Siemens 2008 Annual Report Download - page 164

68 Management’s discussion and analysis
Orders at Renewable Energy climbed 81% year-over-year, to €4.434 billion, including large contracts for wind
turbines in Europe and the U.S. Revenue rose 53% compared to scal 2007. The Oil & Gas Division, beneting
from market conditions favoring increased oil and gas production, increased revenue quarter by quarter
through the scal year for a 20% increase overall compared to the prior year. Demand remained robust at Power
Transmission and the Power Distribution Divisions, including year-over-year order and revenue growth at
Power Transmission of 9% and 12%, respectively, and 8% and 13% at Power Distribution, respectively.
In scal 2008, Fossil Power Generation recorded a loss of €89 million compared to a prot of €792 million in
scal 2007. In contrast, Renewable Energy, Oil & Gas, Power Transmission and Power Distribution all achieved
high double-digit prot growth. The prot increase at Renewable Energy was driven by strong revenue growth
and execution of higher-margin orders. Oil & Gas beneted from the favorable market conditions mentioned
above leading to high capacity utilization and economies of scale. Power Transmission and Power Distribution
continued to gain volume-driven economies of scale by successfully meeting demand for higher efciency and
security in regional power grids.
Within Fossil Power Generation, the substantial decline in prot was due to the turnkey solutions business,
where resource constraints leading to project delays, expiring supplier price agreements and signicantly
higher commodity prices resulted in charges of €559 million in the second quarter of scal 2008. Furthermore,
the Division took additional charges totaling more than €300 million in the rst and fourth quarter of scal
2008, involving a number of large projects. The project having the greatest impact was again a large, technologi-
cally advanced project in Olkiluoto, Finland, where Fossil Power Generation took €344 million in charges. In s-
cal 2007, charges at Olkiluoto and other projects were partly offset by a gain on the sale of a business and posi-
tive effects related to the settlement of an arbitration proceeding. Both periods under review included negative
equity investment income related to Energy’s equity stake in Areva NP, amounting to a negative €26 million in
the current period and a negative €45 million a year earlier, which is also substantially affected by the project in
Finland mentioned above. The Division expects continued volatility in equity investment income in coming
quarters.
Divisions Profit Margin
Year ended
September 30,
Year ended
September 30,
(€ in millions) 2008 2007 % Change 2008 2007
Fossil Power Generation (89) 792 – (1.1)% 9.7%
Renewable Energy 242 134 81% 11.6% 9.8%
Oil & Gas 351 241 46% 8.7% 7.2%
Power Transmission 565 371 52% 10.3% 7.6%
Power Distribution 369 279 32% 11.5% 9.8%