Siemens has won a contract to supply fellow German firm E.On with 500 wind turbines. Due for delivery in 2010 and installation in 2011, the deal represents the largest single wind power deal Siemens has ever signed.
The markets didn’t react well, with E.On dropping 3.5 percent to €36.51 and Siemens following suit with a 1.4 percent drop to €69.36 on Frankfurt trading. E.On is yet to recover its peak of €154 in January, despite strong first half earnings.
Why would a secure contract announcement lead to a price drop? Investors may be signalling the firms to concentrate on the oil and gas markets where they face stiff competition in Europe, especially the United Kingdom. With the falling price of oil and gas, high earnings will not come as easily as they have in the last few months and a stragetic change may be necessary. Wind turbines may have been encouraged when oil was expected to hit $150 but will they remain cost effective if the price of oil receeds? Investors seem doubtful.
I think wind turbines are more about clean energy and social responsibility that they are about efficient forms of creating energy. Renewables may be right for the planet, but it is doubtful that it makes real commercial sense.
By: UK Voter on September 13, 2008
at 5:05 pm