GE Renewable Energy posts $400m Q1 loss amid early signs of turnaround led by US market

GE Renewable Energy posted a $400m loss in the first quarter amid early indications the financially troubled business is starting to benefit from aggressive cost control, better pricing, and a landmark climate law in the critical US onshore wind market.

“Our renewables business is showing continued signs of progress with clearly more to do,” Larry Culp, CEO of parent GE, told analysts on a conference call Tuesday. The loss was unchanged from a year ago and down slightly from $500m last quarter.

He cautioned another $400m loss is likely this quarter. The division aims to become profitable in 2024 even with a negative near-term financial outlook for offshore wind turbine manufacturing.

Culp repeatedly underscored how important the US market and federal climate law will be to achieve a successful financial turnaround at onshore wind, by far the biggest renewables segment revenue generator, and to drive its future growth and profitability.

“We’ve talked about the Inflation Reduction Act as a game changer, providing greater near-term and long-term demand certainty,” said Culp. “We’re already seeing this play out with significantly better visibility with our commercial pipeline over the next several years compared to this time just a year ago.”

Onshore wind turbine orders in North America, mainly the US, more than tripled in the quarter versus a year ago. Total segment orders globally were 529, up from 303. No offshore turbine orders were booked.

The reviving US market helped push GE Renewable Energy orders up 94% to $5.4bn in the period versus a year earlier, while revenue increased a modest 5% to $2.8bn.

Culp said GE is in frequent contact with President Joe Biden’s administration to “share our views on both the substance and timing” for release of guidance on key IRA tax provisions that affect both potential wind manufacturing investments and turbine purchasing decisions by its customers.

“We expect to see that this quarter. Every week matters here. The sooner customers have certainty, the better. We’re quite optimistic,” he said.

Culp asserted the onshore wind business “should be profitable” in the second half. Costs are being slashed. The number of employees was cut 20% from last summer “with more to do,” he said.

Onshore wind is also focusing on fewer markets led by the US and Europe to be more selective with orders it will book.

“We went after business with the best of intentions and didn’t get paid for the risks we were taking. Signed up to probably do things that in hindsight we shouldn’t have,” said Culp, who alluded to this having been a problem in other areas of GE’s sprawling energy equipment supply operations.

As the US onshore wind market shifts rapidly from abundance to scarcity with IRA starting to drive growth, GE has a finite amount of capacity in the short- and medium-term to sell.

“Credit to the team for being as smart as we can making sure we are fully and fairly compensated for the technology we bring and the solutions we offer,” said Culp, adding there was more room to better price turbines and related services.

Also helping margins is a simplified range of product offerings. This is already paying off in the backlog of orders with gains thus far mostly in the US.

Ending red ink at onshore wind is key milestone for Culp’s management team to prepare GE Vernova for a 2024 spin-off as a “standalone, independent, investment grade leader in the energy transition.”

GE Vernova includes renewables – grid, hydro, wind turbines – and traditional thermal energy equipment and related businesses. GE had earlier said the spin-off would occur in first quarter 2024 but Culp said only that the company was positioning it to “go in 2024.”

“We know it won’t be the balance sheet” he added, or, “internal preparation that will pace when we spin GE Vernova, it really will be a function of business performance.”