Markus Tacke, CEO Wind Power and Renewables: Execution according to plan – More to come

d1af5010-fb23-4994-8f7b-078dcdd2fcc7.pdf Execution according to plan - More to come

Markus Tacke, CEO Wind Power and Renewables

Capital Market Day - Energy and Oil & Gas | Houston, June 29, 2016

Unrestricted © Siemens AG 2016

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Notes and forward-looking statements

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Wind Power and Renewables is a crucial pillar of the Siemens energy portfolio − High mutual benefits with other Siemens businesses

Key figures FY 2015: €6.1bn Orders | €5.7bn Revenues | 2.8% Margin | 12,800 Employees | 5 to 8% Margin target

Wind Power and Renewables Division

Mutual benefits within Siemens AG

Onshore Offshore

• Full-fledged energy solutions for customers

  e.g. Egypt deal together with Power & Gas

  and Energy Management

• Financing solutions

  Direct Drive Platform

  e.g. participation of Siemens Financial Services in Gemini offshore project

• Joint R&D efforts

  e.g. new offshore grid access solutions with

  Geared Platform

  Direct Drive Platform

• ~15,000 turbines or 27GW installed until H1 FY16

• 37 years of experience in onshore wind

• 56% of Revenue H1 FY16

Order backlog H1 FY16: €15bn (largest ever)

Geared Platform

• ~2,100 turbines or 7GW installed until H1 FY16

• 25 years of experience in offshore wind, clear #1 with 58% of global capacity installed

• 44% of Revenue H1 FY16

  Energy Management

• Utilization of wide array of internal suppliers

1) Excluding China - served through license partner 2) Bloomberg New Energy Finance - onshore wind LCoE 3) BNEF

Wind2020 program launched in 2015 - Execution according to plan

Wind2020 Priority topics Financial performance

Sustainable return to target range

Orders (in €bn) Profit (in €bn)

Stabilize

Grow

Product Portfolio

Supplier Quality

4.0

7.1%

188

FY15 FY16 FY17 FY18 FY19 FY20

Cost Com- petitiveness

Leadership

@ Wind

2.7

H1 15

H1 16

1.3%

37

H1 15 H1 16

Execution according to plan - Ahead to deliver sustainable returns

x.x% Profit margin as reported

Significant progress on quality visible in better margins - High focus on next generation products

Quality measures

• Established effective quality organization

• Introduction of quality mgmt. practices

  Clear evidence of success

• Significant decrease of quality costs in project execution

  from automotive industry

• Supplier quality improvement initiatives

  e.g. through early involvement

• Digitalization of new product development by introducing Teamcenter

  FY14

  -15%

  FY15

  -20%

  FY16 target

  Leading Edge protection

  • Leading Edge Protection (LEP) solution

    developed successfully

  • Continuous improvement of supply chain quality

    Blade Inspection

    By effectively dealing with our quality issues we are well equipped to launch our next generation products

    Stringent execution of cost out measures; >5% total cost productivity p.a. - Major footprint changes underway

    Cost measures

• Product cost reduction based on market driven targets

• Optimization of project execution

• Reduction of structural cost and overhead

• Adaptation of global footprint

  - including shift to low cost locations and cost reduction in logistics

  Clear evidence of success

• Stringent target costing approach introduced with early involvement of supplier

• Introduction of 24hrs workflow for I&C1)

  of one offshore turbine (>50% OF time reduction2))

• Savings through execution of 1by16

• Capacity of China blade factory being doubled; groundwork for Morocco blade factory started

Morocco

China

Egypt

UK

Germany

Total Cost Productivity of 5% achieved in FY15 - Target for FY16: >5%

1. Installation and commissioning 2) Condition apply - Achieved through smart logistic concepts and shift of offshore work to land

   Complete product portfolio overhaul underway - Main impact starting from FY18

   Development measures

   ON geared platform,

   e.g. SWT-2.3-120

   • Longer blades

   • New gearbox

   • Upgraded bedframe

   • Build on proven design

   • Re-use of components

     Clear evidence of success

     • +9% more energy output

   • Optimal rotor giving strong capacity factor to fill US customer demand

     ON direct drive platform,

     e.g. SWT-3.3-130

   • Longer blades

   • Upgraded Generator

   • New cooling system

   • Upgrade of all critical elements

     • +10% more energy output

   • First order for Finland in Q4 FY15

     OF direct drive platform,

     e.g. SWT-7.0-154

   • New Converter

   • Upgraded transformers

   • Stronger magnets

   • Re-use of established supply chain

     • +10% more energy output

   • First order for UK in Q4 FY15, largest order with 102 units in Q2 FY16

   • Certificate received 8 months earlier than planned

     Further developments ongoing - Communication expected still in 2016 | In FY18 ~80% of deliveries will be new developments

     Onshore to stay successful in traditional strongholds and to tap into new growth markets

     Selected examples

     Ensure success in largest markets

     Large frame contract with

     SH-Wind for new D3 platform

     Joint energy solution together with PG and EM with 2 GW wind frame contract

     Drive partial localization with local partners

     Further expand local setup and capabilities - maintain #1 position

     Capture growth in upcoming markets

     Introduction of new G2 platform (2.3-120) and new concrete tower solution

     First mover with 61 MW at Siahpoush Wind farm

     Orders Split FY151)

     APAC

     Efficiently serve small/opportunistic markets

     Preferred supplier for 850 MW e.g. Midelt, together with EGP. New blade factory for local market and export

     1) Excluding Service Market development

     Support developers to optimize financial arrangements

     Hub-based sales, e.g. in South Africa to efficiently serve small markets like Kenya and Ghana

     EMEA

     AM

     Siemens as Offshore leader drives innovations to further reduce costs

     Offshore Leader

     Largest OF park ever built (London Array 630 MW)

     25 years of experience

     Siemens WP has been the Offshore market leader for years and benefits from its

     unchallenged experience

     ~2,100 Turbines

     51% Market share in CY15 - clear #1

     Innovation on turbine … and beyond

     Innovative turbine: SWT-7.0-154

     • Built on proven 6.0-154

     • 10% more AEP vs. 6 MW

     • Leverage existing supply chain

     • Further expansion to 8 MW planned

       Innovative diagnostics

     • 200 Gigabyte of data per day

     • Detecting damage before it occurs

     • Remotely fixing the problems

       Industrialized jacket foundation

       ~40% cost reduction compared to traditional concepts

       Innovative grid access

     • E.g. new HVAC solution requires no separated platform

     • 40% cost reduction

     Offshore to maintain market leadership - Along with partners paving the way towards

     Target of €9.5ct

     by 2020 to be achieved

     … major recent wins … and leadership to be sustained

     LCoE in €ct/kWh based on reference case1) • East Anglia One

     (UK - 714 MW - ScottishPower Renewables)

     • Unmatched #1 position

~2,100 turbines installed offshore

14.5

Baseline 2014

72%

Implemented Measures2)

28%

Identified levers

9.5

Target 2020

• Hohe See3)

  (GER - 407 MW - EnBW)

• Arkona Becken

  (GER - 360 MW - E.ON)

• Formosa 1

  (Taiwan - 8 MW - Formosa)

  • Best performing wind farms London Array recorded highest output in Dec 2015 (CF4): 79%)

  • Best performing turbines SWT-7.0-154 awarded Turbine of the Year by WPM in 2015

  • Best sold turbine in China OF

    SWT 4.0-130 through license agreement (>70% MS)

  • Siemens fully supports and leads the way to the offshore industry commitment below €8ct LCoE in 2025

1) Based on the SWT-7.0-154 turbine; Offshore project 1 GW, 50m water depth, 114 km from shore 2) Levers include measures in relation to the WTG, Grid, OPEX and AEP and financial levers

3) Preferred Supplier 4) Capacity factor

Execution according to plan - More to come

Key takeaways

Growing Market

4%

CAGR 15-211)

Solid business in growing market

Wind 2020

Execution according to plan

Growth Path

7.1%

Profit margin2)

~80%

New developments in FY18 deliveries

Turnaround program established and well on track

Launch of new products supports the profitable growth - in ON and OF

1) Excluding China - served through license partner

2) H1 2016