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2026.09.23 | TB | Power | Siemens Energy Omterra Spin-Off

原标题：Siemens Energy – Omterra – Spinning off the Transformation of Industry Unit

#power #industrials

Third Bridge · 2026-09-23

Analyst-led • 14 Sep 2026

Companies: ENR DE, 7011 JP, RR. GB, GEV US

Markus Kupetz (MK) Independent Consultant

Louis Knight (LK) — Third Bridge Sector Analyst

Agenda

Key Insights

Introduction

LK: Welcome to Third Bridge's Interview entitled Siemens Energy – Omterra – Spinning off the Transformation of Industry Unit. My name is Louis Knight. I will be facilitating today's Interview with Mr Markus Kupetz, former Senior Executive for Siemens Energy. Markus, thank you for joining, and welcome to today's Interview.

Before we begin, please state I agree or I disagree to this following sentence: You understand the definition of material non-public information and agree not to disclose any such information, or any other information which is confidential, during this Interview.

MK [00:00:45]: I agree.

LK [00:00:46]: Could you start with a brief introduction to your relevant experience, roles and wider background, please?

MK [00:00:57]: Yes. My name, you said, Markus Kupetz. I'm in business for more than 30 years now, energy business. My focus in the last 10-15 years was running business in Siemens Energy, in rotating equipment, which means gas turbines, steam turbines, generators, big size, small size. As part of my roles there being CEO, Managing Director in India a few years back, I was running the steam business there, which is today part of this Transformation of Industry group. I have a lot of experience, a lot of connection to what we are talking here today.

LK [00:01:43]: How does your experience within the ToI business unit relate to the rest of ToI? You had the steam business and there would be other projects, compressors, and other areas of the business. Do they interact?

MK [00:01:59]: Yes. The way Siemens Energy is running the business is very integrated. There's factory networks, there's business networks, there's exchange and there's always an internal supply situation. The growth and the development of this new energy business, which is also now a big part, one of the three big parts of this Transformation of Industry is also something where I was involved a lot in the last 5-10 years to get this up to speed, to get this settled or started like a start-up within the company. Also with compressors. When I was in India, one of the factories I was leading was the Ahmedabad factory, which is also a compressor factory in the beginning when we started to restructure.

Questions

[00:02:47] What are your overarching thoughts on the divestiture of the ToI [Transformation of Industry] business unit by Siemens Energy?

MK [00:02:55]: I, first of all, have to say that I'm not too surprised, even though it's a very interesting step to do it now in a strong environment, a strong business environment. You can say it's a good timing to do it right now where the markets are very strong and robust. I have never seen such a cycle in the 30 years, what we are seeing now. Usually, the cycles were more like two, three, four years. This time, it seems that the boom cycle is lasting at least 10 years or more, and we have just gone 3-4 years now, maybe five years. It's an extremely positive environment for energy business.

LK [00:03:39]: Why is the cycle so strong today?

MK [00:03:45]: The cycle is so strong because different developments are mixing up and adding up in a way that we've never seen before. The demand in electricity is rising so fast and so much driven by data centre, cloud, digitalisation and AI, which is eating up so much energy, which drives the market crazy. The last 2-3 years, some people were buying whatever is there on the market. All the suppliers like Siemens Energy are fully sold out for years. If you want a large gas turbine for a power plant, you have to wait 2-3 years now. Even if you come with all the money you have, it will not help. This kind of market, we've seen sometimes in the last 30 years for one or two years, but this time, it's different. It's a very long cycle.

[00:04:38] Why is Siemens selling off ToI instead of keeping it within the corporate group?

MK [00:04:48]: There's always the discussion in large corporations about the balance, how you focus your activities. Do you want to have a very broad portfolio with all kinds of product solutions or do you want to focus… Now I'm talking 100-plus thousand people. I'm not talking small things. How you want to focus your business and focus means put forth all your forces into CAPEX, investing, innovation and all this. If you have a very wide and broad portfolio, it's very difficult to do it everywhere. This is what I assume right now. That's why it's a good timing to do now the spin-off or think about the spin-off because there's a huge cash need for all the investments on the one side. Especially in this Transformation of Industry, you will find a lot of small products, a lot of new products, which are not established in the market when I see storage solution, hydrogen and all these topics, you need partnerships. At the same time, you have this booming market in large utility, which means power production for large gas turbines, windmills, Gamesa and grid, which are booming like anything. That means to do everything at the same time for one corporation is very difficult. It is a smart step to do it. As I said, the timing is good.

[00:06:21] How should we think about ToI compared with the rest of the Siemens group? We have Siemens Gamesa with onshore and offshore wind turbines, the grid business for HVDC [high-voltage direct-current] grid connections and substations, etc, and the heavy-duty gas turbines in the gas business. What is ToI in relation to that? Is it a vast array of various products that come together to act as a consulting and engineering arm to enable different businesses to become more efficient to electrify, decarbonise and address their own internal needs?

MK [00:07:09]: When you see the entire set-up of Siemens Energy today, you rightly said that there's these big players, the gas business with the large gas turbine, the grid technology and the windmills, wind turbines. Then you have this group or this pillar, this vertical, Transformation of Industry in Siemens Energy, where you find mainly small products like the compressors, small compared to other big gas turbines or big steam turbines. The compressors there is the only place or organisation who is building compressors in Siemens Energy. That's the whole compressor world, you will find in Transformation of Industry. Then you have the small steam turbine which is something that finds a lot of niches around the world in global markets. Steam in general is not so easy in the last five years because there were some decisions that we quit from coal and other things, but there is market and there is still demand in combined-cycle, but also as drive machines for certain applications. Even now in the last one, two, three years, we see that small steam turbines are attractive for this digitalisation for data centre backup and stuff like that.

All in all, you can say it's the smaller products compared to the rest of the big products in Siemens Energy. Plus then the third pillar in Transformation of Industry is all what was called the new energy business. New energy business is just a bucket where you put in all the topics like hydrogen, storages, whatever they try to establish technology-wise, but also market-wise. This is something where today, it's very difficult even after two, three, four years to get a grip on the market because most of these business models are not working in a way that you can easily make money.

[00:09:28] How does ToI work with the rest of the Siemens group? What would be the dis-synergies from detaching from the corporate group?

MK [00:09:40]: There are certain areas where corporate is driving innovation, R&D and also is giving certain frames for processes, for IT systems, SAP, MES, Teamcenter, whatever, design and quality systems. To be part of the family, to be part of the big corporate means you always get the latest up-to-the-mark technologies, software and even cybersecurity, all these topics, which have also a lot of money behind. You are part of a bigger organisation that takes care that you do the right thing. That's the one side. The other side, obviously, is that as a synergy, you can download certain technologies. If you have certain technology steps or innovations, let's say, in the large steam world, which is then used for large combined-cycle power plants, that technology easily you can download like a 3D blade or something to the smaller products, which is done in gas turbines and steam turbines from time to time. This is something that you obviously lose, which is kind of a dis-synergy by detaching.

[00:11:01] Siemens AG renamed its large drive applications and heavy electric motors business as Innomotics and sold it to a PE in October 2024, but the one-off detachment costs were underestimated and Innomotics' ability to set up its own corporate functions has been a long-drawn-out process. To what extent do you think this could happen with ToI if it is spun off from Siemens Energy, and why or why not?

MK [00:11:42]: I've heard the story many times before because, again, as you rightly said, Siemens AG is used to do things like that. When I was at Siemens AG many years back, constantly companies are coming in, going out, merger and acquisition is part of the business. I've seen many times that costs were underestimated. You would think, "Okay, they should have a lot of experience to do the things rightly or better in planning and execution." Nevertheless, there is always some complication and some unexpected issues, critical points, which then take much longer to find the right decision or take the right decision. Let's say, you want to go to a new provider for your HR system and then suddenly, you find issues. "Okay, I don't find anybody or he's already working for Siemens AG or he's working for Siemens Energy or whatever." It sounds very easy, but for a certain size of company, it's not so easy to think about these steps.

[00:12:53] To what extent do you see problems with the potential carve-out of ToI in relation to the prior carve-out experience of Innomotics? Do you think the detachment would be fairly pain-free?

MK [00:13:07]: That's not my expectation. I think it's a 50/50 chance, but yes, it could also happen similarly to what we've seen with the Innomotics.

[00:13:20] How attached do you see the ToI business to be when it comes to Siemens' ERP [enterprise resource planning], CRM, IT infrastructure services and corporate costs that are underappreciated? Do you think this could be the problem?

MK [00:13:42]: Cost is obviously a topic, but also, it's about frameworks, it's about contracts, long-term contracts, frames, whatever. There's much more devil in the detail. Cost is in the end, what counts, but the cost is created by topics that you maybe misinterpret or underestimate. That's why, yes, it could be an issue.

[00:14:15] What would be a rough estimate of the products and services split that ToI provides? We know compressors and steam turbines are two large segments, and then you have new technologies, such as hydrogen electrolysers. Could you provide a rough split?

MK [00:14:37]: All in all, I would say that product and solution definitely is the key. Services in terms of helping customers with certain, I don't know, repairs or spare parts and stuff, it's also a question of definition where your services start compared to the products, but I clearly see a product focus in the two areas in the compression and in steam turbine. In new energy business, it's a little different maybe because there, again, with certain partnerships and certain new technologies that you invest and develop, it might be more a service and engineering service or whatever that you can offer as part of the team in a joint venture or whatever. Clearly, I think service, which for me is also a product topic, service of machines of rotating equipment, and selling new products is the key.

[00:15:42] Do you have a personal estimate on how much revenue would be within compressors vs steam vs others? Would it be a 40/40/20 split?

MK [00:15:54]: I don't have the numbers because, again, I'm nearly two years out of the company, and I also don't want to share any insights. Nevertheless, compressors is the biggest, steam is the second and the last is the new energy stuff. That's for sure.

[00:16:08] What do you estimate the broad OEM vs aftermarket split to be?

MK [00:16:16]: What I think a realistic assumption is that the new apparatus means the new product selling, OEM market sell might be 60%, 60-70% or, let's say, 50-70% of the revenue and 40% is service business, which is a very healthy business. You have to understand new-apparatus business usually in the last 30 years was very tough, especially in small-sized products to make money, but then healthy business, you will find with the service offers and the maintenance work, the modernisation projects, whatever you do service on existing fleets is where you have the chance to make robust income.

LK [00:17:07]: Do you think it would be 50/50, service vs installation?

MK [00:17:12]: No, I think new installation is still a little higher. I saw the last quarter numbers, and it might be around 60% new app, 40% service right now. It's only a snapshot, but that's what I see right now.

[00:17:25] What would be the rough end-market split across O&G [oil and gas], chemicals, paper, cement, maritime and data centres?

MK [00:17:39]: That's also a very difficult judgment because, again, there's the three different areas. The three different areas have totally different business models, different competitors, different customers. If we assume that compressor is the largest player in that team, the oil and gas obviously has the biggest impact on the entire Transformation of Industry. Then you have certain application in compressors, but also in steam, where you have chemicals, paper, cement, data centres also. Maritime, the drives, I think, is something that we are talking 3-4 years. I don't see it in the big scale. It's coming. It has to come also because the old diesel or whatever is burned on the ships is not the future, so something has to happen in the future. This is clearly, for me, the picture, oil and gas, very strong, then chemicals, paper, cement. Yes, it's a solid…

LK [00:18:42]: What would you estimate to be data centre-related revenue or order backlog? Would it be as high as 20%?

MK [00:18:49]: Data centre is just coming up now. It's coming up in the last 2-3 years. Again, I don't know the internal numbers right now, but…

LK [00:18:58]: What would you estimate to be data centre-related revenue or order backlog?

MK [00:19:04]: In terms of the entire Transformation of Industry?

LK [00:19:06]: Yes.

MK [00:19:08]: Maybe 5%, maybe less.

LK [00:19:09]: Where do you see it in 3-5 years?

MK [00:19:16]: That depends on some factors on the market also.

[00:19:20] Given data centre CAPEX expectations in the US, what would be the potential for data centres' revenue contribution for ToI?

MK [00:19:35]: As I tried to explain, on this data centre, there are also many activities, starting with… The last that I heard is Tesla. Elon Musk is now starting to build equipment in GT to have his own production in equipment. Many things are going on in this world because it's a huge market for the future and everybody maybe feels it's a good potential. Number one for data centre clearly is the gas turbine. If you have smaller data centres, it's basically the smaller gas turbines, mid-size, maybe 50-100MW and then you go up to, I don't know, bigger sizes. When you go to the very small sizes, then even a steam turbine might be a good solution. That is what's being discussed right now that in some areas, a small gas turbine is the right product for data centre backup or power. Yes, it's a growing market. There is a lot of demand. I told you in gas turbine world, all companies basically globally are sold out. It's not possible to get anything on the market. With this, the steam, which is maybe not the number one in flexibility, but it comes into the picture now. This is clearly the market that is served right now.

[00:20:56] What are the higher-margin and lower-margin areas across the ToI business in rough percentage terms?

MK [00:21:04]: Oil and gas historically clearly, it's very difficult. It has a high barrier to enter the market, but once you are there, you have good chances to get a solid load, big load and also good, strong margins. That's why compression and oil and gas clearly is a strong contributor. Also, the small steam has a very solid performance in the last two years and also this year, I think, which is paper, cement, data centre, chemicals, small steam set-ups. Number one, compression oil and gas, number two is steam application. Then on the new energy business, as I said earlier, it's very tough to make money at all right now because you try to establish a product and innovation. When you just take the example of hydrogen, green hydrogen, to produce and sell is nothing where you can earn money right now, even with all the regulations, CO2 pricing, all kinds of things, still a long way to go for these solutions.

[00:22:21] What would you estimate to be the combined average annual growth rate of the markets we discussed over the next five years? What is the sustainable growth rate of the business?

MK [00:22:33]: I think what we've seen in the last year is maybe something in the range of 3-6%. I believe in this cycle, in this super mega cycle that we are in right now, definitely, it's towards the higher end of that range, maybe 6% or more, depending, obviously, also on what's going on in the world. We see crisis, oil crisis, we see energy crisis, we see wars, all kinds of things, which also has an impact on the market, but in a more normal environment, I would guess 3-6%, and in the next years, more, 5-6% would be my expectation.

[00:23:16] What would you rank as the top 1-3 growth opportunities facing the ToI business over the next five years? Is it data centres, behind-the-meter power, prime and backup power, shipping because of the IMO [International Maritime Organization] regulations 2020 moving from bunker fuel to more ammonia and hydrogen or general digitalisation of industry? What would you rank as number one, two and three in magnitude?

MK [00:24:05]: Another one that you did not mention here, but I would like to mention is the SMR technology. I don't know, are you familiar with this?

LK [00:24:12]: Yes, the nuclear reactors.

MK [00:24:14]: Yes, small modular reactors and Siemens Energy has certain set-ups with partnerships right now on the larger sizes, but also on the smaller sizes. I think they are on a good path maybe to get the one or the other strategic partnership. Same like oil and gas, there is a high entry barrier for entering this nuclear business with your product, but once you are released and accepted, then it's a very interesting business for growth and also high margin and stuff like that. I see the SMR technology for the small steam is definitely something that should be mentioned.

[00:24:58] What is the nuclear technology associated with Siemens' steam turbine? Rolls-Royce has PWR [pressurised water reactor], which is the 470MW reactor developed in the UK. That's pretty much the only SMR [small modular reactor] coming out of Europe. Then there are many US players, GE, Hitachi, etc. How does Siemens' ToI portfolio line up with the tech?

MK [00:25:33]: Yes, I can explain that. In this nuclear technology, always you have the heat generator, which is the nuclear part. Then you have what we call the cold part, which is the power generation in this, which is the train. In this case, it's always… We call it the wet steam turbine because it's a high-moisture steam that you generate in nuclear and you have a generator behind. Every nuclear power plant needs a steam turbine, period. That's it. You have to do it. There's no other way. For the bigger sizes, as you said, this Rolls-Royce 400 something, there's a partnership with a large Siemens Energy world with the steam, large steam in Siemens Energy, there's some partnership. There are many activities around the globe in China, in Russia… Okay, these markets are little difficult these days, but also in the US to come with much smaller sizes, sizes of 50MW. There's one project in Argentina right now, and there's others developing. That is something where the small steam in Transformation of Industry comes into the game where maybe with a 30MW, 50MW, 100MW unit, they would have exactly the right product to support that partnership.

[00:26:56] Would every Rolls-Royce SMR that is deployed and constructed be in partnership with Siemens, or is there a replacement, substitution or alternative on the customer's side for them to choose a different generation technology alongside the Rolls-Royce SMR PWR?

MK [00:27:19]: Here, you have to understand that the Rolls-Royce project clearly with 400MW-plus is nothing for Transformation of Industry. It's not for the small steam. This is for the large steam. As far as I have seen the official announcements, it's an exclusivity. They want to play together once they establish their train, the production of steam and the generation of power, then they want to sell it in that combination only.

LK [00:27:47]: This is for the large gas…

MK [00:27:49]: SMRs. For the large SMR, so to say, which is the…

LK [00:27:53]: Between Siemens ToI and heavy-duty gas turbines, are you saying that the partnership with Rolls-Royce is on the gas, the heavy-duty turbines.

MK [00:28:02]: Yes, that is true. Again, this is only one development, this Rolls-Royce development. There's only one out of maybe five or 10 which are happening globally right now. SMR, small modular reactor, also for me, I'm a steam guy, I worked in steam half of my life. Steam small means 50MW, 20MW, that is small. If you say 400MW plus, this is not small. SMR is the wrong word. It's more a medium-sized nuclear power plant. SMR in smaller sizes, as I said, 10-20MW…

[00:28:43] Has ToI secured any exclusivity partnerships with other SMR developers, perhaps in the US?

MK [00:28:51]: Not yet, as far as I can see, but I'm very sure there's activities around this. That's a growth market, not in two years, but something maybe that might happen in three, four, five years.

LK [00:29:04]: Are all the SMR reactors using steam technology as their generation?

MK [00:29:10]: Yes. For the power, they need the steam turbine, yes, and the generator also.

LK [00:29:17]: Who would Siemens ToI compete with at that level with the steam turbines of 10-50MW size?

MK [00:29:23]: There's different development projects in the world.

LK [00:29:28]: Who would be the direct competitor? You have GE, I'm sure.

MK [00:29:32]: I'm sure GE is part of that. Mitsubishi might be. Doosan Škoda might be. There are other players. Siemens definitely is a strong candidate. It's a growing market. It's a chance. It's an opportunity.

[00:29:50] Do you have a sense of the unit economics behind constructing EUR 1bn worth of SMR production? What drop-through would that have on the steam turbine provider as opposed to the entire CAPEX of the construction or the CAPEX of the nuclear island?

MK [00:30:18]: I would guess if you say a EUR 1bn split for the steam portion might be EUR 50m-100m, so 5-10% max, I would say.

[00:30:29] How do you see ToI positioned to capture market share in the AI-driven hyperscaler power, prime and backup power behind the meter?

MK [00:30:48]: As I tried to elaborate a little earlier, it's a difficult and very fierce competition in the market.

[00:30:58] There are many types of power generation technologies in play, such as reciprocating engines, gas engines and aero-derivative turbines. These are coming from different areas. We have the Jenbacher Type 6 that is selling out as a result of this. We have Rolls-Royce in those markets, Wärtsilä stepping in, and American players such as GE, etc. How would you say Siemens' ToI is stacking up as a product portfolio fit?

MK [00:31:53]: In your question already, you have given the different aspects, which makes it very difficult to give an easy or straight-through answer here. It depends on the customer. It depends on what kind of supply also in terms of fossil energy, he can provide. Let's say, take an example in India. In India, there is a player who's building large… Reliance is the name. They are building large data centres. In India, you have no gas. What do you do? You can build a solar, you can try other things or you go back to coal and build a steam turbine as a backup for your data centre to keep it on electricity. Looking on the global scale and here, this business is always on a global scale. There's very different markets with different environments. Obviously, an aero-derivative turbine, gas turbine is much easier to handle. It's cheaper. It's many advantages. Maybe if you don't have gas, then there's other things like in the US, you find now people buying nuclear power plants, Microsoft or somebody, to supply power for their AI. That is also something that was unthinkable a few years back, but that's the reality today. The demand for power is so large that just saying the one option, which is the gas turbine or maybe smaller, bigger size applications there is fitting everything is not the case. That's the answer.

[00:33:31] Why would a hyperscaler choose a 10-50MW steam turbine? If they don't have gas, they would have to use steam, and then that would be lined up vs a solid oxide fuel cell. What do you think it comes down to? Is it the fact that you don't have gas or the cost of ownership, including the CAPEX and OPEX over the long run? What else would come into that?

MK [00:34:01]: It's also the security of supply. In that area, the number one topic is not efficiency because it's not so important. In the large producing world, every 10% makes a huge difference in your business case, but if you run a data centre, all that counts is that, "If the power is off, I need my own power." It's reliability and the supply. If I have coal in my country and I can make sure that with this coal, I can produce steam, then that's obviously an option for me to do so.

LK [00:34:35]: What else? If you use coal as a power source, you need the steam turbines?

MK [00:34:39]: Yes.

LK [00:34:39]: What else can be the fuel input for… Nuclear, obviously, but…

MK [00:34:45]: Yes, nuclear or gas turbine usually is one. Then even solar, you find in Germany now data centres, which try…

LK [00:34:52]: In terms of steam, for steam in particular, is that purely coal that…

MK [00:34:56]: It is coal. It's only coal, and steam application can only run for a coal plant, for a nuclear power plant, and the third application is the combined cycle. If you have a gas turbine, then the remaining heat of the gas cycle is used for producing steam, so that's a combined cycle. These three applications are there for steam turbines.

LK [00:35:18]: So every combined cycle gas turbine has a steam turbine at the back of it?

MK [00:35:24]: Exactly. To boost the total efficiency of the power plant.

LK [00:35:31]: So every single heavy-duty gas turbine that Siemens sells, it also sell the same megawatts' worth of steam turbines?

MK [00:35:41]: Not the same, but a smaller size. If you have, let's say, a gas turbine that is generating 300MW power, then the heat that is coming out of the system is used to produce steam maybe 100MW.

LK [00:35:52]: It's a third. A third of the capacity will be sold out in steam.

MK [00:35:59]: Yes. Maybe a third. Depending on the system, it could be a little more or less, but that's maybe a ballpark, yes, correct.

LK [00:36:06]: So for the series of bestsellers from the Siemens gas turbine, they typically would be 100MW steam turbines, which would be from the heavy-duty side of the business, but if it's a smaller combined cycle gas turbine, they could go for a 50MW steam turbine, which would be a ToI sale?

MK [00:36:29]: Yes, not fully like this. The Transformation of Industry steam unit can do up to 200MW, maybe 150MW, 180MW, 200MW, that's probably the biggest possible size. Larger than that, definitely, it's the Siemens Energy world who's doing bigger machines up to 1,000MW or something, what I call the large steam. In a combined cycle…

[00:36:52] What determines whether a sale would go towards ToI for a 200MW steam turbine project vs a 200MW steam turbine that comes from the heavy-duty Siemens gas business?

MK [00:37:06]: Very interesting question. It's either a political decision or it's just driven by who's more competitive.

LK [00:37:15]: More competitive in service or…

MK [00:37:16]: Cost. Because the products look a little different, production is different, the global network, maybe some parts are built in India, some parts are built in China, whatever. The mix can be that in this case, the competitive solution is with that or with the other. It could be…

[00:37:37] If Siemens sells off ToI, would the heavy-duty gas turbine business suffer to some extent, as it wouldn't be able to rely on ToI as much as it could if it were part of the group?

MK [00:37:53]: That is maybe starting speculation. I don't want to go there, but there's definitely some impacts, that's for sure, in both ways. Coming back to the dis-synergies there, in certain areas, there might be impacts.

LK [00:38:10]: You said the technology and the product portfolio is slightly different. Could you explain?

MK [00:38:16]: The history there, I mean, it goes back for many, many years in the company. A company is not just a company. It's a corporate that is buying over years, many companies. The Siemens Energy, they merged with Parsons, they merged with Westinghouse. Then later, the small products merged with parts of Alstom, the small gas steam work and gas work from Alstom. Some factories and technologies looking back, have a very different origin. That's the reason why still today, after 10 years later, 15 years later, in certain pockets, you will find differences, which…

[00:38:53] On a technical basis, if the engineers were to describe the difference between a 200MW set-up from ToI vs a 200MW steam turbine set-up from the heavy-duty business, what would the difference be?

MK [00:39:07]: Maybe I'll try to explain from another perspective. If you build small equipment and scale it up, it's a different thing compared to building large equipment and scale it down. There might be certain areas where this upscaling is more competitive and other areas where the downscaling is more competitive.

LK [00:39:30]: What about in terms of physical or technological changes? Is one more compact as a piece of equipment?

MK [00:39:44]: The smaller-sized turbines usually must be less complicated technology-wise because the market and the output of the turbine is smaller. If I build a turbine for 10MW, a delta in efficiency is not hitting me so much compared to a 1,000MW unit in steam nuclear. Steam nuclear, a 0.1 difference in percentage of efficiency makes millions for the customer in a year. The same for a 10MW chemical guy doesn't count at all. It doesn't matter. That's why the small products have a different focus in development. I wouldn't say they ignore higher efficiencies, but they optimise towards their market. Do you understand? That's why in certain overlapping areas, the one or the other could be better.

[00:40:41] What percentage of ToI sales goes to CCGT [combined-cycle gas turbine]? Is it around 1-2% or 20-30%?

MK [00:40:56]: Here, I have to say I don't know the latest picture. If you assume that the steam world is… You said the number between 30% and 40% of Transformation of Industry in terms of the revenues, then maybe I would guess 5-10% of that business might be combined cycle.

LK [00:41:23]: Would ToI ever be the steam turbine on the back of a GE CCGT?

MK [00:41:30]: It happens. It happened in the past. Especially on the smaller-size market, this is even more common, but it even happens in the big size in the big-scale turbines. It's not good for the customer, by the way.

[00:41:46] Essentially, the only reason a data centre hyperscaler would opt for a steam turbine as opposed to a gas or aero-derivative engine or turbine would be because they would be reliant on coal. Is that correct?

MK [00:42:11]: No, that is only one aspect, but a strong one, obviously. What is my energy carrier? That is one question to be answered. The other question…

LK [00:42:22]: Does that eliminate the vast majority of US hyperscalers because coal is a dirty alternative to natural gas?

MK [00:42:33]: The Trump regulation, they are clear that coal is good. They opened coal mines in the last few years even in the US. Again, it's a political game also. How are the regulations in the country? Another aspect besides…

[00:42:55] Hyperscaler owners such as Microsoft, OpenAI and Amazon with AWS tend to be more renewable-focused or carbon emissions-focused than the Trump administration. Therefore, there's a free-market determination as opposed to the regulatory determination of the energy feedstock. Is that correct?

MK [00:43:24]: I fully agree with you on that one. Nevertheless, all these companies are coming to a limit because the market is sold out. If I want a reliable system for my data centre or AI, I cannot use, at least not as easy, a solar power park or wind power park. I need huge storages, which are very expensive today still. If I want an affordable way to run my data centre safely, I come to a limit with these green energy topics. That they recognised maybe two years back, I guess, or one year back because now they changed the gear. Even these guys changed the gear from… I wouldn't say that they ignore, but I would say that I see a trend that they accept nuclear and that they accept other things just to get power because the demand of power is so high and putting so much pressure on everybody that, yes, obviously, we try to have green solutions, number one and priority number two, number three, but at the end, we need power.

Also coming back to the aspect of steam, a steam turbine usually compared to a gas turbine is not built for going up and down every two minutes. A gas turbine, you can run an aeroplane up and down, up and down, so power on, power off, power on, power off. A steam turbine is not built for that. A steam turbine is usually built for a certain power to run full time or at least one day or whatever.

[00:45:11] Speculatively, if we assume there's 60GW of power feeding into data centres in the US in the next 5-10 years, what percentage of that do you think would be captured by steam turbines?

MK [00:45:27]: I cannot answer that because that's too much speculation, sorry, because it will change 15 times in the next 10 months. I'm sure. What I wanted to add to your question to give it another perspective is if I am a data centre owner and I decide for a steam turbine, also an aspect is this steam turbine can run forever. I can use this to run my own power for my own plant. It's a little different perspective compared to a gas turbine that cycles daily up and down, up and down. In the morning, there's no power, okay, I switch it on. That I would not do with the steam turbine. With the steam turbine, I say I run at 30% load all the time. Maybe sometimes if the demand or there is too much power demand in my grid, I go up to 60% or 100% with my steam. It's a little different regime also of how I operate this thing.

LK [00:46:25]: Is there anything else that you would like to mention in terms of the suitability of ToI portfolio products for behind-the-meter data centre power?

MK [00:46:36]: I think we elaborated now a lot, all the aspects.

[00:46:40] What is the opportunity in shipping, and how would you assess the suitability of ToI to capture that?

MK [00:46:52]: The topic is also not so new. I would say the last 10 years, there is a clear trend that you want to establish electrical drives, and electrical drives, again, they need power and the power has to come from some fuel in your…

LK [00:47:14]: This is not propulsion maritime engines, the four-stroke or two-stroke engines, it's actually the ancillary power for the operation of the vessel in terms of…

MK [00:47:24]: Yes. Electrical. At least that's what I've seen what they try for the large vessels now that they replace diesel engines with electrical engines and then you can install a gas turbine or steam turbine or whatever to run the electrical motors. This is the concept of the old nuclear ships also. The old nuclear ships like the Russians or so, they have a nuclear unit. This is producing steam. The steam turbine produces the power and the power goes to the electrical drives.

[00:48:01] Where are we on the shipping market opportunity path? In 2020, IMO mandated a certain amount of emissions and sustainability by a set date. There's going to be a retrofit of a number of vessels globally. Is this for the gas turbines or steam?

MK [00:48:35]: No, this is mainly also for gas, also there, same discussion that you would have.

LK [00:48:40]: In this case, ToI are offering gas turbines?

MK [00:48:44]: No, I don't think they have gas turbines in there.

LK [00:48:47]: Steam turbines.

MK [00:48:48]: Steam turbines, yes.

LK [00:48:50]: What is the fuel?

MK [00:48:53]: Also here, you have different options in your vessel, how to do it. You can use certain gases also to burn. That's one option. You can also burn oil, if you want or you can use coal again to produce your steam, different options.

LK [00:49:16]: What makes it more sustainable than what they have already for ancillary power?

MK [00:49:21]: To be honest, I am not aware. I'm not in the latest details of what are the latest developments. As I said, we started 10 years back in the large equipment with such applications. Also there, it's not straightforward. It's not so easy. It's basically also about partnerships. You need vessel producers and you need the electrical drive. It's a wider package. It's not only that you say, "Okay, I want to sell my steam or gas turbine" and then it's an easy game because, again, you need frames and partnerships to do so.

[00:50:06] Can you equip or fuel the steam turbines with green methanol and green ammonia?

MK [00:50:19]: No, you cannot fuel them, but you can use any kind of burning to create steam. In a gas turbine, you can, as you said, burn hydrogen or something. The other way to produce power is the e-cell [sic]. If you have hydrogen, you can use an e-cell and produce power that drives my drive in the ship, also an option.

[00:50:55] Given that hydrogen investment has petered out over the last 2-3 years, many hydrogen companies have dissolved and become insolvent. As the market comes back, to what extent do you think Siemens' ToI is well-positioned as part of a corporate group that can withstand the down cycle to be ready for when the up cycle returns? Do you think this is a major advantage to electrolysers from ToI?

MK [00:51:43]: The business around hydrogen has also many aspects. Producing hydrogen is one thing, and Silyzer is the product in the Siemens world to produce hydrogen from surplus power or whatever power you have. Clearly, there has been a lot of effort put into this to have some competitive products. That's for sure. Even partnerships are there with other companies, but the market has not picked up because, again, as you rightly said, the model is not working. You cannot earn money with this. You can only maybe rely on some governmental regulation or some taxes or whatever other things, other mechanisms to make it attractive. To answer your question, is Siemens Energy Transformation of Industry rightly placed or prepared for this market? I would say yes, because the last five years, there has been a lot of invest even in production, in production facilities and so on and so on in that technology.

[00:53:05] How would you assess the competitive vulnerability from Asian equipment manufacturers and third-party independent service providers on ToI's installed base of 85,000 units globally?

MK [00:53:28]: Yes. Here, I have to say it's not only an Asian topic. It's a global topic. I explained a little earlier today that small products usually are a little simpler, a little easier in terms of the technologies, and that makes them attractive for pirates or for non-OEM business. If I can maintain compressors, I can probably maintain compressors from all suppliers. That means the service market is highly competitive and attractive for many players because margins are good in the service world. The barrier of technology for the small products, be it steam or compression. Maybe compression has some exceptions in certain areas where they have very high-tech products, which are not easy to copy and not easy to maintain as a non-OEM, but all in all, I can say the trend is smaller products, it's easier to do non-OEM…

LK [00:54:34]: To what extent is this accelerating vs has been the case for the last 30 years?

MK [00:54:39]: It has been the case in the last 30 years all the time. Pirates are coming and going and customers make the experience. If you take your BMW to a Mercedes garage and they do something wrong, you will not go again. Similar. Every customer has his experience. What the companies do, also Siemens Energy and Transformation of Industry is doing, they are selling companies, customers frame contracts for the servicing.

LK [00:55:06]: This isn't really something that is accelerating today. It's more always a threat, an ongoing threat.

MK [00:55:13]: True, true. When the market is growing that crazy and the numbers are going up, obviously, also on the market, you will see more crazy things.

[00:55:21] To what extent are China-based OEMs coming to market with equally good steam turbines and compressors?

MK [00:55:30]: The Chinese story, I'm also observing the last 25-30 years. They are highly competitive on their own market. They are highly competitive in terms of these equipments that we are talking here in terms of new app, but they are not there at all in service. Even they were blacklisted in India and certain areas where they sold equipment because servicing globally is a different thing compared to just selling something new.

LK [00:55:58]: How do you get blacklisted in this industry?

MK [00:56:01]: If you don't deliver what you promise, then you cannot repair it. If I promise to build a power plant and 10% efficiency is missing, and I'm not able to fix it, then I'm blacklisted.

[00:56:14] You mentioned China-based OEMs being blacklisted in India. Was that blacklisting at a national level or from certain key accounts?

MK [00:56:20]: In India, the set-up is in a way that NTPC is the big governmental player for running all the power plants, and they tried with Chinese suppliers for certain big steam turbine power plants. After many years, they said, "Not anymore, not any longer, we will not do because servicing is impossible. We don't get what we need." That's 10 years back or maybe more. Nevertheless, I haven't seen any threatening approaches in the last years from the Chinese to go abroad to go to the world. They're clearly still in a phase where they concentrate on the local market with the local products, which they do very good now. They do even large gas turbines and other things now with the latest technologies that they download and they buy it even from Siemens Energy, they buy licences that they can build certain stuff. They are yet to go to the world to do the service.

[00:57:22] ToI's 2025 profit margin was around 11.3%. Is a 12-14% range by 2028 a conservative or aggressive estimate, and why?

MK [00:57:39]: I like what I see. I think it's a good message that they put a higher target. Is it aggressive? I believe, yes, in my judgment, it is an aggressive market, but it also needs an aggressive target to run the company. It is possible, so I don't think it's…

LK [00:57:57]: What is the pathway there?

MK [00:58:02]: In this huge portfolio and huge different product solution business that you are doing, you have to focus on that portion where you can earn the money accordingly. You put less focus on things where maybe competition is too high, my margins are too low, and I concentrate on stuff where my margins are good, where my market is strong, where I have good customers. Because the market is so strong, you can really decide right now what… I wouldn't say you can just pick the cherries. That's not the case. Still, you have to convince customers, still you have to face fierce competition here and there, but nevertheless, if you are smart in that environment where you can sell practically whatever your factories are building, you can concentrate and you can improve your own doing, be more effective in the factories, in the way of selling the sales and so on and so on. I think it is possible, but it is aggressive.

[00:59:02] What would you do with the ToI business over the next five years if you were advising the new owner?

MK [00:59:14]: Yes. I would try definitely to use this super mega cycle that we have. That gives me good opportunities, a strong, robust market for the next at least five years, I would say. This super cycle is also not just going up. There are also some swings in between. Here and there, we see some first swings, I guess, because some players are getting hungry or they are getting a little more aggressive in certain areas. I would definitely try to grab more market share. To do this, I need to invest. I have to develop new energy businesses. I have to invest also in these solutions that will come up. There is no question that all the electricity applications in future will have a higher proportion of the energy business in terms of diesel and fossil fuels that will be less. That means more electricity is needed. This electricity has to come from these equipments. Starts maybe with oil and gas and steam and all the new energy business. I would clearly try to put together a master plan where I can grow and where I can collect money for the right CAPEX and innovation that I need to do so.

[01:00:43] Is there anything else you would like to mention about ToI?

MK [01:00:49]: Yes. As I said in the very beginning, it's an interesting step. When I compare and now just look back five years when Siemens AG started to talk about we are carving out Siemens Energy and we go to a minority share in the end. Also, many people said, "Wow, that's a strange step." Is it the right thing to do? Now we are five years later, and we see how much the Siemens Energy was blooming and what potential… Is it the share? Is it the volume of the business? Also, the market has changed, obviously. That is one thing, but having the chance to focus on your own business in your own world, in your own pocket and find the right processes, the right level of what do I need for my business, what do I really need as a minimum to run it successfully might be different compared to what a large corporate is imposing on me. There's always a lot of opportunities to do so. I would be surprised if this is not becoming a success in the end.

LK [01:02:01]: On that note, we'll close the Interview there. Thank you so much for your time. Really appreciate it and hope to stay in touch.

MK [01:02:07]: Welcome. Thank you very much. Have a nice day.

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