General Electric
Ge Windmill

GE Team Details Plan to Improve Renewables Unit

Jan. 26, 2022
Stung mostly by the expiration of tax credits, orders fell more than 20% in the fourth quarter.

Rising costs and uncertainty about production tax credits took a bite out of General Electric’s renewable energy business in the last three months of 2021, when orders fell more than 20% and the unit posted a $312 million operating loss.

In GE’s fourth-quarter earnings statement, Chairman and CEO Larry Culp and his team said they expect the company’s renewable energy business to slightly grow sales and post smaller losses this year—in 2021, the segment posted a loss of $795 million on revenues of $15.7 billion—and they still see GE “firmly positioned to lead the energy transition.” But fourth-quarter orders fell to about $4.8 billion from $6.3 billion in the fourth quarter of 2020, hampered by shaky demand, continued supply chain headaches and higher-than-expected inflation.

Detailing GE’s results, Culp said the company’s onshore wind division—the largest component of the renewables group that is scheduled to be spun out of GE in early 2024—also is dealing with a set of technological issues in international markets. Culp added that his team is focused on pushing through operational improvements along with price increases and supply chain and cost efficiencies both “through restructuring and normal course work.”

The expiration of production tax credits at the end of 2021 has clouded the short-term performance of onshore wind, Culp said. Turning around its results as well as improving those of offshore operations will be an area of attention this year and next and CFO Carolina Dybeck Happe told analysts and investors on a Jan. 25 conference call. The goal is to generate low-single-digit revenue growth and higher margins.

“We were encouraged by the progress we saw in the up-front order price activity in the back half [of 2021], particularly in onshore wind,” Culp said. “There is more to do there.”

Culp made it clear this week he sees GE as a key and profitable player in the energy transition push and is prepared to invest in its growth, as evidenced by the acquisition last month of Canadian software company Opus One Solutions. But another part of GE’s plan to improve the renewables business – as well as some of its other divisions – is being more picky about the types of projects it wants to work. On their call, Culp and Happe repeatedly used the word “selectivity” in describing their focus on margins and cash flow.

“It’s OK not to compete everywhere and we’re looking closer at the margins we underwrite on deals with some early evidence of increased margins on our 2021 orders,” Culp said.

For more details on GE’s fourth-quarter report, visit our Endeavor Business Media partner site IndustryWeek.

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