GE to Split Up Energy Business

Brian Hicks

Written By Brian Hicks

Posted July 24, 2012

In a major move, GE (NYSE: GE) will be splitting up its GE Energy division to create three autonomous units by the end of 2012.

The Energy division will be eliminated, and the three sectors will report directly to CEO Jeff Immelt. This is seen as a streamlining strategy as GE increases its involvement in energy development.

Currently, GE Energy employs around 100,000 people and expects revenues of approximately $50 billion in 2012.

The three new businesses will be GE Power and Water, GE Oil and Gas, and GE Energy Management.

Steve Bolz, GE Senior Vice President and Power and Water CEO, will head GE Power and Water, which is based in Schenectady, NY. The division is responsible for a variety of power generation and management technologies and solutions. It is also involved in renewable energy and water processing and management issues. GE Power and Water looks to have revenues of around $28 billion in 2012 and will employ 41,000 people.

GE Oil and Gas is based in Florence, Italy, and is headed by Dan Heintzelman, GE Senior Vice President and Oil and Gas CEO. The division is responsible for a range of oil services operations, including technology for and management of off- and on-shore drilling. With expected revenues of $15 billion, GE Oil and Gas will employ around 33,000 people.

Finally, GE Energy Management is headquartered in Atlanta, Georgia, and is led by Dan Janki, GE Senior Vice President and Energy Management CEO. This unit handles all electrical power-related issues and management problems for industrial applications, will employ around 27,000 people, and is expected to have revenues of around $7 billion this year.

GE has continued reporting strong growth overall and will likely have another year of double-digits earnings across its Industrial, Capital, and Energy businesses. Vice Chairman and Energy Infrastructure CEO John Krenicki will be overseeing the transition to the new structure and will be leaving GE at the close of 2012.

The Financial quotes GE CEO Jeffrey Immelt on the changes at GE:

“Big companies are always fighting organizational complexity. We are taking action at a time when the Energy business is doing well. The business had a solid quarter with earnings up 13% and has a big backlog of great products. Removing layers is one way to reduce costs and increase our speed, focus and agility in the marketplace so we serve customers better.”

“This move will greatly simplify the way we communicate to investors and customers. We have built three strong franchises with solid growth prospects for each in the future. Our Energy portfolio is well positioned for future growth, our commitment to having the best technology is paying off with customers and we will continue to invest in our growth and competitiveness capabilities.”

The final shift will take place during the third quarter of 2012.

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