Gerhard Cromme – Chairman
Peter Löscher – President and CEO
Siemens AG (SI) Annual General Meeting January 24, 2012 4:00 AM ET
We’ve understood you very well. And as of now, things will become more quiet and calm. Dear shareholders, ladies and gentlemen, the 2012 Annual Shareholders’ Meeting of Siemens Axiom Gazette Shaft (ph) is called to order. And as Chairman of the Supervisory Board, I take the floor in accordance with the Articles of Association.
On behalf of the Supervisory Board and the Board of Management, I would like to welcome all of you here today. And I’m pleased that so many of you have joined us here today. The Supervisory Board – all members of the Supervisory Board are here today. This applies to the members of the Board of Management as well.
Notare Public Dr. Tilman Götte, will be responsible for the notarized minutes. He will be assisted by junior notaries Michelle Goodfried and Dr. Josef Käser in taking statements for the minutes. You will see them at speaker’s table number one, which is to your left.
The Annual Shareholders’ meeting was convened in due time on the 6th, December, in the electronic gazette. And the motion presented by the (inaudible) at Siemens AG was submitted in due time and was published on the 23rd, December 2011 in the electronic gazette. Publications are available in the internet. And they’re also available for inspection at the speaker’s tables. The invitation and the addition to the agenda were disseminated throughout Europe. There were no counter proposals that had to published, ahead of time.
In accordance with Section 19 (7) of our Articles of Association, I have requested that the entire Annual Shareholders’ Meeting be made available live on the internet for our shareholders. Up until the beginning of the general discussion, we will also be transmitting the Annual Shareholders’ Meeting for other interested third parties on the internet and in part on television. There will not be a recording of the entire live transition.
As in the past, there will not be a rebate verbatim record of the entire Annual Shareholders’ Meeting. The cameras and the microphones in the meeting room are only to be used for transmitting to the screens and loudspeakers that are found in various areas of the building.
Up until the end of the general discussion, shareholders who are viewing us on the internet and who registered in due time will have the possibility to change their absentee ballad, their proxies and their instructions.
Up until the end of the Annual Shareholder’s Meeting, we will be updating the list of participants. And the shareholders and their representatives can view this in the upper levels at the information counters and on the computer screen.
All the important information regarding the Annual Shareholders’ Meeting for giving you proxies for making use of your right to speak and ask questions and on the elections were given to you in the organizational information you received with your admission ticket. And there is also the information brochure, which is available at the information counters.
All of the areas accessible to the shareholders in the Olympic Hall are the meeting room, and this also includes the tent.
I would now like to come to agenda item number one. To receive and consider the adopted Annual Financial Statements of Siemens AG and the approved Consolidated Financial Statements together with the combined management’s discussion and analysis of Siemens AG and the Siemens Group, including the explanatory report on the information required Pursuant to Section through 89 (4) and (5) and section 315 (Four of the German Commercial Code as of September 30, 2011).
As well as the report of the Supervisory Board, the Corporate Governance Report, the Compensation Report and the Compliance Report for fiscal 2011. I would also like to refer to the Annual Report, where these issues are dealt with in the appropriate chapters in more detail. The documents are available here in the meeting room. They were sent to you upon request and they have been available in the premises of our company ever since the invitation of the Annual General Meeting was sent out. And they are also available on the internet.
You can also have a look at them at the speaker’s tables today or on the internet. The Annual Financial Statements and the Consolidated Financial Statements, as well as the combined management discussion and analysis were audited by Ernst and Osram GmbH for just preference gazette shaft institute guide. They were elected by you at the last Annual Shareholders’ Meeting as our independent auditors. The auditors gave our financial statements and unqualified opinion in accordance with legal regulations.
At its meeting on the 30, November 2011, the Supervisory Board approved the Annual Financial Statements and the Consolidated Financial Statements. These statements are thus adopted.
Ladies and gentlemen, dear shareholders at Siemens AG, before I turn to the work of the supervisory board in the last year in more detail, I would like to thank you for your trust in our company.
The excellent results in the last fiscal year make it very clear that you have invested in a very successful, sound and sustainable company. And this investment and your trust have paid off. The proposed dividend which is being proposed to today’s Annual Shareholders’ Meeting provides for an increase in the dividend to €3. In the past year, a number of challenges had to be dealt with, important decisions, which I’ll be talking about in more detail later on, were taken and implemented.
In all of the discussions, preparations and decision making processes, I always experienced a company that is characterized by the people who work at this company, employees, works council members, board of management, they were aware of their responsibility. They wanted to bring their company forward on a day to day basis, in their interest, in your interest, in the interest of the shareholders.
In working with them and I have always noticed a very good working environment and constructive atmosphere. And this is the same type of atmosphere that we also have on the supervisory board. This is certainly not something that you can take for granted, that’s why I want to mention that here.
The remarkable results and success in the past fiscal year, was only possible thanks to the dedication and commitment of all of the employees under the leadership of the board of management. That is why, on behalf of the supervisory board, I would like to thank Mr. Löscher and the members of the board of management as well as all of the employees for their commitment, for their dedication and for the results that they achieved.
Mr. Löscher will be going into more details on business development in the past fiscal year in his speech. Now, I’d like to talk about the work of the supervisory board.
In the first few months of the fiscal year, Siemens benefited from a recovery of the economy and this was stronger than originally expected. In the second half of the year, however, the economic uncertainties increased as a result of the debt and financial crisis. The supervisory board and board of management discussed and dealt with the necessary adjustments in business planning.
The board of management presented the supervisory board with the developments of the organization on a number of – at a number of meetings and a number of discussions with regard to medium term planning and corporate strategy. Despite the economic uncertainties for next year, Siemens is focused on growth.
Siemens is a global company in the emerging economies and we have an excellent position. And that’s why I’d like to stress the fact that Siemens is not only well positioned in the BRIC countries, Brazil, Russia, India and China, but we also have a global footprint, especially in smaller, faster growing countries, such as Turkey, Mexico or Indonesia. And this is a very important factor for additional growth.
The Supervisory Board was shown how Siemens wants to achieve its medium term goal of €100 billion revenue annually, every section and every division has been given specific targets in medium term business plans.
And now I’d like to mention a few decisions taken by the supervisory board in the past fiscal year. First of all, I’d like to mention the involvement and decision of the supervisory board in conjunction with the sale of Siemens IT solutions and services to the French company Atos Origin in December of 2010.
Atos Origin has not only acquired global operation of the Siemens IT infrastructure, it is also an important strategic partner in the joint development of IT products and solutions, a good example for successful cooperation between Germany and France in my opinion.
And now I’d like to talk about the rapid increase in urbanization. Today more people live in cities than in the country. Experts expect that in 2050, 70% of the world’s population will live in cities. Siemens wants to make use of these huge market opportunities in these centers of worldwide growth. That is why the supervisory board decided to set up a new sector infrastructure in cities. Siemens has a unique position in this respect and is a global pioneer with the appropriate products.
Another important topic in the supervisory board was dealing with the difficult issue of nuclear energy. The dreadful events in Fukushima made it very clear that there are residual risks in atomic energy. The supervisor, the board of management reacted to this difficult situation judiciately and exited nuclear energy successfully. And this does not change anything with regard to the separation from Areva, which we’ll be talking about in just a little bit.
The supervisory board also agreed to the board of management’s decision to prepare Osram for an IPO. There was a great deal of turbulence on the capital markets, which has postponed the original plan and schedule but are, strategic decision remains. Osram is to be made an independent company and it will be given the necessary flexibility required by the changes in the lighting business, Wolfgang Dan (ph) is preparing Osram for this in a very professional way.
This brings me to personal changes on the board of management, which was decided on – at the Supervisory Board Meeting on the 28 March, 2011. Wolfgang Dan has resigned as a member of the board as of the 31, March 2011.
On behalf of the Supervisory Board, I would like to thank Mr. Dan for his excellent work as a member of the board of management and in the interest of the investors I’d like to wish him every success in his new job in leading Osram to independence. And as of the 1, April 2011, Roland Busch, Klaus Helmrich and Michelle Suze were appointed new members of the Board of Management.
Mr. Busch will be responsible for heading the new sector infrastructure in cities. Mr. Helmrich is the Chief Technology Officer and is responsible for the corporate division, corporate technology. Dr. Suze has been appointed head of the energy sector, which was previously headed by Mr. Dan, congratulation to all of you. And I should wish you a great deal of success and good luck in carrying out your responsibilities.
At its meeting on the 27 July, 2011, the Supervisory Board decided to extend Peter Löscher’s mandate as member and chairman of the executive board as of the 1 April, 2012. His appointment has been extended for another five years. The same applies to the mandates of Siegfried Russwurm and Peter Salzman, Salzman as members of the board of management.
We have also included a regulation on age limits in specimen employment contracts. If a member of the board of management turns 60 during his mandate, his appointment will be extended by one year automatically until a total duration of a maximum of five years has been reached. This will apply until neither the company, nor the member of the board of management objects. We also changed the age structure in the board of management. And this means, this is the basis for even greater continuity. I should also like to wish the reappointed members of the board of management the best of success in their work.
At the same meeting, the supervisory board also took a critical look at the unfortunate ruling of the court of arbitration in Areva versus Siemens. And the board of management also acted on the basis of carefully drawn up proposals and assessed legal risk. It was not predictable to the board of management that the court of arbitration would assume that there was a material violation of the non-competitive regulations with Areva. There is no breach of duty on the part of the board of management.
I should also like to note that the sale of Areva’s shares also including the court’s ruling does not bring any loss to Siemens. On the contrary, with the sale, Siemens had a net profit of 1 billion in the past fiscal year, after dealing with the personal changes on the Board of Management. I’d also like to talk about a pending change on the supervisory board.
At the entities Annual Shareholders’ Meeting, Dita Shaito (ph) will be resigning and he will be retiring. Mr. Shaito (ph), on behalf of the Supervisory Board, I would really like to thank you for years of professional commitment.
In our discussions in the supervisory board, you often presented different arguments, different from those of the shareholders representatives, and these resulted in critical dialogues with the supervisory board. But your dialogues have always been constructive and valuable.
Our common interest to bring Siemens forward has always been our focus. We want to come up with the best decisions for our company. I should like to wish you all the very best in your retirement Mr. Shaito (ph), the best of health and enjoy the pleasant sights of life.
Mr. Yurick Khanna (ph), has been appointed by the court as Mr. Shaito’s (ph) successor, as the member of the supervisory board. His term of office will begin tomorrow, he’s with us today.
Mr. Khanna is a member of the board at IG Metal, the Metal Workers’ Union and will be a representative of the Metal Workers’ Union on the Supervisory Board. Welcome, I look forward to working with you. And I wish you the group, best of success in your new responsibility. And fiscal 2010, that is the fiscal year before the past fiscal year, we reorganized through remuneration system for the board of management.
And this was presented in detail to the Annual Shareholders’ Meeting in 2011. It was approved with a vast majority. This year, the remuneration system has not been changed apart from a few minor details, and that is why it is not on today’s agenda.
Before I give the floor to Mr. Löscher, I would also like to give you some information on some pending claims for damages against former members of the board of management.
As you will recall, at the Annual Shareholders’ Meeting in 2010, we were able to settle with nine former members of the board of management. At that point in time, we were not able to settle with former members of the board of management Thomas Ganswindt and Hans-Joerg Neuberger (ph). That is why, in January 2010, we filed claims for damages.
These civil cases are ongoing, and are pending at the district court in Munich, irrespective thereof, the Securities and Exchange Commission and the United States Department of Justice, filed charged against several individuals in conjunction with a corruption case in Argentina. This includes a former member of the board of management Uriel Sharef. Siemens AG, as a company has not affected by this case. The case in Argentina was part of the settlement reached with the United States Authorities in 2008.
So, that includes my comments on agenda item one for the Annual General Meeting. A detailed description of the work of the Supervisory Board can be found in the Annual Report. I’d like to thank you for your attention. And I would like to give the floor to the CEO, Mr. Löscher, on the state of the company. Mr. Löscher.
Thank you, Dr. Cromme, ladies and gentlemen. A year of great upheavals lies behind us. A year of great challenges lies before us. How can Europe master its crisis and how can countries with high debt loads regain room to maneuver. How can industrialized countries boost growth and competitiveness? How can emerging countries achieve progress without turmoil? How can resources and wealth be fairly distributed worldwide and how livable will the world be for the generations that follow?
People all over the world seek answer to these questions and challenge us. We all want stability, growth, and lower government debt. We all strive for progress and prosperity and we all want a livable world for our children.
These are aspirations that people all over the world share, whether in Germany, Europe and United States or in Brazil, Russia, India or China. And these aspirations for a better world unite us, they spare us on, and very quite cooperation in society, in politics and in business, on local, national and global levels. The basis for successful corporation is always trust.
Business is built on trust. That’s what Carl Fredrick from Siemens said in 1919. He had just taken over the helm of the company, the position he then held for more than 20 years. His time was shaped by the World Wars, the global economic crisis and political and social turmoil. In this time of great uncertainty, he relied on trust and on the unity of the company. He relied on the global market and on partnership. That’s how he safely navigated Siemens through the crisis of his time.
Today, about 90 years later, the world is in incomparably better shape in spite of all the problems. Yet today too, trust in government and business is lacking. In circumstances like these, the value of partners increase if their strength is beyond doubt, they share no hold and experience, they prove their soundness and reliability and they set themselves apart through their pioneering spirit and energy.
These are partners who offer security and earn the trust of others. They are partners of trust and Siemens is that kind of partner. That’s the legacy of our company’s founder and his family. And ladies and gentlemen, that’s our aspiration today and every day.
Ladies and gentlemen, our trustworthiness is based on the stability of our company we proved that again in the past fiscal year. 2011, was an excellent year. New orders grew 16% to over €85 billion, revenue climbed to more than €73 billion. Income from continuing operations soared 65% to over €7 billion and the sectors posted and outstanding result with earnings of over €9 billion. And in fiscal 2011, in Germany, we booked the biggest single order in the history of our company, the IC…
Ladies and gentlemen, this order shows the strength of Siemens in our home market and it also shows or demonstrates the vitality of Germany as an industrial country. This is a fantastic success. I would like to thank our customer Deutsche Bank for placing it’s trust in the partnership that has proven itself over many years. And I would like to congratulate all colleagues involved.
Ladies and gentlemen, last fiscal year we also launched our one Siemens target system and introduced it to you. We achieved our targets in the first year. As far as capital efficiency is concerned, we earned a three-fold return on capital employed, all sectors were able to achieve EBITDA margins within the defined corridors and so proved their profitability. We have now adjusted the target corridors to our new four sector setup.
Our revenue growth lacks behind that of our most important competitors. However, their growth was often driven by high-priced acquisitions. Here, we obviously do not want to keep up with the competition. We deliberately undercut our capital structure target to give ourselves financial and strategic latitude. So, we met the expectations placed in us and we are very happy about the excellent fiscal year.
That also strengthened trust in us in the capital market. Siemens stock kept pace with the tax throughout the fiscal year and performed better than the average of our most important competitor stock. Earnings per share jumped to €7.04 after €4.49 in the previous year. The managing and supervisory boards therefore propose a dividend of €3 for your approval. This is an increase of 11% over the last year and correspond to payout ratio of 41% that in the middle of our previously defined corridor of 30% to 50%.
So, again, it is true, an investment in Siemens is secure, reliable and attractive, especially for investors with a long-term perspective. And these days, that’s a very positive message.
Ladies and gentlemen, fiscal 2012 will be much more challenging. The real economy cannot escape the influence of volatile financial markets. Public budgets are tight. Worries about credit bottle exempt and willingness to invest and the growth of the global economy is leveling off.
Our first quarter results the situation, challenges in individual businesses or business areas compound this development. And for example, delays in the energy sector projects in Germany. The reason for that is that approval processes for the connection of offshore wind farms to the great are lengthy and complex. All this adds up to a slow start into the new fiscal year.
Our order backlog of currently more than €100 billion is a solid foundation. We expect conditions in the global economy to continue to be difficult in the second quarter. However, economic experts believe that a gradual recovery may set in by the end of the second half.
A year ago, I informed you that you would be publicly listing our lighting subsidiary Osram and remain an anchor shareholder. And that continues to be our intention. But we will not do that until the market conditions fall IPO are more favorable.
Ladies and gentlemen, the debt crisis is Europe is causing anxiety. Budget deficits, structural weaknesses and unemployment are putting a strain on a number of European countries. Short term measures such as a debt write-down for Greece or the expansion of the Euro rescue package are necessary to manage the immediate crisis and regain trust. In the long-term however, trust in Europe is based on the strength and competitiveness of its economy. And the foundation for that is a robust industrial base. To strengthen this space, Europe needs more integration, not less.
For example, in financial and economic policy, in the modernization of infrastructures in research and development, and especially in the training and education of young people, trust in Europe, especially among young people grows if the value of Europe is tangible. And if it’s not just a necessity but also an inspiration, peaceful co-existence, freedom of movement and a common currency, all that is completely taken for granted by young people today. This is no longer a vision as it was for our parents. And it is no longer a goal as it was for my generation, rather it is a reality. So, it had always been so.
But, what we take for granted today is not guaranteed tomorrow. That’s why, three points deserve special attention. First, Europe is the engine of our prosperity. Europe is the world’s biggest single domestic market. It has a volume of €12 trillion that’s about one quarter of global GDP, almost one quarter of the worldwide foreign direct investments float to Europe, home to only 7% of the world population. And Europe accounts for about 20% of foreign trade worldwide, that’s more than China, or the United States.
Second, the euro is a success story. It unites our common market. It’s the second most important currency in the world. And since its introduction, nearly 9 million new jobs have been created. The Euro strengthens Europe’s leading role in the global economy. The current crisis is not a Euro crisis rather it is sovereign debt crisis in individual states that burdens the Euro.
Third, Europe must raise its voice and secure its position in the world that is increasingly multi-polar, both politically and economically and where the countries of Europe are no longer at the center. 500 million people from 27 nations form a diverse and fast pool of skills and talent. However, playing a leading role in tomorrow’s world requires team spirit and a strong team effort, so Europe has to be one team.
As an export country, German relies on this strong team effort. At the same time, it’s one of the founding members of the European Union and Germany bears special responsibility for its further integration.
Our whole market has efficient infrastructure, a first class R&D landscape, a highly regarded dual education system and the proven co-determination model. These are excellent pre-conditions for future success. And this is currently reflected by solid growth, low unemployment and a robust industrial base.
Germany is strong and Germany has the power to pull other countries. It can help turn Europe’s challenges into opportunities for further integration. As a global company with German roots, Siemens supports that. We are committed to Germany and we are committed to Europe’s further integration.
At the same time, we are meeting the challenges of the new reality particularly the shift of economic growth to emerging countries. The emerging countries are the most important drivers of the global economy. Within the next five years, more than 60% of global growth will occur there.
Siemens is a partner for industrial countries and emerging countries. We rely on our global footprint. No matter our economic growth is strong, we will profit. We have set our sights on achieving annual revenue of €100 billion in the medium term.
In view of the climate of the global economy ascend will have steep and less steep sections but mountaineers know that climbs to summit are never constant. We are well prepared for this climb. Our one Siemens target system is the wide compass we have 165 years of training in adherence and adaptability. We’ve achieved an excellent position in the leading field of competitors. We have an unmatched global footprint. And we bundle our strengths as a team across sectors and regions.
Each sector will contribute to meeting the €100 billion target. A look back at the past few years makes that evident. It shows that our core business is today grew overall by an average of 8%, roughly half of that growth was through our own efforts and half are through acquisitions.
And a look at our medium term business plans on which the €100 billion target is based makes that evident as well. It indicates that the energy sector will contribute most to growth followed by industry infrastructure in cities and health cap.
We drive growth by forming close partnerships for example with our suppliers, with whom we create strategic networks to enhance innovative strengths and innovation power and to collaborate across organizational boundaries and of course we know proximity to customers.
Ladies and gentlemen, custom of proximity is the basic principle of our new four sectors that up, in the new infrastructure in city sector exemplifies this principle to a special degree. 7 billion people now inhabit earth, that 7 billion good reasons for more sustainability, especially in cities.
By the middle of the century, cities will absorb about 70 million new residents every year that nearly, the population of Germany. This explosive growth will confront city infrastructures with enormous tasks. Also, cities consume about two thirds of the world energy and accounts for about 70% of the greenhouse gas emissions. Worldwide, cities invest about €2 trillion per year to make their infrastructures more energy efficient, livable and competitive. And private sector investments account for over two thirds of this volume.
With our new sector we offer cities comprehensive solutions from a single source for example, rail and mobility systems, smart grids and efficient buildings. More than 85,000 employees worldwide will drive the growth of these businesses.
And they are breaking new ground to do that. Our city account managers engage directly with urban decision makers. We are bundling our infrastructure expertise and will be introducing solutions to customers and send in centers of competence for urban infrastructure, our first center called the Crystal, will be opening in London this summer. You saw it in the opening film. Two further centers are planned, one in Asia and one in United States.
And Siemens is also breaking new ground in the area of financing. We will further expand our offering of project and equipment financing. Solutions that fit from a single source are high level of expertise and customer proximity, these are also key success factors in our regional companies.
Ladies and gentlemen, our regional organization has grown over period of more than 160 years. This year for example, Siemens Canada is celebrating the 100th anniversary of its founding. 120 years ago, our first company office was founded in Australia and our first general representative office was opened in Norway. The first Siemens representatives in Japan began their work, 125 years ago. 150 years ago, Siemens won its first order in Spain in 160 years ago, its first order in the Netherlands. This long tradition makes us strong local partner and we are proud of this.
Employees from nearly 60 countries have told us why they are proud of our company. For example, Karel Jurinek from the Czech Republic is proud to pass on his expertise in turbine production to younger colleagues. Blanca Esperanza Cruz Soto from Colombia is proud that she is part of the global Siemens family and that she can offer her daughter a good education.
Ally Wei is a receptionist in Taiwan and she is proud to provide excellent customer care there. Jesce Horton in the United States is proud that the energy efficiency program being implemented at our locations encourages customers to make similar changes. Bappa Choudhury has worked for our Medical Engineering Business for 30 years, his work has taken him from India to England, United States, and Germany and wherever he is, he feels the passion that drives Siemens employees.
Raseena Illath works as an advisor for us in the United Arab Emirates. She is proud that Siemens technology supports the development of her region. Angad Thorbole in India describes how his work protects the environment for the benefit of future generations. And Steffen Fleckenstein from Germany is proud of the traffic control system of the Richard Charlton here in Munich that he and his team designed to improve safety for motorists and quality of life for residence.
Mr. Fleckenstein is here today. Well thank you Mr. Fleckenstein and we would like to express our thanks to you and your colleagues.
Ladies and gentlemen, stories like these gathered from the daily lives of our employees, show how deeply the German infrastructure pioneer Siemens is routed all over the world and why, because the people of Siemens deliver and care passionately about their work.
For that, I would like to warmly thank all Siemens employees, also on behalf of my colleagues on the Siemens on the managing board.
Siemens has the home advantage all over the world. This is our unique strength and this pays off doubly in difficult times. In spite of fall in growth rate worldwide, we achieved good results and tapped growth opportunities all over the world.
The best proof of that is in our regional companies. Our new order volume in emerging countries grew 18% in fiscal 2011. The many success stories include our biggest order ever in Russia. Russia’s national railway company ordered regional trains worth about €2 billion. Our revenue in emerging countries increase 12% and we were able to gain market share and strength the growth of the company as a whole.
Wherever there is growth, Siemens is there. We are at home in Germany and in Europe and well positioned in all continents and we make the most of our global reach. An excellent example of that is the recent major order for the delivery of turbines and generators for combined cycle power plant in Saudi Arabia, one of the biggest in the world and this includes maintenance and service.
This order is worth about $1 billion and was financed with the help of the U.S. Export-Import Bank. And here, we prevail against our main competitor.
China is another example of close international partnership and the high level of trust. In 1985, we were the first multi-national company to sign a corporation agreement with China. And last year, we renewed and further substantiated that agreement. Our corporation focus is on the key areas of China’s latest five-year plan and we’ve agreed on Annual Summit Meetings with the Chinese government. This is another milestone for our future, in the fastest growing region of the world.
Ladies and gentlemen, our proximity to customers and our multi-local setup enable us to balance out regional economic fluctuations and tap growth opportunities. To make sure we maintain that advantage in the future, we invest both in traditional markets as well as in the emerging markets. Our high liquidity affords us, an outstanding base for expanding our core business.
We have the flexibility to quickly respond to economic developments and growth opportunities in the markets. Here Russia is a good example of such type of investment together with partners we will be investing around €1 billion over the next three years. We will be modernizing and building new facilities, conducting research in innovation city Skolkovo, and supporting to path to modernization in a country with which we have maintained close ties since the days of our company is founding.
I’m also pleased that Russia is eager to deepen its partnership with the European Union. This partnership harvests great opportunities for both sides, even more so now that Russia’s accession to the World Trade Organization has been smoothed and particularly against the backdrop of the global economies shift of weight towards the pacific region, it would good for Russia and the countries of the European Union to tap the opportunities opened up by contiguity and cooperation to a greater extent.
In addition to that, we invest in our global manufacturing network. For example, in our production plant for gas turbines, here the energy sector is planning on investing about €1 billion up to 2014. In addition to our lead plant in Berlin, we opened a new plant in the U.S. last November. We’re also planning to build two further plants, one in Russia, the other in Saudi Arabia.
This will enable us to meet the growing worldwide demand for highly efficient gas power plants and both established and emerging markets. We are also strengthening our businesses through acquisitions. The industry sector for example, supplemented its software capabilities and the manufacturer of composite materials last year by acquiring the medium-size industrial IT company, Vistagy.
We also plan to make an additional investment in our global sales organization and R&D. Germany also offers growth opportunities. And here too we are investing in factories and R&D facilities and also in our headquarters in Munich.
At Wittelsbacherplatz, we will be creating a pioneering building that demonstrates the sustainability of our technologies. It will be carbon-neutral and significantly reduced demand for water, electricity and heat and meet highest international standards. Its design will encourage collaboration among employees and afford the space needed for that. And it will highlight our close ties to Munich as it will form an open vibrant public space that links Munich’s in the city to its museum district.
Siemens is opening its doors to Munich and its citizens. Munich’s Mayor Ude, spoke of a model of sustainable and responsible urban development. I would like to warmly thank him and Munich City Administration for their constructive support.
Ladies and gentlemen, our local roots all over the world drive growth and build trust. And so does our innovation power. With our innovations, we open up opportunities for partners about providing healthcare solutions for growing and aging population by making cities more attractive, by leading the transition to a new age of energy, by increasing industrial productivity.
Siemens presented a world premier for industry at the Hanover fair, the Totally Integrated Automation portal. The TIA portal is an engineering software platform for all types of automation tasks and hundreds of software engineers have worked on its development over many years, customers can save up to 50% of their engineering costs and drastically shorten time to market for new products. This is our investment of millions in the future of the manufacturing industry. The TIA portal is an example of the innovation power of our more than 17,000 software engineers. They develop new systems for a host of applications for industrial production as well as for CT scanners. So we are in an excellent position to play a key role in the growth market of industrial IT, a market with an annual volume of $60 billion.
Our medium-term goal is to become a leading player here. Our partnership with AtoS will strengthen our efforts here. The integration of Siemens IT Solutions and Services made AtoS Europe’s leading power provider of IT services.
Ladies and gentlemen, our exhibits here in the hall showcase many more innovations. For example, the Volvo C30 for which we are cooperating with the car maker to develop the drive’s charging and technology and electronic components. At the end of this year, Volvo will deliver a pilot fleet of cars to us, which we will then test under real conditions.
Together with Diamond Aircraft and EADS, we’ve built the world’s first aircraft with a serial hybrid electric drive. At the Paris Air Show, we presented the E Star to the public. It’s a small airplane propelled by a hybrid electric drive. This technology reduces emissions and fuel consumption by up to 25%.
And we are celebrating a further world premier today together with you, the Roding Roadster Electric. Together with our partner, Roding Automobile, Siemens R&D developed a novel wheel hub drive system for their sports car. It can almost completely recapture the kinetic energy of 70% of the braking actions. And last fiscal year, the Healthcare Sector too, once again improved its outstanding position in innovation.
For example, with the first full body scanner Biograph mMR, which combines magnetic resonance tomography, and positron emission tomography in, a single system. We presented the mMR to you last year. Since then, 15 systems have been installed worldwide and they’re proving their value day after day. For example, in the early diagnosis of cancer, we’re monitoring the effectiveness of therapies.
Ladies and gentlemen, one outstanding example of pioneering spirit of our engineers is the world record in efficiency that the energy sector achieved last May at the Irsching power plant of our customer E.ON.
I would also like to congratulate our engineers on our lead customer E.ON on this outstanding joint success.
Ladies and gentlemen, Irsching shows that climate protection and cost efficient power generation with fossil fuels can in fact go hand-in-hand and must. We are proud at our technology not only makes our businesses successful, but also provides answers to the most urgent questions of our times.
One such fundamental question is the energy question. And one event last year made – has dramatically made clear how urgently we need new answers, Fukushima. The March ‘11 earthquake and its devastating aftermath deeply shocked and moved us. Day-after-day, new horrifying pictures reached us. One picture in particular, made the dimensions of this catastrophe very clear to me personally. It was a picture of Ogawa, a coastal town in Northern Japan. I knew this town well. I was there often during the four years in which I lived and worked in Japan with my family.
The picture I remember it was that of a picturesque coastal town, but the picture I then saw in a newspaper was of complete destruction.
Ladies and gentlemen, Fukushima opened the eyes of the world to the residual risks of new clear power. Germany’s political leadership then very quickly reached the descendent to change its energy policy, the so-called “Energiewende.” In this context, Siemens decided its exit from nuclear power.
As early as 10 years ago, we took the first step toward this exit by spinning off our nuclear business into the joint venture with Areva. Our withdrawal from Areva NP marked a further step. And even though this move caused friction, it was the right thing to do. Now we have drawn the line.
In the future, we will limit our activities to the supply of conventional components such as steam turbines and generators that are also used in solar thermal and gas power plants. The change in energy policy, the Energiewende, is a project of a century full of opportunities. It’s a great opportunity for Germany because it further strengthens its leading position in the global market for energy efficiency and environmental technologies.
Within just 10 years, by 2022, withdrawal from nuclear power is to be completed. At the same time, CO2 emissions are to be drastically reduced. Both the goal and the time frame are ambitious and pose a number of challenges.
First, in the area of financing, experts estimate that the turnaround will require investments of around €20 billion – and that each year.
Energy prices are the second challenge. We could save all the energy we want, yet if energy prices were to rise significantly, the bottom line would be a major competitive disadvantage, particularly for Germany’s manufacturing industry.
Wind power is on track in achieving competitive prices even without subsidies. However, even the 6 megawatts produced by the most powerful wind turbines are still far away from the almost 600 megawatts generated by combined-cycle power plants like Irsching and the approximately 20 gigawatts that were delivered by Germany’s nuclear power plants.
Third, the energy turnaround is an administrative and logistical challenge. Before an offshore wind farm can be built and connected to a power grid in Germany, more than 40 approval processes of different government authorities have to be completed. The time needed for approval processes by far exceeds the desired time frame for projects. And that can significantly delay the deployment of replacement capacities for decommissioned nuclear power plants.
Complexity also results from the countless small power plants going into operation in many locations. Often, these projects are only attractive because of the guaranteed feed-in compensation.
The greater the number and the variety of small power producing plants raise the requirements of power grids must meet. That in turn, creates new challenges and risks as far as stability of power grids is concerned. It would be desirable that public discourse and political decisions take the larger European context into account.
Energy commissioner outing, energy roadmaps to 2050 contains relevant proposals on these issues, our European power grid, our broad energy mix, on-shore and off-shore wind farms where wind is abundant and solar where the intensity of the sun is great.
Much has already been said about the thousands of kilometers of new power lines necessary in Germany, here two priorities must be defined and procedures must be simplified and accelerated.
Fifth, a stable power supply requires reliable base load coverage. Until now, Germany nuclear power plants covered a large share of the base load. And its coverage will now incrementally, disappeared wind and solar energy will not be able to provide base-load coverage within a reasonable timeframe.
That is why, new fossil fuel power plants will have to be built. Gas fire power plants can be built in a relatively short time and can be flexibly started up and shut down.
Six, Germany’s energy, turnaround requires effective corporations among government, the energy industry and business. Then, the energy turnaround will become an advantage for Germany and a model that sets new standards.
With our technology, wherein Siemens can pave the way for the energy turnaround and we support every action that helps achieve this goal and improve Germany’s competitiveness.
Ladies and gentlemen, Germany’s industry leads the global market for environmental technology. This is a fantastic opportunity to demonstrate Germany’s export power and competitiveness. Here, our environmental portfolio contributes in a big way. We have technologies that make fossil fuel based power generation more efficient, not improve the performance of renewable energy sources.
We have technologies that integrate distributed power sources and energy storage systems and that more efficiently balance loads from high voltage, compound emission systems and smart grids to electric cars. And we have technologies that are lower energy consumption from next generation industrial motors to efficient buildings.
In fiscal 2011, our environmental portfolio generated revenue of nearly €30 billion that’s about 40% of our total revenue. These technologies enable customers to save about 320 million tons of CO2 per year, per year that is, that equals close to 1% of the world’s total annual CO2 emissions. For this commitment and our rigorous sustainability strategy, we received the German Sustainability Award.
Ladies and gentlemen, our proximity to customers all over the world, our leading position and innovation has driven growth markets, to stability of our company, all that is not possible without the energy, power expert and teamwork of the people who work for Siemens. It is they who stand by customers it is they who produce innovations that provide the answers to the world’s most urgent questions. It’s they who build trusts as ambassadors of our company, and there into action with customers and the general public. We are one team, we are one Siemens.
Based on continuing operations, 360,000 worldwide belong to this team. And 160,000 of them are based in Germany. Relative to last year that’s an increase of 6,000 in Germany and 24,000 worldwide. This too shows that Siemens is growing.
Ladies and gentlemen, and Siemens, is a preferred employer when it comes to training, education and career development. This past year, we spent more than €420 million worldwide on training and education, from dual education to training and technical project management and sales. In Germany some 2,000 school graduates once again began their training with us this fall.
This commitment, training and education of young people, is a personal concern of mine. At the end of 2011, almost one quarter of the year, young people between 15 and 24, in Europe was unemployed, in some countries like Spain, this almost one half of all young people. At the same time, companies are seeking skilled workers all over the world.
Siemens alone has around 12,000 open positions including about 3,400 in Germany, this is a Paradox. As a company, we can take action to mitigate this paradox both in the interest of young people and in the interest of our company. Here too, energy and commitment are needed.
For example, we’re taking steps to export Germany’s dual education system. We’re currently testing dual system models with local education partners in the U.S., Brazil, Russia and the Middle East. In another pilot project, young people from 14 European countries come to Germany to participate in our three and half year European training program.
They receive classroom training in English, and practical training at our facilities. And after they graduate, they can return to their home countries to work as highly qualified personnel. And we advocate the position that an individual social background should not limit his or her opportunities.
Our training program for disadvantage youth, ladies and gentlemen, our training program for disadvantaged youth is now in its fifth year. And so far it has provided 1,000 young people with training and jobs.
For us, a good education should hinge on an individual’s determination and willingness to learn and on the guidance received. Access to education, an understanding of the working world, the opening up of opportunities, and above all, guidance for young people by role models, this is what schools and companies can offer if they join forces.
We make a contribution to this in our home country Germany as well as in many other countries throughout the world. Nobel Peace Prize Laureate, Nelson Mandela once said, education is the strongest weapon that one can use to change the world.
As a responsible company, we promote changes for the better. That’s why, we support a number of education projects, one, very special project in South Africa.
I’m especially proud of projects like this because they tangibly improve lives on the local level. They open the door to a better future, for individuals and for the entire region. And that is also the objective of the Siemens Stiftung, creating seedbeds for entrepreneurship, so-called social enterprises, is one way the Stiftung is enabling people in Africa and South America to become self-sufficient. It helps to create a basis that people become self-sufficient.
Ladies and gentlemen, this kind of engagement is social responsibility in action. Builds trusts, and it’s in line with our company culture and our core values. For us, being innovative means providing answers to urgent questions; being excellent means strengthening our business and being attractive to our investors and by being responsible that means being a good employer and a reliable corporate citizen.
This value-based culture is especially important to us in times when markets are volatile and trust in government institutions and authorities, is diminished. It provides security and guidance. And it receives recognition in the outside world. Our leading position in the Dow Jones Sustainability Index, with the best score in the category Compliance is proof of that. Once again, we were singled out as a role model for the industry.
We can’t take this recognition for granted. We must continue to earn it by nurturing a value-based culture, by being vigilant, and, if need be, by rigorously enforcing rules. Last year, incidents in Brazil and in Kuwait required rigorous enforcement. And we acted accordingly. Clean business always and everywhere that is the straight line from which we tolerate no deviation.
The employees of Siemens see to that, as does our compliance team. And in that effort we receive the advice and support of our Compliance Monitor, Theo Waigel. We greatly value you efforts in establishing and nurturing a culture of compliance in our company.
Dr. Waigel, you deserve much of the credit for the fact that Siemens today is a role model of integrity. We extend our sincere gratitude to you.
Ladies and gentlemen, I don’t want to fail to mention either that we have someone among us who’s birthday is today, Peter Thomas’, congratulations.
Ladies and gentlemen, trust is a most valuable good. It is quickly lost and hard to win. Trust is not only the foundation for social stability. It is also the foundation for lasting success in business, especially in markets like ours where partnerships are typically long-term.
For us, too, uncertain times, volatile markets, and political crises add up to a challenging business environment, also for us. And it’s especially in times like these that safe harbors are valuable. Siemens is a safe harbor, a tried and proven partner, both for customers and investors.
That’s why for us the opportunities outweigh the challenges. We will again emerge from the current phase in Europe and the world economy stronger than before, as a company with answers to the key questions of our time, as a pioneer of the future, and as your partner of trust.
[No Q&A session for this event]