Siemens mulls options in Brazil

Siemens may be the dominant force in offshore wind and among the top five manufacturers in the global onshore sector, but it is falling behind its rivals in Brazil.

The German industrial giant is weighing up its options in Latin America's wind powerhouse, Siemens Wind chief executive Markus Tacke tells Recharge.

So far, the company has installed 115MW in the 2GW-a-year market, with another 356.5MW currently being built. Siemens doesn't provide order-backlog figures, but it is clear that orders are nowhere near the 2.5GW pipeline of Alstom, which GE will soon be adding to its own 2.5GW pipeline.

Vestas and Enercon's Brazilian unit Wobben also easily surpass Siemens in terms of country market share.

"Brazil is a very attractive market because of its size, but it is also a very challenging market — challenging because of...the requirements for local content in the BNDES financing schemes, which makes it very difficult for market entries," says Tacke.

Brazil's national development bank, BNDES — which offers reduced-rate loans to developers using accredited turbines — insists on local content for pretty much every component of the turbine. The growing list of criteria includes a local nacelle assembly plant by January 2016 — a huge investment for any OEM.

"We need to reconsider how to deal with that market," Tacke says. "We want to be in it. There are good opportunities for us, but what we're reviewing is how to make it more strategic."

Tacke didn't specify whether this means that the company is considering setting up its own nacelle plant. At the moment, Siemens imports nacelles into Brazil from the US.

Siemens' caution is warranted. There are already many players in a market that is known for its low power prices and thin margins, says Sydbank analyst Jacob Pedersen.

"Siemens needs to expand its global reach. But it won't be able to make a lot of money [in Brazil]," he says.

Tacke is well aware of the heightened competition in the Brazilian market and its (until recently) rock-bottom prices for manufacturers.

"Brazil is a competitive market. If you look at tenders that have been awarded, it went very low, making it hard for all OEMs to really succeed in the market," he explains.

"But you see a correction now. That's why we revisit our approach. If you look at the recent awards out of the tendering process, prices have gone up, making them more realistic."

The recent upturn is why Siemens believes it's worthwhile to take a closer look at the Brazilian market, Tacke concludes.