GE Vernova Inc.'s decision to halt production of a larger wind turbine was essential to the newly public company's balance sheet repair strategy, CEO Scott Strazik said, despite the repercussions for several New York offshore wind projects.
The New York State Energy Research and Development Authority (NYSERDA) announced April 19 that it canceled provisional awards to three projects from its third offshore wind solicitation as a result of increasing costs following GE Vernova's decision to scrap plans for the 17-MW to 18-MW Haliade-X offshore wind turbine in favor of a turbine platform with a capacity of 15.5 MW to 16.5 MW.
The three impacted projects are the 1,404-MW Attentive Energy One Offshore Wind Project proposed by TotalEnergies SE, Corio Generation Ltd. and Rise Light & Power; the 1,314-MW Community Offshore Wind Project backed by National Grid PLC and RWE AG; and the 1,314-MW Excelsior Wind project being developed by Copenhagen Infrastructure Partners P/S.
"We've been pretty consistent for a while that we are only going to add to that backlog with materially different economic terms than what is in our backlog today," Strazik said during an April 25 first-quarter earnings call.
GE Vernova's offshore wind segment recorded an approximately $1.1 billion loss in 2023 and started 2024 with a roughly $4 billion backlog due to inflation, high interest rates and supply chain bottlenecks.
"With the phase that offshore wind has been in generally over the past few years it's been hard to get projects to a point that they're ready to thrive, but … we're excited about our future product," Strazik said, adding that the prototype should be ready by the end of 2025.
GE Vernova, which debuted on the New York Stock Exchange on April 3, reported first-quarter adjusted EBITDA of $189 million, compared with a loss of $185 million in the year-ago period. First-quarter adjusted EPS came in at a loss of 41 cents, compared with the S&P Capital IQ normalized EPS consensus estimate of a loss of 22 cents. First-quarter 2023 EPS for GE Vernova was a loss of $1.25.
During the first quarter, the offshore wind segment generated another loss, but overall wind orders and revenues should pick back up, CFO Kenneth Parks said, because "we see North American developers rebuilding their project pipeline as evidenced by the growing onshore interconnection queues."
First-quarter wind orders and revenue were down 40% and 7%, respectively, over the prior-year period.
In the meantime, GE Vernova is gearing up for new natural gas infrastructure required to satisfy soaring electricity demand from large tech companies' AI operations, including datacenters.
"It is forcing us to kind of revisit our capacity additions and think through how we can continue to support this growth," Strazik said. "It's very practical to think this year that our orders in gas equipment could very well be larger than our revenue with a growing backlog."
In the US specifically, GE Vernova's utility customers are already planning for incremental gas generation, a strategy that could make it harder for some power providers to meet clean energy commitments.
"The load growth projections for many of our customers have become a steeper demand curve sooner, say in the last six to 12 months, and that is accelerating discussions on our end on things like framework agreements to secure capacity for them with future heavy duty equipment while they firm up project sites for development," Strazik added.
In recent reports, Morgan Stanley suggested companies that could combine different types of power resources like GE Vernova are primed for upside providing equipment for developing greenfield power projects to supply datacenters.
