Equity Research U.S. Energy Services & Technology 21 November 2025 Distributed Power Update Debates Rage as Power Becomes the Bottleneck to the AI Trade We update our June report on the distributed power industry, which has been thrust into the AI debate as part of the solution to meeting an estimated 60 GW power gap by 2028. Long-term contracts with hyperscalers are proving this is much more than just a temporary bridge, it's part of the solution. Over just the past six months, the Distributed Power story ...

Siemens Energy Capital Markets Day 2025 Summary Company Overview - **Company**: Siemens Energy - **Event**: Capital Markets Day 2025 - **Date**: November 20, 2025 - **Location**: Charlotte, North Carolina Key Industry Insights - **Energy Transition**: Siemens Energy aims to be a reliable partner in the energy transition, focusing on combining manufacturing, technical expertise, and large-scale industrial systems design [5][4] - **Electricity Demand Growth**: Electricity demand is expected to grow at a sustained rate, increasing by approximately 50% over the next decade and doubling by 2050, driven by population growth and electrification [19][20] - **Gas Market Stability**: The gas turbine market is projected to maintain elevated growth until 2035, indicating a continued need for gas in reliable electricity supply [21] - **Grid Infrastructure Investment**: The expansion and stabilization of grids are expected to fuel demand for grid technologies, with transmission networks anticipated to double by 2035 [22] Financial Performance Highlights - **Revenue Growth**: Siemens Energy reported a 15% revenue growth in the last fiscal year, with a backlog of EUR 138 billion [14][15] - **Profit Margins**: The profit margin before special items is expected to be between 14%-16% by 2028, with a commitment to operational excellence and disciplined execution [23][60] - **Free Cash Flow**: Projected free cash flow of EUR 20 billion from 2026 to 2028, reflecting a strong cash conversion rate [56] Strategic Initiatives - **Elevate Program**: A strategic program structured around three pillars: transforming the energy world, strengthening resilience, and improving operational processes [24][25] - **Capacity Expansion**: Siemens Energy plans to invest around EUR 6 billion in CapEx over the next three years to expand capacities, particularly in gas services and grid technologies [37][55] - **R&D Investment**: The company intends to maintain R&D spending above EUR 1 billion per year, focusing on grid technologies and gas services [28] Safety and Employee Engagement - **Safety Performance**: Achieved a 30% reduction in total injury rate over the last three years, with a strong emphasis on a zero-harm framework [8][9] - **Employee Engagement**: Over 90% of employees express pride in working for Siemens Energy, with plans to continue building the workforce through apprenticeships and learning opportunities [39] ESG Commitment - **Emission Reductions**: Siemens Energy has achieved a 55% reduction in Scope 1 and Scope 2 emissions since 2019, aiming for climate neutrality by 2030 [38] - **Workforce Development**: Commitment to developing a motivated workforce with significant investment in training and apprenticeships [39] Market Position and Future Outlook - **Market Leadership**: Siemens Energy is positioned at the center of the energy transformation, ready to capture growth opportunities in the electricity and electrification markets [20] - **Long-term Growth**: The company expects to continue its trajectory of profitable growth, with a focus on operational excellence and value creation for stakeholders [23][62] Conclusion Siemens Energy is strategically positioned to leverage growth in the energy sector, with a strong focus on operational excellence, safety, and sustainability. The company's commitment to expanding its capabilities and enhancing its market position is expected to drive significant value creation for shareholders in the coming years.

Group 1 - Siemens Energy is set to report fiscal fourth-quarter earnings and revenue, closing the book on fiscal 2025, with strong demand for gas turbines expected due to increased electricity needs and the AI data center boom [1] - Analysts predict Q4 profit for Siemens Energy to rise to 48 cents per share, an increase from 36 cents per share in the previous quarter [1] Group 2 - Dow stocks overall experienced a 2.5% increase in October, marking the index's best month since August [2]

By Timour Azhari and Christoph Steitz RIYADH/FRANKFURT (Reuters) -U.S. firm GE Vernova and Germany's Siemens Energy are in talks to supply gas turbines to a $7 billion project aiming to rebuild ​Syria's war-damaged power sector, three people familiar with the matter told Reuters. Syria signed a deal with a ‌subsidiary of Qatar's Power International Holding in May to build four combined-cycle gas turbine power plants with a total capacity of 4,000 megawatts. The ‌agreement also includes a 1,000-MW solar c ...

Core Insights - The energy sector is experiencing unprecedented load growth driven by data center demand, leading to a shift in generation and procurement strategies among utilities [2][4][5] - Traditional engineering, procurement, and construction (EPC) models are being disrupted by urgent timelines and equipment shortages, necessitating a more integrated approach to project execution [8][9][13] - Workforce shortages are emerging as a critical constraint, with a significant need for skilled labor to support the expanding energy infrastructure [17][18] Group 1: Load Growth and Demand - Utilities are signing large-load agreements to meet accelerated demand, with Southern Co. securing over 2 GW in recent contracts and projecting a 50-GW pipeline through the mid-2030s [2] - NextEra Energy has a 30-GW renewables and storage backlog, driven by partnerships with data centers, highlighting the shift towards bespoke generation agreements [3] - Dominion Energy reports a 17% increase in data center demand, with 47 GW in various contracting stages, emphasizing the need for timely resource development [4] Group 2: EPC Model Transformation - The traditional EPC model is being inverted due to geopolitical tensions and supply chain disruptions, leading to a focus on urgency rather than cost [8][9] - Companies like Burns & McDonnell are integrating consulting with execution to address the complexities of energy transition and project delivery [13] - The urgency of data center timelines is forcing utilities to adapt their project execution strategies, with a shift from "Ready, Set, Go" to "Ready, Go, Set" [13] Group 3: Workforce Challenges - The global power engineering workforce needs to double by 2030 to meet infrastructure demands, with significant competition for skilled labor [17] - Companies are investing in workforce development initiatives, such as Burns & McDonnell's Construction Academy, to address labor shortages [18] - Bechtel and Kiewit are implementing training programs to build a self-sustaining pipeline of skilled workers, recognizing the critical need for labor in project execution [18]

Forward-Looking Statements Certain statements in this financial review relate to future events and expectations and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believe," "estimate," "will be," "will," "would," "expect," "anticipate," "plan," "forecast," "target," "guide," "project," "intend," "could," "should" or other similar words or expressions often identify forward-looking statements. All statements other than statements of h ...

Investment Commitments - The Japanese government and companies have committed to investments worth $467 billion in major projects in the United States to revitalize the U.S. industrial base [1] - Japan will invest up to $332 billion in critical energy infrastructure, including partnerships with Westinghouse, GE Vernova, Hitachi, Bechtel, Kiewit, SoftBank Group Corp., and Kinder Morgan [2] Power Equipment and Infrastructure - Japanese companies will invest up to $25 billion to supply large-scale power equipment such as gas turbines and generators in collaboration with GE Vernova [3] - An additional $25 billion will be invested to supply electrical power modules and transformers in collaboration with Toshiba, and $20 billion for thermal cooling systems with Carrier [4] Advanced Technology and Components - A $30 billion investment is pledged with Mitsubishi Electric for power station systems for data centers, $25 billion with TDK for advanced electronic components, and $20 billion with Fujikura for optical fiber cables [5] - Japan will invest $15 billion in advanced electronic components with Murata Manufacturing and another $15 billion for energy storage systems with Panasonic [6] Manufacturing and Infrastructure Projects - Japanese companies will construct a $3 billion ammonia and urea fertilizer facility and a $2 billion copper smelting and refining facility in the U.S. [7] - Investments include $600 million for upgrading ports and waterways, $500 million for a diamond grit manufacturing facility, and $350 million for a lithium-iron-phosphate production facility [8] Trade and Export Opportunities - Japan committed to expanding opportunities for U.S. exports, including Toyota's plans to export U.S.-made vehicles to Japan without additional testing [9] - A Memorandum of Cooperation was signed to expand shipbuilding capacity in both nations [10]

Core Viewpoint - The distinction between a broken stock and a broken company is emphasized, highlighting that stock price movements do not always reflect the underlying company's performance [2][8]. Company Analysis - General Electric's Verova, a significant player in energy supply for data centers, reported strong order growth, indicating its integral role in meeting the high electricity demands of these facilities [4][5]. - Despite a positive outlook from CEO Scott Strah, the company did not raise its full-year estimates, which led to a significant drop in stock price after a strong year-to-date performance [6][7]. - The stock of Verova had already increased nearly 80% prior to the earnings report, suggesting that the market had anticipated more than what was delivered [7][8]. - The stock experienced a decline of 50 points post-earnings, but the company itself did not perform poorly; rather, the market reaction was due to unmet expectations [8][9]. - In a vacuum, Verova's stock could be considered a buying opportunity at current levels, as it recovered most of its losses by the end of the trading day [9].

Mortgage Market - There has been a significant surge in refinancing demand, with refinancing applications growing 4% week-over-week and an 81% increase year-over-year [3] - Mortgage rates have decreased, with the 30-year fixed rate falling to 6.37% from 6.42% [2] - Purchasing applications have seen a 5% increase week-over-week but only a 20% growth year-over-year, indicating ongoing pressures for home buyers [4] Company Earnings - GE Venova reported total revenue of $9.97 billion, exceeding expectations of $9.15 billion, marking the largest earnings beat since its IPO [8] - Adjusted earnings per share came in at $1.64, below the expected $1.95, primarily due to the cancellation of a significant offshore wind project [9] - The electrification segment is experiencing rapid growth, with a backlog of orders expected to last until 2027 [10] Crude Oil Market - Crude oil prices are tracking higher, influenced by trade developments with China and India, despite challenges in reducing Russian oil imports [12][15] - A technical balance is observed in the crude oil market, with prices hitting a key support area around $55 [13] - The potential for new supplies outside of Iran and Russia remains challenging for India, which relies heavily on these imports [16] Commodity Market - Gold is losing momentum but remains steady above the 4,000 mark, while other commodities like silver, copper, palladium, and platinum are showing upward movement [19] - Industrial metals may benefit from a high inflation environment, especially if fiscal policies support economic growth [22] - A hot CPI print could lead to increased demand for metals, particularly silver, as the market adjusts to potential rate-cutting expectations [24]

Financial Data and Key Metrics Changes - GE Vernova reported a 10% organic revenue growth in Q3, with adjusted EBITDA more than tripling year-over-year to $811 million, and EBITDA margins expanded by 600 basis points [27][29] - The total backlog increased to $135 billion, with a year-over-year increase led by both Power and Electrification segments [28] - Free cash flow generation was approximately $730 million in Q3, with a healthy cash balance of nearly $8 billion at the end of the quarter [31][25] Business Line Data and Key Metrics Changes - Electrification revenue increased over 30% with margins expanding to over 15%, while Power revenue grew by 22% [26][29] - The equipment backlog for Electrification grew to over $26 billion, up almost $8 billion compared to the third quarter of 2024 [36] - Prolec GE is expected to generate $3 billion in revenue this year with strong EBITDA margins of 25% [6][12] Market Data and Key Metrics Changes - The North American electrification market is expected to grow at a compounded growth rate of approximately 10%, doubling in size by 2030 [10] - Significant investment in electrification is being driven by increased electricity demand, grid stability needs, and energy transition [10] - The gas turbine backlog grew from 29 GW to 33 GW, with expectations to approach 70 GW of contractual gas power commitments by the end of 2025 [19] Company Strategy and Development Direction - The acquisition of Prolec GE aligns with GE Vernova's strategic and financial objectives, enhancing capabilities in the grid equipment market [5][6] - The company aims to streamline customer experience and improve performance across safety, quality, delivery, and cost by applying lean practices [17] - GE Vernova is focused on expanding its low to medium voltage technology offerings to serve select industries globally [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth trajectory due to strong demand in electrification and gas power sectors, with a backlog increase of $7 billion in Q3 alone [18] - The company anticipates continued strength in gas-powered demand and pricing, with significant contracts signed in Q3 [19] - Management highlighted the importance of integrating Prolec GE to drive revenue and cost synergies, with expectations for $60 million-$120 million in annualized cost synergies by 2028 [16][79] Other Important Information - The company plans to fund the Prolec acquisition with a mix of cash and debt, maintaining an investment-grade balance sheet [14] - GE Vernova is committed to returning at least one-third of cash generated to shareholders while pursuing targeted M&A opportunities [41] - The company has repurchased over $2.2 billion of stock year-to-date and plans to continue share repurchases opportunistically [31] Q&A Session Summary Question: Visibility into 2028 targets for Prolec acquisition - Management indicated confidence in the 2028 targets due to existing backlog and framework agreements with utilities, which are expected to drive growth [46][48] Question: Mix and capacity for Prolec - Management discussed Prolec's investments in capacity and the focus on integrated solutions for data centers, with expectations for peak CapEx in 2026 [53][54] Question: Pricing trends for gas turbines - Management confirmed that while pricing for gas turbines is strong, there is a mix dynamic affecting the perception of pricing softening [59][60] Question: Power equipment dollar orders versus gigawatt orders - Management explained that the positive delta in dollar growth versus gigawatt growth is due to a mix of aeroderivative and heavy-duty gas turbines [63][64] Question: Structural opportunity for margins - Management expressed confidence in exceeding previous peak margin levels due to a larger install base and a more profitable services business [71][72] Question: Cost synergy realization cadence - Management indicated that cost synergies would begin to flow relatively soon after the acquisition, with a range of $60 million-$120 million expected by 2028 [78][79]