April 15 (Bloomberg) -- Siemens AG, Europe’s largest engineering company, got a fifth wind transmissions contract from TenneT Holding BV with terms intended to avoid a repeat of project charges that have burdened earnings.
TenneT awarded Siemens and partner Petrofac Ltd. the five-year contract as part of a transmissions project that’s valued at “significantly” more than 1 billion euros ($1.4 billion), Munich-based Siemens said in an e-mailed statement today. Earlier contracts lasted three years and were valued at about 500 million euros, Siemens said.
“We can now fully apply our broad experience gained in our first four pioneer projects in the North Sea to this project,” Karlheinz Springer, Siemens’s head of power transmissions, said in a separate statement.
Siemens has posted charges totaling 808 million euros since 2011 relating to delays in linking offshore wind farms to the grid, and warned Jan. 28 there would probably be further costs. The mounting price tag contributed to a series of missed profit goals, prompting the ouster of Chief Executive Officer Peter Loescher in July. Successor Joe Kaeser has said the company intends to be more careful in picking contracts.
Winter storms in the North Sea have also delayed projects by competitor ABB Ltd. The Zurich-based company said in January it will book $260 million in charges related to offshore wind projects and issues at its power systems division.
In addition to the five projects Siemens is working on for TenneT, ABB is carrying out three transmissions contracts and Alstom SA is completing one.
The first three projects Siemens is working on for the grid operator were initially intended to be operational in 2013, with the fourth planned for next year. Those four are expected to be working in 2015, Siemens said today.
Germany is investing in clean energy after announcing it will phase out nuclear power by 2022. While the government wants to add 6,500 megawatts of sea-based wind turbines by 2020, utilities including RWE AG and EON SE have in the past threatened to halt investment because of the grid-connection delays.
To contact the reporter on this story: Alex Webb in Munich at email@example.com
To contact the editors responsible for this story: Simon Thiel at firstname.lastname@example.org Thomas Mulier, David Risser