Siemens to spin off power business and cut 10,000 jobs

German industrial giant plans to list the gas and power unit by 2020

Lisa Davis will head the' gas and power unit, in which Siemens will give up its majority stake. Reem Mohammed/The National

Siemens plans to spin off its gas and power unit while cutting costs, even as it targets greater utilities business in markets such as Iraq.

Amid flagging utilities business worldwide, the move is seen as averting the fate of rival GE, which was forced to write down its business and cut dividends to shareholders twice, the last time in December last year.

Siemens’ Gas and Power, which looks after conventional power generation and transmission, will be given “complete independence" and prepared for an initial public offering.

A stock exchange listing is expected by September 2020, the German firm said.

Siemens will also cede 59 per cent of its majority stake in its Spanish acquisition Siemens Gamesa to the gas and power unit.

Siemens plans to "remain a strong anchor shareholder in the new [gas and power] company, with a stake that is to be initially somewhat less than 50 per cent and, for the foreseeable future, above the level of a blocking minority holding”, it said.

Siemens recently spun off its healthcare unit Healthineers. The initial public offering in 2018 of a 15 per cent stake was Germany’s largest IPO in over two decades. Siemens has been looking to grow its gas power generation segment on the back of new projects in markets such as Iraq. The firm last month signed a €700 million (Dh2.8 billion) deal with the Iraqi government to rehabilitate the country’s power infrastructure.

The gas and power unit will continue to work with Siemens on such schemes, said chief executive Joe Kaeser.

"We’re convinced that this strategic decision will be positive for all participants and enable long-term value creation for customers, employees and shareholders – as can also be seen in recent market successes such as those in Iraq, which we’ll jointly continue to pursue,” he said.

The company also said cost cutting of around €2.2bn will be effected by 2023, including the almost €500m culled from the gas and power unit, which was announced in September 2018.

Around 10,000 jobs are expected to be cut by 2023, although the firm said jobs will grow by a net 10,000 globally during the same period.

In its second quarter results Siemens reported a 5 per cent decline in net income, which fell €1.9bn for the three month period ending March 31. Revenue for the period climbed 4 per cent to €20.9bn, which the company attributed to increases in its healthcare and process industries as well as its renewables business.

Orders grew 6 per cent year-on-year for the second quarter to €23.6bn, which the company said was derived from strong volumes from its mobility segment. Power and gas performed tepidly with revenues dropping 4 per cent to €2.8bn, which Siemens blamed on weak order entry in prior periods.

In an interview with The National in January, Lisa Davis, now head of the gas and power unit said oil and gas, as well as power generation was important for Siemens, particularly its business in the Middle East.