Siemens Energy Case Study With Exibits PDF

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0 0 7 7645065
Frank T. R othaermel
M att H oepfer
Siemens Energy (in 2010): How to Engineer a Green Future?

Green is going from boutique to better, from a choice to a necessity, from a fad to a strategy to win,
from an insoluble problem to a great opportunity.
—Thomas Friedman, Hot, Flat, and Crowded
RETURNING FROM DAVOS, Wolfgang Dehen, CEO of Siemens Energy, steps off the plane and
stretches. He has just met with executives of the partner companies of the Energy Industry Partnership
Programme, sponsored by the World Economic Forum. At their annual meeting in Davos, Switzerland,
these partners and the energy ministers from various countries define and address the leading industry
issues for the upcoming year. Siemens is proud to be recognized as a member of this esteemed group,
which includes oil companies like Chevron, Exxon, Shell, and Kuwait Petroleum; alternative-energy
experts such as Vestas Wind systems; and major energy suppliers like Duke Energy and Tokyo Electric
Power. It is always intriguing to meet with energy leaders from across the globe, and especially so
when Siemens’s leading competitors (e.g., ABB and GE) are in the same room, talking about collabora-
tive ways to improve worldwide energy efficiency.1
Energy efficiency has not always been a hot-button topic, least of all in corporate circles. Awareness
of the need to reduce nations’ economic dependence on fossil fuels first came to the forefront during
the oil crisis of the 1970s. As the OPEC countries2 reduced supply, oil prices quadrupled, effectively
shutting down Western economies, at least temporarily. Then, as oil prices decreased and vast new oil
fields were discovered around the world, public and industry interest in energy conservation waned.
As long as oil is cheap and abundant, the public remains unwilling to pay premium prices for their
energy needs, and there is no financial incentive to invest in alternative energy.
However, the price of oil has been trending upward in recent decades in a dramatic roller-coaster
fashion (see Exhibit 1). When crude oil prices spiked at an all-time high of $145.15 per barrel on July
3, 2008 (up from $50 only 18 months earlier), the news sent a shockwave throughout the energy sector.
Combined with a growing global awareness of the impact of greenhouse gases on climate change as
well as increased concerns regarding energy security, energy issues are now receiving renewed interest
from governments and corporations alike.3
One thing the Davos meeting participants have agreed on is that innovation will be essential to
increasing energy efficiency.4 Both continuous improvements in existing technologies and new break-
through approaches to energy generation and distribution are necessary if major economies like the
United States, China, Russia, and the European Union are to meet their respective energy targets over
the next few years. For an energy company like Siemens, this presents both a challenge and an oppor-
tunity to carve out a leadership position in the new energy economy. A group of 20 CEOs captured this
sentiment eloquently in their 2008 Climate Policy Recommendations to G8 Leaders:
Professor Frank T. Rothaermel and PHD in engineering candidate Matt Hoepfer (GT MBA ’09) prepared this case from public sources. This case is
developed for the purpose of class discussion. It is not intended to be used for any kind of endorsement, source of data, or depiction of efficient or
inefficient management. © Rothaermel and Hoepfer, 2013.
This document is authorized for use only by PJ Jesse (pgjesse@liberty.edu). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or
800-988-0886 for additional copies.
Siemens Energy: How to Engineer a Green Future?
A paradigm shift to a low-carbon economy by 2050 has the potential to drive forward the next chapter
of technological innovation. It will require a third—this time a green—industrial revolution. To realize
this potential, the new framework must harness the power of the market to deliver on the environmental
objective.5
However, a host of new, alternative-energy technologies are vying to replace carbon-based fossil
fuels, and it is hard to figure out what to do first and where to place the greatest emphasis. Wind and
solar have reached high levels of technology readiness and are relatively mature compared to other
renewable-energy sources. Better materials have enabled specialized companies to build ever-larger
wind turbines, thus increasing efficiencies and reducing costs of wind energy. Large wind farms have
been installed in several countries, and offshore wind parks have been erected to harvest the more
constant and abundant winds over the oceans. Betting on wind as an alternative energy source, former
oil man T. Boone Pickens announced in 2007 his plans to build the world’s largest wind farm in the
Texas Panhandle. (He later changed locations due to a lack of transmission-line capacity to transport
the energy to either West or East Coast population centers.)6 Meanwhile, solar panels have reached
a production cost of less than $1 per kW (kilowatt) output. And these are only two options out of a
portfolio of technologies that range from useful-yet-untested to plain science fiction. Some other can-
didates, such as geothermal energy and hydropower (water and wave exploitation), not to mention
next-generation nuclear reactors, have evolved quite rapidly in recent years and seem poised to pose a
serious threat to wind and solar applications.
First thing tomorrow, Wolfgang Dehen plans to summon his strategy team and charge them with
a formidable task: to formulate a strategy on how to best position Siemens in the global renewable-
energy market. The stakes are high, and the recent financial turmoil and credit crunch do not make the
decisions any easier. The questions racing through Dehen’s mind are as diverse as they are complex:
• Should Siemens make its best guess on the future and invest deeply in a limited number of options,
or cast a wider net and hedge its bets on multiple forms of alternative energy?
• If Siemens is to focus on a narrower field, how can it identify which alternative energy will become
the leading technology in the future? Can a new disruptive innovation be foreseen and capitalized
upon? Or can Siemens pick an alternative technology and help make it the winner?
• How should Siemens Energy compete in the new field(s)? Should it go it alone, developing
proprietary knowledge and keeping potential profits to itself, but also bearing the full risk of going
too far down the wrong road? Or should it focus on acquiring smaller companies that have already
made promising technological advances, and help them down the path to development? Or will
alliances, which allow Siemens to share both the risks and returns with a partner, provide the opti-
mal solution?
Siemens’s History
From its humble beginnings as the Telegraphen-Bauanstalt von Siemens & Halske in 1847, Siemens has
grown to become the second-largest employer in Germany (behind Deutsche Post), with 427,000 employees
worldwide in 2009. The company’s 150-year history is replete with ingenious inventions and trend-setting
developments. After Werner von Siemens built the first wire telegraph from cigar boxes, tinplate, some
iron, and insulated copper wire in 1846, he went on to improve the Wheatstone telegraph with the help of
mechanical engineer and Physical Society member Johann Georg Halske.
The new Siemens & Halske Company internationalized quickly, as by nature the telegraph was used
for cross-border communications. Then, as electricity became more accessible and less expensive as a
source of energy, Siemens diversified its businesses to include a wide variety of electrical-engineering
applications. One of the company’s earliest areas of specialty was heavy-current engineering, or find-
ing ways to meet the increased power requirements of the new industrial machinery. Other branches
included telephone, electric lighting, electric cable cars and locomotives, radios, motion picture projec-
tors, vacuum cleaners, and other electrical systems.
Based on its expertise in electrical engineering, Siemens next expanded its activities to include
electrical power generation. Siemens Electrical Works was established in 1896 to engineer and build
turnkey power plants to supply electricity. It operated numerous electrical power plants in Germany
and across Europe. One year later, Siemens founded The Electric Light and Power Systems Company
to provide financing solutions for its new power plant contracts. Collectively, these business units
enabled Siemens to offer a complete package of power plant financing, construction, operation, and
maintenance.
While many of Siemens’s initial power plants were fueled by coal, the company also invested in the
research and development (R&D) of alternative-energy sources almost from its very beginning.7 In fact,
the world’s first publicly owned power plant—a small 8-kW hydroelectric plant built in the southern
English town of Godalming in 1881—was connected to a Siemens alternator that provided electricity to
a number of street lamps and shops.8 From this time until the Second World War, Siemens built many
more hydroelectric energy plants, both within Germany and abroad. Like the plant in Godalming, many
of these represented world records or first-of-their-kind applications.
During WWII, many of Siemens’s resources were diverted to the modernization of Nazi Germany’s
war technologies.9 The company renewed its focus on alternative energy exploration after the war
ended, and by 1955 had started theoretical preparations for the development of nuclear reactors. In
1961, Siemens received an order for a 57-MW multipurpose research reactor in Karlsruhe, Germany,
which was fueled by natural uranium. Soon afterward, Siemens contracted the 1,200-MW Biblis, a
nuclear power plant that had the largest single-shaft turbine generator in the world at that time.
Siemens diversified its efforts in alternative energy even further starting in the mid-1980s, expanding
into wind energy. In 1987, Siemens’s 3-MW wind energy converter Mod-5B began operations in Hawaii.
In 1991 and 1992, two 500-kW photovoltaic systems started to supply electricity for the public grids in
Mont Soleil, Switzerland, and Kerman, California, respectively. Alternative-energy generation technolo-
gies remain a major priority within Siemens, with a primary emphasis on wind and solar applications.
Siemens also continues to conduct research in nuclear power, even though the German government made
a controversial decision to withdraw from nuclear energy in the late 1990s. At the same time, Siemens’s
R&D efforts target multiple complementary technologies such as steam and gas turbines, thermal waste
recycling, combined cycle technology, superconducting generators, electric power grids, high-efficiency
power transmission technology, and exhaust gas catalysts and treatment.
Siemens’s Corporate Structure

Siemens underwent a major reorganization in 2008, consolidating the number of sectors from more
than one dozen down to just three—Industry, Energy, and Health Care. These three main sectors were
further divided into 15 divisions (strategic business units, SBUs [as presented in Exhibit 2]). Together,
they comprise approximately 95 percent of company revenues and profits (see Exhibits 3 and 4).
In 2009, the Siemens Energy sector earned 26 billion euros in revenues, and more than 3 billion euros in
profits. This amounted to roughly 33 percent of the overall company revenues, but 42 percent of the prof-
its. Siemens Energy claimed to be “the only company worldwide that supports customers with [. . .] effi-
cient products, solutions, and know-how along the entire chain of energy conversion from the production
of oil and gas to power generation and the transmission and distribution of electrical energy.”10 Exhibit 5
shows a conceptual depiction of Siemens’s energy supply chain.
The Energy sector was subdivided into five divisions, including Fossil Power Generation, Renewable
Energy, Oil & Gas, Power Transmission, and Power Distribution. Exhibit 6 shows the 2009 revenues
generated by the different divisions within the Energy sector, and Exhibit 7 depicts the 2009 profits.
Together, Fossil Power Generation and Oil & Gas created 54 percent of the revenues, but just 39 percent
of the sector’s profits. In contrast, renewable energy generated just 11 percent of the revenues, but nearly
21 percent of the profits.
The Global Energy Market

The global energy market consists of traditional carbon-based fuels and newer alternative energies.
CARBON-BASED FUELS
Carbon-based fuels such as oil, coal, and natural gas make up some 84 percent of the world’s energy
sources. These fuels are based on the fossilized remains of living organisms that became a part of the earth
millions of years ago and then were transformed under extreme pressure and heat. Of these three, oil is
most easily extracted, converted, and stored in a liquid phase. Thus, it has become the primary energy
source for vehicles.
Although oil is relatively cheap, it comes with significant externalities. These are costs that
are not reflected in the price of the commodity but rather are borne by the public. For example,
the burning of fossil fuels releases carbon dioxide (CO2) into the atmosphere, which has been
linked to global warming. The CO2 concentration in the earth’s atmosphere remained at about
280 ppm (parts per million by volume) for the last several thousand years prior to the Industrial
Revolution. In 2007, CO2 levels in the atmosphere reached about 384 parts per million by volume,
and seemed to be increasing at a rate of approximately 2 parts per million per year (see Exhibit
8).11 In addition, many cities have become contaminated by smog, and people are suffering health
problems caused by increased pollution. While experts debate the magnitude of the remaining
carbon-based fuel supply, the reality is that fossil fuels are finite; supplies will eventually run
out—it is just a matter of when.
Ever since humans began using fossil fuels, the amount of fuel needed has grown exponentially
to accommodate ever-increasing living standards and populations. Accelerated industrialization has
led to a spike in the demand for energy over the past 20 years (see global electricity consumption in
Exhibit 9). Currently, rapidly developing Asian countries such as India and China are the main energy
consumers, contributing almost 40 percent to global CO2 emissions (see Exhibit 10 for CO2 emissions
by world region). Yet despite the large volume of CO2 generated, India’s and China’s per capita con-
sumption of energy is still quite low. For 2010, the U.S. Department of Energy projected per capita CO2
emissions of 5.3 and 1.1 metric tons per person for China and India, respectively. In comparison, the
projection for the continental United States was 18.6 metric tons per person.12 Taking into account that
both China and India have populations of more than one billion each and together account for roughly
one quarter of the world population, it is obvious that a per capita energy consumption rate similar to
Western countries is not sustainable. Meanwhile, the continued industrialization of developing coun-
tries combined with rising populations will require more and more energy.
ALTERNATIVE ENERGIES
Underlying alternative energy is the principle of using natural resources such as wind, water, solar
radiation, or heat to create energy instead of carbon-based fuels. Natural energy is regarded as infinite,
at least as far as it can be assumed that the sun and wind will not cease to exist within a time frame
significant for humanity. Also termed renewable energy, the biggest advantage of such natural energy
sources is that they are carbon dioxide (CO2) neutral. Unfortunately, most alternative-energy creation
methods also have one major drawback: They can generate energy only in places where nature pro-
vides the required energy input. For example, wind does not blow steadily and strongly enough every-
where on the planet. Fluctuations in the natural energy supply need to be taken into account, and any
natural energy captured must be transported to wherever it is needed. This has spurred immense R&D
efforts to find optimal ways not just to capture but also to store and distribute energy generated from
natural resources.
Alternative energy is increasingly being viewed as a panacea for the world’s economic as well as
environmental concerns. Companies no longer see investments in green technologies as a burden, but
as a business opportunity. For example, in 2005, GE launched a multibillion dollar ecomagination initia-
tive to leverage its wide-ranging technological capabilities to address problems in the green-energy
arena. Politicians are also jumping on the bandwagon, partly because they believe that millions of
new green jobs may help to reduce high unemployment rates. In the United States, this could be espe-
cially true in Midwestern states that rely heavily on industrial manufacturing. In Germany, the federal
government is supporting a geographic cluster in the alternative energy industry in its eastern region
around Frankfurt/Oder. The race for global leadership in alternative energy is on.
Siemens and Alternative Energies

See Exhibit 11 for the current distribution of the global production of alternative energy sources.
WIND ENERGY
Modern windmills are high-tech devices capable of producing several megawatts of energy each,
enough for one turbine to supply electricity to an entire small village. The technological progress of
wind turbines has been noteworthy. From 1980 to 2008, the average effective power output capacity
for a wind turbine generator increased by a factor of 200.13 Wind power is deemed to have immense
upward potential for at least the next two decades.
Wind turbines have their disadvantages as well. Despite advances in material engineering, the size
of wind turbines is not infinitely scalable due to technological constraints. To increase capacity, mul-
tiple wind turbines therefore must be spread out over large distances from one another, so each has full
exposure to the wind. Densely populated urban areas do not have adequate space to house wind parks,
and rural areas have expressed annoyance with the sound made by the turbines as well as their inter-
ference with wildlife migratory patterns and agricultural productivity. In addition, wind turbines pos-
sess limited efficiency. Physical conditions determine that the maximum energy that can be extracted
from the wind is around 59 percent (Betz’s law), a theoretical value that so far cannot actually be
achieved. Take into account the losses that occur due to the conversion of rotational to electrical energy
and electronic conditioning, and the efficiency of wind turbines falls to a range of 40 to 45 percent. This
is comparable to the efficiency of a good diesel engine, leading critics to argue that wind turbines are
not an economical alternative.
Producing industrial-scale wind turbines requires large and highly specialized assembly facilities. The
entry-level barriers are high, and up-front investments are extensive. The turbine blades must be able to
withstand high centrifugal forces, vibrations, varying weather conditions, radiation, and foreign-object
impacts (e.g., birds), while at the same time they need to be lightweight. To achieve these requirements,
blades are currently made from glass and carbon fiber–base materials, which require special labor-inten-
sive manufacturing techniques. The towers are usually made of reinforced spun concrete, a manufacturing
process that becomes quite complex for tall structures. Transportation and installation also pose challenges.
Turbine blades, sometimes longer than 60 meters (180 feet), and towers, sometimes as tall as 135 meters
(400 feet), need to be transported to the final site, a task that involves huge logistical efforts. In many cases,
bridges must be elevated and/or reinforced, and roads straightened out to transport these large industrial
components.
Siemens and Wind Energy. Despite its disadvantages, wind energy is the fastest-growing alternative-
energy sector, a trend that is predicted to continue. Siemens has therefore staked a strong presence in
the wind-turbine business, winning several large contracts for installing both on- and offshore wind
turbines.14,15 Globally, Siemens claimed to be the fifth-largest installer of wind-turbine power in 2009
(with 8.8 GW installed), and aims to become number 3 by 2012.16, 17 The company’s portfolio includes
all stages of wind-turbine development, including component and system design, R&D, manufactur-
ing, installation, and maintenance. These combined activities earned the company revenues of nearly
19 billion euros in fiscal year 2008, accounting for roughly a quarter of total revenues. One of the unit’s
most recent accomplishments was the introduction of a new 3.6-megawatt wind turbine featuring a
120-meter diameter rotor equipped with 58.5-meter-long rotor blades.
Siemens has developed a particularly strong focus on offshore wind turbines, with some large-scale
projects recently acquired.18 Together with the Norwegian energy company StatoilHydro, Siemens was
instrumental in developing the first-ever floating wind turbine off the coast of Norway in late 2009.19
This new technology is being tested to evaluate whether a wind turbine installation in deep-sea water
is feasible, as the wind there blows stronger and more consistently than along the coast. The main
concerns are the durability and maintenance of the equipment against aggressive environmental condi-
tions at sea.
The majority of Siemens’s wind-energy operations are centralized in Europe. Since transporta-
tion of the increasingly large turbine blades is difficult even on land, international expansion often
means the company must install production facilities overseas. (Even a C-5 cargo aircraft is not large
enough, and cargo ships are not designed to transport wind turbines.) Siemens operates a wind-
turbine blade factory in Fort Madison, Iowa, which was visited by President Obama in April 2010,
receiving important political recognition. Siemens also recently took the first steps in building a pro-
duction facility in China, taking into account that “China could soon become the largest wind-energy
market in the world.”20 Some have even suggested that wind power alone might be able to cover all
of China’s future electricity demands.21, 22
Due to the technological complexity of the wind-turbine business, Siemens has relatively few com-
petitors. Notable European players include Enercon (Germany) and Vestas (Denmark), while its major
U.S. rival is General Electric (GE), which installed 15 GW of new wind-power capacity globally in
2009. However, since the market has high future potential, other players are entering the competition,
most notably from China. Mitsubishi Heavy Industries (Japan) also poses a future challenge since the
company possesses the industrial capabilities and finances to become a major global player, and has
recently ramped up its development and installations of new wind-turbine capacities.23 One of the
attractions of wind power is that, once installed, the turbines need constant maintenance, which means
lucrative long-term service contracts for the original maker and installer of the equipment.
SOLAR ENERGY
Solar is the second most-established renewable energy technology. The amount of solar radiation
that reaches earth at any given moment is far more energy than humans consume during that same
amount of time. This means that solar energy alone could easily meet all of the energy needs on the
planet.
Sunlight can be converted into electricity in various ways. One way is direct conversion through
semiconductors (i.e., photovoltaics). Alternatively, solar power may be used to heat up a medium such
as water, convert it to steam, and propel a turbine that in turn generates energy. The advantage of these
methods is that they require few moving parts, and therefore minimal maintenance. Solar panels are
also easily installed in deserts and other remote areas exposed to high levels of solar radiation. Solar
cells are used to successfully recharge batteries and propel cars. Toyota even offers the option of power-
ing the Prius’s air conditioning through photovoltaic panels on the car’s roof.
The disadvantages of solar energy are nevertheless considerable. Like wind energy, solar power
must be extracted where it occurs naturally. Many of the best places to harvest solar energy are actually
over the oceans. To produce significant quantities of solar energy, panels must be installed over large
areas, which increases their exposure to adverse weather conditions. In addition, solar panels have a
low efficiency, reaching only about 25 percent under optimal laboratory conditions; mass-produced
panels achieve rates of only 18 to 20 percent. Moreover, these efficiencies can only be accomplished
when sunlight reaches the panels unobstructed at an optimum angle, which requires clear weather,
clean air, and clean panel surfaces. The panels also must be actively adjusted to follow the sunlight
throughout the day. Finally, the semiconductors upon which the materials are based require excep-
tional degrees of purity, and can only be manufactured in special (and costly) production facilities that
are hermetically shielded from the environment.
The solar industry is segmented into several categories. On one side of the spectrum is the produc-
tion and manufacturing of solar panels. In recent years, China has become the leading manufacturer
and global exporter of low-cost solar panels due to a combination of cheap labor and available indus-
trial infrastructure. The New York Times reported that China drove prices down by almost 50 percent
from 2008 to 2009.24 Since it is now possible to mass-produce solar panels with a cost of less than $1
per kW, this is a well-developed commodity market, with a readily available technology and minimal
R&D expenses. The only up-front cost is for manufacturing equipment and plants. Rivalry within this
market is strong and almost perfectly competitive.
In the center are the solar-technology installation and service industries. These businesses take hard-
ware like solar panels and install them for the customer, making them easier and more cost-effective
than traditional energy sources. While it is not necessary, installation and service providers benefit
greatly from having the support of the manufacturer of the basic technology. Depending on their capa-
bilities, many have expanded into the development of complementary products, such as switchboards
and distributors for solar panels. For example, the U.S. firm SolarCity25 offers solar system design,
installations, financing, and leasing for commercial and residential customers. Co-founded in 2006 by
serial entrepreneur Elon Musk (who also runs Tesla Motors and SpaceX), SolarCity had grown to be
one of the biggest solar system installers in the United States by 2007.26
On the other side of the spectrum lies the commission of turnkey high-tech solar plants and installa-
tions. Examples of these technologies included CSP (Concentrated Solar Power) and ISCCS (Integrated
Solar Combined Cycle System) plants,27 both on the Siemens product list. In general, these plants con-
sist of large arrays of mirrors that reflect and concentrate sunlight onto receivers. The receivers collect
the solar energy and convert it to heat, which is then used to produce electricity via a steam turbine
or heat engine driving a generator. One advantage of this technology is that it allows for limited stor-
age of the heat produced in a transfer medium (often oil or molten salt).28 Turnkey solar plants require
large amounts of experience and infrastructure for building and operation, resulting in an oligopolistic
market with only a few major competitors.
Siemens and Solar Energy. Siemens is the market leader in turnkey CSP plants, an area where the
company can effectively leverage its size, experience in power-plant development, and reliability as
a long-term service provider. Part of the attractiveness of this sector is that turbines and generators
require long-term (and often lucrative) service contracts, long after plant construction is completed.
In March 2009, Siemens expanded its solar presence by acquiring a 24 percent stake in the Italian
solar-thermal specialist Archimede Solar Energy (ASE). Siemens’s new business unit received its first
photovoltaic order from Statkraft in June 2009. René Umlauft, CEO of the Renewable Energy Division
at Siemens Energy, stated that this contract “proves that we are . . . on the right track with the expansion
of our solar business” and that “in the coming months we are anticipating further orders for projects in
the Mediterranean region.”29 Also in June 2009, Siemens took its efforts in solar and wind to the next
level by leading the Desertec initiative. This transcontinental project aims to generate solar power in
North Africa, where it is most abundant, and then transport it to Europe. The project fits particularly
well with Siemens because it requires not only experience in the primary wind and solar technologies
but also in complementary technologies such as power grids and switchboards, which have tradition-
ally been strong business fields for the company.
NUCLEAR ENERGY
Nuclear power is an infinitely renewable energy that creates a controlled nuclear reaction of
special radioactive material, usually Uranium-235 or Plutonium-239. The energy from the chain
reaction is used to heat up water to produce steam, which in turn propels steam turbines and
generators to produce electricity. In 2007, about 14 percent of electricity worldwide was produced
using nuclear power.30 Nuclear reactors are the strongest power plants possible and the most eco-
nomically feasible.
Yet nuclear power has serious limitations. Issues include potential nuclear accidents (e.g.,
Chernobyl in the Ukraine and the Fukishima reactor after the 2011 tsunami in Japan) and how to
store nuclear waste products. The U.S. Department of Energy claims that its Waste Isolation Pilot
Plant,31 a salt mine in the southern New Mexico desert, can safely store all of the nuclear waste
humans can create in the next 10,000 years. However, disposing of nuclear waste in old caves and
salt mines is not 100 percent safe, as shown by a recent incident in Asse, Germany. Nuclear waste
that had been stored at a waste dump salt mine leaked out of its allegedly safe storage contain-
ers, after the salt mine flooded at a much higher rate than assumed.32 In addition, there have been
reports of increased leukemia rates in areas close to nuclear reactors, changes in the microclimate
due to the vast amounts of steam released into the atmosphere, and concerns regarding nuclear
terrorism. Nuclear energy is also not entirely CO2-neutral.
In countries such as France, where nuclear reactors cover 80 percent of the national electricity pro-
duced, a more liberal stance is taken toward these questions. Germany, meanwhile, has vowed to stop
all its nuclear reactors one by one. Given the need to address global warming and create sustained
economic growth, however, Germany is reconsidering this decision. The German parliamentary elec-
tion in September 2009 spawned new hopes that the German nuclear industry might be revitalized.
The newly elected center-right government (CDU and FDP coalition) believes that the country’s energy
demands might not be met by renewable resources alone, and is considering building new reactors
while keeping the existing nuclear power plants running. Not surprisingly, stocks of German nuclear
companies jumped after the election results were announced.33, 34
Siemens and Nuclear Energy. Siemens has been involved in nuclear research since 1955. However,
these efforts were put on hold in the 1990s when the German government passed a law that would
gradually withdraw the country from nuclear-power generation. During that time, Siemens’s primary
activity in the nuclear sector was upgrading its existing plants.35, 36 Recently, Siemens has taken up its
nuclear activities anew and is expanding to become involved in international agreements.37 Russia
alone has been deemed to be a market for dozens of new reactors in the near future, with Siemens being
a potential partner for many of these projects.38 China also looks to be very active, with plans to have
100 new reactors in operation or under construction by 2020.39 Many other countries that have planned
or built nuclear power plants, such as the United Kingdom, Finland, Japan, Taiwan, South Korea, and
India, are difficult markets to enter because they possess their own technology and production capa-
bilities. Also, due to national security issues, many countries strongly prefer or even require domestic
suppliers.
In the United States, licenses for 35 new nuclear power units are in progress.40 Some of the dominant
players in the U.S. nuclear market are Westinghouse, GE Energy, Hitachi America, Bechtel Corporation,
and Southern Company. The U.S. Department of Energy recently announced $40 million in funding to
support design and planning work for the Next Generation Nuclear Plant (NGNP),41 and also pledged
to support basic university research in nuclear energy.42
HYDROPOWER
There are many different means of establishing hydropower generators, which utilize turbines to
extract energy from water current flows. The most obvious are dams built along rivers. Dams provide
significant amounts of energy and have the lowest CO2 emissions of any energy source.43 Dams are also
unique in that they can store excess available energy by pumping water uphill back into a reservoir,
which can then be used during peak demand times. Since energy storage is one of the main challenges
in the use of alternative energies, this property makes dams especially attractive. On the negative side,
dams require huge up-front investments, pose significant risks regarding potential failure, have a lim-
ited service life due to silt and sediment accumulation, and require severe modifications of the natural
environment. For example, building the Three Gorges Dam in China resulted in the flooding of dozens
of small villages and required the relocation of tens of thousands of people who lived in the river plain;
a manmade lake of considerable size now stands in their place. Although there are more than 45,000
large dams around the world,44 only a limited number of hydro dam projects are active worldwide, and
many of these face problems due to environmental or financial issues.45, 46
Other methods of hydropower generation with lesser environmental impact include river and tide
turbines and wave power. River turbines are small hydro turbines that are installed in rivers without a
dam being required, frequently at support posts for bridges. River turbines extract a small but consis-
tent power supply from the natural water flow, and are best suited for local energy needs. Theoretically,
tide turbines can also provide a reliable power source, as tides change twice a day and can be very
strong in certain areas. Due to significant engineering challenges, however, only a few mass-produced
tide turbines are currently in service. For the technology to work, the seashore needs to be flat with only
a slight slope, and requires long stretches of littoral waters. Also, tide turbines are restricted to unin-
habited beaches, since moving parts under the water surface can create hazards for swimmers, water
sports, and coastal ships. Lastly, harnessing the power of ocean waves has attracted significant attention
since oceans cover some 71 percent of the earth’s surface. Some drawbacks to wave power include the
efficiency of current applications, necessary resistance against hostile environments (e.g., storms and
salt water corrosion), cost of electricity (including transport to shore), possible impacts on marine life,
and hazards to shipping. As with tidal power, several different technologies (e.g., the Pelamis Wave
Energy Converter) are vying to emerge as the industry standard.
Siemens and Hydropower. Siemens has been a strong player in hydroelectric power dams since 1881.
More recently, Siemens acquired a contract for complementary high-voltage gas-insulated transmis-
sion line technologies for China’s second largest hydropower plant.47 Otherwise, Siemens has no stake
in any of the other alternative hydropower technologies described earlier.
Opportunities to expand more fully into hydropower do exist. In 2007, the U.S. Department of
Energy (DOE) established the Hydropower Program, designed to “conduct research and development
that [will] improve the technical, societal, and environmental benefits of hydropower and provide cost-
competitive technologies that enable the development of new and incremental hydropower capacity,
adding diversity to the nation’s energy supply.”48, 49 A total of 5,677 sites with an undeveloped capacity
of about 30,000 MW were identified across the country.50 In 2008, only 2.4 percent of the overall energy
consumption in the United States was covered by hydroelectric power generation. This is, however,
still much more than that covered by either solar or wind energy alternatives.51
GEOTHERMAL POWER
Geothermal power is yet another form of renewable energy. The idea here is to drill two shafts deep
into the earth, pumping water down one of the shafts and extracting energy from the steam that comes
out the other shaft, as the water is heated under the earth’s surface. This technology has the major
advantage that it can be installed wherever energy is actually needed. Geothermal plants require mini-
mal freshwater and external fuel supplies, and due to their layout are highly scalable.
Yet the effort of drilling two shafts into the earth creates significant up-front costs as well as engi-
neering and safety issues. Drilling affects the stability of the surrounding soil, resulting in subsidence
and possible local earthquakes. As a result, geothermal plants can be installed only in areas with low
seismic activity. In addition, this technology is limited to lowlands, since the geothermal heat necessary
to create steam is located too deep in the ground in mountainous regions. Another problem is that the
fluids conveyed from the earth carry a mixture of gases, notably carbon dioxide (CO2) and hydrogen
sulfide (HS2). While these pollutants do contribute to global warming, geothermal emissions make
up only a minor fraction of those generated by conventional fossil-fuel plants. Lastly, the temperature
achievable from this technology might not be enough to heat water sufficiently for use in a steam tur-
bine. This limits the use of geothermal energy to heating and possibly air conditioning, but not power
generation.
10
Siemens and Geothermal Power. Siemens currently has no stakes in geothermal technologies.
Distributing Alternative Energy

A major disadvantage of most renewable energy sources (i.e., wind, solar, and hydropower) is that
they are stationary. They produce energy where it is supplied by nature, which is not necessarily where
it is needed most. Connecting the dots requires large investments in power storage and distribution,
often across national and international borders. The electrical equipment for doing so is a very low-tech
power grid whose development has not kept pace with technological advances in power-generation
methods. The current grid does not possess any correction mechanisms, relying instead on customers
to tell if there is a power outage.
Consequently, a new, complementary industry branch has developed around the concept of a
“smart grid.” Smart grids include self-monitoring and possibly self-repairing capabilities, smart sen-
sors and meters, and a communications network similar to the Internet. This will help avoid power
outages, make the grid more reliable, reduce maintenance, and save energy. It will also be expand-
able with future technologies, such as connecting electric cars to the grid and using their batteries for
storage capacity. Smart distribution will also greatly reduce the current problems with peak power
demand, and can serve to integrate both traditional and alternative energies into a common power
supply and distribution network. Smart-grid technology is therefore likely to have a strong impact on
future pricing strategies, which can turn out to be highly beneficial to alternative energies and their
future development.52
Having seen the importance and market potential of the smart grid, industries and politicians are
eager to get their share of the business. The Obama administration set aside funding to build smart-
grid technologies as part of its recent economic stimulus plan. Startups as well as established compa-
nies are investing significant resources in research and development. Two of these startups, GridPoint
and Silver Spring Networks, have managed to raise $220 million and $170 million, respectively. One
major part of IBM’s “smarter planet” vision is smart-grid technology. Meanwhile Cisco, the world’s
biggest maker of networking gear, expects that the underlying communications network will be “100
or 1,000 times larger than the Internet.” Google and Microsoft likewise have started to identify feasible
business areas, in the hope of providing the software that will control the grid.53, 54
Siemens and Smart Grids

Smart-grid technologies seem to be a natural business opportunity for Siemens, based on the com-
pany’s long history with electronic technologies and products. The company recently established a part-
nership with Landis & Gyr (a leading provider of integrated energy-management solutions for energy
companies) to develop smart meters, a technology that enables the tracking of power requirements
and the ability to adapt where energy is generated and distributed.55 The market volume for smart
meters was expected to be about one billion euros in fiscal year 2009, and Siemens hopes to acquire
orders worth more than six billion euros for intelligent-power networks through 2014. Wolfgang Dehen
believes that the market for smart grids will have “increasingly dynamic growth fueled by climate
change and economic stimulus programs” and that Siemens will “grow twice as fast as the overall
market” within this sector.56, 57
11
Siemens’s Competition
The global energy market is a capital-intensive business in a regulated environment. As a conse-
quence, there are only a few major players in this industry. Financial data for the main global energy
companies are shown in Exhibit 12 (Siemens), Exhibit 13 (ABB), Exhibit 14 (General Electric), and
Exhibit 15 (Alstom), respectively. There are, however, numerous small and highly innovative compa-
nies that focus on R&D in specialized areas of the renewable-energy supply chain. The vast majority of
these are privately owned technology startups.
Siemens’s technological accomplishments have made it the world’s second-largest industrial con-
glomerate, next to General Electric (GE), its major competitor. Exhibits 3 and 16 show 2009 sector rev-
enues for Siemens and GE, respectively. Exhibits 4 and 17 show 2009 sector profits for Siemens and
GE, respectively. Like Siemens, GE is also active worldwide. Exhibits 18 and 19 compare the major
world markets for Siemens and GE, respectively. GE Energy is involved in all the major energy fields
that Siemens covers, including wind, solar, and nuclear. This also includes complementary systems,
components (such as gas turbines), and services and maintenance. GE has the “home advantage” in
the very important U.S. market, while Siemens has a long history of service in the European Union.
Both increasingly have to put up with third-party competitors, such as Chinese manufacturers of
wind-technology products.
Siemens was recently plagued by a bribery scandal that reached high into the management and
directorate ranks, placing it at a temporary disadvantage compared to GE. Investigators alleged that
Siemens spent more than $1 billion bribing governments in at least 10 countries, including Greece,
Italy, and Nigeria, in an effort to obtain lucrative contracts.58 Although Greece and Italy have official
laws against such business conduct, countries like Nigeria have lower ethics standards and tend not
to provide any contracts without sufficient “grease money.” In fact, bribery is commonplace in coun-
tries such as Nigeria, China, and Russia. However, because both the United States and the European
Union have laws that make such business practices illegal, Siemens was sentenced to more than $1.6
billion in fines by the German and U.S. authorities in 2008, and it had to forgo bidding on any World
Bank contracts for two years.59
Decision Time—What to Do? Where to Invest?

Wolfgang Dehen believes it is time for Siemens Energy to place some significant bets, as disruptive
innovations in alternative energies are clearly coming. If Siemens bets badly, the company risks being
relegated to the sidelines as newer, more innovative firms squeeze slower-moving incumbents out of
the market. Investing in the right areas, though, could ensure Siemens and others a stake in the future
of the energy industry, allowing them to leverage their immense assets and keep new entrants at bay.
Siemens appears weakened due to the bribery scandal, but in many ways is experiencing a resurgence
under its new management and structure.60 Could Siemens harness that momentum to capture a lead-
ing role in the new energy economy? The answer to that question depends on the decisions made by
Dehen’s strategic planning team over the upcoming months.
Currently, Siemens’s primary focus in alternative energy is wind-based technologies. Here, the com-
pany operates as a one-stop shop, providing its customers with comprehensive wind-energy solutions
that do not need third-party components or outside service contracts. As the leading supplier of off-
shore wind turbines, Siemens’s market share in the wind sector is strong and growing.61 One option is
for Siemens to utilize its size, competency, and cutting-edge technology to further increase its market
12
share and global footprint in wind energy. Demand for wind turbines is not likely to fall in the near
future. What is not so clear, however, is whether wind energy will turn out to be the leading alterna-
tive technology, and if it does, whether wind technologies alone can generate enough profit to keep
Siemens aloft.
The company’s other main alternative-energy emphasis is solar power, whose future is equally in
question. Here, initial investments have been made, and several projects of significant magnitude have
recently been acquired. These represent good first steps into the solar field, but are they enough? Or is
Siemens’s entry too late to allow it to establish a stronghold in this relatively mature industry? Siemens
currently must rely on third-party suppliers for complete solar plants, and this dependency makes the
firm vulnerable. Nevertheless, solar technology seems to have a bright future, with steadily increasing
demand, suggesting there might be enough capacity to support both new and established competitors.
Then there is the question of whether—and how much—to invest in other alternative energies,
such as nuclear and hydroelectric power. Is it worth reengaging in nuclear technology, not knowing
how long the currently pro-nuclear German legislature will remain in charge? Can nuclear technol-
ogy be improved enough to reduce concerns regarding waste byproducts, the risk of accidents, and
environmental terrorism? Siemens has a rich history in hydroelectric dam projects as well, but it is
not clear whether this is a strength or weakness in the current climate. Fewer and fewer dams are
being commissioned as these projects grow increasingly more expensive and controversial. Dehen
is not sure it is wise to stake Siemens’s reputation as a green energy provider on a technology that
causes so much environmental damage.
In addition, Siemens has made limited investments in the development of hydrogen-based fuel
cells,62 which hold great promise if significant logistical issues in hydrogen storage and distribution
can be overcome. Siemens also has yet to explore multiple other potential technologies, such as geo-
thermal energy or biofuels. Many high-profile researchers, including Craig Venter, a key figure in the
decoding of the human genome, actually view algae as the most promising path. These microscopic
plant cells are present in an infinite supply and can generate energy quickly, effectively, and in an
environmentally friendly manner, if scientists can figure out how to capture it cost effectively. It is
also possible that the next great breakthrough in renewable energy technology has not yet even been
discovered.
After deciding how many and which alternative-energy fields to pursue, Siemens’s strategic leaders
still have to figure out how to compete in the chosen sectors. Historically, Siemens tends to bridge a
middle ground between being a first mover and merely taking up existing technologies and capital-
izing on them (as a second or later mover). Its preferred mode of operation is to monitor market trends
and stay on the lookout for smaller companies with innovative technologies in promising market seg-
ments. If the new technology is determined to be a sustainable business opportunity, Siemens will
acquire the target company and integrate it into its portfolio. While this means that initial gains on the
technology may not be realized under the Siemens name, it does ensure that the investment pays off in
the long run. It also means that Siemens does not have to invest much in basic R&D of uncertain tech-
nologies, but instead should spend its R&D budget continuing and enhancing acquired innovations.
However, history is full of examples in which a company creates a first-mover advantage by capi-
talizing on a new disruptive technology and setting the standard for everyone else to follow. Popular
examples include Henry Ford’s introduction of the conveyor belt in manufacturing, or the online auc-
tion platform at eBay.63 By not investing more in primary R&D, Siemens risks being placed at a perma-
nent disadvantage in the area of alternative energies. In many ways, innovation is like a muscle that
grows stronger with repeated workouts, but weakens when you stop using it.
13
Having just returned from Davos, Mr. Dehen also finds himself wondering whether Siemens is tak-
ing full advantage of all the benefits that alliances have to offer. If major corporations could come
together under the leadership of the World Economic Forum to discuss issues and obstacles in the
development of sustainable energy sources, could they not collaborate under other circumstances as
well? Climate change and renewable energy are, after all, problems on a global scale. Perhaps it is not
even realistic to expect a single corporation, no matter how large, to discover and develop the next
big energy breakthrough without support from other interested parties. Yet he suspects it would be
difficult for previously fierce competitors to forget their past and build a trust-based, collaborative
relationship.
Mr. Dehen’s head is spinning with these thoughts as he heads to his car for the drive home. The
strategic planning group will certainly have much to discuss tomorrow, not to mention in the days and
months to come. . . .
14
EXHIBIT 1 Crude Oil Price per Barrel and Trend Line, 1990–2012
(in constant, inflation-adjusted U.S. dollars)
$140
$120
$100
$80
$60
$40
$20
$0
Jun-90
Jan-91
Aug-91
Mar-92
Oct-92
May-93
Dec-93
Jul-94
Feb-95
Sep-95
Apr-96
Nov-96
Jun-97
Jan-98
Aug-98
Mar-99
Oct-99
May-00
Dec-00
Jul-01
Feb-02
Sep-02
Apr-03
Nov-03
Jun-04
Jan-05
Aug-05
Mar-05
Oct-06
May-07
Dec-07
Jul-08
Feb-09
Sep-09
Apr-10
Nov-10
Jun-11
Jan-12
Source: “Short-term energy outlook – Real petroleum prices,” U.S. Energy Information Administration,
June 10, 2010, www.eia.doe.gov/emeu/steo/pub/fsheets/real_prices.html.
15
EXHIBIT 2 Siemens’s Corporate Structure
Sectors Divisions Former Groups
• Industry Automation • Osram • Automation and Drives (A&D)

• Drive Technologies • Industry Solutions • Industrial Solutions and
Industry
• Building Technologies • Mobility Services (I&S)

• Siemens Building
• Technologies (SBT)
• Osram
• Transportation Systems (TS)
• Oil & Gas • Energy Service • Power Generation (PG)

• Fossil Power • Power Transmission • Power Transmission and
• Generation • Power Distribution Distribution (PTD)
Energy
• Renewable Energy • Industrial Solutions and

Services (I&S OGM)
• Imaging & IT • Medical Solution (Med)

• Workﬂow & Solutions
• Diagnostics
Health
Source: Adapted from “Siemens Energy Sector Presentation,” Renewable Energy Division (ER), June 2009, Version 9.1.
16
EXHIBIT 3 2009 Siemens Business Sector Revenues
Others (IT, Financial, excluding

equity investments)
6.1%
Health Care
15.4%
Industry
Total Revenues 2009:
45.2%
76.651 billion euro
Energy
33.3%
Source: Adapted from the Siemens 2009 Annual Report.
EXHIBIT 4 2009 Siemens Business Sector Profits
Others (IT, Financial, excluding

equity investments)
5.0%
Health Care Industry

18.4% 34.4%
Total Profit 2009:
7.863 billion euro*
Energy
42.2%
17
EXHIBIT 5 Siemens’s Energy Supply Chain
Renewable
Energies
Power Power Power Power

Oil & Gas
Generation Transmission Distribution Conservation
Source: Adapted from Siemens Energy Sector Presentation, Renewable Energy Division (ER), June 2009, Version 9.1.
EXHIBIT 6 EXHIBIT 7
2009 Siemens Revenues by Division within the 2009 Siemens Profits by Division within the
Energy Sector Energy Sector
Power
distribution Power Fossil power
12% distribution generation
Fossil
Power power
21.1% 20.8%
transmission generation
23% Total revenues energy
38%
sector 2009:
Power
transmission Renewable
26.469 billion euro
energy
18.7%
20.8%
Oil & gas
Renewable Oil & gas
16% energy
18.6%
11%
Source: Adapted from the Siemens 2009 Annual Report. Source: Adapted from the Siemens 2009 Annual Report.
18
EXHIBIT 8 Global CO2 Emissions (historic and projected)
45,000
40,000
Million Metric Tons CO2
35,000
30,000
25,000
20,000
1990 1995 2000 2005 2010 2015 2020 2025 2030
Year
Source: Data from www.eia.doe.gov/oiaf/ieo/excel/ieoreftab_10.xls.
EXHIBIT 9 Global Electricity Consumption, 1980–2006
18,000
16,000
Billion Kilowatt-Hours
14,000
12,000
10,000
8,000
6,000
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
Year
Source: Data from www.eia.doe.gov/pub/international/iealf/table62.xls.
19
EXHIBIT 10 2010 Global CO2 Emissions by World Region
OECD North Non-OECD Asia

America
34%
22%
OECD OECD Asia

Europe
7%
14%
Non-OECD Central and South

Europe and America
Eurasia
Africa Middle East
4%
10%
4% 5%
Source: Data from www.eia.doe.gov/oiaf/ieo/excel/ieoreftab_10.xls.
EXHIBIT 11 2008 Global Energy Production by Type (in billions of btu)
Geothermal
1%
Natural Gas Plant Liquids
4%
Crude Oil
Biomass
6% 16%
Coal Solar/PV
36% 0%
Dry Natural
Gas
32%
Hydro Wind
4% 1%
Source: Data adapted from www.eia.doe.gov/emeu/aer/txt/stb0102.xls.
20
EXHIBIT 12 Selected Financial Data, Siemens (revenue and earnings in millions of euros)
2009 2008 2007 2006 2005 2004 2003

Revenue 76,651 77,327 72,448 66,487 55,781 61,480 61,624
Gross profit 20,710 21,043 20,876 17,379 15,683 18,710 18,089
Net income 2,497 5,886 4,038 3,345 2,576 3,405 2,445
Assets, liabilities, and equity (millions of euros):
Current assets 43,634 43,015 47,932 50,014 45,502 45,946 43,489
Current liabilities 36,486 42,117 43,894 38,964 38,376 33,435 32,041
Debt 19,638 16,079 15,497 15,297 12,035 11,219 13,178
Long-term debt 18,940 14,260 9,860 13,122 8,040 9,785 11,433
Pension plans and similar commitments 5,938 4,361 2,780 5,083 5,460 4,392 5,843
Equity 27,287 27,380 29,627 25,895 23,791 26,454 23,404

As a percentage of total assets 29 29 32 30 29 33 30
Total assets 94,926 94,463 91,555 87,528 81,579 79,239 77,378
Key capital market data (in euros):
Earnings per share from continuing operations 2.60 1.91 4.13 2.78 2.96 3.37 2.31
Diluted earnings per share from continuing operations 2.58 1.90 3.99 2.77 2.85 3.23 2.28

Dividend per share 1.60 1.60 1.60 1.45 1.35 1.25 1.10
Siemens stock price
High 66.45 108.86 111.17 79.77 66.18 68.30 58.32
Low 35.52 64.91 66.91 60.08 56.20 52.02 32.05
Year-end (September 30) 63.28 65.75 96.42 68.80 64.10 59.21 51.14
Number of shares (in millions) 914 914 914 891 891 891 891
Market capitalization at period-end (millions of euros) 54,827 56,647 88,147 61,307 57,118 52,761 45,559
Credit rating of long-term debt:
Standard & Poor’s A+ AA– AA– AA– AA– AA– AA–
Moody’s A1 A1 A1 Aa3 Aa3 Aa3 Aa3
Source: Company financial reports. Years 2005 and forward are according to IFRS, years 2004 and earlier according to U.S. GAAP.
21
EXHIBIT 13 Consolidated Income Statement Data, ABB ($ in millions, except per-share data in $)
22
Year ended December 31 2009 2008 2007 2006 2005 2004 2003
Total revenues 31,795 34,912 29,183 23,281 20,964 18,987 17,891
Total cost of sales (22,470) (23,972) (20,215) (16,537) (15,510) (14,219) (13,307)
Gross profit 9,325 10,940 8,968 6,744 5,454 4,768 4,584
SG&A (5,528) (5,822) (4,975) (4,326) (3,780) (3,672) (3,781)
Other income, expense (net) 329 (566) 30 139 37 (41) (193)
EBIT 4,126 4,552 4,023 2,557 1,711 1,055 610
Interest and dividend income 121 315 273 147 153 146 132
Interest and other finance expense (127) (349) (383) (307) (407) (355) (538)
Income from continuing operations before taxes and
minority interest 4,120 4,518 3,913 2,397 1,457 846 204
Provision for taxes (1,001) (1,119) (595) (686) (464) (258) (99)
Income (loss) from discontinued operations, net of tax 17 (21) 586 (142) (127) (523) (803)
Income before cum effect of acctg change, net of tax 3,136 3,378 3,904 1,569 866 65 (698)
Cum. effect of accounting change, net of tax – – (49) – (5) – –
Net income 3,136 3,378 3,855 1,569 861 65 (698)
Net income attrib. to noncontrolling interests (235) (260) (244) (179) (126) (100) (81)
Net income 2,901 3,118 3,611 1,390 735 (35) (779)

Basic earnings (loss) per share:
Income from continuing operations 1.26 1.37 1.37 0.72 0.43 0.24 0.02
Income (loss) from discontinued operations, net of tax 0.01 (0.01) 0.25 (0.07) (0.07) (0.26) (0.66)
Cum. effect of accounting change, net of tax – – (0.02) – – – –
Net income 1.27 1.36 1.60 0.65 0.36 (0.02) (0.64)
Diluted earnings (loss) per share:
Income from continuing operations 1.26 1.37 1.34 0.69 0.42 0.24 0.02
Income (loss) from discontinued operations, net of tax 0.01 (0.01) 0.25 (0.06) (0.06) (0.26) (0.66)
Cum. effect of accounting change, net of tax – – (0.02) – – – –
Net income 1.27 1.36 1.57 0.63 0.36 (0.02) (0.64)
Source: Company financial reports. Prepared according to U.S. GAAP.

EXHIBIT 14 Income Statement Data, General Electric and Consolidated Affiliates ($ in millions, except per-share data in $)
2009 2008 2007 2006 2005

Revenues 156,783 182,515 172,488 151,568 136,262
Earnings from continuing operations before accounting changes 11,218 18,089 22,457 19,344 17,279
Earnings (loss) from discontinued operations, net of taxes (193) (679) (249) 1,398 (559)
Net earnings 11,025 17,410 22,208 20,742 16,720
Dividends declared 6,785 12,649 11,713 10,675 9,647
Return on average shareowners’ equity 10.1% 15.9% 20.4% 19.8% 18.1%
Per common share:
Earnings from continuing operations before accounting changes,
diluted 1.03 1.78 2.20 1.86 1.63
Earnings (loss) from discontinued operations — diluted (0.02) (0.07) (0.02) 0.13 (0.05)
Net earnings — diluted 1.01 1.72 2.17 2.00 1.57

Earnings from continuing operations before accounting changes,
basic 1.03 1.79 2.21 1.87 1.63
Earnings (loss) from discontinued operations — basic (0.02) (0.07) (0.02) 0.14 (0.05)
Net earnings — basic 1.01 1.72 2.18 2.00 1.58
Dividends declared 0.61 1.24 1.15 1.03 0.91

Year-end closing stock price 15.13 16.20 37.07 37.21 35.05
Total assets of continuing operations 780,298 796,046 786,794 674,966 588,821
Total assets 781,818 797,769 795,683 697,273 673,210
Long-term borrowings 338,215 322,847 318,530 260,656 212,082
Common shares outstanding — average (in millions) 10,614 10,080 10,182 10,359 10,570
Shareowner accounts — average 605,000 604,000 608,000 624,000 634,000
Employees at year end:
United States 134,000 152,000 155,000 155,000 161,000
Other countries 154,000 171,000 172,000 164,000 155,000
BAC Credomatic GECF Inc. 16,000 - - - -
Total employees 304,000 323,000 327,000 319,000 316,000
23
(Continued)
EXHIBIT 14 (Continued)
24
2009 2008 2007 2006 2005
GE Data:
Short-term borrowings 504 2,375 4,106 2,076 972
Long-term borrowings 11,681 9,827 11,656 9,043 8,986
Minority interest 5,797 6,678 6,503 5,544 5,308
Shareowners’ equity 117,291 104,665 115,559 111,509 108,633
Total capital invested 135,273 123,545 137,824 128,172 123,899
Return on average total capital invested 9.5% 14.8% 18.9% 18.5% 16.7%
Borrowings as a percentage of total capital invested 9.0% 9.9% 11.4% 8.7% 8.0%
Working capital (1,596) 3,904 6,433 7,527 7,853
GECS Data:
Revenues 54,163 71,287 71,936 61,351 54,889
Earnings from continuing operations before accounting changes 1,590 7,774 12,417 10,219 8,929
Earnings (loss) from discontinued operations, net of taxes (175) (719) (2116) 439 (1,352)
Net earnings 1,415 7,055 10,301 10,658 7,577
Shareowners’ equity 70,833 53,279 57,676 54,097 50,812
Total borrowings and bank deposits 500,334 514,601 500,922 426,262 362,042
Ratio of debt to equity at GE Capital 6.74:1a 8.76:1a 8.10:1 7.52:1 7.09:1

Total assets 650,241 660,902 646,485 565,258 540,584
a
Note: Ratios of 5.22:1 and 7.07:1 for 2009 and 2008, respectively, net of cash and equivalents and with classification of hybrid debt as equity.
Source: Company financial reports. Prepared according to U.S. GAAP.

EXHIBIT 15 Income Statement Data, Alstom (in millions of euros)
Year ended March 31 2009 2008 2007 2006 2005

SALES 18,739 16,908 14,208 13,413 12,920
From products 13,787 12,433 10,225 9,773 9,127
From services 4,952 4,475 3,983 3,640 3,793
Cost of sales (15,225) (13,761) (11,586) (11,080) (10,886)
Research and development expenses (586) (554) (456) (364) (405)
Selling expenses (666) (619) (567) (569) (535)
Administrative expenses (726) (679) (642) (654) (623)
INCOME FROM OPERATIONS 1,536 1,295 957 746 471
Other income 44 26 18 252 67
Other expenses (137) (100) (149) (191) (589)
EARNINGS (LOSS) BEFORE INTEREST AND TAXES 1,443 1,221 826 807 (51)
Financial income 122 115 101
Financial expense (101) (184) (212) (222) (381)
PRE-TAX INCOME (LOSS) 1,464 1,152 715 585 (432)
Income tax charge (373) (291) (145) (125) (163)
Share in net income (loss) of equity investments 27 1 (1)
NET PROFIT (LOSS) FROM CONTINUING OPERATIONS 1,118 862 570 459 (595)
NET PROFIT (LOSS) FROM DISCONTINUED (198) (32)
OPERATIONS – – (32)
NET PROFIT 1,118 862 538 261 (627)
Attributable to equity holders of the parent 1,109 852 547 258 328
Minority interests 9 10 (9) 3 (1)
Earnings per share (in euros)

From continuing and discontinued operations:
- Basic 3.87 3.01 1.94 1.84 (5.76)
- Diluted 3.81 2.95 1.90 1.82 (5.76)
From continuing operations:
- Basic 3.87 3.01 2.05 3.25 (5.47)
- Diluted 3.81 2.95 2.01 3.22 (5.47)
From discontinued operations:
- Basic – – (0.12) (1.41) (0.29)
- Diluted – – (0.11) (1.39) (0.29)
Source: Company financial reports. Prepared according to IFRS.
25
EXHIBIT 16 GE 2009 Sector Revenues
Consumer & industrial

6%
Energy
infrastructure
24%
Capital
finance Total revenues 2009:
33%
155.369 billion $
Technology
infrastructure
NBC
Universal 27%
10%
Source: Adapted from the GE 2009 Annual Report.
EXHIBIT 17 GE 2009 Sector Profits
Consumer & industrial

2%
Capital
finance
12% Energy
infrastructure
NBC
Universal 35%
Total profits 2009:
12%
19.339 billion $
Technology infrastructure
39%
26
EXHIBIT 18 Siemens 2009 Global Market Revenues
Asia, Australia,
Near Middle East
Americas
16%
27%
Total revenues 2009:
76.651 billion euro
Europe, Africa, CIS

57%
EXHIBIT 19 GE 2009 Global Market Revenues
Other global
Middle
East & Afica 3%
6%
Americas
8%
Pacific
Basin Total revenues 2009: U.S.
13% 156.8 billion $ 46%
Europe
24%
27
Endnotes
1. www.weforum.org/pdf/ip/energy/Energy_VisionUpdate2010.pdf.
2. OPEC is the acronym for Organization of the Petroleum Exporting Countries, and has 12 members: Algeria,
Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and
Venezuela.
3. www.weforum.org/pdf/ip/energy/Energy_VisionUpdate2010.pdf.
4. Ibid.
5. www.weforum.org/documents/initiatives/CEOStatement.pdf, p. 7.
6. “The winds blow for clean energy,” The Wall Street Journal, July 9, 2009.
7. Siemens: “Progress is our tradition,” Peter von Siemens, chronicle of Power Plant Engineering at Siemens,
promotional material, Siemens publication.
8. http://en.wikipedia.org/wiki/Electrical_power_industry.
9. “150 years of Siemens, the company from 1847 to 1997,” promotional material, Siemens publication.
10. www.energy.siemens.com/entry/energy/hq/en/?tab=energy-1213565-Power%20Generation#429870.
11. Friedman, T. L. (2008), Hot, Flat, and Crowded: Why We Need a Green Revolution–And How It Can Renew America,
1st ed. (New York: Farrar, Straus, and Giroux).
12. www.eia.doe.gov/oiaf/ieo/pdf/table17.pdf.
13. http://bc1.handelsblatt.com/ShowImage.aspx?img=2496509&l=1, with data from: Bundesverband

Windenergie e.V., Germany.
14. www.reuters.com/article/rbssEnergyNews/idUSL618914420090306.
15. Siemens Power Generations press release website.
16. www.reuters.com/article/idUKLDE62B0OD20100312.
17. www.siemens.com/press/en/pressrelease/?press=/en/pressrelease/2009/renewable_energy/ere
200912024.htm.
18. www.powergeneration.siemens.com/press/press-releases/renewable-energy/2009/ERE200904035.htm.
21. McElroy, M. B., et al. (2009), “Potential for wind-generated electricity in China,” Science, September:
1378–1380.
22. www.chinadaily.com.cn/bizchina/2009-09/11/content_8680007.htm.
23. www.bloomberg.com/apps/news?pid=20601101&sid=adzZiLUAMODU.
24. “China races ahead of U.S. in drive to go solar,” The New York Times, August 25, 2009.
25. http://solarcity.com/.
26. www.time.com/time/specials/2007/article/0,28804,1730759_1730843_1730983,00.html.
27. www.energy.siemens.com/hq/pool/hq/power-generation/steam-turbines/downloads/E50001-W410-
A105-V1-4A00_solarbroschuere.pdf.
28
28. www1.eere.energy.gov/solar/thermal_storage.html.
30. www.iaea.org.
31. www.miller-mccune.com/science_environment/the-salt-mine-solution-1092, Miller-McCune, June 6, 2009.
32. www.spiegel.de/international/germany/0,1518,577018,00.html.
33. http://spectrum.ieee.org/blog/energy/renewables/energywise/
german-election-a-likely-reprieve-for-nuclear.
34. http://theenergycollective.com/TheEnergyCollective/48659.
35. www.powergeneration.siemens.com/press/press-releases/service-rotating-equipment/2007/PG200706-047.
htm.
36. www.powergeneration.siemens.com/press/press-releases/service-rotating-equipment/2007/PG200712-011.
htm.
37. http://nuclearstreet.com/blogs/nuclear_power_news/archive/2009/03/04/rosatom-and-siemens-sign-
memorandum-of-understanding-on-the-creation-of-a-nuclear-joint-venture.aspx.
38. www.businessweek.com/globalbiz/content/may2009/gb20090522_165515.htm.
39. www.pittsburghlive.com/x/pittsburghtrib/s_575073.html.
40. www.nrc.gov/reactors/new-licensing/new-licensing-files/expected-new-rx-applications.pdf.
41. www.ne.doe.gov/newsroom/2009PRs/nePR091809.html.
42. www.ne.doe.gov/newsroom/2009PRs/nePR081409.html.
43. “Externalities of energy: Extension of accounting framework and policy applications,” European
Commission, August 2005, www.externe.info/expoltec.pdf.
44. www.unep.org/dams/documents/Default.asp?DocumentID=648.
45. www.sacw.net/article1007.html.
46. www.rnw.nl/english/radioshow/coroversial-dam-project-turkey-loses-funding-again.
47. www.powergeneration.siemens.com/press/press-releases/power-transmission/2009/EPT200905054.htm.
48. http://hydropower.id.doe.gov/.
49. www.eia.doe.gov/cneaf/solar.renewables/ilands/chapter3.html#hydro.
50. www1.eere.energy.gov/windandhydro/hydro_potential.html.
51. www.eia.doe.gov/fuelrenewable.html.
52. “Drive to link wind, solar power to distant users,” The Wall Street Journal, October 13, 2009.
53. “Wiser wires,” The Economist, October 8, 2009.
54. “Clever, but unprincipled,” The Economist, October 8, 2009.
55. www.powergeneration.siemens.com/press/press-releases/power-distribution/2009/EPD200910007.htm.
56. http://w1.siemens.com/press/en/pressrelease/?press=/en/pressrelease/2009/corporate_communication/
axx20090981.htm.
29
57. http://w1.siemens.com/press/en/pressrelease/?press=/en/pressrelease/2009/power_distribution/
epd200910008.htm.
58. “Siemens settles with World Bank on bribes,” The Wall Street Journal, July 3, 2009.
59. Ibid.
60. “Siemens: A giant awakens,” The Economist, September 9, 2010.
61. Ibid.
62. www.powergeneration.siemens.com/products-solutions-services/products-packages/fuel-cells/.
63. Arthur, W. B. (1989), “Competing technologies, increasing returns, and lock-in by historical events,”
Economics Journal 99: 116–131; and Hill, C. W. L. (1997), “Establishing a standard: Competitive strategy and win-
ner-take-all industries,” Academy of Management Executive 11: 7–25.
30

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MH0011

Siemens Energy (in 2010): How to Engineer a Green Future?

—Thomas Friedman, Hot, Flat, and Crowded

Siemens’s Corporate Structure

The Global Energy Market

Siemens and Alternative Energies

Distributing Alternative Energy

Siemens and Smart Grids

Decision Time—What to Do? Where to Invest?

EXHIBIT 2 Siemens’s Corporate Structure

Sectors Divisions Former Groups

• Industry Automation • Osram • Automation and Drives (A&D)

• Building Technologies • Mobility Services (I&S)

• Oil & Gas • Energy Service • Power Generation (PG)

• Renewable Energy • Industrial Solutions and

• Imaging & IT • Medical Solution (Med)

EXHIBIT 3 2009 Siemens Business Sector Revenues

Others (IT, Financial, excluding

Source: Adapted from the Siemens 2009 Annual Report.

EXHIBIT 4 2009 Siemens Business Sector Profits

Others (IT, Financial, excluding

Health Care Industry

7.863 billion euro*

Source: Adapted from the Siemens 2009 Annual Report.

EXHIBIT 5 Siemens’s Energy Supply Chain

Power Power Power Power

EXHIBIT 8 Global CO2 Emissions (historic and projected)

Source: Data from www.eia.doe.gov/oiaf/ieo/excel/ieoreftab_10.xls.

EXHIBIT 9 Global Electricity Consumption, 1980–2006

Source: Data from www.eia.doe.gov/pub/international/iealf/table62.xls.

EXHIBIT 10 2010 Global CO2 Emissions by World Region

OECD North Non-OECD Asia

OECD OECD Asia

Non-OECD Central and South

2009 2008 2007 2006 2005 2004 2003

Equity 27,287 27,380 29,627 25,895 23,791 26,454 23,404

800-988-0886 for additional copies.

800-988-0886 for additional copies.

Source: Company financial reports. Prepared according to U.S. GAAP.

2009 2008 2007 2006 2005

Net earnings — diluted 1.01 1.72 2.17 2.00 1.57

800-988-0886 for additional copies.

800-988-0886 for additional copies.

Source: Company financial reports. Prepared according to U.S. GAAP.

EXHIBIT 15 Income Statement Data, Alstom (in millions of euros)

Year ended March 31 2009 2008 2007 2006 2005

Earnings per share (in euros)

Source: Company financial reports. Prepared according to IFRS.

EXHIBIT 16 GE 2009 Sector Revenues

Consumer & industrial

Source: Adapted from the GE 2009 Annual Report.

EXHIBIT 17 GE 2009 Sector Profits

Consumer & industrial

Source: Adapted from the GE 2009 Annual Report.

EXHIBIT 18 Siemens 2009 Global Market Revenues

76.651 billion euro

Europe, Africa, CIS

Source: Adapted from the Siemens 2009 Annual Report.

EXHIBIT 19 GE 2009 Global Market Revenues

Source: Adapted from the GE 2009 Annual Report.

13. http://bc1.handelsblatt.com/ShowImage.aspx?img=2496509&l=1, with data from: Bundesverband

15. Siemens Power Generations press release website.

31. www.miller-mccune.com/science_environment/the-salt-mine-solution-1092, Miller-McCune, June 6, 2009.