GE discovers a fault in the last turbines of power plants

The problem was discovered after an "event" a few weeks ago at Exelon's Colorado Bend plant near Houston, where the company had installed two of the new turbines in June 2017, an Exelon spokeswoman said. . As a result, Exelon shut down the plant's new turbines and two HA turbines at a second gas station, Wolf Hollow, near Fort Worth.

"We identified the solution and put in place a plan to solve the problem," said Exelon's spokesperson. "We expect the unit to be back in service soon."

Both plants operate in the deregulated markets of Texas. Although blackouts probably lead to a marginal increase in wholesale prices, there has been no significant price increase since the turbines were taken offline for repairs.

The problem is the last for the GE Power unit, which has been at the center of GE's financial and operational difficulties. The century-old company has suffered heavy losses due to a worldwide decline in demand for power generation equipment. The unit removed 12,000 jobs last year as part of a broader restructuring that also resulted in a reduction in GE's dividend, the sale of the company's business and a split plan of its nursing unit. health.

Exelon, based in Chicago, was among the first to install the new class of GE equipment, which promises to improve its efficiency. GE has sold approximately 80 HA units and approximately 30 are currently in operation; The first HA turbine was commissioned in June 2016. GE expects to have more than 60 in operation by 2020.

GE stated that it expects the oxidation problem to affect other HA turbines, but stated that it is not uncommon for new equipment to undergo "minor adjustments" after they have been installed. service. The repair can put the turbines offline for several weeks, the company said. The cost of the patch is not clear.

GE shares fell 3.7% to $ 12.46 mid-day Thursday morning and fell 50% last year.

"We identified the solution and put in place a plan, and we worked proactively with clients on a case-by-case basis to deal with any affected units," the company said. "We expect Exelon units to return to service soon."

GE has been experiencing the problem of oxidation for months and is working on the solution with customers, according to people familiar with the situation. The weakening of the part, one of the many rotating blades inside the turbine, reduces the expected life of the equipment. While GE was aware of the problem, people said that the failure occurred earlier than expected. Because the problem is related to the age of the part, GE will address customer fixation issues.

Stephen Tusa, an analyst at JPMorgan, who wrote on the subject in a research note to investors, said GE wanted to minimize the problem, but it was important enough that Exelon had to shut down two power plants.

If it was not remedied quickly, he said it could be a loss for the GE Power division. GE generally has service contracts on its turbines and outages or unforeseen problems can reduce the profitability of this arrangement.

Russell Stokes, CEO of GE Power, discussed the issue in an article on LinkedIn Wednesday, categorizing it as a startup problem, a problem with a new complex product early in its launch. He said such setbacks are normal as GE engineers refine and adjust the technology.

"Obviously, it was a frustrating development for both us and our customers," he said.

Write to Thomas Gryta at [email protected] and Russell Gold at [email protected]