What comes to your mind when you hear about the American conglomerate General Electric aka GE?
Many of you will probably think about its manufacturing roots, engineering culture, medical imaging, industrial products, or banking or energy businesses. But not many will probably think about the product the company was originally built around back in the late 19th century – electricity.
Diverse Business Portfolio
Reuters describes GE as a diversified technology and financial services company with various services and products including power generation, aircraft engines, water processing, industrial products, medical imaging, and financing for industry and business.
And so you may think does GE still have an interest in making electricity after 122 years of diversified existence?
Role in Electricity Generation
It might come as a surprise to know that electricity is as important to GE as the other business portfolio of the company. While GE is not considered a utility company, and electrical power generation often gets sandwiched into the company’s broader energy business profile, electricity is an important business on its own.
Not A Utility Company
When you think of electrical power, don’t you think about the utility companies you write a check to month after month? You don’t think of General Electric and don’t associate the company with electricity. GE’s interest is not in utilities, after all but in products that serve as the engines that provide the power to the power generating plants of utility companies. Electricity as you know is created from a fuel source like coal, wind, gas or oil and GE’s involvement is right at the core of that conversion process.
Natural Gas Turbines
Consider this for example, GE has natural gas turbines that turn mechanical energy into electrical energy. These complex tools could be considered the heart of the power generating plant. The blood that runs through it is electricity.
More Reliable Than Wind And Solar
Natural gas turbines are extremely complicated machines designed to burn a cleaner element than coal, at an efficient rate without needing large tracts of land. Coal is a historical permanent element in the business of electrical power generation. The natural gas turbines are undoubtedly more reliable than wind and solar, with an expected life span of up to 50 years. The shortest life span for a natural gas turbine is 30 years. Even at this short end of the turbine’s life span, you cannot deny being impressed considering that these complex machines burn natural gas at an exceedingly high temperature of 2,000 degrees Fahrenheit. This temperature is hotter than the melting point of the metal parts in the machines. But the company was able to keep the machines resilient and rigid at that temperature using material coatings that allow that kind of resistance against melting.
But that’s not where GE’s business ends. Like any machines, natural gas turbines require:
- Rigorous analysis to optimize use over time
Service Or Extended Warranty Plan
Purchasing a gas turbine is packaged with a service plan, or an extended warranty. Utility companies don’t want to risk downtime at their power generating plants and who could be better than the turbine manufacturer to service the machine? The utility companies may have the best engineers but GE has the expertise and extensive knowledge about the turbine. If you are the utility company, you don’t want to bear the brunt of a major repair due to failure to change the oil regularly. The utility company would not want to be concerned about checking to make sure the equipment’s bolted joints have no broken or missing bolts, nuts or metric Belleville spring washers which could result in major damage to the machine. That burden is passed on to the manufacturer as part of the service plan.
Life Span Extended, Performance Improved
With this relationship, the utility company and natural gas turbine manufacturer not only extend the life span of the machine but more importantly improve the performance and delivery of the service of the machine. For its part, GE’s stake in the turbines becomes perpetual. And while GE’s involvement is not directly in providing electricity to households and businesses, electricity remains an important business portfolio of this diversified services company.
Investing In The Future Despite Falling Crude Prices
While some have questioned what’s in store for GE’s future as crude prices continue to fall and companies are buying less drilling and processing equipment, the company has continued to invest in oil and gas, specifically in deep water drilling operations. According to a recent Bloomberg Business article, GE is improving it’s undersea drilling technology in favor of sustainability and efficiency through its Oil & Gas Subsea Systems devision. Placing big bets on delivering flow control valves, wellheads, and other equipment for deep-water drilling work could mean seriously beneficial things for the company in the near future, especially if crude prices start to bounce back up– which they always do.
Do you think GE is making a smart bet with its continued investments in oil, gas, and energy?