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GE Pulls The Plug On Coal
BY GLENN DYER - 12/12/2017 | VIEW MORE ARTICLES BY GLENN DYER

Anyone who thinks coal still has a wonderful outlook should think again and look at the recent decisions by two of the world’s biggest power equipment manufacturers to slash thousands of jobs, as well as AGL’s decision to shut its creaky Hunter Valley power station and replace it with $1.2 billion worth of renewable/gas-based power assets.

GE is the world’s largest maker of gas turbines, but that hasn’t given the company any protection as the power markets undergo rapid change.

So it says it needs to become leaner as its biggest business grapples with the slowing demand. On current trends this could be only the first of a number of cuts for the company and its peers (like Siemens).

General Electric revealed plans last week to axe 12,000 jobs at its global power business, as America’s biggest industrial conglomerate’s tries to shrink itself into a more focused and relevant company for investors and shareholders. The power business is GE’s largest, so he cuts are especially symbolic.

AGL announced the weekend it will close its Liddell power station in 2022 make investments in gas, renewables and battery storage as part of the NSW Generation Plan. As well the company said it is also exploring the feasibility of a pumped hydro project in the Hunter region (with help from the NSW government).

AGL chairman Graeme Hunt said the investments reflected the changing needs of the market and improvements in technology. That is also he reality for GE and Siemens.

GE’s cuts came after German rival, Siemens said last month that it will cut about 6,900 jobs, or close to 2% of its global workforce, mainly at its power and gas division (with half the jobs going in Germany).

In both cases its the rapid growth of renewables that is doing he damage, even though both groups have a presence in this sector - especially wind and solar.

GE's $US10 billion deal to buy Alstom SA’s power assets two years ago has compounded the pain from the slowdown in demand for conventional power. GE launched is cuts to save $US1 billion next, saying it expected dwindling demand for fossil fuel power plants to continue.

“Traditional power markets including gas and coal have softened,” GE said in is statement last week.

Demand for new thermal power plants dramatically dropped in all rich countries, GE said, while traditional utility customers have reduced their investments due to market deterioration and uncertainty about future climate policy measures.

Hardly any new power station projects had been commissioned in Germany in recent years, GE said.

Heightened Asian competition had also increased price pressures.

“This decision was painful but necessary for GE Power to respond to the disruption in the power market, which is driving significantly lower volumes in products and services,” said Russell Stokes, head of GE Power.

“Power will remain a work in progress in 2018. We expect market challenges to continue, but this plan will position us for 2019 and beyond.”

The cuts are part of the plan from New GE Chief Executive John Flannery to shrink GE’s sprawling empire of businesses built up by predecessors Jeff Immelt and Jack Welch.

GE has already confirmed that it will exit its lighting, transportation, industrial solutions and electrical grid businesses. It also plans to ditch its 62.5% in oilfield services company Baker Hughes GE.

Staff in Switzerland and Germany among those badly hit, but not head office in the US.

Nearly a third of the company’s 4,500-strong Swiss workforce could be cut, while 16% of staff in Germany are also likely to lose their jobs, while around 1,100 UK jobs re to be lost.

Globally GE employed 295,000 people worldwide at the end of 2016, according to the company website. It will be lower on December 31 his year

The International Energy Agency thinks renewable energy (such as wind and solar ) will grab a bigger share of the market in the coming decades, generating more electricity than coal worldwide by 2040.

Renewables will reap about two-thirds of $US11.3 trillion in investment expected to flow to power plants over the period, the Agency said. GE has a big wind-power business but last year it slipped to No. 2 in the US market as Denmark’s Vestas Wind Systems became the largest turbine supplier to domestic wind projects.

For GE there’s another problem as wind turbines do not need the same level of maintenance as Gas turbine and coal fired stations do. That means less revenue and less earnings, even if GE wins more contracts.



View More Articles By Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.



 

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