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Siemens Gamesa unveils its 3-year strategic plan, with the L3AD2020 program, focused on profitable growth and €2 billion of savings, designed to achieve global leadership

15 February 2018

  • The L3AD2020 program has 3 pillars: LCoE (Levelized Cost of Energy), Agility and Digitalization, and it is supported by Change Management program focusing in People and Culture
  • The company expects to outperform the market on sales
  • The costs saving are focused on procurement, technology and industrial footprint enhancements, as well as the already-announced synergies and restructuring work
  • The largest industrial merger clearly confirmed with synergy target almost duplicate to over €400 million and will be delivered one year sooner than anticipated
  • Target for 2020 calls for an EBIT margin (pre-PPA and integration and restructuring costs) of 8-10%  

Today, Siemens Gamesa Renewable Energy (SGRE) presented its 2018-2020 strategic plan, designed to deliver global leadership. It sets the foundations in 2018 for sustainable and profitable growth in the years ahead.

Against a backdrop of increasing competition, Siemens Gamesa expects to outperform the market on sales while maintaining strict balance-sheet control. With this target in mind, SGRE has launched a three-year program -L3AD2020-, articulated around three strategic cornerstones:

  • Business model agility, offering customers greater flexibility in terms of products and services, financial solutions and response times.
  • Best-in class LCoE (Levelized Cost of Energy), thanks to the technology platform, cost streamlining and operational excellence.  
  • Digital intelligence, as a differentiating factor as against its competitors. 

Also a key element in this transformation plan is the Change Management program, focused on People and Culture.

Siemens Gamesa's CEO, Markus Tacke, said that "the measures rolled out in recent months, coupled with the strategic plan we are presenting today, set Siemens Gamesa on track for strong profitable growth that will enable us to create more value for our shareholders and customers, fully bearing out the merger rationale and positioning us as leaders in an increasingly competitive environment".

The plan includes a series of measures that will unlock €2 billion of cost reductions. They include accelerated delivery of the targeted merger synergies -estimated at over €400 million by 2020-, fine-tuning of the product portfolio, procurement and industrial footprint as well as the restructuring effort already underway.

Streamlined product and service range

The company's technology strategy is premised on "one segment, one technology", which means consolidating geared technology in the onshore segment and direct-drive technology in the offshore arena. 

Siemens Gamesa expects to continue to grow in the onshore segment, increasing its market share, underpinned by its new product portfolio. To this end, during the three-year plan, it will launch new turbines under the 4.2 MW platform, with rotors spanning 132, 145 and 155 meters, as well as turbines custom-configured to address the needs of strategic markets such as the US and India.

In the offshore segment, where Siemens Gamesa is the global leader, the target is to maintain its leadership in Europe, where it has a market share of 70%, and establish itself as a benchmark player in new markets such as Taiwan and the US.

Siemens Gamesa is in the process of developing its new offshore turbine, the SG 8.0-167 DD, working to continuously improve this platform's competitiveness and laying the foundations for the development of higher-capacity platforms from 2020.

In operations and maintenance services, the company remains the number-two player worldwide and expects to leverage digitalization to grow faster than the market. By 2020 it expects to increase the portfolio for this business by 40% to 80 GW.

The wind power sector expects huge growth in the coming years. The onshore market will grow a 5% until 2020, and the offshore market will raise 13% to 2025. For Services, market size will increase by 11% to 2020.  

Meanwhile, Siemens Gamesa continues to explore businesses that complement its core wind business, such as solar power, hybrid technology and energy storage.

Financial targets

Financial guidance FY18 confirmed as previously communicated in the Q1 Earnings Release.

Underpinned by the L3AD2020 program, Siemens Gamesa has set itself well-defined growth and profitability targets for 2020:

  • Increase top line by growing in MW and EUR faster than the market
  • Reach EBIT margin excl. PPA and Integration & Restructuring costs in the range of 8-10%
  • Manage CAPEX < 5% of sales
  • Generate positive cash flow every year
  • Enhance capital efficiency with a ROCE in the range of 8-10%
  • Dividend policy: 25% of net income

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