General Electric Co. executives are targeting an early-April spin-off of their power and renewable energy businesses, which they said Jan. 23 are set to produce “substantial” profit and cash flow growth in their first year on their own.
GE’s energy group comprises more than 80,000 people globally and markets gas-powered turbines, on- and offshore wind energy equipment and services as well as various grid products and services for utilities and industrial companies. Speaking after GE reported its fourth-quarter results, GE Chairman and CEO Larry Culp and GE Vernova CEO Scott Strazik said those units are on track to bring in nearly $35 billion in sales this year, up from $32.7 billion in 2023, when they manufactured 2,225 wind turbines and 91 gas turbines.
“I’m encouraged by what our team accomplished in 2023 as we delivered meaningfully better results,” CEO Scott Strazik said on a conference call, pointing to the winning of a large contract to help supply turbines to Pattern Energy’s massive SunZia project in the Southwest as a recent highlight.
The creation of GE Vernova and its pending split will cap a process, announced in late 2021, to separate GE into three more focused businesses. Culp and his team in early 2023 spun out GE HealthCare, which has annual sales of about $20 billion, before progressing on the Vernova separation that will leave legacy GE focused on the aerospace sector.
Inside GE Vernova’s story are several contrasting energy-transition plot lines: The power group is a growing cash cow and last year produced more than $1.4 billion in profits on nearly $18 billion in sales while the renewables division lost about $1.4 billion on revenues of $15 billion. The money-losing culprit in the latter is offshore wind, where Strazik and his team are whittling down their $6 billion backlog and—along with other sector players—catching their breath during a reset of expectations and investment plans.
GE Vernova’s onshore division began turning a profit in mid-2023 and is on a path to “improve significantly” this year, Strazik said. That’s a major turnaround from mid-2022, when that business with hit by a lull in orders ahead of the Inflation Reduction Act as well as warranty issues from manufacturing glitches. Combining that progress with better pricing dynamics and other manufacturing efficiency improvements has Strazik upbeat about the numbers Vernova can put up this year.
“We see a clear pathway in ’24 to accrete margin,” he said. “But also then to continue to accrete our margin beyond as we liquidate the rest of the tough economics with offshore in ’25.”
Strazik and his team will dive deeper into their goals and plans for GE Vernova at an investor day in early March.