GE ‘Misjudged’ Green Energy Transition And Lost Billions: IEEFA

Investors lost “billions when the (once) most valuable company in the world, General Electric Company (GE) and its largest shareholders – BlackRock, Vanguard, State Street and Fidelity – misjudged the pace of the global energy transition,” says the IEEFA report.

The report by Institute for Energy Economics and Financial Analysis titled, General Electric Misread the Energy Transition: A Cautionary Tale, highlights GE and its primary shareholders as a case study in how rapidly the global energy transition away from fossil fuels travels up the economic chain and destroys value.

From an all-time high of US$600 billion in 2000, the total market value of GE’s outstanding shares has fallen to US$87 billion, and the company’s reputation has been severely damaged. Its largest shareholder, BlackRock investors suffered an astronomical $16bn loss in the three years of 2016-2018 related to its GE holdings, representing in effect a huge stranded asset loss. U.S. financial markets priced in a rising probability of bankruptcy in late 2018.

Co-author Tim Buckley, Director of Energy Finance Studies at IEEFA says GE badly misread the tea leaves and its shareholders have paid a massive price.

“GE lost investors an almost unprecedented and simply staggering US$193 billion in just three years to 2018, 74% of its market capitalization,” said Buckley.

However, the report which clearly elaborates GE’s epic failure of corporate governance thinks that investors could have turned up the heat.

“It is in [shareholder] hands to ensure companies evaluate and understand the inevitable energy transition as the world accelerates towards meeting the Paris Agreement,” said report co-author and IEEFA financial analyst Kathy Hipple.

“The world is transitioning away from fossil fuels – particularly expensive imported thermal coal and gas – into low-cost, zero-pollution domestic renewables such as wind and solar,” said Sanzillo. “This is where the smart money is, but GE failed to pick the trend – and ultimately failed.”

GE assumed wrongly that demand for natural gas and coal would continue to track global economic growth. The company did not recognize the ever-lowering costs of renewable technologies and the increased take-up of energy efficiency, which decoupled energy demand from economic activity.