Ge Vernova Inc (GEV)

• Strong and diversified demand in the Gas Power segment, with increasing orders across various turbine types, including 25 H-class units, 20 F-class units, and over 40 aeroderivative units in 2024. This indicates robust growth opportunities, with demand becoming more diversified and the company planning to expand capacity to deliver approximately 20 gigawatts annually starting in 2027. - -
• The Electrification (Grid) segment is experiencing significant growth, with the equipment backlog increasing from $6 billion to $20 billion over the past two years. The company expects this backlog to grow substantially in 2025 and beyond, especially in North America and Asia, indicating substantial opportunities for expansion and revenue growth. - -
• Increasing service opportunities in the Gas Power business, as customers invest more in technology upgrades to improve performance. The company expects upgrades to grow by approximately 50% by the end of the decade, enhancing growth prospects in the high-margin services segment. -

• GEV's wind segment remains soft, with market fundamentals being weaker than the other two large businesses, and uncertainty about when the North American wind market will improve, potentially impacting growth. -
• Production capacity constraints in the gas turbine business, with GEV limited to 20 gigawatts of capacity per year by 2027, may limit the company's ability to capitalize on increased demand in the gas power market. - -
• Potential challenges in project execution due to constraints in EPC support could impact GEV's ability to fulfill orders and realize revenue on time, posing risks to financial performance. -

1. Gas Turbine Capacity
   Q: Can you discuss gas turbine pricing and capacity constraints?
   A: Our H-class gas turbine pricing is around $2,000 per kilowatt all-in, with our content making up 30%-35% of that cost, as you mentioned. - We're quickly filling our annual 20 gigawatt capacity, and orders are extending through 2029. - There's little pricing difference between 2027 and 2029 deliveries, and we expect to start discussing 2029 orders soon. - The main challenge is ensuring customers can secure not just our equipment but also the necessary EPC support to keep projects on schedule. -

2. Electrification Backlog Growth
   Q: What's the outlook for your electrification business, especially in North America?
   A: Our electrification equipment backlog has grown to over $20 billion, and we expect it to grow substantially in 2025 and beyond. - North America now represents 20%-25% of this business, with significant opportunities ahead. - We're investing in capacity expansion, leveraging our industrial footprint in both Asia and North America. -

3. Capacity Expansion in Electrification
   Q: Are you accelerating capacity in your electrification business?
   A: Yes, we're accelerating capacity build-out in electrification, particularly in North America. - We're focusing on lean initiatives to expand capacity without significant capital investment. - The ability to sell premium slots is a key opportunity as the market needs everything we can provide. -

4. Services Growth in Power Segment
   Q: How should we think about power services growth this year?
   A: We're projecting mid-single-digit growth overall, with 90% of our GE Vernova volumes in backlog. - While early in the year may see slightly slower growth, it's due to how the backlog rolls out. - We see opportunities in both contract and transactional services as gas power utilization rises. - We expect an acceleration to high single-digit growth in 2026 and beyond. -

5. Gas Turbine Pricing and Premium Slots
   Q: Any updates on gas turbine pricing and customer receptivity?
   A: While there hasn't been significant order activity in the last six weeks due to the holidays, discussions are intense. - Customers are focused on securing premium slots for 2028-2029 deliveries rather than price. - We haven't raised prices since December, but we're partnering with customers to meet their needs while maximizing our economics. -

6. Impact of Rising Gas Prices on Services
   Q: How will rising gas prices affect your service activities?
   A: Customers are investing more in technology during outages to increase output. - We have over 700 F-class gas turbines in the U.S. and can provide upgrades to enhance output and efficiency. - We expect upgrades to grow directionally by 50% by the end of the decade. -

7. SMR Deployment and Customer Interest
   Q: Can SMR deployment be accelerated, and is customer interest increasing?
   A: Last week's announcement was significant, with Duke and AEP joining our consortium for projects slated between 2032-2034 in the U.S.. - While the first plant in Canada will be commissioned in 2029, we don't expect to accelerate that timeline. - Customer interest is strengthening both in the U.S. and internationally. -

8. Turbine Diversification and Supply Constraints
   Q: How does turbine diversification impact your capacity constraints?
   A: While it won't materially change our 2026 capacity, producing more F-class turbines, which are easier to make, helps. - Supply constraints limit overall capacity to 20 gigawatts by 2027, steady going forward. - We're balancing opportunities with what our supply base can serve. -

9. Premium Slots and Capacity Expansion
   Q: Can you provide more color on accelerating capacity to sell premium slots?
   A: In electrification, we're expanding capacity and focusing on selling premium slots. - Lean initiatives are allowing us to increase capacity effectively without heavy capital investment. - We're dedicated to meeting market demand and see fulfillment and price opportunities. -

Quarterly guidance for Q1 2025:

• Revenue (Wind segment): mid-single-digit growth - (no prior guidance)
• Adjusted EBITDA margin: year-over-year expansion - (no prior guidance)
• Free Cash Flow: positive - (no prior guidance)
• Power segment revenue growth: low single-digit organic growth; low single-digit decline on a reported basis - (no prior guidance)
• Power segment EBITDA margin: 10% to 11% - (no prior guidance)
• Electrification segment revenue growth: in line with full-year guidance - (no prior guidance)
• Electrification segment EBITDA margin: year-over-year expansion - (no prior guidance)
• Wind segment revenue growth: mid-single-digit - (no prior guidance)
• Wind segment EBITDA losses: relatively consistent year-over-year - (no prior guidance)

Annual guidance for FY 2025:

• Revenue: $36 billion to $37 billion - (raised from $34 billion to $35 billion - )
• Adjusted EBITDA Margin: high single digits - (raised from 5% to 7% - )
• Free Cash Flow: $2 billion to $2.5 billion - (raised from $1.3 billion to $1.7 billion - )
• Power segment (organic revenue growth): mid-single-digit growth - (no change from mid-single-digit growth - )
• Power segment (EBITDA margin): 13% to 14% - (raised from expansion at the higher end of 150–200 basis points - )
• Electrification segment (organic revenue growth): mid- to high-teens - (no change from high-teens - )
• Electrification segment (EBITDA margin): 11% to 13% - (raised from upper end of high single digits - )
• Wind segment (EBITDA losses): $200 million to $400 million - (raised from approximately $500 million loss - )