Page 9 - AsiaElec Week 19

AsiaElec COMPANY NEWS AsiaElec
Fitch downgrades Siemens Gamesa
GLOBAL
FITCH Ratings has downgraded from stable to negative its outlook for global wind OEM Siemens Gamesa Renewable Energy, blaming coronavirus’s (COVID-19) effect on industrial activity and its looser links with parent Siemens.
However, the company’s longer-term pros- pects are stronger, as it will be able to use its size to withstand cost pressures as the competitive wind market eventually recovers.
Yet Fitch stressed that the company faced severe supply chain disruption during the cur- rent global lockdown, as well as pressures on its margins in the onshore wind sector.
“Fitch believes that margin improvement will be tied to an increased reliance on the service and offshore business and on the success of cost-cut- ting measures. We see implementation risk in the latter given the magnitude of cuts and possible delays following the outbreak,” the ratings group said in a note.
The revised outlook also reflects concern that the “linkage could weaken” between Siemens Gamesa and Siemens.
Siemens aims to merge its majority stake in Siemens Gamesa with its struggling gas and power division, before spinning them both off into a new company.
“In the short term, the pandemic poses chal- lenges in the form of installation delays, due to
supply-chains bottlenecks and limited manu- facturing activity, as well as postponed orders on weaker economic prospects and reduced financ- ing availability,” the note read.
However, looking further ahead, Fitch fore- cast Siemens Gamesa will be able to take advan- tage of increasing government and popular support for renewables energy.
Fitch predicts “a supportive environment for the renewable energy market over the medium to long term. Increasing concerns about global warming and rising energy demand are the key drivers of increasing power supply demand from renewable energy.”
Siemens Gamesa said last week that it had a record order backlog of €28.6bn ($31bn), 21% higher than last year.
Siemens itself predicts that wind power could account for 34% of global electricity out- put by 2040, up from 4% at present, according to a KPMG report commissioned by the Span- ish-based company.
The wind OEM recently said in a results update for the first quarter of 2020 that the COVID-19 crisis had reduced its profitability by €56mn ($60.6mn), meaning that it booked losses of €165mn ($179mn) in the quarter. Revenues fell by 8% to €2.204bn ($2.4bn), driven by lower sales of wind generators. ™
Week 19 13•May•2020 w w w . N E W S B A S E . c o m P9