1 Key indicator signals GE’s renewable energy business is bottoming out

There’s no way to whitewash it: It’s been a miserable year for wind turbine manufacturers. The renewable energy businesses of the three Western giants — Vest (VWDRY -3.90%), Siemens Gamesa (GCTAY 0.81%)with General Electric (General Electric -1.47%) — will lose money in 2022.

That said, there is clear evidence that an upturn is on the way, and investors should expect the industry’s fortunes to gradually improve by 2023. The reason is as follows.

not the year they expected

A quick glance at the guidance given by the three wind power companies at the start of their relevant fiscal years (Siemens Gamesa’s fiscal year ends at the end of September) compared with their latest results and outlook shows that it has been a challenging year .

Siemens Gamesa posted a loss in its 2022 fiscal year, and Vestas is on track to do the same — but both companies started the fiscal year with forecasts of profit. GE Renewable Energy, meanwhile, is expected to post a loss of as much as $2 billion, rather than the midpoint loss of $600 million it guided at the start of the year.


Initial 2022 full-year outlook

Latest Outlook/Results


Revenue of 15 billion to 16.5 billion euros, adjusted EBIT margin of 0%-4%

Expected revenue of 14.5 billion to 15.5 billion euros, adjusted EBIT margin of negative 5%

GE Renewable Energy

Low-single-digit revenue growth, $500 million to $700 million operating loss

Estimated loss of $2 billion

Siemens Gamesa

Revenue of 9.5 billion to 10 billion euros, adjusted EBIT margin of 1%-4%

Actual revenue was EUR 9.8 billion, with an adjusted EBIT margin of -5.9%.

Data source: company presentation. EBIT = Earnings Before Interest and Taxes.

What went wrong in 2022

This year, the industry has encountered a perfect storm. Soaring raw material prices, higher transportation costs, supply chain disruptions and component shortages are weighing on margins, as all three continue to fulfill orders they won years ago in a more favorable environment. Combine that with rising interest rates and their negative impact on funding costs, and it’s no surprise that things have deteriorated so badly.

As a result, all three companies have announced layoffs, with GE Renewable Energy laying off approximately 20% of its US onshore wind workforce. Siemens Gamesa changed its management and operating model and developed a turnaround strategy. Meanwhile, Scott Strazik, the man responsible for the turnaround of GE Power, is now in charge of the turnaround of GE Renewable Energy.

Turnaround plan

The turnaround plans of fierce rivals Siemens Gamesa and GE Renewable Energy have a lot in common. Both companies are determined to cut costs and focus on competing in core regions to secure profitable orders.

It all points to improved pricing discipline. In short, wind farms will have to get used to paying higher prices for wind turbines. GE, Siemens Gamesa and Vestas will try to “muddle through” orders received at relatively low prices while securing new orders at higher prices.

The good news is that’s exactly what’s happening. GE’s management noticed an improvement in order pricing. The average selling price of Siemens Gamesa’s onshore orders is EUR 820,000 per MW in 2022, compared to EUR 650,000 per MW in 2021.

Data from industry leader Vestas also reflected improved pricing across the industry. As you can see below, there has been a significant improvement in the pricing of Vestas’ new orders, which is reflected well across the industry. All three companies are working to improve pricing, and Vestas’ numbers are a clear sign of improvement likely to be followed by GE Renewable Energy.

Vestas Order Pricing

Data source: Vestas presentation.

Has GE Renewable Energy turned the corner?

There is no quick fix for GE’s most problematic business. However, improved pricing across the industry and buyer optimism generated by the Lower Inflation Act, which expanded tax credits for wind farms, suggest that the bottoming process is firmly in place.

So don’t be surprised if GE Renewable Energy bottoms out before the end of next year, and if all three end 2023 in much better shape than they entered it.

Lee Samaha does not hold a position in any of the stocks mentioned above. The Motley Fool has no positions in any of the stocks mentioned above. The Motley Fool has a disclosure policy.

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