Billions in order from Brazil for power plant division

Gas turbine production in Berlin

As part of the current job cuts at Siemens Energy, 2,600 jobs will be lost in Germany alone.

(Photo: Siemens Energy)

Munich Siemens Energy has received a major order for its troubled power plant division from South America. The Dax group is to build a turnkey gas and steam power plant in Brazil. The overall project has a volume of around one billion euros – according to industry estimates, Siemens Energy will account for around 700 million of this.

The project is of great importance to Siemens Energy. On the one hand, the “Gas and Power” division desperately needs every order: The world market for large gas turbines, where Siemens is traditionally strong, has slumped in recent years because smaller, decentralized solutions are in demand in times of the energy transition.

That is why the division is in permanent restructuring. As part of the current job reduction program, around 2,600 jobs will be lost in Germany.

In addition, CEO Christian Bruch has long insisted that gas should play a bigger role in the energy transition. “With gas-fired power plants, we can efficiently guarantee security of supply even when demand increases,” he said recently when he presented the balance sheet for the 2020/21 financial year. Compared to coal, gas saves up to two thirds of climate-damaging emissions.

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Bruch in the economy is not alone in making this demand. “It would make absolute sense for the world to shut down all coal-fired power plants immediately and replace them with gas-fired power plants,” said the future Linde boss, Sanjiv Lamba, to the Handelsblatt. The incumbent CEO Steve Angel added: “When I talk to industrial managers, it is clear to everyone that we also need gas.” It is extremely expensive to switch to renewable energies in one fell swoop.

Gas power plants: only 80 instead of 400 turbines per year

But despite all the demands and hopes, the market for large gas turbines remains weak. The manufacturers once built up capacities for around 400 turbines a year during the boom. Most recently, the market has leveled off at around 80 turbines sold per year.

So an order like the one from Brazil comes in handy. The project company Gás Natural Açu wants to implement an LNG-to-Power project in addition to the existing GNA 1 plant in Porto do Açu in the state of Rio de Janeiro, which was also implemented with Siemens participation. The gas and steam power plant is supposed to generate electricity with the help of liquid gas.

With an output of 1.7 gigawatts, it will be the largest plant of its kind in Latin America. The complex will then have a total of three gigawatts and, according to Siemens Energy, can supply around 14 million households with electricity. The plant could be expanded to include additional power plants in the future.

Siemens Energy will supply three large HL-class gas turbines, a steam turbine, four generators, three heat recovery steam generators and the electrical and control technology. In addition, the Munich-based company is responsible for service and operation.

“This project is of strategic importance, not only because of its dimensions, but also because of its geographical location near the two most important gas pipeline systems in the north-east and south-east of Brazil,” said Siemens Energy Board Member Jochen Eickholt. The gas turbines are designed in such a way that they can also be operated with hydrogen in the future.

With the project, Brazil wants to diversify its electricity generation mix. According to experts, two thirds of the country currently uses hydropower plants.

Siemens Energy primarily earns money with service

In the 2020/21 financial year, “Gas and Power” sales increased slightly to 18.4 billion euros. The adjusted operating margin was 2.1 percent. This means that the renovation is making good progress.

The service in the power plant sector in particular is still lucrative. Renewable energies at Siemens Energy are actually supposed to contribute to growing new business.

But of all things, the wind power subsidiary Siemens Gamesa has been weak for years – and brought the entire group a loss of 560 million euros in the past fiscal year.

Problems had been caused by the ramp-up of the new 5.X generation of wind turbines. This is the first jointly developed platform by Siemens Gamesa for onshore wind turbines and the most powerful onshore turbine with gearbox to date.

The company also received its first major order from Brazil. However, a share of local production is required there – and the establishment of the new production caused difficulties.

Such problems are not to be expected with the new power plant in Brazil. The turbines are manufactured in the traditional Siemens Energy turbine plant in Berlin.

More: Siemens Energy makes heavy losses in the first year of self-employment

Handelsblatt Energie Briefing

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