Energy sector on the upswing: Siemens Energy, Manuka Resources and Nordex Group focus on a sustainable future

Innovative agreement: Siemens Energy and Iraq use associated gas for sustainable power generation

The German Federal Ministry for Economic Affairs and Energy under Economics Minister Robert Habeck recently pushed ahead with the decarbonization of private heating systems. Germany is to be heated with heat pumps and district heating, regardless of the building fabric. It does not necessarily help tenants or landlords, but it certainly helps the climate. A new document from the ministry discusses the option of dismantling gas grids in Germany. The aim is to achieve a climate-neutral heat supply by 2045, and the increased use of heat pumps or district heating in the next 10 to 15 years could render the natural gas network superfluous or costly. This is the theory proposed by the ministry under green leadership.

In 2022, natural gas covered around 1/4 of Germany's energy consumption. Consumption patterns in various sectors, in particular, influenced domestic demand. Natural gas was primarily used in industry (35%) and private households (31% for space heating and hot water). In addition, natural gas plants supplied 14% of the electricity generated in Germany and fed into the grid in 2022 (BDEW 2023).

Siemens Energy is currently making better economic progress. The Company is extending its lead in the 'gas and electricity, gas turbines and transformers' market environment. According to Reuters, the Iraqi government and Siemens Energy have signed an agreement to use associated gas from oil fields to generate electricity. Iraq burns 40% of its gas production capacity without any benefit. Thanks to Siemens Energy, this is now changing. This is according to a statement from the Iraqi Ministry of Electricity, published by the Shafaq News Agency.

The agreement includes the capture of approximately 120 million standard cubic feet (MMscf) of associated gas within six months and an additional 120 MMscf within one year. The gas will be used to operate a 2,000-megawatt (MW) power plant.

Siemens Energy itself can look back on decades of cooperation with Iraq. As early as 80 years ago, the Company (then still as parent company Siemens) helped the country in the Middle East to build local infrastructure, from building bridges across the Tigris River to constructing nuclear power plants to provide the population with a seamless power supply. Since 2018, Siemens Energy has been helping Iraq to modernize 13 of the country's power plants and add 700 MW of capacity to the grid. This agreement is worth USD 520 million. Today, 60% of the power supply is based on Siemens Energy technology.

In Q1/2024, Siemens Energy recorded a 23.9% increase in orders to EUR 15.4 billion. The total order backlog stands at EUR 118 billion. Sales increased by 12.6% to EUR 7.6 billion. Earnings before interest and taxes amounted to EUR 208 million, compared to the previous year's loss of EUR 282 million, with a profit margin of 2.7%. Pre-tax free cash flow was negative EUR 283 million, while adjusted net cash amounted to EUR 840 million. The turnaround plan for Siemens Gamesa is being continued. Whether the wind turbines will be sold will become clear in the coming weeks.

New Zealand's legislative reform accelerates Manuka Resources' vanadium project

Metals and minerals are needed worldwide to drive forward the energy transition, most of which are not available or cannot be mined domestically. Lithium is needed for the electrification of mobility, silver has become indispensable in electronics and is also used extensively in solar energy. Vanadium is considered a critical raw material, and 90% of it is used worldwide in refining steel. The addition of vanadium doubles the strength of steel, which is very popular in the construction industry. Vanadium is also used in electric vehicles. Another advantage of adding vanadium to steel is the increase in heat resistance. Vanadium-added steel is therefore suitable for the manufacture of drills, circular saws, turbine blades, shafts, crankshafts and gear wheels for transmissions, tools and surgical instruments.

China is the world's largest producer of vanadium, with a production volume of around 68,000 tons in 2023. Russia is in second place, followed by South Africa. The Australian mining and exploration company Manuka Resources has significant raw material deposits in Australia's Cobar Basin in the state of New South Wales. In addition to gold and silver, Manuka Resources also has a vanadium resource. The project is located outside New Zealand's territorial waters (within its exclusive economic zone) and has a mining license that allows the production of 5 million tons per year. It is located in coastal waters with a depth of only 20-40 meters.

Thanks to the New Zealand government, exploration of the area can start soon. At the beginning of March this year, the parliament introduced a law to fast-track project approval. The Fast Track Consenting Approvals Act is designed to fast-track the approval of major mining projects, including marine mining. All of this progress could have a positive impact on Manuka Resources' Taranaki VTM project. Dennis Karp, Executive Chairman of the Company, welcomes the government's move and emphasizes its importance to the New Zealand economy.

According to the latest investor presentation (Feb 24), the Taranaki VTM project has a world-class resource of 3.2 billion tons of vanadium, titanium and iron ore. Expected costs are anticipated to be in the lowest quartile for iron producers, between 20 and 24 USD/t FOB. The project has a mining license for a production capacity of 5 million t/p.a. for 20 years and has already received around USD 50 million in investments. The EPA's environmental permits for operations were already granted in 2017.

Nordex: Company receives order for 57 turbines in South Africa

There is good news from the Hamburg-based Nordex Group. The Company has received a major order to provide and install 57 turbines in South Africa. The order also includes a service contract for the maintenance of the turbines. A turbine usually lasts 20 years. Nordex is the market leader in South Africa, with a market share of 32% and more than 1.1 GW of installed wind capacity. The turbines will be used for a cluster of three wind farms, each with a total capacity of 112.1 MW, located in the Eastern Cape province, a region known for its excellent wind conditions.

Installation of the first turbine is scheduled for the second half of 2024, with electricity being fed into the grid in the second half of 2025. The Nordex Group will manufacture the concrete towers of the turbines locally, which will create up to 300 jobs in the region and support the local economy during the construction phase.

Nordex manufactured a total of 1,520 wind turbines in the last financial year, 18 more than in the previous year. Overall, the order backlog grew to a total of EUR 10.5 billion in the last financial year. The nominal output of the turbines rose by 7.0% to almost 8.0 GW thanks to the increased output of the wind turbines. In-house production of rotor blades amounted to 1,159 blades, while 3,476 blades were sourced from external suppliers. Rotor blades are generally made of glass fibre-reinforced plastic and weigh around 25 t when three rotor blades are used per wind turbine.

For 2024, the Nordex Group forecasts consolidated sales of around EUR 7 to 7.7 billion and an EBITDA margin of 2.0 to 4.0%. The Company expects a stronger second half of the year due to better political and economic conditions. At the end of 2024, the Company is planning a working capital ratio of less than minus 9% in relation to Group sales and investments of around EUR 175 million. In view of the positive outlook, the Company is aiming for an EBITDA margin of 8% in the medium term.

Siemens Energy is again supporting the Iraqi government to use the 40% associated gas from local oil production to generate electricity. Through this partnership, Iraq continues to benefit from a more efficient use of its gas resources. The New Zealand government has passed legislation to fast-track the approval of mining projects, which will have a positive impact on Manuka Resources' vanadium project. The Company has significant reserves in Australia's Cobar Basin and plans to produce 5 million tons per year. Thanks to this measure, exploration activities in the coastal waters where the vanadium is found can soon begin. The Taranaki VTM project has a world-class resource of 3.2 billion tons of vanadium, titanium and iron ore. The Company, known as a gold and silver producer, can thus further expand its portfolio of critical raw materials. The Nordex Group is building 57 turbines for use in South Africa. The order also includes the maintenance of the turbines, which will be used in three wind farms with a total capacity of 112.1 MW each. The Group aims for an EBITDA margin of 2.0 to 4.0% in 2024 and plans to increase this to 8% in the medium term. The prerequisites for this are conducive political framework conditions and seamless supply chains. All three companies have diverse energy generation requirements that offer investors various opportunities to increase their portfolios.