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Restructuring on Horizon for Siemens and GE

June 25, 2018

Siemens and General Electric, two rivals battling financial problems due to fewer orders for their flagship energy products and services, could each announce major restructuring moves in the coming weeks, according to media reports.

Reuters on June 21, citing a person familiar with the matter, said Siemens plans to merge or trim some of its industrial units, which could include its power operations. Reuters said it was told the Munich, Germany-based company would reduce its core industrial divisions from five to three, effective October 1—the start of the company’s next fiscal year. It reported that sources said details of the company’s “Vision 2020+” plan would be known in August.

Bloomberg earlier this month said the company was considering the sale of its gas turbines manufacturing unit.

Germany’s Manager Magazin also reported the changes on Thursday. The magazine said the new divisions would have higher margin targets. It reported that part of the plan is to merge the company’s “so-called Digital Factory unit with operations designed to automate process industries, and to combine overland high-voltage networks with the power plant business.”…

First AP1000 Nuclear Units Reach Key Milestones

June 23, 2018

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Two Westinghouse AP1000 nuclear power plants being constructed in China have successfully completed significant project milestones.

Sanmen Unit 1—the world’s first AP1000 reactor—achieved initial criticality on June 21. Initial criticality is a nuclear industry term meaning the reactor’s neutron population has remained steady from one generation to the next and the nuclear fission chain reaction is self-sustaining for the first time.

“Today we completed the final major milestone before commercial operation for Westinghouse’s AP1000 nuclear power plant technology,” Westinghouse President and CEO José Emeterio Gutiérrez said in a press release announcing the accomplishment. “We are one step closer to delivering the world’s first AP1000 plant to our customer and the world—with our customers, we will provide our customers in China with safe, reliable and clean energy from Sanmen 1.”

The next significant step is connecting the unit to the electric grid. Assuming work continues on schedule, Sanmen Unit 1 will be the first AP1000 nuclear power plant to commence operation.

Meanwhile, at the Haiyang facility, fuel loading began on Unit 1—another AP1000 reactor.…

Increasingly Debt-Laden, Regulated Utility Sector Outlook Veers from ‘Stable’ to ‘Negative’

June 21, 2018

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For the first time since it began conducting sector outlooks, Moody’s Investors Service has downgraded the regulated utility sector from stable to negative. The new outlook reflects a surge in financial risks in the sector as more individual companies in the regulated space funnel funds to debt.

Using an analysis of 42 of the largest U.S. utility and power holding companies and 102 utility operating companies with at least 10 years of financial data, Moody’s concluded in a June 18 report that the outlook clearly points to a “declining financial trend” in the sector. The trend is a function of “higher holding company debt levels incurred in the last few years” as a result of lower cash flows, and “a lower deferred tax contribution to cash flow going forward due to tax reform.”

The credit rating agency’s downgrade is mostly rooted in “degradation” of key financial credit ratios. These include the ratio of cash flow from operations to debt; funds from operations (FFO) to debt and retained cash flow to debt; as well as certain book leverage ratios.…

Memo: Siemens ‘Committed’ to Gas Turbines Unit

June 17, 2018

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Siemens still hasn’t commented on reports it could be looking to sell its gas turbine business. But the managing board member responsible for the company’s power and gas division reportedly issued a memo to staff in the wake of those reports, saying Siemens remains committed to its long-time flagship product.

Bloomberg, which on June 13 first reported the company could shed its gas turbines, today reported a memo was sent by managing board member Lisa Davis, citing what it called “a person familiar with the document.” The Bloomberg report quoted the memo as saying “There is no truth to the rumors” about a possible sale of the turbine unit. “Siemens is committed to the power generation business for the long term! And of course this is also true for our large gas turbines.”

Bloomberg said the memo, which it claims to have seen, contained instructions on how staff should respond to media inquiries about the future of Siemens’ turbine business.…

TEPCO Exec: Daini Plant Will Be Decommissioned

June 15, 2018

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A Tokyo Electric Power Co. (TEPCO) executive on June 14 said the utility is prepared to decommission the four idle units at its Fukushima Daini nuclear plant in Japan. The comments come as TEPCO continues to struggle with large compensation payments and cleanup costs associated with the March 2011 accident at its Fukushima Daiichi nuclear plant.

TEPCO President Tomoaki Kobayakawa’s remarks today are the first public statements from the company regarding the Daini plant, known as Fukushima No. 2, which escaped damage in 2011 but which is among dozens of Japanese nuclear plants that have remained offline for more than seven years in the wake of the Daiichi disaster. Kobayakawa at a news conference in Fukushima said local opposition to restarting the Daini units is partly behind his company’s decision to permanently close the plant.

The Daini plant is about 7 miles south of Daiichi. Some of its reactors lost cooling functions during the 2011 incident but none of the four units experienced a critical situation.…

GE Will Cut Jobs, End Manufacturing at Virginia Plant

June 13, 2018

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General Electric’s (GE’s) power unit has said it will end manufacturing operations at its plant in Salem, Virginia, next year, with more than 260 workers losing their jobs, according to union officials. Officials noted that 42% of the affected workers are eligible for retirement.

The plan announced June 8 said the Salem plant, which opened in 1955, would continue as an engineering center staffed by some 200 employees. GE is among the largest employers in the Salem region, and the plant at one time had about 3,500 workers.

The company said the Salem manufacturing work would move to other GE locations or be handled by supplier partners. GE has struggled along with other turbine manufacturers over the past year as global demand for the units has fallen. CEO John Flannery in May told a Florida electrical products conference that the company is trying to stem the tide of business losses, but said he is “being deliberate” with moves to reorganize GE even as the company’s stock price has been hammered in the past year.…