KEY POINTS

  • GE noted this business decision will likely involve divestitures, site closings and job cuts
  • GE will now focus more on renewable energy projects
  • Only five years ago, GE purchased the power and grid businesses of France’s Alstom for about $10 billion

General Electric (GE) said on Monday that it will exit the coal power market.

On a practical basis this means that GE will cease supplying equipment to new coal-fired power plants and will stop construction of such facilities.

GE noted this business decision will likely involve divestitures, site closings, and job cuts. The industrial conglomerate said it will now focus more on renewable energy projects.

“With the continued transformation of GE, we are focused on power generation businesses that have attractive economics and a growth trajectory,” said Russell Stokes, GE senior vice president and president and CEO of GE Power Portfolio. “As we pursue this exit from the new-build coal power market, we will continue to support our customers, helping them to keep their existing plants running in a cost-effective and efficient way with best-in-class technology and service expertise.”

The decision marks a sudden turn for GE. Only five years ago, GE purchased the power and grid businesses of France’s Alstom (which manufactures coal-fueled turbines) for about $10 billion. That transaction represented GE’s biggest industrial purchase ever.

However, the Alstom turned sour as industries and customers shifted away from coal toward cheaper natural gas, solar, wind and other renewables. GE has since laid off thousands of power workers.

Aaron Larson of Power Magazine wrote that GE’s power business has “struggled financially” since the Alstom acquisition.

“The power market has been difficult in recent years, and GE has suffered as a result,” Larson wrote. “Weak earnings associated with the underperforming investment in Alstom prompted GE to rejigger its power business in November 2017.”

The decision to depart coal represents another step in Chief Executive Officer Larry Culp’s plans to reshape GE’s electricity equipment business, Blomberg reported.

Gordon Haskett analyst John Inch told Bloomberg that GE’s change in strategy highlights the “billions of dollars of shareholder value destruction that is embodied with the failed Alstom acquisition, and also likely reflects GE’s inability to sell the business.”

The Natural Resources Defense Council, an environmental advocacy group, praised GE’s move.

NRDC tweeted: "Communities and organizers have been calling on GE to get out of coal for years. This is an important and long overdue step in the right direction to protect communities' health and the environment."

“It’s great news for our climate that GE is heeding the calls of communities around the world to stop financing and building new coal plants,” said Han Chen, manager of energy policy in NRDC’s international program. “Coal plants are the biggest single source of global carbon emissions – which are fueling climate change.”

Chen added that GE’s continued backing of coal projects “would have locked in new carbon emissions, local pollution, and economic [harm] across the globe, for decades – at a time when clean, affordable energy solutions abound and costs to build and install these systems are plummeting. GE has seen the writing on the wall, and the future is in clean, not dirty energy.”