GE’s Immelt: It’s a World of “Slow Growth and Volatility”

We live in a world of “slow growth and volatility,” said Jeffrey Immelt, chairman and CEO of General Electric, but there’s an opportunity to “make a lot of money” if you have courage in such times. As an example, he gave GE’s purchase of Enron’s wind business in 2002 for about $2 million, a business that is now worth around $7 million. [Note that the Wall Street Journal in 2002 reported that the selling price was likely to be around $250 million; the value of GE’s wind turbine business today far exceeds $7 million, as the company sold 2,869 wind turbines in 2015, according to GE’s 10k report.]

Speaking at the 2016 IHS CERAWeek conference in Houston on February 22, Immelt noted that since he became CEO of GE in 2000, he has been through a few business cycles affecting the company, including the “aviation cycle” post-2001, the financial cycle beginning in 2008, and now the oil and gas cycle.

In a conversation with the event’s chairman and IHS vice chairman, Daniel Yergin, Immelt reminded the audience that nobody even a few years ago was predicting the huge market shifts created by U.S. shale gas and plummeting prices for solar photovoltaics. Given the ongoing unpredictability and volatility of energy markets, Immelt promoted the need for flexibility and versatility (an advantage that GE, with its offerings in multiple industry sectors, has over many of the oil and gas players attending this week’s international energy event).

“A multi-business structure is useful,” in tough times, Immelt said.

For GE, as he has said in other venues, flexibility also means being a more technical and global company, closer to the customer. In 2016, he noted, 70% of GE’s business is outside the U.S. That includes being “contrarian” about emerging markets like Brazil, Immelt added, where doing business is hard now, but “they are long on things that are worth a lot.”

In response to a question about carbon capture and storage (CCS), which had been discussed in a previous panel, Immelt said he’s “not so sure” about CCS. “It’s going to be a struggle,” he predicted—an unsurprising view, considering that GE’s business is more heavily weighted toward gas turbine–powered generation than coal power.

Energy storage, on the other hand, is something Immelt said he is “intrigued” by and “where I’d be long right now.”

Finally, asked why GE purchased Alstom recently, Immelt noted that “there are a finite number of companies on the game board” in the large industrial players category, and the opportunities for such purchases come up infrequently. GE was “very comfortable investing in Europe,” he said, and the two companies’ strengths were complementary, with GE strong in gas generation and onshore wind, while Alstom brought strength in coal generation, offshore wind, hydro, and a growth market footprint.

[Comment on wind business numbers added 3/8/16.]

Gail Reitenbach, PhD, editor (@GailReit, @POWERmagazine)