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Monday, December 31, 2007
GE Energy - Wind Turbines
Image: courtesy of GE Energy (http://www.gewind.com/)

Wind Generated Profits

Many people know General Electric for their lighting systems, their jet aircraft engines, and their medical equipment, but their wind turbine business is also becoming a significant growth sector for them. GE Energy is General Electric's division that produces the GE wind turbines and in 2006 the division had $19 billion in sales (inclusive of steam turbine, wind turbine and other energy generation equipment). GE Energy is the third largest wind turbine manufacturer in the world after Vestas Wind Systems #1 (Denmark) and Gamesa #2 (Spain). GE Energy had approximately 16% of the world wind turbine business in 2006.

As of November 2007 GE Energy had announced agreements for future supply of $1.5 billion of wind turbines to U.S. and European wind power project customers. Thus far, GE has installed 6,500 1.5 MW wind turbines worldwide and Victor Abate, Vice-President Renewables for GE Energy said "by the end of 2008, we expect the number to exceed 10,000 units".

For the investor, it is not unreasonable to project that ten years from now, if GE gets its strategy correct, wind turbine revenue could be as much as 10% or greater of General Electric's total operating revenue. The growth in wind power demand over the next ten years will be huge at approx 20-25%/ annum with an initial surge in demand expected during the next three years of as much as 35% per annum. GE's total operating revenue (all business areas) for 2006 was $163.4 billion.

A recent win for GE Energy on October 23, 2007 was an order for 281 wind turbines. This represented an order of 80 of the 2.5 MW (2.5xl) wind turbines from EDP - Energias de Portugal and 201 1.5 MW wind turbines from Horizon Wind Energy (LLC), a 100% owned subsidiary of EDP in the United States. The total value of the agreement with EDP was $730 million.

GE Energy offers three models of their wind turbines which are the 1.5, 2.5 and 3.6 MW models. The 3.6 MW wind turbine has been designed specifically for offshore energy generation and has built in features for strength, durability and harsh weather access for maintenance activities offshore. GE Energy is also developing their solar panel business which will be covered in a future Green Investment article on this site.

General Electric (GE:NYSE) currently trades (Dec 31-10:28 AM) at $37.12 with a 52 wk high of $42.15 and a 52 wk low of $33.90. The PE for General Electric is currently 16.64 and the dividend yield is 3.34%.

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