Summary
Political and economic forces are uniting to de-carbonize the global economy in an orderly but rapid manner, and equity investors must pay attention.
GE Power and its interest in Baker Hughes GE may be worth much less than the consensus believes.
GE stock may be worth as little as $9 per share.
I detailed a downside case for General Electric (NYSE:GE)'s Power unit back in the summer. I argued the downside was a flattish global installed base of natural gas turbines, which would leave GE with a still mammoth power-related profit pool. Since then, GE stock has been smacked by ongoing earnings misses, another CEO change, another massive impairment charge, and now a dividend cut to near zero.
But those headlines don’t concern me as much as a few others over the past several weeks:
- The world’s fifth largest economy plans to have carbon-free electricity generation by 2045. And the outgoing governor set a target of carbon-neutral economy by the same year.
- The Intergovernmental Panel on Climate Change has outlined the need for dramatic policy actions to keep the planet from warming much further.
- General Motors isn’t backing the Trump administration’s plan to roll back vehicle emission standards; they want a mandate for selling zero-emission (read electric) vehicles.
Political and economic forces are uniting to de-carbonize the global economy in an orderly but rapid manner, and equity investors must pay attention. When you buy a perpetual security, the likely world in 2030 and 2045 actually matters. It especially matters when the inexorable trend works against several of the businesses you own.
