Wednesday, September 29, 2010

GE CEO Immelt boils over

He tells Sec. Chu U.S. energy policy is “stupid”

oatmeal cookies You don’t get harsh words, almost a temper tantrum, from the CEO of a firm that is doing well. When the financials are deep in the black, what you get are corporate PR statements with all the excitement of a stack of oatmeal cookies. Current stockholders and future investors line up for firms that have high profits and a low public profile.

So when Jeff Immelt, the CEO of GE, (left) makes headlines Sept 24 in the Wall Street Journal and the New York Times by blowing his stack in a public forum with “sharply worded comments,” you have to wonder what the bottom line looks like?

immeltWhen CEOs blame government regulation, and a lack of support for international deals, for their troubles, it looks more like finger pointing at others rather than a humble self-assessment of what’s wrong with their business.

Immelt is anything but humble. Speaking at a Washington, DC, conference on smart grids, Immelt said America is falling behind China and other countries because of the lack of a comprehensive energy policy.

“The rest of the world is moving 10 times faster than we are . . . We have to have an energy policy. This is just stupid what we have today.”

Steven-Chu Energy Sec. Steven Chu (right) was in the audience when Immelt delivered these remarks. Chu told the WSJ in an interview afterward that energy policy does “need an overhaul,” but he defended the Obama administration’s initiatives in funding clean energy technologies including wind, which is a growing market segment for GE.

Immelt wasn’t done. In what appear to be off-the-cuff remarks, he said the current U.S. regulatory framework “is a relic.” He said China has a much better idea with a single national framework.

He singled out the Federal Energy Regulatory Commission (FERC) as an impediment to construction of new power lines. FERC’s chairman Jon Wellinghoff made headlines in April 2009 when he said new baseload power plants, including nuclear reactors, might not be necessary.

Energy Sec. Chu told the WSJ in response to Immelt’s remarks about smart grids that China’s central planning model is a brake on innovation compared to America’s entrepreneurial paradigm.

The New York Times reported Sept 24 that Immelt later praised Chu personally for his “entrepreneurial” spirit and support for smart grid and clean energy programs. After this praise, Immelt returned to form telling the newspaper “we probably are not going to lead on nuclear energy.”

U.S. fumbles the loan guarantee program

fumble Immelt’s got a point. The Obama administration has allowed bureaucratic infighting between DOE and OMB to fumble efforts to award loan guarantees to new nuclear power plants. It failed twice to convince Congress to expand the loan guarantee program.

Exelon CEO John Rowe has been quoted as saying that without the loan guarantees, the U.S. could wind up building as few as five new nuclear reactors by 2020.

Rowe has also noted that the low price of natural gas and the lack of a carbon tax contribute to the outlook. The Nuclear Energy Institute cited these factors Sept 23 in testimony before Congress.

Nuclear industry better at press releases than production

pressImmelt also had a razor-edged analysis of what’s wrong with U.S. government support for the nuclear industry. He said the U.S. situation is so bad we aren’t even doing well enough to be in catch-up mode.

According to the WSJ, Immelt said most Americans don’t realize the U.S. is building just one new nuclear reactor while the rest of the world is building 50 plants.

Immelt’s sound byte for the conference was that the primary output of the U.S. nuclear industry is press releases.

That’s a great way to get potential customers, the nation’s nuclear utilities, to beat a path to your door. What was Immelt thinking? It’s not like he has a bulging order book.

What’s wrong with GE’s nukes?

no-excusesGE’s efforts to capture market share with its 1,500 MW ESBWR reactor haven’t produced much by way of results. The two largest U.S. nuclear utilities, Exelon and Entergy, bid goodbye in 2008 to plans to use the reactor in new projects.

Both utilities cited GE’s reluctance to come to terms over how to handle cost over runs and delays. Dominion also scrapped plans to reference the ESBWR in an NRC license application choosing a design by Mitsubishi.

GE hasn’t done well with international markets. It was a distant third in competition for a $20 billion deal won by South Korea for construction of new nuclear reactors in the United Arab Emirates. It is a late comer to the design review process for new reactors in the U.K.

But Danny Roderick, GE’s SVP for nuclear, told the WSJ Aug 25 the firm is focused on Europe where it hopes to sell 15 of the new reactors by 2030. World Nuclear News published an update Sept 28 on the firm's efforts to enter the European market

Prospects may be brighter in India

ElephantWhile Immelt was lambasting the U.S. market, the Nuclear Power Corporation of India LTD (NPCIL) opened talks with GE and Westinghouse to build as many as six nuclear reactors. The deal is said to be worth $10 billion.

India is scrambling to line up a formal announcement of a nuclear deal with U.S. firms in advance of President Obama’s visit to that country in mid-November. A stumbling block is a new nuclear liability law that assigns long-term accountability to suppliers as well as operators.

One possible way out of the dilemma is for NPCIl to be the “supplier” to Indian nuclear plants thus providing domestic indemnification and shielding U.S. firms once their equipment is installed and running in operating plants.

According to the Global Security Newswire for Sept 28, U.S. Secretary of State Hillary Clinton discussed the liability issue with her Indian counterpart, S.M. Krishna, at the U.N. General Assembly conference in New York.

"We've taken note of some of the concerns that industry representatives have raised about some of the provisions of the liability bill and that the bill may possibly be inconsistent with international standards," U.S. Assistant Secretary of State Robert Blake said to journalists.

India is said to be offering a bargaining chip in a trade-off that would change the way the U.S. deals with exports of military equipment to India.

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Brian Mays said...

"Immelt's sound byte for the conference was that the primary output of the U.S. nuclear industry is press releases."

They produce a lot of Environmental Impact Statements as well.

Anonymous said...

As a former senior manager with GE's new nuclear plant's group, I can categorically state that Immelt is right on the money with his remarks. One of the problems he has over looked is that selling new nuclear plants is not a good fit for GE's business model. GE is so risk averse that no "risk the business" deals can possibly get done. What looks too risky at the outset is killed at Immelt and John Krenicki's level. The only way to go forward as a nuclear AE or design firm is to be a monolithic company that does business soley in the nuclear arena. Neither Immelt nor Krenicki knows a lick about the nuclear business. In true GE fashion, they are financial guys and do not understand the rubs that their peers at Westinghouse, Toshiba, Mitsubishi, et al understand. That is good if you don't want to go bust, but future success in the nuclear-construction field lies with those willing to take the risks, and the rewards are there to ensure those risk takers will do so.