Siemens Energy: Winds of Change

**SPEAKER_1** (0:00)
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**SPEAKER_2** (1:47)
This is Business Breakdowns.
Business Breakdowns is a series of conversations with investors and operators diving deep into a single business. For each business, we explore its history, its business model, its competitive advantages, and what makes it tick. We believe every business has lessons and secrets that investors and operators can learn from. And we are here to bring them to you. To find more episodes of Breakdowns, check out joincolossus.com. All opinions expressed by hosts and podcast guests are solely their own opinions. Hosts, podcast guests, their employers, or affiliates may maintain positions in the securities discussed in this podcast. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.

**Zack Fuss** (2:35)
I'm Zack Fuss, and today we are breaking down Siemens Energy, a spinoff from industrial giant Siemens completed in 2020 Siemens Energy operates across the entire energy value chain, with a significant presence in both conventional and renewable power. They are a major player in gas turbines and power generation, while also more recently taking full control of Siemens Gamesa renewable energy. What makes this company particularly interesting is its position at the forefront of the energy transition. As the world moves towards more sustainable energy systems, Siemens is uniquely placed to bridge the gap between traditional energy sources and renewables. However, the company faces real challenges, particularly in its renewables division. Siemens Gamesa has been dealing with a litany of issues, including supply chain disruptions, project delays, and technical issues with their turbines. It presents a complex situation for Siemens Energy as they navigate the shift to green energy. The company's ability to leverage its expertise in conventional power to address these renewable energy challenges will prove to be crucial. As the global economy balances the demands of incremental energy along with a mandate of decarbonization, Siemens Energy will play a vital role. To break down Siemens Energy, I am joined by Mark Hiley, the founder and managing partner of The Analyst, a London-based independent equity research firm. We hope you enjoy this breakdown of Siemens Energy.
Mark, thanks for joining us to break down Siemens Energy. It's a business that as early as 2019, Siemens, the larger conglomerate, started to discuss its intention to separate. Now with it being an independent public company, I thought maybe we just kick things off with talking about the impetus for the demurger and what the business represents to you today.

**Mark Hiley** (4:32)
It's an interesting business. Siemens, as most people will know, is a very old company. It's over 150 years old, founded in the mid-19th century by Verner von Siemens. It's been a sprawling engineering business. They were pioneers in many of the electrical innovations in the 19th century. And then it became a much bigger industrial conglomerate through most of the 20th century. In 2019-2020, they started to discuss the spin-off of Siemens Energy, which is the business in gas and power and wind, which we'll be discussing today. But prior to that, they'd already spun off Siemens Healthineers, which was their health care business. Healthineers then went and acquired Varian, the large radiotherapy business. And Siemens AG retained their core industrial businesses, which were digital industries, is the main division, inside Siemens AG today. And that has a lot of software and industrial applications. So the idea with Siemens Energy was that in 2020, the business needed separate focus, given the megatrends which were on the horizon around renewables, grid, this sort of revolution which was coming on the world around energy networks. And also within Siemens Energy, there had been some problematic businesses. So the gas and power business, although it's profitable today, had actually had some challenges inside Siemens. It had been loss making. They'd struggled with some of the platforms. They probably had too many products and a lack of focus. So Siemens AG really from the top down was trying to improve capital allocation, start to focus really on shareholder value, which was a big change for Siemens AG, given that it was 150 year old German conglomerate and reduce complexity. So that's how Siemens Energy came about and it was spun off from Siemens in 2020 Siemens AG retained something around a 30 to 40% controlling minority shareholding. They've subsequently sold down some of their stock and put some of the shares into the Siemens AG pension fund and the pension fund has sold. And you now have Siemens Energy listed today about 20 billion euro market cap in Germany.