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Analysis - revolving CEO doors at Siemens

GERMANY: Following on the heels of GE Wind's management shuffle in Germany, Siemens Energy is bringing in Markus Tacke on 1 August replace Felix Ferlemann as CEO of its Wind Power division.

Incoming Siemens Wind Power CEO Markus Tacke
Incoming Siemens Wind Power CEO Markus Tacke

With less than three years in office as head of the two complex worlds of onshore and offshore wind energy at Siemens Energy, Ferlemann barely had time to find his feet before leaving the company "by mutual agreement to pursue new career challenges".

In contrast, Ferlemann's predecessor Andreas Nauen had spent roughly six years as head of Siemens Wind before moving to become CEO of the Suzlon-owned Repower Systems.

Siemens declined to comment on whether the change at the helm is connected to the temporary output curtailment of all turbines worldwide using the B53-type blade after breakages in California and Iowa earlier this year. The incidents were embarrassing, the company did not reveal the cost of what looks like a quality control failure. Siemens said the adhesive bonding failure responsible for the fractures was "caused by insufficient surface preparation of the root segments" — that is, the pre-cast inserts used to construct the blade root that are delivered to Siemens by a number of suppliers.

As of 30 May, the majority of wind turbines with B53 blades had been inspected and returned to operation. On a small number of blades indications of delamination have been discovered, and these blades will be replaced, according to Siemens.

Clash of opinions

Ferlemann may also have come into conflict with Siemens' corporate view on the German Energiewende — the switch to increasing reliance on renewable energies — as propagated by Peter Loescher, Siemens group chairman, on 5 June. Löscher recommended slowing the Energiewende by setting a target of 40% share of renewables electricity by 2030 instead of the current 50% — which would help Siemens conventional power station sector — and replacing the German feed-in tariff support system — which has allowed the growth of a strong turbine manufacturing sector — with wind project auctions, the winning bidder touting the cheapest electricity price. Countries with wind project auction systems generally show slower expansion of the wind sector, have little if any domestic turbine manufacturing capability and rely on heavyweight energy companies rather than generally more agile medium and small-sized project developers for wind developments.

After his switch to Siemens in October 2011 from a position as head of automotive chassis systems at Benteler-Automobiltechnik, Ferlemann provided "essential stimuli", according to Michael Suess, board member at Siemens and Siemens Energy CEO.

Ferlemann brought in best practices from the truck industry, for instance reducing the number of turbine platforms, as a step towards industrialisation of turbine production, a Siemens spokeswoman said. Siemens Wind's offering now comprises of two onshore turbine platforms and two offshore turbine platforms, each with and without gearbox respectively. The aim is to analyse turbine components, develop a modular design with standardisation of parts and to move away from vertical integration towards more outsourcing of non-key components, the Siemens spokeswoman said. The 6MW D6 platform has been developed from the start with a modular concept, she noted. Blades are a key-component and remain in-house, she stressed.

Tacke has been with Siemens since 1998 and has headed the industrial power businessunit in the oil and gas division of Siemens Energy since October 2009. He also has experience in small industrial steam turbines, of around 250MW per unit. It therefore looks as though, like Ferlemann, he is entering the wind energy field with little or no experience in the sector. But his current post has involved energy company customers that also buy wind turbines. Siemens has concentrated on large utility-scale wind projects, one of the reasons why it has not gained a foothold in the German onshore market, which generally involves small projects, said the Siemens spokeswoman.

"Tacke has yet to take up his post. It is too early too say where his aims lie," another Siemens spokesman said. But the overall target is to reduce the costs of onshore and offshore wind energy to compete directly with conventional energies within this decade and by 2030 respectively, he stressed. He cited Siemens data for average costs around the world, currently EUR 0.05-0.10/kWh for onshore wind and EUR 0.11-0.16/kWh for offshore, compared with new coal generation at EUR 0.03-0.08/kWh, new nuclear at EUR 0.05-0.08/kWh and new natural gas generation at Eur 0.02-0.07/kWh.

The outlook certainly looks upbeat in view of Siemens Wind's record incoming orders in the last business quarter reported, January-March 2013, of EUR 3.3 billion. This compares with EUR 1.2 billion and EUR 2.3 billion in the previous two quarters, September-December 2012, July to September 2012, respectively.

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