L For a week, General Electric announced it would close a gas fireworks plant in California 20 years ahead of schedule. The Inland Empire Energy Center in California, the firm said, was "uneconomical to support further" partly due to outdated technology.
But California's aggressive clean energy targets and commitment to using renewable energy were also a key determinant of GE's decision to take the plant off-line. Moreover, the closure is not only a hiccup in GE's energy plans, but is only a small piece of the American giant's stumbling block on clean energy in recent years.
The company has lost hundreds of billions of dollars of investor funds in just two years as its stock has fallen. And a new report claims the decline is largely because the company has not been aware of the increase in clean energy.
"You don't necessarily think of GE as an energy company," said Kathy Hipple, a financial analyst at the Department of Energy Economics and Financial Analysis (IEFEF), who drafted the report. "But any business on the planet will be affected by climate change."
Founded at the end of the 1
GE now owns ten subsidiaries, including companies that handle aviation technology, healthcare and financial services. Its energy supplies are divided into two units: GE Power, a gas-focused division and GE Renewables, a much smaller company primarily focused on wind technology.
GE's energy problems began in 2014 when the company announced it would buy French gas turbine company Alstom for $ 13 billion. The timing of the purchase coincided with a seismic shift in climate policy. The acquisition was completed in November 2015, just a month before hundreds of people gathered in Paris to ratify the landmark climate agreement in December 2015.
"It was a bit like Bayer bought Monsanto just as most of the class came through, "Ion Yadigaroglu, managing partner of Capricorn Investment Group, said a clean energy investment company.
GE's purchase of Alstom also coincided with a global downturn in the price of renewable energy, reducing demand for gas turbines right after GE made its expensive pick. Between 2010 and 2016, the cost price of solar cells decreased by 69 per cent. – so it became "well into the price of fossil fuels", according to the International Renewable Energy Agency – while the cost of land wind down to 20 per cent. In the same time period.
Since then, costs have only fallen further. In November, the financial advisory firm Lazard reported that the construction and operation of new renewable energy plants had become sometimes cheaper than the older conventional plants.
"You are in a situation where the market for one of your main products – Literally falling off it," Hipple said. She explained that utilities were cautious about spending millions on gas turbines that would take years or decades to pay off.
"Utilities and power plants said," We don't have to do things now. We just want to wait and see, "she said." The price of renewable energy is falling – why the lock-in? Why is it locked in now? Let's keep an eye on natural gas prices. Let's keep an eye on renewable energy courses. We don't have to act fast. "
According to IEEFA's report, GE investors lost an astonishing $ 193 billion – 74 percent of its market value – between 2016 and 2018. GE Power was a major driver of this loss as it began to soften money, going from bringing 4 billion dollars in profits in 2016 to lose more than $ 800 million in 2018. The company's other subsidiaries experienced only weak gains in the profits during this time.
Last year, GE was kicked off by Dow after 110 years on the index after its GE was the last remaining original member of the index and a remnant from a time when the US economy was driven by industrial giants rather than big tech. "The company was often at the center of US capitalism" over the last century, wrote the change in Dow last summer and noted the removal as a "fresh blow" to a company "reeling" from challenges to its power companies. "So recently as in the 1990s, GE is sometimes the most valuable US company of market value, "Times reported.
GE's downfall, of course, cannot be entirely attributed to lack of foresight on clean energy. The widespread leadership struggles within the company – its long-term CEO Jeff Immelt was forced to retire in 2017, and his successor was removed by the board a year later – as well as numerous legal issues have significantly destroyed the investor's confidence. And GE has a significant investment in renewable energy sources: Its wind turbine business is the third largest in the world and has generated hundreds of millions of dollars in profits over the last two years.
The Alstom acquisition was praised by many investors as the acquisition was completed in 2015, when the New York Times pledged the agreement as "strengthening GE's foothold in emerging markets such as China and India, where coal-fired air pollution is a threat to public health." Analysts now say GE paid too much to acquire the company.
Experts agree that GE at best suffers from poor timing and in the worst case, the price pays for a significant lack of foresight. The Alstom takeover and the subsequent matches in the Power Division were the key to bringing the rest of the company down. News reports on GE's downturn and the company's wicked future strongly point to the Alstom acquisition as one of the key drivers of its falling stock prices. A Fortune profile of Immelt painted the Alstom agreement as a key example of the CEO's often-deprived tendency to "pay top dollar to acquire the fast-paced companies at the moment."
And in a July interview with Bloomberg, JP Morgan analyst Stephen Tusa said GE's power business was "in secular decline," meaning it is threatened by long-term market trends. Tusa predicted GE's power business in the future "could be worse, not better than today."
This story was published with permission from Nexus Media. Read the whole story.
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