat on is [indiscernible]. [indiscernible] the commercialization of the 5x platform has been paralyzed. How much time do you think it will take to have the correct equipment available and be back in sales?
[Interpreted] I'll answer in German. Thank you very much for the question. We're currently checking precisely that. Currently developing initial solutions on the basis of 5x. We're optimistic that with the corresponding pages, we'll be able to use 5x as a good platform. It will still take a while. I believe that over the course of the next weeks and months, we'll be able to offer more information as to when we'll as to when this will take place exactly it's a question of planning. As soon as we entrance the market, we have to offer delivery times. That's something we're still discussing. We need to consult with our suppliers. And you know that there are still challenges with components. Of course, in these situations, we'll work together with other suppliers as well. We still need to clarify this point. We're currently using a task force, which is preparing precisely that. And as I've said, we are working on it, and I'm optimistic that in the next weeks and months, we'll have a good basis for this.
No further question from the chat. Many colleagues from Spain have participants also from Beijing and Hong Kong, given the guarantees how can we ensure the Delta being in the EUR 12 billion or EUR 15 billion. How has this number being achieved?
[Interpreted] Well, the entire guarantee volume issue is actually far higher than the EUR 7.5 million to EUR 12 million. I think that we've understood this, we are not new in this area. We are certainly working on these guarantees. We are discussing it with the various countries. Ultimately, this is a very common instruments in the reinsurance systems in various countries. We will discuss this with those countries in which we have places. We've discussed this in Germany because, of course, we have 26,000 employees, and we are constantly increasing in this country, we'll continue to do the same in other countries. The second point is the European Union with its wind energy power package, which aims to create guarantees for large-scale wind energy projects because that wasn't just concern us, but also our suppliers and competitors. This is currently being developed. Where is it coming from? How is it structured? How can it be paid for? What is the repayment guarantee? But I believe that at the beginning of next year, we'll have the corresponding instruments for it. We'll work through this and work through the individual questions.
Thank you. In the room, we have [ Mr. Hanover] a question.
[Interpreted] Just 2 follow-up questions. Do you need a political solution for the question of guarantees or from 2026, would you be able to do this yourselves if you have profit in wind? Secondly, the wind energy area is not currently being analyzed from more possible areas in terms of offshore. Is that right?
[Interpreted] Have we been so successful in wind energy as we had planned and would already be making profits, then we wouldn't need to talk about the guarantees of the federal government. Our rating would have been high enough. And that must always remain our aim is to use this instrument for as short a time as possible. And that's also one of the reasons we will be strengthening our balance sheet because this doesn't need those back counter guarantees. We're in a very good position. We have 17% -- 70% successful business and then we're talking about renewable energies and the best placed companies were making profit, that will be a problem 2 years ago. I started having this discussion with the European Union. That's actually how we offered our input in the wind energy package. Because there are suppliers behind all of these stories. These are companies that have small margins, they need to grow. In the renewables sector, this is an important topic and that's why we've discussed it with the European Union. But for us, certainly, with other strong areas, this needs to be solved by way of normal commercial banking models. So wind energy as a whole, off onshore is adverse is not up for discussion. Onshore is something that you'll hear me go about next week as well, but I wouldn't say anything different. You will hear from us, however, that we'll focus on the most important regions, products and improve structures. And that needs to be done before we think about anything else. We need to assess time and again whether business is going to achieve its midterm profitability targets. Offshore wind is the largest area. It has a profitable service business. But ultimately, we need to achieve profits corridor with our midterm targets. Otherwise, this will always be something that we'll have to check. But currently, we'll be focusing next week on improving problematic structures in order to stop this leak that's occurring. So we now move to other colleagues.
So the 96,000 employees, how many of them are actually working in wind and where are the largest sites? [ Mr. Herman ] is asking these questions. If you're thinking about recalling products, 5x your newest products in order to ramp up other business areas, will this not lead to problems of capacity in your factories? What would this mean for your employees in the factories? Would it mean decreasing in the number of jobs?
[Interpreted] Thank you very much for these good questions. I have to calculate this, first of all, of course. We always have 2 topics in this area. New business and service business, service business is approximately from 10,000 employees onwards, and I think this is 70% [ control area ]. So I think that's approximately 3,000 employees in of control and a few factories is half of the business to Siemens Companies is onshore. But this is a long-term service business. So it's the employees that actually climb on top of the turbines, for example, you can say that's a base with 50,000 turbines. That means that we have a mostly profitable business model even if there are some losses here in there. This is a system that exists globally because these are distributed well.
[Interpreted] What about production?
[Interpreted] Not today. I'll come to that. Just let me finish speaking, please. The important sites in offshore, if we're thinking about engineering. Spain, Denmark and Germany. In particular, Spain is very important because of old Gamesa. Production sites are China, India, Spain and North America. Those are the most important production site, of course. We have fewer orders, significantly few orders for 2023 and 2024, we had more incoming orders planned, those were prior to completion. This will lead to capacity utilization being reduced in individual factories and sites. But of course, we do have a backlog we need to work through. So it's necessary to consider when we're going to start and it's also necessary to consider make versus buy. In onshore area, questions regarding [ blades of horizon], certain blades that we have bought in broker. We don't always produce these blades. We do some. We don't [ process ]. So it's necessary [indiscernible] what we purchase -- what we produce in our own plants for capacity utilization, but of course, offshore capacity utilization is lower than earlier than expected earlier, which has led to a dissatisfactory result in 2023, 2024.
I still haven't understood. Are there risks here?
At this point in time, this question is still open. We haven't talked about closing down sites, but of course, these discussions are held now and again, in terms of which countries require measures in South America given 2023, we discussed certain things that wouldn't be continued and win the industry sites in several areas and regions where projects are happening as to whether that's the right way forward -- that's a question for another time. But in terms of capacity utilization, we haven't yet talked about absolute closures. I cannot confirm what is being printed in the press. And of course, we'll offer you these numbers in more detail.
I have a couple of follow-up questions, Mr. Bruch. The Siemens Energy structure, is this acceptable for the future? You said a number of times today, that the legacy area, and that is the survive -- this is what secures the survival of the company. My question is, does such a major structure such as what you have? Does it make sense? That's my first question. And the second question is we have a dividend ban and how long is this ban in place? Can you put a time line on that? And maybe an add-on question on the issues in offshore. Have you seen any major cancellations from customers for offshore wind turbines as a result of the ramifications in the U.S. And now another question. Are you planning a capital increase?
[Interpreted] Okay. I'll begin with the first question. Does the structure make sense now? If in areas such as we loses money that, of course, have question strategy. No question there. We are having a very careful look at this. In other words, what are we going to focus on, how quick will the transformation be? When we first started, we had a very big [ continuous ] issue not only when it comes to the business areas, but also the whole set up. I think you're familiar with this 23 SAP systems, also a lot of different IT systems, a lot had to be harvested over the last 3 years. There are many areas where we have different issues. But they also have synergies, data, technology, execution. Maybe we take a look at when we can see from -- we can say everything would very well. We have to ask these questions, what will our strategy be going forward? You've always said we will also have to have transformation in all technologies to new technologies with a certain growth rate, but also with certain requirements with regard to profitability. Some of them create these requirements but not all business areas so that's how we would have a look at the portfolio and see what structure will take us where we need to be I look at things difficult than I did 2 years ago [indiscernible]. We did not estimate the grid as much as it was, much earlier than gas turbines. We thought that was the case. Things are changing. Underlying conditions are changing. We also see this is an opportunity. We will need to continue to work on our portfolio. It's not so much the basic structure in some areas, I must be honest here and say when we take a look at onshore quality, then we can see we had the situation in '17 through 2020. These are the things that we are finding very painful, the errors that need to be corrected. It's not only the structure per se in the business areas that needs to be criticized. The basic structure is not the issue. But of course, we have to be open enough to say and to ask yourself, is what I thought 2 years ago, correct? Or do we have to say, "No, we're going to have to change things." And the final analysis, we will have to meet the profitability and growth targets. [indiscernible] you also asked about offshore wind.
Any cancellations with regards to United States? I think that's what you're focusing on there.
[Interpreted] Individual projects have disappeared, so to speak, and things have been reduced as a result of what we see here. Nothing was canceled from the backlog, if that's what you're getting at. And that's why I said I'm looking at 2024 in this way. We were in a phase where we need to reflect. You have to see what the projects need to look like. There's one major customer of ours and they have made some announcements recently. Of course, this has an impact on how many projects are awarded and the interest costs, all of this have an impact. So I assume that in 2024 that the incoming orders will be low. I think we have to sort things out in this industry.
I will talk about the capital raise now. So thank you for the question, of course. And maybe just to reflect upon what we mentioned with respect to the measures we're already proactively taking. The EUR 2.5 billion to EUR 3 billion, these are measures as you see that will have cash impact this year, yes. So if you look at our balance sheet, this actually gives us the ability to be net cash this year when those proceeds are in. And all of the proceeds will come in, in this fiscal year. That's what's planned. And of course, this is very important to us. What I always say is we need a balance sheet that has an investment-grade profile. But as you see, there's more and quite some optionality that we have as a company in order to continue to strengthen the balance sheet if need be. But it's not just about strengthening the balance sheet. It's also about, as Christian mentioned, how do we continue to optimize or capitalize on opportunities within our business. You see the massive order growth. There are opportunities that we would look to see and how we accelerate, for example, our divestment program already to make sure that we are able to capitalize on those opportunities. So we have all options available to us. This is for sure. And again, we remain committed to having a solid balance sheet.
[ Mr. Flamig, ] and then we will turn to the chat again. [ Mr. Fleming ] from the person.
I think I have 3 questions, one for Mr. Bruch and 2 for Ms. Ferraro. Mr. Bruch, you said in wind, you will -- it's a question of focusing and which products will be offered where. Now when you talk about wind, they are -- it's an industry that's in deficit. What considerations are you using here? How do you sift through it all in other words? And maybe you could talk about the revenue volume. What do you have there in your analysis?
You said that put these minutes better than expected and the cash flow in the fourth quarter has been better than expected. Could you give us the relevant factors for this development. And the second one, Siemens Energy makes a huge loss. Nevertheless, you pay taxes of EUR 1.2 billion. Why is this so?
[Interpreted] Let me begin with rationality. At the end of the day, the question is, in the medium term, can I enter this target margin [indiscernible] 8%? And for us, and for the competition, we've also had somewhere up to 10%. That's what should be possible in this area. So these are medium long-term charges but with rationality, I have to look and see how much volume can I cover with one product because a lot to depend on doing the same thing many times. The same turbine and productivity is going to be increased. About Siemens [indiscernible] lots of different turbine conversions to come sort of different market, not just for the 5x with [indiscernible] as business I don't need all of that. How many markets can I talk about this? That's one idea behind all of this and this might mean that I can't even off of my product in certain product market. So we'd have to say, what can I do so that manufacturing and productivity can be kept as simple as possible so that I can used the same thing again. Another possibility is to take a look at the competitors there. A good example will be Chinese competition in certain markets, especially capital construction, financing, et cetera. And of course, I don't have to enter into this competition, I can focus on where the large markets are located and we have -- Western supplier can act. We will not be acting. We don't want to act in every region globally speaking. So as a matter of principle, we make a distinction between onshore and offshore. Offshore is a much more global market. It's only in 8 to 10 countries and it's much of a focus. That's why it's a question here when will we have the next largest turbine, what is the service life for this product and it's less a question of countries and regions. It's a question of simplification and focusing and the question is, will I be in the providence in the [indiscernible] and how much money do I have to invest up front? The wind industry has to invest in plans for product development. They have to strike a balance with my investments. I have to be able to have as much revenue as possible. So I might not invest in a region where I might have a market share but at the same time, I simply would not have enough of the market to get the money back that I've invested. So this is all driven by profitability expectations. You could say this saves us in complication from our competition. Industry believes that in the medium term, our profits can deeply realize we are behind -- with behind competition because of our quality issues -- and that is why I am convinced that in selected markets, we do have a good profit pool. Otherwise, we wouldn't be there.
The net debt and the cash flow, yes, it was better than expected, as I mentioned. And it actually is across the board in all business areas. And I actually looked into this in quite a detailed manner. A lot of this was just based on, of course, our top line development with respect to advanced payments, et cetera. You also may have noticed that on our balance sheet, we have a favorable trend there with respect to our contract liabilities that also helped. And something that I think the team has done a very good job at this year is looking at overdue receivables. I mentioned in other quarters. And for example, in Q4, we were able to actually collect one overdue, which is quite sizable in a certain country that was trapped for some time. So all of these factors really added to this exceptional, let's say, free cash flow and, therefore, less net debt for the quarter. Based on the second question, yes, you're absolutely right. We're making losses. And unfortunately, we continue to pay tax. This is due to the unfortunate business situation, of course, in the downturn in the business in Siemens Gamesa. We're unfortunately not able to utilize deferred tax or recognized deferred tax assets counter, let's say, where we do make profits with losses at this point in time. So you're right, it's unfortunately, it's a double impact for us. We're watching that very closely and doing whatever we can, but this is a situation that we have right now.
Does that answer your question, [ Mr. Flemmings]? Excellent. Let's take a look at the chat. This is a question for an [ engineer]. Mr. Bruch, could you explain once again which correctional measures exactly have been carried out for the 4x and 5x platforms and how this works in operative manager manner, but please explain it for the labor. Well, I'm glad that the Manager Magazine is asking a customer of engineering.
This is a great number of topics. What is important for error-free operation, is improving usability of certain problems. Less critical components, I've mentioned blades and storage. For the blades, it was necessary to repair these on the turbines themselves. So perhaps to sand down a particular area and then refill it then in a very simple manner. And then if you climb back down, in other cases, it might have been necessary to remove the blade entirely. For the bearings, more a question of which point is the where -- so high on the bearing that it needs to be replaced, if this needs to be replaced, this has to be cared out with crane therefore, requires more planning. This takes place with coordination that requires prioritization for 5x, part of these turbines are still in the plants or on construction -- in the construction side. So if we noticed that certain things need to be repaired, we can move this forward in order to deliver more quickly for the customers. Regardless of the wind regime, we can see what the wear and tear is like and when things will need to be done. The planning is possible. There are also smaller topics on the fringes and if we are installing something anyway, then we can carry out ABCDE, and that's why -- similarly to automotive recall actions, we can act in a similar way in order to ensure error-free operation for 20 to 30 years. So the problematic areas are those blades and bearings. There are various solutions is possible. It is complex. We don't have a one-stop solution for everything when we introduced this, we had said that we have various suppliers for, for example, a bearing. That don't always mean that we can use the same repair solution. Moving forward. Therefore, we will, of course, have to coordinate closely with our customers.
For instance, from Javier Radio from [ Sinodis]. If we talk about further cost reductions and optimization of processes, does this mean that redundancies and plant closures will take place at Siemens Gamesa and especially in Spain.
[Interpreted] At the moment, we do not have any specific plans for this. It's necessary to bear in mind -- we have -- we've been acquiring and hiring the whole time, more so than any redundancies or the like. So the question is, how can we actually redirect staff? If we shift this businesses in order to reflect upon this. Well, we do have no plans for redundancies. But of course, we do have much at our disposal and that is the most important thing. As I said, Spain is such an important site for us. You know that the wind represent headquarters are in Spain. And for me at the moment, this is not up for discussion. Thank you very much. Then I'll pass the floor back to someone here.
I'm interested as to how concerned you are about your investment rate. If you were to lose 11, a level, would this have an impact on the guarantees? I have a question about the guarantees, what are the fees that you have to pay? And the crux, the crucial question, Gamesa in 2017, '18, '19, you move Gamesa to Siemens AG. What debt weather back then?
[Interpreted] Or perhaps I could. -- so you were talking about guarantees and fees. That was the first question. The investment rate, maria will answer this question. The guarantees and profits that's currently being negotiated just to clarify this point. So we have a structure which has been defined in terms of which fees are paid and when. This is being negotiated, and it will be finalized in the coming weeks and months. What is important is that these are fees which are normal comment for the market. This is assistance. Of course, it has to be a commercial model but it is not assistance. Is it common for the market? Once again, this is a press conference. And I take it you depend on what you've just said and what impact does that have on the investment grade? What are the rest -- what is the exposure created the bank? We're talking about the banking consortium earlier and Maria will discuss this as well. There is no one true number. What is important is that there are conditions that regulatory authorities would agree to that and that this is done in a commercial way as in private pass. The Siemens Gamesa, I don't necessarily want to talk about whose fault it is, but our problems are more complex than this. Some things can be seen in supervisory Board, other things cannot be if they go run deeper. Some things are simply down to the industry. Race has been created as we will be able to create the next turbine, but we have to ask ourselves, why did this happen in order to learn from it but saying who is responsible in nonsensical. From the perspective of the Board, we, of course, see less of what happens at a deeper level in the engineering area. So I think talking about [indiscernible] and fault is the on discussion at this point.
I already said regarding the investment-grade rating. We stand firm that the investment-grade rating is absolutely important to us. Of course, this is critical to our business model. I think we've said that since the beginning of the inception of the company, and we're doing everything we can to ensure that we have a balance sheet and profile of a company is deserving of an investment-grade rating. And that's exactly why we've proactively knowing that we have the cash gap for this year. We proactively implemented measures to ensure that we strengthen that balance sheet immediately with the EUR 2.5 billion to EUR 3 billion in proceeds that are coming from the acceleration of our divestment program. I think this is absolutely critical, and we're always in very good and constructive talks with S&P or our credit rating agency. And this is something that, of course, we deal with on a very, very serious basis.
Okay. Continue with [ Mr. Yes]. Have 2 questions. The first concerns India. The business there is supposed to grow, how do you want to operate? I understood that you want to leave the area completely. The second question in regards to China. We just had quotes that it would be an error to keep Chinese competitors out of the European market to deny them access to tenders because they're better in terms of technology. The ramp-up of wind power could actually be achieved with their assistance. I'd be interested to know your view on these points.
[Interpreted] As regards India, [indiscernible], we will remain to be part of Siemens India, we will still have a place in the Supervisory and Executive Board. The structure will change. However, this divesture into 2 companies. We'll have the Siemens AG so to say, or Siemens Energy AG India. That's this divestiture so that we have one Siemens AG, which is this business field and the other is the Siemens Energy business field. If you remember, that's been a report -- there was always a share swap. This will be structured in a different manner. That it is always a question of separating the companies as it stands. We will continue to operate as normal. We will continue to expand in India, expand production within our areas of work that will not change. This is merely moving forward divestiture structure.
A question from [ Martin mine], who I find to be a very competent colleague. I can't remember what was written down more exactly we said, but a few comments. It's not question of protecting the market from Chinese competitors for a wind area. We need a level playing field. And that's why we need to use guarantees. We have to see what Chinese competitors are doing. It has to be fair. We need to consider how in investments, in new products, new platforms, new factory structures are being carried out. I respect our Chinese investors. They are excellent in building production plants, for example, I've got 30 years of experience in this area. But I've also come to understand that we can keep pace with the Chinese and even beat them on an international level if we have the right solutions available to us. Our Chinese passages -- well, first of all, I should say, we need to solve our own problems first. In order to confront and beat Chinese competitors. The problem that I see is that we have countries and regions where I would question whether this is indeed a level playing field. It's necessary to talk about this, but we're not talking about separating the market. We're talking about creating criteria that are important to us as regions and countries in order to have a sustainable industry whereas production carried out, whereas research carried out, it's not so much the question who is doing it, but where it is done. What's happening with sustainability, CO2 footprint? How are these questions reflected in tenders? And for wind tenders, there is the question, is it price or is it a criteria that go beyond this. This is something that we talked about with Wind Europe. We ask them to look at this and make it broader and reflects the individual elements included therein. But -- this is not a question, as I said, of excluding from the market, the Chinese wind energy market makes up half of the global market, and we are unable to gain access to it. However, we need to look at this in a balanced manner. It is a question of a level playing field, not of exclusion. Thank you. I have another 2 questions from the room before we come to the final comments, we will go back to the chart. [ Mr. Nanea ] and onshore region. So that's not the factories and that's not service. That's 2049 colleagues. If you look at the numbers from the factories, we'll offer those numbers later on, we move to the chart to reach a minute on the financial time. Can you please elaborate on your review into the scope of Siemens Gamesa's activities. Are there some products you might stop in the future?
[Interpreted] Yes. In some areas, it might be too early to answer that question. But what we're doing now is we say how do I have to be positioned so that I can execute things possibly and how can I best manage my plan. That's what is important to me. The first especially was we took all of the different varieties, 4x and 5x large versions we had with special equipment on them. We said we're not going to do that anymore. Then we want to have a standardization of the basic product. We're not doing any of these other special things. And the second point is that we have to think about when will we be launching the products in offshore. That's the major question. How quickly do we want to move on to the next platform right now? Which I like to clearly say that we want to operate the platforms for a longer period of time. We want to sell them for a longer period of time and launch the new ones later on. We have to do the same thing over and over again. These are 2 things that are driving us. We're also taking a look at products where we can say it's just one market, which depends on one product because of the wind conditions we ask ourselves, are we the best ones to do this? Should we go into partnerships, should we divest it? We aren't going in our discussions right day, but I can't answer that question today. The question is, how can I get a very large volume with one product. Let's turn to the telephone line as us on. [Operator Instructions]. Mr. Please from Energy.
Just 2 questions on offshore wind. In the financial results, it's mentioned that there are continued ramp-up challenges in the offshore activities. You mentioned those in Q3 as well, but have they changed? And if so, how? And to the further extent on your point about simplifying the turbine portfolio where it's mentioned that the offshore is focusing on the SG-14, the new turbine. But does this mean the discontinuing of Ola turbine types? And if so, what about products projects that has already ordered those turbines?
[Interpreted] I've been answering to [indiscernible]. It's a question of how many blades, how many cells can I produce in each in each plant. This has improved considerably in offshore plans to get to earlier points, but we are still not where we need to be in terms of productivity when you consider the former business plan. That's why offshore next year will not yet be in the profitability range that we had planned. So we need to have even more measures, but we can see a clear improvement and all of the control mechanisms have been established so that we really can see which blades are being produced. And of course, we can, as I said in my presentation already, it's still a question of process, which lost a lot of employees that need to be hired and train and have to do the same thing again and again, so we can increase productivity in the long play, the offshore blades. Here we have to see, is quality good enough and are the processes correct. These are things that need to be trained. So this is why the profit life of a product is important. Things are improving. Yes, but we haven't achieved everything we want to achieve. It will occupy us for all of 2024. So that we can be where we want to be. When it comes to real products, yes, we have 15, 16 megawatt trials entering the market, and we're still constructing the 11 one and we look at different markets and the contracts that we have. Existing turbines those contracts that have been concluded and will be executed. Nothing will change. This is a gradual launch of a new product and then we'll have the ramp-up on the one hand and phasing out on the other hand. And the products are such that you begin with a category and a blade leg and the next would be the nacelle remains same, but the blade becomes long. So these are step by step improvements which will be coming, but it's a process with plan. It's running on plan. and it doesn't change anything with regard to the backlog or project execution. We have a total of 6 more questions. We're a bit beyond the time we had allocated but please try to be quick, so we'll have time for quick answers from [indiscernible] as well, and they will go into the chat, and then we can conclude. Go ahead, [ Mr. Baer].
I just wanted to ask what the plans for the U.S. markets are following the closure of the Virginia bleed manufacturing facility?
[Interpreted] I'm not sure I understood you correctly. The U.S. market?
Sorry. It was just I want to get some more information on the discontinuation of the Virginia Blade Manufacturing Policy and the plans for the U.S. market following that.
[Interpreted] On the one hand, we have an existing site still there and there was an option to expand it, which we did not carry out that has been pubished. The reason is we said that we didn't see the projects behind this. If in the future, projects were to look interesting in the future, then we can reconsider it, but at this point in time the expansion -- that is something that is not being continued. But as I said in the Q3 call, we will be focusing on existing plants and their optimization and improving their capacity utilization as opposed to expansions and new sites. We'll take one step at a time.
[ Back to Javier from Single tears]. Is there any news on the process of selling factories in Spain?
[Interpreted] No. This is still part of our one make versus buy discussions. These are still ongoing They have not been completed. And we will inform you as soon as we come to a conclusion there. But this is more a question of who is the best owner of what? Thank you. And now I see [ Mr. Rice ] in the chat from Dow Jones.
Until when do these guarantees [indiscernible]. These are details that have to clarify. We want them to be as short as possible. We will have to really work hard on our balance sheet. I cannot say right now how long these guarantees will be in effect. But as I said it's in our interest, it's in the interest of our shareholders to have as short as possible. But I assume it will be less than 2 years. But this is not something you have to wait and see on. We have a structure. We have certain planning for the next 2 years, but it's our responsibility to no longer require these guarantees.
And then a follow-up question, which is in the chat as well. And that is in the press release from the government, they talked about the ban on dividends. Could you give us your point of view on that?
[Interpreted] That too is something that is to be discussed in detail. This is one of the conditions. It's actually common here. I think that's something we need to talk about, but it is in the paper. We will also have to clarify this with the federal government, but it's quite clear as long as we are a loss-making company, and the government is giving us a guarantee, then I can understand this requirement. And that's why it's so very important for us to the avoid this. We want to avoid needing such guarantees as long as this is the case, we will be in a situation where we don't have any net income and that is the prerequisite of paying out a dividend. And that's why this is also quite logical. So the main target must be we want to generate net income so that we would then be in a position to pay a dividend. Thank you very much.
I just have 2 very brief questions, Ms. Ferraro. Actually when you actually hope or expect the credit rating or investment grade rating that has been downgraded to be upgraded again, something like that. [indiscernible] which regions or markets are particularly in your focus regarding your assessments of where you'd like to work in the future.
Yes. Thank you. Well fit for the question regarding the credit rating. So we are right now, if you may have read that S&P published that we're under credit watch. In that credit watch, they indicated they gave us actually a lot of praise for the measures that we're undertaking that I discussed earlier, the product measures for the balance sheet. They also recognize the efforts of the rest of the parts of the business. But of course, also reflected with respect to the [ SGRE ] impact on us as a group. They've also indicated in their report that there are certain things that they need to see, which today is one of them. Of course, to see our publications and so on, even including the Capital Market Day to some extent, where then and at that point, they will determine if the credit watch is lifted. So that's where we stand right now. So there has not been a credit action as such, we still have our investment grade rating. So no change on the business today.
[Interpreted] The markets we were looking at it, but we are a European company. Europe is a key market it will remain to be so in the offshore area. It's growing significantly for onshore. So Europe will be an important market for us. That is clear. The U.S.A. also offers attractive conditions for offshore. Onshore we'll have to see what happens given these shifted options and the reaction of the U.S. government. But of course, or anything else, we'll have to see what happens. Those are 2 such central markets that offer a significant volume. And then we need to ask the question in how many markets do we need to be present? Of course, my focus is Europe and the U.S.A. There are always opportunistic markets where the same products are more thinking about products work due to the wind conditions. But of course, that would have to be looked at later on.
Thank you to my colleague, [ Mr. Stahl ] once again, do you have another question?
Mr. Bruch, an important question. We all want wind energy. We all need wind energy. However, it seems impossible to earn money with this. Can you name 5 reasons as to why that's the case?
Siemens Gamesa offered a booklet in which these 5 reasons are listed labs. Ultimately, this industry grew very rapidly. And I think that we underestimated these growing pains. It's not uncommon and other plant construction industries. We've forgotten, however, what this was like because it took base 30 years ago. One significant problem is that products were introduced far too quickly. Second is supply chains, which weren't stabilize fast enough then, of course, the war, corona, increased cost which couldn't be covered by normal inflation increases. And thirdly, we cannot forget the price for wind energy decrease the collapsed dramatically. We saw a stable increase, but then we suddenly saw a downward spiral in prices. And this was a question of the economy of as simply the cheapest form of creating energy. The industry did not face up to this quickly, especially when considering introducing new products. What is important is planability. That is a topic that after a significant wave of projects, we had a sudden collapse and our factories are not all used at full capacity and we therefore had to go down in terms of productivity. So we need plantability. We need stability for the production for the product. We also need a risk profile for projects between our customers and our suppliers, which is balanced in terms of equipment. We cannot forget that many companies and a significant amount of money in operating wind farms. There is so much opportunity to be had, and this needs to be balanced. As I said, these are growing pains of a very young industry, which are extremely unfortunate.
Ms. Mayer, the final question from the room before we move back to the chat. Two short questions. In summary, you founded 2 committees, one task force of the Supervisory Board, where all of these details are supposed to be discussed and illuminated. How could this have happened? What expectations do you have of these committees? The second question I have is that I'd like to take a step back. There was a real shock for the market at the end of October when we found out that you had to ask the federal government for a [indiscernible]. My question is, how could it get this far? We all know that wind energy turbines are complex. We've known that for a few years. It seems to be a bottomless pit ultimately, of complexity. The rating was downgraded in July. Cash outflow was not particularly high due to the new quality problems. So this cash was still led due to high down payments. How can there be such a cash gap that you need so much cash, Ms. Ferraro? Could you have ranged the alarms faster? Perhaps 6 months ago, could you have carried out a capital increase? Why did you let it get this far?
[Interpreted] Perhaps I can respond to the question of the quality task force and income. All of the large problems we analyzed the root causes [ tides ] for example. There are a few completion reports, but engineer teams looked at these. They assess the root causes. Either faster or more longer-term correctional measures are being defined to work out what can be improved or repaired. Regards the quality task force, I said this at the time. I'm sure that this will continue to exist for one to 2 years in order to garner experience to consider which projects need to be looked at first and later on, there is much to work through. The special committee is assessing the next row of defense, so to say. They look at provisions, which are established and how we can move forward. That is what the cyber committee does. It carries out comparable assessments and considers what can be improved in the future. But as I said, at the moment, it has understood the problems and it is now looking at implementation. Before you answer, Maria. I've consciously said that quality and guarantees -- this topic was -- we launched approximately 2 years ago, and that's when we started talking to the federal government. Our order books are actually growing more quickly than our revenue. For a company that is a significant challenge in a low-margin business area -- at any rate, this would have been a topic that would have always concerned us. And I was rather surprised you wrote a very good article [ Ms. Mayer. ] I have to mention that. Congratulations, but many people understood this incorrectly. A question of state aid and cash inflow. As a business we began to look at the complexity of guarantees very early. We did not do this at how the high-quality problem costs in the third quarter of Siemens Gamesa had its heart. The quality limitations that we had continue to limit us in our planning for 2024. So if we have productivity, the quality issues now. They're not going to disappear by tomorrow. So business planning of Siemens Gamesa is actually deteriorated significantly and given that we had EUR 15 billion -- we have EUR 15 billion each year, so EUR 7.5 billion in guarantees have to be issued or drawn upon each time. So it's these 2 effects, especially for Siemens Gamesa came together. But we did say that the topic of guarantees was very important early on, and this hasn't been announced just today with the wind energy market.
To confuse the guarantee topic with the cash topic that you're rightly bringing up. If you remember in Q3, we said at the time that our assumption for the quality issue for fiscal year '23 was going to be a small amount because exactly the work that Christian mentioned had to be done to understand exactly when are the repairs need to be made, what are the corrective actions? And when will -- because the charge was taken, but when will the cash then need to be, let's say, spent into the future? And so Angola, that's exactly what we've now done. And we've said, okay, '24 we have an impact, '25, we have an impact. And then we've always indicated that the curve kind of goes like this. What we now know is that there's 50% of the cash between now and 2030 that will be spent. And then the rest will be spent well after into the future because it is based on our contractual commitments right? And we also said that we try to get those repairs in with the regular maintenance intervals wherever possible. So that was only known as we did our work. And of course, the second topic, Angola that we mentioned in Q3, which also has an impact in 2024 is that we indicated there would be a consequential profit impact because of the onerous backlog has increased now because of the quality issues. And of course, even for those that are not onerous contracts that is in the onshore business, for example, because of the quality costs, if their profit was this, it was then reduced accordingly into the next year, for example. So those are the impacts that have materialized for fiscal year '24 on the back after the Q3 quality issues. I hope that clarifies.
And the famous last question goes to Spain today to [indiscernible] I would assume we have already answered the question. But maybe Christian, a very quick answer. The Spanish government asks last announced last night that it is working on possible line of bank guarantees for new contracts for Siemens Gamesa abroad. How does that fit into overall guarantee scheme we just announced?
[Interpreted] As I said, there are all sorts of discussions like this that we had prior to this discussion also with the government and the German government. We had a special package with the German government in Spain. I think this was a public as mentioned in the German government's publication of the EUR 3 billion, 12 plus 3 makes 15 and the EUR 3 billion will be in countries where we're active as well. So they would also have guarantees and structures, et cetera. And as I said, of course, countries such as Spain, that's a very important country for us for wind business, but also for the European Union, with the European Investment Bank. And here, we see that this is part of an industrial measure that we want to carry out.
Thank you very much. Christian. Thank you Maria. That brings us to the end of our conference. We spent longer than intended. It seems that you had a lot of questions it was important for you to go into more detail. And I hope that Christian and Maria have answered all the questions. if any question has not been answered, of course, our press team is available after this so that they can answer your questions. That concludes our webcast. Remember, there will be an analyst call at 11:00 will be live on the Internet as well. And now we would like to thank all of you who have followed us on the phone or in the webcast or in the chat. And now we just have time for a quick cup of coffee with Christian and Maria. And I'd like to note that now we are in the background, so to speak. So that concludes today's press conference. Thank you all for coming and for your interest. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]