GE’s $250 million Doosan deal will boost revenue

General Electric Co’s (GE.N) recent purchase of part of Doosan Engineering & Construction Co Ltd (011160.KS) of Korea will sharply boost the U.S. manufacturer’s revenues from energy assets acquired last year from France’s Alstom SA (ALSO.PA), a senior GE executive said on Tuesday.

GE’s purchase of Doosan’s heat recovery steam generator (HRSG) unit for $250 million provides critical engineering and manufacturing capacity that GE needs as sales increase in the businesses it acquired from Alstom, Joe Mastrangelo, Chief Executive Officer of GE’s gas power systems business, said in an interview.

New equipment orders in GE’s power division, excluding Alstom, fell 11 percent in the second quarter. But since the Alstom deal closed last November, GE has added 30 orders for heat recovery steam generators to its backlog, Mastrangelo said, noting that the company typically sold 14 per year before the acquisition. GE acquired the Alstom energy business for $9.5 billion last year. Alstom SA is now focused on its transport business, such as building trains.

GE Chief Executive Jeff Immelt told investors in July he expects those energy assets acquired from Alstom to deliver 5 cents a share in profits for the year. GE’s Alstom business had $7.5 billion in orders during the first half of the year, he said.

An HRSG is part of a combined cycle plant and provides about one third of its power.

The purchase of Doosan’s HRSG business, which closed Tuesday, will help GE fill those new orders while also gaining after-sale service revenue and project management capability, Mastrangelo said.

“This allows us to double the output of the product into our business,” he said.

The Alstom deal increased revenue from each massive gas power plant GE sells. Before the purchase, GE’s sales totaled about $175 per kilowatt of capacity in a typical large plant. Now, the figure is more than $300 per kilowatt.

“Even if you had a flat market, we’ll still grow because of the Alstom capability,” Mastrangelo said.

Source: Reuters