Siemens Energy AG is considering selling a substantial part of its 24% stake in a listed Indian affiliate to former parent Siemens AG as part of efforts to shore up its balance sheet, according to people familiar with the matter.
The German turbine maker may announce the divestment of shares in Mumbai-listed Siemens Ltd. as early as this week, some of the people said, asking not to be identified because the information is private. The shares are currently worth about 3.3 billion ($3.5 billion). Siemens already owns 51% of the Indian business.
At the same time, Siemens is facing pressure from the government to provide loan guarantees that are critical for Siemens Energy to take on future large projects. The government is now discussing a combination of state-backed guarantees for Siemens Energy flanked by guarantees from Siemens, its largest shareholder, according to people familiar with the matter.
Last week, Siemens Energy confirmed it’s in talks with the government about loan guarantees. It’s been seeking backing worth as much as 16 billion euro for future projects after Siemens indicated it was no longer willing to help, Bloomberg News has reported.
The guarantees provided by Siemens could cover several billion euros for future projects if the Munich-based technology giant agrees to a deal despite its previously announced intention to reduce ties with the division it spun off three years ago, the people said.
The government is ready in principle to commit as much as 8 billion euro in guarantees but expects Siemens and banks to cover the rest, according to the people.
Deliberations are ongoing, and details of the proposals could still change. A spokesperson for Siemens Energy declined to comment. A spokesperson for Siemens AG couldn’t immediately be reached.
A spokesperson for the Economy Ministry said “the government is in close talks with the company” that are ongoing, declining to provide further details.
Siemens Energy supervisory board chairman Joe Kaeser has pushed back against speculation the company might seek money from the state and sought to clarify the talks are limited to financial guarantees for future projects. Siemens Energy needs the guarantees to win new large-scale contracts to build transmission networks and gas turbines. While those units are profitable, they’re now threatened by the strain that the string of losses from the Spanish Gamesa wind unit is putting on the company’s balance sheet.
