GE withdraws from the coal-fired electricity market

This decision marks a dramatic turnaround for GE. Barely five years ago, the the company doubled the coal by acquiring the electricity business of Alstom, which manufactures coal turbines.
The $ 9.5 billion deal – the biggest industrial purchase GE ever made – turned out to be a disaster. Coal has been crushed by the boom in natural gas and a shift towards solar, wind and renewable energies. Since then, GE has laid off thousands of energy workers, cut its dividend to a dime, sacked two CEOs and sharply depreciated the value of its power company.

“With GE’s continued transformation, we are focusing on power generation companies that have attractive economies and a growth trajectory,” GE Power CEO Russell Stokes said in a statement.

GE shares fell 6% on Monday, leaving them down 42% on the year. The pandemic has taken a heavy toll on GE’s jet engine business, which is reeling from a drop in orders.

Acquisition “failed”

The move marks the latest dismantling of the GE empire as the company struggles to reduce a mountain of debt and cut profits. In recent years, GE has made deals to sell its century-old locomotive division, reverse its takeover of the oil and gas giant Baker Hugues (BKR), sell a major healthcare unit and even abandon its iconic light bulb business.

GE’s exit from coal “highlights the billions of dollars in destruction of shareholder value that are embodied in the failed Alstom acquisition,” John Inch, senior analyst at Gordon Haskett Research Advisors, told CNN Business in an email.

Inch added that the news also suggests that GE could not find any buyers for the steam power sector, which in January Bloomberg News reported that the company was trying to sell.
GE had been under pressure from investors, particularly socially aware, reduce its investments in fossil fuels.

But GE isn’t completely cutting ties with coal, at least not yet. The company will continue to maintain existing coal-fired power plants as well as build turbines for nuclear power plants.

Coal is in decline

Yet the move marks a move away from more polluting fuels, leaving GE to focus on natural gas as well as solar and wind power. GE has made a big bet on offshore wind, exemplified by the creation of Haliade-X, the world’s largest and most powerful offshore wind turbine.

This makes sense because despite President Donald Trump’s campaign pledge to revive coal, the industry continues to lose ground, especially in the United States.

In a significant milestone, the United States consumed more energy in 2019 from renewable sources than coal for the first time since before 1885. The consumption of coal in the United States has declined for six consecutive years to reach levels never seen since 1964.

Although emerging markets like India still depend on new coal-fired power plants to fuel their rapid growth, the climate crisis and falling solar and wind costs have renewed pressure on utilities to look to renewable energies.

GE Steam Power is the world’s largest steam and coal-fired power franchise, with 30% of the world’s steam turbine capacity, according to its website.