Power Transmission Transform to Win Karlheinz Springer CEO Power Transmission Division Capital Market Day Siemens Energy Charlotte, December 11, 2012 © Siemens AG 2012. All rights reserved. Safe Harbour Statement This document includes supplemental financial measures that are or may be non-GAAP financial measures. New orders and order backlog; adjusted or organic growth rates of revenue and new orders; book-to-bill ratio; Total Sectors profit; return on equity (after tax), or ROE (after tax); return on capital employed (adjusted), or ROCE (adjusted); Free cash flow, or FCF; cash conversion rate, or CCR; adjusted EBITDA; adjusted EBIT; adjusted EBITDA margins, earnings effects from purchase price allocation, or PPA effects; net debt and adjusted industrial net debt are or may be such non-GAAP financial measures. These supplemental financial measures should not be viewed in isolation as alternatives to measures of Siemens’ financial condition, results of operations or cash flows as presented in accordance with IFRS in its Consolidated Financial Statements. Other companies that report or describe similarly titled financial measures may calculate them differently. Definitions of these supplemental financial measures, a discussion of the most directly comparable IFRS financial measures, information regarding the usefulness of Siemens’ supplemental financial measures, the limitations associated with these measures and reconciliations to the most comparable IFRS financial measures are available on Siemens’ Investor Relations website at www.siemens.com/nonGAAP. For additional information, see supplemental financial measures and the related discussion in Siemens’ most recent annual report on Form 20-F, which can be found on our Investor Relations website or via the EDGAR system on the website of the United States Securities and Exchange Commission. This document contains statements related to our future business and financial performance and future events or developments involving Siemens that may constitute forwardlooking statements. These statements may be identified by words such as “expects,” “looks forward to,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “will,” “project” or words of similar meaning. We may also make forward-looking statements in other reports, in presentations, in material delivered to stockholders and in press releases. In addition, our representatives may from time to time make oral forward-looking statements. 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Due to rounding, numbers presented throughout this and other documents may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures. Page 2 December 11, 2012 Capital Market Day Energy © Siemens AG 2012. All rights reserved. CEO Power Transmission Division New Division set-up with sharpened business focus Power Transmission Products High Voltage Transformers Technology leader AC circuit breakers Instrument transformers Bushings Coils Surge arresters Gas-insulated switchgear #1 Page 3 December 11, 2012 Solutions Transmission Solutions Total cost of ownership Comprehensive solutions Power transformers HVDC transformers Distribution transformers Traction transformers Phase shifters High-voltage, direct current transmission (HVDC) Reactive power compensation / FACTS Gas- and air insulated substations #2 Capital Market Day Energy #2 © Siemens AG 2012. All rights reserved. CEO Power Transmission Division Grid access projects & aggressive competition made a challenging 2012 Grid access projects German North Sea €570m project charges in FY 12 Four orders for innovative HVDC platforms Underestimated complexity, delivery times, environmental conditions, missing policies Aggressive competitors in transformers and switchgears Attractive market with strong Asian competition Overcapacity of 30-40% From 2009 to 2012, ~6% p.a. price erosion in transformers order intake, now slowing down Page 4 December 11, 2012 Capital Market Day Energy © Siemens AG 2012. All rights reserved. CEO Power Transmission Division Focus is on return to Profit Order Entry Revenue €bn €bn Growth1) 6.3 Growth1) +8% +5% 7.3 6.8 5.8 bookto-bill FY 2009 FY 2010 FY 2011 FY 2012 Underlying Margin 11.7% 11.0% 680 in % of Rev. 11.0% 715 11.6% 6.2 6.1 6.3 6.6 1.02 1.10 1.15 0.88 FY 2009 FY 2010 FY 2011 FY 2012 Free Cash Flow and Cash Conversion Rate Profit €m +2% +4% -4% -21% CCR 0.8 0.6 >1 744 9.8% 566 1.0 546 4.3% 345 €m 8.9% -4.6% -302 FY 2009 FY 2010 FY 2011 FY 2012 -123 FY 2009 1) Year-on-year on a comparable basis, i.e. excluding currency translation and portfolio effects Page 5 December 11, 2012 Capital Market Day Energy FY 2010 FY 2011 FY 2012 © Siemens AG 2012. All rights reserved. CEO Power Transmission Division Clear path to growth and profits 1. Stronger with offshore experience Cost savings of 30% 2. Significant cost reduction Transform 3. Competitiveness through innovation to Win 4. Global presence for customer value 5. Profitable growth Page 6 December 11, 2012 Capital Market Day Energy 2015 Profitability at 8% Grow faster than the market © Siemens AG 2012. All rights reserved. CEO Power Transmission Division Fast start – accelerated recovery since May 2012 North Sea grid access projects stabilized Project and risk management strengthened New management in place New organizational structure: 1 solution, 2 product business units -30% until 2015 Global 30% cost reduction target implemented Headcount reduction initiated Cost savings increased by €50m to €330m in FY 12 Gross margin New orders quality in Q4 improved Q3 Q4 Turnaround is well under way Page 7 December 11, 2012 Capital Market Day Energy © Siemens AG 2012. All rights reserved. CEO Power Transmission Division Headcount reduction by 8% and shift to low-cost countries -8% closing 2011 Berlin Germany Nuremberg Germany Shanghai China Aurangabad India Guanajuato Mexico 2015 Advanced economies Emerging economies Page 8 Grenoble (factory) France December 11, 2012 Capital Market Day Energy © Siemens AG 2012. All rights reserved. CEO Power Transmission Division Ambitious target – 30% total cost reduction 30 % cost reduction €1.8bn Effect of midterm measures Page 9 2013 December 11, 2012 2014 Capital Market Day Energy 2014 0.7 0.3 2015 2015 0.4 Energy 2014 Continued re-structuring Feeder & focus plants Lean factories & processes Immediate action Staff reduction Design-to-cost Global resource mgmt Capacity adjustments 2012 0.4 Shift to low-cost countries Site closures Standardization / Modularization 2013 2012 Total savings in €bn © Siemens AG 2012. All rights reserved. CEO Power Transmission Division les p am Ex €1.1bn cost reduction contribution to "Energy 2014" Standardized modules of SVC PLUS Less engineering effort Reduced material cost >€100m cost reduction Global lean factory initiative 4 . 3 . 5 . 2 . Footprint and rightsizing December 11, 2012 1 . Less idle time Higher delivery reliability >€30m cost reduction New GIS 8DN8 Reduction of overcapacities Optimization of footprint >€100m cost reduction Page 10 6 . Reduced material cost Smaller in size & weight Less installation space (lower civil works cost) 30% cost reduction Capital Market Day Energy © Siemens AG 2012. All rights reserved. CEO Power Transmission Division Competitive advantage for our customers through innovation 1st European onshore HVDC FITformer REG 2,000 MW HVDC Low environmental impact Most advanced converter technology Ideal for intermittent renewables infeed De-central and municipal grids Continuous increase in R&D investment Strong R&D focus 8 global lead centers 2,200 active patents All products younger than 5 years Page 11 December 11, 2012 Capital Market Day Energy © Siemens AG 2012. All rights reserved. CEO Power Transmission Division Market trends play into our hands Strong DC grid growth ~4% €42bn DC AC AC grid opportunities €37bn DC >20% AC ~2% Country interconnections Offshore wind farms New lines in Germany Extension in China, India Grid modernization in US and Europe, esp. Russia Grid extension in emerging markets 2012 2015 Addressed market One third of grid investment is for grid modernization Page 12 December 11, 2012 Capital Market Day Energy © Siemens AG 2012. All rights reserved. CEO Power Transmission Division Local strength is our competitive edge 28 32 3 2 4 2 3 2 2 8 5 2 4 Focus markets Page 13 December 11, 2012 2 2 2 Lead R&D centers Centers of competence Manufacturing facilities Service centers Capital Market Day Energy © Siemens AG 2012. All rights reserved. CEO Power Transmission Division North America – Grid modernization and new builds Grid modernization Keep top position through HVDC 28 32 3 2 4 3 2 2 Full portfolio manufactured in NAFTA (Mexico, Canada, US) 2 Further capacity increase 8 Local turnkey expertise 5 2 4 Focus markets Page 14 December 11, 2012 2 2 More power for New York: 2 HVDC back-to-back link to boost Manhattan's power supply Lead R&D centers Centers of competence Manufacturing facilities Service centers Capital Market Day Energy © Siemens AG 2012. All rights reserved. CEO Power Transmission Division Northern and Central Europe – Capitalize on transformation of the energy system Denmark SylWin BorWin HelWin DolWin 28 32 3 2 4 2 Germany 3 2 2 Netherlands Capitalize on Energiewende 8 Master offshore grid 5 2 2 2 Offshore AC engineering center in Manchester 4 Focus markets Page 15 December 11, 2012 2 Offshore platform engineering center in Hamburg £1bn contract for first ever sub-sea electricity link between Lead R&D centers ScotlandCenters of competence and England Manufacturing facilities Capital Market Day Energy © Siemens AG 2012. All rights reserved. CEO Power Transmission Division Russia – Strong entry in Russian market National brand Grid modernization Voronezh: local factory ramp-up for HV products and transformers 28 32 3 2 4 2 3 2 Partnership for large projects in place 2 8 5 2 4 Cooperation with Federal Grid for mass producing highvoltage equipment 2 2 2 RIA Novosti Focus markets Page 16 December 11, 2012 Lead R&D centers Centers of competence Manufacturing facilities Service centers Capital Market Day Energy © Siemens AG 2012. All rights reserved. CEO Power Transmission Division Asia – Technology leader in HVDC Strengthen competitiveness Gain top position through UHV Full portfolio manufactured in each country 28 32 3 2 4 2 3 Further capacity increase 2 2 8 Local R&D centers to develop products for local markets 5 2 2 2 4 2 India’s largest private HVDC transmission system commissioned Focus markets Page 17 December 11, 2012 Lead R&D centers Centers of competence Manufacturing facilities Service centers Capital Market Day Energy © Siemens AG 2012. All rights reserved. CEO Power Transmission Division Power Transmission – best prepared to win the future 1 Grid access projects stabilized 2 30% cost reduction by 2015 3 Competitive advantages through innovation 4 Global footprint & expertise for profitable growth Page 18 December 11, 2012 Capital Market Day Energy © Siemens AG 2012. All rights reserved. CEO Power Transmission Division Reconciliation and Definitions for Non-GAAP Measures This document includes supplemental financial measures that are or may be non-GAAP financial measures. New orders and order backlog; adjusted or organic growth rates of revenue and new orders; book-to-bill ratio; Total Sectors profit; return on equity (after tax), or ROE (after tax); return on capital employed (adjusted), or ROCE (adjusted); Free cash flow, or FCF; cash conversion rate, or CCR; adjusted EBITDA; adjusted EBIT; adjusted EBITDA margins, earnings effects from purchase price allocation, or PPA effects; net debt and adjusted industrial net debt are or may be such non-GAAP financial measures. These supplemental financial measures should not be viewed in isolation as alternatives to measures of Siemens’ financial condition, results of operations or cash flows as presented in accordance with IFRS in its Consolidated Financial Statements. Other companies that report or describe similarly titled financial measures may calculate them differently. Definitions of these supplemental financial measures, a discussion of the most directly comparable IFRS financial measures, information regarding the usefulness of Siemens’ supplemental financial measures, the limitations associated with these measures and reconciliations to the most comparable IFRS financial measures are available on Siemens’ Investor Relations website at www.siemens.com/nonGAAP. For additional information, see supplemental financial measures and the related discussion in Siemens’ most recent annual report on Form 20-F, which can be found on our Investor Relations website or via the EDGAR system on the website of the United States Securities and Exchange commission. Page 19 December 11, 2012 Capital Market Day Energy © Siemens AG 2012. All rights reserved. CEO Power Transmission Division