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 Chief Executive Officer Jeff Immelt has made energy sector growth a
key part of his plan to return the company to its manufacturing
roots, adding oilfield pumps, wind turbines and similar products to
the portfolio in recent years.
Financing customers' purchases of those products, as well as
investing in oil royalties, pipelines, wind farms and other energy
projects, will compliment GE's industrial growth after the company
spins off its North American consumer credit card business next
year, executives said.
"This is a business that the GE board wants to grow," David Nason,
head of the GE Energy Financial Services unit, said in an interview
on Thursday. "It's not tied into the overall shrinking story of GE
Capital. This is a core GE business."
The unit, which reported profit of $410 million last year, has a
goal of posting double-digit-profit growth each year, in line with
goals Immelt has laid down for the industrial part of the company's
portfolio, Nason said.
"I'd love to tell you it'd be faster," he said. "I don't think
anyone at GE would put the brakes on our growth."
The unit not only finances equipment purchases for customers, but
directly invests in energy projects, regardless of whether they use
GE products, though Nason acknowledged he would prefer to finance
purchases from GE.
In 2012, for instance, the unit teamed up with JPMorgan <JPM.N> to
invest $225 million in a NextEra Energy <NEE.N> Texas wind farm that
used both GE and Siemens <SIEGn.DE> turbines.
"I have a dual mandate: to generate returns and also to support GE,"
Nason said. "Where they both fit, that's perfect. And where they
don't fit, I still want to generate above-average returns."
About $10 billion has been invested in the past decade in renewable
energy projects, and late Wednesday GE Energy Financial Services
said it plans to invest $5 billion more on solar, wind and other
renewable projects through 2020.
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TOO BIG TO FAIL?
Even as GE Capital shrinks, investors say they are comfortable with
the rise of GE Energy Financial Services.
"Financing on the industrial side is still a going concern at GE,"
said Tim Ghriskey, of Solaris Asset Management, which manages GE
shares. "And GE Capital remains a strong organization. When they
became too exposed on the consumer side is when problems surfaced."
Nason, who worked in the George W. Bush administration and helped
design the Troubled Asset Relief Program that capitalized American
banks in 2008, took the top job at the unit last fall.
GE Capital, the parent entity of GE Energy Financial Services, was
named a systemically risky financial institution last year by the
U.S. Financial Stability Oversight Council.
The designation, commonly known as "Too Big To Fail," in effect
guaranteed more regulatory oversight of GE Capital, though Nason
said he did not expect that to limit the company's growth in energy
investments.
"I think I'm uniquely qualified because I lived through the building
of the (regulatory) architecture, and now can help a complex company
navigate through that," he said.
(Reporting by Ernest Scheyder; additional reporting by Lewis Krauskopf;
editing by Terry Wade and Tom Brown)
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