The beleaguered industrial giant GE can't catch a break.
General Electric Co. (GE) stock plummeted on Thursday, Sept. 20, after the head of its power unit confirmed an issue with a new model of its gas turbine.
The Boston-based company discovered an "oxidation issue" that could cause distress on blade components of the HA gas turbine. GE launched the HA turbine in 2016 and has received orders for more than 80 turbines, more than half of which have already shipped to customers in the U.S., Europe and Asia.
"Obviously, this was a frustrating development, for us, as well as for our customers," GE Power CEO Russell Stokes wrote in a LinkedIn post. "But we have identified a fix and have been working proactively with HA operators to address impacted turbines."
"A few weeks ago, there was an event at Exelon's Colorado Bend site that resulted from an issue with an HA turbine component," GE said in an emailed statement. "We expect the same issue to impact other HA units. We have identified the solution and have a plan in place, and we have been proactively working with customers on a case-by-case basis to address any impacted unit. We expect the Exelon unit to return to service soon." Exelon (EXC) is a utility company that supplies gas and electricity in 48 states.
Stokes said that every new product introduction includes a period after its launch where experts fine tune and adjust the product and technology. "This is normal," Stokes said.
Shares of GE tumbled 3.1% to $12.46 intrading today on the New York Stock Exchange.
The news of the HA turbine issue prompted J.P. Morgan analyst Stephen Tusa to cut his price target on the stock to $10.
"The impact on 'asset value" from a failure at GE's U.S. H-frame launch customer, while tough to estimate, represents a negative development for a company that has little wiggle room for more 'shoes to drop,' counting on V-shape recoveries in long cycle businesses to reduce leverage that is already well above levels that support the standing rating," Tusa wrote.
Credit rating giant Moody's cautioned in April that if it "expects that revenues in the Power segment will be subject to further declines beyond 2019," GE's rating could be downgraded.
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