GE foresees turbine order slowdown in 2003

By the OGJ Online Staff

HOUSTON, Dec. 19 -- Electric turbine orders could decline a "little" next year, but earnings from the Power Systems division still are expected to grow 20% in 2002, said General Electric Co. CEO Jeff Immelt.

Immelt told analysts in New York rising revenue from $30 billion worth of contractual service business "behind the installed base" should help offset the impact of any potential slowdown in global turbine orders next year. As the world's largest manufacturer of power plant turbines, GE has been the biggest beneficiary of the boom in power plant construction.

With 90% of the units expected to be delivered next year already financed and sited, Immelt said, "project risk is low," and "customer risk is relatively low." However, the economic slowdown and weak power prices could begin to have an effect on future orders. Access to capital is also becoming a problem for some companies.

A number of energy companies, including Williams Cos. Inc., El Paso Corp., Calpine Corp., and Dynegy Inc., have already announced plans to cut or defer capital spending. Independent power producer NRG Energy Inc. said it will delay a decision on whether to proceed with projects that were scheduled for 2003.

Based on talks with customers, Immelt said GE expects turbine orders to decline in 2003 and is prepared for a $500 million decline in income from the Power Systems division. The top 20 customers, who account for 70% of demand, have asked to reschedule delivery of units in 2002, 2003, and 2004, he said.

Immelt said GE is comfortable with 2001 earnings estimates of $1.41/share, up 11% from 2000. He said GE is targeting 2002 earnings per share of $1.65-$1.67, up 17-18%. GE can achieve its 2002 target even if the global economy is as challenging as 2001's for the entire year, he said. The company has based its earnings projections on a no-growth economy next year, Immelt said.

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