GE taps into natural gas deal

subscribe

General Electric Co. is expanding its energy business by tapping into the growing reliance of utilities and factories on natural gas.

The addition of privately held energy equipment maker Dresser Inc. for $3 billion bolsters GE's already sizable position in energy. GE builds natural gas-fired turbines for power generation, equipment for pipelines and liquefied natural gas terminals. It also provides water treatment and recycling for oil and gas drilling operations. The company announced a mobile version of its water treatment technology designed to reach remote gas drilling locations.

Analysts predict that recent development of huge, cheaply accessible reservoirs of natural gas found deep underground in shale formations worldwide will mean relatively low and stable natural gas prices for years to come. As a result utilities, chemicals producers and other industrial companies are beginning to use more natural gas instead of coal or oil either as a feedstock or to generate electricity.

GE, based in Fairfield, Connecticut, follows some corporate peers that also want to cash in on the natural gas boom. ExxonMobil agreed to buy natural gas company XTO Energy for $31 billion last December. Royal Dutch Shell said in May that it will acquire East Resources, which has natural gas assets in two U.S. shale formations, for $4.7 billion.

Dresser's motors, pumps and flow-control equipment help move gas and liquids through pipelines and power plants. Its natural gas fueled generators produce power for factories, dairy farms, landfills and rural areas.

Dresser's products will complement similar equipment and technology that GE already uses on a larger scale. For example, GE provides some of the pumping infrastructure for large new natural gas pipelines stretching across India, according to John Krenicki, vice chairman of GE and chief executive of GE's energy unit. Dresser's small engines will allow GE to expand on that by building branch lines to rural areas.

The same kind of infrastructure construction is booming in China, too. Dresser's equipment will also be used in liquefied natural gas facilities now being built in Australia to export fuel to Asia.

Dresser, based in Addison, Texas, designs and builds fuel dispensers for filling stations as well. GE wants to use that expertise and experience to roll out a line of electric vehicle charging stations it unveiled recently, as the market for electric cars grows.

GE had signaled it was ready to begin buying companies again, long a growth strategy for the company. This is its first major purchase since the beginning of the financial crisis in 2008, according to a report by Deutsche Bank analyst Nigel Coe.

The financial crisis hurt GE more than some of its competitors because of the company's exposure to debt markets through its giant GE Capital unit, which provides financing to businesses and credit cards to consumers.

GE chief executive Jeffrey Immelt has said he plans to focus on core businesses like energy infrastructure, health care and aerospace. The company is in the process of selling its majority stake in NBC Universal to Comcast for about $14 billion.

After that sale closes, analysts expect GE to have about $25 billion in cash on its balance sheet. The company has increased its dividend and has plans to buy back shares. That will still leave plenty of cash for acquisitions, according to Morningstar analyst Daniel Holland. "I would expect the company to continue to do acquisitions, but I wouldn't expect a binge," Holland said.

GE announced Wednesday that a deal it made for the London-based deepwater oil pipeline company Wellstream was rejected. GE offered to buy Wellstream, which was once owned by Dresser, for about $1 billion.

The company also agreed Wednesday to pay $1.6 billion to buy a portfolio of sales financing accounts from Citigroup to provide customers of small retailers with credit to buy furniture, motorsports, home furnishings and consumer electronics.

GE didn't say whether the Dresser deal's value includes the assumption of Dresser's debt, or provide further details on the financial terms of the deal. The deal requires regulatory approval.

Dresser earned $318 million on revenue of $2 billion last year, according to the company.

Related News

B.C. Challenges Alberta's Electricity Export Restrictions

B.C. Challenges Alberta's Electricity Export Restrictions

CALGARY - In a move that underscores the complexities of Canada's interprovincial energy relationships, the government of British Columbia (B.C.) has formally expressed concerns over recent electricity restrictions imposed by Alberta. These restrictions, which limit the export of electricity from Alberta to neighboring provinces, have significant implications for energy sharing, economic cooperation, and the broader Canadian energy landscape.

Background: Alberta's Electricity Restrictions

Alberta, traditionally reliant on coal and natural gas for electricity generation, has been undergoing a transition towards more sustainable energy sources. However, the pace and nature of this transition have led to challenges in meeting both domestic demand…

READ MORE
a-new-electric-boat-club-launches-in-seattle

A New Electric Boat Club Launches in Seattle

READ MORE

sheerness power plant

Alberta gives $40M to help workers transition from coal power jobs

READ MORE

oil rig

Global oil demand to decline in 2020 as Coronavirus weighs heavily on markets

READ MORE

Opinion: Now is the time for a western Canadian electricity grid

READ MORE