Profitable Growth

in Challenging Times

Klaus Voges, Group President

Power Generation
Financial Market Day, February 17, 2004
FEB-04
 My topics today:

We are achieving strong results

in challenging times

Continuous execution of our strategies

leads to profitable growth

Siemens Management System at PG –

Structured programs and initiatives

We will deliver continuous strong performance

FEB-04 2
 PG business results

in millions of euros
Q1 FY04 Q1 FY03 FY03

Orders 2,676 2,270 7,302

Sales 1,902 1,785 6,967

Group profit 245 409 1,171

as % of sales 12.9% 22.9% 16.8%

Net cash 40 (46) (448)

Employees 30,300

FEB-04 3
 Continuous execution of our strategies...

Portfolio optimization

Service growth

Global market and customer diversity

Innovation leadership

Optimization of business mix

... leads to profitable growth for our businesses

FEB-04 4
 Continuous optimization
of PG business portfolio

Joint
Acquisitions PG F PG I PG L ventures
Divestiture

Framatome Ceramics (CE)

Parsons 1997
ANP 2) Redwitz
34% (formerly KWU's
Westinghouse 1998 Nuclear Div.)

Demag Delaval 2001 Voith Siemens

Hydro (VSH)
Alstom 35% (formerly KWU
2003 Hydro)
Ind. Turbines

ICIS 1) 2002 Turbo Service

Network
2002
New Energy (TSN)
Associates 2003 (joint venture with
Chromalloy
managed by PG)

1) Industrial Control and Information Systems F = Fossil Power Generation

2) Framatome Advanced Nuclear Power I = Industrial Applications
L = Instrumentation & Control

FEB-04 5
 Business model of
PG Industrial Applications

CUSTOMER

‘PG I as One-Stop Shop and System Integrator for Rotating Equipment’

Profit Machine Competence Machine Growth Machine
(and growth) (fuel) (and future profit)

Low ‘Total Cost of Ownership’

Speed/Customer Intimacy Quality Costs/Reliability Integrated Systems/Risk Mgmt.

Service Products Systems/ Solution

Subdiv.: Subdiv.: Subdiv.:

Ind. Ind. Com-
Steam Gas pressors
Turbines Turbines

Subdiv.:
Service Subdiv.:
Subdiv.: Power
Oil & Gas Plants

FEB-04 6
 Alstom Industrial Turbines integration
is progressing as planned

Measures and Status:

Organization Newly integrated PG I already in operation 2 months

after closing (since October 2003)

Sales Network Optimized customer approach through global PG I

sales management and key account management
to fully exploit all market opportunities

Service Network Organization of service activities in regional hubs to

support service growth strategy

Manufacturing Design of integrated manufacturing network,

including best practice sharing

Supply Introduction of central supply management

Management organization and launch of major savings initiatives

FEB-04 7
 Siemens Management System at PG

company programs
Innovation Customer focus Global competitiveness

Platform strategies Winning new customers Software initiative

Harmonize GT product Partnering + AEs1) Project-

as customers management@Siemens
line
Oil & Gas worldwide
manufacturing concept
Cross selling initiative Low cost
New large GT family Pilot customer manufacturing
engagement
Complementor strategy Shared services
Optimized steam
turbine family Asset management

Service initiative
Steam turbine mods and upgrades;
Total plant maintenance and diagnostics; GT-LTP’s with risk / gain sharing

Quality and process initiative

Customer site back quality program

Clear responsibilities, goals and incentives on project level

FEB-04 1) Architect Engineers 8
 Winning new customers:
PG enters attractive Oil & Gas business

Rotating equipment
market within
Oil & Gas
EUR 15 bn p.a. Our offerings to the Oil &
Gas industry increase significantly
due to the completion of our product
portfolio with small / medium gas
turbines and compressors
Up-
stream Service
Full portfolio of rotating equipment:
- compressor stations
- gas and steam turbine packages
- power plants, and
Mid- - related services
stream New
Equipment Opportunities within growth areas,
e.g. LNG (Liquified Natural Gas)
Down-
stream
plants, subsea applications

Strong position within rotating equipment

FEB-04 9
 Cross selling initiative:
Sell ‘All electric LNG’ plants in
cooperation with other groups

Trends within Oil & Gas: Core competencies within Siemens:

• Increasing need for gas • Power plant (PG)
transportation • Electric grid / system control (PTD)
• Increasing relevance of availability • Compressor trains (PG, A&D)

LNG market ‘All electric LNG’ plant

Power Plant (Island operation)
EUR 5.0 bn
(250 MW)
G GT G ST G GT
+25% p.a.
EUR 3.0 bn 3.0
„All electric
LNG“ (incl.
Process Plant
1.0 Power Plant) Electrical Grid

2.0 GT Driven 2.0 Compressor

LNG
Trains
2003 2008 (190 MW) M C M C M C

GT = Gas Turbine, ST = Steam Turbine, G = Generator, M = Synchronous Motor, C = Compressor

Double digit growth opportunity: ‘All electric LNG’

FEB-04 10
 Service initiative:
Installed fleet provides strong basis
for future profitable growth

in GW, status of 2002

Gas Turbines
Steam Turbines
Americas Nuclear Steam Turbines
484
Europe
261
336 189

Asia / Pacific
50
World total: 12 110 109
88
2900 GW 69 AP Siemens GE MHI 60
928 22
GE Siemens AP MHI

696 665
Africa / Middle East
55 53 52
23
445
AP GE Siemens MHI

166

GE Siemens AP MHI Others

Siemens PG is strong in all regions

FEB-04 11
 Service initiative:
PG Service – a profitable, growing business
Service Mix 3.3
in billions of euros ~ 13% p.a.

I&C Service 2.3

Ind. Applications
Service

Fossil Service

FY02 FY05e

Follow through:
• Full integration of AP Industrial Turbines
Three key levers: • Implementation of teaming agreements
• Improved base between divisions
• Organic growth • Regional service optimization
• Accelerated growth • Balance of plant initiative
• Total plant solutions
• Diagnostics implementation

FEB-04 12
 Quality and process initiative:
Focus of top+ Quality @ PG is shifting from
internal focus to suppliers and customers

Cumulative business benefits

Goal FY04
Current Status
400
in millions of euros
• Cumulative savings
294 EUR 294 millions
• More than 6,000 people
~142 trained worldwide
~110
~75
~45
~16 ~14 Outlook
• Customer Site-Back Quality:
FY01 FY02 FY03 FY04e
Make the customer feel the
Cumulative numbers: Investment Business benefit
impact of our quality efforts
• top+ with Six Sigma @ PG
Training is the foundation Supply Base:
7000 > 6,000 We require the same efforts
Participants
6000 from our suppliers as we
5000 demand internally
4000 Staff • Shift of Six Sigma Project
3000 Focus ...
2000 Green &
Black Belts ... from reactive to
1000
Management preventive measures to
0
FY00 FY01 FY02 FY03
ensure quality

FEB-04 13
 Market development in the power plant
market by types and regions

Power Plant Types Regions

[GW p.a.] [GW p.a.]
158 158
12 11
138 138
5
11 Small Generators1 Africa &
45 18
4 Nuclear thereof:
Middle East
China 21

3
59 Asia &
104 75 Fossil Market 22 thereof:
Australia
China 28

8 Eastern Europe/CIS

17 Industrial Market 77 22 Western Europe

thereof:
16 10 Wind, Solar USA 66
7 31 Americas
21 Hydro thereof:
14 USA 16

Ø 98-02 Ø 03-08 Ø 98-02 Ø 03-08

1) Recip. engine, fuel cell, micro gas turbines

Long term development is positive

FEB-04 14
 Continuous execution of our strategies leads
to profit performance in the 10-13 % range

Segment Segment
profit target profit target
Others
(incl. Ind. Applications, I&C) 4%
Strategies for growth 6-10%
and profitability Service 14%
• Portfolio optimization
• Service growth 18-22%
EPC 5%
• Global market and
customer diversity
• Innovation leadership Components 4-6%
24%
• Optimization of
business mix
6-8%

FY02 FY05e

Increasing importance of Service and Industrial

Application in PG‘s business mix
FEB-04 15
 Siemens Investor Relations Team

Marcus Desimoni +49-89-636-32445

Constantin Birnstiel +49-89-636-36165

Christina Schmöe +49-89-636-32677

Claudia Wagner +49-89-636-33693

Webpage: http://www.siemens.com Investor Relations

e-mail: [email protected]

Fax: +49-89-636-32830

Disclaimer:
This presentation contains forward-looking statements based on beliefs of Siemens' management. Such
statements reflect the company's current views with respect to future events and are subject to risks and
uncertainties. Many factors could cause the actual results to be materially different, including, among
others, changes in general economic and business conditions, changes in currency exchange rates and
interest rates, introduction of competing products, lack of acceptance of new products or services and
changes in business strategy. Actual results may vary materially from those projected here. Siemens does
not intend or assume any obligation to update these forward-looking statements.
FEB-04 16