Shares in GE Vernova tumbled nearly 10 percent this week, wiping out about $5 billion from the company’s market value, as news stories and photos circulated of a busted offshore wind turbine made by the company and of debris from the turbine tower washing up on the shores of nearby Nantucket beaches.
Most of the decline happened on Wednesday; the shares actually rose slightly on Friday to close at $163.34, down from $180.45 a week earlier. The sell-off represented an unusual setback for a stock that’s been on a tear since the Cambridge-based energy company split from General Electric’s aerospace business in early April, in what was likely the final breakup of the once-gigantic industrial conglomerate.
Pieces of fiberglass fell into the ocean from the giant tower, which is part of the Vineyard Wind project going up south of Martha’s Vineyard and Nantucket, after the blade broke while the turbine was undergoing testing on Saturday. By the end of the day on Tuesday, truckloads of debris were being removed from Nantucket’s southern shores, and the other Vineyard Wind turbines were shut down.
Then, on Thursday, the Vineyard Wind joint venture said a significant part of the compromised blade had detached from the turbine. The venture, owned by Avangrid and Copenhagen Infrastructure Partners, is putting up 62 turbines, with football field-sized blades that reach as high as 850 feet above the water, to generate electricity for Massachusetts homes and businesses.
Advertisement
The cause of the incident remains unclear, and it’s still unknown whether an installation error or a manufacturing issue is to blame. A GE Vernova spokesperson said the company’s top priority “is safety and minimizing the impact” on nearby communities, and the company is working to complete a “root cause analysis” of the event.
While the failure of GE Vernova’s Haliade-X blade brought bad publicity in the company’s home state, analysts don’t expect a big hit to its financials. The offshore wind business represented less than 5 percent of the company’s $33 billion in revenue last year. And GE Vernova recently scaled back plans to manufacture a much bigger version of the Haliade-X turbines.
Advertisement
However, the bills could add up if manufacturing flaws are found and other turbines need to be replaced as a result.
Christopher Dendrinos, an analyst at RBC Capital Markets, said investors don’t seem to be worried about GE Vernova’s ability to win new business. But many do seem worried about the repair bills possibly eating into the company’s cash flow if GE Vernova is found to be at fault.
GE is supplying blades for just one other offshore wind farm, the Dogger Bank project in the United Kingdom. Dendrinos said he’s not aware of any other offshore wind projects in GE’s pipeline.
“It’s not a monumental piece of the business by any means, but the risk is that these losses can add up quickly,” Dendrinos said. “What investors want is for them to get these projects in the water and [then] wipe their hands clean. The risk is, they’re trying to wipe their hands clean, and there continues to be dirt on them.”
The Vineyard Wind incident represents just the latest problem to arise with large-scale wind power installations. Siemens Gamesa, a GE Vernova rival, has reported significant issues with its onshore blades in Europe. A GE Vernova blade at Doggers Bank was damaged earlier this year, and Reuters reported that several onshore wind turbines made by GE Vernova in Germany and Sweden have broken in recent years.
Dendrinos also pointed to a lawsuit filed in recent weeks by generator owner American Electric Power against GE Vernova over defects in turbines supplied to wind projects in Oklahoma.
Pavel Molchanov, an analyst with investment bank Raymond James, downplayed the impact that the failed Vineyard Wind blade will have on GE Vernova’s fortunes. He sees the stock drop as investors taking advantage of a bad headline to sell shares after a steady run-up in the price this spring, not of any fundamental problems with the company itself.
Advertisement
“Even if, worst case scenario, Vernova’s equipment malfunctioned [and] the company will need to replace some turbines, this happens with infrastructure of every imaginable variety,” Molchanov said. “It’s not the end of the world. This is what warranties are for.”
Jon Chesto can be reached at [email protected]. Follow him @jonchesto.