Siemens Takes Big Loss Due To Wind Turbine Issues

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Although the Germany-based conglomerate Siemens AG racked up some solid earnings overall in the fourth quarter of fiscal year 2014 (Q4'14), its wind power division suffered major losses due to costs related to turbine issues.

According to the company's Q4'14 financial report, the wind division recorded a EUR 66 million loss (about $82 million) in the quarter, which contrasts with a profit of EUR 179 million (around $222 million) during the same period last year.

The company attributes the drastic change to approximately $277 million in expenses incurred to replace main bearings in its onshore wind turbines and repair onshore and offshore turbine blades.

As Torsten Wolf, a Siemens spokesperson, explains, ‘Siemens has detected premature degradation of bearing raceways on main bearings in the company's 3 MW onshore turbines.’

‘The premature degradation has affected bearings from a specific supplier only; bearings from other suppliers have not shown such signs of distress,’ notes Wolf. He says a comprehensive root-cause analysis is under way in collaboration with the bearing supplier, whose name Wolf did not disclose.

‘After review of all relevant design, testing and field inspection information, Siemens has come to the preliminary conclusion that the degradation is primarily a result of certain issues in the bearing manufacturing process,’ he adds. ‘These issues appear to be related to certain batches of bearings. Siemens has initialized a process to replace affected bearings in the field.’

Wolf also comments on the losses that occurred due to turbine blade repairs.

‘Charges for blade repairs caused by harsh weather conditions (in particular offshore, but also onshore) had to be recognized,’ he says. ‘Those issues are mainly related to surface erosion beyond normal wear and tear seen on the leading edges toward the tips of turbine blades.

‘These damages are caused by the stress exerted when unusually intense rain or high amounts of spray water hit the blade tips, which move at high velocity,’ he continues. ‘On this basis, blades exposed to especially harsh weather conditions exhibit the highest erosion risk.

‘A leading edge protection based on a polyurethane coating was generally introduced on all offshore blades as a preventive action this summer and is planned to be introduced for all blades on sites with harsh weather conditions. This system has already been successfully applied for selected sites.’

Despite Siemens' losses in its wind division in Q4'14, the company says it recorded a Total Sectors profit of EUR 2.195 billion – a 28% year-over-year increase – led by substantial profit improvements in its industry and infrastructure and cities business.

Fourth-quarter revenue was level year-over-year, and net income rose 40% from the same period in 2013, reaching EUR 1.498 billion.

‘We delivered the results we originally promised for fiscal 2014 and made substantial progress in strengthening our portfolio,’ says Joe Kaeser, president and CEO of Siemens AG. ‘Vision 2020 gives us clear strategic direction going forward.’

The company unveiled its Vision 2020, a strategy to streamline and restructure the company's operations, in May.

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