Q4 2024 GE Vernova Inc Earnings Call
Speaker Change: Good day, ladies and gentlemen, and welcome to GE Vernova's fourth quarter and full year 2024 earnings conference call.
Liz: At this time, all participants are in a listen-only mode. My name is Liz, and I will be your conference coordinator today. If you experience issues with the webcast slides refreshing or there appears to be delays in the slide advancement, please hit F5 on your keyboard to refresh.
Speaker Change: As a reminder, this conference is being recorded. I would now like to turn the program over to your host for today's conference, Michael Lapides, Vice President of Investor Relations. Please proceed.
Speaker Change: Welcome to GE Vernova's fourth quarter and full year 24 earnings call. I'm joined today by our CEO Scott Strazik and our CFO Ken Parks. Our conference call remarks will include both GAAP and non-GAAP financial results.
Speaker Change: Reconciliations between gap and non-gap measures can be found in today's press release and in the presentation slides, all of which are available on our website.
Speaker Change: Please note that year-over-year commentary or variances on orders, revenue, adjusted and segment EBITDA and margin discussed during our prepared remarks are on an organic basis, unless otherwise specified.
We will make forward-looking statements about our performance.
These statements are based on how we see things today.
Speaker Change: While we may elect to update these forward-looking statements at some point in the future, we do not undertake an obligation to do so. As described in our SEC filings, actual results may differ materially due to risk and uncertainties. With that, I'll hand the call over to Scott.
Scott Strazik: Thanks, Michael. Good morning, everyone, and welcome to our fourth quarter earnings call.
Speaker Change: We built a strong foundation in 24 in our first year as an independent company. The investment super cycle in the electric power sector, driven by the growing need for reliable power generation, grid modernization, and decarbonization, continues to accelerate.
Speaker Change: The world is shifting, relying more on electrons and megawatts, and this is changing the energy landscape, driving increased demand for our equipment and services.
We are investing in decarbonization technologies within our own portfolio.
For example, advancing carbon capture and sequestration.
Speaker Change: Late last year, we had a great customer milestone with the announcement of the Net-Zero T-Side Power Project, expected to be the first gas-fired power station fully integrated with carbon capture technology.
Speaker Change: Last week, we also announced efforts, jointly with multiple large U.S. utilities, to accelerate the deployment of our small modular nuclear reactor, the BWRX-300.
Speaker Change: We expect these technologies to impact the electric power system in the coming decades.
Speaker Change: Our progress in 24 reinforced the important role we play at GE Fernova in electrifying and decarbonizing the world while creating value for our stakeholders.
Speaker Change: Turning to slide four, I will spend a few minutes on each of our segments and how we are executing to meet demand.
Speaker Change: In power, market demand for gas generation is driving significant orders growth.
Speaker Change: For the full year, we booked approximately 20 gigawatts of gas orders, double last year's level, and secured 9 gigawatts of slot reservation agreements for new turbines, agreements that should convert to orders in 2025-26.
Speaker Change: These agreements are tied to load growth in the U.S., partially driven by data center hyperscaler demand associated with AI.
Speaker Change: Given our expansion plans to produce 70 to 80 heavy-duty gas turbines per year, beginning in the second half of 2026, up from 48 this year, we are positioning to meet this demand.
Speaker Change: We expect to grow our gas equipment backlog considerably in 2025, even as we ramp to ship approximately 20 gigawatts annually starting in 2027, and expect to remain at that level going forward.
Speaker Change: In addition to equipment demand growth, we are also seeing high margin services growth in our install base, as customers aim to get more capacity and better performance out of their plants.
Speaker Change: Today, we deliver about 2 billion of upgrades annually in our gas business, and we anticipate this could grow by 50% by the end of the decade.
Speaker Change: Beyond gas power, we're having more active customer discussions on nuclear about the existing install base of 65 plants here in the U.S. that are running our technology today.
Speaker Change: we see an opportunity to add five gigawatts of nuclear power in the U.S. between these existing facilities and potential restarts that could impact both nuclear and steam services beginning late in this decade.
Speaker Change: Against this backdrop, power delivered 7% revenue growth and nearly 200 basis points of margin expansion in 24. Overall, there is a lot to be excited about as our power segment drives profitable growth and significant free cash flow.
and electrification.
Speaker Change: Demand for our products remains strong, with equipment orders more than doubling in 4Q24 compared to last year, as customers modernize and invest in critical grid components such as transformers.
Speaker Change: switchgears, and HVDC systems, which are essential to ensuring a reliable electricity system and effectively connecting new generation sources.
Speaker Change: we are seeing significant orders and backlog growth in both Europe and North America. And while Europe remains our largest market for grid, we are seeing orders accelerate in North America, which was our fastest growing market in 24.
Speaker Change: Demand trends and improving execution are driving an acceleration of margin expansion, increasing our confidence in our trajectory, and we expect this segment to deliver double-digit EBITDA margin in 2025 and expand further in 2026 and beyond.
Speaker Change: Turning to wind. We've made solid progress in our turnaround of this segment in 24, cutting our EBITDA losses by almost half despite lower revenues.
Speaker Change: And on short, we delivered high single-digit EBITDA margins on roughly flat revenue in 2004.
Speaker Change: The timing of an inflection in North America onshore wind orders remains uncertain, but we expect to continue a creating margin in this business with our focus on our key countries, improving quality, and delivering cost-out initiatives.
Speaker Change: We are deploying more crews and cranes to insert technology that should improve the performance of the existing fleet and better serve our customers.
Speaker Change: As a result, we expect to grow these investments by over $100 million in 25 versus 24, with a heavy year-on-year increase in the first half as we accelerate our operational improvements in this business.
Speaker Change: In Offshore, we're focused on improving execution and delivering on the approximately three billion remaining backlogs swiftly
safely and economically for our customers and ourselves.
Speaker Change: We are back to fully installing at both project sites, and as we discussed during our investor update in December, we expect materially complete with VineyardWin in 2025, and we have a pathway to be mostly complete with Dogger Bank in 2026.
Speaker Change: We do not foresee adding to the offshore backlog without substantially different industry economics than what we see in the marketplace today. Looking ahead, we are applying what we've learned from the challenges in offshore wind to make us a stronger company going forward.
Now over to the right-hand side of the page.
Speaker Change: We're focused on further embedding the Lean culture across the organization, driving operational improvement across safety, quality, delivery, and cost.
Speaker Change: Let me take you through an example where the Lean journey over the last seven years has driven real results and improved performance across all of SQDC.
Speaker Change: Earlier this month I visited a gas power services and repair facility in Singapore that focuses on F and H gas turbines.
Speaker Change: On safety, this facility has achieved decades of fatality-free operations supported through implementation of lean lines, which has eliminated millions of mechanical lifts per year.
Speaker Change: On quality, we have lowered escapes at this facility by 25% from driving standard work and have used lean to reduce the amount of rework, generating cost savings.
Speaker Change: On delivery, through implementing eight lean lines, we have tripled the output, utilizing 50% less shop floor space and doubling the working hours.
Speaker Change: on cost by performing more database preventative maintenance and removing waste, we reduced machine costs by 50% and significantly increased productivity on existing machines.
Speaker Change: The Singapore example represents the culture we are building at GE Vernova as we accelerate our lean progress across the entire company and improve our own efficiency.
Speaker Change: There is significant growth we will achieve in this facility in the years ahead, all within the same four walls, without pouring concrete or adding new cranes, with a team that has fully embraced lean to serve our customers while preserving our capital for our shareholder accretive actions.
Turning to slide five on our financial performance in 24.
Speaker Change: we booked 44 billion of orders with $35 billion in revenue, delivered EBITDA margin expansion across all segments, and more than a billion dollar improvement in free cash flow.
Speaker Change: We grew our backlog to $119 billion and nearly doubled our cash balance to over $0.08 billion spend from a combination of strong free cash flow generation and capitalizing on value creation opportunities.
Speaker Change: such as the partial stake sales of GEV T&D India and China XD Electric, which generated 1.3 billion of pre-tax proceeds in 2024.
Speaker Change: As I said in December, this is representative of the culture we are building inside GE Vernova. When we see opportunities to simplify our organization
Speaker Change: or to monetize parts of the portfolio at attractive prices that creates capital that allows us to either invest back into our business or return to shareholders. We are going to act with urgency.
Speaker Change: In December, we raised our multi-year financial outlook and framed our capital allocation strategy, including a shareholder return program with our initial dividend and first buyback authorization, reflecting our conviction in the substantial value creation opportunities ahead.
Speaker Change: One of the primary drivers of our conviction our path forward is the significant growth and margin expansion in our equipment backlog again in 24, which I'll touch on in the next page.
Speaker Change: Over the past two years, we have added more than $6 billion of margin to our equipment backlog given better pricing and more disciplined underwriting, as this backlog has grown over 50% to $43 billion. We also expanded margin across all three segments again in 2024.
Speaker Change: Starting with power and electrification, we expect these segments to continue to materially grow their backlogs in 2025 at better margins.
Speaker Change: We see this clearly in front of us because of our wins in late 24, such as the gas slot reservation agreements that we expect to turn into orders this year, along with a continued strong demand for electrification products driven by increased grid investments.
Speaker Change: Because these segments are longer cycle, we won't begin delivering on the majority of the high margin orders of 23 and 24 until 26 and beyond.
Speaker Change: Moving to wind, we project a stable to modestly lower backlog in 2025. Our backlog will reduce an offshore wind as we execute on the remaining $3 billion of backlog, but the margins will improve as this unprofitable business is completed.
Speaker Change: At Onshore, we expect backlogs should remain approximately flat with stable margins as we remain focused on key markets and disciplined underwriting while we leverage our existing footprint and our supply chain.
Speaker Change: But as we said in December, we see incremental opportunity for the teams to expand margins that aren't projected in our external backlog today.
Speaker Change: That starts with our operating teams delivering variable cost productivity from things like sourcing savings and project execution at important milestones that can secure lower costs and allow us to accrete margins as we execute.
Speaker Change: The teams are also working hard to accelerate capacity additions leveraging lean, which can create incremental slots we can sell at premium pricing.
Speaker Change: In summary, we are encouraged with our progress here, but it is just the beginning.
Speaker Change: When I look at our pricing success in gas in late 24, our continued momentum and electrification with things like switchgears in North America,
Speaker Change: and the internal expectations I have of the opportunity for teams to accrete incremental margin with variable cost productivity savings.
Speaker Change: and I expect the margin we create in backlog in 2025 to be higher than our run rate the prior two years, further positioning GE Vernova for profitable growth over the long term.
Speaker Change: With that, I will now turn the call over to Ken for more details on our fourth quarter performance.
Ken Parks: Thanks, Scott. Turning to slide 7, we finished 2024 strong with record quarterly orders and revenues and adjusted EBITDA margin reaching 10.2%.
Ken Parks: We increased our cash balance to over eight billion dollars with our third consecutive quarter of positive free cash flow generation and the benefit of two additional value accretive portfolio actions.
Ken Parks: Demand remained robust in the fourth quarter as we booked $13.2 billion of orders, an increase of 22% year-over-year, and approximately 1.3 times revenue.
Ken Parks: Equipment orders grew 44% driven by strength in both electrification and power, partially offset by lower orders in onshore wind.
Ken Parks: As a result, our backlog continued to grow both year over year and sequentially across equipment and services, reaching $119 billion.
Ken Parks: Equipment margin and backlog remains healthy, with overall margin and backlog increasing approximately five points versus year-end 2023, reflecting our focus on disciplined, profitable growth.
The
Ken Parks: Revenue increased 9% driven by both higher equipment and services revenues.
Ken Parks: Wind and electrification equipment revenue both grew double digits while services revenue increased 6% with growth in all three segments.
In addition, price was positive in each segment.
Ken Parks: Adjusted EBITDA grew to approximately 1.1 billion dollars, up 85%, and EBITDA margin expanded 440 basis points.
Ken Parks: We delivered our first quarter of double-digit margins with expansion in all three segments driven by more profitable volume, price, and productivity, which more than offset inflationary impacts.
Ken Parks: In addition, we benefited from previously announced restructuring actions, primarily at wind and power.
Ken Parks: We delivered approximately $600 million of positive free cash flow in the fourth quarter.
Ken Parks: As expected, free cash flow decreased year-over-year, primarily due to lower customer downpayments at WEND, and actions we've taken to improve cash linearity across the quarters as we continue to more closely align the timing of disbursements and collections.
Ken Parks: Working capital in the quarter was an approximately $200 million cash benefit, which combined with our stronger EBITDA more than offset higher CapEx investments to support future capacity expansion along with higher cash taxes on higher EBITDA.
Ken Parks: We're using Lean to drive better cash management and linearity. For example, the electrification team implemented new standard work and daily management to improve the timing of invoices and reduce disputes.
Ken Parks: These actions drove a reduction in days sales outstanding by four days resulting in approximately 80 million dollars of additional free cash flow.
Ken Parks: We continue to leverage our lean culture across GE Vernova to deliver better financial results.
Ken Parks: In the fourth quarter of 2024, we generated approximately $600 million of incremental pre-tax proceeds by selling partial ownership stakes in our GEV, T&D India, and China XD grid businesses.
Ken Parks: These proceeds are classified outside of free cash flow, and the gain was removed from adjusted EBITDA.
Ken Parks: Combined with our fourth quarter free cash flow, these proceeds increased our cash balance to 8.2 billion dollars.
Ken Parks: Our strong cash balance and further improved free cash flow profile enabled us to frame our capital allocation strategy at our investor update on December 10th, while maintaining our firm commitment to an investment grade balance sheet.
Ken Parks: We expect to return at least one-third of cash generated to shareholders, starting with a $1 per share annualized dividend and our $6 billion share repurchase authorization.
Ken Parks: In late December, we initiated our share repurchase activity, buying approximately $3 million in the month.
Ken Parks: We're pleased with our full year 2024 financial performance. As Scott said, it was strong, but it was just the start of where we expect to go.
Ken Parks: During the year, we booked over $44 billion of orders led by double-digit equipment growth in both power and electrification. Services orders increased 12% largely due to the strength at power.
Please.
Ken Parks: We doubled our adjusted EBITDA to over $2 billion and expanded margins nearly 300 basis points year over year with significant improvement in each segment.
Ken Parks: We also made solid progress towards our lower adjusted GNA target by achieving an almost 200 million dollar reduction in 2024.
Ken Parks: Finally, we generated $1.7 billion of free cash flow, a year-over-year improvement of $1.3 billion, primarily driven by our stronger EBITDA.
Ken Parks: Our growing backlog with higher margin provides an excellent foundation for further improvement in our financial performance ahead.
Ken Parks: Turning to power on slide 8, power delivered strong full year 2024 results led by the gas power business.
Ken Parks: Power orders grew 28% given robust demand for gas equipment and 10% growth in services, which combined increased adjusted backlog by more than four billion dollars.
Ken Parks: Power grew revenue 7% for the year, with gas power growing 9%.
Ken Parks: Power EBITDA increased by more than 20%, expanding margins by 180 basis points, driven by services strength, more profitable equipment, and continued productivity, partially offset by inflation.
Ken Parks: In the fourth quarter, power orders grew 24%, led by high equipment at gas power and hydro partially offset by lower services.
Ken Parks: In gas power, equipment orders increased nearly 80% as we booked 24 heavy-duty gas turbines, including four HA units.
Ken Parks: This was almost triple the number of heavy duty units booked in fourth quarter of 2023.
Ken Parks: Power services orders remain strong but declined 6% largely due to a strong fourth quarter 2023 gas transactional services comparison.
Ken Parks: Revenue increased low single digits as power services growth and higher HA deliveries more than offset lower aero derivative shipments.
Ken Parks: EBITDA margins expanded to approximately 15% led by gas power from services volume, productivity, and price more than offsetting the impact of inflation.
Ken Parks: Looking at the first quarter of 2025, we expect continued year-over-year growth in gas equipment orders.
Ken Parks: We also anticipate low single-digit revenue growth at power, but a low single-digit decline on a reported basis as a result of the impact of the divestiture of a portion of the steam business in the second quarter of 2024.
Ken Parks: We expect EBITDA margins of approximately 10 to 11 percent as productivity and price should more than offset inflation as well as higher investments at nuclear and gas.
Ken Parks: Turning to slide 9, wind results continued to progress in 2024, improving full-year EBITDA losses by 42%.
Ken Parks: Onshore had a solid second half to 2024 and achieved approximately 7% EBITDA margins for the year.
Ken Parks: Offshore performance was challenging as we recorded approximately $1 billion of incremental contract losses in 2024, largely due to the impacts of blade events and project execution delays.
Ken Parks: These costs were partially offset by a 300 million dollar gain recorded in the third quarter from a previously canceled offshore project.
Ken Parks: In the fourth quarter, wind orders decreased 41 percent, driven by lower onshore wind, given we booked our largest ever onshore order in the fourth quarter of 2023, the 2.4 gigawatt Sunzeo Wind Project in the U.S.
Excluding this large order, onshore orders declined slightly.
Ken Parks: In offshore, we remain focused on executing our existing challenged backlog.
Ken Parks: Wind revenue increased 21% in the quarter on higher onshore equipment deliveries, partially offset by lower offshore revenue.
Ken Parks: We've now restarted blade installations at the Vineyard Wind Project in December.
Ken Parks: Wind was modestly profitable in fourth quarter of 2024, with EBITDA improving approximately $300 million year-over-year.
Ken Parks: Onshore delivered its most profitable quarter in over three years on strong volume, price, and productivity, partially offset by higher services costs as we deployed more crews and cranes as we focus on improving installed fleet availability.
Speaker Change: The first time I've seen this video, I've been watching this video for a long time.
Speaker Change: As we've discussed, we remain cautious on the timing of an onshore order inflection in North America as customers continue to navigate growing interconnection queues and higher interest rates. We do expect the wind segment to grow revenue mid-single digits in the first quarter of 2025, driven by higher onshore equipment deliveries.
Speaker Change: EBITDA losses should remain relatively consistent year-over-year as the impact of higher onshore volume is offset by increased services cost to further improve the operating performance of the installed onshore fleet.
Speaker Change: Turning to electrification, strong demand and price resulted in high teens full-year orders and revenue growth with EBITDA margins expanding to 9% in 2024.
Speaker Change: Electrification equipment orders grew nearly 20%, which further increased the equipment backlog to $20 billion.
Speaker Change: Electrification revenue grew 18%, led by grid solutions, and margins expanded 520 basis points from higher volume, favorable pricing, and productivity.
Speaker Change: In the fourth quarter, orders were robust at approximately $4.8 billion, roughly 2.2 times fourth quarter revenue, more than doubling year-over-year driven by the growing need for grid equipment and services.
Speaker Change: We booked two large HVDC orders in the quarter in Germany and Korea, and demand also remained strong for switchgears, particularly in North America.
Speaker Change: Revenue increased 12% even compared to a strong fourth quarter 2023 which benefited from the rampant volume that started late last year.
Speaker Change: Revenue growth in the quarter was primarily driven by higher volume and price at Grid Solutions, where we saw meaningful growth in switchgears and substation equipment.
Speaker Change: The segment delivered another quarter of double-digit EBITDA margins with 500 basis points of margin expansion on more profitable volume, higher price, and increased productivity.
Speaker Change: In the first quarter of 2025, we anticipate solid equipment orders at healthy margins.
Speaker Change: Electrification revenue should increase at a growth rate in line with our full year guidance led by grid solutions.
Speaker Change: We expect year-over-year margin expansion similar to what we delivered in the fourth quarter from higher volume, productivity, and favorable pricing.
Speaker Change: Consistent with prior years, we expect first quarter revenue and EBITDA margin to be lower sequentially, primarily due to the timing of project milestones, which tend to be more second-half weighted.
Speaker Change: I'll now turn to slide 11 to discuss GE Vernova guidance further.
Speaker Change: For the first quarter, based on our expectations for the segments, which I've already outlined, we expect continued year-over-year revenue growth and adjusted EBITDA margin expansion in the quarter.
Speaker Change: We also expect positive free cash flow in the first quarter, a significant improvement year-over-year, driven by our continuing focus on better cash linearity, along with increased EBITDA, partially offset by higher capex.
Speaker Change: As discussed in December, we expect to generate positive free cash flow in all four quarters this year.
Speaker Change: For the full year, we're reaffirming the 2025 guidance we provided at our Investor Update on December 10th.
Speaker Change: We continue to expect full-year 2025 revenue to be in the $36-$37 billion range amid single-digit year-over-year increase with growth in both services and equipment.
Speaker Change: We also expect continued expansion and adjusted EBITDA margin to high single digits as we deliver our growing backlog at better pricing and with better execution.
Speaker Change: We anticipate free cash flow to be between two and two and a half billion dollars.
Speaker Change: By segment, we continue to expect mid-single-digit organic revenue growth in power driven by higher gas services and equipment with EBITDA margins between 13 and 14 percent.
Speaker Change: In wind, we expect revenue to be down mid-single digits given our continued geographic selectivity in onshore and the benefit of the one-time settlement from an offshore contract termination in 2024.
Speaker Change: We expect 2025 wind EBITDA losses to be between $200 and $400 million, improving year-over-year driven by onshore margin expansion within the high single-digit range and slightly lower losses at offshore.
Speaker Change: In electrification, we anticipate continued strong demand and favorable price to drive mid to high teens organic revenue growth with 11 to 13% EBITDA margins as we deliver a more profitable backlog.
Speaker Change: We expect 2025 adjusted EBITDA to be more second-half weighted, similar to last year.
Speaker Change: We anticipate the typical gas services seasonality with the highest outage volume in the fourth quarter.
Speaker Change: In addition, wind EBITDA should improve in the second half compared to the first, largely due to the timing of onshore turbine deliveries already in backlog and improved services profitability.
Speaker Change: Finally, we expect electrification earnings to grow sequentially through the year.
Speaker Change: Overall, we built a solid foundation in 2024, delivering significant margin expansion with growing free cash flow generation.
Speaker Change: In 2025, we expect to drive even stronger results as we deliver our growing, more profitable backlog with improved execution enabled by our lean culture.
With that, I'll turn it back to Scott.
Scott Strazik: Thanks, Ken. We are pleased with our performance this year and are excited about our future as we help our customers electrify and decarbonize the world.
Scott Strazik: 24 has increased my conviction that GE Vernova is well positioned to lead. In power, it's about delivering continued margin expansion with growing free cash flow, both from equipment as well as strong services.
Scott Strazik: In wind, it's about discipline, margin expansion, and onshore, while we position for the market inflection in quality and execution in offshore.
Scott Strazik: For electrification, it's about delivering on accelerated, high-margin profitable growth from rising demand for grid technologies.
Scott Strazik: Market dynamics continue to drive strong demand that will lead to multi-decade growth for GE Vernova and continue creating value for our stakeholders.
As we head into 25...
Scott Strazik: I am optimistic about the future, and we are just getting started. With that, I'll hand it back to Michael for the Q&A portion of the call.
Speaker Change: Before we open the line, I'd ask everyone in the queue to consider your fellow analysts and ask one question so we can get to as many people as possible. Please return to the queue if you have follow-ups. Operator, please open the line.
Speaker Change: Ladies and gentlemen, if you wish to ask a question, please press star 1 1 on your telephone. If you wish to withdraw your question or your question has already been answered, please press star 1 1 again.
Our first question comes from Andrew Percoco with Morgan Stanley.
Hey, good morning, guys. Good morning, Andrew.
Speaker Change: Good morning. So yeah, maybe just to start out at a very high level here, I mean, you guys give a very comprehensive update.
back in December, but it's been a pretty active...
Speaker Change: 48 hours or so with the new administration. Certainly some positives to point to on the AI investments and gas infrastructure side, but also some potential headwinds that we're seeing on wind. Can you maybe just give us your latest thoughts on how you're thinking about this incoming administration and how it might impact the outlook across each of your businesses?
Speaker Change: You bet, Andrew. I mean, I'll start. I just would take it a step back beyond maybe the last 48 hours and let's just talk about the last six weeks since we were together December 10th for the Analysts' Day.
Speaker Change: I would say in our largest scale businesses, the market continues to get stronger. I mean, we see accelerated activity in pipeline and gas.
Speaker Change: That's very focused in the U.S., but not just the U.S., and what I'd emphasize on gas is it's becoming an even more
Speaker Change: diversified demand cycle and that you can start to see in the numbers. I mean we had 25 HAs that we had on order this year. We also had 20 F-class units. We had north of 40 Arrow derivative units. So the diversity of demand just continues to get stronger.
Speaker Change: Similar theme in grid. Even the last six weeks, we closed the year very strongly with grid orders. The pipeline remains very strong, but the diversity of the pipeline is really what I would emphasize. I mean, this was a business that two years ago was basically a European company.
Speaker Change: Today, we've taken a business that was $6 billion a backlog two years ago, it's $20 billion today. Yeah, a little bit more than half of that's still Europe, but 20 to 25% is in North America. The other 20 to 25% is the rest of the world with Asia really growing.
Speaker Change: So the diversity of demand in grid is just giving me that much more confidence in the durability of those two businesses.
Speaker Change: On the other side to your question on wind, it remained soft. I mean, we talked about a generally flat
Speaker Change: financial projection with wind through the next few years. That's still really what we see six weeks later from where we were on December 10th. We're cautious on when that inflection point is going to come in North America. We have been for a while.
Speaker Change: we still are today, and we're going to keep focused on executing and serving our customers as well as we can there, but the market fundamentals are softer there, certainly relative to the other two large businesses.
Thank you. Thank you. Thank you.
Our next question comes from Julian Mitchell with Barclays.
Hi, good morning.
Speaker Change: Maybe I just wanted to ask my question around the power organic sales outlook for the year. So you grew I think low single digits or you're guiding for low single digits growth.
Speaker Change: starting out the year organically. You've got that mid-single-digit guide for the year. Maybe help us understand sort of how we should think about that pace of acceleration through the balance of 2025 and also
Speaker Change: help us understand within power service how we should think about the growth.
Speaker Change: there. You know, should it be equivalent to equipment this year at sort of mid-single digits, or do you see opportunities on the transactional side of power service maybe to get higher volume and price as gas power utilization rises? Thank you.
Speaker Change: Thanks Julian. You know, maybe if we just think about kind of the pace of that business.
Speaker Change: I would say if you think about equipments and services, which is really how you broke down your question.
Speaker Change: As we look at what's in backlog, while we're growing at a slightly slower organic pace early in the year, and we're still projecting mid-single-digit growth overall for that business for the year, it's really just built upon how we expect the backlog to roll out, so the build cycle for that, for the equipment piece.
Speaker Change: So nothing surprising there. We overall have about 90% of our...
Speaker Change: overall GE Vernova volumes in backlog today, so that gives us really good visibility on how it's going to roll. So I wouldn't take any indication...
of a maybe a slightly slower first quarter growth.
Speaker Change: against a full-year guide that's higher than that, is anything other than us having the knowledge.
of how that backlog is going to roll out.
Speaker Change: On the services side, there's certainly opportunity, as we're in this cycle of higher utilization, to see opportunities not only on the contract service part of our portfolio, but also the transactional part of our service business, which equates for about half of the overall total.
Speaker Change: So, we feel really good about where we're starting and we feel good about the visibility into the backlog and the visibility into the service outages that will take us to the right place on the guide.
Speaker Change: Julian, the only thing I'd emphasize is that we talked about in December this being really the last year at mid single-digit revenue growth with an acceleration to high single digits and 26 and beyond in the segment.
Speaker Change: and you know I spent a lot of the first month of the year with some of our suppliers and partners in this space and continue to have real confidence and conviction that they're capacitizing as we need them to for this growth that comes in 26 and beyond.
Our next question comes from Mark Strazik, J.P. Morgan.
Morning, Mark. Morning, Mark.
Good morning, everybody. Thanks for taking our questions.
Speaker Change: So when we were together in December, you gave some color about increasing your pricing on the the gas power side. Just curious if you can talk about order activities since then or maybe just kind of general customer receptivity to that and and do you have any near-term plans to raise pricing further? Thank you.
Speaker Change: the receptivity to pay for what I'll call premium slots in the out years going in, I'm talking premium slots 28, 29 really to a large extent. The discussions are much more focused on
Speaker Change: How can the end customers fulfill than the last dollar of price?
I wouldn't say there's been another explicit...
that the pricing dynamics are...
Speaker Change: the main event. It's us continuing to partner with these end customers on
Speaker Change: their ability to actually generate the power when they need it and And we'll continue to do everything we can to serve them, but also maximize our economics
Our next question comes from Nicole DeBlaise with Deutsche Bank.
Yeah, thanks. Good morning guys
Good morning, Nicole.
Speaker Change: Can we talk a little bit about last week's SMR announcement? I thought that was really interesting. I guess, Kim, what extent can deployment actually be accelerated? And does this kind of come with increased customer interest in the SMR offering? Thank you.
Speaker Change: Nicole, I think it's a great question. I'm glad I'm glad to get a chance to spend a little bit more time talking about that. I mean, it is a longer term play for us, but last week was meaningful because
Speaker Change: When you think about where we were previous to that, our launch customers in North America with Ontario Power Generation and Tennessee Valley Authority
These are two customers that are 100% government owned, okay?
Speaker Change: Last week's announcement was that next shift forward having Duke having AEP
Speaker Change: join into the mix and join into the consortium to invest in this product and commit towards our technology for projects that they have slotted for new zero-carbon power between 2032 and 2034 in the US.
Speaker Change: The activity of customer interest here, not just in the U.S., but also outside the U.S., is only strengthening. I mean, to give you a little bit more color...
Speaker Change: I was in Japan the first week of the new year. We've turned on two of our BWX nuclear plants in Japan very recently. There's another 18 in Japan that have not been restarted.
Speaker Change: That is only accelerating in activity, and I generally spend the first week of the New Year in Japan for kind of the New Year's greetings. It's the first year.
Speaker Change: I've left the market saying, okay, this is happening now. These plants are going to be turned back on, whether it be from the federal government or from the local communities because of the clear need.
Speaker Change: And we continue to see more activity on upgrades and upgrades into the install base in North America. We've talked in the past, we've got 65 plants running with our technology. We will add more megawatts to those existing plants.
Speaker Change: and more and more customers with those plants are coming back to us and saying within the security apparatus of the existing plant.
Speaker Change: So, you can hear the enthusiasm in my voice on this.
Speaker Change: Can we move it to the left earlier than the first plant being commissioned in Ontario in 2029? I don't think that will happen. The first plant will be commissioned in Canada in 29.
Speaker Change: even more confidence that in the U.S. many more plants can be commissioned, let's just call it 2032 and beyond, but this is about the next decade. It's not going to create a substantial amount of incremental megawatts until we get there.
Speaker Change: Our next question comes from Andrew Obin with Bank of America.
Speaker Change: Yes, good morning. Good morning, Andrew. Yeah, you know, with the headlines like Constellation buying Calpine, it seems people are getting excited about NatGas.
Speaker Change: as, you know, price of gas is going up over the next several years, just trying to understand what happens to the scope of your service activities as price of gas, if price of gas structurally goes up, and if you are starting to have those conversations with your customers.
Speaker Change: Andrew, if you just take the F-class fleet, which is our largest fleet in North America, we have over 700 F-class gas turbines in the U.S. that we have.
Speaker Change: incremental technology that we can insert into the existing install base in the U.S. and drive output and efficiency savings and that's just the F-class fleet in North America as an illustration amongst the 7,000 gas turbines we have globally and that's what we're going to see happen.
Speaker Change: Admittedly, today the discussions with incremental investments is more focused on megawatts than it is efficiency. I agree with your train of thought on where gas pricing is going, but the discussion is much more on efficiency.
Speaker Change: We need every megawatt we can get right now, and how can you operationally allow us to generate those megawatts, even if in the end it leads to a few more outages over time because we run the gas turbines at higher firing temperatures, as an example?
But what this is clearly going to lead to is
Speaker Change: The scope per outage is going up because the amount that our customers are willing to invest in technology at that outage event is going up for, at the moment,
Speaker Change: megawatts, but ultimately efficiency will matter too. So that's why we've talked for the better part of, call it the last four months, about the fact that we see the upgrades.
Speaker Change: growing directionally 50% by the end of the decade in the gas business because of this market opportunity, and a lot of it's going to be in North America. And the
Speaker Change: Demand signals with more investment into gas like you alluded to with constellations a great indicator.
Our next question comes from Julian Dumoulin-Smith with Jeffreys.
Julian: Morning, Julian. Hey, good morning. Nice to chat with you guys. Thank you very much.
Julian Dumoulin-Smith: Hey, look, you made allusion to this earlier about sort of the diversification in your turbine sales, right? Not just H-class, but F and Aero. Can you speak a little bit more to the extent to which that might be accelerating, given the availability dynamics?
Julian Dumoulin-Smith: supply constraints and and how that might drive volumetric upside where folks might have otherwise thought you were constrained and what you can do in that kind of 26-27 time frame.
Julian Dumoulin-Smith: Julian, thanks for the question. It's not going to materially change 26. At the end of the day,
Julian Dumoulin-Smith: the same amount of forging and at least 26 is really kind of what we're going to have to be clear. I mean, we're working this very hard, but the premise of your question is spot-on.
Julian Dumoulin-Smith: in the sense that the more that we do F-class gas turbines, as an example, we've been making them for 25 years, it is easier for us to make an F-class gas turbine than it is an H. The supply base has an ability to ramp those.
Julian Dumoulin-Smith: faster. And the reality is, yes, there's a lot of baseload power needs. A lot of the data centers AI will be H-class.
Julian Dumoulin-Smith: because the end customers are underwriting a business case where they need the power 24 hours a day, 7 days a week, and the efficiency...
it's a given it'll be a baseload H class.
Julian Dumoulin-Smith: At the same time, you look at where the reserve margins are today in PJM and
Julian Dumoulin-Smith: and ERCOT and where pricing's going. And there's a lot of simple cycle pipeline demand growth for F-Class.
Julian Dumoulin-Smith: that makes a lot of sense. And the truth of it is, those are easier for us to make. And as we continue to drive.
Julian Dumoulin-Smith: our lean improvement, and I'll be back down in Greenville, South Carolina next week with the team for the entire week to kind of partner with them on our path forward, that diversification of gas turbines, including let's call it more mature gas turbines like F-Class.
Julian Dumoulin-Smith: with what our supply base is able to serve. And in that regard today, nothing's changed from our previous comments that we'll be at directionally 20 gigawatts by 27 and steady there going forward.
Our next question comes from Andrew Kaplowitz with Centuryline.
Andrew
Good morning, everyone.
Good morning.
Speaker Change: Scott, can you give more color into your commentary regarding accelerating capacity expansion to sell premium slots that you have on slide six? I think at the investor day you were careful to say that you're going to be thoughtful and down quickly, you grow capacity, and maybe slide six commentary today seems slightly more pointed. I know you just talked about power and no real changes there, but what about an electrification? Are you, you know, potentially going to accelerate capacity a little bit on that side of business?
Speaker Change: Yes, and that comment is exactly, Andrew, as you said, more applicable to electrification. I'm looking forward to being at one of our factories in Pennsylvania in a few weeks for the better part of a week.
Speaker Change: We do see opportunity to continue to accelerate capacity build-out and electrification.
Speaker Change: that is in North America in the near term, leveraging some of our industrial footprint.
Speaker Change: And as we do, the ability to sell those premium slots is something we're very, very focused on.
Speaker Change: We did try to talk about this in December, that if there was an upside case within our Call It What's In, What's Out of our By 28 Guide, we did talk about accelerated fulfillment and electrification being the most
Speaker Change: applicable example and that remains the case and we've got a team that's incredibly focused on on making progress there and a leadership team that's here to serve them because
Speaker Change: The market needs everything we can give them, and we're hopeful we're going to ramp that up even faster. And with it, we should have fulfillment and price opportunity. Yeah, and I think the only thing I would add to that is that...
Speaker Change: One of the things we called out in December, which is still true only a few weeks later
Speaker Change: is a big portion of the electrification capacity expansion really isn't driven by bricks and mortar, right? The lean culture within some of the businesses that are faster flow businesses, less kind of like project
Speaker Change: moving through the factory but flow businesses, we're getting a significant amount of capacity expansion with lean initiatives which are some of the most effective from a return perspective because you're not putting that bricks and mortar in the ground forever.
Speaker Change: and Michael Strazik. Thank you. Thank you. Thank you. Thank you.
Our next question comes from Joe Ritchie.
with Goldman Sachs.
Morning, Joe.
Speaker Change: Hey, good morning, guys. So look, I think very few of us would have thought that over the past two years, you'd be able to grow that electrification equipment backlog to over $20 billion. It's pretty, pretty incredible. As you're looking out for 2025, Scott,
Julian Dumoulin-Smith: Any thoughts around how much that backlog can build and then specifically as it relates to North America really encouraging to hear you know that that business is now 20 to 25 percent of your of your business today. What's the opportunity in North America?
substantial
Julian Dumoulin-Smith: It continues to be the part of the business that as we lean into the front end, I continue to be encouraged that the GE Vernova
Julian Dumoulin-Smith: Symmetry, Synergy helps the most on the front end. We continue to educate our customers on our offerings and electrification.
Julian Dumoulin-Smith: And we're liking the response. And, you know, I've alluded to the fact that I spent a week in Asia to start the year in both Singapore and Japan.
Julian Dumoulin-Smith: that's applicable in those markets, too. We are not a known commodity, but there are industrial footprint opportunities for us to invest into in both Asia and North America that are attractive and that are things that we're going to keep working very hard right now.
Of our three business segments, Joe, it's
Julian Dumoulin-Smith: very clear to me from a commercial perspective beyond market growth, us simply gaining share, let's say, within the market regardless of where it goes.
Julian Dumoulin-Smith: There's a lot more for us to do in electrification, and I expect that $20 billion equipment backlog to grow substantially in 2025 and beyond as we continue to run this business better.
Operator, we have time for about one last question.
This question will come from Moses Sutton with BNP Paribas.
Thanks for creating the game, Moses.
Moses Sutton: Hi, thanks for squeezing me in. I wanted to continue on gas turbine pricing. At this point, new CCGTs are costing $2,000 per kilowatt, all in and rising perhaps. Is your content still tracking at 30% to 35% of that new build cost?
Moses Sutton: And, you know, our pricing and bids, is there any differentiation between, I don't know, like a U.S. 2027 versus an international 2028, which might have a little more open room? So, like, just thoughts on that price level against the total content and then variation by geography and shipment year. Thanks.
Moses Sutton: Moses, the directional numbers you're giving for an H-class gas turbine in North America or a plant build are directionally accurate today and our share of that is directionally accurate too. So I wouldn't think it's different than
Moses Sutton: than what you're saying. The only thing maybe I would distinguish is
Moses Sutton: schedule and capacity. It's really turning into more 28 versus 32. Okay. Internationally, there are markets...
Moses Sutton: that will plan out that far. That may lead to a modestly different way to think about things, but...
Moses Sutton: 27, 28, you know, we're going to be talking about 2029 and gas before the year is over on some of these calls. That's very clear to me because
Moses Sutton: We've got 20 gigawatts of capacity. We're going to have a strong orders year. We're going to fill the bathtub, so to speak, of those 20 gigawatts per year fairly quickly and be into the out years.
Thank you.
Speaker Change: So I don't think we're going to be making much of a pricing distinction between 27 and 29 right now. It's really going to continue to be a challenge of how the customers secure, not just our equipment, but the
Speaker Change: Everything else required. The EPC support is going to be a big open switch and one that
Speaker Change: I'm going to invest a lot of time in 2025, because I continue to believe that could be one of the bigger challenges towards fulfillment, is just whether the projects stay on schedule, notwithstanding our explicit gas turbine.
Speaker Change: deliveries, and we have a number of strategic sessions in the first quarter with those EPCs to just stay very aligned on their schedule and ours. So thanks for the question.
Scott Strazik: Before we wrap up, let me turn it back to Scott for closing comments.
Scott Strazik: No, everybody, I just want to thank everyone again for your continued interest in G.E. Vernova. As I do on all these calls, I think it's important to recognize our employees in our first year as a public company. I have an incredible amount of pride to lead this group, a lot of optimism and ambition.
Scott Strazik: for the company that we're creating. I have a huge appreciation.
Scott Strazik: for the customers that are leaning in with us right now on the opportunity and the excitement they have for the art of the possible for what GE Vernova can be so
Scott Strazik: We had a good first year, but there's nobody inside the walls of G.E. Vernova that's celebrating right now. We've got our feet on the ground. We're very focused on the opportunity in front of us.
Scott Strazik: in these markets and serving it and going into new year with a lot of a lot of energy and a lot of optimism. So thanks for giving us the time today and we look forward to seeing all of you out in the field in the next few months.
Speaker Change: Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.
Andrew Percoco, Michael
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