21.09.2020 Power Magazine
GE said it will exit the new-build coal power market, subject to applicable consultation requirements.
“GE’s Steam Power business will work with customers on existing obligations as it pursues this exit, which may include divestitures, site closings, job impacts and appropriate considerations for publicly held subsidiaries,” the company said in a Sept. 21 announcement. It will also continue to deliver turbine islands for the nuclear market, and service existing nuclear and coal power plants.
The company’s power business has struggled financially since the acquisition of Alstom’s Power and Grid business in November 2015. GE claimed it bought the French company for four reasons: its installed base; a broad product line in steam and power islands, which GE anticipated it could cross-sell; synergies across operations, costs, and revenues; and the talent of Alstom’s personnel. The €9.7 billion ($10.6 billion) transaction—GE’s largest deal ever—was expected to make the company, which was already a leader in the power sector, an even more-dominant force.
But the power market has been difficult in recent years, and GE has suffered as a result. Weak earnings associated with the underperforming investment in Alstom prompted GE to rejigger its power business in November 2017. Then-CEO John Flannery, who had replaced Jeffrey Immelt less than four months earlier, announced changes at the time related to costs, capital allocation, working capital and operations, governance, and culture. He said moves would involve “right-sizing” for market structure, simplifying GE’s portfolio, revamping its supply chain, and resetting its supply base.
The changes didn’t seem to help, and on Oct. 1, 2018, Flannery was replaced by H. Lawrence Culp Jr. Soon thereafter, GE divested its Distributed Power business, which included the Jenbacher and Waukesha product lines; sold part of its stake in oil services company Baker Hughes; and announced its intention to reorganize GE Power into two businesses, forming GE Gas Power, comprised of Gas Power Systems and Power Services, and GE Power Portfolio, comprised of the Steam, Grid Solutions, Nuclear, and Power Conversion businesses. In January 2019, GE announced it would move its grid solutions, solar solutions, and storage businesses from GE Power to GE Renewable Energy.
But despite all the card shuffling, the company has struggled to turn things around. GE Power’s financials announced on Jan. 31, 2019, were notably poor, plagued by slack market demand for products and services, technical glitches in its flagship HA gas turbine model, and poor project execution. This year, the coronavirus has hindered business. For GE, the main impact has reportedly been in its Aviation business, but the Power sector has very likely suffered, too, due to outage postponements, supply chains disruptions, and other pandemic-related difficulties.
Amid the trouble, GE has now decided to exit the new-build coal power market. The company said Monday that it “will continue to focus on and invest in its core renewable energy and power generation businesses, working to make electricity more affordable, reliable, accessible, and sustainable.”
“With the continued transformation of GE, we are focused on power generation businesses that have attractive economics and a growth trajectory. As we pursue this exit from the new build coal power market, we will continue to support our customers, helping them to keep their existing plants running in a cost-effective and efficient way with best-in-class technology and service expertise,” Russell Stokes, GE senior vice president, and president and CEO of GE Power Portfolio, said in a statement.
GE is getting out of the coal power business
21.09.2020 CNN
General Electric is one of the world’s largest makers of coal-fired power plants. But now it plans to say goodbye to coal. Struggling GE (GE) announced Monday it won’t build new coal-fueled power plants, making it the latest major company to dump coal in an exit that may include asset sales, site closures and layoffs.
The move marks a dramatic reversal for GE. Just five years ago, the company doubled down on coal by acquiring Alstom’s power business, which makes coal-fueled turbines.That $9.5 billion deal — GE’s biggest-ever industrial purchase — proved to be a disaster. Coal has been crushed by the rise of natural gas and a shift toward solar, wind and renewable energy. Since then, GE has laid off thousands of power workers, slashed its dividend to a penny, fired two CEOs and sharply written down the value of its power business.»With the continued transformation of GE, we are focused on power generation businesses that have attractive economics and a growth trajectory,» GE Power CEO Russell Stokes said in a statement.GE shares tumbled 6% Monday, leaving them down a whopping 42% on the year. The pandemic has dealt a damaging blow to GE’s jet engine business, which is reeling from a plunge in orders.
‘Failed’ acquisition
The decision marks the latest unraveling of the GE empire as the company struggles to cut a mountain of debt and shrinking profits. In recent years, GE has reached deals to sell its century-old locomotive division, reverse its takeover of oil-and-gas giant Baker Hughes (BKR), sell a major healthcare unit and even dump its iconic light-bulb business.GE’s exit from coal «highlights the billions of dollars of shareholder value destruction that is embodied with the failed Alstom acquisition,» John Inch, senior analyst at Gordon Haskett Research Advisors, told CNN Business in an email.Inch added that the news also suggests GE has not found any buyers for the steam power business, which in January Bloomberg News reported the company was attempting to sell.GE had been under pressure from investors, especially socially conscious ones, to cut back on its fossil fuel investments.But GE is not completely cutting ties with coal — at least not yet. The company will continue to service existing coal power plants as well as build turbines for nuclear power plants.
Coal is in decline
Still, the move marks a shift away from dirtier fuels, leaving GE to focus on natural gas as well as solar and wind. GE has made a big bet on offshore wind, illustrated by the creation of Haliade-X, the world’s largest and most powerful offshore wind turbine.
That makes sense because despite President Donald Trump’s campaign promise to revive coal, the industry continues to lose ground, especially in the United States.In a major milestone, the United States consumed more energy in 2019 from renewable sources than from coal for the first time since before 1885. US coal consumption has declined for six straight years to levels unseen since 1964.Although emerging markets like India still rely on new coal power plants to fuel their rapid growth, the climate crisis and plunging solar and wind costs have renewed pressure on utilities to turn to renewables instead.GE Steam Power is the world’s largest steam and coal power franchise, with 30% of the world’s steam turbine capacity, according to its website.