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GE Nears $1 Billion Deal With Caithness in Power-Plant Pact

General Electric Co. is nearing a deal with Caithness Energy with a potential value of more than $1 billion to supply equipment for multiple power plants in the U.S.

GE would provide as many as six of its new H-class gas turbines, along with steam turbines and other equipment, the companies announced Wednesday. The pact, covering plants to be developed in 2017 and 2018, is expected to become final by the end of this month.

“The momentum continues,” Steve Bolze, chief executive officer of GE Power, said at an investor meeting in New York. The company has received orders for 58 of its so-called HA turbines, not including the potential Caithness order. The rollout has been the “best new-product launch in the last 20 years for the power business.”

A new deal would be a boon for GE as CEO Jeffrey Immelt reorients it around industries such as energy, aviation and oil. The Boston-based company shed most of its finance and consumer operations while bulking up equipment manufacturing through agreements including the $10 billion acquisition of Alstom SA’s power division.

The HA turbine, a Winnebago-sized unit that is the company’s most efficient, is crucial to GE Power as global population growth drives demand for electricity. GE committed $2 billion to develop the product and help maintain its position as the world’s leading supplier of gas turbines. The manufacturer accounted for about 39 percent of the world market in 2016, followed by competitors Siemens AG and Mitsubishi Hitachi Power Systems Ltd., according to data from McCoy Power Reports.

“Seventy percent of our revenue is now outside the U.S., so we’re very much a global organization,” Bolze said. GE is “well positioned in a big, essential global industry.”

Under the agreement being discussed with Caithness, GE would provide equipment generating as much as 3 gigawatts of electricity, or enough to power about 2.5 million U.S. homes. Orders for the turbines and associated service agreements are expected to be recorded by GE in the next 24 months.

Caithness is poised to become the top customer for the HA turbine, following a 2015 agreement to buy two units for a Pennsylvania plant. That facility, known as Caithness Moxie Freedom, is under development and will go online next year.

Tough Market

Total orders of gas turbines across all manufacturers declined 33 percent in the fourth quarter, according to McCoy data. In the meeting Wednesday, Bolze acknowledged the “tough market” and said GE is increasing its focus on reducing costs and improving cash conversion.

“Organic growth, cost out, cash — that’s the story,” he said.

Read full article at Bloomberg