Perspectives: Building resilience through a crisis

0:00Welcome to HSBC Global Viewpoint. The podcast series that brings together business leaders and industry experts to explore the latest global insights, trends and opportunities. Make sure you're subscribed to stay up to date with new episodes. Thanks for listening and now on to today's show. Hi, this is Kai working for HSBC, heading globally our sector business and the partnerships business. But more important, I'm here today with Andreas from Siemens Energy. Thank you very much for the invitation. Really nice to be here. So just a few words about myself. My name is Andreas Meier. I've been with Siemens and Siemens Energy in the field of actually energy business for more than 30 years. Let us go now back in time. Let us go into and I'm quoting your CEO here,

1:01existential crisis for the company. Can you explain to our audience what was that existential crisis? What has happened? Going back into the year 2023, it turned out we faced significant technology issues with some of our onshore turbine models. The height of the crisis probably occurred in the mid of 2020. We had to post a multi-billion loss to our profit and loss statement, which really was the starting point of this crisis as our CEO mentioned. Was that for you a difficult time personally or was it something you've mapped it out? You worked it through. Well, first and foremost, I became a part of a team that was already starting to actually deal with that crisis. The main trajectory for me was learning, personal learning. Then bringing my experience of the past, particularly in change management to a team,

2:06to ensure that this team would be able to actually meet with a challenge and learn to run at the speed that this crisis really demanded from us. My sleepless nights, I would say, were more on how to learn as quickly as I can, how to transfer that learning onto my team, onto my new team. How can I motivate the team to go this extra mile that seemed at times impossible? But ultimately, I guess, we persevered. I think let's spend for our audience a little bit of time on what is the facility nature, the performance guarantees, bit bonds, why is it so important for the business itself, why is it so important for the older book? We provide large-scale energy infrastructure. We have long delivery times. Without advance payment and performance guarantees, it is essentially impossible for us to book an order with a customer.

3:11There are no ifs and buts. It's essentially impossible. You can imagine that for a company with a Siemens DNA, the provision of guarantees was never a problem. Until a crisis hits and suddenly it becomes the bottleneck. And that's what we felt and that's what really fueled our energy to try and persevere in this state of crisis. So now we have established why performance guarantees, why these facilities are so important to facilitate the business. So let's drill into the structure. We had the moment of crisis. How did you structure the facility? What was the pressure points and how did you involve the German government? We're talking about the nearly 11 billion facility. How did you structure the steel? I quote our CEO with a beautiful little statement that was never waste a crisis.

4:12And with that crisis, we unleashed enormous energy to do whatever was necessary to bring our company and our processes up to speed to know exactly what we need on guarantee volumes, what we need, when we need it and where we need it. So with all of this in our backpack, we could then go approach the government who was ready to help us as we were deemed an important factor, an important European factor, to continue to help the energy transition going forward. And we could convince the government, we could convince partner banks, a consortium of banks, to actually move into this new structure with us, whereby the government to go over two thirds of the backstop and banks were only burdened with one third. And that was a trust-inducing measure for our partnering banks to go this mile with us. How long did it take, daughter to daughter, to put that facility together, the structure, the processes you have mentioned, never waste a good crisis?

5:19How long does it take to put that again, 11 billion facility together? Well, let me say the crisis event, the profit warning happened in June 23. The facility was put together pretty much exactly six months later. So I would say, from ideation through formation, negotiation, ultimately wet ink, six months. So when you structure the facility, why did you do it as a bridge facility? I would probably say that calling it a bridge facility doesn't do it justice. But I would say, naturally, asking the government for help in this situation must only be or can only be a bridge. Because there are certain strings attached, that one needs to accept in the event of crisis, but probably a difficult one's the crisis is over.

6:22Such things is, for example, a ban for the company to pay dividends to investors, which is a significant problem, particularly once the company evolved again, recovered again, and was able to pay such dividends. The cost of the facility, of course, were significant, so we couldn't help but think from the beginning, what is it that we need to do to actually see it as a bridge and then go for the next thing that replaces it as soon as we can, as soon as our balance sheet has recovered from the profit shortfall in 2023. And all boy, it has recovered. Now fast forward to now. What's the status of the facility right now? Have you replaced it? Has it ended? What has happened since? We went out and launched the new 9 billion facility with a consortium of 23 banks.

7:28I guess the performance and the perception of the performance in the market was so good that it was significantly over subscribed. Let us go into the resilience. We see resilience being important for supply chains. How do you look at resilience in your business? Yes, absolutely. Look, coming from our journey, we know how it feels like when resilience factors aren't affected into your financial strategy, when it comes to trade finance and provision of guarantees that as we established our lifeblood of our company. So what we've done is we have essentially now built a mix of different kinds of facilities, not only the typical one-to-one relationships by lateral relationships that may break once the crisis hits, but also committed facilities that actually help to protect you as a corporate against a rainy day, so to speak, or against a crisis.

8:33In my past, I've spent a lot of time in sales, and in sales we talk a lot about customer intimacy. So I think this intimate relationship of the bank with the corporate is probably the most important in such a time of crisis, knowing what the other party really needs. The global reach of HSBC is for everyday business of essential value, because we are talking about now in this format about an existential crisis. Andreas, wow. Thanks for spending time with me. Fantastic journey. Really loved it. Big, big thank you from HSBC. Personal thank you. Thank you for the invitation. It was lovely to be here. Very nice talking to you. Thank you for joining us at HSBC Global Viewpoint. We hope you enjoyed the discussion. Make sure you're subscribed to stay up to date with new episodes.