In our ESG and Climate report tomorrow we are focusing on the wind industry and specifically the problems that Siemens Gamesa is facing with execution, costs, and logistics. The estimates for China and the rest of the world in the chart below assume a significant step-up in the rate of installation, and in 2022 we are seeing an industry that is struggling with that. Siemens Gamesa is having problems with its new platform, which had been intended to deliver projects more cheaply from an installed cost basis and an operating costs basis and is perhaps an illustration of what can happen when you are trying to move too quickly – partly because your customers are demanding it. Operational problems at Siemens Gamesa have been compounded by logistic challenges and raw material price and availability, such that current expectations are for the company to break even at an EBITDA level in 2022. This is another great example of the policy and investor disconnects that we see in several aspects of energy transition – we are encouraging investment in front line capacity, but not in the materials and feedstocks needed to feed the front line – metals, natural gas, crops. See our recent body of ESG and Climate work for more on this. These subjects are at the heart of many of the private engagements that we have with several clients in this space.
When we highlighted the Ag equipment names as interesting in our daily report earlier in the week, we had not realized that a Deere earnings announcement was imminent. The high farm profitability in the US is giving farmers some freedom with spending at a time when the equipment makers are hitting the market with some exciting new products – especially autonomous machinery – which can save on labor costs. The ESG angle here is further advances in precision agriculture, which can allow for more output for fewer inputs. There is also a very strong push towards low-till and no-till farming (to lower net CO2 emissions or increase CO2 capture) and this is an opportunity for the equipment makers to sell new equipment.