General Electric reports that an “oxidation issue” has forced the shut down of four GE power turbines in the United States. The company says it expects the same issue to affect more of the 51 units already shipped. General Electric photo.
GE power turbines beating heart of electricity plants
General Electric Co says four of its GE power turbines have been shut down due to an “oxidation issue” and the company warns that the same problem is expected to affect more of the 51 units already shipped.
The General Electric HA class turbines are critical to billion dollar electricity plants around the world and the machines played a crucial part in rescuing the company’s power division after a steep drop in sales and profits.
“This issue, if not quickly resolved, could hurt GE’s turbine brand image and market share,” Reuters reports Jim Corridore, an analyst at CFRA, said in a note. Corridore cut his price target to $14 from $15.
After the announcement, GE stock fell 2.76 per cent to $12.51 on the New York Stock Exchange.
The company told Reuters the issue first came to light on turbine blades in a natural gas-fuelled turbine at an Exelon Corp power plant in Texas a few weeks ago. As a result, Exelon shut down one turbine and then shut down its other three units as a precaution.
According to GE and Exelon, the turbines are expected to be returned to service soon. Neither company offered details about the oxidation or how it resulted in shutdowns.
Now, GE is working with other customers “to address any impacted unit,” GE spokesman Christ Shigas told Reuters. He added that 10 other HA turbines in the US were still operational.
But Shigas added “we expect the same issue will impact other HA units”.
Industry experts say that if these problems continue, GE may have to pay millions in compensation to customers as well as make costly design changes.
J.P. Morgan analyst Stephen Tusa wrote in a note on Tuesday that the Texas outage “represents a negative development for a company that has little wiggle room for more ‘shoes to drop”.
Tusa cut his price target to $10 per share from $11 per share.
In a LinkedIn post on Wednesday, GE Power Chief Executive Officer Russell Stokes mentioned the problem.
“The minor adjustments that we need to make do not make the HA any less of a record setting turbine – they are meeting – and in many cases exceeding – their performance goals at every customer site today,” wrote Stokes.
To date GE has received 82 orders for its HA turbine. The units have had trouble in the past; a group of units installed in Pakistan required costly repairs.