GE benefits from the wind energy sector’s failures
The wind energy industry is struggling due to rising inflation, interest rates,
supply chain chaos, and costly quality lapses.
This has led to the cancellation of some major projects,
including Orsted’s offshore wind farm project off the coast of New Jersey.
Topic
The details
This cancellation was a loss for Orsted, but it was a boon for GE,
the largest wind turbine manufacturer in the United States.
The company had contracted to supply nearly 100 giant turbines to generate electricity from Orsted’s first projects,
and the deal, which was close to $1.5 billion before a major increase in industry costs,
was expected to cause GE to suffer heavy losses on every tower it delivered.
The cancellation of the project will write off $6 billion in loss-making orders from GE’s offshore wind accounts.
This will improve the position of its renewable energy business to be on a more solid financial footing,
as CEO Larry Culp approaches completing his plan to split the company.
The separation of GE’s operations in the renewable energy sector is the last part of the massive restructuring that Culp has undertaken to dismantle a company that was among the leading American companies about a decade ago.
He has separated the financial services unit that weighed GE down with debt and hidden risks,
and he has almost completed his plan to split the company into three publicly traded companies operating in diverse sectors: healthcare, aviation, and energy.
The success of the separation plan could bolster Culp’s legacy as the CEO who saved a company that was founded by Thomas Edison.
Conclusion
GE Renewable Energy has been quietly gaining momentum after losing $5.6 billion from 2019 to the third quarter of this year. Its onshore wind business,
which accounted for most of the company’s overall renewable energy losses of $2.2 billion last year, posted a profit in the third quarter.
The company’s power grid business, which produces devices and systems for power grids,
could see its first annual profit in years this year.
Orsted’s latest setback will also significantly reduce GE’s offshore wind unit’s spending rate and the likelihood of future losses.
Colup said: “If you heard anything from me in the last earnings call that has a sense of growing excitement and confidence,
it’s not about all that’s great and wonderful in commercial aviation right now.
It’s about our approach to the transformation in the state of the renewable energy business.”
GE benefits from the wind energy sector’s failures
