Siemens Energy's €15 Billion Guarantee Deal: A Strategic Turnaround or Hidden Risks?

The German government's €15 billion guarantee package for Siemens Energy, announced in late 2023, marks a pivotal moment in the company's quest to stabilize its finances amid a crisis rooted in its struggling wind-turbine division, Siemens Gamesa. While the deal provides immediate liquidity to execute its €110 billion order backlog, its long-term implications—particularly for credit risk mitigation and stakeholder obligations—remain fraught with complexity. This article dissects whether the guarantees signal a sustainable turnaround or merely paper over systemic risks.

The Deal's Structure: Public-Private Risk Sharing

The €15 billion package combines €7.5 billion in government-backed guarantees and €7.5 billion from private lenders and stakeholders. The German government's counter-guarantees aim to reassure banks, which had become wary of lending to Siemens Energy due to its downgraded credit rating and mounting losses. In exchange, Siemens Energy agreed to suspend dividends and executive bonuses until obligations are met. Additionally, Siemens AG (which owns 32% of Siemens Energy) contributed €2 billion by acquiring a stake in a joint venture, Siemens Ltd, reducing its ownership to 18%.

This structure redistributes risk: taxpayers underwrite 50% of the guarantees, while Siemens AG assumes equity dilution and potential first-loss responsibility. Private banks, in turn, accept reduced returns in exchange for government-backed security.

Credit Risk Mitigation: Immediate Gains vs. Long-Term Uncertainties

The guarantees have already stabilized Siemens Energy's ability to access capital markets. shows a 3% rebound post-announcement, though shares remain 40% below 2023 highs, reflecting lingering skepticism. By securing loans to fulfill its order book—which includes gas turbines, wind farms, and hydrogen projects—the deal buys time for Siemens Energy to execute its turnaround strategy.

However, credit risk remains elevated. Siemens Gamesa's defective turbines and rising repair costs (a €4.5 billion net loss in FY2023/24) have not been fully resolved. The company must now balance executing high-margin grid and gas projects with repairing its wind division's reputation. If Siemens Energy fails to stabilize margins (currently 4–6%) or address turbine defects, the guarantees could become contingent liabilities for taxpayers and Siemens AG.

Stakeholder Obligations: Who Bears the Burden?

• Taxpayers: The German government's guarantees expose taxpayers to potential losses if Siemens Energy defaults. Critics argue this undermines fiscal prudence, especially as Siemens Energy's credit rating remains near junk status.
• Siemens AG: By acquiring Siemens Ltd's stake, Siemens AG assumes equity risk while retaining minority influence. A failure to recoup the €2 billion investment could strain its own balance sheet.
• Shareholders: Dividend suspensions and equity dilution reduce immediate returns, though long-term value hinges on the company's ability to grow its order book.

Risks and Opportunities

Risks:
1. Contingent Liabilities: The guarantees' terms are unclear if Siemens Energy's operational issues worsen. Taxpayers and Siemens AG may face calls to cover losses.
2. Wind Division Turnaround: Siemens Gamesa's path to profitability—targeted for breakeven by 2026—is uncertain. Persistent defects or market saturation could derail progress.
3. Interest Rate Pressures: High debt levels (€7.6 billion in Q2 2025) remain vulnerable to rising interest rates.

Opportunities:
1. Order Backlog Execution: Siemens Energy's €133 billion record order book (as of Q2 2025) provides a solid revenue base, especially in grid and gas services.
2. Renewable Demand: Germany's energy transition goals—targeting 80% renewables by 2030—favor Siemens Energy's core competencies in wind and hydrogen infrastructure.
3. Margin Expansion: Strong free cash flow (€1.4 billion in Q2 2025) and cost-cutting measures could improve profit margins to 10–12% by 2028, as outlined in its mid-term targets.

Investment Thesis: Buy with Caution

The guarantee deal is a lifeline for Siemens Energy, enabling it to fulfill contracts critical to Germany's climate goals. Its grid and gas divisions are already delivering high margins (16–20%), and the order book's growth (1.45 book-to-bill ratio) suggests demand resilience. However, investors must weigh these positives against lingering risks:
- Dividend Suspension: Until guarantees are lifted, shareholders face limited income.
- Wind Turbine Liabilities: Ongoing repair costs and reputational damage could cap growth.

Recommendation: Siemens Energy's shares (SIEGn.DE) offer long-term upside in renewable infrastructure, but the near-term risk-reward balance demands caution. Investors should seek entry points below €20/share (current ~€24) and monitor progress in Siemens Gamesa's turnaround. A “hold” rating is warranted until clearer margin improvements and reduced dependency on guarantees emerge.

Conclusion

The €15 billion deal is a necessary stopgap, but Siemens Energy's success hinges on executing its order book while transforming Siemens Gamesa into a profit center. For now, the guarantees mitigate credit risks, but stakeholders—taxpayers, Siemens AG, and shareholders—must remain vigilant. In a world increasingly reliant on renewable energy, Siemens Energy's strategic role ensures its survival; the question is whether it can thrive.

Final word: Siemens Energy is a buy for patient investors focused on renewable infrastructure's long-term growth, but short-term traders should tread carefully.