Siemens 2013 Annual Report Download - page 228

92 A. To our Shareholders
117 B. Corporate Governance 155 C. Combined Management Report
156 C. Business and economic environment
173 C. Financial performance system
179 C. Results of operations
192 C. Financial position
204 C. Net assets position
207 C. Overall assessment of the economic position
209 C. Subsequent events
210 C. Sustainability
227 C. Report on expected developments and
associated material opportunities and risks

Second, risks in the financial sector remain, in particular in
shadow banks, due to high indebtedness of households and
municipalities.
However, both risks should be manageable
which leaves room for the modest recovery to continue. In con-
trast, difficulties in the Indian economy are more severe. Inter-
national capital flows have reversed, heading out of the coun-
try, and caused a continuing depreciation of the Rupee. Togeth-
er with the inflation rate already on a high level the central bank
was forced to tighten monetary policy although economic activ-
ity slowed considerably in . Hence, restrictive financial con-
ditions and unresolved supply-side restrictions (e.g. heavily reg-
ulated product and factor markets and an insufficient infrastruc-
ture) weigh on growth in the near term. Nevertheless, due
mainly to increasing momentum in China and Japan, we expect
GDP growth for the Asia, Australia region to increase to roughly
% in . We expect fixed investments and value-added man-
ufacturing to expand even more at roughly % each.
All in all, we anticipate that global economic activity should im-
prove in . While the risk balance looks better than last year,
which included the threat of a partial break-up of the Euro zone
with possible ramifications for world financial markets, signifi-
cant risks remain for the world economy. Assuming U.S. politi-
cal parties achieve lasting solutions for the federal debt and
budget, we do not see comparable high-impact risks at the mo-
ment that could endanger global growth prospects. Favorable
monetary conditions and a significant backlog in investment
spending provide a solid basis for the global economy in .
C... MARKET DEVELOPMENT
In fiscal year , we expect Energy Sector markets to contin-
ue on a moderate growth path, including slightly stronger
markets for all Sector businesses compared to fiscal . Gas-
fired power plants and wind-farms (both onshore and off-
shore) are expected to show the most growth.
Effective with the beginning of fiscal , the Fossil Power
Generation Division and the Oil & Gas Division were combined
into a single Division, Power Generation. Within the markets
served by the Power Generation Division, we overall expect
gas-fired power generation to grow more strongly than coal-
fired power generation due to various factors. One is the
increased need for highly flexible peaking and intermediate
duty, such as to compensate for the fluctuating power genera-
tion associated with renewable energy sources such as sun
and wind. Stricter carbon emission regulations will also favor
natural gas over coal. The general drivers for market growth
are expected to remain in place: economic growth and the
increasing need to replace older, mainly coal-fired units in
industrialized countries. Growing environmental awareness
increases the demand for environmentally friendly technolo-
gies, such as highly efficient power plants and CO reduction
techniques. We expect growth in fossil power generation mar-
kets to be fueled by moderately growing demand for large gas
power plants, following a low level of demand in fiscal .
We believe that the observed trend towards larger and more
efficient generation units is going to continue. On a regional
basis, growth is expected to come primarily from the U.S. and
the Middle East, while demand in Europe and Asia remains rel-
atively stable compared to fiscal . Political developments
in the Middle East and economic instability in Europe continue
to pose a downside risk. Growth in the Division’s industrial
power generation markets is expected to come from small-
scale combined-cycle power plants. We believe that oil and gas
markets will be fueled by the growing compression and solu-
tions businesses. Compression markets are expected to grow
moderately year-over-year, especially in Russia and the Middle
East. We expect growth in the solutions market in North Amer-
ica, the Middle East and in parts of Western Europe.
Markets served by our Wind Power Division are expected to be
stronger in fiscal  compared to fiscal . We believe
growth will come from the continued pick-up of the offshore
market and continued moderate growth in the onshore market.
Potential changes in regulatory frameworks in key markets such
as Germany and the U.K. could limit growth in the offshore mar-
ket. We expect the onshore market in fiscal  to be especially
strong in the U.S., where investors are expected to initiate new
projects in order to capture the benefits of tax incentives before
they expire. This is expected to more than offset slightly declin-
ing onshore markets in Western Europe, North-East Asia, the
Middle East and Africa. We expect overall stability in the Asia,
Australia region. We also expect intense local competition par-
ticularly in China, which is the largest national wind market in
the world. Further growth in China is supported by ambitious
government targets for renewable energy. But because most of
this market has low technical requirements, only a fraction of it
can be addressed by the Wind Power Division.
The markets of our Power Transmission Division are also ex-
pected to grow slightly compared to fiscal . While trans-
former markets are expected to remain stable, we believe the
markets for high-voltage products and transmission solutions
markets will be moderately stronger. Growth in transmission
solutions is expected to come mainly from the Middle East and
the U.S. (for high-voltage, direct current electric power trans-
mission systems and flexible alternating current power trans-
mission system) and from North-West Europe (for grid access).
In fiscal , we expect continued moderate growth in the
markets served by our Healthcare Sector. We expect emerging
markets to outgrow markets in industrialized economies, as
healthcare systems in the latter countries address cost pres-
sures and governments continue to address high sovereign