'This Was the Right Play': GE Vernova CEO Talks Splitting Off From GE and Nukes | At Barron's

Andy, thanks for having us.

Yeah. Well, I mean to take a step back, GE Vernova, for context generates about 25% of the world's electricity every day through our customers with our equipment. In the US, that's about 55% of the electricity. And if you exclude China from the global number, it's about a third. So, we've got a huge install base across a number of technology sets. That includes gas power, over 7,000 gas power units creating electricity every day. We've got 57,000 wind turbines creating electricity every day. We have 65 gigawatt worth of nuclear power. All experiencing different dynamics, all of which we should talk about. And then beyond the power generation technologies, our fastest growing business is our electrification business, which is all things related to the grid. Because the reality is we'll often have debates on which power generation source we should use. Regardless of that, we collectively need to invest substantially into the grid to be able to integrate a lot of these different technologies and a lot of different end uses that are coming. So, there's a lot of work to do, but it's work to do that we're ready for this moment.

I appreciate the question and I don't get sick of the question ever because I'll be the first to say I've spent my entire adult life with what started as GE and turned into GE Vernova with a lot of pride. You know, in April of '24 we separated out from GE 100% separation. So it'll be two years in April but we have the history of what General Electric was. And I think the reason I've spent my adult life here is I've always loved the ambition of the company. I've always loved the people, but also within a big conglomerate because we historically had a big aerospace business, a big healthcare business, and our energy businesses. That can be complicated. Too many goals could be no goals at all. And what the separation from GE is set up is a purpose-built company that I can look at my customers every day and tell them as you invest in me buying my stuff, I'm going to reinvest that in you. You don't have to worry about that money getting reallocated to healthcare or aerospace, I'm going to make an even better company for you. And I think that's working great for our customers and shareholders. I think it's also working great for the two other GE companies that now exist between GE Aerospace and GE Healthcare.

Well, at the time of the separation it definitely wasn't valuing Vernova at a third of the other two, right? So the market decides ultimately how they valued the three individual companies. But certainly at the time of our separation, the assumed valuation of Vernova relative to the valuation of aerospace, which were the last two transactions that happened, it was more the value of Vernova was a fifth of the value of aerospace.

Well, there's certainly been a lot of appreciation in value in Vernova in the last two years.

Yeah. No, for sure that has normalized to some extent, but not one to one over the last almost 24 months. But I also say every day it's still very early for us. And that's early in the opportunity for us, but one that we need to earn every day with our customers and with our investors.

There's no question about it. I think there's a lot to be said for focus.

Well, the US is our largest end market today. I mean there's just a huge demand for electricity today. If you take a step back, we probably haven't seen an analogous period of time like this since 1945. Now after World War II in the US and in Western Europe every 10 years we doubled the electric power system in the country. And then from 1975 on it was reasonably modest growth until 2000 and then no growth for 25 years. And the reason there was no growth is because of globalization. A lot of jobs and manufacturing was moving out of the country. There was a lot of productivity that was being experienced in the economy from software from the internet. There's also a lot of energy efficiency savings as our refrigerators got more efficient. The reality today is those things that were leading to very flat demand are going in reverse. Globalization all of a sudden is creating in many cases a decoupled world and that decoupled world requires new manufacturing in the US that's driving a lot of demand. Software and the internet that maybe at one point was driving productivity while artificial intelligence needs the electrons along with the chips and the data to drive that productivity. So we're really going into what we believe is the early chapters of an investment super cycle in the US for electricity growth. Now the other kind of general theme I would drive is the world needs more energy everywhere but it's only getting 20% of its energy from electric power. The other 80% of the world is still getting its energy from liquid molecules from coal and industrial applications. It's really hard to find someone that believes that isn't going to evolve over time and that the shift isn't going to go more and more towards the electron. So, we have growing markets in many dynamics, but the US is definitely our fastest growing market today.

Yeah, we have 57,000 wind turbines creating electrons today. In the US about half of the wind electricity that's created every day is with our wind turbines. So these are long cycle businesses. And in our case, businesses that we've got to invest in through the cycles. President Trump definitely is tough on wind in a lot of his narrative. But I'll tell you, I've lived through other administrations that haven't been cheerleading all of my technologies. We're investing for the long term. The Biden administration wasn't really cheerleading new gas, but we're investing in our gas power business during the Biden administration. And now our customers and our investors are benefiting from that. We continue to invest in our wind business today because from everything we see between now and 2050, the world needs a lot more wind. And what we really are focused on is positioning our company to serve markets and different administrations with different priorities and not fighting those priorities. But if we continue to create a more competitive product and solution, in the end, both our customers and our investors will win.

Probably the one that's emerging the fastest is our small modular reactor, and that is moving quickly. So think to yourself in the size of a European football field. We...

It's about the same. It's rounding. I'm just doing it because we're in Europe, you know.

Fair enough. Either hemisphere. Any hemisphere. Exactly. Any football field. Anywhere.

Exactly. We can build a small modular reactor that creates 300 megawatt.

Nuclear reactor. The nuclear combustion happens underground and all the electrical equipment is in a turbine building on the ground. That 300 megawatts, to just make that real, that'll power every day about 300,000 homes. That's 300,000 homes in the US. Frankly, in Europe, it's even more. That's important because we don't talk a lot about power density or how much electricity can you create using the least amount of space, but that's going to become a theme over time. So, it's a very attractive product because it's power dense and it's zero carbon. And we're in construction on the first one right now in Ontario outside of Toronto. In November we signed an MOU with both the US and Japanese government for up to a hundred billion dollars of financing of new small modular reactors which would be 40 in our case. And we see a lot of interest. A lot of our conversations this week are with countries that are looking at where the US is going and working to draft in that same direction. So we're incredibly excited about where small modular reactors are going.

We have our first application into the NRC, the nuclear regulatory commission. We would expect to get approval by summertime from them to start construction on the first plant.

In Tennessee.

Yeah. So, this is happening and I would...

In that case, it's with Tennessee Valley Authority.

Yes. But at the same time I'm highly confident we'll come out of this year with offtake agreements with at least one hyperscaler and other counterparties. So this is happening now. It doesn't happen tomorrow from when we start construction and we will be in construction by '27 on the first one. It takes four years until the electrons are available. So in the US we're talking about new nuclear electrons and directionally 2031. And that can feel like a while but while we're building that we also have the ability in the US to uprate our existing nuclear. So for context, we see a pathway to about 5 gigawatt. So that would be, you know, 5 million homes in the US of incremental power just upgrading existing plants. And that will happen between now and the small modular reactor being commissioned.

Exactly.