One of Germany’s biggest engineering companies is suffering indirectly from the country’s ongoing transition towards renewable energy.

Bilfinger is being impacted by utilities’ inability to build new conventional power plant capacity, and expects full-year adjusted net profit to decline to between €230m and €245m, compared with €255m last year.

JPMorgan estimated that utility spending accounts for about 19 per cent of the revenues of European capital goods companies for which it provides coverage, but the rapid decline in utility spend means Bilfinger has been forced to announce job and capacity cuts due to falling profits.
Bilfinger engineers
Bilfinger’s power business segment has been affected by Germany’s efforts to shift from fossil fuels to renewables, “which has led to a considerable reluctance to invest on the part of energy suppliers”, it said.

The impact is being felt throughout central Europe, with the addition of large amounts of saved wind power being added to the grid spurring exports of cheap electricity to Poland, causing utilities to cancel projects there, Bilfinger said.

Suppliers to energy-related projects, facing falling orders, are pushing into other sectors such as chemicals, squeezing Bilfinger’s margins in its industrial business.

“The main problem at the present time is that nobody who has anything to do with energy can make an investment decision [in Europe],” Roland Koch, Bilfinger’s chief executive, said. “The situation for us is simple – our customers have no planning certainty.”

The problems experienced by major engineering companies look set to continue, with JP Morgan analysts forecasting that most countries in Europe will probably not build new fossil-fueled power plants in this decade.