GE ‘badly’ misjudged clean energy transition – cost investors $193 million

A new report from the Insititute of Energy Economics and Financial Analysis (IEEFA) has accused General Electric (GE) of costing its investors a near-record $193 million between 2015 and 2018, following the company’s strategy to pursue natural gas over renewables.

The report notes that GE’s misjudgement of the rise of renewables, and the decline of gas, following its investments and pursuit of the sector with companies like Alstom “was ill-advised and ill-timed” in an analysis release.

GE were acknowledged as leader in gas turbine manufacture in 2015, but the company lost 74% of its market capitalisation in the years to follow as demand for new gas turbines plummeted.

Company officials conceded that they missed the transition, whilst misjudging the global appetite for national gas, and in January estimated the new gas market to be in the 25GW to 30GW range “for the foreseeable future,” – less than 50% of GE’s original forecasted market demand.

The company is working to restructure itself and grow its renewables portfolio, which the company says, will be its fastest-growing segment in 2019. According to GE, it has the largest installed base of onshore wind turbines in the US.

The report says GE is “a case study in how rapidly and unexpectedly the global energy transition away from fossil fuels travels up the economic chain and destroys value in the power generation sector”.

The report lays the blame at the feet of large shareholders such as State Street, BlackRock, Vanguard, and Fidelity, with the IEEFA’s analysts calling for GE to do more to push companies away from fossil-fuelled generation.

“It is in shareholders hands to ensure companies evaluate and understand the inevitable energy transition as the world accelerates towards meeting the Paris Agreement,” said IEEFA financial analyst and report co-author Kathy Hipple in a statement.

GE is yet to comment, referring instead to previous company statements. In January 2019, GE CEO Lawrence Culp admitted that company was late to the transition-table, stating it was “late to embrace the realities of the secular and cyclical pressures” relating to its power divisions.

Despite the increasing focus on renewables, GE is confident on the future of the gas turbine market.

“We continue to believe gas will play an important role in global electrification, but we have to resize our cost structure, our capital expenses and our supply chains to this new reality now,” Culp said.

A May 2019 statement from GE noted that it had installed repowering upgrades since 2017, totalling over  4 GWs of capacity at 36 different wind farms across the US, and expect to repower an additional 3GW of units to supply 11 customers at over 25 wind facilities before the end of 2020.

This isn’t the first bit of bad news for the international utility giant in 2019. The company was fined €52 million for providing erroneous information to the European Commission during their investigation of its takeover of LM Wind in January 2017. Here’s the story.