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.
