EX-99.1 12 d542465dex991.htm EX-99.1 EX-99.1
Table of Contents

Exhibit 99.1

 

LOGO

    , 2024

Dear GE Shareholders:

It has been just over two years since we announced our intention to form three independent investment-grade industry-leading public companies. In early 2023, we successfully completed the spin-off of GE HealthCare, and now, we are approaching the spin-off of GE Vernova and launch of GE Aerospace in the beginning of the second quarter of 2024. Each of these companies are global leaders in vital industries, continuing to become more important over time, and, notably, each will carry forward GE’s inimitable DNA centered on innovation, customer focus, and humility.

Our teams have worked hard to prepare for life as independent companies and now are getting ready to launch. As we’re already seeing take hold at GE HealthCare, as standalone companies, GE Vernova and GE Aerospace will benefit from greater focus on their customers and increased capital allocation and strategic flexibility to pursue high-quality growth in their specific industries. They are attracting broader and deeper teams, boards, and investor bases that want to be a part of GE Aerospace and GE Vernova, each offering missions with its own appeal. Both companies have made tremendous strides in creating lean cultures of accountability, problem solving, and customer focus. Both companies also will have strong financial profiles and investment-grade ratings that provide a foundation for targeted investments in growth and innovation.

The distribution to GE shareholders of shares of common stock of GE Vernova will provide current GE shareholders with proportional ownership interest in GE Vernova. GE Vernova is uniquely positioned to accelerate the energy transition and advance global sustainability. With an installed base of 7,000 gas turbines–the world’s largest–and approximately 55,000 wind turbines, its technology helps generate approximately 30% of the world’s electricity. GE Vernova provides solutions to customers to meet the strong global demand to increase electrification and decarbonization levels by delivering critical energy transition technologies and services. GE Vernova’s leadership team has extensive functional and industry expertise in driving global sustainability, as well as a deep commitment to continuous improvement through lean. As a standalone company, GE Vernova will build on its extraordinary track record of innovation, continuing to develop and commercialize breakthrough technologies that enable the energy transition, while executing on its strategy to grow profitably with strong free cash flow generation.

The GE Vernova distribution will be the form of a pro rata distribution to GE shareholders of all of the outstanding shares of GE Vernova. The distribution is intended to be tax-free to GE shareholders for U.S. federal income tax purposes. Shareholder approval is not required, and you do not need to take any action to receive shares of GE Vernova to which you are entitled as a GE shareholder. You do not need to pay any consideration or surrender or exchange your shares of GE common stock to participate in the spin-off.

Upon the spin-off of GE Vernova, GE shareholders as of the spin-off date also will continue to hold their shares of GE, which will be listed on the NYSE under the ticker “GE” with the name “GE Aerospace”. GE Aerospace’s sole focus will be executing its bold vision to invent the future of flight, lift people up, and bring them home safely. With nearly 41,000 commercial engines at work in more than 70% of global airlines, and a diverse portfolio of more than 26,000 defense engines, this exceptional franchise is a global aerospace leader. And more than 70% of its revenue is derived from aftermarket services that not only have attractive economics, but also keeps the team closer than ever to our customers. GE Aerospace will continue to generate significant value for decades to come, leveraging the quality of its technology and product development plans, the energy and collaboration of its team, and its positioning as the industry’s largest and youngest fleet.


Table of Contents

I encourage you to read the attached Information Statement carefully, which is being provided to all holders of GE shares as of the record date for the distribution of shares of GE Vernova common stock. The Information Statement describes the separation in detail and contains important business and financial information about GE Vernova.

Our futures are bright. As an independent company, GE Vernova will be even better positioned to accelerate the energy transition and drive sustainability, focused on delivering disciplined revenue growth today while innovating to create incremental value tomorrow. We thank you for your investment in GE.

Sincerely,

H. Lawrence Culp, Jr.

Chairman and CEO, GE

Chairman and CEO, GE Aerospace


Table of Contents

LOGO

    , 2024

Dear Future GE Vernova Stockholders,

I am excited to welcome you as stockholders of GE Vernova, a purpose-built company developing, delivering and servicing critical technologies that accelerate the energy transition. We create a more sustainable world, enabling our customers to increase electrification and decarbonization levels, which improves the quality of life of the communities and people our customers serve.

Communities around the world face significant challenges in maintaining a reliable, affordable and secure electricity system, while also increasing access to electricity and reducing emissions. Demand for electricity is expected to grow over 50% by 2040 given electrification of economies and as approximately 750 million people lack electricity. Electricity generation from the power sector emits approximately 13 gigatons of CO2 annually and the entire power sector accounts for 40% of total global manmade CO2 emissions. The increase in electricity needed, along with the focus on decarbonization, will require generation capacity to almost double to 16,000 GW – driving annual electricity related investment from just over $1.0 trillion to over $2.0 trillion.

GE Vernova delivers solutions to these challenges, through our significant scale and diversity of offerings that serve the energy transition, building on more than 130 years of history as an industry leader. Many of the world’s leading utilities, developers, governments and large industrial electricity users rely on our installed base to generate approximately 30% of the world’s electricity – as well as to move this electricity reliably and efficiently.

Our leadership in innovation will remain a key enabler for customers in their efforts to meet long-term sustainability goals. We invest approximately $1 billion annually in R&D – and do so efficiently often with partners or other third parties. These efforts drive critical breakthroughs across a range of technologies, such as energy storage, hydrogen, carbon capture, small modular nuclear reactors, advanced wind turbines and electricity software.

We achieved significantly better financial results in 2023 and will continue to improve profitability and cash flow, as well as reduce risk, through better contracting on both the sale of new equipment and solutions we provide. We also remain committed to our lean operating model to drive productivity, quality, and cost improvements, which will bring margin expansion as well as the delivery of high quality products and services to our customers. The GE Vernova Way, the principles we run our company on, prioritizes Safety, Quality, Delivery and Cost (SQDC) – with safety coming first, for our employees, contractors, customers and other stakeholders.

Growing demand from the multi-decade energy transition ahead along with our own cost and productivity efforts will drive shareholder value. We will increase earnings and deliver stronger, more resilient cash flow, all while enabling our customers to provide more reliable, affordable and sustainable electricity to the communities they serve. Combating climate change and advancing sustainability remain global challenges, but also create significant opportunities for GE Vernova, in supporting customer investments necessary to meet these challenges. Our company is positioned for an attractive future – our leadership team and employees look forward to sharing our success with you, our stockholders, and with the broader global community.

Scott L. Strazik

Chief Executive Officer


Table of Contents

Information contained herein is subject to completion or amendment. A registration statement on Form 10 relating to these securities has been filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

 

Subject to Completion—Dated February 15, 2024

INFORMATION STATEMENT

GE Vernova LLC

Common Stock

(par value $0.01 per share)

 

 

We are sending you this Information Statement in connection with the spin-off (“Spin-Off”) by General Electric Company (“GE”) of its wholly-owned subsidiary, GE Vernova LLC (together with its subsidiaries, “GE Vernova,” the “Company,” “we,” “us,” or “our”), which holds GE’s renewable energy, power, and digital businesses. GE Vernova LLC will convert into a corporation and will be renamed GE Vernova Inc. prior to the completion of the Spin-Off.

To consummate the Spin-Off, GE will distribute all our common stock on a pro rata basis to the holders of GE common stock (the “GE stockholders”). We expect that the distribution of our common stock will be tax-free to holders of GE common stock for U.S. federal income tax purposes, except for cash that stockholders may receive (if any) in lieu of fractional shares.

If you are a record holder of GE common stock as of the close of business on     , 2024 which is the record date for the Spin-Off, you will be entitled to receive      share of our common stock for every      shares of GE common stock that you hold on that date. GE will distribute its shares of our common stock in book-entry form, which means that we will not issue physical stock certificates. Equiniti Trust Company, LLC (the “Distribution Agent”) will not distribute any fractional shares of our common stock.

The Spin-Off will be effective as of     , New York City time, on     , 2024. Immediately after the Spin-Off becomes effective, we will be an independent, publicly traded company.

GE stockholders are not required to vote on or take any other action to approve the Spin-Off. We are not asking you for a proxy, and request that you do not send us a proxy. GE stockholders will not be required to pay any consideration for the shares of our common stock they receive in the Spin-Off, and they will not be required to surrender or exchange their shares of GE common stock or take any other action in connection with the Spin-Off.

No trading market for our common stock currently exists. We expect, however, that a limited trading market for our common stock, commonly known as a “when-issued” trading market, will develop as early as three days prior to the distribution date, and we expect “regular-way” trading of our common stock will begin on the first trading day after the distribution date. We have applied to list our common stock on the New York Stock Exchange under the ticker symbol “GEV.”

 

 

In reviewing this Information Statement, you should carefully consider the matters described in the section entitled “Risk Factors” beginning on page 24 of this Information Statement.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this Information Statement is truthful or complete. Any representation to the contrary is a criminal offense.

This Information Statement is not an offer to sell, or a solicitation of an offer to buy, any securities.

 

 

The date of this Information Statement is     , 2024.

 


Table of Contents

TABLE OF CONTENTS

 

     Page  

Trademarks and Copyrights

     ii  

Industry, Ranking, and Market Data

     ii  

Non-GAAP Financial Data

     ii  

Questions and Answers About GE’S Reasons for the Spin-Off

     iv  

Information Statement Summary

     1  

Risk Factors

     24  

Cautionary Statement Concerning Forward-Looking Statements

     60  

The Spin-Off

     62  

Dividend Policy

     68  

Capitalization

     69  

Unaudited Pro Forma Condensed Combined Financial Statements

     70  

Our Industry

     80  

Our Business

     92  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     128  

Management

     155  

Director Compensation

     164  

Executive Compensation

     165  

Security Ownership of Certain Beneficial Owners and Management

     185  

Certain Relationships and Related Person Transactions

     187  

Material U.S. Federal Income Tax Consequences of the Spin-Off

     195  

Description of Our Capital Stock

     199  

Where You Can Find More Information

     204  

Index to Combined Financial Statements

     F-1  

 

i


Table of Contents

TRADEMARKS AND COPYRIGHTS

GE and the GE Monogram Logo are trademarks of the General Electric Company. Logos, trademarks, service marks, trade names, and copyrights referred to in this Information Statement belong to us or are licensed for our use. Solely for convenience, we refer to our intellectual property (“IP”) assets in this Information Statement without the , ®, and © symbols, but such references are not intended to indicate that we will not assert, to the fullest extent under applicable law, our rights to our intellectual property assets. Other logos, trademarks, service marks, trade names, and copyrights referred to in this Information Statement are the property of their respective owners.

INDUSTRY, RANKING, AND MARKET DATA

This Information Statement contains various historical and projected information concerning our industry, the markets in which we participate, and our positions in these markets. Some of this information is from industry publications and other third-party sources, and other information is from our own analysis of data received from these third-party sources, our own internal data, and market research that our management team commissions for our own evaluations and planning. All of this information involves a variety of assumptions, limitations, and methodologies and is inherently subject to uncertainties, and therefore you are cautioned not to give undue weight to these estimates. All references to the information published by the IEA refer to information contained in the International Energy Agency, World Energy Outlook 2023.

NON-GAAP FINANCIAL DATA

All financial information presented in this Information Statement is derived from the combined financial statements of the Company included elsewhere in this Information Statement. All financial information presented in this Information Statement has been prepared in U.S. Dollars in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), except for the presentation of the following non-GAAP financial measures: Organic Revenues, Organic Segment EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Organic EBITDA, Adjusted Organic EBITDA Margin, Adjusted Net Income, Adjusted Net Income Margin, and free cash flow.

We present Organic Revenues, Organic Segment EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Organic EBITDA, Adjusted Organic EBITDA Margin, Adjusted Net Income, Adjusted Net Income Margin, and free cash flow in this Information Statement because we believe such measures provide investors with additional information to measure our performance. Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for an explanation on why we use these non-GAAP financial measures, their definitions, and their limitations, and reconciliations to their nearest U.S. GAAP financial measures.

Because of their limitations, these non-GAAP financial measures are not intended as alternatives to U.S. GAAP financial measures as indicators of our operating performance and should not be considered as measures of cash available to us to invest in the growth of our business or that will be available to us to meet our obligations. We compensate for these limitations by using these non-GAAP financial measures along with other comparative tools, together with U.S. GAAP financial measures, to assist in the evaluation of operating performance.

BASIS OF PRESENTATION

Unless otherwise indicated or the context otherwise requires, references in this Information Statement to:

 

  (i)

the “Company,” “GE Vernova,” “we,” “us,” and “our” refer to GE Vernova LLC (a newly formed holding company) and its direct and indirect subsidiaries after giving effect to the Spin-Off. GE

 

ii


Table of Contents
  Vernova LLC will convert into a corporation and will be renamed GE Vernova Inc. prior to the completion of the Spin-Off;

 

  (ii)

the “Board” or “our Board” refers to the board of directors of the Company;

 

  (iii)

the “bylaws” refers to our bylaws that will become effective as part of the Spin-Off, the form of which is filed as an exhibit to our registration statement on Form 10 of which this Information Statement is a part;

 

  (iv)

the “certificate of incorporation” refers to our certificate of incorporation that will become effective as part of the Spin-Off, the form of which is filed as an exhibit to our registration statement on Form 10 of which this Information Statement is a part;

 

  (v)

the “Spin-Off” refers to the transaction in which GE will distribute to its stockholders all of the shares of our common stock;

 

  (vi)

the “Exchange” refers to the New York Stock Exchange;

 

  (vii)

“GE” refers to General Electric Company and its direct and indirect subsidiaries;

 

  (viii)

the “GE Board” refers to the board of directors of General Electric Company;

 

  (ix)

“stockholders” or “shareholders” refers to shareholders of General Electric Company or stockholders of GE Vernova, depending on the context;

 

  (x)

the “Reorganization Transactions” refer to a series of internal reorganization transactions that GE will undertake prior to, at, or after the Spin-Off, pursuant to which, among other transactions, GE Vernova will hold, through its subsidiaries, GE’s renewable energy, power and digital businesses; and

 

  (xi)

the “GE Vernova business” refers to GE’s renewable energy, power, and digital businesses.

Certain percentages and other figures provided and used in this Information Statement may not add up to 100.0% due to the rounding of individual components. In this Information Statement, we present estimated U.S. dollar amounts for the industries in which we operate.

On November 9, 2021, GE announced its plans to form three independent, industry-leading, investment grade public companies from (i) GE’s aviation business (“GE Aerospace”), (ii) GE’s healthcare business, GE HealthCare Technologies Inc. (“GE HealthCare”), and (iii) GE’s energy business, GE Vernova. To accomplish this, GE completed the tax-free spin-off of GE HealthCare on January 3, 2023 (the “GE HealthCare Spin-Off”) and intends to execute the tax-free spin-off of GE Vernova in the beginning of the second quarter of 2024. This Information Statement only relates to the Spin-Off of GE Vernova and does not apply to the GE HealthCare Spin-Off.

In connection with the reverse stock split of GE’s shares of common stock effective on July 30, 2021, the holders of GE share certificates were notified to surrender their GE share certificates in order to receive one post-split share of GE common stock in exchange for eight pre-split shares of GE common stock. As of December 6, 2023, approximately 158,264,159 GE shares of common stock continue to be held in certificated form. If you continue to hold GE common stock in certificated form, you are encouraged to contact Equiniti Trust Company, LLC, GE’s exchange agent for the reverse stock split, in order to exchange your GE share certificates representing pre-split shares of GE common stock for (a) a statement indicating the number of newly issued shares of post-split GE common stock held by you electronically in book-entry form together with a check for cash in lieu of any fractional shares and any accrued dividends of GE paid prior to the date that you exchange your GE share certificates, and (b) a statement indicating the number of newly issued shares of common stock of GE HealthCare that you were entitled to receive in the GE HealthCare Spin-Off together with a check for cash in lieu of any fractional shares and any accrued dividends of GE HealthCare paid prior to the date that you exchange your GE share certificates. If you do not exchange your GE share certificates prior to the Spin-Off, you will also be entitled to receive upon exchange of your GE share certificates a statement indicating the number of newly

 

iii


Table of Contents

issued shares of our common stock in the Spin-Off together with cash in lieu of any fractional shares and any accrued dividends of GE Vernova paid prior to the date you exchange your GE share certificates. However, you will not receive any such shares of our common stock until you exchange your GE share certificates.

QUESTIONS AND ANSWERS ABOUT GE’S REASONS FOR THE SPIN-OFF

The following provides only a summary of certain information regarding GE’s reasons for the Spin-Off. You should read this Information Statement in its entirety for a more detailed description of the matters described below.

 

Q:

What spin-offs has GE announced?

A: On November 9, 2021, GE announced its plan to form three independent, industry-leading, investment grade public companies: (i) GE Aerospace, (ii) GE HealthCare, and (iii) GE’s energy business, GE Vernova. To accomplish this, GE completed the GE HealthCare Spin-Off on January 3, 2023 and intends to execute the tax-free spin-off of GE Vernova in the beginning of the second quarter of 2024. The separation of the three businesses into stand-alone public companies is intended, among other things, to better position the management of each business to focus and pursue opportunities for long-term growth and profitability unique to each company’s business and to allow each business to more effectively implement its capital allocation strategies. This Information Statement only relates to the spin-off of GE Vernova and does not apply to the previously completed GE HealthCare Spin-Off.

 

Q:

Why I am receiving this document?

A: GE is making this document available to you because you are a GE stockholder. If you are a holder of GE common stock as of the close of business on the Record Date (as defined below), you will be entitled to receive a distribution of    share of our common stock for every    shares of common stock of GE that you hold on that date. This document will help you understand how the Spin-Off will result in your ownership of shares in the Company and the operations of the Company as a stand-alone entity.

 

Q:

What are the reasons for the Spin-Off?

A: The GE Board believes that the separation of the GE Vernova business from GE is in the best interests of GE and its stockholders and for the success of the GE Vernova business for a number of reasons. See “The Spin-Off—Reasons for the Spin-Off.”

 

Q:

Why is our separation structured as a spin-off?

A: GE believes that a distribution of our shares that is tax-free to GE and its stockholders for U.S. federal income tax purposes is the most efficient way to separate our business from GE.

Questions and Answers about the Spin-Off

The following provides only a summary of certain information regarding the Spin-Off. You should read this Information Statement in its entirety for a more detailed description of the matters described below.

 

Q:

What is the Spin-Off?

A: The Spin-Off is the method by which we will separate from GE. In the Spin-Off, GE will distribute to its stockholders all of the outstanding shares of our common stock. Following the Spin-Off, we will be an independent, publicly traded company.

 

iv


Table of Contents
Q:

Is the completion of the Spin-Off subject to the satisfaction or waiver of any conditions?

A: Yes, the completion of the Spin-Off is subject to the satisfaction, or the GE Board’s waiver, of certain conditions. Any of these conditions may be waived by the GE Board to the extent such waiver is permitted by law. In addition, GE may at any time until the Spin-Off decide to abandon the Spin-Off or modify or change the terms of the Spin-Off. See “The Spin-Off—Conditions to the Spin-Off.” Alternatively, GE may waive any of the conditions to the Spin-Off and proceed with the Spin-Off even if all such conditions have not been met. If GE waives any such condition and the Spin-Off is completed, such waiver could have a material adverse effect on GE’s and GE Vernova’s respective business, financial condition, or results of operations, the trading price of GE’s common stock, or the ability of stockholders to sell their shares after the Spin-Off, including, without limitation, as a result of illiquid trading due to the failure of our common stock to be accepted for listing or litigation giving rise to any preliminary or permanent injunctions sought to prevent the consummation of the Spin-Off. If GE elects to proceed with the Spin-Off notwithstanding that one or more of the conditions to the Spin-Off has not been met, GE will evaluate the applicable facts and circumstances at that time and make such additional disclosure and take such other actions as GE determines to be necessary or appropriate in accordance with applicable law.

In particular, if GE waives the condition that GE will receive an opinion from each of Paul, Weiss, Rifkind, Wharton & Garrison LLP and Ernst & Young LLP to the effect that the Spin-Off will qualify for non-recognition of gain and loss under Section 355 and related provisions of the Code, then GE would notify its stockholders (1) by filing an amendment to the Registration Statement on Form 10 of which this Information Statement forms a part if the waiver occurs before the Registration Statement becomes effective or (2) by filing a Current Report on Form 8-K if the waiver occurs after the Registration Statement becomes effective, as described in “The Spin-Off—Conditions to the Spin-Off.” If GE waives that condition and then it is determined that the Spin-Off does not qualify for non-recognition of gain and loss under Section 355 and related provisions of the Code, then in addition to the potential material adverse effects described above, there could be material adverse tax consequences to GE and its stockholders. See “Risk Factors—Risks Relating to the Spin-Off—The Spin-Off could result in significant tax liability to GE and its stockholders if it is determined to be a taxable transaction” and “Material U.S. Federal Income Tax Consequences of the Spin-Off.” GE does not currently intend to waive this condition to the Spin-Off.

 

Q:

Can GE cancel the Spin-Off even if all conditions have been met?

A: Yes. Until the Spin-Off has occurred, GE has the right to not effect the Spin-Off, even if all of the conditions are satisfied. See the section entitled “The Spin-Off—Conditions to the Spin-Off.”

 

Q:

Will the number of GE shares I own change as a result of the Spin-Off?

A: No, the number of shares of GE common stock you own will not change as a result of the Spin-Off.

 

Q:

Will the Spin-Off affect the trading price of my GE common stock?

A: GE believes that our separation from GE offers its stockholders the greatest long-term value. There can be no assurance that, following the Spin-Off, the combined trading prices of the GE common stock and our common stock will equal or exceed what the trading price of GE common stock would have been in the absence of the Spin-Off. It is possible that after the Spin-Off, our and GE’s combined equity value will be less than GE’s equity value before the Spin-Off. We expect the trading price of GE’s shares of common stock will be lower than immediately prior to the Spin-Off, as they will no longer reflect the value of the GE Vernova business.

 

Q:

What will I receive in the Spin-Off in respect of my GE common stock?

A: As a holder of GE common stock, you will receive a distribution of    share of our common stock for every    shares of GE common stock you hold on the Record Date. The Distribution Agent will distribute

 

v


Table of Contents

only whole shares of our common stock in the Spin-Off. See “The Spin-Off—Treatment of Fractional Shares” for more information on the treatment of the fractional share you might otherwise be entitled to receive in the Spin-Off. Your proportionate interest in GE will not change as a result of the Spin-Off. For a more detailed description, see “The Spin-Off.”

 

Q:

What is being distributed in the Spin-Off?

A: GE will distribute approximately    shares of our common stock in the Spin-Off, based on the approximately    shares of GE common stock outstanding as of    , 2024. The actual number of shares of our common stock that GE will distribute will depend on the total number of shares of GE common stock outstanding on the Record Date. The shares of our common stock that GE distributes will constitute all of the issued and outstanding shares of our common stock immediately prior to the Spin-Off. For more information on the shares being distributed in the Spin-Off, see “Description of Our Capital Stock—Common Stock.”

 

Q:

What do I have to do to participate in the Spin-Off?

A: All holders of GE’s common stock as of the Record Date will participate in the Spin-Off. You are not required to take any action in order to participate, but we urge you to read this Information Statement carefully. Holders of GE common stock on the Record Date will not need to pay any cash or deliver any other consideration, including any shares of GE common stock, in order to receive shares of our common stock in the Spin-Off. In addition, no stockholder approval of the Spin-Off is required. We are not asking you for a vote and request that you do not send us a proxy card.

 

Q:

What will happen if I continue to hold GE share certificates?

A: If you hold GE share certificates that have not been converted into book-entry form, you will still be entitled to receive shares of our common stock in the Spin-Off although you will not receive such shares until you exchange your GE share certificates. In connection with the reverse stock split of GE’s shares of common stock effective on July 30, 2021, the holders of GE share certificates were notified to surrender their GE share certificates in order to receive one post-split share of GE common stock in exchange for eight pre-split shares of GE common stock. As of December 6, 2023, approximately 158,264,159 GE shares of common stock continue to be held in certificated form. If you continue to hold GE common stock in certificated form, you are encouraged to contact Equiniti Trust Company, LLC, GE’s exchange agent for the reverse stock split, in order to exchange your GE share certificates representing pre-split shares of GE common stock for (a) a statement indicating the number of newly issued shares of post-split GE common stock held by you electronically in book-entry form together with a check for cash in lieu of any fractional shares and any accrued dividends of GE paid prior to the date that you exchange your GE share certificates, and (b) a statement indicating the number of newly issued shares of common stock of GE HealthCare that you were entitled to receive in the GE HealthCare Spin-Off together with a check for cash in lieu of any fractional shares and any accrued dividends of GE HealthCare paid prior to the date that you exchange your GE share certificates. If you do not exchange your GE share certificates prior to the Spin-Off, you will also be entitled to receive upon exchange of your GE share certificates a statement indicating the number of newly issued shares of our common stock in the Spin-Off together with cash in lieu of any fractional shares and any accrued dividends of GE Vernova paid prior to the date you exchange your GE share certificates. However, you will not receive any such shares of our common stock until you exchange your GE share certificates.

 

Q:

What is the record date for the Spin-Off?

A: GE will determine record ownership as of the close of business on    , 2024, which we refer to as the “Record Date.”

 

vi


Table of Contents
Q:

When will the Spin-Off occur?

A: The Spin-Off will be effective as of    , New York City time, on    , 2024, which time and date we refer to as the “Distribution Date.”

 

Q:

How will GE distribute shares of our common stock?

A: On the Distribution Date, GE will release the shares of our common stock to the Distribution Agent to distribute to GE stockholders. The whole shares of our common stock will be credited in book-entry accounts for GE stockholders entitled to receive the shares in the Spin-Off. If you own GE common stock as of the close of business on the Record Date, and you retain your entitlement to receive the shares of our common stock through the Distribution Date, the shares of our common stock that you are entitled to receive in the Spin-Off will be issued to your account as follows:

Registered stockholders: If you own your shares of GE common stock directly, either in book-entry form through an account at GE’s transfer agent (Equiniti Trust Company, LLC) and/or if you hold paper stock certificates, you are a registered stockholder. In this case, the Distribution Agent will credit the whole shares of our common stock you receive in the Spin-Off by way of direct registration in book-entry form to a new account with our transfer agent. Registration in book- entry form refers to a method of recording share ownership where no physical stock certificates are issued to stockholders, as will be the case in the Spin-Off. You will be able to access information regarding your book-entry account for shares of our common stock at www.shareowneronline.com by calling 1-888-999-0031.

“Street name” or beneficial stockholders: If you own your shares of GE common stock beneficially through a bank, broker, or other nominee, the bank, broker, or other nominee holds the shares in “street name” and records your ownership on its books. In this case, your bank, broker, or other nominee will credit your account with the whole shares of our common stock that you receive in the Spin-Off on or shortly after the Distribution Date. We encourage you to contact your bank, broker, or other nominee if you have any questions concerning the mechanics of having shares held in “street name.”

See “The Spin-Off—When and How You Will Receive Our Shares” for a more detailed explanation.

 

Q:

If I sell my shares of GE common stock on or before the Distribution Date, will I still be entitled to receive shares of our common stock in the Spin-Off?

A: If you sell your shares of GE common stock before the Record Date, you will not be entitled to receive shares of our common stock in the Spin-Off. If you hold shares of GE common stock on the Record Date and decide to sell them on or before the Distribution Date, you may have the ability to choose to sell your GE common stock with or without your entitlement to receive our common stock in the Spin-Off. You should discuss the available options in this regard with your bank, broker, or other nominee. See “The Spin-Off—Trading Prior to the Distribution Date.”

 

Q:

How will fractional shares be treated in the Spin-Off?

A: The Distribution Agent will not distribute any fractional shares of our common stock in connection with the Spin-Off. Instead, the Distribution Agent will aggregate all fractional shares into whole shares and sell the whole shares in the open market at prevailing market prices on behalf of GE stockholders entitled to receive a fractional share. The Distribution Agent will then distribute the aggregate cash proceeds of the sales, net of brokerage fees, transfer taxes and other costs, pro rata to these holders (net of any required withholding for taxes applicable to each holder). See “The Spin-Off—Treatment of Fractional Shares” for a more detailed explanation of the treatment of fractional shares. The receipt of cash in lieu of fractional shares generally will be taxable to the recipient GE stockholders for U.S. federal income tax purposes as described in the section entitled “Material U.S.

 

vii


Table of Contents

Federal Income Tax Consequences of the Spin-Off.” The Distribution Agent will, in its sole discretion, without any influence by GE or us, determine when, how, through which broker-dealer and at what price to sell the whole shares of our common stock. The Distribution Agent is not, and any broker-dealer used by the Distribution Agent will not be, an affiliate of either GE or us.

 

Q:

What are the U.S. federal income tax consequences to me of the Spin-Off?

A: GE has received a private letter ruling from the Internal Revenue Service (the “IRS”) to the effect that, among other things, the Spin-Off, will qualify as a transaction that is tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the “Code”). Completion of the Spin-Off is conditioned on GE’s receipt of a separate written opinion from each of Paul, Weiss, Rifkind, Wharton & Garrison LLP and Ernst & Young, LLP to the effect that the Spin-Off will qualify for non-recognition of gain and loss under Section 355 and related provisions of the Code. It is expected that the Spin-Off will qualify as a transaction that is tax-free to GE and GE stockholders, for U.S. federal income tax purposes, under Sections 368(a)(1)(D) and 355 of the Code, and thus no gain or loss will be recognized by, or be includible in the income of a U.S. Holder (as defined in “Material U.S. Federal Income Tax Consequences of the Spin-Off”) as a result of the Spin-Off, except with respect to any cash (if any) received by GE stockholders in lieu of fractional shares. After the Spin-Off, GE stockholders will allocate their basis in their GE common stock held immediately before the Spin-Off between their GE common stock and our common stock in proportion to their relative fair market values on the date of Spin-Off. GE may also waive the tax opinions as a condition to the completion of the Spin-Off. GE does not currently intend to waive this condition to the obligation to complete the Spin-Off. If GE were to waive this condition, it would communicate such waiver to GE stockholders in a manner as described in “The Spin-Off—Conditions to the Spin-Off.” See “Material U.S. Federal Income Tax Consequences of the Spin-Off” for more information regarding the potential tax consequences to you of the Spin-Off. You should consult your tax advisor as to the particular tax consequences of the Spin-Off to you.

 

Q:

What will the Company’s relationship be with GE following the Spin-Off?

A: In connection with the Spin-Off, we and GE will enter into a Separation and Distribution Agreement (as defined herein) and will enter into various other agreements, including a Transition Services Agreement, a Tax Matters Agreement, an Employee Matters Agreement, an Intellectual Property Cross License Agreement, a Trademark License Agreement, and a Real Estate Matters Agreement (each, as defined herein). These agreements will provide a framework for our relationship with GE after the Spin-Off and provide for the allocation between us and GE of GE’s assets, employees, liabilities, and obligations (including its property, employee benefits, environmental liabilities, and tax liabilities) attributable to periods prior to, at, and after our Spin-Off from GE. For additional information regarding the Separation and Distribution Agreement and other transaction agreements, see “Risk Factors—Risks Relating to the Spin-Off.”

 

Q:

Who will manage the Company after the Spin-Off?

A: Led by Scott Strazik, who will be our Chief Executive Officer after the Spin-Off, our executive management team possesses deep knowledge of, and extensive experience in, our industries. Our executive management team has been closely involved in key strategic decisions with respect to the Company and in establishing a vision for the future of the Company. See “Management.”

 

Q:

What will govern my rights as a GE Vernova stockholder?

A: Your rights as a GE Vernova stockholder will be governed by Delaware law, as well as our amended and restated certificate of incorporation and our amended and restated bylaws. At the time of the Spin-Off, we expect that there will be no material differences in stockholder rights between the existing GE common stock and GE Vernova common stock other than (i) your ability for five years after the Spin-Off to elect only a particular class

 

viii


Table of Contents

of our Board subject to election in any given year (versus the ability to elect GE’s entire board of directors each year), (ii) the stockholder vote required to remove a director will be the affirmative vote of at least a majority of the voting power of our outstanding common stock (versus GE’s majority of the votes cast standard), (iii) our stockholders will be able to remove directors with or without cause following the period during which the Board is classified (versus GE’s stockholders being able to remove directors only for cause at any time), (iv) the heightened voting threshold to call a special meeting of 25% of the holders of outstanding shares of our common stock (versus GE’s 10% threshold), (v) the advance notification window for stockholder proposals and nominations, which is between 90 and 120 days prior to the first anniversary of the prior year’s annual meeting (versus GE’s advance notification window of between 120 and 150 days prior to the first anniversary of the mailing of the previous year’s proxy materials), and (vi) the exclusive forum provisions in our amended and restated certificate of incorporation, which provide that Delaware courts will be the exclusive forum for any shareholder derivative action and for certain other types of claims brought against us, and that the federal district courts of the United States will be the exclusive forum for any claims arising under the Securities Act (versus no such provision in GE’s organizational documents). For additional details regarding GE Vernova common stock and GE Vernova stockholder rights, see “Description of Our Capital Stock” and “Risk Factors – Risks Relating to Our Common Stock and the Securities Market.”

 

Q:

Do I have appraisal rights in connection with the Spin-Off?

A: No. Holders of GE common stock are not entitled to appraisal rights in connection with the Spin-Off.

 

Q:

Where can I get more information?

A: If you have any questions relating to the mechanics of the Spin-Off, you should contact the Distribution Agent at:

Equiniti Trust Company, LLC

Attn: Account Management Team

1110 Centre Pointe Curve, Suite 101

Mendota Heights, Minnesota 55120-4101

Before the Spin-Off, if you have any questions relating to the Spin-Off, you should contact GE at:

GE Investor Relations

One Financial Center, Suite 3700

Boston, Massachusetts 02111

After the Spin-Off, if you have any questions relating to GE Vernova, you should contact GE Vernova at:

GE Vernova LLC

58 Charles Street

Cambridge, Massachusetts 02141

Attention: Investor Relations

Questions and Answers about GE Vernova

The following provides only a summary of certain information regarding GE Vernova. You should read this Information Statement in its entirety for a more detailed description of the matters described below.

 

Q:

Do we intend to pay cash dividends?

A: Once the Spin-Off is effective, we will determine the optimal allocation of capital to achieve the company’s strategy and deliver competitive returns to our stockholders, including whether to pay cash dividends to our

 

ix


Table of Contents

stockholders. The timing, declaration, amount, and payment of future dividends to stockholders, if any, will fall within the discretion of our Board. Among the items we will consider when establishing a dividend policy will be the capital needs of our business and opportunities to retain future earnings for use in the operation of our business and to fund future growth. See “Dividend Policy.”

 

Q:

How will our common stock trade?

A: We have applied to list our common stock on the New York Stock Exchange under the ticker symbol “GEV.” Currently, there is no public market for our common stock. We anticipate that trading in our common stock will begin on a “when-issued” basis as early as three days prior to the Distribution Date and will continue up to and including the Distribution Date. “When-issued” trading in the context of a spin-off refers to a sale or purchase made conditionally on or before the Distribution Date because the securities of the spun-off entity have not yet been distributed. “When-issued” trades generally settle within two trading days after the Distribution Date. On the first trading day following the Distribution Date, any “when-issued” trading of our common stock will end and “regular-way” trading will begin. Regular-way trading refers to trading after the security has been distributed and typically involves a trade that settles on the second full trading day following the date of the trade. See “The Spin-Off—Trading Prior to the Distribution Date.” We cannot predict the trading prices for our common stock before, on, or after the Distribution Date.

 

Q:

Who is the transfer agent and registrar for our common stock?

 

A:

Equiniti Trust Company, LLC is the transfer agent and registrar for our common stock.

 

Q:

Are there risks associated with owning shares of our common stock?

A: Yes, there are substantial risks associated with owning shares of our common stock. Accordingly, you should read carefully the information set forth under the section entitled “Risk Factors” in this Information Statement.

 

x


Table of Contents

INFORMATION STATEMENT SUMMARY

The following summary contains selected information about us and about the Spin-Off. It does not contain all of the information that is important to you. You should review this Information Statement in its entirety, including matters set forth under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the combined financial statements and the notes thereto included elsewhere in this Information Statement. Some of the statements in the following summary constitute forward-looking statements. See “Cautionary Statement Concerning Forward-Looking Statements.”

Introduction

GE Vernova is a global leader in the electric power industry, with products and services that generate, transfer, orchestrate, convert, and store electricity. We design, manufacture, deliver, and service technologies to create a more reliable and sustainable electric power system, enabling electrification and decarbonization, underpinning the progress and prosperity of the communities we serve. We are a purpose-built company, uniquely positioned with a scope and scale of solutions to accelerate the energy transition, while servicing and growing our installed base and strengthening our own profitability and shareholder returns. We have a strong history of innovation which is a key strength enabling us to meet our customers’ needs.

The breadth of our portfolio also enables us to provide an extensive range of technologies and integrated solutions to help advance our customers’ sustainability goals. Our installed base generates approximately 30% of the world’s electricity. We support our customers’ specific efforts to electrify their economies, meet demand growth, improve reliability and resiliency, and navigate the energy transition through limiting and reducing emissions. The portfolio of equipment and services that we deliver is diversified across technology types and is adaptable based on electric power market conditions and demand.

We blend GE’s culture of innovation and technological excellence with our focus to drive electrification and decarbonization through our cultural foundation—known as the GE Vernova Way—which guides everything we do. The principles of the GE Vernova Way are Innovation, Customers, Lean, One Team, and Accountable. These principles define how we work and create value for our people, customers, shareholders, and the planet. We drive Innovation in everything we do, serve our Customers with pride and focus, and operate with a Lean mindset, focusing on safety, quality, delivery, and cost, across our operations. We act as One Team with inclusivity, authenticity, and diversity allowing us to win together, and are Accountable both individually and collectively to deliver on our purpose and commitments. These principles are embedded throughout the organization through our monthly operating reviews, employee training programs, internal communications, and in how we measure performance. We see the GE Vernova Way as a potential differentiator, as this helps ensure we deliver effective, measurable, and sustainably successful outcomes for our customers, employees, and other stakeholders.

Within GE Vernova, we have aligned our businesses, and report our financial results across three operating segments:

 

   

Our Power segment includes the design, manufacture, and servicing of gas, nuclear, hydro, and steam technologies, providing a critical foundation of dispatchable, flexible, stable, and reliable power. This segment delivers predictable and growing, long-term earnings and free cash flow from servicing our vast installed base and from growing this installed base with new equipment and services. For example, we maintain the largest installed base of gas turbines globally of 886 installed GW and 2,206 GW total across our Gas Power, Nuclear Power, Hydro Power, and Steam Power businesses within this segment.

 

   

Our Wind segment includes our wind generation technologies, inclusive of onshore and offshore wind turbines and blades. This segment benefits from secular demand tailwinds for zero-carbon power generation.

 

1


Table of Contents
 

We are pivoting our Onshore Wind strategy to focus on fewer markets, where we believe we have built and maintain competitive advantages, fewer product offerings, and increased productivity efforts, all to drive long-term profitable growth. We maintain an installed base of 117 GW of Onshore Wind and 1 GW of Offshore Wind turbines for zero-carbon power generation.

 

   

Our Electrification segment includes grid solutions, power conversion, solar and storage solutions, which we collectively refer to as Electrification Systems, and digital technologies, which we refer to as Electrification Software, required for the transmission, distribution, conversion, storage, and orchestration of electricity from point of generation to point of consumption. This segment benefits from a growing need for grid infrastructure, modernization, and reliability, as well as from the demand for new products, solutions, and services. Investment in these technologies will be critical to enabling the energy transition by connecting renewables to the grid, electrifying other carbon-intense sectors, and preserving grid resilience and reliability.

Sources of revenue for GE Vernova in 2023 were approximately split equally between the sale of products and services. About 65% of GE Vernova’s total RPO (remaining performance obligation, a measure of backlog) of $116 billion at the end of 2023, or $75 billion, was for services, with a significant portion committed under long-term contractual arrangements, providing us with enhanced levels of predictability and visibility into services revenue for years to come. Services are typically sold directly to our customers, either through long-term contractual service agreements or as individual transactions at time of service.

Services include the maintenance, replacement of spare parts, repairs, upgrades, and software subscriptions throughout the operating life of our products globally. To lead in services, we invest in inspection and repair technologies, monitoring and diagnostics capability, and plant upgrade offerings to improve the performance and operation of our installed base.

Products include the design, manufacture, and delivery of a wide range of power generating, grid hardware and software, power conversion, and energy storage products. We sell our products directly to customers or through engineering, procurement, and construction firms, where we can be either a sub-supplier or a consortium partner. Our scope of supply can range from products alone to extended plant or project development scope, which can include plant-level guarantees and/or GE Vernova having turn-key responsibilities, often shared with partners, for project development. GE Vernova has manufacturing, assembly, and component production capabilities in over 100 plants across 27 countries.

We are well-positioned to benefit from extended growth in the demand for our products and services as emerging economies focus on electrification and mature economies on further electrification and decarbonization. We expect to drive profitable growth through cost reductions, improved quality, better contracting, and higher productivity levels — all as demand accelerates. We expect to generate cash flow, fund incremental growth opportunities and increase flexibility to drive future capital allocation while maintaining investment grade ratings.

Our Industry and Business

Electricity is critical to economic progress and prosperity as well as to improve the quality of life. The International Energy Agency (the “IEA”) expects demand for electricity generation in 2040 to grow by more than 55% from 2022 levels with the natural gas, hydro, wind, nuclear, solar and storage energy sub-sectors playing a key role. This growing demand for electricity generation is driven by multiple factors. Approximately 750 million people globally lack access to electricity, and many more who do have access experience frequent, extended outages that disrupt their lives, impact their safety and security, and challenge their economic growth. Electricity use is also increasing as an alternative to fossil fuels for whole industries or sectors, such as transportation, which are currently pursuing increased electrification as a means to decarbonize. The future electric power system must meet this demand growth

 

2


Table of Contents

while incorporating new and diverse sources, preserving or improving system reliability, affordability, and sustainability. Electric power sector emissions account for approximately 40% of all human-made carbon dioxide (“CO2”) emissions in the world today and without a change to the current energy mix, global growth in demand for electricity generation would increase CO2 emissions by more than 7 billion tons annually by 2040.

GE Vernova innovates and invests across our broad portfolio of technologies to help our customers meet growing demand for electricity generation and reduce the carbon intensity of power grids and electricity supply, while maintaining or improving system reliability, affordability, and sustainability. Today, approximately 30% of the world’s electricity is generated using GE Vernova’s installed base of technologies. We intend to grow profitably through the sale of equipment needed to electrify and to decarbonize power systems, as well as by servicing this installed base for decades to come. We will continue to support customer efforts to limit or reduce emissions, and we expect to continue reducing the carbon intensity of our installed base – all while increasing the resiliency of the grid and achieving the goals of our customers, investors, and employees.

We deliver products and services that generate, transfer, orchestrate, convert, and store electricity. Our products and solutions generate electricity from various forms of energy or fuels, including wind, hydro, solar, nuclear, natural gas, and steam. We have offerings that transfer and orchestrate electricity reliably, safely, and securely from generation sources to consumers, over various electricity grids or systems – using grid-related software, hardware, automation, and controls. We develop and deliver technologies that convert electricity across grid systems, such as from alternating to direct current (AC to DC) or vice versa (DC to AC); from one voltage level or frequency to another; and into other forms of energy including mechanical, thermal, and chemical. We also develop and deliver solutions that enable customers to store electricity for use to meet peak demand, through products such as pumped hydro and integrated battery energy storage systems.

 

LOGO

GE Vernova’s products, services, and pipeline of investments in leading edge technologies help utility, commercial, and industrial customers avoid, reduce, or capture greenhouse gas emissions produced when generating electricity. Use of carbon-free generation technologies like wind, solar, hydro, and nuclear helps avoid greenhouse gas emissions. Power plant efficiency upgrades and the increasing use of lower carbon-intense fuels like hydrogen in gas turbines can help our customers reduce their greenhouse gas emissions compared to their current state. We also develop integrated solutions that capture carbon for use or sequestration, rather than releasing carbon into the atmosphere and contributing to climate change.

The global electric power industry landscape is subject to volatility driven by quickly changing economic outlooks, increasing geopolitical tensions, and energy policy uncertainty. Renewables growth may also be impacted by transmission capacity constraints, site permitting, and electrical interconnection delays, project constraints driven by reduction in available land and/or increased land costs, growing importance of biodiversity protection, and security of supply concerns on critical minerals. The broader wind industry is further challenged with fleet quality and reliability issues, with the offshore wind industry recently facing high project execution risks and limited profitability at current price levels.

 

3


Table of Contents

In addition to these industry pressures, some of our business units experienced operating losses in the recent past attributed to a variety of challenges, including fleet quality issues, pricing, execution challenges on complex projects, a lack of commercial underwriting terms that protect for inflationary pressures, and not enough standardization of products. Each of the business units facing these challenges has made significant progress on their paths towards profitability over the past several quarters. Strengthened operational rigor and commercial discipline together with actions to reduce structural and operating costs—by leveraging lean business practices—are contributing to the turnaround and improvement seen in several of these businesses over the last few periods.

GE Vernova maintains a global reach and scale necessary to lead the energy transition to an electrified and decarbonized future, with approximately 80,000 employees, including our field services associates, and a local presence in more than 100 countries. We derived approximately 71% of our 2023 revenues from OECD countries—and geographically 47% of our revenue from the Americas, 25% from Europe, 16% from Asia and 12% from the Middle East & Africa. We deliver products and services into large, growing segments tied to the energy transition and we estimate the addressable market we serve was approximately $265 billion in 2022. Overall, industry experts conservatively anticipate spending in the power and end-use sectors will increase from $1.4 trillion per year in recent years to more than $2.4 trillion per year in the 2030s. We serve the world’s largest utilities – many of whom serve the OECD or developed markets – that today focus heavily on decarbonization efforts.

LOGO

LOGO

Globally, the IEA estimates the world will need 55% more generation of electricity in 2040 than it did in 2022 and that electricity levels required to reach economy-wide net zero emissions would need to more than double from 2022 levels, which will drive a shift in generation technology mix, improved resilience and security of power grids, and modernization / digitalization of the existing infrastructure.

 

4


Table of Contents

Carbon-free generation technologies including wind, solar, hydro, and nuclear are expected to account for nearly 90% of new capacity addition orders over the next ten years, with a balance of many generation sources likely required to navigate the energy transition towards a more sustainable power sector while preserving system reliability and affordability. Wind and solar combined accounted for 12% of all electricity generated in the world in 2022. By 2030 many experts expect this figure will reach approximately 25%, and in scenarios that achieve net zero emissions may reach 70% percent by 2050. Nuclear power generation is expected to grow, with small modular nuclear reactor (“SMR”) technology expected to be operative by 2030, assuming a critical role in the sector. Hydro power offers emission-free power output and we expect it will play an important role in the evolving energy mix. Besides benefiting from increasing customer demand for wind equipment and the need to service this equipment, we also expect to support customers through service of their existing nuclear and hydro plants and sales of incremental new units.

Natural gas power plants will continue to play a vital role in the energy transition through the provision of dependable, dispatchable, and flexible power, helping to address the intermittency of renewable energy sources. Approximately 22% of the world’s electricity in 2022 was generated using natural gas. We expect to continue servicing our large existing and growing our installed base of gas turbines. In the coming years, we expect to expand this business to accelerate decarbonization by retrofitting gas turbines to use hydrogen and/or adopting them for use in carbon capture systems.

As we serve these markets, GE Vernova will continue to build on a rich heritage of technology leadership and innovation, with more than 140 years of experience dating back to Thomas Edison’s first commercial power plant in the United States (1882). We continue to be an innovation leader, with approximately 36,000 patents and patent applications filed in approximately 60 countries. Other significant innovations developed by us include:

 

   

the world’s first licensed nuclear power plant (1957),

 

   

the world’s first F-class gas turbine (1990),

 

   

wind blades for the world’s first offshore wind farm (1991),

 

   

the world’s first mobile (trailer-mounted) aeroderivative gas turbine for power generation (1996),

 

   

the world’s first wind turbines with low-voltage-ride-through capability (2003),

 

   

multiple world records for most efficient gas combined cycle plant (2016), and

 

   

North America’s first commercial award for a small modular nuclear reactor (2022).

Investment Highlights

GE Vernova is an industry leader creating a more reliable and sustainable electric power system by providing a breadth of products and services necessary to increase electrification and decarbonization. We serve customers in accelerating the global energy transition to improve the quality of life and combat climate change. Our products and services will help reduce overall global emission levels by enabling our customers to limit emissions from power generation and by reducing the carbon intensity of our installed base.

We expect increased demand for many of our products and services, along with our focus on lean to drive productivity improvements and cost reductions, to deliver Adjusted EBITDA and free cash flow growth—creating significant value for customers and shareholders. Expanding electrification, increasing global urgency to combat the impacts of climate change, and a greater focus on energy security will stimulate broader investment in the electric power sector, potentially leading to rising demand for GE Vernova’s products, services, and solutions. A multi-decade inflection of global spend in the energy transition end-markets is expected to be driven by technological advancements, government policies, corporate strategies, and individual efforts to increase electrification of the economy and to reduce carbon emissions. We will support the global transition to renewable energy sources by providing a broad range of product and service offerings needed by public and private utilities, grid operators, governments, and large electricity users.

 

5


Table of Contents

As the energy transition accelerates and our cost structure improves, we expect GE Vernova to deliver revenue growth combined with improving Adjusted EBITDA and free cash flow. We expect to benefit from:

 

   

Strong long-term industry demand growth driven by increasing electrification and decarbonization trends. We see significant opportunities for revenue growth across our business segments, as electrification trends drive a need for new firm and quick-starting electricity generation, and decarbonization efforts require reduced or zero emission generation sources. The electricity grid also needs significant investment to connect new generation and to enhance reliability. Forecasts from the IEA and other third parties estimate the world will need 55% more generation of electricity in 2040 than it did in 2022 and that electricity levels required to reach economy-wide net zero emissions would need to more than double from 2022 levels. We believe this need will drive increased demand for our products and services as equipment needs grow and customers need to maintain or improve performance from existing assets in order to supply reliable, secure electricity. This need includes investments in both hardware and software to manage a more complex grid, especially given the rise in supply of renewable energy going forward. Government policies, such as the Inflation Reduction Act of 2022 (the “IRA”) in the United States, the Green Deal Industrial Plan in Europe, and emissions trading frameworks in both Europe and the United States, serve as tailwinds for our customers and suppliers like GE Vernova to fund the growth in low or zero emission capacity and the grid required to deliver this electricity. Our large commercial and industrial customers as well as residential consumers, place a heightened importance on decarbonizing their electricity use, driving incremental demand for GE Vernova’s products and services. We provide products and services through the Power, Wind and Electrification segments that served addressable market sizes of $110 billion, $80 billion, and $75 billion, respectively, in 2022. Overall, industry experts conservatively anticipate spending in the power and end-use sectors to increase from $1.4 trillion per year in recent years to more than $2.4 trillion per year in the 2030s.

 

LOGO

 

 

LOGO

 

6


Table of Contents
   

Significant, long-term customer relationships with many of the largest customers in select key markets. Our technologies and services help electrify some of the fastest growing markets and help decarbonize those areas that relied heavily on less efficient and more emissions-intensive generation fleets. We supply and service many of the world’s largest utilities and grid operators across multiple continents and support our customers with solutions across the energy trilemma (as described further below) tailored to their individual situation and circumstances. For example, our ten largest generation customers by installed capacity in Europe and the United States generate approximately 40% of the electricity in these markets, respectively. Our deep, long-standing relationships with customers are a competitive advantage and our track record gives customers confidence in partnering with us to implement new technology.

 

   

Lean as a pillar of the GE Vernova Way and how we will drive both long-term breakthroughs and continuous improvements that enhance profitability. We started our lean journey more than five years ago as GE and have progressed to the point that lean is now part of our culture. We are applying lean to all aspects of our businesses to drive growth, innovation and results for our customers. For example, lean was an integral lever of the Gas Power transformation that started in 2018, driving out $1 billion in fixed costs while improving the customer experience. The Gas Power business applied lean methods in executing its strategy and transforming its long-term performance. We also realized, utilizing lean and other efforts implemented over the last three years, significant cost savings in both our Electrification segment (approximately $300 million) and within our Onshore Wind business (approximately $500 million) – partially through improved operations and streamlined organizational structures. The application of lean in our Gas Power, Onshore Wind, and Grid businesses has already created significant value. Within GE Vernova we see substantial opportunity for additional competitive differentiation and value creation by using and continuously improving our lean rigor across our portfolio of businesses. After the Spin-Off, our company will continue to utilize and evolve lean through our GE Vernova operating method to realize our strategic initiatives while simplifying and transforming our business into a more efficient, highly focused company.

 

   

Strengthening revenue and cost fundamentals will enable the Company to fund growth opportunities and maintain flexibility for capital allocation. Increasing demand for our products and services will lead to revenue growth in the coming years. Continued use of our lean operating method and culture will drive lower costs, improving profitability. Given limited expected leverage levels, we anticipate generating increasing levels of free cash flow. This cash flow will enable our efforts to maintain a strong balance sheet, obtain and maintain investment grade ratings, invest in new products and services, fund cost-reduction opportunities that create long-term savings, evaluate and consider targeted value-added acquisitions, and provide flexibility for potential future capital allocation.

 

   

A Power segment, with durable, growing earnings and cash flow from its large installed base. Services are a key portion of the Power segment, a recurring and high-margin revenue stream that in 2023 contributed 68% of total segment revenue. Because the average life of our large heavy-duty gas turbine fleet service contracts in the Gas Power business, the largest business in the Power segment, is over ten years, we have revenue visibility for many years ahead and we continue to have service contract customer renewal rates of approximately 70%. Our services capabilities help improve the economics, the efficiency, the reliability, and the life-span of customer-owned generating units. We view our long-term services agreements as key elements for the continued success of our Gas Power business, which maintains a leading global scale and an installed base of approximately 7,000 turbines. We continue to implement technology enhancements to deliver improved service, reducing the outage time for gas power plants and leading to increased MWh output by customer facilities while also reducing our costs to deliver on outage management initiatives. We maintain annual service contracts for over 25% of the units in our gas installed base, while also delivering outage services or parts – as part of our transactional services offerings – to a large portion of those natural gas units not under long-term contracts. We also provide services to nuclear power plants, hydro power facilities, and steam power turbines. As a result, we expect revenue and EBITDA from our Power segment to rise over time with improved margins due to increasing product sales and the

 

7


Table of Contents
 

continued growth in our services, as well as improvements in our cost structure and productivity. As coal generation still comprised 36% of total generation in 2022, we believe there will be opportunities to replace coal with other, less carbon intensive resources, which in turn will create opportunities for GE Vernova to sell products and services across our Power businesses.

 

   

A Wind segment with significant margin expansion and long-term revenue growth ahead. Our Wind segment remains one of the largest wind products, parts, and service providers. In the onshore wind industry, we expect to increasingly focus our efforts on the attractive and growing North American markets given the demand tailwinds driven by the IRA, while still targeting opportunities of profitable high-margin product sales outside of North America. We believe our strong manufacturing capacity, our supply chain capabilities, and our deep customer relationships provide competitive advantages in these markets. Additionally, we continue to focus on improving the cost structure and driving better quality and performance across the installed base and new units. In the relatively nascent and fast-growing offshore wind industry, in the coming years we expect to improve the quality of our backlog and overall business profitability. As the industry matures, we expect the existing technologies and supply chain to improve, and GE Vernova to remain focused on product quality, processes reliability, and improved underwriting. We will be highly disciplined in the pace of new product introduction, while being selective in adding new projects to our backlog if we believe they provide sufficient pricing, profitability, and improved risk mitigation in line with our expected returns.

 

   

An Electrification segment positioned for higher, more profitable growth driven by increasing global demand for our equipment, systems, software, and services. Our Electrification segment provides much of the necessary products, services, and software to manage, transfer, and orchestrate electricity over the power grid – each a key offering that enables the energy transition as renewable capacity coming online accelerates globally. Our high voltage direct current (“HVDC”) technology offerings support the expansion of major new renewable projects, including offshore wind, and we are already seeing rapidly rising RPO levels from recently announced HVDC project awards in Europe. Our detailed engineering and design capabilities as well as technology advancements help decarbonize the operations of our larger industrial customers, which include energy intensive liquified natural gas (“LNG”) facilities, marine fleets, chemical, steel facilities, and higher tech data centers. Our digital and software applications and business have become more critical to the grid as they help ensure reliable and secure power, and they move electricity from variable renewable resources, often in remote locations, to demand centers.

 

   

Our continued efforts in driving innovation – creating new product and service opportunities that could enhance long-term profitable growth. Our company maintains a long, rich history of advanced research and technology development. We continue to invest, often jointly with third parties, to develop and deploy new technologies that support customers in the energy transition. We remain committed to creating, improving, and providing solutions for customers by leading in the development of key offerings that can help electrify and decarbonize the global economy. Innovation occurs within our businesses, as well as within the company’s Advanced Research team (as defined herein), where we develop and commercialize new technologies that can improve electrification and decarbonization efforts. With partners, including governments helping to finance our research, our strong, interdisciplinary Advanced Research team focuses on key technologies like hydrogen, carbon capture, software, energy storage, and other emerging and critical areas necessary to facilitate the energy transition in the coming years. We maintain approximately 36,000 patents and patent applications on various technologies, and our research center continues to utilize external funding and disciplined oversight of capital deployment to evaluate, test, and successfully prepare emerging technologies for commercialization.

 

   

An experienced leadership team. Our management team consists of leaders with decades of experience working in key roles within publicly traded companies, as well as leaders with deep and diverse subject matter expertise across our industries’ end-markets, products, and services. This team will lead GE Vernova as the industry undergoes dramatic change and navigates the energy transition. Our team remains focused on maintaining and creating a culture that utilizes lean and focuses on improving safety, quality, delivery, and cost to deliver value to customers, stakeholders, and employees.

 

8


Table of Contents

Our Company Strategy

GE Vernova is uniquely positioned as the industry leader to drive the energy transition forward, supplying customers with products and services necessary to deliver more reliable, affordable, and sustainable electricity. We expect significant growth in demand for the offerings we provide to the electricity sector. We anticipate improving our cost structure and productivity levels as we continue to meet this secular demand with existing and new products and services. We will focus on generating revenue, Adjusted EBITDA, and free cash flow growth, which are the primary key financial indicators we believe will drive value creation for our shareholders.

Our company strategy is focused on:

 

   

Delivering on global sustainability, by developing, providing, and servicing technologies that enable electrification and decarbonization. Sustainability is core to our long-term strategy and tactics. Our products and services help governments, utilities, developers and other industries drive sustainable economic growth via increased electrification – often by providing technologies that power markets. We expect our products and services to help improve electric reliability and resilience as well as lower the carbon intensity of our own installed base and reduce our Scope 3 emission levels. Longer term we anticipate enabling greater reductions in emissions levels by further developing and commercializing emerging technologies such as small modular nuclear reactors, natural gas with either hydrogen or carbon capture capabilities, or direct air capture products. Additionally, we expect to improve our own Scope 1 and Scope 2 emission levels, as well as other key sustainability metrics.

 

   

Maintaining and enhancing strong relationships with many of the leading and largest utilities, developers, governments, and electricity users. We serve and maintain long-standing relationships with many of the largest entities across conventional generation, renewables, transmission, software, and other key portions of the electricity industry, which enables us to provide multiple different products and services from across our businesses to existing customers. Customers continue to rely on our partnerships with them to help them deliver reliable, affordable, and more sustainable electricity. These deep, long-standing relationships are a competitive advantage and enable us to successfully introduce both new and existing products and services to our existing customers.

 

   

Servicing the existing installed base and delivering new technologies and processes, which improve customer outcomes while driving increased profitability and cash flow. The world derives approximately 30% of its electricity generation from an installed base of GE Vernova products, technologies, and solutions. We service a substantial share of this installed base, including approximately 25% of our gas installed base, which delivers electricity that our customers rely upon and where these long term contracts and arrangements create a reliable, visible source of revenue for GE Vernova. The heavy-duty gas turbines that are still under servicing contracts in our gas installed base maintain an average contract life of over ten years. Our continued innovation, process improvement efforts, and use of advanced technology will benefit customers (especially in areas like reduced outage times, reduced carbon-intensity, or better operating performance), while lowering our costs to service these assets, leading to margin expansion for GE Vernova. We expect to benefit from significant demand growth for our equipment, which we anticipate will grow our installed base and lead to longer term growth in service revenues.

 

   

Improving margins and lowering risk through better underwriting. We are focused on shortening our bid cycles to reduce the risk of cost escalation, as well as improving protections embedded in customer agreements to protect against inflation. We maintain a heightened focus on risk mitigation and management — tactics we utilized successfully to improve results in our Gas Power business and more recently, in our Grid and Onshore Wind businesses, and anticipate doing so across our remaining businesses. Pricing and margins on new orders across multiple product lines such as Onshore Wind, transmission equipment from our Electrification segment, and other areas continue to improve, both as a result of favorable supply and demand trends as well as our own heightened focus on risk management. In addition, we continue to work to improve the risk profile embedded in new service contracts.

 

9


Table of Contents
   

Streamlining our product portfolio to focus on core workhorse products, which will improve both cost and quality going forward. We continue to reduce the complexity of new sales offerings and increased standardization of products that we provide to customers. For example, in our Onshore Wind business, we are implementing a more simplified product suite (i.e., what we call “workhorse products”) that enables us to deliver better performing assets produced at scale and at lower costs, which improves our margins, especially for new equipment sales. In our Onshore Wind business, workhorse products are expected to comprise approximately 90% of our wind turbine shipments in 2024.

 

   

Using lean to improve our cost structure and productivity levels across our business and corporate functions. Lean is one of the key pillars of the GE Vernova Way, and will be embedded in our culture as an independent company. Lean, deployed through the GE Vernova operating method, drives our business strategies and safety, quality, delivery, and cost improvements to achieve growth, innovation and results for our customers. The leadership team uses monthly operating reviews focused on developing breakthrough capabilities linked to strategy and drives continuous improvement on Key Performance Indicators (“KPIs”) using kaizens (which are focused week-long workshops creating immediate results), problem solving and management of change. Our leadership teams are held accountable for going to Genba (which refers to going to the actual place work is performed) and the daily management of escalations to help our teams apply and enhance the standards and ensure results.

 

   

Innovating and investing, along with third parties, in new offerings and technologies that will help customers electrify and decarbonize the world. Technological innovation remains integral to our corporate history and future, as the world will need new solutions to drive the changes required to affect the energy transition. Both within our businesses, as well as at Advanced Research, we continue to invest efficiently, utilizing both our own cash flow and funding from third parties, to develop or commercialize and scale new technologies. We focus on near-term advancements, such as with our grid-related software solutions, and long-term breakthrough technological developments, such as carbon capture or small modular reactors, to help our customers deliver for the economies and markets they serve. Our investments allow us to continue developing new solutions to help orchestrate the efficient generation, transmission, and use of electricity, as well as focusing on new energy storage solutions that can reduce the intermittency of variable generation sources. We believe our work on hydrogen and carbon capture-related innovation will also help to enable decarbonization of existing and new fossil fuel generation sources, while also continuing to develop and deploy small modular reactor designs – all necessary long-term needs for our customers to deliver reliable baseload power. Innovation leadership in the power sector remains key, but with a heightened focus on co-funding opportunities to drive this advancement forward and to deliver profitable new products or services to market.

 

   

Allocating capital as a whole and within our various businesses – focused on generating cash flow to enable attractive shareholder returns. As a more focused, independent, stand-alone company with a broad range of businesses and offerings, we intend to focus primarily on maintaining a strong balance sheet and low leverage, with ample liquidity and cash flow to maintain our industry leading positions and to grow our various businesses. We expect to focus on growing free cash flow, with each of our businesses effectively earning above their cost of capital over the medium and long-term. We believe that multiple businesses within GE Vernova are poised for significant growth ahead, due to demand tailwinds or our own cost improvement efforts. GE Vernova plans to maximize value creation opportunities for businesses that maintain attractive potential growth, generate high returns or deliver ample cash flow, while consistently evaluating the appropriate strategy, investment levels and ownership structures for those with lower or less attractive returns and cash flows. Over time, we anticipate delivering shareholder value by investing in growth businesses, increasing our free cash flow and utilizing our cash flow for organic and inorganic value creating growth, as well as for increasing flexibility for future potential capital allocation, while maintaining investment grade ratings.

 

10


Table of Contents

Our Competitive Strengths

GE Vernova is well-positioned for success, given our extensive history and track record of supplying governments, utilities, and developers with critical innovations across different electric power technologies. We provide the electric power sector with a broad array of electricity-related solutions that will help customers accelerate the energy transition. With average annual economic spend in the electric power sector estimated at $2 trillion in the 2023-2030 timeframe, we believe we maintain a host of competitive strengths that will enable GE Vernova’s continued growth:

 

   

The sizable, approximately 2,200 GW installed base of our products and technologies delivers critical electricity that our customers rely on, while providing high-margin services revenue and cash flow with significant long-term visibility. The scope of our installed base leads to economies of scale that enable cost and technological advantages for our business, both in the servicing of these units and in the marketing or delivery of new products or solutions to existing customers. We further invest, on behalf of customers, in the installed base to maintain or enhance our customers’ fleet and asset reliability, while reducing our own costs via process improvements and technology enhancements to service these assets. Our installed base provides significant competitive advantages, given that it is the world’s largest installed base of gas turbines and a sizable base of wind turbines. The installed base of GE Vernova’s technologies helps generate approximately 30% of global electricity, and we continue to provide services for many of these assets today. A significant portion of revenue comes from services we provide – approximately 45% in 2023 and 47% in 2022. As of December 31, 2023 and 2022, services comprised approximately 65% and 70% of RPO, with services generally provided either under long-term contracts or through transactional services that may include parts, repairs, outage services, and other offerings. Continued growth in our installed base should lead to increases in our services and related RPO which will drive long-term revenue growth.

 

   

We provide a breadth and depth of offerings that our customers need to generate and deliver power over the coming decades. We supply and service most of the electric generation-related technology segments (gas, wind, nuclear, hydro, solar, and steam) and deliver key transmission and other grid-related products necessary for power companies and large commercial and industrial customers to both decarbonize their systems and sites, while improving their reliability.

 

   

We maintain long-standing and deep customer relationships, providing a host of products and services, to many of the largest utilities and power developers. Our ten largest generation customers by installed capacity in Europe and the United States generate approximately 40% of the electricity in these markets, respectively. We derive approximately 71% of our revenues from customers in the OECD economies. Going forward, in the OECD or developed markets where our technologies help customers reduce emissions in the communities they serve, we anticipate greater focus by customers on decarbonization. Increased decarbonization efforts in developed economies is expected to yield demand growth for many of GE Vernova’s offerings across our three segments. In the developing markets, population and GDP growth drives higher power demand and a need for new products and equipment.

 

   

We embed lean deeply into our culture to accelerate our strategy and differentiate GE Vernova versus our competitors. All manufacturing companies have similar inputs of team members, materials, and machines that they use to create products via their global supply chains. We will differentiate ourselves from other manufacturing companies that support the energy transition by using lean to drive enterprise-wide strategic breakthroughs and continuous improvements. Our method identifies inefficiencies and defines a structured way to solve problems, continuously improve our processes, and drive customer, employee, and other stakeholder satisfaction. By utilizing lean, we have driven real performance improvement and lower costs across several of our larger businesses, including in Gas Power, in Electrification, and in Onshore Wind more recently. While some of the GE Vernova businesses, such as Gas Power, Onshore Wind, and Grid Solutions, made and continue to implement sizable improvements in cost, productivity, or cycle times by applying lean, we anticipate broader application of lean across all of GE Vernova to be a competitive advantage.

 

11


Table of Contents
   

Our continued innovation efforts will help customers deploy new solutions to electrify and decarbonize their electricity systems, especially critical in a world seeing rapid growth in power demand. We remain a global leader in the development of new technologies – innovation occurs within Advanced Research and as part of the annual investment each of our businesses make, funded with our own operating cash flow and through investments by third parties. Continued technological advancements in natural gas turbines have and will continue to drive reduced emissions as well as higher and quicker levels of output. We expect to see increased longer term demand for our hydrogen and carbon capture technologies, key to reducing or eliminating emissions from fossil fuels. Our turbines in the Wind segment are expected to drive higher zero carbon output from our customers’ facilities, while our high voltage transmission-related product offerings will enable utilities to deliver electricity in scale across large geographies. We continue to develop software to enhance our position as the market leader in grid-related software.

Our Segments

Our Power Segment

GE Vernova’s Power segment includes our Gas Power, Nuclear Power, Hydro Power, and Steam Power businesses that provide products and services enabling a critical foundation of dispatchable, flexible, stable, and reliable power on global power grids throughout the world. These technologies accounted for 85% of global electricity generation in 2022 and are used by utilities, independent power producers and industrial customers mainly to provide firm baseload power in bulk, as well as intermediate or peaking power, to customers and power systems. Our technologies comprise a large installed base of more than 2,000 GW that requires significant ongoing maintenance and services to maintain and extend the useful life as well as to improve output. We estimate that our Power segment served an addressable market of $110 billion in 2022, a market expected to grow at low single digit rates through 2030, inclusive of new units and services.

 

 

 

LOGO

 

12


Table of Contents

Service revenues accounted for approximately 68% of GE Vernova’s Power segment revenues in 2023 and this segment reported services RPO of $59 billion as of December 31, 2023 and $57 billion as of December 31, 2022. Services include long-term contractual service agreements as well as transactional business for spare parts, repairs, and services in support of maintenance outages on power-generating products. For example, in our Gas Power business, the average remaining length of more than 70% of existing long-term service agreements is over 10 years and we have approximately 70% renewal rates. Services can include upgrades to existing products to improve performance, extend plant life or outage cycles, reduce emissions, and enhance flexibility to complement variable renewables. A sizable portion of our customers in our Power segment continue to renew contracts, providing durable and growing revenue and cash flow. We expect margin enhancement potential in our services business due to price escalation and improving productivity.

Our Wind Segment

GE Vernova’s Wind segment includes our Onshore Wind and Offshore Wind businesses as well as our LM Wind Power business that designs, produces, and tests wind turbine blades. We sell wind turbines to utilities, renewable developers, independent power producers, and commercial customers to provide carbon-free power generation with no fuel expense. GE Vernova designs and produces onshore and offshore turbines for U.S. and global customers. We design, produce, and validate turbine blades for use on our wind turbines, as well as produce blades for sale to third-party OEMs. Generation from wind accounted for 7% of global electricity generation in 2022. GE Vernova has an approximate installed base of onshore wind turbines totaling 117 GW of installed capacity and has the largest installed base of onshore turbines in the United States according to the American Clean Power Association. More than 80% of revenues are generated in OECD countries and GE Vernova led onshore U.S. installations for the last five years. We estimate the addressable portion of the total wind industry that can be served by our products and services was $80 billion in 2022 and is expected to grow at high single digit rates through 2030, inclusive of new units and services.

 

 

LOGO

Equipment sales accounted for 85% of total segment revenues in each of 2023 and 2022, respectively. Equipment sales in the Wind segment include new turbines as well as repowerings. Wind turbine repowering involves replacing older units with new, higher capacity turbines or retrofitting them with more efficient components, each of which significantly increases wind farm production and extends wind farm life with a much lower capital investment than is required for a new wind farm. On average, wind turbines repowered by GE Vernova have seen a 20% increase in annual energy production.

Service revenues accounted for approximately 15% of GE Vernova’s Wind segment revenues in each of 2023 and 2022, respectively, and this segment maintained a $13 billion and $14 billion services RPO at the end of 2023 and 2022, respectively. Services include long-term flexible service agreements as well as transactional

 

13


Table of Contents

business for spare parts, repairs, and services in support of planned maintenance outages on wind turbines. Services can also include upgrades and refurbishment of wind turbines for life extension and improved performance. GE Vernova’s flexible service agreements include continuous wind asset monitoring and diagnostics services 24 hours a day, 365 days a year from technicians based at four customer support and remote operations centers around the globe.

Our Electrification Segment

GE Vernova’s Electrification segment includes our Grid Solutions, Power Conversion, and Solar & Storage Solutions businesses, which we collectively refer to as Electrification Systems, and our Digital business, which we refer to as Electrification Software, that provide products and services required for the transmission, distribution, conversion, storage, and orchestration of electricity from point of generation to point of consumption. Several of the key offerings in this segment, for example, include our high voltage direct current transmission, or HVDC, products, power transformers and our grid automation related products and services. The Electrification segment had a served addressable market of $75 billion in 2022. We anticipate that significant grid investment will be required to meet growing energy demands, improve system resilience, integrate variable renewables, and upgrade and digitize aging infrastructure, creating opportunities for GE Vernova products and services.

Multiple dynamics are affecting the grid of the future. Increasing generation from variable and intermittent renewables must be addressed to preserve system reliability. Additionally, the growth of inverter-based technologies like wind and solar challenge system inertia and stability. The power grid, which was historically designed for one-way flow of electricity from centralized plants, must also be augmented to accommodate two-way flows from a highly distributed network of generation and storage solutions. Software and data analytics are becoming critical for grid management and resilience to balance highly-variable demand for and supply of electricity generation and to protect the grid from cybersecurity risks.

 

 

LOGO

Equipment revenues accounted for approximately 71% and service revenues accounted for approximately 29% of GE Vernova’s Electrification segment revenues in 2023 and approximately 68% and 32%, respectively in 2022. This segment maintained a $13.2 billion equipment RPO and a $3.1 billion services RPO at the end of 2023 and a $6.4 billion equipment RPO and a $2.6 billion services RPO at the end of 2022. Our Electrification segment delivered positive full year segment EBITDA of $234 million in 2023, driven by higher volume, better pricing, and a multi-year effort to reduce costs. Services include long-term service agreements as well as transactional business for spare parts, repairs, and services in support of maintenance outages on grid and electrification products. Services can include upgrades to existing products to improve performance, extend life, and enhance grid flexibility and resilience. Services can also include subscription services for digital offerings.

 

14


Table of Contents

Summary of Risk Factors

An investment in our company is subject to a number of risks. These risks relate to our business, industry dynamics, laws and regulations, the Spin-Off, and our common stock, and the securities market. Any of these risks and other risks could materially and adversely affect our business, results of operations, cash flows, and financial condition and the actual outcome of matters as to which forward-looking statements are made in this Information Statement. Please read the information in the section captioned “Risk Factors” of this Information Statement for a description of the principal risks that we face. Some of the more significant challenges and risks we face include the following:

 

   

We provide complex and specialized products, solutions, and services, and we could be adversely affected by actual or perceived quality issues or safety failures.

 

   

If our ongoing efforts to achieve our anticipated operational cost savings and implement initiatives to control or reduce our operating costs are not successful, our financial results and cash flows may be adversely affected.

 

   

Significant disruptions in our supply chain, including the high cost or unavailability of raw materials, components, and products essential to our business, and significant disruptions to our manufacturing and production facilities and distribution networks could adversely affect our future financial results and our ability to execute our operations on a timely basis.

 

   

Our failure to manage customers relationships and customer contracts could adversely affect our financial results.

 

   

Our ability to obtain and maintain our investment grade credit ratings could affect our ability to access capital, could increase our interest rates, and could limit our ability to secure new contracts or business opportunities.

 

   

The strategic priorities and financial performance of many of our businesses are subject to market and other dynamics related to decarbonization, which can pose risks in addition to opportunities.

 

   

There are risks associated with our joint venture arrangements, consortiums, and similar collaborations with third parties for certain projects, which could impose additional costs and obligations on us.

 

   

Any reductions or modifications to, or the elimination of, governmental incentives or policies that support renewable energy and energy transition innovation and technology could have a material adverse effect on our business, results of operations, cash flows, financial condition, and prospects.

 

   

Our business is exposed to risks associated with the volatile global economic environment and geopolitical conditions.

 

   

We operate in highly competitive environments. Our failure to compete successfully could adversely affect our results of operations, cash flows, and financial condition.

 

   

Our future success will depend, in part, on our ability to develop and introduce new technologies.

 

   

Failure to meet ESG expectations or standards or achieve our ESG goals could adversely affect our business, reputation, results of operations, cash flows, and financial condition.

 

   

Our operations are subject to various environmental, health and safety laws and regulations, and potential litigation, and non-compliance with or liabilities under such laws and regulations could result in substantial costs, fines, sanctions and claims.

 

   

We are subject to laws and regulations governing government contracts, public procurement, and government reimbursements in many jurisdictions, and the failure to comply could adversely affect our business.

 

15


Table of Contents
   

If we are unable to attract and retain highly qualified personnel, we may not be able to execute our business strategy effectively and our operations and financial results could be adversely affected.

 

   

We may be unable to obtain, maintain, protect, or effectively enforce our intellectual property rights.

 

   

Increased cybersecurity requirements, vulnerabilities, threats, and more sophisticated and targeted computer crimes pose a risk to our systems, networks, products, solutions, services, and data, as well as our reputation, which could adversely affect our business.

 

   

Failure to comply with evolving data privacy and data protection laws and regulations or to otherwise protect personal data in the jurisdictions in which we operate, may adversely impact our business and financial results.

 

   

Volatility in currency exchange rates may adversely affect our financial condition, results of operations and cash flows.

 

   

We may be unable to achieve some or all of the benefits that we expect to achieve from the Spin-Off.

 

   

No market for our common stock currently exists and an active trading market may not develop or be sustained after the Spin-Off. Following the Spin-Off, our stock price may fluctuate significantly, and there can be no assurance that the combined trading prices of our and GE’s common stock would exceed the trading price of GE common stock absent the Spin-Off.

 

   

Substantial sales of our common stock may occur in connection with the Spin-Off, or in the future, which could cause our stock price to decline or be volatile.

The Spin-Off

On November 9, 2021, GE announced plans for the complete legal and structural separation of the GE Vernova business from GE, as well as the GE HealthCare Spin-Off. The GE HealthCare Spin-Off was completed on January 3, 2023. In reaching the decision to pursue the Spin-Off of the GE Vernova business, GE considered a range of potential structural alternatives and concluded that the Spin-Off is the most attractive alternative for enhancing stockholder value. To consummate the Spin-Off, GE will undertake the Reorganization Transactions. GE will subsequently distribute all of our common stock to GE’s stockholders, and following the Spin-Off, GE Vernova, holding the GE Vernova business, will become an independent, publicly traded company. Prior to the completion of the Spin-Off, we will enter into a separation and distribution agreement with GE (the “Separation and Distribution Agreement”) and several other agreements with GE related to the Spin-Off. These agreements will govern our relationship with GE up to and after completion of the Spin-Off and allocate between us and GE various assets, liabilities and obligations, including employee benefits, intellectual property, and tax-related assets and liabilities. See “Certain Relationships and Related Person Transactions.”

Completion of the Spin-Off is subject to the satisfaction or waiver of a number of conditions. In addition, GE has the right not to complete the Spin-Off if, at any time, the GE Board determines, in its sole and absolute discretion, that the Spin-Off is not in the best interests of GE or its stockholders, or is otherwise not advisable. See “The Spin-Off—Conditions to the Spin-Off.”

Following the Spin-Off, we and GE Aerospace will be better positioned to increase managerial focus on pursuing individual strategies to drive performance, invest more in growth opportunities, and execute strategic plans best suited to address the distinct market trends and opportunities for the respective businesses. Following the Reorganization Transactions, we will hold GE’s former GE Vernova business, and we will have greater agility to deliver market-leading innovation across our products, services, and solutions. We plan to focus on further developing our expertise in power, wind, and electrification. Additionally, following the Spin-Off, GE intends to

 

16


Table of Contents

focus on its aviation business, GE Aerospace. Further, the Spin-Off will allow our management team to devote its time and attention to the corporate strategies and policies that are based specifically on the needs of the GE Vernova business. We plan to create incentives for our management and employees that align with our business performance and the interests of our stockholders, which will help us attract, retain, and motivate highly qualified personnel. Moreover, following the Spin-Off, each company will be able to use its capital to pursue and achieve strategic objectives including effectuating acquisitions. Additionally, we and GE believe the Spin-Off will help align our stockholder base with the characteristics and risk profile of the respective businesses. See “The Spin-Off—Reasons for the Spin-Off.”

Following the Spin-Off, we expect our common stock will trade on the New York Stock Exchange under the ticker symbol “GEV.”

Our Corporate Information

We are a wholly-owned subsidiary of GE. We were formed on February 28, 2023 to serve as a holding company for the GE Vernova business. We have engaged in no business operations to date and have no assets or liabilities of any kind, other than those incidental to our formation and reorganization to acquire the assets and liabilities of the GE Vernova business prior to the Spin-Off. Our corporate headquarters will be located at 58 Charles Street, Cambridge, Massachusetts 02141, and our telephone number is (617) 674-7555. Our website address is www.gevernova.com. Information contained on, or that can be accessed through, our website is not part of, and is not incorporated into, this Information Statement. GE Vernova LLC will convert into a corporation and will be renamed GE Vernova Inc. prior to the completion of the Spin-Off.

 

17


Table of Contents

Summary Historical and Unaudited Pro Forma Condensed Combined Financial Information

The following summary financial data reflects the combined operations of GE Vernova. The summary historical and unaudited pro forma condensed combined financial data shown below should be read in conjunction with the sections herein entitled “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Unaudited Pro Forma Condensed Combined Financial Statements,” and “Certain Relationships and Related Person Transactions” as well as our combined financial statements and the corresponding notes included elsewhere in this Information Statement. For factors that could cause actual results to differ materially from those presented in the summary historical and pro forma condensed combined financial data, see “Cautionary Statement Concerning Forward-Looking Statements” and “Risk Factors” included elsewhere in this Information Statement. Unless otherwise noted, tables are presented in U.S. dollars in millions.

We derived the summary historical combined financial information for each of the fiscal years in the three-year period ended December 31, 2023 from our audited combined financial statements, which are included elsewhere in this Information Statement.

The summary unaudited pro forma condensed combined financial information for the year ended December 31, 2023 has been derived from our unaudited pro forma condensed combined financial information, which is included elsewhere in this Information Statement.

 

     Pro Forma            Historical  
     Year ended
December 31,
           Years ended
December 31,
 
      2023             2023     2022     2021  

Total revenues

   $  33,239        $  33,239     $  29,654     $  33,006  

Cost of revenues

     28,436                28,421       26,196       28,061  

Gross profit

     4,803                4,818       3,458       4,945  

Selling, general and administrative expenses

     4,928          4,845       5,360       4,821  

Research and development expenses

     896                896       979       1,008  

Operating income (loss)

     (1,021              (923     (2,881     (884

Net income (loss)

   $ (576      $ (474   $ (2,722   $ (724

Net income (loss) attributable to GE Vernova

   $ (540      $ (438   $ (2,736   $ (633

Net income (loss) margin

     (1.7 )%         (1.4 )%      (9.2 )%      (2.2 )% 

Cash from (used for) operating activities

        $ 1,186     $ (114   $ (1,660

Other data(a):

           

Adjusted EBITDA*

        $ 807     $ (428   $ 654  

Adjusted EBITDA margin*

          2.4     (1.4 )%      2.0

Adjusted net income*

        $ (569   $ (1,698   $ (422

Adjusted net income margin*

          (1.7 )%      (5.7 )%      (1.3 )% 

Free cash flow*

                    $ 442     $ (627   $ (123

 

(a)

In addition to our operating results calculated in accordance with U.S. GAAP, we use, and plan to continue using certain non-GAAP financial measures when monitoring and evaluating operating performance. The non-GAAP financial measures presented in this Information Statement are supplemental measures of our performance and our liquidity that we believe help investors understand our financial condition, cash flows,

 

*

Non-GAAP financial measure.

 

18


Table of Contents
  and operating results and assess our future prospects. We believe that these non-GAAP financial measures, in addition to the corresponding U.S. GAAP financial measures, are important supplemental measures that exclude non-cash or other items that may not be indicative of or are unrelated to our core operating results and the overall health of our company. For more information about our non-GAAP financial measures, see “Non-GAAP Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures.”

 

     Pro Forma      Historical  
     As of December 31,      As of December 31,  
      2023      2023      2022  

Cash, cash equivalents and restricted cash(a)

   $ 3,597      $ 1,551      $ 2,067  

Total assets

      47,194         46,121         44,471  

Due to related parties

     34        532        575  

Total liabilities(b)

     38,226        37,741        32,864  

Total equity

     8,968        8,380        11,607  

Total liabilities and equity

     47,194        46,121        44,471  

 

(a)

In connection with the Spin-Off, we expect to receive a net cash contribution from GE to be used for our future operations such that our cash balance on the date of the completion of the Spin-Off will be approximately $4.2 billion, of which $603 million is reported in Assets of business held for sale as of December 31, 2023 related to the planned sale of a portion of our Steam business to Electricité de France S.A. (“EDF”). At the time of sale, a portion of the cash consideration that we will receive from EDF will compensate us for the amount of cash recorded in Assets of business held for sale.

(b)

On January 1, 2023, in advance of the Spin-Off, pension plans sponsored by GE, and previously accounted for as multiemployer plans, were legally split or allocated. GE allocated to GE Vernova a net deficit of $1.6 billion associated with these plans at the date of plan separation or allocation. See the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our combined financial statements and the corresponding notes included elsewhere in this Information Statement.

 

 

*

Non-GAAP financial measure.

 

19


Table of Contents

The tables below reconcile our non-GAAP financial measures to the nearest financial measure that is in accordance with U.S. GAAP for the periods presented. See “Non-GAAP Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for further information.

 

ORGANIC REVENUES*
BY SEGMENT(a)
   2023     2022     2023/2022 V%           

2022

   

2021

   

2022/2021 V%

 

Power

   $ 17,436     $ 16,124       8     $ 16,124     $ 16,729       (4 )% 

Less: Acquisitions

     152       —            —        —     

Less: Business dispositions

     —        —            —        502    

Less: Foreign currency effect

     38       (12                     (467     (6        

Power organic*

   $ 17,246     $ 16,136       7           $ 16,591     $ 16,233       2

Wind

   $ 9,826     $ 8,905       10     $ 8,905     $ 11,539       (23 )% 

Less: Acquisitions

     —        —            —        —     

Less: Business dispositions

     —        —            —        —     

Less: Foreign currency effect

     (14     58                       (424     1          

Wind organic*

   $ 9,840     $ 8,847       11           $ 9,329     $ 11,538       (19 )% 

Electrification

   $ 6,378     $ 5,076       26     $ 5,076     $ 5,292       (4 )% 

Less: Acquisitions

     2       —            2       —     

Less: Business dispositions

     —        —            —        —     

Less: Foreign currency effect

     50       (4                     (335     2          

Electrification organic

   $ 6,326     $ 5,080       25           $ 5,409     $ 5,290       2

 

(a)

Includes intersegment sales of $414 million, $451 million and $554 million for the years ended December 31, 2023, 2022 and 2021, respectively. See the table titled Total Segment Revenues by Business Unit in Note 23 to the audited combined financial statements included elsewhere in this Information Statement.

 

ORGANIC EBITDA*
BY SEGMENT
   2023     2022     2023/2022 V%            2022     2021     2022/2021 V%  

Power

   $ 1,722     $ 1,655       4     $ 1,655     $ 1,407       18

Less: Acquisitions

     32       —            —        —     

Less: Business dispositions

     —        —            —        43    

Less: Foreign currency effect

     (119     (72                     (71     (5        

Power organic*

   $ 1,809     $ 1,727       5           $ 1,726     $ 1,369       26

Wind

   $ (1,033   $ (1,710     40     $ (1,710   $ 176       U  

Less: Acquisitions

     —        —            —        —     

Less: Business dispositions

     —        —            —        —     

Less: Foreign currency effect

     (133     62                       89       55          

Wind organic*

   $ (900   $ (1,772     49           $ (1,799   $ 121       U  

Electrification

   $ 234       (164     F       $ (164   $ (461     64

Less: Acquisitions

     (1     —            (17     —     

Less: Business dispositions

     —        —            —        —     

Less: Foreign currency effect

     (15     (23                     (56     (13        

Electrification organic*

   $ 250     $ (141     F             $ (91   $ (448     80

 

*

Non-GAAP financial measure.

 

20


Table of Contents
ORGANIC REVENUES*    2023      2022      2023/2022 V%             2022     2021     2022/2021 V%  

Total revenues

   $ 33,239      $ 29,654        12      $ 29,654     $ 33,006       (10 )% 

Less: Acquisitions

     154        —              2       —     

Less: Business dispositions

     —         —              —        502    

Less: Foreign currency effect

     74        42                         (1,226     (2        

Organic revenues*

   $ 33,011      $ 29,612        11            $ 30,878     $ 32,506       (5 )% 

 

EQUIPMENT AND
SERVICES ORGANIC
REVENUES*
   2023      2022     2023/2022 V%             2022     2021     2022/2021 V%  

Total equipment revenues

   $ 18,258      $ 15,819       15      $ 15,819     $ 18,831       (16 )% 

Less: Acquisitions

     64        —             —        —     

Less: Business dispositions

     —         —             —        —     

Less: Foreign currency effect

     73        50                        (841     4          

Equipment organic revenues*

   $ 18,121      $ 15,769       15            $ 16,660     $ 18,827       (12 )% 

Total services revenues

   $ 14,981      $ 13,835       8      $ 13,835     $ 14,175       (2 )% 

Less: Acquisitions

     90        —             2       —     

Less: Business dispositions

     —         —             —        502    

Less: Foreign currency effect

     1        (8                      (385     (6        

Services organic revenues*

   $ 14,890      $ 13,843       8            $ 14,218     $ 13,679       4

 

ADJUSTED EBITDA* AND ADJUSTED EBITDA MARGIN*    2023     2022     2021  

Net income (loss)

   $ (474   $ (2,722   $ (724

Add: Restructuring and other charges(a)

     433       288       299  

Add: Steam Power asset sale impairment(b)

     —        824       —   

Add: Purchases and sales of business interests(c)

     (92     (55     139  

Add: Russia and Ukraine charges(d)

     95       188       —   

Add: Non-operating benefit income(e)

     (567     (188     (159

Add: Depreciation and amortization(f)

     847       893       1,150  

Add: Interest and other financial charges – net(g)

     53       97       109  

Add: Provision (benefit) for income taxes(g)

     512       247       (160

Adjusted EBITDA*

   $ 807     $ (428   $ 654  

Net income (loss) margin

     (1.4 )%      (9.2 )%      (2.2 )% 

Adjusted EBITDA margin*

     2.4     (1.4 )%      2.0

 

(a)

Consists of severance, facility closures, acquisition and disposition, and other charges associated with major restructuring programs.

(b)

Represents non-cash, pre-tax impairment charge related to our remaining Steam Power business.

(c)

Consists of gains and losses resulting from purchases and sales of business interests and assets.

(d)

Related to recoverability of asset charges recorded in connection with the ongoing conflict between Russia and Ukraine and resulting sanctions.

(e)

Primarily related to the expected return on plan assets, partially offset by interest cost.

 

*

Non-GAAP financial measure.

 

21


Table of Contents
(f)

Excludes depreciation and amortization expense included in Restructuring and other charges, the Steam Power asset sale impairment and Russia and Ukraine charges.

(g)

Excludes interest expense of $45 million, $54 million and $63 million and a benefit for income taxes of $195 million, $257 million and $138 million, offset by a change in valuation allowance of $27 million, $258 million and $158 million, for the years ended December 31, 2023, 2022 and 2021, respectively, related to our Financial Services business which because of the nature of its investments, is measured on an after-tax basis due to its strategic investments in renewable energy tax equity investments. The change in the valuation allowance recorded for the year is driven by the absence of a valuation allowance on production tax credits earned during 2023 given our ability to transfer such credits.

 

ADJUSTED ORGANIC EBITDA*
AND ADJUSTED ORGANIC
EBITDA MARGIN*
  2023     2022     2023/2022 V%              2022     2021     2022/2021 V%  

Adjusted EBITDA*

  $ 807     $ (428     F         $ (428   $ 654       U  

Less: Acquisitions

    31       —              (17     —     

Less: Business dispositions

    —        —              —        43    

Less: Foreign currency effect

    (266     (38                       (49     35          

Adjusted organic EBITDA*

  $ 1,042     $ (390     F               $ (362   $ 576       U  

Adjusted EBITDA margin*

    2.4     (1.4 )%            (1.4 )%      2.0  

Adjusted organic EBITDA margin*

    3.1     (1.3 )%                        (1.2 )%      1.7        

 

ADJUSTED NET INCOME* AND ADJUSTED NET INCOME
MARGIN*
   2023     2022     2021  

Net income (loss)

   $ (474   $ (2,722   $ (724

Add: Restructuring and other charges(a)

     433       288        299  

Add: Steam Power asset sale impairment(b)

     —          824       —   

Add: Purchases and sales of business interests(c)

     (92     (55     139  

Add: Russia and Ukraine charges(d)

     95       188       —   

Add: Non-operating benefit income(e)

     (567     (188     (159

Add: Tax effect of reconciling items

     36       (70     23  

Add: Certain tax adjustments(f)

     —        37       —   

Adjusted net income*

   $ (569   $ (1,698   $ (422

Net income (loss) margin

     (1.4 )%      (9.2 )%      (2.2 )% 

Adjusted net income margin*

     (1.7 )%      (5.7 )%      (1.3 )% 

 

(a)

Consists of severance, facility closures, acquisition and disposition, and other charges associated with major restructuring programs.

(b)

Represents non-cash, pre-tax impairment charge related to our remaining Steam Power business.

(c)

Consists of gains and losses resulting from purchases and sales of business interests and assets.

(d)

Related to recoverability of asset charges recorded in connection with the ongoing conflict between Russia and Ukraine and resulting sanctions.

(e)

Primarily related to the expected return on plan assets, partially offset by interest cost.

(f)

Consists of income tax adjustments for the impact of tax legislation.

 

*

Non-GAAP financial measure.

 

22


Table of Contents

FREE CASH FLOW*

   2023(a)      2022      2021  

Cash from (used for) operating activities

   $ 1,186      $ (114    $ (1,660

Add: gross additions to property, plant and equipment and
internal-use software

     (744      (513      (577

Less: impact of discontinued factoring programs(b)

        —         —         (2,114

Free cash flow*

   $ 442      $ (627    $ (123
(a)

Wind and Power made prepayments of $473 million and $185 million, respectively, related to supply chain finance programs during the fourth quarter of 2023. Additionally, free cash flow* includes benefits arising from the IRA related to production tax credits of $183 million. See Notes 12 and 22 to the audited combined financial statements included elsewhere in this Information Statement for further information.

(b)

The Company historically factored U.S. and non-U.S. receivables through GE’s Working Capital Solutions (“WCS”) on a recourse and nonrecourse basis pursuant to various factoring and servicing agreements. This adjustment is to present net cash flows from operating activities had we not factored receivables with WCS. The receivables factoring programs with WCS were discontinued in 2021.

 

 

*

Non-GAAP financial measure.

 

23


Table of Contents

RISK FACTORS

You should carefully consider the following risks and other information in this Information Statement in evaluating GE Vernova and GE Vernova’s common stock. Any of the following risks could materially and adversely affect GE Vernova’s business, results of operations, cash flows, or financial condition.

Risks Relating to Our Business and Our Industry

Risks Relating to Operations and Supply Chain

We provide complex and specialized products, solutions, and services, and we could be adversely affected by actual or perceived quality issues or safety failures.

We produce highly sophisticated and leading-edge products and provide specialized solutions and services for complex technology and engineered products and projects, including both products and software. Many of our products, solutions, and services involve complex industrial machinery or infrastructure projects, such as gas turbines, onshore and offshore wind turbines, grid infrastructure, or nuclear power generation. A serious product or execution failure could result in a range of adverse outcomes including injuries or death, widespread power outages, fleet delivery delays, or similar systemic issues and could have a material adverse effect on our business, reputation, financial position, cash flows, and results of operations. Actual or perceived design, production, performance, or other quality issues related to new product introductions or existing product lines can result in direct warranty, maintenance, and other claims for damages, including costs associated with project delays. For example, in the third quarter of 2022, we booked a provision due to changes in estimates for existing warranties for the deployment of repairs and other corrective measures to improve overall quality and fleet availability relating to our Onshore Wind business. Quality issues can also result in reputational harm to our business with a potential loss of attractiveness of our products, solutions, and services to new and existing customers. For example, a widespread fleet issue could result in revenue loss while the associated product is suspended from operation. This risk is pronounced in connection with the introduction of new technology in the main components of offshore wind turbines. Due to the challenges of servicing and performing maintenance on offshore wind turbines and the difficulties associated with scaling up production of new components, a fleet-wide product quality issue with our offshore wind turbines could cause us to incur substantial costs and could take significant time to address. Additionally, many of our products, solutions, and services function under demanding operating conditions and meet exacting certification, performance, and reliability standards that we, our customers, or regulators adopt. Developing and maintaining products, solutions, and services that meet or exceed these standards can be costly and technologically challenging and require extensive coordination of our suppliers and team members at our technology, manufacturing, and remote project sites in both developed and developing markets around the world. A failure to deliver products, solutions, and services that meet these standards could have significant adverse financial, competitive, or reputational effects.

Our products contain and are integrated with products from third parties. From time to time, the processes used to ensure the quality of those third-party products may fail to detect defects. Despite the operational processes around product design, manufacture, performance, and servicing that we and our customers or other third parties have developed to meet rigorous quality standards, the risk of operational process or product failures and other problems cannot be eliminated. Such problems could result in increased costs, delayed payments, lost products or services revenue, and product, safety, quality, regulatory, or environmental risks, which could have an adverse effect on our financial results.

If our ongoing efforts to achieve our anticipated operational cost savings and implement initiatives to control or reduce our operating costs are not successful, our financial results and cash flows may be adversely affected.

Achieving our long-term financial results and cash flow goals depends significantly on our ability to control and/or reduce our operating costs. Generally, because many of our costs are affected by factors completely, or

 

24


Table of Contents

substantially outside our control, we must seek to control or reduce costs through productivity initiatives. We seek continued cost savings through lean operations and supply chain management. While controlling our cost base is important for our business and future competitiveness, there is no guarantee that we will achieve this goal. Additionally, cost savings anticipated by us are based on estimates and assumptions that are inherently uncertain and may be subject to significant business, economic and competitive uncertainties, and contingencies, all of which are difficult to predict and may be beyond our control. For example, the rapid pace of innovation among onshore and offshore wind turbine manufacturers in recent years has led to short product cycles, early market introductions, and faster time to market, all of which have and can lead to quality and execution issues, higher costs, or other challenges to achieving profitability for new products. Such risks are especially acute in the offshore wind industry, which is a nascent industry, with higher ramp up costs and the potential for new product introductions to result in losses both in the short-and in the long-run. If we are not able to identify and implement initiatives that control and/or reduce costs and increase operating efficiency, or if the cost savings initiatives we have implemented to date do not generate expected cost savings, our financial results could be adversely affected.

We enter into long-term service agreements in connection with significant contracts for the sale of products, particularly in our Gas Power business unit. In connection with these agreements, we estimate our products’ durability and reliability, as well as our costs associated with delivering the products and the provision of services over time in order to be profitable and generate acceptable returns on our investments. Particularly for our long-cycle businesses and contracts like these, a failure to appropriately estimate, plan for, or execute our business plans may adversely affect our delivery of products, services, and outcomes in line with our projected financial performance or cost estimates, and ultimately may result in excess costs, build-up of inventory that becomes obsolete, lower profit margins and cash flows, and an erosion of our competitive position.

Significant disruptions in our supply chain, including the high cost or unavailability of raw materials, components, and products essential to our business, and significant disruptions to our manufacturing and production facilities and distribution networks could adversely affect our future financial results, and our ability to execute our operations on a timely basis.

Our reliance on third-party suppliers, contract manufacturers and service providers, and commodity markets to secure raw materials, parts, components, and sub-systems used in our products exposes us to volatility in the prices and availability of these materials, parts, components, systems, and services. As our supply chains extend into many different countries and regions of the world, including many developing economies, we are also subject to global economic and geopolitical dynamics and risks associated with exporting or importing components and raw materials for completing the construction or incorporation process in other countries.

We operate in a supply-constrained environment and are facing, and may continue to face, supply-chain shortages, inflationary pressures, shortages of skilled labor, transportation and logistics challenges and manufacturing disruptions that impact our revenues, profitability, cash flow, and timeliness in fulfilling customer orders. To manage the impact of supply chain shortages and inflationary pressures, we have sought, and may continue to seek, to negotiate long-term agreements with suppliers, develop relationships with alternative suppliers, drive productivity initiatives in our manufacturing operations, provide training to our employees, develop alternate transportation routes, modes, and providers, and share rising costs with our customers. While these measures have successfully mitigated against historical impact, we expect supply chain pressures across our businesses will continue to challenge and adversely affect our operations and financial performance for some period of time. In addition, some of our suppliers or their sub-suppliers are limited-or sole-source suppliers, and our ability to meet our obligations to customers depends on the performance, product quality, and stability of such suppliers. Generally, raw materials and components are available from a number of different suppliers, although we rely on a single supplier, a small number of suppliers, or suppliers located in a single country for certain materials and components, including for example some semiconductor chips, cobalt, certain steel, hafnium, and other rare earth metals. We have in the past experienced, and in the future may experience, disruptions related to availability of components and materials sourced from single suppliers, but the impact to

 

25


Table of Contents

our operations and financial results of such disruptions have not been material. However, if one of these suppliers were unable to provide us with a raw material or component we need, our ability to manufacture some of our products or provide some of our services could be adversely affected if and to the extent that we are unable to find a sufficient alternative supply channel in a reasonable period of time or on commercially reasonable terms in light of the circumstances.

Disruptions in deliveries, capacity constraints, production disruptions up-or down-stream, price increases, cyber-related attacks, or decreased availability of raw materials or commodities, including as a result of war, natural disasters, actual or threatened public health emergencies, or other business continuity events, adversely affect our operations and, depending on the length and severity of the disruption, could limit our ability to manufacture products on a timely basis and could harm our financial results. Additionally, nonperformance or underperformance by third-party suppliers could materially impact our ability to perform obligations to our customers, which could result in a customer terminating their contract with us, exposing us to liability, and substantially impairing our ability to compete for future contracts and orders.

Furthermore, we depend on multiple routes and modes of transport to acquire components and materials used in our operations. We are vulnerable to disruptions in transport and logistics activities due to weather-related problems, strikes, lockouts, inadequacy of roadways, transportation infrastructure and port facilities or other events. We are also subject to fluctuations in the costs of transportation. We may be unable to store components and materials sufficient for more than a limited period of production, which increases our dependence on efficient logistics. In addition, during transport and shipping, our products and/or their components and materials may become damaged. Such factors could also result in liability and significant reputational harm. These factors could adversely impact our ability to deliver quality products, solutions, and services to our customers and may have a substantial adverse impact on our business activities, results of operations, cash flows, and financial condition.

Any interruption in the operations of our manufacturing facilities may impair our ability to deliver or provide products, solutions, and services.

We are dependent on our global production and operating network to develop, manufacture, assemble, supply, and service our offerings. A work stoppage, labor shortage, or other production limitation, including import or export restrictions and transportation issues, among others, could occur at our manufacturing facilities and negatively impact our reputation and market position. In addition, manufacturing disruptions related to significant public health and safety events, severe weather, financial distress, unscheduled downtimes, production constraints, mechanical failures, cybersecurity attacks, and geopolitical dynamics and risks could interrupt our ability to deliver or provide certain products, solutions, and services. Such risks may be heightened in emerging market countries, which may be subject to varying degrees of economic, political, and social instability.

We also have internal dependencies on certain key manufacturing or other facilities. For example, our Onshore and Offshore Wind businesses are, and may in the future be, reliant on our internal ability to manufacture blades for wind turbines through our LM Wind Power business unit, which accounts for a substantial percentage of our wind blade production. Similarly, we internally manufacture certain specialized transformers for our Grid Solutions business. If we are unable to produce or assemble these components internally in sufficient quantities, due to disturbances at a certain production location or for any other reason, we may be forced to increase the volume of wind turbine blades or transformers purchased from external suppliers which could lead to delays, quality control issues, or additional costs.

Any significant event affecting one of our production or operating facilities may result in a disruption to our ability to supply customers. The impact of these risks is heightened if our production capacity is at or near full utilization (or if we lack alternative manufacturing sites) and could result in our inability to accept orders or deliver products in a timely manner. Additionally, significant capital investment to increase manufacturing capacity may be required to expand our business or meet increased demand for existing or newly introduced products in the future. Any of these risks could have a material adverse effect on our business results, cash flows, financial condition, or prospects.

 

26


Table of Contents

Our failure to manage customers relationships and customer contracts could adversely affect our financial results.

An important element of our success is our ability to manage customer relationships, while delivering against our contractual requirements and anticipating changes in customer requirements and circumstances. Existing or potential customers may delay or cancel plans to purchase our products, solutions, and services, including large infrastructure projects, and may not be able to fulfill their obligations to us in a timely fashion or at all as a result of business deterioration, cash flow shortages, shifts in the availability of financing for certain types of projects or technologies (such as prohibitions on financing for fossil fuel-based projects or technologies), macroeconomic conditions, changes in law, disputes, or other delays. If a large customer was to experience difficulties in fulfilling their obligations to us, cease doing business with us, significantly reduce the amount of their purchases from us, favor competitors or new entrants, change their purchasing patterns, or impose unexpected fees on us, our business may be harmed. In addition, many of our customer contracts are complex and contain provisions that could cause us to incur penalties, be liable for liquidated or other damages, and/or incur unanticipated expenses with respect to the timely delivery, functionality, deployment, operation, and availability of our products, solutions, and services. For example, we may face risks in our Offshore Wind business related to our ability to assemble and deliver specific components such as nacelles on the timelines and schedules detailed in our customer contracts. Failure to adhere to such delivery schedules could result in higher potential costs, present litigation risks, or expose us to liquidated damages.

Our customers include numerous governmental owned or affiliated entities within and outside the United States, including the U.S. federal government and state and local entities. Some of those contracts could be subject to the risk of delay, modification, or termination if future government funding or support is not available. We also at times face greater challenges with the timely collection of receivables with customers that are sovereign governments, government owned entities, or customers located in emerging markets.

Our ability to obtain and maintain our investment grade credit ratings could affect our ability to access capital, could increase our interest rates, and could limit our ability to secure new contracts or business opportunities.

The success of our commercial relationships is predicated on our ability to obtain and maintain our corporate investment grade ratings. Our credit risk is expected to be evaluated by the major independent rating agencies. Once a credit rating is obtained, any future downgrades could increase the cost of borrowing under any indebtedness we may incur. Adverse changes in our investment grade credit ratings could affect our borrowing and bonding capacity and terms in the future, may increase our interest expense or other costs of capital, or capital may not be available to us on competitive terms, or at all, and may reduce our ability to secure new contracts or business opportunities with operating partners, suppliers, and customers, each of which would negatively impact our financial performance. There can be no assurance that we will be able to maintain our credit ratings once established, and any additional actual or anticipated changes or downgrades in our credit ratings, including any announcement that our ratings are under review for a downgrade, may have a negative impact on our liquidity, capital position, bonding capacity, and access to credit.

We enter into fixed-price contracts with our customers and our failure to mitigate certain risks associated with such contracts may result in reduced operating margins.

Some of our contracts have been established on a fixed-price basis which commit us to a specific price well before the completion of the applicable project. However, actual revenues or costs may be different from those we originally estimated and may result in reduced profitability or losses on projects. Some of these risks include:

 

   

difficulties encountered on our large-scale projects related to the procurement of materials or due to schedule disruptions, product performance failures, unforeseen site conditions, rejection clauses in customer contracts, or other factors that may result in additional costs to us, reductions in revenue, claims, or disputes;

 

27


Table of Contents
   

our inability to obtain compensation for additional work we perform or expenses we incur as a result of unanticipated technical issues or our customers providing deficient design, engineering information, products, or materials;

 

   

reliance on historical cost and/or execution data that is not representative of current conditions, including as a result of inflation and increases in labor and material costs;

 

   

delays or productivity issues caused by weather conditions, or other force majeure events (e.g., pandemics);

 

   

requirements to pay liquidated damages upon our failure to meet schedule or performance requirements of our contracts;

 

   

difficulties in engaging third-party subcontractors, product manufacturers, or materials suppliers or failures by third-party subcontractors, product manufacturers, or materials suppliers to perform could result in project delays and cause us to incur additional costs; and

 

   

modifications to projects that create unanticipated costs or delays.

As a result of one or more of these factors, we may incur losses or contracts may not be as profitable as we expect, and this could materially and adversely affect our business, results of operations, cash flows, and financial condition.

Risks Relating to Industry Dynamics

The strategic priorities and financial performance of many of our businesses are subject to market and other dynamics related to decarbonization, which can pose risks in addition to opportunities.

Given the nature of our businesses and the industries we serve, we must anticipate and respond to market, technological, regulatory, and other changes driven by broader trends related to decarbonization efforts in response to climate change and energy security. In particular, we provide products, solutions, and services to utilities and other customers in the power generation sector, which has historically been carbon intensive and is in the midst of a transition with global efforts to lower greenhouse gas emissions. For example, the significant decreases in recent years in the cost of energy for renewable sources of power generation (such as wind and solar), along with ongoing changes in government, investor, customer and consumer policies, commitments, preferences, and considerations related to climate change, in some cases have adversely affected, and may continue to affect, the demand for and the competitiveness of products, solutions, and services related to fossil fuel-based power generation, including sales of new gas turbines and the utilization and servicing needs for existing gas power plants that are unmitigated with capabilities such as hydrogen or carbon capture.

Continued shifts toward greater penetration by renewables in both new capacity additions and the proportionate share of power generation, particularly depending on the pace and timeframe for such shifts across different industries globally, could have a material adverse effect on the performance of our Power segment and our consolidated results. We also face risks and uncertainties for those businesses related to future levels and timeframes of government subsidies and credits (including the impact of the IRA in the United States and other U.S. and global policies), timeframes for negotiations with regulators, significant price competition among product manufacturers, changing dynamics between onshore and offshore wind power, potential further consolidation in the wind industry, competition with solar power-based and other sources of renewable energy, the pace at which power grids are modernized to maintain reliability with higher levels of renewables penetration, and industry-wide shifts in profitability levels.

Our long-term success depends on our ability to effectively address both electrification and decarbonization, which over time will require adapting our technology portfolio to changing customer preferences and government policies and scaling innovative low-carbon and carbon-neutral technologies. If we fail or are perceived to not be adequately advancing decarbonization objectives, or if investors or financial institutions shift

 

28


Table of Contents

funding away from companies in fossil fuel-related industries, our and our customers’ access to capital could be negatively impacted. Furthermore, governments may enact or implement policies that impact these dynamics as they pertain to us or our customers in unforeseeable ways. The achievement of decarbonization goals for the electric power industry over the coming decades is also likely to depend in part on technologies that are not yet deployed or widely adopted today but that may become more important over time (such as hydrogen-based power generation, carbon capture and sequestration technologies, small modular or other advanced nuclear power and grid-scale batteries or other storage solutions). Successfully navigating these changes will require significant investments in power grids and other infrastructure, research and development, and new technology and products, both by us and third parties. Our success in advancing decarbonization objectives across our businesses will also depend in part on the actions of governments, regulators and other market participants to invest in infrastructure, create appropriate market incentives and to otherwise support the development of new technologies in time to take advantage of existing or emerging market opportunities. Considering the above, there is no assurance that we will be successful in addressing effectively or at all both electrification and decarbonization.

The process of developing new high-technology products and enhancing existing products to address the impact of climate change is often complex, costly and uncertain, and we may pursue strategies or make investments that do not prove to be commercially successful in the timeframes expected or at all. If the decarbonization landscape changes faster than anticipated or in a manner that we do not anticipate, demand for our products, solutions, and services could be adversely affected.

Demand for certain of our products, solutions, and services, particularly in our Power segment, depend on oil and gas regulatory policy, prices, and global and regional supply and demand, which are subject to factors beyond our control and may adversely affect our operating results.

Demand for certain of our products, solutions, and services, particularly in our Power segment, is partially affected by oil and gas regulatory policy, prices, and demand for oil and, in particular, gas, which are subject to factors beyond our control. Several U.S. and international pledges, agreements, and initiatives, such as those adopted at the 2023 United Nations Climate Change Conference (COP28), have strengthened regulations on oil and gas operations, which could impact production costs, reduce oil and gas demand, and curtail future investments in gas turbine generation. The oil and gas market could also experience a reduction in utilization by the switch away from gas to other sources of energy if prices for such alternative sources are lower than those for gas.

Energy prices could impact many of our customers’ cash flows and their ability to fund exploration and development activities. Because prices of oil and gas products are set on a commodity basis, the volatility in oil and gas prices and demand can impact our customers’ activity levels and spending for our products, solutions, and services. Expectations about future prices and price volatility are important for determining future spending levels. Actual and anticipated increases in oil and gas prices (and therefore low demand for oil and gas) have in the past resulted in, and may in the future result in, an overall economic recession, which may raise risks across our industries. During these periods, certain countries that are heavily dependent on income from oil and gas may curtail investments in capital intensive oil and gas, power generation and transmission projects due to insufficient funds, which would also lead to less demand for certain of our products, solutions, and services in our Power segment. Furthermore, persistently high gas prices as well as potential gas shortages, which may be further exacerbated by the conflict in Ukraine, pose additional risks in particular for the market for large gas turbines, including the service market.

We may be unable to adjust our personnel and functional cost base fast enough to adapt to demand swings caused by changes in oil and gas prices, which may result in under-or-overcapacities. This inefficiency as well as sustained low demand for our products, solutions, and services, particularly in our Power segment, could have a material adverse impact on our business, financial position, cash flows, and results of operations and could require us to record asset impairments.

 

29


Table of Contents

We could be subject to risks in connection with our ability to connect to power grids and our customers’ ability to sell the electricity they generate or to establish grid connections efficiently.

The connection or access to a power grid is essential when it comes to generating electricity. Factors beyond our control, such as regulatory constraints or system failures, could impair our ability to connect our power generation products to the grid. If our customers fail to obtain a connection or access to the transmission grids on a timely basis, or on economically reasonable terms and, as a result, they are delayed or prevented from entering into an agreement (whether on a statutory or contractual basis) concerning the purchase of the electrical energy generated, the timing of orders and/or project milestones could be impacted, and we could experience a material adverse effect on our business, results of operations, cash flows, and financial condition. Grid capacity constraints and the limited availability of land to build connection infrastructure could further exacerbate the risks to our business.

There are statutory rules and regulations which govern the connection of power generation products to the power grid in the markets where we operate. This helps ensure that grids are safe and stable and that there is sufficient supply of electricity. Moreover, the full transmission and dispatch output of electricity may be curtailed as a result of various grid constraints, such as grid congestion, restrictions on transmission capacity of the grid and restrictions on electricity dispatch during certain periods. Electricity transmission lines may experience unplanned outages due to system failures, accidents and severe weather conditions, or planned outages due to repair and maintenance, construction work and other reasons beyond our control. For example, as electricity generated from wind farms today is currently often not stored and must be transmitted or used once it is generated, some of the wind turbines of a wind farm may be turned off during such period when electricity is unable to be transmitted due to grid congestion or other grid constraints. Such events could reduce the actual net power generation of the wind farms. In addition, a number of other factors may further decrease electricity output, including wind speed or wind direction or other severe weather condition.

As a result, we and our customers may experience significant financial losses from inefficient electricity outputs, the inability to connect to power grids, or grid capacity constraints, which may in turn cause the decrease in the demand for our products and could lead to a material adverse effect on our business, results of operations, cash flows, and financial condition.

Some of our operations involve the handling, use, transportation, and disposal of radioactive and hazardous materials, which subject us and our customers to regulations, related costs and delays and potential liabilities for injuries and claims.

Our operations involve the handling, use, transportation, and disposal of radioactive and hazardous materials, including nuclear fuel, nuclear power devices and their components. The risks associated with radioactive materials and the public perception of those risks can affect our business. Failure to properly handle radioactive and hazardous materials could pose a health risk to humans or wildlife and could cause personal injury, property damage (including environmental contamination), and damage the health and safety of the surrounding community. If an accident were to occur, its severity could be significantly affected by the nature of the accident and the speed of corrective action taken by us and others, including emergency response personnel, as well as other factors beyond our control, such as weather and wind conditions. In addition to health risks, a release of these materials may cause damage to, or the loss of, property and may adversely affect property values. Actions taken in response to an accident could result in significant costs. Activities of our contractors, suppliers or other counterparties similarly may involve toxic, hazardous, and radioactive materials and we may be liable contractually, or under applicable law, to contribute to remedy damages or other costs arising from such activities.

Adverse public reaction to developments in the use of nuclear power or nuclear radiation could directly affect our customers and indirectly affect our business. Adverse public reaction, increased regulatory scrutiny, and potential litigation and other legal challenges could contribute to a slowdown in, or in some cases, a complete halt to new

 

30


Table of Contents

construction of nuclear power plants, an early shut down of existing power plants, delays or resistance to reopening power plants that have been shut down, or a dampening of the favorable regulatory climate needed to introduce new nuclear technologies. Negative public perceptions could also lead to increased regulation or limitations on the activities of our customers, more onerous operating requirements, or other conditions that could have a material adverse impact on our customers and our business.

We are subject to international, federal, state, and local regulations governing handling, use, transportation, and disposal of radioactive and hazardous materials. These requirements are complex and subject to frequent change. Our compliance with amended, new, or more stringent requirements, stricter interpretations of existing requirements or the future discovery of contamination may require us to make material expenditures or subject us to liabilities that we currently do not anticipate. Such expenditures and liabilities may adversely affect our business, results of operations, cash flows, and financial condition.

We seek to protect ourselves from liability associated with accidents through contractual precautions with our counterparties, but there can be no assurance that such contractual limitations on liability will be effective in all cases or that our or our counterparties’ insurance will cover all the liabilities we have assumed under those contracts. While we maintain insurance coverage as part of our overall risk management strategy, these policies do not protect us against all liabilities associated with accidents or for unrelated claims. The costs of defending against a claim arising out of an incident involving radioactive or hazardous materials, such as a precautionary evacuation, and any damages awarded as a result of such a claim, could adversely affect our results of operations, cash flows, and financial condition.

Wind energy is a variable source of electricity and is susceptible to the impacts of weather conditions and other seasonal factors.

Due to the variable availability of wind energy, coupled with various transmission limitations, such as grid congestion caused by the underdevelopment of the local power grids and temporary transmission interruptions caused by system upgrades, wind power may not be a viable base load source of electricity. As such, while demand for wind power is expected to increase, there are challenges to wind power becoming a large-scale substitute for other energy sources unless special technologies (e.g., energy storage) are developed to ensure a more stable and reliable output of electricity generated by the wind power industry. We cannot be certain that our efforts to develop and introduce advanced wind technologies will be successful, or how successful wind power will be as a larger share of total power generation over a long horizon. If future developments or innovations in the wind power industry are less successful than those of other energy sources, there may be a negative impact on the future prospects of the wind power industry, which, in turn, could materially and adversely affect the demand for our products, solutions, services, and platforms.

The generation of wind power depends on wind conditions and patterns, which are inherently uncertain and difficult to predict or anticipate. Sales of our wind turbines and the provision of related technical services are subject to seasonal variations since the delivery and installation of our wind turbines depend on the construction cycles of wind farm projects by our customers. The installation and maintenance of offshore wind turbines can be particularly impacted by weather-related scheduling delays due to their complex infrastructure, higher wind speeds, and the challenges of accessing offshore sites. Adverse events relating to our wind business operations during peak demand periods can create unpredictability in activity and utilization rates and affect demand for our support services. Furthermore, wind turbine specifications must be suitable for the wind conditions expected at a particular site. Therefore, unavailability of locations that are suitable for the wind turbines we offer would have a negative impact on our sales and thus materially adversely affect our business, results of operations, cash flows, and financial condition.

 

31


Table of Contents

Risks Relating to Macroeconomic and Geopolitical Conditions

Our business is exposed to risks associated with the volatile global economic environment and geopolitical conditions.

Adverse changes in economic or geopolitical conditions, particularly in locations where our customers, suppliers, or operations are located, as well as concerns about a range of other external factors including global trade and global supply chain, developments in energy prices, inflation, interest rates, changes in government monetary or fiscal policies, and labor market challenges, could have a material adverse effect on our business, results of operations, cash flows, and financial condition and may adversely impact the demand for our products, solutions, and services. Rising inflation and interest rates may increase our cost of capital and could reduce the number of customers who purchase our products, solutions, and services as credit becomes more expensive or less available. While interest rates had remained at historically low levels in recent years, the Federal Reserve Board and other central banks have been increasing their government funding rate starting in 2022 to combat rising inflation. The consequences of the ongoing conflict between Russia and Ukraine, such as sanctions and other measures imposed by the European Union, the United States, and other countries in response, have also caused and may continue to cause disruption and instability in global markets, supply chains and industries that negatively impact our businesses, results of operations, cash flows, financial condition, and pose reputational risks. In addition, our customers and suppliers could be affected directly by an economic downturn and some could face credit issues or cash flow problems that could give rise to payment delays, increased credit risk, bankruptcies, and other financial hardships, which could adversely impact customer demand for our products as well as our ability to manage normal commercial relationships with our customers and suppliers. Depending on their severity and duration, the effects and consequences of global economic and political conditions could have an adverse impact on our results of operations, cash flows, and financial condition.

Unexpected events, such as natural disasters, geopolitical conflicts, pandemics, and other events beyond our control, may increase our cost of doing business or disrupt our operations.

The occurrence of one or more unexpected events, including geopolitical conflicts (such as the Russia-Ukraine conflict and the more recent conflict in the Middle East), acts of terrorism or violence, civil unrest, fires, tornadoes, tsunamis, hurricanes, earthquakes, floods and other forms of severe weather in regions in which we operate or in which our suppliers are located could adversely affect our operations and financial performance. Natural disasters, product failures, power outages or other unexpected events could result in physical damage to and complete or partial closure of one or more of our manufacturing facilities or distribution centers, temporary or long-term disruption in the supply of component products from local and international suppliers, and disruption and delay in the transport of our products to project sites and distribution centers. A public health epidemic or pandemic, such as the COVID-19 pandemic, poses the risk that our employees, contractors, suppliers, customers, and other business partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns, travel restrictions, or other actions that may be requested or mandated by governmental authorities, or that such epidemic or pandemic may otherwise interrupt or impair business activities. Our operations and financial performance were negatively impacted by the COVID-19 pandemic that has caused, and may continue to cause, a slowdown of economic activity (including the decrease in demand for a broad variety of goods and services), disruptions in global supply chains, and significant volatility and disruption of financial markets. While we were able to mitigate most of the operational impacts caused by COVID-19, we cannot provide assurance that the impact of future such events will be mitigated to the same extent. Existing insurance coverage may not provide protection for all the costs that may arise from such events, and any incidents may result in loss of, or increased costs of, such insurance. In addition, while we have disaster recovery and business continuity plans (including those relating to our information technology systems), they may not be fully responsive to, or capable of eliminating or materially minimizing losses associated with, catastrophic events. As a result, any business disruption could still negatively affect our business, operating results, cash flows, or financial condition.

Political and economic instability, restrictive trade policies, restrictions on the repatriation of funds, and export and import restrictions may disrupt our supply chain and impact our ability to generate products, solutions, and

 

32


Table of Contents

services to meet customer demands. The prices of raw materials and other components that we use in production may increase and be susceptible to significant fluctuations due to trends in supply and demand, commodity prices, currency exchange rates, transportation costs, government regulations and tariffs, price controls, and economic conditions, among other factors. In addition, various geopolitical factors, including the level of economic activity in China, the conflict in Ukraine, and the conflict in the Middle East, has added to the volatility in energy costs. These circumstances may have a substantial adverse impact on our business activities, results of operations, cash flows, and financial condition.

Our business, results of operations, cash flows, and financial condition could be adversely affected by any negative impact on the global economy and financial markets resulting from the ongoing conflict between Russia and Ukraine.

Global markets experienced volatility and disruption as a result of the ongoing conflict between Russia and Ukraine. Although the length and impact of the ongoing conflict is highly unpredictable, the conflict in Ukraine has and could continue to contribute to volatility in global financial markets, energy costs, and commodity prices and exacerbate existing supply chain constraints. Additionally, the conflict in Ukraine has led to sanctions and other penalties being levied by the United States, European Union, and other countries against Russia. Additional potential sanctions and penalties have also been proposed and/or threatened. Our business and financial performance have been negatively impacted by the sanctions and penalties implemented in response to the conflict between Russia and Ukraine. For example, in 2022 we recognized $0.2 billion of pre-tax charges primarily from impairments of receivables, inventory, contract assets, and equity method investments directly resulting from the sanctions relating to this conflict, predominantly related to our Power business. Due to the expansion of U.S. sanctions in 2023, we recognized an additional pre-tax charge of $0.1 billion primarily from impairments of inventory, receivables, and contract assets. While our remaining net asset exposure to Russia is not material, we continue to actively monitor the dynamic situation in Ukraine and applicable laws, sanctions, and trade control restrictions resulting from the conflict. The extent to which our operations and financial results may be affected by the ongoing conflict in Ukraine will depend on various factors, including the extent and duration of the conflict; the effects of the conflict on regional and global economic and geopolitical conditions; the effects of further laws, sanctions, and trade control restrictions on our business, the global economy, and global supply chains; and the impact of fluctuations in the exchange rate of the ruble. Continuation or escalation of the conflict may also magnify the impact of other risks identified in this Information Statement, including cybersecurity, regulatory, and reputational risks.

Risks Relating to Competition and Managing Growth

We operate in highly competitive environments. Our failure to compete successfully could adversely affect our results of operations, cash flows, and financial condition.

Our products, solutions, and services are subject to significant competitive pressures, and in many of the industries in which we operate we face intense competition from both international and domestic competitors. The continual development of advanced technologies, new and existing products and solutions including product enhancements, and high quality but cost-effective supply chain, production, and delivery methods are critical to remaining competitive by maintaining commercially attractive products, solutions, and services at acceptable pricing levels. A change in the strategic priorities of our business or a failure to anticipate or respond quickly to a number of factors including technological developments, evolving industry standards, new regulations or incentives, changing customer demands, supply chain issues, or innovations in production techniques in the industries we serve could cause us to experience lower revenues, price erosion, lower margins, and could result in forgone growth opportunities. Competition has also intensified as a result of international expansion by existing industry participants exploiting new markets and increasing pressure from competitors from other regions who strive to improve the quality and reliability of their technologies and expand beyond their existing markets. The entry of new market participants could further intensify competition. If we are unable to respond successfully to these competitive pressures, our business, results of operations, cash flows, and financial condition may be adversely affected.

 

33


Table of Contents

There are risks associated with our joint venture arrangements, consortiums, and similar collaborations with third parties for certain projects, which could impose additional costs and obligations on us.

We have entered and will sometimes continue to enter into joint venture arrangements for manufacturing and commercial operations and/or project development and funding. We also enter into agreements with third parties to act as a consortium to perform projects.

Our joint venture arrangements may expose us to risks, including risks with respect to the economic, political, and regulatory environment of any foreign entities with which we partner, legal and regulatory violations committed by partners whose actions are outside of our control, and risks associated with certain exclusivity obligations with partners that may impose operational restrictions on us. Furthermore, these arrangements may require us to incur non-recurring and other charges, increase expenditures, or disrupt our ordinary business activities. If joint venture, consortium, or other strategic partners cannot meet their obligations due to financial or other difficulties, including if they declare bankruptcy or otherwise modify their capital structure, we could be required to provide additional investment or services or take responsibility for breaches of contracts or assume additional financial or operational obligations which could have a substantial adverse impact on our business, results of operations, cash flows, and financial condition.

We currently have equity interests in multiple joint ventures and expect to enter into additional joint venture arrangements in the future. Our influence over these entities varies depending on the level and nature of ownership and/or rights agreed, and for some of these entities our influence may be limited. Even in joint ventures where we have greatest influence, we are usually required to reach consensus with our joint venture partners in connection with major decisions concerning the operations of the joint ventures. This could create the risk of impasses on decisions, given that our partners in these arrangements may have economic or business interests that diverge from our interests. Additionally, differences in views among the joint venture participants may result in delayed decisions or disputes. Conflicts may arise in these arrangements concerning the achievement of performance milestones or the interpretation of significant terms under any agreement (including financial obligations), termination rights, or the ownership or control of intellectual property developed during the arrangement. We also cannot control the actions of our joint venture partners. We sometimes have joint and several liabilities with our joint venture partners under the applicable contracts for joint venture projects and we cannot be certain that our partners will be able to satisfy any potential liability that could arise. These factors could potentially harm the business and operations of a joint venture and, in turn, our business and operations. In addition, our arrangements involving joint ventures may restrict us from gaining access to the cash flows or assets of these entities. In some cases, our joint ventures have governmentally imposed restrictions on their abilities to transfer funds to us.

In addition, success on consortium projects depends in part on whether our consortium partners fulfill their contractual obligations. Such projects are subject to the risk that our consortium partners may block or delay decisions which could be integral to the success of the project or investments in the project, or could implement strategies that are contrary to our economic interests, resulting in a lower return than expected. If any of these third parties fails to perform its contractual obligations satisfactorily, we may be required to provide or procure added services to compensate for such failure. Such third-party failures may also expose us to reputational harm as well as complaints from customers and other counterparties. Any of the foregoing could have a material adverse effect on our business results, cash flows, financial condition, or prospects.

Our future success will depend, in part, on our ability to develop and introduce new technologies.

In many of the industries in which we operate, technologies change rapidly, and customer needs evolve regularly. Our future growth will depend on our ability to continue to innovate by developing and commercializing new products, solutions, and services. The commercial success of new technologies, such as hydrogen-based power generation, carbon capture and sequestration technologies, small modular or other advanced nuclear power and grid-scale batteries or other storage solutions, depends on many factors, including the pace of innovation, the

 

34


Table of Contents

development costs and the availability of capital resources to fund those costs, the levels of competition from others developing similar or other competing technologies, our ability to obtain or maintain government permits or certifications, the effectiveness of our production, distribution, and marketing efforts, the availability of raw materials and components, and the costs to customers to deploy and provide support for the new technologies. Also, overall market demand, growth, and acceptance of our new innovations remain key to their success, as well as the timing of when we bring these offerings to market. If and to the extent these predictions are proved wrong, our investments in new products, solutions, and services may not achieve revenue or profits at all or the recovery of investments may be over an extended period. Unsuccessful efforts to develop and adapt our products, solutions, and services could ultimately result in lower revenue, lower margins, and/or higher costs, which could harm our competitive position and adversely impact our financial performance.

We face a complex global operating environment, particularly in emerging markets.

Due to our global nature, we deal with a range of legal and regulatory systems with varying requirements. Due to the nature of our projects and products, we face risks associated with engagements with foreign officials and government agencies, including the risks of complying with diverse procedures and standards imposed by (among others) the U.S. Foreign Corrupt Practices Act (“FCPA”) and similar anti-corruption and anti-bribery laws in other jurisdictions. We also face risks associated with compliance with global privacy and data security laws and regulations including the General Data Protection Regulation (“GDPR”) in Europe. Navigating a variety of legal and regulatory regimes may increase the difficulty of compliance, particularly as such laws change or are interpreted in unexpected ways. In addition, as an employer of permanent and fixed-term contract employees and contractors, we are required to create compensation programs, employment policies and other administrative programs that comply with the laws of multiple countries. We also must communicate, monitor, and uphold group-wide standards and directives across our global network, including in relation to our suppliers, subcontractors, and other relevant stakeholders. Our failure to manage our geographically diverse operations successfully could impair our ability to react quickly to changing business and market conditions and to enforce compliance with group-wide standards and procedures.

Our business strategy may include acquisitions, strategic investments, and divestitures to support our growth, and our failure to successfully implement this strategy could adversely affect our business.

Our business strategy may include the acquisition of technologies and businesses that expand or complement our existing business. Successful growth through acquisitions depends upon our ability to identify suitable acquisition targets or assets, conduct due diligence, negotiate transactions on favorable terms, and ultimately complete such transactions and integrate the acquired target or asset successfully, and will be subject, in certain circumstances, to the consent of GE under the Tax Matters Agreement, as discussed in “—Risks Relating to the Spin-Off.”

Acquisitions may expose us to significant risks and uncertainties, including:

 

   

competition for acquisition targets and assets, which may lead to substantial increases in purchase price or terms that are less attractive to us;

 

   

dependence on external sources of capital, in particular to finance the purchase price of acquisitions;

 

   

rulings by antitrust or other regulatory bodies;

 

   

acquired companies’ previous failure to comply with applicable regulatory requirements;

 

   

failure to timely integrate acquired companies’ strategies, functions, and products into our own;

 

   

inability to produce products at increased scale or loss of previously available distribution channels;

 

   

heightened external scrutiny on acquired intellectual property rights, regulatory exclusivity periods, and confidentiality agreements, or lack of intellectual property rights for the acquired portfolio;

 

35


Table of Contents
   

diversion of our management’s attention from existing operations to the acquisition and integration process;

 

   

a failure to accurately predict or to realize expected growth opportunities, cost savings, synergies, and market acceptance of acquired companies’ products;

 

   

a failure to identify material problems or liabilities during due diligence review of acquisition targets prior to acquisition;

 

   

a failure to identify significant non-compliant behaviors or practices by, or liabilities relating to, the acquisition target (or its agents) prior to acquisition;

 

   

successor liability imposed by regulators for actions by the target (or its agents) prior to acquisition;

 

   

expenses, delays, and difficulties in integrating acquired businesses into our existing businesses;

 

   

difficulties in retaining key customers and personnel; and

 

   

adverse market reactions to an acquisition.

Various other assessments and assumptions regarding acquisition targets may prove to be incorrect, and actual developments may differ significantly from our expectations.

In addition, we also regularly evaluate a variety of potential strategic transactions, including equity method investments, joint ventures and other strategic alliances that could further our strategic business objectives. We may not successfully identify, complete, or manage the risks presented by these strategic transactions, including those outlined above. Equity investments and other strategic alliances pose additional risks, as we could share ownership in both public and private companies and in some cases management responsibilities with one or more other parties whose objectives for the alliance may diverge from ours over time, who may not have the same priorities, strategies, or resources as we do, or whose interpretation of applicable policies may differ from our own.

Our business strategy may also include the divestiture of certain assets or operating units in order to enable the redeployment of capital. We may encounter difficulty in finding buyers or face other limitations such as regulatory, governmental or contractual requirements that could delay or prevent the accomplishment of our objectives and adversely affect our business. These limitations include the provisions of the Separation and Distribution Agreement described under “Certain Relationships and Related Person Transactions—Agreements with GE—Separation and Distribution Agreement—Credit Support.”

The occurrence of any of the above in connection with any acquisition, strategic transaction, or disposition could have a material adverse effect on our business results, cash flows, financial condition, or prospects.

Risks Relating to Government Regulations and Legal Matters

Policies may alter the demand mix for our products in unfavorable ways. Any reductions or the elimination of governmental incentives or policies that support renewable energy could have a material adverse effect on our business, results of operations, cash flows, financial condition, and prospects.

Parts of our business benefit significantly from government policies that support utility scale renewable energy and enhance the economic feasibility of such projects in regions in which we operate or plan to develop and operate renewable energy facilities. In a number of countries, notably in the United States, European Union, Japan, and Korea, the federal governments and some state and other local governments provide incentives, such as tax incentives, renewable portfolio standards, or feed-in-tariffs, that support or are designed to support the sale of energy from utility scale renewable energy facilities, such as wind, hydro, and solar energy facilities and support the manufacture of products to be used in these facilities. As a result of budgetary constraints, political factors or otherwise, governments from time to time may review such laws and policies and take actions that would be less conducive to the development and operation of renewable energy facilities or to the manufacture of

 

36


Table of Contents

products for these facilities. Any reductions or the elimination of governmental incentives or policies that support renewable energy, such as the imposition of additional taxes or other assessments on renewable energy, could result in the lack of a satisfactory market for the development and/or financing of new renewable energy projects, our abandoning the development of renewable energy projects, reduced return on the manufacture of products for these facilities, or a loss of our investments in such projects or reduced project returns from such projects. Additionally, a broad decline in public support or a rollback of policy support for renewable energy technologies could adversely impact our business.

In the United States, the IRA includes incentives for development and production of renewable energy. In particular, the IRA extends the availability of investment tax credits (“ITCs”) and production tax credits (“PTCs”) to certain renewable energy projects and provides a credit for the manufacture of qualifying products. We and our tax equity partners benefit from ITCs and PTCs with respect to qualifying renewable energy projects. In structuring tax equity partnerships and determining ITC and PTC eligibility, we have relied upon applicable tax law and published Internal Revenue Service guidance. However, the application of law and guidance regarding ITC and PTC eligibility to the facts of particular renewable energy projects is subject to a number of uncertainties. The IRS, Department of Treasury, and Congress may modify existing guidance with respect to the application of the newly enacted IRA, possibly with retroactive effect. We may face uncertainties as a result of efforts to pass legislation to repeal, substantially modify, or invalidate some or all of the provisions of the IRA. Additionally, our operations and strategic plans may have to change if certain provisions of the IRA were to be repealed, modified, or invalidated. Furthermore, there can be no assurance that the IRS will agree with our approach in the event of an audit. Any of the foregoing items could reduce the amount of ITCs or PTCs available to us and our tax equity partners. In this event, we could be required to adjust the terms of future tax equity partnerships or seek alternative sources of funding for renewable energy projects, each of which could have a material adverse effect on our business, financial condition, cash flows, results of operations, and prospects. We expect to claim credits associated with the manufacture of qualified products. We rely on applicable tax law and guidance to determine the amount of these credits. However, the Department of the Treasury or IRS may issue additional guidance that may reduce our eligibility for credit or may disagree with our interpretation of the applicable tax law in the event of an audit. Our business could also be adversely affected by the loss or significant reduction in access to U.S. government technology grants and related funding programs. Beyond incentives policies, new environmental regulatory actions or significant modifications to existing policies of the U.S. Environmental Protection Agency (“EPA”), such as the EPA’s announcement in April 2023 of proposed new air emissions standards for natural gas operators, could increase our operating costs or impede sales of our products, solutions, and services.

In Europe, we benefit from a number of government-sponsored programs, incentives, and initiatives related to renewable energy. In December 2020, the EU agreed to reduce EU greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. In May 2022, the EU announced the REPowerEU plan which seeks to rapidly reduce the EU’s dependence on fossil fuels by 2027. Furthermore, the EU introduced the Green Deal Industrial Plan that is expected to further accelerate the expansion of renewable energy and green technologies including easing state aid rules to enable higher subsidies. A key component of the Green Deal Industrial Plan is the Net Zero Industry Act to simplify regulations, speed up permits and promote cross-border projects to accelerate climate neutrality. There can be no assurance that these EU regulations will remain in effect in their present form or at all, and the elimination, reduction, or modification of these regulations could materially harm our renewable energy programs.

International, national, and state governments and agencies continue to evaluate and promulgate legislation and regulations that are focused on reducing greenhouse gas emissions. Caps or fees on carbon emissions have been and may continue to be established and the cost of such caps or fees could disproportionately affect the fossil-fuel sectors. While such legislation and regulations could boost demand for our technologies that contribute to the reduction of greenhouse gas emissions, such as hydrogen and carbon capture technologies, compliance with greenhouse gas emission legislation and regulations applicable to our or our customers’ operations may have significant implications that could adversely affect our business and operating results.

 

37


Table of Contents

Failure to meet ESG expectations or standards or achieve our ESG goals could adversely affect our business, results of operations, cash flows, and financial condition.

There has been an increased focus from regulators and stakeholders on environmental, social and governance (“ESG”) matters. These include areas such as greenhouse gas emissions and climate-related risks that are particularly relevant for the industries we serve and our businesses, as well as other areas such as diversity, equity, and inclusion, responsible sourcing, human rights and social responsibility, and corporate governance. We have established certain ESG goals and targets. Our ability to accomplish them presents numerous operational, regulatory, financial, legal, and other challenges, several of which are outside of our control.

Increasing focus on ESG factors has led to enhanced interest in the review of performance results by investors and other stakeholders and the potential for litigation and reputational risk. Some investors have used, and may continue to use, ESG criteria to guide their investment strategies, and may not invest in us, or divest their holdings of us, if they believe our policies relating to ESG matters are inadequate. Our voluntary disclosures of ESG data under standards such as the Global Reporting Initiative, the Sustainability Accounting Standards Board (“SASB”), and recommendations issued by the Financial Stability Board’s Task Force for Climate-related Financial Disclosures (“TCFD”) are evaluated and rated by various organizations that assess corporate ESG performance. Unfavorable ESG ratings, or our inability to meet the ESG standards set by specific investors, may lead to unfavorable sentiment toward us, which could have a negative impact, among other things, on our stock price and cost of capital. Regulatory requirements related to ESG or sustainability reporting have been adopted in the EU that apply to financial market participants. In the United States, such regulations have been issued related to pension investments in California, and for the responsible investment of public funds in Illinois. Additional regulation is pending at the SEC, at the federal level for government contractors, and in other states. We expect regulatory requirements related to ESG matters to continue to expand globally, particularly in the European Union. We may be affected by our ability to meet evolving and expanding emissions reporting requirements and by investor and public perception of our reporting and performance related to voluntary climate standards. Given the increasing scrutiny on ESG matters as well as the increasing number of regulatory obligations relating to our business, there is also an increasing risk that we could be perceived as or accused of making inaccurate or misleading statements regarding our performance against ESG-related measures and/or ESG initiatives.

Failure to achieve our ESG goals, commitments and targets or comply with emerging ESG regulations could adversely affect our business, results of operations, cash flows, and financial condition. Changes in ESG regulations could lead to additional operational restrictions and compliance requirements upon us or our products, require new or additional investment in product designs, result in carbon offset investments or otherwise could negatively impact our business and/or competitive position. Any such failure could harm our reputation, adversely impact our ability to attract and retain customers and talent and expose us to increased scrutiny from the investment community and enforcement authorities.

International trade policies may impact demand for our products and our competitive position.

Changes in government policies on foreign trade and investment can affect the demand for our products solutions, and services, impact our competitive position, subject us to escalating costs, or prevent us from being able to offer our products, solutions, and services in certain countries. The implementation of more restrictive trade policies, such as import or export controls, required licenses or authorizations to engage in business dealings with certain countries or entities, higher tariffs, restrictions on outbound investment, more detailed inspections, exchange controls, a government’s adoption of “buy national” policies, local production requirements, or other barriers to entry, in countries where we sell large quantities of products, solutions, and services could be disruptive and costly to our business and could negatively impact our business, results of operations, cash flows, financial condition, and prospects.

 

38


Table of Contents

Failure to obtain or comply with federal, state and local government approvals, licenses, and permits may negatively affect our ability to produce, market, and sell our products, solutions, and services.

Parts of our business are required to obtain, and to comply with, federal, state, and local government approvals, licenses, and permits. Any of these approvals, licenses, or permits may be subject to denial, revocation, or modification under various circumstances. Failure to obtain or comply with the conditions of approvals, licenses, or permits may adversely affect our operations by suspending our activities or curtailing our work and may subject us to penalties and other sanctions. For example, our nuclear operations in the United States are subject to regulation by the Nuclear Regulatory Commission (“NRC”). Failure to obtain approval or renewal of our NRC licenses could result in significant disruptions to our nuclear business.

Although existing licenses are routinely renewed by various regulators, renewal could be denied or jeopardized by various factors, including the failure to comply with environmental, health, and safety (“EHS”) laws and regulations, the failure to comply with permit conditions, violations found during inspections or otherwise, or local community, political, or other opposition.

In addition, concerns about climate change and increased environmental activism could slowdown regulatory approval of fossil fuel-based power generation activities that could negatively impact the related products, solutions, and services we provide to customers. If new legislation or regulations are enacted or implemented, or if existing laws or regulations are amended or are interpreted or enforced differently, we may be required to obtain additional operating approvals, licenses, or permits. Moreover, changes in industry standards and governmental regulations may cause us to incur substantial costs to adapt our products, solutions, and services. Our inability to obtain, and to comply with, the approvals, licenses, or permits required for our business could have a material adverse effect on us.

The physical effects of climate change, including weather disruptions and related effects, could adversely impact our business.

The physical effects of climate change can include extreme variability in weather patterns such as increased frequency and severity of significant weather events (e.g., flooding, hurricanes, and tropical storms), natural hazards (e.g., increased wildfire risk), rising mean temperature and sea levels, and long-term changes in precipitation patterns (e.g., drought, desertification, or poor water quality). Climate change may also produce general changes in weather or other environmental conditions, including temperature or precipitation levels, and thus may impact consumer demand for electricity generation. Such effects have the potential to affect business continuity and operating results, and could disrupt our operations or those of our customers or suppliers, including through direct damage to physical assets and indirect impacts from supply chain disruption and market volatility. These effects may negatively impact our business, cash flows, and results of operations.

Our operations are subject to various environmental, health, and safety laws and regulations, and potential litigation, and non-compliance with or liabilities under such laws and regulations could result in substantial costs, fines, sanctions, claims, and reputational harm.

We and our business are subject to extensive domestic and international EHS regulations. In addition to EHS regulatory compliance obligations, we may face liability arising out of the normal course of business, including alleged personal injury, property damage, and human health risks due to exposure to hazardous substances, processes, or working conditions at our current or former facilities. We may also face liability in connection with the actions or omissions of third-party contractors working at our project sites. Any perceived or actual employee safety issues could result in substantial costs to us that may exceed our reserves, harm our reputation, divert management’s attention, and could potentially affect our ability to continue operating in certain jurisdictions.

We may be impacted by material changes in EHS regulations or subject to substantial liability for environmental impacts, both of which may require increased capital expenditures. We may also be subject to increasingly

 

39


Table of Contents

stringent environmental standards in the future, particularly as greenhouse gas emissions and climate change regulations and initiatives increase and EHS laws and regulations grow in number and complexity. Such laws and regulations may impose additional liability on industrial manufacturers for the use or generation of chemicals, such as per/polyfluoroalkyl substances (PFAS), contained in components and products sourced in connection with manufacturing and services operations, and if adopted, may create additional liability, impact product design, manufacturing, and/or servicing and negatively affect financial results. Environmental laws also generally impose liability for investigation, remediation, and removal of hazardous materials and other waste products on property owners and those who dispose of materials at waste sites, whether or not the waste was disposed of legally at the time in question. Some environmental laws provide for joint and several or strict liability for remediation of releases of hazardous substances, which could result in us incurring a liability for environmental damage without regard to our negligence or fault. Such laws and regulations could expose us to liability arising out of the conduct of operations or conditions caused by others, or for our acts which were in compliance with all applicable laws at the time the acts were performed.

Our nuclear operations expose us to various additional environmental, regulatory, and financial risks, including:

 

   

potential liabilities relating to harmful effects on the environment and human health resulting from nuclear operations and the storage, handling and disposal of radioactive materials;

 

   

unplanned expenditures relating to maintenance, operation, security, defects, upgrades and repairs required by the NRC and other government agencies;

 

   

limitations on the amounts and types of insurance commercially available to cover losses that might arise in connection with nuclear operations; and

 

   

potential liabilities arising out of a nuclear, radiological or criticality incident, whether or not it is within our control.

Our nuclear operations are subject to various safety-related requirements imposed by the U.S. Government, the Department of Energy (“DOE”), and the NRC. In the event of non-compliance, these agencies might increase regulatory oversight, impose fines or shut down our operations, depending upon the assessment of the severity of the situation. Revised security and safety requirements promulgated by these agencies could necessitate substantial capital and other expenditures. In addition, we must comply with and are affected by laws and regulations relating to the award, administration, and performance of U.S. Government contracts. Government contract laws and regulations affect how we do business with our customers and, in some instances, impose added costs on our business. A violation of specific laws and regulations could result in the imposition of fines and penalties or the termination of our contracts or debarment from bidding on contracts.

We may be subject to periodic litigation, regulatory proceedings, and enforcement actions, which may adversely affect our business and financial performance.

From time to time, we are involved in lawsuits, regulatory proceedings, and enforcement actions brought or threatened against us in the ordinary course of business. Our business is subject to the risk of claims involving current and former employees, affiliates, customers, subcontractors, suppliers, competitors, shareholders, government regulatory agencies or others through private actions, class actions, whistleblower claims, administrative proceedings, regulatory actions, or other proceedings.

Global enforcement of anti-corruption laws, such as the FCPA, has increased substantially in recent years, with more frequent voluntary self-disclosure by companies, aggressive investigations (including coordinated investigations across countries and governmental authorities) and enforcement proceedings by U.S. and non-U.S. governmental agencies, and assessment of significant civil and criminal fines, penalties, and other sanctions against companies and individuals. We may face liability under anti-corruption laws based upon actions or inactions even when they are not subject to our control. Our global activities can also subject us to legacy legal proceedings and legal compliance risks that relate to claimed anti-competitive conduct or improper payments of

 

40


Table of Contents

certain companies we acquire during the pre-acquisition periods. Such investigations or government scrutiny may also impact our ability to participate in various governmental financing programs and could limit our access to project financing from multilateral development banks and the World Bank.

Due to the inherent uncertainties of litigation, it is often difficult to accurately predict the ultimate outcome of any such actions or proceedings. The outcome of litigation, particularly class action lawsuits and regulatory actions, is often difficult to assess or quantify, as plaintiffs may seek injunctive relief or recovery of very large or indeterminate amounts in these types of lawsuits, and the magnitude of the potential loss may remain unknown for substantial periods of time. Given that our business involves large scale infrastructure projects and products and service contracts with a long duration, we are involved in commercial litigation or disputes from time to time where the initial amounts claimed by counterparties can be large, even if ultimately our liability or a resolution of such claims is significantly lower. In addition, plaintiffs in many types of actions may seek punitive damages, civil penalties, consequential damages or other losses, or injunctive or declaratory relief. Activist shareholders advocating for certain governance or strategic changes may also bring actions against us. These proceedings or actions could result in substantial cost and may require us to devote substantial resources to defend ourselves and distract our management from the operation of our business. While we maintain insurance for certain potential liabilities, such insurance does not cover all types and amounts of potential liabilities and is subject to various exclusions as well as caps on amounts recoverable. We may therefore incur significant expenses defending any such suit or government charge and may be required to pay amounts or otherwise change our operations in ways that could adversely affect our results of operations, and cash flows, and financial condition. For further information on material pending legal proceedings, see Note 20, “Commitments, Guarantees, Product Warranties, and Other Loss Contingencies” to the audited combined financial statements included in this Information Statement.

We are subject to antitrust and competition laws that can result in sanctions and conditions on the way we conduct our business.

We are subject to antitrust and competition laws, which generally prohibit certain types of conduct deemed to be anti-competitive, including price fixing, bid rigging, cartel activities, price discrimination, market monopolization, tying arrangements, acquisitions of competitors, and other practices that have, or may have, an adverse effect on competition. Regulatory authorities may have authority to impose fines and sanctions or to require changes or impose conditions on the way we conduct business in connection with alleged non-compliance with applicable law. Under certain circumstances, violations of antitrust laws could result in suspension or debarment of our ability to contract with certain parties or complete certain transactions. In addition, an increasing number of jurisdictions also provide private rights of action for competitors or consumers to seek damages asserting claims of anti-competitive conduct. Increased government scrutiny of our actions or enforcement or private rights of action could adversely affect our business or damage our reputation. In addition, as previously reported by GE, the power and grid businesses that GE acquired from Alstom in 2015 were the subject of significant cases involving alleged anti-competitive conduct or improper payments by Alstom in the pre-acquisition period. A number of these matters remain ongoing as we seek to resolve them, and it is possible that additional claims from legacy Alstom conduct could arise in the future. Conducting internal investigations or responding to audits or investigations by government agencies could be costly and time-consuming. An adverse outcome under any such investigation or audit could subject us to fines or criminal or other penalties, which could have a material adverse effect on our business results, cash flows, financial condition, or prospects.

We are subject to laws and regulations governing government contracts, public procurement, and government reimbursements in many jurisdictions, and the failure to comply could adversely affect our business.

We have agreements relating to the sale of our offerings to government entities around the world. As a result, we are subject to various statutes and regulations in a variety of jurisdictions that apply to companies doing business with the government. The laws governing government contracts can differ from the laws governing private contracts and government contracts may contain terms and conditions that are not applicable to private contracts

 

41


Table of Contents

or that expose us to higher levels of risk and potential liability than non-government contracts. Similarly, most jurisdictions have public procurement laws and reimbursement policies that set out rules and regulations for purchases and reimbursements by governmental entities. Certain countries impose additional requirements on government suppliers as a prerequisite to doing business in the country including, among other things, local headcount requirements, local manufacturing and supplier requirements, and technology or intellectual property transfers. These jurisdictions may modify their laws, policies, rules, or regulations, or impose new requirements that could adversely affect our business.

For contracts with the U.S. federal government, with certain exceptions, we must comply with the Federal Acquisition Regulation and applicable agency rules, the Procurement Integrity Act, the Buy American Act, and/or the Trade Agreements Act. Some governmental entities, including the U.S. federal government, can terminate contracts for their convenience or for our default. These governmental entities may also be subject to continued legislative funding approval. Early termination for convenience of one or more of our contracts, or a change in a government customer’s funding levels, could impact our expected revenues. A termination for default of one or more of our contracts could subject us to penalties and damages resulting from the default, including costs for the governmental entity to reprocure the items under contract, in addition to other penalties previously listed. In addition, the U.S. federal government could invoke the Defense Production Act (“DPA”), requiring that we accept and prioritize contracts for materials deemed necessary for national defense, regardless of loss in revenue incurred on such contracts. In such circumstances, we may be required to reallocate time and resources away from our customers to fulfill U.S. federal government requests under the DPA. This could cause us to be unable to fulfill contractual obligations to non-U.S. federal government customers and harm long-term business relationships with our customers, suppliers, and channel partners, which could adversely affect our business.

We are also subject to government audits, investigations, and oversight proceedings with respect to regulations governing government contracts, public procurement, and government reimbursements. Efforts to ensure our business arrangements comply with applicable laws involve substantial costs. It is possible that governmental and enforcement authorities will conclude that our business practices do not comply with current or future laws and regulations. If any such actions are instituted against us, defense can be costly, time-consuming, and may require significant financial and personnel resources. If we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal, and administrative penalties, damages, disgorgement, monetary fines, individual imprisonment, possible exclusion from participation in certain government programs, contractual damages, reputational harm, delayed or reduced payments, diminished profits and future earnings, and curtailment or restructuring of our operations. In addition, any of our government contracts could be terminated or we could be suspended or debarred from all government contract work or participation in projects involving multilateral development banks. Any of these risks could have a material adverse effect on our business, results of operations, cash flows, financial condition, or prospects.

Our failure to comply with financial services regulatory obligations could damage our reputation, result in regulatory action against us and adversely affect our business.

Certain of our affiliates intend to become a broker-dealer or a registered investment adviser, as applicable, and will provide fee-based services in respect of the arranging and syndication of securities, transaction advisory and structuring, and investment management inclusive of tax equity investments. For the first two years of GE Vernova’s existence, these services will be provided to GE on a cost-basis. In the future, such services may be provided to third parties on an arms-length basis. For more information, see “Certain Relationships and Related Person Transactions—Agreements with GE—Framework Investment Agreement.” While we believe these kinds of transactions are beneficial to our business, the functions that our affiliates may perform may give rise to conflicts of interest, because these transactions will typically involve investments in large energy infrastructure projects to which GE Vernova’s businesses will sell equipment and services. Such conflicts of interest, whether actual or perceived, may result in potential litigation or regulatory enforcement actions. Broker-dealers are registered with the SEC and are members of self-regulatory organizations such as the Financial Industry Regulatory Authority (“FINRA”). As such, they are subject to the regulations established under the Exchange Act and FINRA rules.

 

42


Table of Contents

Registered investment advisers are registered with the SEC and are subject to the requirements and regulations of the Investment Advisers Act of 1940, as amended (the “Advisers Act”). The regulations to which broker-dealers and registered investment advisers are subject are extensive and evolving over time, and the level of financial regulation has generally increased in recent years. A failure to comply with the obligations imposed by the Advisers Act, Exchange Act or FINRA rules, including recordkeeping, advertising and operating requirements, disclosure obligations and prohibitions on fraudulent activities, could result in examinations, investigations, sanctions, and reputational damage, and could have a material adverse effect on our business, financial condition, and results of operations. For further information, see “Our Business—Regulation—Broker-Dealer and Investment Adviser Regulations.”

Risks Relating to Employee Matters

If we are unable to attract and retain highly qualified personnel, we may not be able to execute our business strategy effectively and our operations and financial results could be adversely affected.

Our operations and future success depend on our ability to recruit, develop, and retain highly qualified personnel, particularly our senior management team, key employees and technical personnel, and on our efficient utilization of our workforce. Our team members are the key resource to developing, manufacturing, and delivering our products and providing technical services to our customers around the world. Some of our project sites involve placing team members in geographically remote or high-risk locations, and we may expend significant efforts and incur substantial costs to satisfy employee safety criteria and retain highly skilled personnel. For example, the installation, operation, and maintenance of offshore wind turbines is difficult, labor intensive, and costly, and requires the availability of a highly skilled labor force. Notwithstanding our safety precautions and compliance with applicable laws and regulations, we may be unable to avoid incidents that result in serious injury or even death to our employees, contractors, or other visitors to our operations. Any employee safety concerns or incidents, regardless of fault, could adversely affect our ability to attract additional qualified personnel. Factors that may affect our ability to attract and retain sufficient numbers of qualified employees include employee morale, our reputation, competition from other employers, our ability to manage attrition, and availability of qualified individuals. Difficulties in hiring or retaining highly qualified personnel, the failure to properly manage succession plans, or the unexpected loss of experienced employees resulting in the depletion of our institutional knowledge base as well as difficulties in efficient utilization of our workforce could have an adverse impact on our business performance, reputation, results of operations, liquidity, or financial condition. Failure to ensure that we have the depth and breadth of personnel with the necessary skill set and experience, or the loss of key employees, could impede our ability to deliver our growth objectives and execute our strategy.

We have and will assume significant net liabilities with respect to our postretirement benefit plans, including increases in pension, healthcare, and life insurance benefits obligations, and the actual costs of these obligations could exceed current estimates and asset returns could be less than current estimates, which are both reliant on GE’s estimates and assumptions.

As of December 31, 2023, our total postretirement benefit plans’ net liabilities for our employees, our former employees, and certain legacy former employees unrelated to our core business and allocated to us by GE was approximately $1.9 billion. These net liabilities arise under multiple benefit plans and statutory obligations in various countries. Increases in pension, healthcare, and life insurance benefits obligations and costs and decreases in rate of return of associated assets can adversely affect our earnings, cash flows, and financial condition. In addition, there may be upward pressure on the cost of providing healthcare benefits to current and future retirees and there can be no assurance that the measures we have taken to control increases in these costs will succeed and this could have a material adverse effect on our business results, cash flows, and financial condition. Most of the liabilities arise under pension plans, including defined benefit pension plans, either funded (or partly funded) with plan assets or unfunded.

Our results of operations may be positively or negatively affected by the amount of income or expense we record for our defined benefit pension plans. U.S. GAAP requires that we calculate income or expense for the plans

 

43


Table of Contents

using actuarial valuations, which reflect assumptions about financial markets, interest rates, discount rate, and the expected long-term rate of return on plan assets. We are also required to make an annual measurement of plan assets and liabilities, which may result in a significant reduction or increase in equity. The factors that impact our pension calculations are subject to changes in key economic indicators, and future decreases in the discount rate or low returns on plan assets can increase our funding obligations and adversely impact our financial results. In addition, although U.S. GAAP expense and pension funding contributions are not directly related, key economic factors that affect U.S. GAAP expense would also likely affect the amount of cash we would be required to contribute to pension plans under ERISA. Failure to achieve expected returns on plan assets driven by various factors, including sustained market volatility, could also result in an increase in the amount of cash we would be required to contribute to pension plans.

The defined benefit obligation is determined by actuarial assumptions such as the rate of compensation increase or pension progression rate and biometric factors (such as participant mortality), as well as the discount rate applied. The basis for determining the discount rate is in principle the yield on high-quality corporate bonds. A change of the discount rate and changes of the assessments of market yields used, respectively, may result in significant changes to the defined benefit obligation. Differences between actual experience and the predicted actuarial assumptions, discount rates, and investment performance on plan assets can affect defined benefit plan liabilities.

We will assume certain liabilities from GE in connection with the Spin-Off, including some liabilities unrelated to our core business. For example, we will retain and assume responsibility for certain liabilities for pension, healthcare, and life insurance benefits previously provided to GE employees, including our employees, our former employees, and certain other legacy former employees unrelated to our core business and allocated to us by GE. We currently rely on estimates and assumptions made by GE with respect to the scope, probability, and magnitude of these liabilities. Such estimates and assumptions involve complex judgments which are difficult to make. Actual developments may differ from estimates and assumptions, thereby resulting in an increase or decrease in our actual obligations for these liabilities. Changes in economic conditions, financial markets, investment performance, or legal conditions governing these liabilities can result in significant increases or decreases in the size of our actual obligations over time. Any of these factors and developments could have a material adverse effect on our business results, cash flows, financial condition, or prospects. Furthermore, accounting standards and legal conditions governing our pension obligations are subject to changes in applicable legislation, regulations, or case law. We cannot provide any assurance that we will not incur new or more extensive pension obligations in the future due to such changes.

Any of these factors and developments could have a material adverse effect on our business results, cash flows, financial condition, or prospects. For a discussion regarding how our financial statements have been and can be affected by our pension and healthcare benefit obligation, see Note 13, “Postretirement Benefit Plans” to the audited combined financial statements included elsewhere in this Information Statement.

Disruptions caused by labor disputes or organized labor activities could harm our business.

A significant number of our employees around the world are members of, or represented by, labor unions and are covered by collective bargaining agreements with varying durations and expiration dates. Many of our European employees belong to, or are represented by, works councils. Union and works council requirements may limit our flexibility in managing costs and responding to market changes. In addition, employees who are not currently members of, or otherwise represented by, labor organizations may seek such membership or representation, as applicable, in the future.

We cannot ensure that existing collective bargaining agreements will prevent a strike or work stoppage at our facilities in the future, that we will be successful in negotiating new collective bargaining agreements, that such negotiations will not result in significant increases in the cost of labor, including healthcare, pensions, or other benefits, or that a breakdown in such negotiations will not result in the disruption of our operations, including by

 

44


Table of Contents

way of strikes or work stoppages. In addition, negotiations with labor unions, possible work stoppages and other labor problems could divert management attention, which could further harm our business. Furthermore, some of our customers and suppliers have unionized work forces. We may experience an adverse impact on our operating results, financial condition, cash flows, and competitive position if we are subject, directly or indirectly, to labor actions by our or our suppliers’ or customers’ employees, or as a result of general country strikes or work stoppages unrelated to our business or collective bargaining agreements.

Our reputation and our ability to conduct business may be impaired by improper conduct by any of our employees, agents, or business partners.

Misconduct, fraud, non-compliance with applicable laws and regulations, or other improper activities by any of our employees, agents, or business partners could have a significant negative impact on our business and reputation. Such misconduct could include payments to government officials, bribery, fraud, anti-kickback and false claims rules, competition, export and import compliance, money laundering, data privacy, and lobbying and similar activities. The FCPA, the U.K. Bribery Act of 2010, the Brazil Clean Companies Act, China’s Unfair Competition Law, India’s Prevention of Corruption Act, and similar anti-corruption and anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business. We operate in parts of the world that have experienced governmental corruption to some degree. It is possible that the controls that we undertake to facilitate lawful conduct, which include training, internal control policies, and other safeguards to educate our employees and certain third parties, could be intentionally circumvented or become inadequate because of changed conditions. As a result, we cannot assure that our controls will protect us from reckless or criminal acts committed by our employees or agents. Any alleged or actual violations of these laws or regulations may subject us to government scrutiny, criminal, civil, or administrative sanctions, stockholder lawsuits, reputational damage, and other liabilities. In some instances, we make self-disclosures to relevant authorities who may pursue or decline to pursue enforcement proceedings against us. The costs associated with the investigation, remediation, and potential notification of any violation to customers, regulators, and counterparties could be material. Any of the foregoing could have a material adverse effect on our business results, cash flows, financial condition, or prospects.

Risks Relating to Technology and Intellectual Property

We may be unable to obtain, maintain, protect, or effectively enforce our intellectual property rights.

We cannot assure that our means of obtaining, maintaining, and enforcing our intellectual property rights will be adequate to maintain a competitive advantage. The laws of many jurisdictions may not protect our intellectual property rights or provide an adequate forum to effectively address situations where our intellectual property rights have been compromised. Furthermore, protecting against the unauthorized use of proprietary technology is difficult and expensive and we may need to litigate with third parties to enforce or defend patents issued to us and our other intellectual property rights or to determine the enforceability and validity of our proprietary rights or those of others. Determining whether an offering infringes, misappropriates, or otherwise violates a third party’s intellectual property rights involves complex legal and factual issues, and the outcome of this type of litigation is often uncertain and inconsistent. An adverse determination in any such litigation could materially impair our intellectual property rights and may harm our business.

From time to time, we receive notices from third parties asserting infringement, misappropriation, or violation of their intellectual property rights. We are also subject to lawsuits alleging infringement, misappropriation, or other violation of third-party intellectual property rights. When such claims are asserted against us (or to avoid such claims), we may seek to license the third party’s intellectual property rights, which may be costly. We may be unable to obtain necessary licenses on satisfactory terms, if at all. If we are unable to obtain an adequate license, we may be subject to lawsuits seeking damages or an injunction against the manufacture, import, marketing, sale, or operation of our offerings or against the operation of our business as presently conducted. Any settlement

 

45


Table of Contents

payment or other compromise may have future repercussions on our ability to defend and protect our IP rights. We do not maintain insurance for claims or litigation involving the infringement, misappropriation, or other violation of intellectual property rights. Regardless of the merits or outcome, the resolution of any intellectual property dispute could require significant financial and management resources.

Adverse judicial rulings or our entry into any license or settlement agreement in connection with third-party claims could affect our ability to compete and have a material adverse effect on our business results, cash flows, financial condition, or prospects. Our agreements with our customers and other third parties typically include indemnification or other provisions under which we agree to indemnify or otherwise be liable to them for losses suffered or incurred as a result of intellectual property claims. We may not always be successful in limiting our liability with respect to such obligations and could become subject to large indemnity payments or damages claims from contractual breach, which could harm our business results, cash flows, financial condition, or prospects.

Furthermore, protecting confidential information and trade secrets can be difficult and, even if a successful enforcement action is brought, such action may not be effective in protecting our intellectual property rights. Additionally, the increased sharing of our data with third parties as a result of right to repair legislation could increase the risk of loss or damage to our intellectual property. If we cannot adequately obtain, maintain, protect, or enforce our intellectual property rights, our competitors may be able to compete more successfully against us, which could have a material adverse effect on our business results, cash flows, financial condition, or prospects.

We may not receive protection for pending or future applications relating to intellectual property rights owned by or licensed to us and the claims allowed under any issued intellectual property rights may not be sufficiently broad to protect our products, services, solutions, and any associated trademarks. Products sold by our competitors may infringe, misappropriate, or otherwise violate intellectual property rights owned or licensed by us. Any issued intellectual property rights owned by or licensed to us may be challenged, invalidated, held unenforceable, or circumvented in litigation or other proceedings, and these limited intellectual property rights may not provide us with effective competitive advantages. Intellectual property rights may also be unavailable, limited, unenforceable, or practically unenforceable in some countries, and some governments may require us to transfer our intellectual property rights to local entities to do business in the jurisdiction, either of which could make it easier for competitors to capture increased market position and compete with us. We may also incur substantial costs to protect ourselves in litigation or other proceedings involving the validity and enforceability of our intellectual property rights. If claims against us are successful, we could lose valuable intellectual property rights. An unfavorable outcome in any such litigation could have a material adverse effect on our business results, cash flows, financial condition, or prospects.

We do not own the GE trademark or logo, and any elimination of our rights to use specified trademarks granted to us under the Trademark License Agreement could have an adverse effect on our business results, cash flows, financial condition, or prospects.

We do not own the GE trademark or logo and will enter into a Trademark License Agreement with GE as of or prior to the date of the completion of the Spin-Off, pursuant to which GE will grant us a license to use the GE Monogram and the GE word mark combined with the “Vernova” mark for use in connection with certain of our products, solutions, and services, as well as the right to use the GE brand in connection with certain legal entity names within our corporate structure. GE owns and controls the GE brand, and the integrity and strength of the GE brand will depend in large part on the efforts and businesses of GE and other licensees of the GE brand and how the brand is used, promoted, and protected by them, which will be largely outside of our control. Furthermore, there are certain circumstances under which the Trademark License Agreement may be terminated. Termination of the Trademark License Agreement would eliminate our rights to use the specified trademarks granted to us under this agreement and may result in our having to negotiate a new or reinstated agreement with less favorable terms or cause us to lose our rights under the Trademark License Agreement, which would require us to change our corporate name and undergo significant rebranding efforts. We will own the “Vernova”

 

46


Table of Contents

trademark and have taken steps to protect the “Vernova” trademark and have filed trademark applications for this mark around the world. We cannot be certain that the legal steps we are taking around the world will enable us to secure registrations in the mark, or will be or are sufficient to protect our intellectual property rights in the mark, or that, notwithstanding the legal protections, others do not or will not infringe or misappropriate our intellectual property rights in this mark. These rebranding efforts may require significant resources and expenses and may affect our ability to attract and retain customers, all of which could have an adverse effect on our business results, cash flows, financial condition, or prospects.

Increased cybersecurity requirements, vulnerabilities, threats, and more sophisticated and targeted computer crimes pose a risk to our systems, networks, products, solutions, services, and data, as well as our reputation, which could adversely affect our business.

We manufacture and sell products that rely upon software and computer systems to operate properly and process and store confidential information. Our products often are connected to, and reside within, our customers’ information technology (“IT”) infrastructures. In some jurisdictions, we are expected to design our products to include appropriate cybersecurity protections, and regulatory authorities review such protections when granting marketing authorizations. The measures we take to protect our products and IT systems from unauthorized access may not be effective, particularly because techniques used to obtain unauthorized access or to sabotage systems change frequently, increase in sophistication, and often are not recognized until launched against a target. These risks apply to our installed base of products, products we currently sell, new products we will introduce in the future, and older technology that we no longer sell or service but remains in use by customers.

Increased global cybersecurity vulnerabilities, threats, computer viruses, and more sophisticated and targeted cyber-related attacks such as ransomware, as well as cybersecurity failures resulting from human error and technological errors, pose a risk to our security and the security of our customers’, partners’, suppliers’ and third-party service providers’ infrastructure, products, systems, and networks and the confidentiality, availability and integrity of our and our customers’ data, as well as associated financial risks. As the perpetrators of such attacks become more capable (including sophisticated state or state-affiliated actors), and as critical infrastructure increasingly becomes digitized, the risks in this area continue to grow. A significant cyber-related attack, such as an attack on power grids, or power plants (even if such an attack does not involve our products, solutions, services, or systems), could pose broader disruptions and adversely affect our business. We have also observed an increase in third-party breaches and ransomware attacks at suppliers, service providers and software providers, and our efforts to mitigate adverse effects on us if this trend continues may not be successful in the future. The large number of suppliers that we work with requires significant effort for the initial and ongoing verification of the effective implementation of cybersecurity requirements by suppliers. The increasing degree of interconnectedness and shared liability between us and our partners, suppliers and customers also poses a risk to the security of our network as well as the larger ecosystem in which we operate. There can be no assurance that our various cybersecurity measures, including employee training, monitoring and testing, performing security reviews and requiring business partners with connections to our network to appropriately secure their IT systems, and maintenance of protective systems and contingency plans, will be sufficient to prevent, detect and limit the impact of cyber-related attacks, and we remain vulnerable to known or unknown threats. For example, we outsource certain cybersecurity functions and will continue to look for opportunities to utilize managed security service providers, and such arrangements will increase our overall cyber risk given the degree of our interconnectedness with the provider and the potential impact on our outsourced functions that could be caused by an attack on such a provider.

In addition to existing risks from the integration of digital technologies into our business portfolio, the adoption of new technologies in the future may also increase our exposure to cybersecurity breaches and failures. An unknown vulnerability or compromise could potentially impact the security of our software or connected products and lead to the misuse or unintended use of our products, loss of our intellectual property, misappropriation of sensitive, confidential or personal data, safety risks or unavailability of products.

We also have access to sensitive, confidential or personal data or information in certain of our businesses that is subject to privacy and security laws, regulations or customer-imposed controls. We have vulnerability to security

 

47


Table of Contents

breaches, theft, misplaced, lost or corrupted data, programming errors, employee errors and/or malfeasance (including misappropriation by departing employees) that could potentially lead to material compromising of sensitive, confidential or personal data or information, improper use of our systems, software solutions or networks, unauthorized access, use, disclosure, modification or destruction of or denial of access to information, defective products, production downtimes, and operational disruptions.

Furthermore, we rely on software, hardware, and other material components from a number of third parties to manufacture our products. If a material cyber incident impacting a supplier were to result in its prolonged inability to manufacture and/or ship such components, this could impact our ability to manufacture our products. In addition, third-party sourced software components, malicious code, or a critical vulnerability emerging within such software could expose our customers to increased cyber risk. If we were to experience a significant cybersecurity breach of our information systems or data, the costs associated with the investigation, remediation, and potential notification of the breach to customers, regulators, and counterparties could be material. Any such impact could result in financial or reputational damage, as well as expose us to litigation and regulatory enforcement actions.

Failure to comply with evolving data privacy and data protection laws and regulations or to otherwise protect personal data in the jurisdictions in which we operate, may adversely impact our business and financial results.

We may have access to sensitive, confidential, proprietary, or personal data or information in certain of our businesses that is subject to various data privacy and security laws, regulations, standards, contractual obligations, or customer-imposed controls in the jurisdictions in which we operate. The legal and regulatory environment related to data privacy and security is increasingly rigorous, with new and constantly changing requirements applicable to our business, and enforcement practices are likely to remain uncertain for the foreseeable future.

As a result of our worldwide operations, we are subject to rapidly evolving privacy and data protection laws and regulations in many jurisdictions. In the United States, various federal and state regulators, including governmental agencies like the Federal Trade Commission (“FTC”), have adopted, or are considering adopting, laws, regulations, and standards concerning personal information, privacy, and data security. There are also U.S. state privacy laws that set forth comprehensive privacy and security obligations regarding the collection and processing of personal data. These state statutes, and other similar state or federal laws that may be enacted in the future, may require us to modify our data processing practices and policies, incur substantial compliance-related expenses, and otherwise suffer adverse impacts on our business. Internationally, every jurisdiction in which we operate has established its own data privacy and security legal framework with which we must comply. For example, the GDPR has stringent data protection requirements for companies doing business in or handling personal data of individuals in the European Union and may impose fines of up to 4% of our global revenue in the event of certain violations. Breaches of the GDPR or other applicable data privacy or data protection laws or regulations could result in substantial fines, regulatory investigations, reputational damage, orders to cease/change our use of data, sanctions, and enforcement notices, as well as potential civil claims and proceedings, including class action type litigation.

These various and evolving international, federal, and state laws, regulations, and standards can differ significantly from one another and may be interpreted and applied differently over time and from jurisdiction to jurisdiction. Given our global footprint, this may significantly complicate our compliance efforts and impose considerable costs, such as costs related to organizational changes, modifying our data processing practices and policies, and implementing additional protection technologies. In addition, compliance with applicable requirements may distract management and divert resources from other initiatives and projects. Any failure or perceived failure by us to comply with any applicable international, federal, or state laws, regulations, standards, contractual obligations, or customer-imposed controls relating to data privacy and security could adversely affect our business and result in damage to our reputation and our relationship with our customers.

 

48


Table of Contents

Risks Relating to Financial, Accounting, and Tax Matters

Volatility in currency exchange rates may adversely affect our financial condition, results of operations and cash flows.

As a result of our global operations, we generate and incur a significant portion of our revenues and expenses in currencies other that the U.S. Dollar. Our business is subject to foreign currency exchange rates fluctuations, particularly with respect to the Euro, the Indian Rupee, the British Pound Sterling and the Brazilian Real. Changes in the value of currencies of the countries in which we do business relative to the value of the U.S. Dollar could affect our ability to sell products competitively and control our cost structure, which could have an adverse effect on our business, cash flows, financial condition, and results of operations. Additionally, we are subject to foreign exchange translation risk due to changes in the value of foreign currencies in relation to our reporting currency, the U.S. Dollar. As the U.S. Dollar fluctuates against other currencies in which we transact business, revenue and income can be impacted, including revenue decreases due to unfavorable foreign currency impacts. Strengthening of the U.S. Dollar relative to the euro and the currencies of the other countries in which we do business, could materially and adversely affect our ability to compete in international markets and our sales growth in future periods. In addition, we may be unable to hedge the effects of foreign exchange rate and interest rate changes in a cost-effective manner. A discussion of the ways and extent to which we attempt to mitigate the impact of foreign exchange risk is contained in Note 18, “Financial Instruments” to the audited combined financial statements included elsewhere in this Information Statement. Any of these risks could have a material adverse effect on our business results, cash flows, financial condition, or prospects.

We may not be able to access the capital and credit markets on terms that are favorable to us, or at all.

Our business relies on the availability of financing for our products and services. The capital and credit markets may experience extreme volatility or disruptions that may lead to uncertainty and liquidity issues for both borrowers and investors. Certain customers and suppliers, as well as our business, may need access to credit and trade finance lines and other financing instruments for certain transactions. We intend to enter into a $3.0 billion committed credit facility and a $3.0 billion committed trade finance agreement, but there can be no assurance that these agreements will be sufficient to meet our needs for such transactions. Additionally, we may need to access the capital markets to supplement our existing funds and cash generated from operations to satisfy our needs for example, for working capital or capital expenditure requirements. A variety of factors beyond our control could impact the availability or cost of capital, including domestic or international economic conditions, increases in key benchmark interest rates and/or credit spreads, the adoption of new or amended banking or capital market laws or regulations, and the repricing of market risks and volatility in capital and financial markets. In the event of adverse capital and credit market conditions, we may be unable to obtain capital market financing on favorable terms, or at all, and changes in credit ratings issued by nationally recognized credit-rating agencies could adversely affect our ability to obtain capital market financing and the cost of such financing. Additionally, a large portion of our total consolidated cash will be held overseas and may not be efficiently accessible to GE Vernova to finance or to otherwise support our capital market requirements. Such factors may impact our ability, or the ability of our customers or suppliers, to obtain debt financing, guarantees, or hedging from financial institutions which may negatively impact our business.

In addition, large energy projects may require co-financing of projects through project development loans, structured debt financing or equity investments, including those done in partnership with our Financial Services business. It is possible that such financing may not be available, or that the cost may be higher than anticipated, negatively impacting our ability to bid for certain projects, or negatively impacting our earnings, cash flows, and returns. The termination of, expiration of, or exhaustion of funding capacity or commitments available to us under, the Framework Investment Agreement that we expect to sign with GE, our inability to establish sufficient balance sheet capacity to make future tax equity commitments, or an inability to generate sufficient U.S. tax base to allow us to monetize tax credits, could reduce our ability to make, or prevent us from making at all, future such investments, which could further negatively impact our financial condition. Any of these risks could have a material adverse effect on our business results, cash flows, financial condition, prospects, and the market price of our securities.

 

49


Table of Contents

Future material impairments in the value of our long-lived assets, including goodwill, could adversely affect our business.

We review our long-lived assets, including identifiable intangible assets, goodwill, and property, plant, and equipment (“PP&E”), for impairment at least annually. All long-lived assets are reviewed when there is an indication that impairment may have occurred. Changes in market conditions or other changes in the outlook of value may lead to impairment charges in the future. In addition, we may sell assets that we determine are not critical to our strategy. Future events or decisions may lead to asset impairments or related charges. Certain non-cash impairments may result from a change in our strategic goals, business direction, or other factors relating to the overall business environment. Material impairment charges could negatively affect our results of operations.

Changes in tax laws, tax rates, tariffs, adverse positions taken by taxing authorities, and tax audits could impact operating results.

We are subject to income and other taxes (including sales, excise, and value-added) in the United States and numerous foreign jurisdictions. The determination of the Company’s worldwide provision for income taxes and liability for income and other tax liabilities requires judgment and is based on diverse legislative and regulatory structures that exist in the various jurisdictions where the Company operates. These factors, together with changes in tax laws, tax rates, tariffs, changes in interpretation of tax laws, the resolution of tax assessments or audits by various tax authorities, and the ability to fully utilize tax loss carryforwards and tax credits, could impact our operating results, including additional valuation allowances for deferred tax assets. Potential changes to tax laws, including changes to taxation of global income, may have an effect on our subsidiaries structure, operations, sales, liquidity, cash flows, capital requirements, effective tax rate and performance. For example, legislative or regulatory measures by U.S. federal, state or non-U.S. governments such as newly adopted global minimum taxes or other changes to the treatment of global income could increase our cash tax costs and effective tax rate. We are unable to predict what tax reforms may be proposed or enacted in the future or what effect such changes would have on our business, but such changes could potentially result in higher tax expense and payments, along with increasing the complexity, burden, and cost of compliance.

Our tax burden could increase as a result of ongoing or future tax audits.

We are subject to periodic tax audits by tax authorities. Tax authorities may not agree with our interpretation of applicable tax laws and regulations. As a result, such tax authorities may assess additional tax, interest, and penalties. We regularly assess the likely outcomes of these audits and other tax disputes to determine the appropriateness of our tax provision and establish reserves for material, known tax exposures. However, the calculation of such tax exposures involves the application of complex tax laws and regulations in many jurisdictions. Therefore, there can be no assurance that we will accurately predict the outcomes of any tax audit or other tax dispute or that issues raised by tax authorities will be resolved at a financial cost that does not exceed our related reserves. As such, the actual outcomes of these disputes and other tax audits could have a material impact on our financial results.

Our ability to use deferred tax assets may be subject to limitation.

We have deferred tax assets in certain countries and our ability to use such assets will depend on taxable income generation in the relevant countries. Further, while the majority of these assets either do not currently have an expiration date or have an expiration date that is later than when we expect to use such assets, subsequent changes to applicable tax laws in these jurisdictions could impact our ability to fully benefit from the deferred tax assets.

 

50


Table of Contents

Risks Relating to the Spin-Off

The Spin-Off could result in significant tax liability to GE and its stockholders if it is determined to be a taxable transaction.

GE has received a private letter ruling from the IRS to the effect that, among other things, the Spin-Off, will qualify as a transaction that is tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code. Completion of the Spin-Off is conditioned on GE’s receipt of a written opinion from each of Paul, Weiss, Rifkind, Wharton & Garrison LLP and Ernst & Young, LLP to the effect that the Spin-Off will qualify for non-recognition of gain and loss under Section 355 and related provisions of the Code. GE can waive receipt of the tax opinions as a condition to the completion of the Spin-Off.

The opinion of counsel and the opinion of Ernst & Young, LLP will not address any U.S. state or local or foreign tax consequences of the Spin-Off. Each opinion assumes that the Spin-Off will be completed according to the terms of the Separation and Distribution Agreement and relies on the facts as stated in the Separation and Distribution Agreement, the Tax Matters Agreement, the other ancillary agreements, this Information Statement and a number of other documents.

In addition, the opinion of counsel, the opinion of Ernst & Young, LLP, and the private letter ruling rely on certain facts, assumptions, representations, and undertakings from GE and us regarding the past and future conduct of the companies’ respective businesses and other matters. If any of these facts, assumptions, representations, or undertakings are incorrect or not otherwise satisfied, GE and its stockholders may not be able to rely on the opinion of counsel, the opinion of Ernst & Young, LLP, or the private letter ruling and could be subject to significant tax liabilities.

The opinion of counsel and the opinion of Ernst & Young, LLP will not be binding on the IRS or the courts, and there can be no assurance that the IRS or a court will not take a contrary position. Notwithstanding the opinion of counsel, the opinion of Ernst & Young, LLP, or the private letter ruling, the IRS could determine on audit that the Spin-Off or any of certain related transactions is taxable if it determines that any of these facts, assumptions, representations, or undertakings are not correct or have been violated or if it disagrees with the conclusions in the opinion that are not covered by the private letter ruling, or for other reasons, including as a result of certain significant changes in the stock ownership of GE or us after the Spin-Off. If the conclusions expressed in the opinion of counsel or the opinion of Ernst & Young, LLP are challenged by the IRS, and if the IRS prevails in such challenge, the tax consequences of the Spin-Off (including the tax consequences to GE and the U.S. Holders (as defined herein)) could be materially less favorable.

If the Spin-Off were determined not to qualify for non-recognition of gain or loss under Section 355 and related provisions of the Code, each U.S. Holder who receives our common stock in the Spin-Off would generally be treated as receiving a distribution in an amount equal to the fair market value of our common stock received, which would generally result in: (i) a taxable dividend to the U.S. Holder to the extent of that U.S. Holder’s pro rata share of GE’s current or accumulated earnings and profits; (ii) a reduction in the U.S. Holder’s basis (but not below zero) in GE common stock to the extent the amount received exceeds the stockholder’s share of GE’s earnings and profits; and (iii) taxable gain from the exchange of GE common stock to the extent the amount received exceeds the sum of the U.S. Holder’s share of GE’s earnings and profits and the U.S. Holder’s basis in its GE common stock. See below and “Material U.S. Federal Income Tax Consequences of the Spin-Off.”

If the Spin-Off were determined not to qualify as tax-free for U.S. federal income tax purposes, we could have an indemnification obligation to GE, which could adversely affect our business, financial condition, cash flows, and results of operations.

If, as a result of any of our representations being untrue or our covenants being breached, the Spin-Off were determined not to qualify for non-recognition of gain or loss under Section 355 and related provisions of the Code, we could be required by the Tax Matters Agreement to indemnify GE for the resulting taxes and related expenses. Those amounts could be material. Any such indemnification obligation could adversely affect our business, financial condition, cash flows, and results of operations.

 

51


Table of Contents

For example, if we or our stockholders were to engage in transactions that resulted in a 50% or greater change by vote or value in the ownership of our stock during the four-year period beginning on the date that begins two years before the date of the Spin-Off, the Spin-Off would generally be taxable to GE, but not to GE stockholders, under Section 355(e), unless it were established that such transactions and the Spin-Off were not part of a plan or series of related transactions. If the Spin-Off were taxable to GE due to such a 50% or greater change by vote or value in the ownership of our stock, GE would recognize gain equal to the excess of the fair market value on the Distribution Date of our common stock distributed to GE stockholders over GE’s tax basis in our common stock, and we generally would be required to indemnify GE for the tax on such gain and related expenses. Those amounts could be material. Any such indemnification obligation could adversely affect our business, financial condition, cash flows, and results of operations. See “Certain Relationships and Related Person Transactions—Agreements with GE—Tax Matters Agreement.”

We intend to agree to numerous restrictions to preserve the non-recognition tax treatment of the Spin-Off, which may reduce our strategic and operating flexibility.

To preserve the tax-free nature of the Spin-Off and related transactions, we intend to agree in the Tax Matters Agreement to covenants and indemnification obligations that address compliance with Section 355 and related provisions of the Code, as well as state, local and foreign tax law. These covenants will include certain restrictions on our activity for a period of two years following the Spin-Off. Specifically, we will be subject to certain restrictions on our ability to enter into acquisition, merger, liquidation, sale, and stock redemption transactions with respect to our stock or assets and we may be required to indemnify GE against any resulting tax liabilities even if we do not participate in or otherwise facilitate the acquisition. Furthermore, we will be subject to specific restrictions on discontinuing the active conduct of our trade or business, the issuance or sale of stock or other securities (including securities convertible into our stock but excluding certain compensatory arrangements), and sales of assets outside the ordinary course of business. These covenants and indemnification obligations may limit our ability to pursue strategic transactions or engage in new businesses or other transactions that may maximize the value of our business, and might discourage or delay a strategic transaction that our stockholders may consider favorable. See “Certain Relationships and Related Person Transactions—Agreements with GE—Tax Matters Agreement.”

We may be unable to achieve some or all of the benefits that we expect to achieve from the Spin-Off.

We may be unable to achieve the full strategic and financial benefits expected to result from the separation and distribution, or such benefits may be delayed or not occur at all. We believe that, as an independent, publicly traded company, we will be able to, among other things, more effectively focus on our own distinct operating priorities and strategies, enhance our ability to better address specific market dynamics and target innovation, create incentives for our management and employees that align more closely with our business performance and the interests of our stockholders, achieve operational simplification and cost savings, and allow us to articulate a clear investment proposition and tailored capital allocation policy to attract a long-term investor base best suited to our business needs. We may be unable to achieve some or all of the benefits that we expect to achieve as an independent company in the time we expect, if at all, for a variety of reasons, including: (i) the completion of the Spin-Off and compliance with the requirements of being an independent, publicly traded company will require significant amounts of our management’s time and effort, which may divert management’s attention from operating and growing our business; (ii) following the Spin-Off, we may be more susceptible to market fluctuations, actions by activist shareholders, and other adverse events than if we were still a part of GE; (iii) following the Spin-Off, our businesses will be less diversified than GE’s businesses prior to the separation; (iv) the other actions required to separate GE’s and our respective businesses could disrupt our operations; and (v) under the terms of the Tax Matters Agreement, we will be restricted from taking certain actions that could cause the Spin-Off to fail to qualify as a tax-free transaction and these restrictions may limit us for a period of time from pursuing strategic transactions and equity issuances or engaging in other transactions that may increase the value of our business. If we fail to achieve some or all of the benefits that we expect to achieve as an independent company, or do not achieve them in the time we expect, our business, financial condition, cash flows, and results of operations could be adversely affected.

 

52


Table of Contents

The terms we will receive in our agreements with GE could be less beneficial than the terms we may have otherwise received from unaffiliated third parties.

The agreements we will enter into with GE in connection with the separation will be negotiated prior to the Spin-Off, at a time when our business will still be operated by GE. Many aspects of the agreements will be entered into on arms-length terms similar to those that would be agreed with an unaffiliated third party such as a buyer in a sale transaction, but we will not have an independent board of directors or a management team independent of GE representing our interests while the agreements are being negotiated. In addition, until the Spin-Off occurs, we will continue to be a wholly-owned subsidiary of GE and, accordingly, GE will still have the discretion to determine and change the terms of the separation until the Distribution Date. As a result of these factors, some of the terms of those agreements may not reflect terms that would have resulted from arm’s-length negotiations between unaffiliated third parties, and it is possible that we might have been able to achieve more favorable terms if the circumstances differed. See “Certain Relationships and Related Person Transactions.”

Following the Spin-Off, we could incur substantial additional costs and experience temporary business interruptions, and we may not be adequately prepared to meet the requirements of an independent, publicly traded company on a timely or cost-effective basis.

We have historically operated as part of GE, and GE has provided us with various corporate functions. Following the Spin-Off, GE will not provide us with assistance other than the transition and other services described under “Certain Relationships and Related Person Transactions.” These services do not include every service that we have received from GE in the past, and GE is only obligated to provide the transition services for limited periods following completion of the Spin-Off. Following the Spin-Off and the cessation of any transition services agreements, we will need to provide internally or obtain from unaffiliated third parties the services we will no longer receive from GE. We may be unable to replace these services in a timely manner or on terms and conditions as favorable as those we receive from GE.

In connection with the Spin-Off, we have been installing and implementing information technology infrastructure to support certain of our business functions, including accounting and financial reporting, human resources, legal and compliance, communications, and indirect sourcing. We may incur substantially higher costs than currently anticipated as we transition from the existing transactional and operational systems and data centers we currently use as part of GE. If we are unable to transition effectively, we may incur temporary interruptions in business operations. Any delay in implementing, or operational interruptions suffered while implementing, our new information technology infrastructure could disrupt our business and have a material adverse effect on our results of operations.

In addition, in connection with the Spin-Off, we will be directly subject to reporting and other obligations under the U.S. Securities and Exchange Act of 1934, as amended (the “Exchange Act”). The Exchange Act requires that we file annual, quarterly, and current reports with respect to our business and financial condition. Beginning with our second required Annual Report on Form 10-K, we intend to comply with Section 404 of the Sarbanes Oxley Act of 2002, as amended (the “Sarbanes Oxley Act”), which will require annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent registered public accounting firm on the effectiveness of internal control over financial reporting. Under the Sarbanes Oxley Act, we are also required to maintain effective disclosure controls and procedures. To comply with these requirements, we may need to upgrade our systems, implement additional financial and management controls, reporting systems, and procedures and hire additional accounting and finance staff. These reporting and other obligations may place significant demands on management, administrative, and operational resources, including accounting systems and resources. If we are unable to upgrade our financial and management controls, reporting systems, information technology systems, and procedures in a timely and effective fashion, our ability to comply with financial reporting requirements and other rules that apply to reporting companies under the Exchange Act could be impaired, and we may be unable to conclude that our internal control over financial reporting is effective. If we are not able to comply with the requirements of Section 404 of the Sarbanes Oxley Act in a

 

53


Table of Contents

timely manner, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of shares of our common stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.

Moreover, we cannot be certain that these measures would ensure that we implement and maintain adequate controls over our financial processes and reporting in the future. Even if we were to conclude, and our auditors were to concur, that our internal control over financial reporting provided reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP, because of its inherent limitations, internal control over financial reporting might not prevent or detect fraud or misstatements. This, in turn, could have an adverse impact on trading prices for shares of our common stock, and could adversely affect our ability to access the capital markets.

As an independent, publicly traded company, we may not enjoy the same benefits that we did as a part of GE.

There is a risk that, by separating from GE, we may become more susceptible to market fluctuations and other adverse events than we would have been if we were still a part of the current GE organizational structure. As part of GE, we have been able to enjoy certain benefits from GE’s operating diversity, size, purchasing power, cost of capital, borrowing and bonding capacity, and opportunities to pursue integrated strategies with GE’s other businesses. As an independent, publicly traded company, we will not have the same benefits. Additionally, as part of GE, we have been able to leverage GE’s historical reputation, performance, and brand identity to recruit and retain key personnel to run and operate our business. As an independent, publicly traded company, we will need to develop new strategies, and it may be more difficult for us to recruit or retain such key personnel.

We have no operating history as an independent, publicly traded company, and our historical combined financial information is not necessarily representative of the results we would have achieved as an independent, publicly traded company and may not be a reliable indicator of our future results.

We derived the historical combined financial information included in this Information Statement from GE’s consolidated financial statements, and this information does not necessarily reflect the results of operations, cash flows, and financial position we would have achieved as an independent, publicly traded company during the periods presented, or those that we will achieve in the future. This is primarily because of the following factors:

 

   

Prior to the Spin-Off, we operated as part of GE, and GE performed various corporate functions for us. Our historical combined financial information reflects allocations of corporate expenses from GE for these functions. These allocations may not reflect the costs we will incur for similar services in the future as an independent, publicly traded company.

 

   

We will enter into transactions with GE that did not exist prior to the Spin-Off, such as GE’s provision of transition and other services, and undertake indemnification obligations, which will cause us to incur new costs. See “Certain Relationships and Related Person Transactions—Agreements with GE.”

 

   

Our historical combined financial information does not reflect changes that we expect to experience in the future as a result of our separation from GE, including changes in the financing, cash management, operations, cost structure, and personnel needs of our business. As part of GE, we enjoyed certain benefits from GE’s operating diversity, reputation, size, purchasing power, ability to borrow, and available capital for investments, and we will lose these benefits after the Spin-Off. As an independent entity, we may be unable to purchase goods, services, and technologies, obtain insurance and health care benefits, computer software licenses, or other services or licenses, or access capital markets, on terms as favorable to us as those we obtained as part of GE prior to the Spin-Off, and our results of operations may be adversely affected.

Following the Spin-Off, we will also face additional costs and demands on management’s time associated with being an independent, publicly traded company, including costs and demands related to corporate governance,

 

54


Table of Contents

investor and public relations, and public financial reporting. Our success will depend on our ability to integrate 12 separate businesses operating in various aspects of the power industry into one cohesive company following the Spin-Off. In addition, we depend on the successful cooperation of our leadership team, who have not previously led our business. For additional information about our past financial performance and the basis of presentation of our combined financial statements, see “Unaudited Pro Forma Condensed Combined Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our historical combined financial statements and the notes thereto included elsewhere in this Information Statement.

Following the Spin-Off, certain of our directors and employees may have actual or potential conflicts of interest because of their financial interests in GE or because of their previous or continuing positions with GE.

Because of their current or former positions with GE, certain of our expected executive officers and directors own equity interests in both us and GE. Continuing ownership of GE shares and equity awards could create, or appear to create, potential conflicts of interest if we and GE face decisions that could have implications for both us and GE. We expect our Board chair to be a director who currently also serves on the board of directors of GE. Potential conflicts of interest could arise in connection with the resolution of any dispute between us and GE regarding the terms of the agreements governing the separation and distribution and our relationship with GE following the separation and distribution. See “Certain Relationships and Related Person Transactions” for information about some of these agreements. Potential conflicts of interest may also arise out of any commercial arrangements that we or GE may enter into in the future. A dispute regarding a potential or actual conflict of interest involving us and GE could negatively impact our businesses, results of operations, cash flows, and financial condition. In addition, public perception of such an actual or apparent conflict of interest could pose reputational risks and expose us to increased scrutiny from investors and regulators.

Prior to the Spin-Off, we will adopt a written code of conduct that will apply to our directors and executive officers, as well as employees, which intends to promote honest and ethical conduct, including the handling of actual or apparent conflicts of interests between personal and professional relationships. See “Management—Code of Conduct.” The Board will also adopt a set of governance principles in connection with the Spin-Off to assist with governance practices, including a requirement that directors disclose actual or potential conflicts of interest and recuse themselves from any discussion or decision affecting their personal, business, or professional interests. The governance principles will also delegate the resolution of any conflict of interest question involving a director or an executive officer to the Nominating and Governance Committee and the resolution of any conflict of interest issue involving any other officer of the Company to the CEO. See “Management – Governance Principles” for more information on the governance principles. In addition, each of our expected officers and directors have confirmed their ongoing obligation to notify management of their outside activities, which will enable management to monitor future potential conflicts of interest, whether with GE or other third parties.

Following the Spin-Off, we may not be able to arrange for the termination or replacement of, and the release of GE and its subsidiaries from, all parent company credit support obligations that remain outstanding.

To support GE Vernova in selling products and services globally, GE often enters into contracts on behalf of GE Vernova or issues parent company guarantees or trade finance instruments supporting the performance of what currently are subsidiary legal entities transacting directly with customers of GE Vernova, in addition to providing similar credit support for some non-customer related activities of GE Vernova (collectively, “GE credit support”, which GE credit support is further described in the section “Certain Relationships and Related Person Transactions—Agreements with GE—Separation and Distribution Agreement—Credit Support”). In preparation for the Spin-Off, we are working to seek novation or assignment of GE credit support, the majority of which relates to parent company guarantees, associated with GE Vernova legal entities from GE to GE Vernova. The Separation and Distribution Agreement requires us to use reasonable best efforts to arrange for the termination or replacement of, and the release of GE and its subsidiaries from, all GE credit support. We may, however, be unable to convince our counterparties to novate, or assign our obligations (with a release of GE and its subsidiaries) from GE to us. For the obligations that remain outstanding under GE credit support following the Spin-Off, we will indemnify GE against any amounts paid

 

55


Table of Contents

in connection with such GE credit support. Commencing on January 1, 2025, we will pay a quarterly fee to GE based on amounts related to the GE credit support, which could have an adverse effect on our liquidity. Pursuant to the Separation and Distribution Agreement, we will be subject to certain restrictions and covenants with respect to contracts underlying GE credit support under which GE or its subsidiaries remain liable, including a prohibition on certain amendments and on any disposition of such contracts (including indirectly through dispositions of our subsidiaries). These provisions may restrict us from extending contracts, or amending contracts in a manner which increases GE’s obligations under, outstanding GE credit support or require us to obtain third-party credit support with respect to such obligations. In each case, these provisions could delay or prevent the accomplishment of our objectives and adversely affect our business. In addition, so long as obligations remain outstanding under GE credit support, unless GE otherwise consents, it will be a condition to any acquisition or change of control of GE Vernova that the acquiring person have the financial and operational capacity to satisfy those obligations, have unsecured investment grade ratings and agree to be bound by all the same provisions applicable to us under the Separation and Distribution Agreement with respect to the GE credit support, or we or such acquiring person will be required to provide third-party credit support reasonably acceptable to GE with respect to such GE credit support. This condition may discourage, delay, or prevent certain types of transactions involving an actual or a threatened acquisition or change in control of GE Vernova, including unsolicited takeover attempts, even though the transaction may offer our stockholders the opportunity to sell their shares of our common stock at a price above the prevailing market price. For more information on our obligations pertaining to the GE credit support, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity—Parent Company Credit Support” and “Certain Relationships and Related Person Transactions—Separation and Distribution Agreement—Credit Support.”

We or GE may fail to perform under various transaction agreements that will be executed as part of the separation.

In connection with the separation, and prior to the Spin-Off, we and GE will enter into various transaction agreements related to the Spin-Off. All of these agreements will also govern our relationship with GE following the Spin-Off. We will rely on GE to satisfy its performance obligations under these agreements. If we or GE are unable to satisfy our or its respective obligations under these agreements, including indemnification obligations, our business, results of operations, cash flows, and financial condition could be adversely affected. See “Certain Relationships and Related Person Transactions.”

Certain non-U.S. entities or assets that are part of our separation from GE may not be transferred to us prior to the Spin-Off or at all.

Certain non-U.S. entities and assets that are part of our separation from GE may not be transferred prior to the Spin-Off because the entities or assets, as applicable, are subject to foreign government or third-party approvals that we may not receive prior to the Spin-Off. Such approvals may include, but are not limited to, approvals to merge or demerge, to form new legal entities (including obtaining required registrations and/or licenses or permits), and to transfer assets and/or liabilities. It is currently anticipated that most material transfers will occur without delays beyond the Distribution Date, but we cannot offer any assurance that such transfers will ultimately occur or not be delayed for an extended period of time. To the extent such transfers do not occur prior to the Spin-Off, under the Separation and Distribution Agreement, the economic consequences of owning such assets and/or entities will, to the extent reasonably possible and permitted by applicable law, be provided to us. In the event such transfers do not occur or are significantly delayed because we do not receive the required approvals, we may not realize all of the anticipated benefits of our separation from GE and we may be dependent on GE for transition services for a longer period of time than would otherwise be the case.

Transfer or assignment to us of some contracts, joint ventures, and other assets will require the consent of a third party. If such consent is not given or if its requirement is used to obtain more favorable contractual terms, we may not be entitled to some or all of the benefit of such contracts, joint ventures, investments, and other assets in the future.

Transfer or assignment of some of the contracts, joint ventures, and other assets in connection with the Spin-Off and change of control in the ownership structure following the Spin-Off will require the consent of a third party to the

 

56


Table of Contents

transfer or assignment. Similarly, in some circumstances, we are joint beneficiaries of contracts, and we will need to enter into a new agreement with the third party to replicate the existing contract or assign the portion of the existing contract related to our business. While we will endeavor to cause these contract and joint ventures transfers, assignments, consents, and new agreements to be obtained prior to the Spin-Off, we may not be able to obtain all required consents or enter into all such agreements, as applicable, until after the Distribution Date. Some parties may use the requirement of a consent to seek more favorable contractual terms from us, which could require us to accept a lower economic benefit from the contract or joint venture or include our having to obtain letters of credit or other forms of credit support. If we are unable to obtain such consents or such credit support on commercially reasonable and satisfactory terms, we may be unable to obtain some of the benefits, assets, and contractual commitments that are intended to be allocated to us as part of the Spin-Off. In addition, where we do not intend to seek consent from third-party counterparties based on our understanding that no consent is required, the third-party counterparties may challenge the transaction on the basis that the terms of the applicable commercial arrangements require their consent. We may incur substantial litigation and other costs in connection with any such claims and, if we do not prevail, our ability to use these assets could be adversely impacted.

We cannot provide assurance that all such required third-party consents and agreements will be procured or put in place, as applicable, prior to the Distribution Date. Consequently, we may not realize certain of the benefits that are intended to be allocated to us as part of the Spin-Off.

Risks Relating to Our Common Stock and the Securities Market

No market for our common stock currently exists and an active trading market may not develop or be sustained after the Spin-Off. Following the Spin-Off, our stock price may fluctuate significantly, and there can be no assurance that the combined trading prices of our and GE’s common stock would exceed the trading price of GE common stock absent the Spin-Off.

There is currently no public market for our common stock. In connection with the Spin-Off, we have applied to list our common stock on the New York Stock Exchange. We anticipate that before the Distribution Date, trading of shares of our common stock will begin on a “when-issued” basis and this trading will continue through the Distribution Date. However, an active trading market for our common stock may not develop as a result of the Spin-Off or may not be sustained in the future. The lack of an active market may make it more difficult for stockholders to sell our shares and could lead to our share price being depressed or volatile.

We cannot predict the prices at which our common stock may trade after the Spin-Off or whether the combined trading prices of a share of our common stock and a share of GE’s common stock will be less than, equal to, or greater than the trading price of a share of GE common stock prior to the Spin-Off. The market price of our common stock may fluctuate widely depending on many factors, some of which may be beyond our control.

Furthermore, our business profile and market capitalization may not fit the investment objectives of some GE stockholders and, as a result, these GE stockholders may sell their shares of our common stock after the Spin-Off. See “—Substantial sales of our common stock may occur in connection with the Spin-Off, or in the future, which could cause our stock price to decline or be volatile.” Low trading volume for our stock, which may occur if an active trading market does not develop, among other reasons, would amplify the effect of the above factors on our stock price volatility. Should the market price of our shares drop significantly, stockholders may institute securities class action lawsuits against us. A lawsuit against us could cause us to incur substantial costs and could divert the time and attention of our management and other resources.

Substantial sales of our common stock may occur in connection with the Spin-Off, or in the future, which could cause our stock price to decline or be volatile.

GE stockholders receiving shares of our common stock in the Spin-Off may sell those shares immediately in the public market. It is likely that some GE stockholders, including some of its larger stockholders, will sell their shares of our common stock received in the Spin-Off if, for reasons such as our business profile or market capitalization as an independent company, we do not fit their investment objectives or, in the case of index funds, we are not a

 

57


Table of Contents

participant in the index in which they are investing. The sales of significant amounts of our common stock or the perception in the market that such sales might occur may decrease the market price of our common stock.

We will evaluate whether to pay cash dividends on shares of our common stock in the future, and the terms of our indebtedness may limit our ability to pay dividends on shares of our common stock.

As an independent, publicly traded company, we will be determining the optimal allocation of capital to achieve the company’s strategy and deliver competitive returns to our stockholders, including whether to pay cash dividends to our stockholders. The timing, declaration, amount, and payment of future dividends to stockholders, if any, will fall within the discretion of our Board. Our Board’s decisions regarding the payment of dividends will depend on consideration of many factors, such as our financial condition, earnings, sufficiency of distributable reserves, opportunities to retain future earnings for use in the operation of our business and to fund future growth, capital requirements, debt service obligations, legal requirements, regulatory constraints, and other factors that our Board deems relevant. For more information, See “Dividend Policy.” There can be no assurance that we will pay a dividend in the future or continue to pay any dividend if we do commence paying dividends.

Holders of our common stock may be diluted due to equity issuances.

In the future, holders of our common stock may be diluted because of equity issuances for acquisitions, capital market transactions, or otherwise, including any equity awards that we will grant to our directors, officers, and employees. Our employees will have stock-based awards that correspond to shares of our common stock after the Spin-Off as a result of the conversion of and/or adjustments to their GE stock-based awards. Such awards will have a dilutive effect on our earnings per share, which could adversely affect the market price of our common stock. We also plan to issue additional stock-based awards, including annual awards, new hire awards, and periodic retention awards, as applicable, to our directors, officers, and other employees under our employee benefits plans as part of our ongoing equity compensation program.

The rights associated with our common stock will differ from the rights associated with GE common stock.

Upon completion of the Spin-Off, the rights of GE stockholders who become our stockholders will be governed by our certificate of incorporation, bylaws, and Delaware law. The rights associated with GE shares are different from the rights associated with our shares. In addition, the rights of GE stockholders are governed by New York law, while the rights of our stockholders will be governed by Delaware law. Material differences between the rights of stockholders of GE and the rights of our stockholders include differences with respect to, among other things, anti-takeover measures and the fact that we will have a classified board. See “Description of Our Capital Stock—Certain Provisions of Delaware Law, Our Certificate of Incorporation, and Bylaws.”

Certain provisions in our certificate of incorporation, bylaws, the Separation and Distribution Agreement, and Delaware law may discourage takeovers and limit the power of our stockholders.

Several provisions of our certificate of incorporation, bylaws, the Separation and Distribution Agreement, and Delaware law may discourage, delay, or prevent a merger or acquisition. These include, among others, provisions that (i) establish a classified board of directors so that not all members are elected at one time, which could delay the ability of stockholders to change the membership of a majority of our board of directors; (ii) provide for the removal of directors only for cause during the time the Board is classified; (iii) establish advance notice requirements for stockholder nominations and proposals; (iv) limit the ability of stockholders to call special meetings or act by written consent; (v) provide the Board the right to issue shares of preferred stock without stockholder approval; and (vi) provide for the ability of our directors, and not stockholders, to fill vacancies on the Board (including those resulting from an enlargement of the Board). We are subject to Section 203 of the Delaware General Corporation Law (“DGCL”), which could have the effect of delaying or preventing a change of control that you may favor. See “Description of Our Capital Stock.” In addition, we will be subject to the restrictions on change of control transactions under the Separation and Distribution Agreement described under “Certain Relationships and Related Person Transactions—Agreements with GE—Separation and Distribution Agreement—Credit Support.”

 

58


Table of Contents

These and other provisions of our certificate of incorporation, bylaws, the Separation and Distribution Agreement, and Delaware law, as well as the restrictions in our Tax Matters Agreement (see “Certain Relationships and Related Person Transactions—Agreements with GE—Tax Matters Agreement”), may discourage, delay, or prevent certain types of transactions involving an actual or a threatened acquisition or change in control of GE Vernova, including unsolicited takeover attempts, even though the transaction may offer our stockholders the opportunity to sell their shares of our common stock at a price above the prevailing market price. Our Board believes these provisions will protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with the Board and by providing the Board with more time to assess any acquisition proposal. These provisions will apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that the Board determines is not in our and our stockholders’ best interests. See “Description of Our Capital Stock.”

Our certificate of incorporation will provide that certain courts in the State of Delaware or the federal district courts of the United States will be the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.

Our certificate of incorporation will provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery located within the State of Delaware will be the sole and exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, employee, agent, or stockholder to us or our stockholders, any action asserting a claim arising pursuant to the DGCL, the certificate of incorporation or the bylaws, or any action asserting a claim governed by the internal affairs doctrine. However, if the Court of Chancery within the State of Delaware lacks jurisdiction over such action, the action may be brought in another court of the State of Delaware or, if no court of the State of Delaware has jurisdiction, then in the United States District Court for the District of Delaware. Additionally, our certificate of incorporation will state that the foregoing provision will not apply to claims arising under the Securities Act. Unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. The exclusive forum provisions will be applicable to the fullest extent permitted by applicable law, subject to certain exceptions. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provisions will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. There is, however, uncertainty as to whether a court would enforce the exclusive forum provisions, and investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for state and federal courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.

Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of and, to the fullest extent permitted by law, to have consented to the provisions of our certificate of incorporation described above. The choice of forum provision may result in increased costs for investors to bring a claim. Further, the choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, other employees, or stockholders, which may discourage such lawsuits against us and our directors, officers, other employees, or stockholders. However, the enforceability of similar forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings. If a court were to find the exclusive choice of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.

 

59


Table of Contents

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Information Statement may constitute “forward-looking statements” that involve risks and uncertainties. Forward-looking statements are based on our current assumptions regarding future business and financial performance. These statements by their nature address matters that are uncertain to different degrees. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Words such as “anticipates,” “believes,” “expects,” “estimates,” “intends,” “plans,” “projects,” and similar expressions, may identify such forward-looking statements. Any forward-looking statement in this Information Statement speaks only as of the date on which it is made. Although we believe that the forward-looking statements contained in this Information Statement are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results, cash flows, or results of operations and could cause actual results to differ materially from those in such forward-looking statements, including but not limited to:

 

   

our strategy, outcomes, and growth prospects;

 

   

significant disruptions in our operations or supply chain;

 

   

potential failures in managing customer relationships and customer contracts;

 

   

general economic trends and trends in the industry, including market and other dynamics related to decarbonization, and markets in which we operate;

 

   

actual or perceived quality or safety issues in our products, solutions and services;

 

   

the competitive environment in which we operate;

 

   

our business dealings involving third-party partners in various markets;

 

   

modifications to governmental incentives or policies that support renewable energy;

 

   

our ability to compete successfully;

 

   

our ability to develop and introduce new technologies;

 

   

our ability to meet ESG expectations or standards and achieve our ESG goals;

 

   

our ability to attract and retain highly qualified personnel;

 

   

our ability to obtain, maintain, protect, and effectively enforce our intellectual property rights;

 

   

the risks from acquisitions, collaborations, and dispositions;

 

   

damage to our reputation;

 

   

our ability to comply with complex and increasing legal and regulatory requirements;

 

   

the failure to protect our intellectual property or allegations that we have infringed the intellectual property of others;

 

   

cybersecurity and privacy considerations;

 

   

legal proceedings and investigatory risks;

 

   

extensive laws and regulations;

 

   

environmental matters;

 

   

tax matters;

 

   

the impact of the commercial and credit environment on our access to capital;

 

   

exposure to interest rate and currency risk;

 

   

GE’s failure to complete the Spin-Off as planned or at all;

 

60


Table of Contents
   

our failure to manage the transition to a stand-alone public company or achieve some or all of the benefits we expect to achieve from the Spin-Off;

 

   

the risk of an active trading market not developing or being sustained;

 

   

the risk of significant volatility in our stock price; and

 

   

certain factors discussed elsewhere in this Information Statement.

These and other factors are more fully discussed in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and elsewhere in this Information Statement. Those cautionary statements are not exclusive and are in addition to other factors discussed elsewhere in this Information Statement. Except as required by law, we assume no obligation to update or revise any forward-looking statements.

 

61


Table of Contents

THE SPIN-OFF

Background

On November 9, 2021, GE announced its plans to form three industry-leading, global investment grade public companies: (i) GE Aerospace, (ii) GE HealthCare, and (iii) GE’s energy business, GE Vernova. The GE HealthCare Spin-Off was completed on January 3, 2023. To consummate the Spin-Off of GE Vernova, GE is undertaking the Reorganization Transactions and, following the Reorganization Transactions, will distribute all of the outstanding shares of our common stock to holders of GE’s common stock on a pro rata basis.

On     , 2024, the GE Board approved the distribution of all of the issued and outstanding shares of our common stock, on the basis of      share of our common stock for every      shares of GE common stock held as of the close of business on the record date of     , 2024.

On     , 2024, the Distribution Date, each GE stockholder will receive      share of our common stock for every      shares of GE common stock held at close of business on the record date. Following the Spin-Off, we will operate independently from GE. No approval of GE’s stockholders is required in connection with the Spin-Off, and GE’s stockholders will not have any appraisal rights in connection with the Spin-Off.

Completion of the Spin-Off is subject to the satisfaction, or the GE Board’s waiver, to the extent permitted by law, of a number of conditions. In addition, GE may at any time until the Spin-Off decide to abandon the Spin-Off or modify or change the terms of the Spin-Off. For a more detailed discussion, see “—Conditions to the Spin-Off.”

Reasons for the Spin-Off

In 2021, the GE Board authorized a review of GE’s business portfolio and capital allocation options, with the goal of enhancing shareholder value. Due to differences in operational and strategic focus between GE’s different businesses and because the renewable energy, power, and digital industries are highly complex and global markets that would benefit from the focus and investment by an independent company, GE considered a variety of alternatives for separating the GE Vernova business from GE. As part of its review process, GE evaluated a range of potential structural alternatives in addition to the Spin-Off, including potential opportunities for sales and other separation transactions. In this process, GE also evaluated potential options for maintaining its existing businesses and structure.

As part of this evaluation, the GE Board considered a number of factors, including strategic clarity and flexibility for GE and GE Vernova after the Spin-Off, the ability of the GE Vernova business to compete and operate efficiently in the renewable energy, power and digital markets (including the ability to retain and attract management talent), the financial profile of GE Vernova, GE Vernova’s ability to enhance merger, acquisition, and other capital allocation strategies for its focus areas, the expected tax impact of each structural alternative, and the potential reaction of investors. After evaluating these and other considerations, the GE Board concluded that the other alternatives considered did not present the same advantages as the Spin-Off, that the separation of the GE Vernova business from the remainder of GE as a stand-alone, public company is the most attractive alternative for enhancing long-term stockholder value and that proceeding with the Spin-Off would be in the best interests of GE and its stockholders.

In particular, the GE Board considered the following potential benefits in making the determination to consummate the Spin-Off:

 

   

Enhanced Strategic and Operational Focus: The Spin-Off will permit both us and GE, and our respective management teams and boards of directors, to more effectively focus on pursuing distinct operating strategies and to leverage our deep domain expertise. As a result, we will have greater agility to deliver market-leading innovation across our products, services, and solutions. This will enable each company to better serve and adapt faster to clients’ changing needs. After our separation from GE, GE intends to focus on GE Aerospace.

 

62


Table of Contents
   

Strong Financial Profile to Support Growth: The Spin-Off will enable each company to maintain investment grade credit ratings and strong financial characteristics and to independently drive growth and investment to better address specific market dynamics and target innovation.

 

   

More Flexible and Efficient Allocation of Capital: The Spin-Off is expected to allow each company to use its securities to pursue and achieve strategic objectives including executing on acquisitions and other growth opportunities.

 

   

Alignment of Incentives with Performance: The Spin-Off will enable each company to create incentives for its management and employees that align more closely with business performance and the interests of their respective stockholders, which is also expected to help each company attract, retain, and motivate highly qualified personnel.

 

   

Attracting a Focused Investor Base: The Spin-Off allows each company to articulate a clear investment proposition and tailored capital allocation policy to attract a long-term investor base best suited to its business needs.

In determining whether to consummate the Spin-Off, the GE Board considered the costs and risks associated with the transaction, including the costs associated with preparing GE Vernova to become an independent, publicly traded company, the risk of volatility in our stock price immediately following the Spin-Off due to sales by GE stockholders whose investment objectives may no longer be met by shares of our common stock, the time it may take for us to attract our optimal stockholder base, the possibility of disruptions in our business as a result of the Spin-Off, the risk that the combined trading prices of shares of our common stock and the shares of common stock of GE after the Spin-Off may drop below the trading price of shares of common stock of GE before the Spin-Off, and the loss of synergies and scale, including the benefits of capital allocation operating as one company. Notwithstanding these costs and risks, taking into account the factors discussed above, GE determined that the Spin-Off provided the best opportunity to achieve the above benefits and enhance long-term stockholder value. Please refer to the “Risk Factors—Risks Relating to the Spin-Off” elsewhere in this Information Statement for additional considerations.

When and How You Will Receive Our Shares

GE will distribute to its stockholders, as a pro rata distribution,      share of our common stock for every      shares of GE common stock outstanding as of     , 2024, the Record Date of the Spin-Off.

Prior to the Spin-Off, GE will deliver all of the issued and outstanding shares of our common stock to the Distribution Agent. Equiniti Trust Company, LLC will serve as Distribution Agent in connection with the Spin-Off and as transfer agent and registrar for our common stock.

If you own GE common stock as of the close of business on the Record Date, and you retain your entitlement to receive the shares of our common stock through the Distribution Date, the shares of our common stock that you are entitled to receive in the Spin-Off will be issued to your account as follows:

 

   

Registered stockholders. If you own your shares of GE common stock directly through GE’s transfer agent, you are a registered stockholder. In this case, the Distribution Agent will credit the whole shares of our common stock you receive in the Spin-Off by way of direct registration in book-entry form to a new account with our transfer agent. Registration in book-entry form refers to a method of recording share ownership where no physical stock certificates are issued to stockholders, as is the case in the Spin-Off. You will be able to access information regarding your book-entry account for our shares at www.shareowneronline.com or by calling 1-888-999-0031.

 

   

“Street name” or beneficial stockholders. If you own your shares of GE common stock beneficially through a bank, broker, or other nominee, the bank, broker, or other nominee holds the shares in “street name” and records your ownership on its books. In this case, your bank, broker, or other nominee will

 

63


Table of Contents
 

credit your account with the whole shares of our common stock that you receive in the Spin-Off on or shortly after the Distribution Date. We encourage you to contact your bank, broker, or other nominee if you have any questions concerning the mechanics of having shares held in “street name.”

If you sell any of your shares of GE common stock after the Record Date but on or before the Distribution Date, the buyer of those shares, rather than you, may in some circumstances be entitled to receive the shares of our common stock to be distributed in respect of the GE shares you sold. See “—Trading Prior to the Distribution Date.”

We are not asking GE stockholders to take any action in connection with the Spin-Off. We are not asking you for a proxy and request that you not send us a proxy. We are also not asking you to make any payment or surrender or exchange any of your shares of GE common stock for shares of our common stock. The number of outstanding shares of GE common stock will not change as a result of the Spin-Off.

Number of Shares You Will Receive

On the Distribution Date, you will be entitled to receive      share of our common stock for every      shares of GE common stock that you hold on the Record Date.

Treatment of Fractional Shares

The Distribution Agent will not distribute any fractional shares of our common stock in connection with the Spin-Off. Instead, the Distribution Agent will aggregate all fractional shares into whole shares and sell the whole shares in the open market at prevailing market prices on behalf of GE stockholders entitled to receive a fractional share. The Distribution Agent will then distribute the aggregate cash proceeds of the sales, net of brokerage fees, transfer taxes, and other costs, pro rata to these holders (net of any required withholding for taxes applicable to each holder). The Distribution Agent will, in its sole discretion, without any influence by GE or us, determine when, how, through which broker-dealer, and at what price to sell the whole shares. The Distribution Agent is not, and any broker-dealer used by the Distribution Agent will not be, an affiliate of either GE or us.

The Distribution Agent will send to each registered holder of GE common stock entitled to a fractional share a check in the cash amount deliverable in lieu of that holder’s fractional share as soon as practicable following the Distribution Date. We expect the Distribution Agent to take about two weeks after the Distribution Date to complete the distribution of cash in lieu of fractional shares to GE stockholders. If you hold your shares through a bank, broker, or other nominee, your bank, broker, or nominee will receive, on your behalf, your pro rata share of the aggregate net cash proceeds of the sales. No interest will be paid on any cash you receive in lieu of a fractional share. The cash you receive in lieu of a fractional share will generally be taxable to you for U.S. federal income tax purposes. See “Material U.S. Federal Income Tax Consequences of the Spin-Off.”

Treatment of Equity Awards

GE equity awards outstanding as of the Distribution Date that are expected to be converted, in whole or in part, into GE Vernova equity awards, are described below.

Stock Option and Restricted Stock Unit Awards Held by GE Vernova Employees and Performance Share Award Held by GE’s CEO

As of the Distribution Date, (i) each outstanding GE stock option and restricted stock unit award (including any performance stock unit award) that is held immediately prior to the Spin-Off by an employee of GE Vernova or one of its subsidiaries and (ii) a portion of the outstanding performance share award held by GE’s CEO immediately prior to the Spin-Off will be converted into a respective stock option, restricted stock unit or performance share award denominated in shares of our common stock. Each of our converted awards will

 

64


Table of Contents

generally be subject to the same terms, vesting conditions and other restrictions that applied to the original GE award immediately before the Spin-Off, except that performance-vesting conditions, as applicable, will be adjusted to reflect the Spin-Off.

Director Deferred Stock Units

As of the Distribution Date, a portion of each outstanding GE deferred stock unit held by a current or former director of GE will be converted into a deferred stock unit relating to shares of our common stock. GE will retain the liability for our deferred stock units held by each current and former director of GE; except that GE Vernova will assume the liability for dividend payments made in respect of converted deferred stock units held by a GE director immediately prior to the Distribution Date who serves on the board of GE Vernova after the Distribution Date. Our deferred stock units will generally be subject to the same terms, payment timing rules and other restrictions that applied to the original GE deferred stock units immediately before the Spin-Off.

Results of the Spin-Off

After the Spin-Off, we will be an independent, publicly traded company. Immediately following the Spin-Off, we expect to have approximately      shares of our common stock outstanding, based on the number of GE shares of common stock outstanding on     , 2024. The actual number of shares of our common stock GE will distribute in the Spin-Off will depend on the actual number of shares of GE common stock outstanding on the Record Date, which will reflect any issuance of new shares, vesting of equity awards, or exercises of outstanding options pursuant to GE’s equity plans, and any repurchase of GE shares by GE under its common stock repurchase program, on or prior to the Record Date. Shares of GE common stock held by GE as treasury shares will not be considered outstanding for purposes of, and will not be entitled to participate in, the Spin-Off. The Spin-Off will not affect the number of outstanding shares of GE common stock or any rights of GE stockholders. However, following the Spin-Off, the equity value of GE will no longer reflect the value of the GE Vernova business. Although GE believes that our separation from GE offers its stockholders the greatest long-term value, there can be no assurance that the combined trading prices of the GE common stock and our common stock will equal or exceed what the trading price of GE common stock would have been in absence of the Spin-Off.

Before our separation from GE, we intend to enter into the Separation and Distribution Agreement and several other agreements with GE related to the Spin-Off. These agreements will govern the relationship between us and GE up to and after completion of the Spin-Off and allocate between us and GE various assets, liabilities, rights and obligations, including employee benefits, environmental, intellectual property, and tax-related assets and liabilities. We describe these arrangements in greater detail under “Certain Relationships And Related Person Transactions—Agreements with GE.”

Listing and Trading of Our Common Stock

As of the date of this Information Statement, we are a wholly-owned subsidiary of GE. Accordingly, no public market for our common stock currently exists, although a “when-issued” market in our common stock may develop prior to the Spin-Off. See “—Trading Prior to the Distribution Date” below for an explanation of a “when-issued” market. We have applied to list our shares of common stock on the New York Stock Exchange under the ticker symbol “GEV.” Following the Spin-Off, GE common stock will continue to trade on the New York Stock Exchange under the ticker symbol “GE.”

Although GE believes that our separation from GE offers its stockholders the greatest long-term value, neither we nor GE can assure you as to the trading price of GE common stock or our common stock after the Spin-Off, or as to whether the combined trading prices of our common stock and the GE common stock after the Spin-Off will equal or exceed the trading prices of GE common stock prior to the Spin-Off. The trading price of our common stock may fluctuate significantly following the Spin-Off.

 

65


Table of Contents

The shares of our common stock distributed to GE stockholders will be freely transferable, except for shares received by individuals who are our affiliates. Individuals who may be considered our affiliates after the Spin-Off include individuals who control, are controlled by, or are under common control with us, as those terms generally are interpreted for federal securities law purposes. These individuals may include some or all of our directors and executive officers. Individuals who are our affiliates will be permitted to sell their shares of our common stock only pursuant to an effective registration statement under the Securities Act of 1933, or the “Securities Act,” or an exemption from the registration requirements of the Securities Act, such as those afforded by Section 4(a)(1) of the Securities Act or Rule 144 thereunder.

Trading Prior to the Distribution Date

We expect a “when-issued” market in our common stock to develop as early as three days prior to the Distribution Date and continue up to and including the Distribution Date. “When-issued” trading refers to a sale or purchase made conditionally on or before the Distribution Date because the securities of the spun-off entity have not yet been distributed. If you own shares of GE common stock at the close of business on the Record Date, you will be entitled to receive shares of our common stock in the Spin-Off. You may trade this entitlement to receive shares of our common stock, without the shares of GE common stock you own, on the “when-issued” market. We expect “when-issued” trades of our common stock to settle within two trading days after the Distribution Date. On the first trading day following the Distribution Date, we expect that “when-issued” trading of our common stock will end and “regular-way” trading will begin.

We also anticipate that, as early as three days prior to the Distribution Date and continuing up to and including the Distribution Date, there will be two markets in GE common stock: a “regular-way” market and an “ex-distribution” market. Shares of GE common stock that trade on the regular-way market will trade with an entitlement to receive shares of our common stock in the Spin-Off. Shares that trade on the ex-distribution market will trade without an entitlement to receive shares of our common stock in the Spin-Off. Therefore, if you sell shares of GE common stock in the regular-way market up to and including the Distribution Date, you will be selling your right to receive shares of our common stock in the Spin-Off. However, if you own shares of GE common stock at the close of business on the Record Date and sell those shares on the ex-distribution market up to and including the Distribution Date, you will still receive the shares of our common stock that you would otherwise be entitled to receive in the Spin-Off.

If “when-issued” trading occurs, the listing for our common stock is expected to be under a trading symbol different from our regular-way trading symbol. We will announce our “when-issued” trading symbol when and if it becomes available. If the Spin-Off does not occur, all “when-issued” trading will be null and void.

Conditions to the Spin-Off

We expect that the Spin-Off will be effective on the Distribution Date, provided that the following conditions shall have been satisfied or waived by GE:

 

   

the GE Board shall have approved the Spin-Off and not withdrawn such approval, and shall have declared the dividend of our common stock to GE stockholders;

 

   

the Separation and Distribution Agreement, as well as the ancillary agreements contemplated by the Separation and Distribution Agreement, shall have been executed by each party to those agreements;

 

   

the SEC shall have declared effective our Registration Statement on Form 10, of which this Information Statement is a part, under the Exchange Act, and no stop order suspending the effectiveness of the Registration Statement shall be in effect and no proceedings for that purpose shall be pending before or threatened by the SEC;

 

   

our common stock shall have been accepted for listing on a national securities exchange approved by GE, subject to official notice of issuance;

 

66


Table of Contents
   

GE shall have received the written opinion of Paul, Weiss, Rifkind, Wharton & Garrison LLP, which shall remain in full force and effect, regarding the intended tax treatment of the Spin-Off under the Code;

 

   

GE shall have received the written opinion of Ernst & Young, LLP, which shall remain in full force and effect, regarding the intended tax treatment of the Spin-Off under the Code;

 

   

the Reorganization Transactions shall have been completed (other than those steps that are expressly contemplated to occur at or after the Spin-Off);

 

   

no order, injunction, or decree issued by any governmental authority of competent jurisdiction or other legal restraint or prohibition preventing consummation of the Spin-Off shall be in effect, and no other event outside the control of GE shall have occurred or failed to occur that prevents the consummation of the Spin-Off;

 

   

no other events or developments shall have occurred prior to the Spin-Off that, in the judgment of the GE Board, would result in the Spin-Off having a material adverse effect on GE or its stockholders;

 

   

prior to the Distribution Date, the Notice of Internet Availability of this Information Statement or this Information Statement shall have been mailed to the holders of GE common stock as of the Record Date; and

 

   

certain other conditions set forth in the Separation and Distribution Agreement.

Any of the above conditions may be waived by the GE Board to the extent such waiver is permitted by law. If the GE Board waives any condition prior to the effectiveness of the Registration Statement on Form 10, of which this Information Statement forms a part, or change the terms of the Spin-Off, and the result of such waiver or change is material to GE stockholders, we will file an amendment to the Registration Statement on Form 10, of which this Information Statement forms a part, to revise the disclosure in the Information Statement accordingly. In the event that GE waives a condition or changes the terms of the Spin-Off after this Registration Statement on Form 10 becomes effective and such waiver or change is material to GE stockholders, we would communicate such waiver or change to GE’s stockholders by filing a Form 8-K describing the waiver or change.

The fulfillment of the above conditions will not create any obligation on GE’s part to complete the Spin-Off. We are not aware of any material federal, foreign, or state regulatory requirements with which we must comply, other than SEC rules and regulations, or any material approvals that we must obtain, other than the approval for listing of our common stock and the SEC’s declaration of the effectiveness of the Registration Statement, in connection with the Spin-Off. GE may at any time until the Spin-Off decide to abandon the Spin-Off or modify or change the terms of the Spin-Off.

Reasons for Furnishing This Information Statement

We are furnishing this Information Statement solely to provide information to GE’s stockholders who will receive shares of our common stock in the Spin-Off. You should not construe this Information Statement as an inducement or encouragement to buy, hold, or sell any of our securities or any securities of GE. We believe that the information contained in this Information Statement is accurate as of the date set forth on the cover. Changes to the information contained in this Information Statement may occur after that date, and neither we nor GE undertakes any obligation to update the information except in the normal course of our and GE’s public disclosure obligations and practices.

 

67


Table of Contents

DIVIDEND POLICY

As an independent, publicly traded company, we will be determining the optimal allocation of capital to achieve the company’s strategy and deliver competitive returns to our stockholders, including whether to pay cash dividends to our stockholders. The timing, declaration, amount, and payment of future dividends to stockholders, if any, will fall within the discretion of our Board. Among the items we will consider when establishing a dividend policy will be the capital needs of GE Vernova and opportunities to retain future earnings for use in the operation of our business and to fund future growth. There can be no assurance that we will pay a dividend in the future or continue to pay any dividend if we do commence the payment of dividends.

 

68


Table of Contents

CAPITALIZATION

The following table sets forth our Cash, cash equivalents, and restricted cash and capitalization as of December 31, 2023, on a historical basis and on a pro forma basis to give effect to the Spin-Off and the transactions related to the Spin-Off, as if they occurred on December 31, 2023. You should review the following table in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our audited combined financial statements and the notes thereto, and our unaudited pro forma condensed combined financial statements and the notes thereto included elsewhere in this Information Statement.

 

     As of December 31, 2023  
($ in millions)     Historical       Pro Forma   

Assets

    

Cash, cash equivalents and restricted cash(a)

   $ 1,551     $ 3,597  

 

 

Liabilities

    

Total debt(a)

     129       129  

Stockholders’ equity

    

Net parent investment

     8,051       —   

Common stock

     —        [●

Additional paid-in capital

     —        [●

Accumulated other comprehensive income (loss) – net attributable to GE Vernova

     (635     (635

 

 

Total equity attributable to GE Vernova

     7,416       8,004  

Noncontrolling interests

     964       964  

 

 

Total equity

     8,380       8,968  

 

 

Total capitalization

   $ 8,509     $ 9,097  

 

 
(a)

In connection with the Spin-Off, we expect to receive a net cash contribution from GE to be used for our future operations such that our cash balance on the date of the completion of the Spin-Off will be approximately $4.2 billion, of which $603 million is reported in Assets of business held for sale as of December 31, 2023 related to the planned sale of a portion of our Steam business to Electricité de France S.A. (“EDF”). At the time of sale, a portion of the cash consideration that we will receive from EDF will compensate us for the amount of cash recorded in Assets of business held for sale.

In addition, we intend to enter into a $3.0 billion committed revolving credit facility. The facility is not expected to be utilized at the closing of the Spin-Off, however, we expect to use this facility to fund near-term intra-quarter working capital needs. We also intend to enter into a $3.0 billion committed trade finance facility. The trade finance facility is not expected to be utilized and will not provide direct liquidity to GE Vernova. The terms of such indebtedness are subject to change and will be finalized prior to the closing of the Spin-Off. See “Unaudited Pro Forma Condensed Combined Financial Statements,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

 

69


Table of Contents

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma condensed combined financial statements consist of the unaudited pro forma condensed combined statement of income (loss) for the year ended December 31, 2023 and the unaudited pro forma condensed combined statement of financial position as of December 31, 2023.

The unaudited pro forma condensed combined financial statements reflect adjustments to our historical audited combined statement of income (loss) for the year ended December 31, 2023 and our historical audited combined statement of financial position as of December 31, 2023.

The unaudited pro forma condensed combined statement of income (loss) gives effect to the Spin-Off and related transactions, described below, as if they had occurred on January 1, 2023, the beginning of our most recently completed fiscal year. The unaudited pro forma condensed combined statement of financial position gives effect to the Spin-Off and related transactions as if they occurred as of December 31, 2023, our latest statement of financial position date.

The unaudited pro forma condensed combined financial statements have been prepared to reflect transaction accounting and autonomous entity adjustments to present the financial condition and results of operations as if we were a separate stand-alone entity. In addition, the unaudited pro forma condensed combined financial statements include a presentation of management adjustments that management believes are necessary to enhance an understanding of the pro forma effects of the transaction. The unaudited pro forma condensed combined financial statements have been adjusted to give effect to the following (collectively, the “Pro Forma Transactions”):

 

   

the contribution of assets and liabilities that comprise our business by GE and the retention by GE of certain specified assets and liabilities reflected in our historical combined financial statements, in each case, pursuant to the Separation and Distribution Agreement;

 

   

the expected transfer to us, prior to or concurrent with the Spin-Off, of various GE assets and liabilities not included in our historical combined statement of financial position;

 

   

the anticipated post Spin-Off capital structure, including the issuance of approximately    shares of our common stock to holders of GE common stock in connection with the Spin-Off;

 

   

the impact of the Tax Matters Agreement to be entered into with GE in connection with the Spin-Off;

 

   

the impact of the Transition Services Agreements and other commercial agreements to be entered into with GE in connection with the Spin-Off (see “Certain Relationships and Related Person Transactions”);

 

   

transaction and incremental income and costs expected to be incurred as an autonomous entity and specifically related to the Spin-Off; and

 

   

other adjustments described in the notes to the unaudited pro forma condensed combined financial statements.

The unaudited pro forma condensed combined financial statements were prepared in accordance with Article 11 of Regulation S-X. The unaudited pro forma condensed combined financial statements are presented for informational purposes only and do not purport to represent what our financial position and results of operations actually would have been had the Pro Forma Transactions occurred on the dates indicated, or to project our financial performance for any future period. The unaudited pro forma condensed combined financial statements are based on information and assumptions, which are described in the accompanying notes. These amounts are an estimate, and the final amounts could differ materially from these estimates.

Our historical combined financial statements, which were the basis for the unaudited pro forma condensed combined financial statements, were prepared on a carve-out basis as we did not operate as a stand-alone entity

 

70


Table of Contents

for the periods presented. Accordingly, such financial information reflects an allocation of certain corporate costs, such as finance, supply chain, human resources, information technology, insurance, employee benefits, and other expenses that are either specifically identifiable or clearly applicable to GE Vernova. See Notes 1 and 22 to the historical combined financial statements as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” included elsewhere in this Information Statement for further information on the allocation of corporate costs.

The unaudited pro forma condensed combined financial statements have been prepared to include transaction accounting (including the impact of changes to our legal entity structure in anticipation of the Spin-Off), autonomous entity and management adjustments to reflect the financial condition and results of operations as if we were a stand-alone entity. Transaction adjustments have been presented to show the impact and associated cost as a direct result of the legal separation from GE, including the establishment of GE Vernova’s expected capital structure and funding at the time of Spin-Off, transfer of certain renewable energy U.S. tax equity investments to GE, and the Tax Matters Agreement. Autonomous entity adjustments have been presented to show the impact of items such as the Transition Services Agreement, lease arrangements with third parties and GE, and certain incremental costs expected to be incurred as an autonomous entity. In addition, the unaudited pro forma condensed combined financial statements include a presentation of management adjustments that management believes are necessary to enhance an understanding of the pro forma effects of the transaction. Actual future costs incurred may differ from these estimates.

The unaudited pro forma condensed combined financial statements shown below should be read in conjunction with the sections herein entitled “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Certain Relationships and Related Person Transactions” as well as the historical combined financial statements and the corresponding notes included elsewhere in this Information Statement. For factors that could cause actual results to differ materially from those presented in the unaudited pro forma condensed combined financial statements, see “Cautionary Statement Concerning Forward-Looking Statements” and “Risk Factors” included elsewhere in this Information Statement.

 

71


Table of Contents

Unaudited Pro Forma Condensed Combined Statement of Income (Loss)

For the Year Ended December 31, 2023

 

($ in millions, except share and per share amounts)      Historical    

Transaction

Accounting

Adjustments

         

Autonomous

Entity

Adjustments

          Pro Forma  

 

 

Sales of equipment

     $  18,258     $   —        $    —        $  18,258  

Sales of services

       14,981       —          —          14,981  

 

 

Total revenues

       33,239     —          —          33,239

 

 

Cost of equipment

       18,705     15       (d     —          18,720

Cost of services

       9,716     —          —          9,716

 

 

Gross profit

       4,818     (15       —          4,803  

 

 

Selling, general and administrative expenses

       4,845     —          83       (m ), (o), (p)      4,928  

Research and development expenses

       896     —          —          896

 

 

Operating income (loss)

       (923     (15       (83       (1,021

 

 

Interest and other financial charges – net

       (98     27       (a ), (d)      —          (71

Non-operating benefit income

       567     —          —          567

Other income (expense) – net

       324     132       (d     20       (n     476

 

 

Income (loss) before income taxes

       (130     144         (63       (49

Provision (benefit) for income taxes

       344       183       (i     —        (q     527

 

 

Net income (loss)

       (474     (39       (63       (576

Net loss (income) attributable to noncontrolling interests

       36       —          —          36  

 

 

Net income (loss) attributable to GE Vernova

     $ (438   $ (39     $ (63     $ (540

 

 

Earnings (loss) per share of common stock

              

Basic

               (k   $    

Diluted

               (k   $    

Weighted-average number of common shares outstanding

              

Basic

               (k  

Diluted

               (k  

 

 

See accompanying notes to the unaudited pro forma condensed combined financial statements.

 

72


Table of Contents

Unaudited Pro Forma Condensed Combined Statement of Financial Position

As of December 31, 2023

 

($ in millions)   Historical    

Transaction

Accounting

Adjustments

         

Autonomous

Entity

Adjustments

        Pro Forma  

 

 

Cash, cash equivalents and restricted cash

  $ 1,551     $    2,046       (a ), (b)    $    —        $ 3,597  

Current receivables – net

    7,409     76       (h     —          7,485

Due from related parties

    80     (76     (h     —          4

Inventories, including deferred inventory costs

    8,253     —          —          8,253

Current contract assets

    8,339     —          —          8,339

All other current assets

    352     —          48     (p)     400

Assets of business held for sale

    1,444     —          —          1,444

 

 

Current assets

    27,428     2,046         48         29,522

 

 

Property, plant and equipment – net

    5,228     11       (c     12     (l)     5,251

Goodwill

    4,437     —          —          4,437

Intangible assets – net

    1,042     11       (c     —          1,053

Contract and other deferred assets

    621     —          —          621

Equity method investments

    3,555     (1,214     (c ), (d)      —          2,341

Deferred income taxes

    1,582     16       (e ), (i)      —          1,598

All other assets

    2,228     132       (a ), (b), (c)      11     (p)     2,371  

 

 

Total assets

  $ 46,121     $ 1,002     $ 71       $  47,194  

 

 

Accounts payable and equipment project payables

  $ 7,900     $ 376       (h   $ —        $ 8,276  

Due to related parties

    532       (498     (h     —          34

Contract liabilities and deferred income

    15,074     —          —          15,074

All other current liabilities

    4,352     238       (c ), (f), (g), (h)      8     (l)     4,598

Liabilities of business held for sale

    1,448     —          —          1,448

 

 

Current liabilities

    29,306     116         8         29,430

 

 

Deferred income taxes

    382     —          —          382

Noncurrent compensation and benefits

    3,273     45       (g ), (h)      —          3,318

All other liabilities

    4,780     309       (b ), (c), (d), (f)      7     (l)     5,096

 

 

Total liabilities

    37,741     470         15         38,226

 

 

Net parent investment

    8,051       532       (a ), (c) - (g), (i)     56     (l), (p)     8,639

Common stock, $0.01 par value

    —        [●     (j     —          —   

Additional paid-in capital

    —        [●     (j     —          —   

Accumulated other comprehensive income (loss) – net attributable to GE Vernova

    (635     —          —          (635 )

 

 

Total equity attributable to GE Vernova

    7,416     532         56         8,004  

Noncontrolling interests

    964     —          —          964

 

 

Total equity

    8,380     532         56         8,968

 

 

Total liabilities and equity

  $ 46,121     $ 1,002       $ 71       $ 47,194  

 

 

See accompanying notes to the unaudited pro forma condensed combined financial statements.

 

73


Table of Contents

Notes to the Unaudited Pro Forma Condensed Combined Financial Statements

The unaudited pro forma condensed combined statement of income (loss) for the year ended December 31, 2023 and the unaudited pro forma condensed combined statement of financial position as of December 31, 2023 include the following adjustments:

Transaction Accounting Adjustments:

 

  (a)

Historically, we participated in cash pooling and other financing arrangements with GE to manage liquidity and fund our operations and, upon completion of this Spin-Off, we will no longer participate in these arrangements. In connection with the Spin-Off, we expect to receive a net cash contribution from GE to be used for our future operations such that our cash balance on the date of the completion of the Spin-Off will be approximately $4.2 billion, of which $603 million is reported in Assets of business held for sale as of December 31, 2023 related to the planned sale of a portion of our Steam business to Electricité de France S.A. (“EDF”). At the time of sale, a portion of the cash consideration that we will receive from EDF will compensate us for the amount of cash recorded in Assets of business held for sale.

Prior to the completion of the Spin-Off, we intend to enter into a $3.0 billion committed revolving credit facility. The facility is not expected to be utilized at the closing of the Spin-Off, however, we expect to use this facility to fund near-term intra-quarter working capital needs. In addition, we intend to enter into a $3.0 billion committed trade finance facility. The trade finance facility is not expected to be utilized and will not provide direct liquidity to GE Vernova. Total deferred debt issuance costs associated with the credit facility and trade finance facility of $15 million are recorded in All other assets and are amortized to Interest and other financial charges – net over the terms of the credit facility and trade finance facility. In addition, annual fees related to the credit facility and trade finance facility are recorded in Interest and other financial charges – net. Total amortization and fees related to the credit facility and trade finance facility are $17 million for the year ended December 31, 2023.

 

  (b)

This adjustment reflects assets and liabilities that are unrelated to the historical operations of GE Vernova but relate to certain legal entities that will be transferred from GE to GE Vernova in connection with the Spin-Off and will be subject to indemnifications for the full amount by either GE or GE Vernova. Refer to the below table for further details.

 

($ in millions)    As of
December 31, 2023
 

Cash, cash equivalents and restricted cash

   $       323  

All other assets

   $ 80  

All other liabilities

   $ 403

This adjustment includes the transfer of restricted cash of $323 million and a deposit of $32 million included in All other assets in connection with certain legal matters related to legacy GE operations, and a corresponding indemnification liability has been recorded for $355 million in All other liabilities that reflects the use of these funds to settle any associated obligations and the return of any remaining cash to GE in a future reporting period once resolved.

This adjustment also includes liabilities of $48 million transferred to GE Vernova related to GE legal and environmental, health and safety matters, with a corresponding indemnification asset due from GE recorded in All other assets.

 

  (c)

This adjustment reflects assets and liabilities that have historically been shared with other GE businesses but that are expected to transfer to us, prior to or concurrent with the Spin-Off. See Note 1 to the historical combined financial statements for further discussion of the basis of presentation and the Company’s historical assets and liabilities. Refer to the below table for further details.

 

74


Table of Contents
($ in millions)    As of
December 31, 2023
 

Property, plant and equipment – net

   $       11  

Intangible assets – net

   $ 11  

Equity method investments

   $ 13  

All other assets

   $ 37  

All other current liabilities

   $ 60  

All other liabilities

   $ 7  

Net parent investment

   $ 5  

 

  (d)

This adjustment removes renewable energy U.S. tax equity investments of $1,227 million owned by our Financial Services business that are included in the historical combined financial statements but that will be transferred by us to GE prior to the Spin-Off with their related tax attributes. This adjustment also removes $146 million of deferred income recorded in All other liabilities primarily related to intercompany profit eliminations that we defer when our Wind segment records sales to the investees and recognize over the estimated life of the related investment.

In addition, this adjustment reflects the corresponding impact to the unaudited pro forma condensed combined statement of income (loss), including the removal of gains and losses related to these investments, interest expense allocated to us by GE for funding such investments and the net impact of intercompany profit eliminations of $15 million recorded during the year. The table below provides further details on the removal of these investments from the unaudited pro forma condensed combined statement of income (loss):

 

($ in millions)   

Year Ended

December 31, 2023

 

Cost of equipment

   $       15  

Interest and other financial charges – net

   $ 44  

Other income (expense) – net

   $ 132  

These investments generated production tax credits of $183 million for the year ended December 31, 2023. See note (i) for further details related to the tax effects of the pre-tax transaction pro forma adjustments.

 

  (e)

This adjustment reflects the net amount of deferred tax assets of $3 million related to tax attributes that are expected to be transferred from us to GE as a result of the Spin-Off.

Certain tax attributes, such as net operating losses, credit carryforwards, and fully offsetting valuation allowances, existed in the stand-alone GE Vernova combined financial statements as a result of using the separate return method but will not exist in GE Vernova’s financial statements following the Spin-Off. These tax attributes have been derecognized in the unaudited pro forma condensed combined statement of financial position.

 

  (f)

This adjustment reflects the establishment of indemnification liabilities of $64 million by GE Vernova and a reduction to uncertain tax positions of $19 million and related interest of $13 million pursuant to the Tax Matters Agreement. Refer to the below table for further details.

 

($ in millions)   

Year Ended

December 31, 2023

 

All other current liabilities

   $       (13

All other liabilities

   $ 45  

Net parent investment

   $ (32

 

75


Table of Contents
  (g)

Reflects $87 million in All other current liabilities and $27 million in Noncurrent compensation and benefits with respect to additional employee-related obligations expected to be transferred from GE to GE Vernova prior to Spin-Off. These liabilities are incremental to the liabilities included in the audited combined statement of financial position as they relate to shared liabilities that were not allocated ratably to GE Vernova but for which GE Vernova records and pays the related expense in the reporting period.

 

  (h)

Reflects the reclassification of certain transactions historically included in related parties accounts to the appropriate third-party or employee-related accounts based on the nature of the transaction, as of December 31, 2023.

 

($ in millions)    As of
December 31, 2023
 

Current receivables, net

   $       76  

Due from related parties

   $ (76

Accounts payable and equipment project payables

   $ 376  

Due to related parties

   $ (498

All other current liabilities

   $ 104  

Noncurrent compensation and benefits

   $ 18  

 

  (i)

Reflects the tax effects of the transaction pro forma adjustments at the applicable statutory tax rates, net of related valuation allowances, and the expected effects of the Separation and Distribution Agreement, changes to our legal entity structure in anticipation of the Spin-Off and stand-alone effects within the respective jurisdictions. This adjustment was determined by applying the respective statutory tax rates to pre-tax pro forma adjustments in jurisdictions where valuation allowances were not required. The applicable tax rates could be impacted (either higher or lower) depending on many factors subsequent to the Spin-Off including the profitability in local jurisdictions and the legal entity structure implemented subsequent to the Spin-Off and may be materially different from the pro forma results. In addition to the $183 million expense for income taxes recorded in the unaudited pro forma condensed combined statement of income (loss), primarily related to the removal of production tax credits generated by renewable energy tax equity investments to be transferred to GE, this adjustment includes deferred tax assets of $19 million reflected in the unaudited pro forma condensed combined statement of financial position as of December 31, 2023.

 

  (j)

Reflects the reclassification of GE’s net investment in our Company to Additional paid-in capital, as well as the issuance of      shares of our common stock with a par value of $0.01 per share pursuant to the Separation and Distribution Agreement. We have assumed the number of outstanding shares of our common stock based on      shares of GE common stock outstanding as of December 31, 2023 and on the basis of      shares of our common stock for every      shares of GE common stock. The actual number of shares issued will not be known until the record date for the distribution.

 

  (k)

The weighted-average number of shares used to compute pro forma basic and diluted earnings (loss) per share for the year ended December 31, 2023 is    , on the basis of    shares of our common stock for every    shares of GE common stock outstanding as of December 31, 2023. In periods in which we report a net loss, pro forma diluted earnings (loss) per share is the same as pro forma basic earnings (loss) per share since the inclusion of common stock equivalents would be anti-dilutive.

Autonomous Entity Adjustments:

 

  (l)

Reflects the net impact of lease arrangements with third parties and lease arrangements with GE for shared facilities and equipment that have been entered into or will be entered into prior to the Spin-Off. These adjustments record the operating right-of-use assets and related operating lease liabilities based

 

76


Table of Contents
  on the estimated present value of the lease payments over the lease term. The pro forma adjustment related to our leases is reflected in the unaudited pro forma condensed combined statement of financial position as of December 31, 2023, as follows:

 

($ in millions)   

Property, plant and

equipment – net

    

All other current

liabilities

    

All other

liabilities

 

Operating leases

   $    12      $    8      $    7  

 

  (m)

Pursuant to the Transition Services Agreement and the Trademark License Agreement we intend to enter into with GE, we will incur incremental expenses of approximately $10 million for the year ended December 31, 2023 above the previous allocation of GE corporate costs. Costs incurred under the Transition Services Agreement are primarily related to certain digital technology, human resources, supply chain, finance, and real estate services, among other services.

 

  (n)

This adjustment reflects an investment management fee of $20 million expected to be payable to GE Vernova for Financial Services’ continuing involvement and management of the renewable energy U.S. tax equity investments on behalf of GE after the Spin-Off and until the related investments are exited. This management fee is recorded in Other income (expense) and will vary based on the value of assets managed on behalf of GE and is expected to continue over a period of three to five years. See note (d) for further details related to these investments.

 

  (o)

In preparation for the Spin-Off, we are working to seek novation or assignment of the GE credit support (as defined in the section “Certain Relationships and Related Person Transactions—Agreements with GE—Separation and Distribution Agreement—Credit Support,” the majority of which relates to parent company guarantees, associated with GE Vernova legal entities from GE to GE Vernova. Pursuant to an agreement we intend to enter into with GE, commencing on January 1, 2025, we will pay a fee to GE based on amounts related to the GE credit support. This adjustment reflects an annual fee of up to approximately $25 million associated with the amount of credit support expected to be provided by GE during 2025 based on the expected contractual maturity of the underlying obligations as if such credit support was required for the year ended December 31, 2023 and assuming no additional novations or assignments (with a release of GE) of any GE credit support to GE Vernova were completed. This fee is recorded in Selling, general and administrative expenses. Future fees will vary depending on the amount of remaining credit support and fee structure agreed to with GE. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources and Liquidity—Parent Company Credit Support” included elsewhere in this Information Statement for further information.

 

  (p)

As part of the Spin-Off, GE will incur additional non-recurring costs for the development of advanced research and other technological infrastructure on behalf of GE Vernova. These costs are expected to be incurred within eighteen months of the Spin-Off. Upon the Spin-Off, we will record a prepaid asset of approximately $59 million representing the value to be received from such development activities. Capitalization of such expenditures for GE Vernova is expected to be limited given these activities are necessary for the separation of GE Vernova from GE. Related non-cash non-recurring expenses of approximately $48 million have been recorded in Selling, general and administrative expenses for the year ended December 31, 2023. Refer to the below table for further details.

 

($ in millions)   

Year Ended

December 31, 2023

 

All other current assets

   $      48  

All other assets

   $ 11  

Net parent investment

   $ 59  

 

  (q)

Reflects the tax effects of the autonomous entity pro forma adjustments at the applicable statutory tax rates, net of related valuation allowance, and the expected effects of the Separation and Distribution Agreement and the Tax Matters Agreement, or stand-alone effects within the respective jurisdictions. The tax benefit associated with the autonomous entity adjustments described above is zero given a full

 

77


Table of Contents
  valuation allowance is required in the jurisdictions where the costs will be incurred. The applicable tax rates could be impacted depending on many factors subsequent to the Spin-Off including, but not limited to, the profitability in local jurisdictions and the legal entity structure implemented subsequent to the Spin-Off and may be materially different from the pro forma results.

Management Adjustments:

We have elected to present management adjustments to the pro forma financial information and included all adjustments that are, in the opinion of management, necessary for a fair statement of such information. Following the Spin-Off, we expect to incur incremental costs as a stand-alone entity in certain of our corporate support functions (e.g., finance, accounting, tax, treasury, information technology, human resources, and legal, among others). We received the benefit of economies of scale as businesses within GE’s overall centralized model; however, in establishing these independent support functions, the expenses will be higher than the prior shared allocation.

As a stand-alone public company, we expect to incur certain costs in addition to those incurred pursuant to the Transition Services Agreement as described in note (m) and other transaction and autonomous entity adjustments noted above, including costs resulting from:

 

   

One-time and non-recurring expenses associated with Spin-Off and stand-up of functions required to operate as a stand-alone public entity. These non-recurring costs primarily relate to system implementation costs, business and facilities separation, applicable employee-related costs, development of our brand, and other matters; and

 

   

Recurring and ongoing costs required to operate new functions required for a public company, such as external reporting, internal audit, treasury, investor relations, board of directors and officers, stock administration, and expanding the services of existing functions such as information technology, finance, supply chain, human resources, legal, tax, facilities, branding, security, government relations, community outreach, and insurance.

We estimate that we would have incurred approximately $410 million of total expenses (including one-time expenses of approximately $210 million and estimated recurring expenses of $200 million) for the year ended December 31, 2023 if the Spin-Off had occurred on January 1, 2023. We expect to incur these costs beginning at Spin-Off, with one-time costs expected to be incurred over a period of twelve to twenty-four months post Spin-Off.

These management adjustments are reflective of the dis-synergies that we expect as a stand-alone public company. We estimated these dis-synergies by assessing the resources and associated one-time and recurring costs that each function (e.g., finance, information technology, human resources, etc.) will require to stand up and operate GE Vernova as a stand-alone public company. We expect to address shortfalls to the estimated required resources, in addition to the services provided by GE under the Transition Services Agreement, through additional hiring or incremental vendor and other third-party spend.

The dis-synergies have been estimated based on assumptions that our management believes are reasonable. However, actual additional costs that will be incurred could be different from the estimates and would depend on several factors, including the economic environment, results of contractual negotiations with third party vendors, ability to execute on proposed separation plans, and strategic decisions made in areas such as manufacturing, selling and marketing, research and development, information technology, and infrastructures. In addition, adverse effects and limitations including those discussed in the section entitled “Risk Factors” to this document may impact actual costs incurred. We may also decide to increase or reduce resources or invest more heavily in certain areas in the future, which may differentiate the management adjustments even further from actual costs incurred in the future. These management adjustments include forward-looking information.

 

78


Table of Contents

For the year ended December 31, 2023

 

($ in millions, except share and per share amounts)   Net income (loss)    

Basic earnings

(loss) per share

   

Diluted earnings

(loss) per share

 

Unaudited pro forma condensed combined net income (loss)(a)

  $ (576    

Net loss (income) attributable to noncontrolling interests(a)

    36      
         

Unaudited pro forma condensed combined net income (loss) attributable to GE Vernova(a)

    (540   $          $       

Management’s adjustments

    (410    

Tax effect(b)

    —       
         

Unaudited pro forma condensed combined net income (loss) attributable to GE Vernova after management’s adjustments

  $ (950   $       $    
         

Weighted-average number of common shares outstanding(c):

     

Basic

     

Diluted

     
         
(a)

As shown in the unaudited pro forma condensed combined statement of income (loss).

(b)

No tax effect has been included as most tax jurisdictions require a full valuation allowance to be recorded for the tax benefits associated with the management adjustments described above.

(c)

The aforementioned management adjustments are not expected to result in any change to the number of shares or potential common shares to be issued in the Spin-Off.

 

79


Table of Contents

OUR INDUSTRY

Introduction

GE Vernova is a global leader in the electric power industry, with products and services that generate, transfer, orchestrate, convert, and store electricity. We design, manufacture, deliver, and service technologies to create a more reliable and sustainable electric power system, enabling electrification and decarbonization, underpinning the progress and prosperity of the communities we serve. We are a purpose-built company, uniquely positioned with a scope and scale of solutions to accelerate the energy transition, while servicing and growing our installed base and strengthening our own profitability and shareholder returns. We have a strong history of innovation which is a key strength enabling us to meet our customers’ needs.

Electricity is critical to economic progress and prosperity as well as to improve the quality of life. The IEA expects demand for electricity generation in 2040 to grow by more than 55% from 2022 levels with the natural gas, hydro, wind, nuclear, solar and storage energy sub-sectors playing a key role. This growing demand for electricity generation is driven by multiple factors. Approximately 750 million people globally lack access to electricity, and many more who do have access experience frequent, extended outages that disrupt their lives, impact their safety and security, and challenge their economic growth. Electricity use is also increasing as an alternative to fossil fuels for whole industries or sectors, such as transportation, which are currently pursuing increased electrification as a means to decarbonize. The future electric power system must meet this demand growth while incorporating new and diverse sources, preserving or improving system reliability, affordability, and sustainability. Electric power sector emissions account for approximately 40% of all human-made CO2 emissions in the world today and without a change to the current energy mix, global growth in demand for electricity generation would increase CO2 emissions by more than 7 billion tons annually by 2040.

GE Vernova innovates and invests across our broad portfolio of technologies to help our customers meet growing demand for electricity generation and reduce the carbon intensity of power grids and electricity supply, while maintaining or improving system reliability, affordability, and sustainability. Today, approximately 30% of the world’s electricity is generated using GE Vernova’s installed base of technologies. We intend to grow profitably through the sale of equipment needed to electrify and to decarbonize power systems, as well as by servicing this installed base for decades to come. We will continue to support customer efforts to limit or reduce emissions, and we expect to continue reducing the carbon intensity of our installed base – all while increasing the resiliency of the grid and achieving the goals of our customers, investors, and employees.

We deliver products and services that generate, transfer, orchestrate, convert, and store electricity. Our products and solutions generate electricity from various forms of energy or fuels, including wind, hydro, solar, nuclear, natural gas, and steam. We have offerings that transfer and orchestrate electricity reliably, safely, and securely from generation sources to consumers, over various electricity grids or systems – using grid-related software, hardware, automation, and controls. We develop and deliver technologies that convert electricity across grid systems, such as from alternating to direct current (AC to DC) or vice versa (DC to AC); from one voltage level or frequency to another; and into other forms of energy including mechanical, thermal, and chemical. We also develop and deliver solutions that enable customers to store electricity for use to meet peak demand, through products such as pumped hydro and integrated battery energy storage systems.

 

LOGO

 

80


Table of Contents

GE Vernova’s products, services, and pipeline of investments in leading edge technologies help utility, commercial, and industrial customers avoid, reduce, or capture greenhouse gas emissions produced when generating electricity. Use of carbon-free generation technologies like wind, solar, hydro, and nuclear helps avoid greenhouse gas emissions. Power plant efficiency upgrades and the increasing use of lower carbon-intense fuels like hydrogen in gas turbines can help our customers reduce their greenhouse gas emissions compared to their current state. We also develop integrated solutions that capture carbon for use or sequestration, rather than releasing carbon into the atmosphere and contributing to climate change.

GE Vernova maintains a global reach and scale necessary to lead the energy transition to an electrified and decarbonized future, with approximately 80,000 employees, including our field services associates, and a local presence in more than 100 countries. We derived approximately 71% of our 2023 revenues from OECD countries—and geographically 47% of our revenue from the Americas, 25% from Europe, 16% from Asia and 12% from the Middle East & Africa. We deliver products and services into large, growing segments tied to the energy transition and we estimate the addressable market we serve was approximately $265 billion in 2022. Overall, industry experts conservatively anticipate spending in the power and end-use sectors will increase from $1.4 trillion per year in recent years to more than $2.4 trillion per year in the 2030s. We serve the world’s largest utilities – many of whom serve the OECD or developed markets – that today focus heavily on decarbonization efforts.

LOGO

 

LOGO

 

81


Table of Contents

As we serve these markets, GE Vernova will continue to build on a rich heritage of technology leadership and innovation, with more than 140 years of experience dating back to Thomas Edison’s first commercial power plant in the United States (1882). We continue to be an innovation leader, with approximately 36,000 patents and patent applications filed in approximately 60 countries. Other significant innovations developed by us include:

 

   

the world’s first licensed nuclear power plant (1957),

 

   

the world’s first F-class gas turbine (1990),

 

   

wind blades for the world’s first offshore wind farm (1991),

 

   

the world’s first mobile (trailer-mounted) aeroderivative gas turbine for power generation (1996),

 

   

the world’s first wind turbines with low-voltage-ride-through capability (2003),

 

   

multiple world records for most efficient gas combined cycle plant (2016), and

 

   

North America’s first commercial award for a small modular nuclear reactor (2022).

The Customers We Serve

GE Vernova serves customers across the global electric power industry, entities responsible for providing reliable electricity fundamental to economic growth and improving the quality of life. The electric power industry includes customers who generate electricity, transmit it over medium and long distances, distribute it from substations to industrial, commercial, or residential consumers of electricity, or help to electrify other industries to decarbonize them. The electric power industry products and solutions we provide can be part of large, interconnected grid systems or isolated, self-contained microgrids. Our customers include:

 

   

utilities and independent power producers that generate electricity,

 

   

large commercial and industrial customers who own power plants that generate electricity for sale into regulated markets, wholesale markets or for their own usage, and

 

   

utilities and grid operators who own and operate the transmission and distribution systems that deliver electricity to consumers, as well as large commercial and industrial customers with their own electrical grid infrastructure they utilize to serve their facilities.

The electric power industry and the systems that support the generation, transmission and distribution of electricity will continue to evolve rapidly. Consumers, in addition to being end-customers of the electric power system, are increasingly becoming suppliers to it via their own generation through growth of distributed solar and battery energy storage solutions. We believe our customers seek to improve their ability to deliver the energy trilemma (as described further below), and that GE Vernova is well-positioned to support these efforts.

 

82


Table of Contents

The Energy Trilemma

Electricity providers must balance three important criteria for end consumers, which the industry often refers to as the energy trilemma or consumers’ desire for electricity that is reliable, affordable, and sustainable, which at times serve as competing priorities. The relative importance of each criteria fluctuates over time and can vary significantly by geography, the state of local economies, and the prevailing political landscape. One of the United Nations’ Sustainable Development Goals refers to the trilemma by aiming to “ensure access to affordable, reliable, sustainable and modern energy for all.”

 

LOGO

Consumers demand reliable electricity generation with minimal disruptions in service and quick restoration times when outages do occur. Two sub-criteria of reliability that have grown in importance recently are resilience and energy security. Consumers expect their power grid and generation sources to be resilient to short-term disruptions from factors such as extreme weather or spikes in demand and to be secure from long-term disruptions from factors such as cyber-attacks or potential supply constraints due to over-reliance on imported power, fuels, or technology. As the world moves to electrify transportation through use of electric vehicles and expands the electrification of heating and cooking to replace fossil fuels, and continues to increase its reliance on electronic devices and systems, dependence on a reliable power grid has increased, as has the impact when extended outages occur. Recent global events, such as extreme weather events and the energy crisis that stemmed from the Russia and Ukraine conflict have highlighted the importance of energy reliability, resilience, and security. The significance of these same criteria is even more critical in developing economies where power outages can be daily events which can last hours, or days at a time and limit economic growth and access to healthcare, education, and communication. Concerns about energy security have grown significantly and are influencing decisions on energy mix and the origin of critical components of their electric power systems.

A key priority for consumers and governments is that electricity be affordable to everyone. The median U.S. household spends an average of 3% of income on home energy bills, yet for low-income households, that percentage grows to 8% according to the American Council for an Energy Efficient Economy. Globally, the lowest income households are often least able to make energy efficiency investments. Electricity prices can fluctuate significantly, as the cost of fuels or other costs are often volatile. As an example, wholesale electricity prices in Europe during the summer of 2022 increased by tenfold their levels at the beginning of 2021 due to the energy crisis resulting from the Russia and Ukraine conflict.

The third criteria in the energy trilemma is that electricity be more sustainable and align with the global effort to accelerate decarbonization and combat climate change. The electric power sector has the potential for significant decarbonization ahead of other sectors through adoption of zero and low-carbon generation technologies. Countries and companies have committed, and continue to commit, to aggressive targets for decarbonization, and many have established net zero emission targets by 2050 or sooner. Utility, industrial, and commercial customers must attempt to balance the energy trilemma priorities, and GE Vernova offers a wide range of products and services to help them in their transition to improve grid reliability, reduce system costs, and reduce carbon emissions.

 

83


Table of Contents

Regulated Utilities

Across the globe, the electricity needs of a region can be served by either regulated or deregulated utilities. In many geographies, electricity markets remain regulated monopolies. In these cases, a vertically integrated utility or a federal or state-owned utility typically owns the electricity generation, transmission, distribution, and grid operations for their service territories. Under this arrangement, a regulator or government entity oversees prices, allowing a utility to recover its operating and investment costs plus a “fair” regulated return on debt and equity capital employed. Regulators also generally approve new plant or grid infrastructure investments through an integrated resource planning process. A vertically integrated utility may also trade with other utilities, purchasing or selling power. In a regulated power market, GE Vernova’s customers can include federal, state (or provincial) government-owned utilities and municipals, electric cooperatives, or regulated subsidiaries of investor-owned utilities. In some markets, a regulated utility may only provide transmission and distribution services – with generation provided by deregulated utilities or independent power producers, as outlined below.

Deregulated Utilities and Independent Power Producers

In other locations, federal or regional policy makers created competitive wholesale energy markets where electricity generation has been deregulated and decoupled from its transmission and distribution, both of which remain regulated. In these deregulated markets, generators offer to sell electricity for a particular bid price, while transmission and distribution entities bid for that electricity to meet end-consumer demand. Supply side quantities are ordered in ascending order of offer price. Generally, a market clearing price is established by the last offer price required to meet the electricity demanded for that hour and all generators receive this market price per megawatt hour of power generated. In a deregulated market, our power generation customers can include deregulated arms of investor-owned utilities or independent power producers which purchase and operate power plants. In addition, transmission companies, and distribution companies are customers for GE Vernova’s grid and electrification solutions. Grid operators, which include independent system operators and transmission system operators can also be customers for some of our digital and grid orchestration software solutions.

Commercial and Industrial Customers

In addition to power utilities, GE Vernova supports a wide range of commercial and industrial customers that self-generate all or a portion of their own power needs. Such commercial and industrial customers are actively seeking out more efficient, lower-carbon energy use and generation. Within the oil and gas industry we deliver tailored products, solutions and services for pipeline compression and the liquefaction of natural gas into LNG. Both applications require turbines or electric motors to power large compressors. Many oil and gas facilities also require extensive electrical systems such as microgrids on an offshore platform. GE Vernova also supports the marine industry with power technologies, solutions, and services. Large ships, including naval fleets, require propulsion drives and extensive on-board electrical systems with high reliability and security. Ports are also increasingly being electrified to address decarbonization, thereby reducing the use of more emissions-intensive hydrocarbons such as fuel oil. Many other industries, including steel, mining, paper, textiles, and desalination plants, require a combination of power and some form of thermal energy. Commercial customers, such as information technology data centers, rail infrastructure operators, universities, and large retailers, are also beginning to self-generate some of their electricity needs, which efforts may also require other electricity related infrastructure for support.

 

84


Table of Contents

Macro Industry Trends

An evolving mix of electric power generation technologies are being shaped by demand growth for electricity generation, decarbonization, and growing concerns for energy security and stability. Grid modernization and investment are also being shaped by the changing generation mix and concerns for energy security and stability. While closely interconnected, the following sections will highlight each of these five macro trends.

 

 

LOGO

Demand Growth for Electricity Generation

Demand for electricity generation tends to scale with population and GDP growth, although increasing levels of electrification across the global economy are expected to drive this even higher. Conservative forecasts, from the IEA and other third parties, estimate the world electric generation demand will increase by about 55% in 2040 versus 2022 and that electricity generation required to reach economy-wide net zero emissions would need to more than double from 2022 levels, driven by global movement towards electrification of key sectors such as transportation, real estate, and industry.

Access to reliable electricity remains fundamental to supporting economic growth and improved quality of life. Reliable electricity is vital to personal health, including access to refrigeration for food and medicine and medical care facilities with adequate light and power for lifesaving technologies. Electricity is critical to safety and security by having lights and access to communication technologies. Access to electricity is vital to education, by providing light to read or study, and powering computers and networks enabling access to information. Reliable access to electricity can affect one’s comfort and quality of life, providing heat or air conditioning, powering basic appliances, and enabling access to entertainment and communication.

While many people in developed economies take reliable electricity for granted, significant investment, controls, infrastructure, and diversity of supply are required to deliver reliable power all hours of the day and throughout the year. Extended power disruptions, such as the extended outage that occurred in Texas during the winter of 2021, and in many parts of the world frequently, have a tangible impact on lives and the economy. Substantial growth in the electrification of the economy will also increase the importance of reliable electricity to modern life in the decades to come.

 

85


Table of Contents

We expect continued demand growth as the power sector will lead global decarbonization and enable other sectors to decarbonize through electrification of:

 

   

Transportation (such as the shift where possible from internal combustion vehicles towards hybrid and electric vehicles for automotive, rail, marine or aviation);

 

   

Real estate (with the shift from use of fossil fuels towards electricity for heating and cooking); and

 

   

Industrial plants (with the shift from use of fossil fuels towards electricity for mechanical, thermal, or chemical energy process needs).

The electrification of these other sectors and their increasing reliance on power generation and grids demonstrates the importance of improved electricity reliability.

Decarbonization

Power sector emissions account for about 40% of all human-made CO2 emissions in the world today with 70% of that coming from coal generation. To address climate change, GE Vernova believes we should reduce carbon emissions from the power sector while meeting the growing demand for electricity generation simultaneously. Because of growth in variable or intermittent renewables, the installed level of generation capacity is expected to more than double by 2040 to meet the more than 55% increase in demand for electricity generation and maintain or improve required reliability levels. To put this in perspective, over the last 40 years the world added approximately 6,000 GW of generating capacity. A more than doubling of generation demand would require building approximately 12,500 additional GW in less than half that time.

Increasing global urgency to address and reduce the impact of climate change will serve as a significant tailwind for broader investment in the power sector and will drive increased demand for GE Vernova’s products, services, and solutions. Countries continue to establish or strengthen commitments and policies to address climate change through legislative and regulatory frameworks such as the Paris Agreement, the IRA, and the European Union Taxonomy. The European Union Taxonomy classifies which technologies may be marketed as sustainable investments, thereby qualifying for and attracting green investment. Many companies continue to establish or strengthen their own greenhouse gas emissions reductions targets, net zero pathways, and broader ESG-related goals and commitments. Consumers increasingly factor life-cycle environmental impacts of products and services into their purchasing decisions, while investors often choose to allocate capital based on climate or sustainability initiatives and actions taken by companies. Workers are beginning to select an employer based on its mission and impact on the world, including its impact on the environment.

Governments can play a critical role in global decarbonization by stimulating and attracting investment in the energy transition to help create a more sustainable power sector. Many governments are deploying a “carrots and sticks” approach using tax credits to incentivize investment in a variety of technologies vital to decarbonizing electricity. Governments are also recognizing the role that improvements, modernization, and growth in infrastructure will play in pacing the transition. Many governments are committing funding for infrastructure projects designed to facilitate decarbonization and working to streamline the regulatory permitting processes for large infrastructure projects such as grid interconnections. The recently enacted laws described above are rapidly accelerating investments in cleaner energy, encouraging a multi-pronged approach with a wide range of technologies vital to the energy transition. National Net Zero pledges now cover 88% of annual global emissions, according to Net Zero Tracker. In some instances, these pledges are in law or a policy document, versus being a proposal or pledge.

 

86


Table of Contents

 

LOGO

Companies across a wide range of industries are becoming active participants and investors, committing to greenhouse gas emission reductions across their operations. In many cases they are sourcing cleaner energy or developing their own sources of power generation using zero or low-carbon technologies to serve and meet their own electricity needs. Public-private partnerships between government agencies such as the U.S. Department of Energy and private sector companies to finance, build and operate clean energy demonstration projects are accelerating deployment and scaling of breakthrough technologies. These initiatives are expected to drive increased demand for our equipment and services across our three segments in the near term and going forward.

Technology advancement is also helping to accelerate investment in clean energy alternatives. Lifecycle cost of electricity from renewable energy is often lower than that of gas or coal generation. The capacity factors of renewable energy plants, which is the ratio of a plant’s actual generation divided by its rated capacity, measured over the course of a year, are also improving, particularly for onshore wind, where average capacity factors for projects built between 2013 and 2021 were 40% compared to 23% for projects built between 1998-2003. Power generation from offshore wind is growing rapidly, as are the wind turbine sizes, the largest of which exceed 15 megawatts (“MW”) per turbine. Cost effective energy storage technologies such as battery energy storage systems for short duration needs of less than 8 hours and pumped hydro for duration needs of up to 48 hours are emerging and are expected to scale over the decade ahead. Hydrogen, when used in a fuel cell or combusted, creates no CO2 emissions, and can be blended with or replace natural gas in existing or new gas turbine power plants. Advances in carbon capture technology for point source applications such as gas combined cycle plants or for direct air capture are significantly improving in economic viability. Small modular nuclear reactors could also enable dramatic reductions in nuclear power plant costs and cycle times.

Evolving Generation Mix

Global electricity generation in 2022 was approximately 29,000 terawatt hours (“TWh”), with coal generation providing the largest source, accounting for more than one-third of all electricity generated in the world yet

 

87


Table of Contents

contributing more than 70% of all power sector CO2 emissions. As customers shift from coal generation towards more power generated from renewables and natural gas, services for the remaining coal plants will still be required given the multi-decade energy transition and variance in capital, resources, and generation mix globally. Nearly 40% of the electricity generated in 2022 came from zero-carbon sources including hydro, nuclear, wind, and solar.

2022 Global Capacity and Generation

 

LOGO    LOGO

Globally, the installed base of generation capacity in 2022 was approximately 8,500 GW. The mix by technology of the installed capacity is different than the generation mix, as the average capacity factors (utilization) differ for each generation technology. The IEA estimates global installed capacity would need to more than double by 2040 to meet growing demand for electricity generation.

 

 

LOGO

 

Carbon-free generation technologies including wind, solar, hydro, and nuclear are expected to account for nearly 90% of new capacity addition orders over this decade, with a balance of many generation sources likely required to navigate the energy transition towards a more sustainable power sector while preserving system reliability and affordability. Hydro power, both conventional as well as pumped storage, can offer emission-free power output, and we expect it will play an important role in the evolving energy mix. Drought conditions are affecting generation from existing hydro plants in some regions and availability of supply can be impacted seasonally. Pumped storage hydro projects have gained in popularity and can provide valuable energy storage to enable greater utilization of variable renewable energy sources.

Wind and solar combined accounted for 12% of all electricity generated in the world in 2022. By 2030 many experts expect this figure will reach approximately 25%, and in scenarios that achieve net zero emissions may

 

88


Table of Contents

reach 70% percent by 2050. The levelized cost of electricity (“LCOE”)—an industry-standard measure of generation cost—from wind is at parity or below that of conventional power sources, though variability of the generation source makes it difficult to compare with dispatchable technologies that can be turned on whenever needed. With technology enhancements, average capacity factors for onshore wind farms are near 40%, and offshore turbine capacity factors have reached more than 60%. The delivered cost of electricity generated from wind and solar may include significant transmission investment needed to transfer power to consumers. More than 90% of installed wind capacity consists of onshore wind, although the IEA and other third parties forecast sizable multi-decade growth in offshore wind.

Nuclear power generation is expected to grow, with life-extensions for existing plants in the United States and Europe along with potential restarts of the Japanese nuclear fleet, outpacing retirements or phase-outs in Germany, Korea, and Taiwan. Longer-term support for small modular nuclear reactor (“SMR”) technology is increasing, in anticipation of reduced capital spending requirements for SMRs compared to larger scale units, and shorter potential construction cycle time for building these new nuclear plants. The first nuclear plants powered by SMRs are expected to go into operation by 2030.

Natural gas power plants will continue to play a vital role in the energy transition through the provision of dependable, dispatchable, and flexible power, helping to address the intermittency of renewable energy sources. Approximately 22% of the world’s electricity in 2022 was generated using natural gas. Gas power generation with fast start times and ramping capability can provide valuable flexibility that complements the intermittent nature of power supplied by renewable energy sources. Gas plants available today can generate two-thirds fewer CO2 emissions than coal plants per kilowatt-hour produced, with a future pathway to decarbonize through deployment of hydrogen or carbon capture technologies. The technology to decarbonize new or existing gas generation sources will become increasingly feasible and cost-effective with policy support and incentives such as the IRA. Notably, the European Union Parliament included gas and nuclear power sources in the EU Taxonomy, classifying new investments as environmentally sustainable under the Taxonomy through 2030. We expect to continue servicing our large existing and growing installed base of gas turbines. In the coming years, we expect to expand this business to accelerate decarbonization by retrofitting gas turbines to use hydrogen and/or adopting them for use in carbon capture systems.

Energy Resilience & Security

Extreme weather events, threats of cyber-attacks, and rising geopolitical tensions have increased focus and investment to strengthen the resilience and security of power grids. Extreme droughts, forest fires, severe storms, and extended freezing temperatures have had major implications on power grids and generation supply with increasing frequency and impact over the past several years. Severe droughts in China, across parts of Europe, and in the Western United States have reduced availability of hydro generation but have also impacted the availability of water used for cooling fossil fuel and nuclear power plants and transporting fuel to power plants via barges. Severe storms and cold weather events have exposed the vulnerability of our power grids and highlighted the impact that extended power outages can have on communities and lives. Grid distribution systems have grown more vulnerable due to increasing decentralization, level of remote access granted, increasing complexity, and connections to business networks, while potential threat actors are becoming increasingly capable of conducting cyber-attacks. The ongoing Russia and Ukraine conflict exposed the vulnerability of Europe’s dependence on Russian natural gas and has significantly impacted global energy markets. Although Russia historically supplied 40% of Europe’s natural gas for heating and power generation, many nations are reevaluating their dependance on imported electricity, fuels, generation technologies, or raw materials for critical power infrastructure following the invasion.

Although wind and solar offer carbon-free generation sources that can produce affordable electricity, the variability of these energy sources also create challenges as they become a greater percentage of the energy mix. Understanding and addressing these challenges through technology is vital so that they do not limit the pace of the energy transition to a decarbonized future. These challenges include:

 

89


Table of Contents
   

Wind and solar are intermittent and variable energy sources. Given that wind speeds can vary dramatically throughout the day and year, and because the sun does not always shine with the same intensity due to its position in the sky or the amount of cloud cover, wind and solar power plants may generate electricity at levels well below their full rated capacity. Average capacity factors for utility-scale solar PV systems worldwide are near 17% and for onshore wind are near 40%. The lower a technology’s capacity factor, the lower the actual quantity of electricity it generates, and the more capacity is needed to produce the same amount of electricity over a year. As renewable energy sources become a greater percentage of the generation mix, capacity addition growth must outpace growth in demand for electricity generation to ensure reliable service.

 

   

Wind and solar, while key to global electrification and decarbonization trends, are not dispatchable, meaning they cannot be “turned on” or “adjusted” to meet power demand requirements, which can create a mismatch between supply and demand unless other generation sources step in to fulfill this role. Additionally, renewable resources can, at times, create more electricity than the grid is demanding, which then requires either curtailment of power generation on the grid or transportation of that excess power generation to areas with higher real-time demand needs. Curtailment can impair project returns for generating companies.

 

   

Many of the best renewable resources and sites are found in remote or rural locations and are often not co-located with large electricity demand centers, requiring significant grid investment to connect them. Additionally, the shift towards variable, renewables distributed closer to the point of power consumption requires bi-directional flows of electricity that can challenge grids originally designed for one-way flow of electricity from large, centralized power plants.

 

   

Solar and wind are inverter-based renewable energy sources that do not provide sufficient natural inertia like their power counterparts. Sudden, large changes in demand or supply can cause the frequency to change, which can damage motors and sensitive electronics unless sufficient inertia generated from large, spinning turbine-generators such as those in nuclear, steam or gas plants can help stabilize the power grid. As the energy mix shifts towards higher levels of energy provided by variable renewables, alternative forms of inertia such as synthetic inertia via power electronics or maintaining other sources of generation with natural inertia via synchronized rotating machines may be required to maintain system stability and resilience.

The challenges associated with the importance of increasing variable renewables create growth opportunities for the development and deployment of new technology solutions to help address them. Cost-effective storage technologies like grid-scale batteries and pumped hydro are emerging to address dispatchability and avoid curtailment for short durations. Synthetic inertia, grid hardware and software solutions can help orchestrate the grid and address or prevent stability concerns. Conventional power facilities such as small modular nuclear reactors and decarbonized gas plants can supplement variable renewables, providing dispatchable, flexible solutions supported by natural inertia. Companies with a breadth of generation, storage, grid, and digital solutions will play a vital role solving these challenges and enabling the energy transition.

Grid Modernization & Investment

The grid is the backbone of the electric power industry, connecting, monitoring, protecting, and controlling the flow of electricity from diverse, distributed generation sources safely, reliably, and securely to point of consumption. In 2022, global grid system integration, power transmission, grid automation, and software annual investments presented an addressable market of $75 billion for our Electrification segment. Multiple dynamics are affecting the construction and modernization of the grid of the future, including:

 

   

Evolution from a centralized infrastructure for power generation towards a more distributed infrastructure.

 

   

Increasing shift from dispatchable power generation sources towards variable renewable power sources must be addressed to preserve system reliability.

 

90


Table of Contents
   

Growth of inverter-based technologies, such as wind and solar, will challenge system inertia and stability.

 

   

Grids designed for one-way flow of electricity from centralized plants must be augmented to accommodate two-way flows from a highly distributed network of generation and storage solutions.

 

   

Historically predictable demand for electricity generation is shifting towards mobile, less predictable loads driven by new factors such as increased demand for electric vehicle charging.

 

   

Software and data analytics are becoming more critical for grid management and resilience.

 

   

Cybersecurity and other security risks, including more severe weather events to critical infrastructure are increasing.

The global power grid requires significant investment to meet growing energy demands, improve system resilience, integrate variable renewables, and upgrade and digitize aging infrastructure. Companies that provide products and services required for the transmission, distribution, conversion, storage, and orchestration of electricity from point of generation to point of consumption will play an important role in supporting the energy transition.

 

91


Table of Contents

OUR BUSINESS

Overview

GE Vernova is a global leader in the electric power industry, with products and services that generate, transfer, orchestrate, convert, and store electricity. We design, manufacture, deliver, and service technologies to create a more reliable and sustainable electric power system, enabling electrification and decarbonization, underpinning the progress and prosperity of the communities we serve. We are a purpose-built company, uniquely positioned with a scope and scale of solutions to accelerate the energy transition, while servicing and growing our installed base and strengthening our own profitability and shareholder returns. We have a strong history of innovation which is a key strength enabling us to meet our customers’ needs.

The breadth of our portfolio also enables us to provide an extensive range of technologies and integrated solutions to help advance our customers’ sustainability goals. Our installed base generates approximately 30% of the world’s electricity. We support our customers’ specific efforts to electrify their economies, meet demand growth, improve reliability and resiliency, and navigate the energy transition through limiting and reducing emissions. The portfolio of equipment and services that we deliver is diversified across technology types and is adaptable based on electric power market conditions and demand.

We blend GE’s culture of innovation and technological excellence with our focus to drive electrification and decarbonization through our cultural foundation—known as the GE Vernova Way—which guides everything we do. The principles of the GE Vernova Way are Innovation, Customers, Lean, One Team, and Accountable. These principles define how we work and create value for our people, customers, shareholders, and the planet. We drive Innovation in everything we do, serve our Customers with pride and focus, and operate with a Lean mindset, focusing on safety, quality, delivery, and cost, across our operations. We act as One Team with inclusivity, authenticity, and diversity allowing us to win together, and are Accountable both individually and collectively to deliver on our purpose and commitments. These principles are embedded throughout the organization through our monthly operating reviews, employee training programs, internal communications, and in how we measure performance. We see the GE Vernova Way as a potential differentiator, as this helps ensure we deliver effective, measurable, and sustainably successful outcomes for our customers, employees, and other stakeholders.

Within GE Vernova, we have aligned our businesses, and report our financial results across three operating segments:

 

   

Our Power segment includes the design, manufacture, and servicing of gas, nuclear, hydro, and steam technologies, providing a critical foundation of dispatchable, flexible, stable, and reliable power. This segment delivers predictable and growing, long-term earnings and free cash flow from servicing our vast installed base and from growing this installed base with new equipment and services. For example, we maintain the largest installed base of gas turbines globally of 886 installed GW and 2,206 GW total across our Gas Power, Nuclear Power, Hydro Power, and Steam Power businesses within this segment.

 

   

Our Wind segment includes our wind generation technologies, inclusive of onshore and offshore wind turbines and blades. This segment benefits from secular demand tailwinds for zero-carbon power generation. We are pivoting our Onshore Wind strategy to focus on fewer markets, where we believe we have built and maintain competitive advantages, fewer product offerings, and increased productivity efforts, all to drive long-term profitable growth. We maintain an installed base of 117 GW of Onshore Wind and 1 GW of Offshore Wind turbines for zero-carbon power generation.

 

   

Our Electrification segment includes grid solutions, power conversion, solar and storage solutions, which we collectively refer to as Electrification Systems, and digital technologies, which we refer to as Electrification Software, required for the transmission, distribution, conversion, storage, and orchestration of electricity from point of generation to point of consumption. This segment benefits from a growing need for grid infrastructure,

 

92


Table of Contents
 

modernization, and reliability, as well as from the demand for new products, solutions, and services. Investment in these technologies will be critical to enabling the energy transition by connecting renewables to the grid, electrifying other carbon-intense sectors, and preserving grid resilience and reliability.

Sources of revenue for GE Vernova in 2023 were approximately split equally between the sale of products and services. About 65% of GE Vernova’s total RPO (remaining performance obligation, a measure of backlog) of $116 billion at the end of 2023, or $75 billion, was for services, with a significant portion committed under long-term contractual arrangements, providing us with enhanced levels of predictability and visibility into services revenue for years to come. Services are typically sold directly to our customers, either through long-term contractual service agreements or as individual transactions at time of service.

Services include the maintenance, replacement of spare parts, repairs, upgrades, and software subscriptions throughout the operating life of our products globally. To lead in services, we invest in inspection and repair technologies, monitoring and diagnostics capability, and plant upgrade offerings to improve the performance and operation of our installed base.

Products include the design, manufacture, and delivery of a wide range of power generating, grid hardware and software, power conversion, and energy storage products. We sell our products directly to customers or through engineering, procurement, and construction firms, where we can be either a sub-supplier or a consortium partner. Our scope of supply can range from products alone to extended plant or project development scope, which can include plant-level guarantees and/or GE Vernova having turn-key responsibilities, often shared with partners, for project development. GE Vernova has manufacturing, assembly, and component production capabilities in over 100 plants across 27 countries.

We are well-positioned to benefit from extended growth in the demand for our products and services as emerging economies focus on electrification and mature economies on further electrification and decarbonization. We expect to drive profitable growth through cost reductions, improved quality, better contracting, and higher productivity levels — all as demand accelerates. We expect to generate cash flow, fund incremental growth opportunities and increase flexibility to drive future capital allocation while maintaining investment grade ratings.

 

LOGO

 

93


Table of Contents

LOGO

 

*GTs = Gas turbines

*STs = Steam turbines

*T/Gs = Turbines/generators

*WTs = Wind turbines

Investment Highlights

GE Vernova is an industry leader creating a more reliable and sustainable electric power system by providing a breadth of products and services necessary to increase electrification and decarbonization. We serve customers in accelerating the global energy transition to improve the quality of life and combat climate change. Our products and services will help reduce overall global emission levels by enabling our customers to limit emissions from power generation and by reducing the carbon intensity of our installed base.

We expect increased demand for many of our products and services, along with our focus on lean to drive productivity improvements and cost reductions, to deliver Adjusted EBITDA and free cash flow growth—creating significant value for customers and shareholders. Expanding electrification, increasing global urgency to combat the impacts of climate change, and a greater focus on energy security will stimulate broader investment in the electric power sector, potentially leading to rising demand for GE Vernova’s products, services, and solutions. A multi-decade inflection of global spend in the energy transition end-markets is expected to be driven by technological advancements, government policies, corporate strategies, and individual efforts to increase electrification of the economy and to reduce carbon emissions. We will support the global transition to renewable energy sources by providing a broad range of product and service offerings needed by public and private utilities, grid operators, governments, and large electricity users.

As the energy transition accelerates and our cost structure improves, we expect GE Vernova to deliver revenue growth combined with improving Adjusted EBITDA and free cash flow. We expect to benefit from:

 

   

Strong long-term industry demand growth driven by increasing electrification and decarbonization trends. We see significant opportunities for revenue growth across our business segments, as electrification trends drive a need for new firm and quick-starting electricity generation, and decarbonization efforts require reduced or zero emission generation sources. The electricity grid also needs significant investment to connect new generation and to enhance reliability. Forecasts from the IEA and other third parties estimate the world will need 55% more generation of electricity in 2040 than it did in 2022 and that electricity levels required to reach economy-wide net zero emissions would need to more than double from 2022 levels. We believe this need will drive increased demand for our products and services as equipment needs grow and

 

94


Table of Contents
 

customers need to maintain or improve performance from existing assets in order to supply reliable, secure electricity. This need includes investments in both hardware and software to manage a more complex grid, especially given the rise in supply of renewable energy going forward. Government policies, such as the Inflation Reduction Act of 2022 (the “IRA”) in the United States, the Green Deal Industrial Plan in Europe, and emissions trading frameworks in both Europe and the United States, serve as tailwinds for our customers and suppliers like GE Vernova to fund the growth in low or zero emission capacity and the grid required to deliver this electricity. Our large commercial and industrial customers as well as residential consumers, place a heightened importance on decarbonizing their electricity use, driving incremental demand for GE Vernova’s products and services. We provide products and services through the Power, Wind and Electrification segments that served addressable market sizes of $110 billion, $80 billion, and $75 billion, respectively, in 2022. Overall, industry experts conservatively anticipate spending in the power and end-use sectors to increase from $1.4 trillion per year in recent years to more than $2.4 trillion per year in the 2030s.

 

 

LOGO

 

 

LOGO

 

   

Significant, long-term customer relationships with many of the largest customers in select key markets. Our technologies and services help electrify some of the fastest growing markets and help decarbonize those areas that relied heavily on less efficient and more emissions-intensive generation fleets. We supply and service many of the world’s largest utilities and grid operators across multiple continents and support our customers with solutions across the energy trilemma tailored to their individual situation and circumstances. For example, our ten largest generation customers by installed capacity in Europe and the United States generate approximately 40% of the electricity in these markets, respectively. Our deep, long-standing relationships with customers are a competitive advantage and our track record gives customers confidence in partnering with us to implement new technology.

 

95


Table of Contents
   

Lean as a pillar of the GE Vernova Way and how we will drive both long-term breakthroughs and continuous improvements that enhance profitability. We started our lean journey more than five years ago as GE and have progressed to the point that lean is now part of our culture. We are applying lean to all aspects of our businesses to drive growth, innovation and results for our customers. For example, lean was an integral lever of the Gas Power transformation that started in 2018, driving out $1 billion in fixed costs while improving the customer experience. The Gas Power business applied lean methods in executing its strategy and transforming its long-term performance. We also realized, utilizing lean and other efforts implemented over the last three years, significant cost savings in both our Electrification segment (approximately $300 million) and within our Onshore Wind business (approximately $500 million)-partially through improved operations and streamlined organizational structures. The application of lean in our Gas Power, Onshore Wind, and Grid businesses has already created significant value. Within GE Vernova we see substantial opportunity for additional competitive differentiation and value creation by using and continuously improving our lean rigor across our portfolio of businesses. After the Spin-Off, our company will continue to utilize and evolve lean through our GE Vernova operating method to realize our strategic initiatives while simplifying and transforming our business into a more efficient, highly focused company.

 

   

Strengthening revenue and cost fundamentals will enable the Company to fund growth opportunities and maintain flexibility for capital allocation. Increasing demand for our products and services will lead to revenue growth in the coming years. Continued use of our lean operating method and culture will drive lower costs, improving profitability. Given limited expected leverage levels, we anticipate generating increasing levels of free cash flow. This cash flow will enable our efforts to maintain a strong balance sheet, obtain and maintain investment grade ratings, invest in new products and services, fund cost-reduction opportunities that create long-term savings, evaluate and consider targeted value-added acquisitions, and provide flexibility for potential future capital allocation.

 

   

A Power segment, with durable, growing earnings and cash flow from its large installed base. Services are a key portion of the Power segment, a recurring and high-margin revenue stream that in 2023 contributed 68% of total segment revenue. Because the average life of our large heavy-duty gas turbine fleet service contracts in the Gas Power business, the largest business in the Power segment, is over ten years, we have revenue visibility for many years ahead and we continue to have service contract customer renewal rates of approximately 70%. Our services capabilities help improve the economics, the efficiency, the reliability, and the life-span of customer-owned generating units. We view our long-term services agreements as key elements for the continued success of our Gas Power business, which maintains a leading global scale and an installed base of approximately 7,000 turbines. We continue to implement technology enhancements to deliver improved service, reducing the outage time for gas power plants and leading to increased MWh output by customer facilities while also reducing our costs to deliver on outage management initiatives. We maintain annual service contracts for over 25% of the units in our gas installed base, while also delivering outage services or parts – as part of our transactional services offerings – to a large portion of those natural gas units not under long-term contracts. We also provide services to nuclear power plants, hydro power facilities, and steam power turbines. As a result, we expect revenue and EBITDA from our Power segment to rise over time with improved margins due to increasing product sales and the continued growth in our services, as well as improvements in our cost structure and productivity. As coal generation still comprised 36% of total generation in 2022, we believe there will be opportunities to replace coal with other, less carbon intensive resources, which in turn will create opportunities for GE Vernova to sell products and services across our Power businesses.

 

   

A Wind segment with significant margin expansion and long-term revenue growth ahead. Our Wind segment remains one of the largest wind products, parts, and service providers. In the onshore wind industry, we expect to increasingly focus our efforts on the attractive and growing North American markets given the demand tailwinds driven by the IRA, while still targeting opportunities of profitable high-margin product sales outside of North America. We believe our strong manufacturing capacity, our supply chain capabilities, and our deep customer relationships provide competitive advantages in these markets. Additionally, we continue to focus on improving the cost structure and driving better quality and

 

96


Table of Contents
 

performance across the installed base and new units. In the relatively nascent and fast-growing offshore wind industry, in the coming years we expect to improve the quality of our backlog and overall business profitability. As the industry matures, we expect the existing technologies and supply chain to improve, and GE Vernova to remain focused on product quality, processes reliability, and improved underwriting. We will be highly disciplined in the pace of new product introduction, while being selective in adding new projects to our backlog if we believe they provide sufficient pricing, profitability, and improved risk mitigation in line with our expected returns.

 

   

An Electrification segment positioned for higher, more profitable growth driven by increasing global demand for our equipment, systems, software, and services. Our Electrification segment provides much of the necessary products, services, and software to manage, transfer, and orchestrate electricity over the power grid – each a key offering that enables the energy transition as renewable capacity coming online accelerates globally. Our HVDC technology offerings support the expansion of major new renewable projects, including offshore wind, and we are already seeing rapidly rising RPO levels from recently announced HVDC project awards in Europe. Our detailed engineering and design capabilities as well as technology advancements help decarbonize the operations of our larger industrial customers, which include energy intensive LNG facilities, marine fleets, chemical, steel facilities, and higher tech data centers. Our digital and software applications and business have become more critical to the grid as they help ensure reliable and secure power, and they move electricity from variable renewable resources, often in remote locations, to demand centers.

 

   

Our continued efforts in driving innovation – creating new product and service opportunities that could enhance long-term profitable growth. Our company maintains a long, rich history of advanced research and technology development. We continue to invest, often jointly with third parties, to develop and deploy new technologies that support customers in the energy transition. We remain committed to creating, improving, and providing solutions for customers by leading in the development of key offerings that can help electrify and decarbonize the global economy. Innovation occurs within our businesses, as well as within the company’s Advanced Research team, where we develop and commercialize new technologies that can improve electrification and decarbonization efforts. With partners, including governments helping to finance our research, our strong, interdisciplinary Advanced Research team focuses on key technologies like hydrogen, carbon capture, software, energy storage, and other emerging and critical areas necessary to facilitate the energy transition in the coming years. We maintain approximately 36,000 patents and patent applications on various technologies, and our research center continues to utilize external funding and disciplined oversight of capital deployment to evaluate, test, and successfully prepare emerging technologies for commercialization.

 

   

An experienced leadership team. Our management team consists of leaders with decades of experience working in key roles within publicly traded companies, as well as leaders with deep and diverse subject matter expertise across our industries’ end-markets, products, and services. This team will lead GE Vernova as the industry undergoes dramatic change and navigates the energy transition. Our team remains focused on maintaining and creating a culture that utilizes lean and focuses on improving safety, quality, delivery, and cost to deliver value to customers, stakeholders, and employees.

Our Company Strategy

GE Vernova is uniquely positioned as the industry leader to drive the energy transition forward, supplying customers with products and services necessary to deliver more reliable, affordable, and sustainable electricity. We expect significant growth in demand for the offerings we provide to the electricity sector. We anticipate improving our cost structure and productivity levels as we continue to meet this secular demand with existing and new products and services. We will focus on generating revenue, Adjusted EBITDA, and free cash flow growth, which are the primary key financial indicators we believe will drive value creation for our shareholders.

 

97


Table of Contents

Our company strategy is focused on:

 

   

Delivering on global sustainability, by developing, providing, and servicing technologies that enable electrification and decarbonization. Sustainability is core to our long-term strategy and tactics. Our products and services help governments, utilities, developers and other industries drive sustainable economic growth via increased electrification – often by providing technologies that power markets. We expect our products and services to help improve electric reliability and resilience as well as lower the carbon intensity of our own installed base and reduce our Scope 3 emission levels. Longer term we anticipate enabling greater reductions in emissions levels by further developing and commercializing emerging technologies such as small modular nuclear reactors, natural gas with either hydrogen or carbon capture capabilities, or direct air capture products. Additionally, we expect to improve our own Scope 1 and Scope 2 emission levels, as well as other key sustainability metrics.

 

   

Maintaining and enhancing strong relationships with many of the leading and largest utilities, developers, governments, and electricity users. We serve and maintain long-standing relationships with many of the largest entities across conventional generation, renewables, transmission, software, and other key portions of the electricity industry, which enables us to provide multiple different products and services from across our businesses to existing customers. Customers continue to rely on our partnerships with them to help them deliver reliable, affordable, and more sustainable electricity. These deep, long-standing relationships are a competitive advantage and enable us to successfully introduce both new and existing products and services to our existing customers.

 

   

Servicing the existing installed base and delivering new technologies and processes, which improve customer outcomes while driving increased profitability and cash flow. The world derives approximately 30% of its electricity generation from an installed base of GE Vernova products, technologies, and solutions. We service a substantial share of this installed base, including approximately 25% of our gas installed base, which delivers electricity that our customers rely upon and where these long term contracts and arrangements create a reliable, visible source of revenue for GE Vernova. The heavy-duty gas turbines that are still under servicing contracts in our gas installed base maintain an average contract life of over ten years. Our continued innovation, process improvement efforts, and use of advanced technology will benefit customers (especially in areas like reduced outage times, reduced carbon-intensity, or better operating performance), while lowering our costs to service these assets, leading to margin expansion for GE Vernova. We expect to benefit from significant demand growth for our equipment, which we anticipate will grow our installed base and lead to longer term growth in service revenues.

 

   

Improving margins and lowering risk through better underwriting. We are focused on shortening our bid cycles to reduce the risk of cost escalation, as well as improving protections embedded in customer agreements to protect against inflation. We maintain a heightened focus on risk mitigation and management — tactics we utilized successfully to improve results in our Gas Power business and more recently, in our Grid and Onshore Wind businesses, and anticipate doing so across our remaining businesses. Pricing and margins on new orders across multiple product lines such as Onshore Wind, transmission equipment from our Electrification segment, and other areas continue to improve, both as a result of favorable supply and demand trends as well as our own heightened focus on risk management. In addition, we continue to work to improve the risk profile embedded in new service contracts.

 

   

Streamlining our product portfolio to focus on core workhorse products, which will improve both cost and quality going forward. We continue to reduce the complexity of new sales offerings and increased standardization of products that we provide to customers. For example, in our Onshore Wind business, we are implementing a more simplified product suite (i.e., what we call “workhorse products”) that enables us to deliver better performing assets produced at scale and at lower costs, which improves our margins, especially for new equipment sales. In our Onshore Wind business, workhorse products are expected to comprise approximately 90% of our wind turbine shipments in 2024.

 

   

Using lean to improve our cost structure and productivity levels across our business and corporate functions. Lean is one of the key pillars of the GE Vernova Way, and will be embedded in our culture as an

 

98


Table of Contents
 

independent company. Lean, deployed through the GE Vernova operating method, drives our business strategies and safety, quality, delivery, and cost improvements to achieve growth, innovation and results for our customers. The leadership team uses monthly operating reviews focused on developing breakthrough capabilities linked to strategy and drives continuous improvement on KPIs using kaizens (which are focused week-long workshops creating immediate results), problem solving and management of change. Our leadership teams are held accountable for going to Genba (which refers to going to the actual place work is performed) and the daily management of escalations to help our teams apply and enhance the standards and ensure results.

 

   

Innovating and investing, along with third parties, in new offerings and technologies that will help customers electrify and decarbonize the world. Technological innovation remains integral to our corporate history and future, as the world will need new solutions to drive the changes required to affect the energy transition. Both within our businesses, as well as at Advanced Research, we continue to invest efficiently, utilizing both our own cash flow and funding from third parties, to develop or commercialize and scale new technologies. We focus on near-term advancements, such as with our grid-related software solutions, and long-term breakthrough technological developments, such as carbon capture or small modular reactors, to help our customers deliver for the economies and markets they serve. Our investments allow us to continue developing new digital solutions to help orchestrate the efficient generation, transmission, and use of electricity, as well as focusing on new energy storage solutions that can reduce the intermittency of variable generation sources. We believe our work on hydrogen and carbon capture-related innovation will also help to enable decarbonization of existing and new fossil fuel generation sources, while also continuing to develop and deploy small modular reactor designs – all necessary long-term needs for our customers to deliver reliable baseload power. Innovation leadership in the power sector remains key, but with a heightened focus on co-funding opportunities to drive this advancement forward and to deliver profitable new products or services to market.

 

   

Allocating capital as a whole and within our various businesses – focused on generating cash flow to enable attractive shareholder returns. As a more focused, independent, stand-alone company with a broad range of businesses and offerings, we intend to focus primarily on maintaining a strong balance sheet and low leverage, with ample liquidity and cash flow to maintain our industry leading positions and to grow our various businesses. We expect to focus on growing free cash flow, with each of our businesses effectively earning above their cost of capital over the medium and long-term. We believe that multiple businesses within GE Vernova are poised for significant growth ahead, due to demand tailwinds or our own cost improvement efforts. GE Vernova plans to maximize value creation opportunities for businesses that maintain attractive potential growth, generate high returns or deliver ample cash flow, while consistently evaluating the appropriate strategy, investment levels and ownership structures for those with lower or less attractive returns and cash flows. Over time, we anticipate delivering shareholder value by investing in growth businesses, increasing our free cash flow and utilizing our cash flow for organic and inorganic value creating growth, as well as for increasing flexibility for future potential capital allocation, while maintaining investment grade ratings.

Our Competitive Strengths

GE Vernova is well-positioned for success, given our extensive history and track record of supplying governments, utilities, and developers with critical innovations across different electric power technologies. We provide the electric power sector with a broad array of electricity-related solutions that will help customers accelerate the energy transition. With average annual economic spend in the electric power sector estimated at $2 trillion in the 2023-2030 timeframe, we believe we maintain a host of competitive strengths that will enable GE Vernova’s continued growth:

 

   

The sizable, approximately 2,200 GW installed base of our products and technologies delivers critical electricity that our customers rely on, while providing high-margin services revenue and cash flow with

 

99


Table of Contents
 

significant long-term visibility. The scope of our installed base leads to economies of scale that enable cost and technological advantages for our business, both in the servicing of these units and in the marketing or delivery of new products or solutions to existing customers. We further invest, on behalf of customers, in the installed base to maintain or enhance our customers’ fleet and asset reliability, while reducing our own costs via process improvements and technology enhancements to service these assets. Our installed base provides significant competitive advantages, given that it is the world’s largest installed base of gas turbines and a sizable base of wind turbines. The installed base of GE Vernova’s technologies helps generate approximately 30% of global electricity, and we continue to provide services for many of these assets today. A significant portion of revenue comes from services we provide – approximately 45% in 2023 and 47% in 2022. As of December 31, 2023 and 2022, services comprised approximately 65% and 70% of RPO, with services generally provided either under long-term contracts or through transactional services that may include parts, repairs, outage services, and other offerings. Continued growth in our installed base should lead to increases in our services and related RPO which will drive long-term revenue growth.

 

   

We provide a breadth and depth of offerings that our customers need to generate and deliver power over the coming decades. We supply and service most of the electric generation-related technology segments (gas, wind, nuclear, hydro, solar, and steam) and deliver key transmission and other grid-related products necessary for power companies and large commercial and industrial customers to both decarbonize their systems and sites, while improving their reliability.

 

   

We maintain long-standing and deep customer relationships, providing a host of products and services, to many of the largest utilities and power developers. Our ten largest generation customers by installed capacity in Europe and the United States generate approximately 40% of the electricity in these markets, respectively. We derive approximately 71% of our revenues from customers in the OECD economies. Going forward, in the OECD or developed markets where our technologies help customers reduce emissions in the communities they serve, we anticipate greater focus by customers on decarbonization. Increased decarbonization efforts in developed economies is expected to yield demand growth for many of GE Vernova’s offerings across our three segments. In the developing markets, population and GDP growth drives higher power demand and a need for new products and equipment.

 

   

We embed lean deeply into our culture to accelerate our strategy and differentiate GE Vernova versus our competitors. All manufacturing companies have similar inputs of team members, materials, and machines that they use to create products via their global supply chains. We will differentiate ourselves from other manufacturing companies that support the energy transition by using lean to drive enterprise-wide strategic breakthroughs and continuous improvements. Our method identifies inefficiencies and defines a structured way to solve problems, continuously improve our processes, and drive customer, employee, and other stakeholder satisfaction. By utilizing lean, we have driven real performance improvement and lower costs across several of our larger businesses, including in Gas Power, in Electrification and in Onshore Wind more recently. While some of the GE Vernova businesses, such as Gas Power, Onshore Wind, and Grid Solutions, made and continue to implement sizable improvements in cost, productivity, or cycle times by applying lean, we anticipate broader application of lean across all of GE Vernova to be a competitive advantage.

 

   

Our continued innovation efforts will help customers deploy new solutions to electrify and decarbonize their electricity systems, especially critical in a world seeing rapid growth in power demand. We remain a global leader in the development of new technologies – innovation occurs within Advanced Research and as part of the annual investment each of our businesses make, funded with our own operating cash flow and through investments by third parties. Continued technological advancements in natural gas turbines have and will continue to drive reduced emissions as well as higher and quicker levels of output. We expect to see increased longer term demand for our hydrogen and carbon capture technologies, key to reducing or eliminating emissions from fossil fuels. Our turbines in the Wind segment are expected to drive higher zero carbon output from our customers’ facilities, while our high voltage transmission-related product offerings will enable utilities to deliver electricity in scale across large geographies. We continue to develop software to enhance our position as the market leader in grid-related software.

 

100


Table of Contents

Our Power Segment

Overview

GE Vernova’s Power segment includes our Gas Power, Nuclear Power, Hydro Power, and Steam Power businesses that provide products and services enabling a critical foundation of dispatchable, flexible, stable, and reliable power on global power grids throughout the world. These technologies accounted for 85% of global electricity generation in 2022 and are used by utilities, independent power producers and industrial customers mainly to provide firm baseload power in bulk, as well as intermediate or peaking power, to customers and power systems. Our technologies comprise a large installed base of more than 2,000 GW that requires significant ongoing maintenance and services to maintain and extend the useful life as well as to improve output. We estimate that our Power segment served an addressable market of $110 billion in 2022, a market expected to grow at low single digit rates through 2030, inclusive of new units and services.

Service revenues accounted for approximately 68% of GE Vernova’s Power segment revenues in 2023 and this segment reported services RPO of $59 billion as of December 31, 2023 and $57 billion as of December 31, 2022. Services include long-term contractual service agreements as well as transactional business for spare parts, repairs, and services in support of maintenance outages on power-generating products. For example, in our Gas Power business, the average remaining length of more than 70% of existing long-term service agreements is over 10 years and we have approximately 70% renewal rates. Services can include upgrades to existing products to improve performance, extend plant life or outage cycles, reduce emissions, and enhance flexibility to complement variable renewables. A sizable portion of our customers in our Power segment continue to renew contracts, providing durable and growing revenue and cash flow. We expect margin enhancement potential in our services business due to price escalation and improving productivity.

 

 

LOGO

Power Segment Strategy

Our strategy in the Power segment is focused on maintaining and growing value from our large installed base of generation technologies and developing pathways to accelerate the transition towards a more sustainable electric power system. Our strategy is also focused on providing dispatchable, flexible generation that can preserve energy security and resilience while complementing variable and intermittent renewable energy sources. We aim to do this by pursuing the following goals:

 

   

Providing exceptional service, support, and value to our customers on our installed base to deliver strong, stable, long-term free cash flow: While revenue growth for the segment is expected to be limited due to the energy transition, we expect that this segment will remain GE Vernova’s largest source of free cash flow through a combination of long-term service agreements, transactional services, and upgrades. Approximately 25% of our gas turbine fleet is under long-term service contracts with average renewal rates

 

101


Table of Contents
 

of approximately 70% and over 10 years of contract term remaining. We strive to maximize the value of the installed base by:

 

   

maintaining high utilization rates across the installed fleet by offering high levels of plant efficiency in converting fuel to electricity and operating flexibility that result in more frequent dispatch (operation) while minimizing downtime for maintenance outages or quality issues;

 

   

offering valuable upgrades to increase output, improve efficiency, reduce emissions, extend outages, and enhance plant flexibility; and

 

   

expanding services scope to include generators, steam turbines, and other plant products which is aging and in need of maintenance and upgrades.

 

   

Driving the energy transition forward: Within the Power segment, we intend to make strategic investments, often with third parties, to develop and commercialize breakthrough technologies required for the energy transition, including:

 

   

coal-to-gas switching, as our customers replace coal-fired power with more efficient gas technologies;

 

   

small modular nuclear reactors, with the first award and planned operation in North America;

 

   

hydrogen and carbon capture offerings to decarbonize new and existing gas turbines; and

 

   

pumped storage hydro power plants as a cost-effective means for medium-duration energy storage.

 

   

Delivering sustainable cost reductions: We are targeting annual cost productivity and pricing discipline to enhance profitability of the Power segment with margin accretion efforts focused in three distinct areas:

 

   

driving variable cost productivity to maintain competitive product and service offerings leveraging lean through a combination of increasing use of standardized and configurable offerings to minimize transaction-specific engineering hours, and transforming the way we perform maintenance outages to reduce costs and cycle time;

 

   

reducing fixed operating costs with particular focus on sales, general, and administrative cost and fixed production cost reductions enabled through streamlining processes, resources, and our global footprint;

 

   

minimizing margin erosion through improvements in product quality and manufacturing cycle times to reduce contract penalties and minimize field modifications and rework; and

 

   

continuing to utilize data and technology to improve our manufacturing and service capabilities, reduce our costs, and enhance our customers’ asset performance.

Key Power Segment Competitors

GE Vernova’s select competitors for gas turbines and combined cycle plants include Siemens Energy, Mitsubishi Power, Ansaldo Energia, Doosan, and in select markets, DongFang and Shanghai Electric. For gas turbine services, there are also several independent service providers including: PSM, Sulzer, Ethos, and some smaller regional players. Our Steam Power competitors for services include: Siemens Energy, Mitsubishi Power, and various independent service providers. Within our Nuclear Power business, select competitors for fuels and services include Westinghouse and Framatome, while competitors for small modular reactors include: NuScale, Westinghouse, Holtec, Rolls-Royce, X-energy, and others. Select hydro competitors within the Power segment include: Andritz, Voith, and several regional players.

Gas Power

GE Vernova is a global leader in gas turbines and gas power plant technologies and services with the industry’s largest installed base of approximately 7,000 gas turbines, which is approximately twice the size of our nearest

 

102


Table of Contents

competitor. With more than 800 GW of gas capacity installed globally, our turbines account for nearly half of all electricity generated from natural gas globally. Gas Power generated revenue of $13.2 billion in 2023. We expect the Gas Power business to continue to produce strong free cash flow going forward.

 

 

LOGO

About half of Gas Power’s services revenue is generated through long-term contracts, where we maintain a RPO of $55 billion. We historically experienced an approximately 70% renewal rate in our services agreements. The other portion of the services revenue stream is transactional in nature, with transactional revenue having grown by 27% over the past three years. Services on gas turbines scale with utilization (operating hours and number of starts) of the installed base. Over the past two years electricity generation from natural gas across the industry grew low single-digits, while utilization rates of our equipment over that same period grew mid to high single-digits. Services include performing service outages, replacing or repairing parts, and selling upgrades for performance, flexibility and decarbonization. Upgrades have an added benefit of helping to preserve or increase utilization of the installed base.

GE Vernova’s gas turbine portfolio includes both heavy-duty and aeroderivative turbines which produce rotational power to generate electricity when coupled to a generator or can provide mechanical horsepower when coupled to a compressor in oil and gas applications. Gas turbines can burn a wide range of liquid or gaseous fuels including natural gas or hydrogen. Heavy-duty gas turbines are purpose-built for land-based power applications, while aeroderivative gas turbines leverage GE Aerospace airplane engine technology designed for flight that has been specially packaged for land-based power generation applications. For more information on the relationship between us and GE Aerospace following the Spin-Off, see “Certain Relationships and Related Person Transactions” and Note 22, “Related Parties” to the audited combined financial statements.

Our heavy-duty gas turbine portfolio, with offerings ranging from 45 MW to more than 570 MW in size, is further segmented into three product lines based on firing-temperature and efficiency. Our state-of-the art HA-class gas turbines offer industry-leading levels of efficiency and low variable operating costs. We launched our HA products in 2014 and after years of work to install approximately 100 turbines, scheduled maintenance outages on these turbines are starting to grow substantially and are expected to generate $1 billion in annual services billings by mid-2020s. GE Vernova’s F-class gas turbines are the workhorse of the fleet with more than 1,400 turbines installed globally. The 7F gas turbine has been used for 30 years since its introduction and continuous technological innovations and investments have ensured it is still an industry leading solution. The B/E-class gas turbines are the oldest turbines offered, but still provide robust solutions for remote locations, high fuel-flexibility, or lower MW plant requirements.

GE Vernova’s aeroderivative gas turbines range from 35 MW to 115 MW in size and offer the highest simple cycle efficiency for peaking applications. Aeroderivative gas turbines offer fast start times (as short as 5 minutes) with the capability to ramp up or down rapidly to quickly respond to variable and intermittent renewables. The aeroderivative product line includes a trailer-mounted offering that can be ideal for providing a baseload bridge

 

103


Table of Contents

to permanent power installations or for generating backup power in the wake of a natural disaster, plant shutdowns, or grid instability. The trailer-mounted gas turbine generator set and containerized balance-of-plant, can put power on the grid within as little as 30 days of award.

GE Vernova’s Gas Power portfolio also includes heat recovery steam generators (“HRSG”) that produce steam by recovering energy from the exhaust of a gas turbine. That steam can be used as thermal energy to industrial processes, for distinct heating applications, for use in desalination of water, or used to produce additional electricity through its use in a steam turbine as part of a combined cycle power plant.

GE Vernova’s highly efficient and reliable combined cycle steam turbine portfolio has the breadth and depth to meet project-specific needs, integrating seamlessly with our gas turbines, HRSGs, and balance-of-plant products to help ensure operational success, GE Vernova has a combined cycle steam turbine installed base of more than 1,100 turbines accounting for approximately 45% of the world’s combined cycle steam turbine capacity. Our steam turbines can be installed and operational in eight months or less for industry-leading commissioning. The steam turbine portfolio includes both reheat and non-reheat designs.

The Gas Power business offers a wide range of generators to be coupled with heavy-duty or aeroderivative gas turbines and combined cycle steam turbines. Generators convert rotational energy from the turbines into electricity. The portfolio, which ranges from 45 MVA to more than 1,000 MVA, includes air-cooled, hydrogen-cooled, and water-cooled generators.

GE Vernova offers integrated turbine and plant control offerings which ensure safe, reliable operation of turbines and plants by providing turbine fuel control, temperature control, sequencing, protection, operator interface, and communication. The Mark Vle turbine controls help deliver high system reliability, availability, and industry-leading operating flexibility. Distributed Control System offerings also enable enhanced performance and operability at the plant-level.

GE Vernova’s Gas Power business provides an array of digital solutions with support from GE Vernova’s Electrification Software business to help customers maximize the performance and profitability of their assets, operations, and people. Powered by Digital Twin analytics and built-in intelligence, these applications are supported by other foundational GE Vernova products and services to create a complete end-to-end solution. Asset Performance Management (“APM”) software helps generators enhance plant-wide product reliability and overall O&M efficiency. Operations Performance Management (“OPM”) software provides analytics-driven insights to drive profitable operations and planning decisions. Performance intelligence tools help staff operate products more efficiently while production planning tools help managers drive profitability using real-time knowledge of plant capacity, schedules and fluctuating marketplace demands.

GE Vernova’s Gas Power business offers decarbonization solutions as part of new plant orders or as upgrades to units in the installed base. Pre-combustion technologies include low-carbon fuels such as hydrogen. With modifications to the combustions system and balance-of-plant products, hydrogen produced from electrolyzers powered by renewables or zero-carbon sources of generation can be used in our gas turbines and produce carbon-free power. GE leads the industry in experience burning hydrogen and similar fuels in existing, operational gas turbines, with more than eight million hours of operating experience. Integrated carbon capture solutions are also available with new and existing plant offerings. GE Vernova has a differentiated carbon capture solution, leveraging experience with exhaust gas recirculation to increase the concentration of carbon dioxide in the exhaust, thereby reducing the size of, and the capital expenditures required for, the plant. We are investing to develop the next generation of carbon capture technology for point-source capture applications for gas turbines as well as direct air capture (“DAC”) solutions which can remove existing carbon dioxide from the atmosphere.

Nuclear Power

GE Vernova, through its joint venture with Hitachi, Ltd. (“Hitachi”), is a world-leading provider of nuclear products and services, including but not limited to nuclear fuel products and services, nuclear reactor services,

 

104


Table of Contents

and advanced nuclear reactor designs (“Nuclear Power Business”). The joint venture with Hitachi is governed by two indefinite term arrangements. GE Vernova owns a majority interest of the global business, outside of service operations in Japan, where Hitachi is the majority owner. GE Vernova is a majority owner of the joint venture’s fuel business and the joint venture’s services business outside of Japan. GE Vernova supports the global operations of the Nuclear Power Business, except for the services business in Japan, where a local Hitachi nominated executive team supports the business. Overall, this global business is an OEM for boiling water reactor (“BWR”) technology. Nuclear Power revenues for GE Vernova were $0.8 billion in 2023.

 

LOGO

Within our Nuclear Power business, services include field services for outages and reactor services, including maintenance, inspection and operation support and training. It includes engineered solutions for parts, controls, asset enhancement, and digital solutions for the reactor fleet. It also includes our global nuclear fuels business where we provide fuel bundles to customers for boiling water reactors.

Our installed base of nuclear reactors that GE Vernova can service includes approximately 61 GW of BWRs. With BWRs in Japan currently in suspended operation status, globally 80% of BWRs are currently operating in North America. Geopolitical developments over the past year and the increased focus on energy security have resulted in greater recognition of the role of the nuclear plants with energy security emerging as an important driver, in addition to decarbonization, for extending the value of the installed base. Initial licensed life for BWRs was 40 years and approximately 90% of current U.S. fleet has extended their license to 60 years. Subsequent license renewal is an extension to 80 years, and it is expected that most plants will pursue this extension. This means that the vast majority of the current fleet could operate to 2050 or beyond. Extending the life for the installed base, also extends the associated fuel and services business. As plant life is extended, customers may also consider plant upgrades such as increasing generation capacity, extending fuel contracts, and investing in digital upgrades to control systems. The Nuclear Power business is structured around 3 business lines:

 

   

Fuels consist of the design and manufacture of nuclear fuel bundles, a structured group of fuel rods containing pellets of uranium, which provide thermal, carbon-free energy for BWRs. Fuel assemblies are designed to meet stringent customer expectations for fuel cycle economics, performance, reliability, and flexibility of operation. Our customers procure and provide the nuclear fuel to us and we incorporate it into the fuel bundles.

 

   

Services primarily comprise outage services, inspections of critical structures, technical services and the manufacturing of reactor vessel components and internals for the BWR fleet. Our priority is to continue to successfully execute our outages, while capitalizing on the industry momentum around life extensions, power uprates, and obsolescence.

 

   

New advanced nuclear plants are expected to be nearly evenly split between large reactors and SMRs with each accounting for around 375 GW by 2050. Most large reactors will be deployed in emerging markets led by China and India, while advanced economies in North America and Europe are expected to strongly favor SMRs. SMR’s value proposition is based on lower capital at-risk, smaller footprint, and greater modularity. GE Vernova’s joint venture with Hitachi has a commercial contract to build North America’s first SMR plant (the “BWRX-300”), with Ontario Power Generation in Canada. The BWRX-300 uses the same fuel

 

105