Siemens Gamesa Renewable Energy in its new L3AD2020 (pronounced: "lead 2020") strategic plan for the 2018-20 period has presented a series of measures aimed at unlocking €2bn ($2.5bn) in cost reductions, including higher synergies than previously expected of €400m by 2020.

The German-Spanish wind OEM previously had expected €230m in synergies from the merger of Siemens Wind with Gamesa by 2019.

"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,” chief executive Markus Tacke said as the company is presenting its strategic plan at a capital market day in Madrid.

Investors were reacting positively to the announcements, with Siemens Gamesa shares rising 1.57% to €12.65 per share in early morning trading at the Madrid stock exchange.

To reach its ambitious goals, SGRE wants to grow faster than the market, both in terms of megawatts added, and profits. That includes the commitment to reach an 8-10% EBIT margin excluding PPA, integration and restructuring costs.

The OEM expects a huge growth in the wind power sector in coming years, led by a 13% growth in the offshore market per year until 2025, an 11% increase in services by 2020, and a 5% growth in onshore wind, also by 2020.

Tacke at a press conference stressed the importance of scale in the ever more competitive global wind market as one of the factors that will help SGRE reach its targets.

"Companies that have the scale, that are Tier 1 companies in this market, are able to reach the benefits of this market. It’s simply economies of scale," Tacke said.

"You can leverage your cost base, you can deploy technology even faster, and you can be there where your customers need you. We have installations in more than 90 countries. We have a permanent presence in more than 50 countries, so we are where our customers need us, and for that, scale is needed."

Chief financial officer Miguel Angel Lopez at the same event gave a positive outlook for a rising order backlog. This year, the OEM expects the order backlog to reach €9-9.6bn, with most of that coming from firm orders that will be delivered during 2018.

For the fiscal year 2019 and beyond, SGRE sees a backlog of €14.9bn, Lopez said, helped by a buoyant service and offshore wind business.

In offshore wind, the company wants to keep its leading position with a market share of more than 50%.

After already reaching the No. 1 spot in the European and indirectly also in the Chinese offshore market (via a licensing deal with Shanghai Electric), Siemens Gamesa also wants to capture that position in the growing markets for wind at sea in the US and other Asian countries, in particular Taiwan, Tacke said.

The manufacturer currently is developing a 10MW-plus offshore turbine, but the CEO said he expects its deployment starting with projects coming online in 2024 and beyond. In onshore wind technology, the company stressed a streamlining of its product portfolio that was already revealed at the WindEurope conference in Amsterdam in November.

The cost savings announced next to the expected synergies, technology advancements and digitalisation, will also come from productivity gains through an already started restructuring. While Tacke said the company currently does not plan to go beyond the already known staff reduction of 6,000 people globally, it cannot give details on where exactly workforce cuts may hit.

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

UPDATES to add stock market reaction, comment from CEO, detail throughout

Wind

Siemens Gamesa eyes €2bn in cost savings and €400m in synergies by 2020