GE Vernova (GEV) Morgan Stanley‘s 12th Annual Laguna Conference 2024 summary

Business segment performance and outlook

• Power segment secured capacity to deliver 70–80 heavy-duty gas turbines annually from 2026, up from 55, with strong global demand and higher pricing, especially for 2026–2027 slots.

• Electrification is the fastest-growing segment, with backlog projected to triple from $6B to $18B by year-end and EBITDA margins expected to approach 9% in 2024, with further margin gains as higher-priced orders convert to revenue from 2026.

• Onshore wind will deliver its fifth consecutive profitable quarter, achieving high single-digit EBITDA margins for the year, but offshore wind faces a $300M loss in Q3 due to project delays and cost accruals.

• Offshore wind backlog reduced to $3B, with installation delays impacting profitability; full installation and commissioning have resumed, and profitability is now expected in Q4 2024.

• Investor update scheduled for December 10 will address long-term targets, offshore wind progress, and capital allocation strategy.

Market trends and demand drivers

• Gas power demand is rising globally, with significant orders from Saudi Arabia, Japan, Korea, Taiwan, and the U.S.; capacity expansion is primarily U.S.-based and funded by customer down payments.

• Services revenue in gas is expected to grow by 50% later in the decade as customers invest more per outage to optimize assets for longer runtimes.

• Electrification demand is shifting, with Europe as the largest market but North America as the fastest-growing, driven by grid and transformer needs; capacity expansion in North America will leverage existing facilities.

• Pricing environments are favorable across gas and electrification, with margin accretion in backlog and continued ability to raise prices, including in North America.

Financial strategy and capital allocation

• Strong cash position ($5.8B) expected to grow through Q3, Q4, and into 2025, with organic growth largely customer-funded via order progress and slot fees.

• Capital allocation priorities include maintaining a strong balance sheet, returning capital to shareholders, and pursuing small, strategic M&A for growth adjacencies.

• Cost reduction efforts are ongoing, with a target of $500M in G&A cost out over several years; further details to be shared at the December investor update.