General Electric Explores Sale of Steam Power Unit

(Bloomberg) -- General Electric Co. is exploring a sale of its steam-power unit, according to people familiar with the matter, as Chief Executive Officer Larry Culp looks to raise cash and revive the ailing energy business.

The company plans to gauge buyer interest in the steam operations in the coming months, said the people, who asked to not be identified because the matter isn’t public. No final decision has been made, and GE could decide to retain the asset, the people said.

A sale would mark a major step in Culp’s effort to reshape the power business that was at the heart of GE’s troubles in recent years. GE Power, which also makes gas turbines and generators, has been a cash drain amid waning demand for new power plants.

GE provided a glimmer of hope on Wednesday, when the company said cash from its manufacturing operations is likely to rise in 2020, sending the shares soaring. While the power-equipment unit continues to face challenges, including a 30% decline in fourth-quarter orders, Culp said he’s seeing “signs of stability” in the business.

A representative of the Boston-based company declined to comment on the possibility of a steam sale.

GE fell 3% to $12.55 at 1:54 p.m. in New York. The shares surged 10% on Wednesday after the company issued the upbeat outlook for 2020.

Coal Plants

GE’s steam unit is a leading supplier to power plants that burn coal. The dirtiest fossil fuel remains the biggest source of electricity worldwide and global consumption is expected to increase slightly in the coming years because of growing demand for power in developing countries.

That will outpace a shift to cleaner generation sources in industrialized nations, especially in the U.S. and Europe where there’s increasing pressure to close power plants that are seen as one of the biggest drivers of climate change.

GE’s steam power business was built largely through the disastrous 2015 deal for Alstom SA’s energy assets, which GE hoped would enhance its ability to supply “combined cycle” power plants using gas and steam turbines. GE took a $22 billion charge in 2018, largely related to Alstom.

Shortly after being named CEO in 2018, Culp reorganized the power business, splitting it into one division focused primarily on gas and another housing steam, grid, nuclear and other operations. The move was seen by some as a precursor to a sale of the non-gas businesses.

Steam represents a relatively small portion of GE’s broader power operations, accounting for about $1.9 billion of the larger unit’s $27.3 billion in 2018 sales, according to a regulatory filing.

Asset Sales

GE has been shedding power assets in recent years, including the industrial gas-engine business in 2018 and industrial solutions in 2017.

The manufacturing giant is starting to get credit from analysts and investors for turning things around after years of management turmoil, deteriorating cash flow and flagging demand for key products. The shares jumped 53% last year, GE’s best annual gain in almost four decades.

Part of the turnaround has hinged on divestitures. In addition to the power-asset sales, GE recently unloaded an aircraft leasing business with $3.6 billion of financing receivables to Apollo Global Management LLC and Athene Holding Ltd. It also announced a sale of its biopharma business to Danaher Corp. for $21 billion in February.

--With assistance from Will Wade.

To contact the reporters on this story: Aaron Kirchfeld in London at akirchfeld@bloomberg.net;Dinesh Nair in London at dnair5@bloomberg.net;Richard Clough in New York at rclough9@bloomberg.net

To contact the editors responsible for this story: Liana Baker at lbaker75@bloomberg.net, ;Brendan Case at bcase4@bloomberg.net, Susan Warren, Tony Robinson

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