Business is booming in General Electric Co.'s renewable energy division as wind project developers in the U.S. race to take advantage of expiring tax incentives.
The GE unit, which sells wind turbines and repowering kits to boost output from existing wind farms, saw revenues increase 26% year over year in the second quarter to $3.63 billion as onshore wind orders soared 87%.
The "wind ramp" was the main driver behind organic revenue growth of 7% in GE's broader industrial segment, Jamie Miller, the company's outgoing CFO, said on a July 31 earnings call.
Wind farm developers face an end-of-2019 deadline to start construction in order to qualify for the production tax credit, but companies that meet safe harbor provisions will have four years to finish projects to collect the incentive. Miller previously said that GE expects to deliver a record number of turbines through 2020.
GE delivered approximately 1,500 turbines and repowering kits during the first half of 2019, and the company expects deliveries to approximately double through the last six months of the year, Chairman and CEO Larry Culp told analysts.
Miller told analysts in May that managing the demand surge would be a challenge. "[There] are certainly things we're monitoring ... with respect to onshore wind deliveries," Miller said July 31.
The renewable energy division, which also includes GE's hydroelectric business and a low-margin power grid equipment and services unit, reported a second-quarter loss of $184 million, compared to a profit of $85 million a year earlier, due to consolidation efforts, losses on legacy contracts, higher spending on research and development, and tariffs, among other factors.
GE's onshore wind business is profitable year-to-date, Miller said.
In the company's power division, which is trying to recover after executives misjudged demand for natural gas-fired turbines, conditions have started to improve, Culp said. Gas power orders were up 27% year over year on a reported basis in the second quarter.
"At power, we're seeing early signs of stabilization as we've been focused on improving daily execution," Culp said. "There's a lot of keen interest in adding gas capacity" in China and parts of southeast Asia "as they work through not only their own underlying economic growth but the energy transition."
GE raised its guidance for 2019 adjusted earnings per share to between 55 cents and 65 cents from an earlier range of 50 cents to 60 cents. Second-quarter adjusted EPS came in at 17 cents compared to 18 cents a year earlier.
The company booked a net loss attributable to GE common shareowners of $61 million, or 1 cent per share, in the second quarter, compared with attributable net earnings of $615 million, or 7 cents per share, in the year-earlier period.
Culp said 2019 "remains a reset year" for GE. However, at the midway point, the power division is performing "better than expected," he said.