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2 May 2019

GE Renewables figures just drifting along, losing money

There is a big debate among investors about whether or not the worst is over for GE, should it sell off more assets, get into or out of this or that business, and is there more bad news coming? Whatever your position, the renewables market doesn’t seem to be coming to the rescue any time soon.

Hiding in among GE’s Q1 figures are numbers for GE Renewable Energy, with revenues of $2,448 million, a 1% increase on this time last year. It is not an inspiring growth rate for an industry that is on fire right now.

However it’s oil and gas figures in its power segment are still going great guns, perhaps suggesting where GEs real heart lies – in keeping with the widely held US belief that natural gas will be with us for a long time. Revenues in the power segment were up 9% to $5,695 million with a 23% improvement in profits. GE should be producing that type of result in renewables.

GE said that the onshore wind market was experiencing continued MW growth as customers shift to larger turbine models and finally compete head to head with other power generation options. GE said that onshore wind pricing was stabilized in the quarter because everyone wants to push their products through in time for the expiration of US Production Tax Credits in 2020.

International markets also stabilized it also said, although if they looked further afield to India or China, GE would see wind prices continuing to fall aggressively. GE said it expects significant production ramp for 2019 deliveries. The segment is loss-making for the quarter against a profit last year, primarily because of contract terminations and cost overruns, which we reported last week (in France) with the bulk of the revenue ($1.4 billion out of $1.6 billion) in onshore wind.  The French deal gone sour is at Eolien Maritime France where it is honor the first slice of a contract, but has ceded the remainder to Siemens Gamesa. The deal was a hangover from GE acquiring Alstom and it was due originally to supply 240 turbines for $2.6 billion but the French renegotiated it as it got older. Revenues also decreased due to the effects of a stronger US dollar versus certain currencies and US tariff barriers also created pricing pressure.

GE Renewable said it also received its first orders for the new 5 MW onshore Cypress platform and signed an agreement to install the first Haliade-X 12 MW offshore wind turbine, but R&D for this new product line is another reason for losses, the company said. It is still sitting on an order backlog of $18.5 billion and that is up on last year’s backlog with 970 turbine orders.

Total revenue for the company was a 3% fall to $ 25.3 billion, with net earnings of $3.55 billion, against a $1.2 billion loss last time. However all of this but $1.1 billion was from asset sales.

The US needs stronger industrials in and around the renewables segments who are making money, but right now the only US interests making money in renewables are start ups and investors who back both US and European projects with virtually guaranteed returns.