Siemens Tilts at GE's Windmills

NEW YORK (TheStreet) -- As Siemens  (SI) expands into wind power from its core businesses of energy, industrial machinery and health care, it grows more like General Electric (GE) every year.

Those similarities are highlighted by a big deal Siemens announced yesterday with a unit of Berkshire-Hathaway  (BRK.A). Siemens described it as the biggest onshore wind turbine order ever. MidAmerican Energy Company ordered 448 huge wind turbines, which will produce 1.05 gigawatts of power in 2015. They will be made and installed in the center of America's wind belt.

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Solar power grabs most of the renewable energy headlines, but hydropower and wind create much more of this country's new renewable energy, according to the Energy Information Agency. Of the 12% of electrical grid energy produced from renewable sources in 2012, hydropower produced 56%, wind produced 28%, and solar a mere 1%. In 2012, wind power generated roughly 140 billion kilowatt hours.

This deal should bring Siemens' market share in wind closer to that of GE. It's currently third in the market, according to most studies, behind both GE and Vestas Wind Systems. A Danish company traded in Copenhagen, Vestas specializes in wind. Its shares are up by quite a lot this year alone.

Tax credits have made wind a healthy industry, and the Siemens deal was timed to beat the end of the Renewable Electricity Production Tax Credit, which will happen in January unless Democrats are able to extend it. An extension is not in the budget deal now before the Senate.

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GE, Vestas and Siemens are all focusing on ever-longer, ever-lighter turbine blades and better gearboxes to drive them more efficiently. The industry could be on the cusp of rapid technological change.

Turbines without blades, vertical turbines, and wind concentrator known as a wind lens all suggest that large improvements in efficiency, cost and environmental sustainability are on the horizon.

For investors, even this big wind deal won't move the needle much. Siemens has revenue of over 75 billion euros per year, over 4 billion of which fell to the bottom line for the year ending in September. Under CEO Joe Kaeser, Siemens is working toward the same goals as GE has been under Jeff Immelt. Both Siemens and GE want to be fully integrated power, industrial equipment and healthcare conglomerates.

As GE's own transformation has accelerated in the last few years, the two stocks have increasingly moved in tandem. Over the last year they're up an almost identical amount, 22% for Siemens, 23% for GE. Based on current exchange rates, Siemens is about two-thirds the size of GE. Even their yields, about 2.5%, and their price-to-earnings multiples, about 20, are similar.

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While GE is venerable enough to be the only Dow Jones industrial left from Charles Dow's original list, Siemens is older. Werner von Siemens founded the company in 1847 to make telegraph equipment. By the 1880s, the company expanded into electricity, trains, light bulbs and more. Siemens himself was as distinguished in Germany as Thomas Edison was in the U.S., and the international unit for electrical inductance is named for him. Edison, who incorporated GE in 1889 to encompass many of his businesses, was a kindred spirit with Siemens.

What all this means for investors is that you have a choice. Do you feel better about the future of the dollar or the euro? If you like the dollar buy GE. If you like the euro, buy Siemens. You should do well next year either way. 

As the disclosure below notes, I personally prefer the dollar. 

At the time of publication the author owned shares of GE.  

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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