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.
—Aaron Larson is POWER’s executive editor (@AaronL_Power, @POWERmagazine).