GE's Troubled Power-Generation Division Likely to Be Top Challenge for New CEO

Researched by Industrial Info Resources (Sugar Land, Texas)--Market watchers were in for a shock Monday morning when General Electric Company (NYSE:GE) (Boston, Massachusetts) announced it would replace John Flannery as its chief executive officer (CEO) with Larry Culp, a member of the Board of Directors. Culp will take the reins of a wagon amid a very bumpy ride, as the company is dealing with the fallout from a series of bad bets in its Power Generation division and recent issues with its 7HA gas turbines, one of which had to be shut down last month due to operational problems. Industrial Info is tracking more than $36 billion in active projects involving GE's 7HA turbines, nearly $30 billion of which are in the U.S.

Click on the image at right for a graph detailing the top 10 U.S. states for 7HA projects, by investment value.

The 7HA gas turbine is one of GE's fastest-selling products. In a LinkedIn post on September 19, Russell Stokes, the president and CEO of GE's Power division, acknowledged that the 7HA turbine at Exelon Corporation's (NYSE:EXC) (Chicago, Illinois) Colorado Bend plant in Wharton, Texas, experienced an issue that forced it and three other power-generating units to shut down: "It involves an oxidation issue that affects the lifespan of a single blade component. Obviously, this was a frustrating development for us, as well as for our customers. But we have identified a fix and have been working proactively with HA operators to address impacted turbines."

For more information on the Colorado Bend plant, see Industrial Info's plant profile.

Following the announcement, a GE spokesman told Utility Dive that the company expected other 7HA machines would be affected by the same problems. Flannery told employees in a video the following week that the problems at the Exelon plant were "under control," but GE had been betting on the 7HA and similar products to improve fortunes at its Power division, which has been hobbled by weak energy demand and declining fortunes for fossil fuels.

It is not yet known how ongoing natural gas-fired, combined-cycle (NGCC) projects involving the 7HA will be affected by the problems at the Exelon plant. Of the nearly $14 billion worth that are nearing or under construction, about $4.3 billion worth are slated to finish construction next year. The highest-valued include:

• Invenergy LLC's (Chicago, Illinois) $1.25 billion Lackawanna Energy Center in Jessup, Pennsylvania, which will generate 1,485 megawatts (MW) from three 7HA units and three steam turbines; see project report
• NextEra Energy Incorporated's (NYSE:NEE) (Juno Beach, Florida) $1.2 billion Okeechobee Clean Energy Center in Okeechobee, Florida, which will generate 1,600 MW from three 7HA units and a steam turbine; see project report
• EmberClear Corporation's (Houston, Texas) $520 million power station in Birdsboro, Pennsylvania, which will generate 488 MW from a 7HA unit and a steam turbine; see project report
• Public Service Enterprise Group Incorporated's (NYSE:PEG) (Newark, New Jersey) $550 million Harbor Power Station in Bridgeport, Connecticut, which will generate 485 MW from a 7HA unit and two steam turbines; see project report

Construction began last year on Competitive Power Ventures Incorporated's (Braintree, Massachusetts) $1 billion Fairview Energy Center in Johnstown, Pennsylvania, an NGCC facility that is expected to generate 1,050 MW from a pair of 7HA units and a steam turbine; it is scheduled to be completed in the fourth quarter of 2020. For more information, see Industrial Info's project report.

Problems in GE's Power division have been worsened all the more by the company's acquisition of Alstom in 2015, which was blamed for this week's $23 billion goodwill write-off. Worldwide, GE has received 82 orders for the 7HA and shipped 51 of the turbines, 30 of which have been installed since the first one entered service in France in 2016, according to Utility Dive. Eleven are operational in the U.S., including the Exelon unit.

Three more 7HA projects are slated to begin construction before the end of this year:

• Advanced Power AG's (Zug, Switzerland) $1.1 billion South Field Energy Center in Wellsville, Ohio, which is expected to generate 1,100 MW from two 7HA units and two steam turbines; see project report
• EmberClear's $1 billion Harrison Power Station in Cadiz, Ohio, which is expected to generate 1,050 MW from two 7HA units and two steam turbines; see project report
• Ohio River Partners Shareholder LLC's $1.1 billion Hannibal Port Power Station in Hannibal, Ohio, which is expected to generate 485 MW from a 7HA unit and a steam turbine; see project report

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.