From Investing.com, October 22, skipping past the very concise introductory material:
....Q&A
During the earnings call, analysts inquired about the strategic rationale behind the Prolec GE acquisition and its expected impact on the company’s capabilities. Questions also focused on the dynamics of the gas turbine market and how GE Vernova plans to navigate pricing trends. The company addressed its capacity expansion plans and highlighted opportunities for international growth in transformer technologies.Full transcript - GE Vernova LLC (GEV) Q3 2025:
Liz, Conference Coordinator: Good day, ladies and gentlemen, and welcome to GE Vernova’s conference call to discuss the acquisition of Prolec GE, as well as GE Vernova’s third quarter financial results and outlook. At this time, all participants are in a listen-only mode. My name is Liz, and I will be your conference coordinator today. If you experience issues with the webcast slides refreshing or there appears to be delays in the slide advancement, please hit F5 on your keyboard to refresh. As a reminder, this conference is being recorded. I would now like to turn the program over to your host for today’s conference, Michael Lapides, Vice President of Investor Relations. Please proceed.
Michael Lapides, Vice President of Investor Relations, GE Vernova: Welcome to GE Vernova’s conference call today, where we will start by discussing the planned acquisition of the remaining 50% of Prolec GE and then cover our third quarter 2025 earnings results. I’m joined today by our CEO, Scott Strazik, and our CFO, Ken Parks. Today’s remarks include GAAP and non-GAAP measures, including standalone forecasts of the Prolec GE joint venture, reconciliations of GAAP to non-GAAP measures, and related information are in our Form 10-Q press releases and presentation slides available on our website. Our Prolec GE comments reflect expectations for the transaction and the joint venture’s business, cost, and revenue synergies from the transaction and capital allocation plans. Unless otherwise noted, year-over-year changes in orders, revenue adjusted in segment, EBITDA, and margin are on an organic basis. We will make forward-looking statements based on how we see things today.
We may update these statements in the future but undertake no obligation to do so. Actual results may differ materially due to risks and uncertainties described in our SEC filings. With that, let me turn the call over to Scott.
Ken Parks, CFO, GE Vernova: Thank you, Michael. We are excited to update you on our announced acquisition of the remaining 50% of the Prolec GE joint venture from our partner, Xignux. We’ve partnered with Xignux for 30 years to build a world-class transformer business. This is a business we know well and is an attractive acquisition for GE Vernova, consolidating a leading grid equipment provider that produces transformers to serve North American utilities, industrials, and data centers. While Ken will go into the details, we’re paying $5.275 billion, planned to be funded 50% with cash and 50% with debt. We expect the transaction will close by mid-2026. This acquisition fully aligns with our strategic and financial objectives. Prolec will further strengthen our capabilities in the grid equipment market, primarily for transformers in North America, but also over time beyond North America, accelerating the growth trajectory of our fastest growing segment, electrification.
The acquisition is immediately accretive to EBITDA before synergies. We are confident in the cost synergies and expect to drive revenue synergies over the medium to long term after bringing Prolec fully into GE Vernova. This transaction is also consistent with the disciplined capital allocation strategy discussed at our December 2024 investor update, where we highlighted our commitment to fund organic growth, return at least one-third of cash generated to shareholders, and execute on targeted M&A like this transaction, which aligns with our core and adds to the electrification product solution we can deliver to customers. Turning to slide five, we expect Prolec to generate $3 billion in revenue this year at strong EBITDA margins of 25%, making this a margin-accretive business to GE Vernova overall.
Prolec is focused on producing transformers across most high, medium, and low voltages, with approximately 10,000 employees across seven sites, including five in the U.S. and one in Mexico, which is USMCA compliant. Prolec’s largest product offering is power transformers, which many energy-intensive customers rely upon, including data centers. While GE Vernova sells transformers internationally, this joint venture sells almost all of its volume to U.S. customers and is the exclusive way we’ve delivered transformers into North America. We value our relationship with Xignux, our partner in the Prolec GE venture, and the management team at Prolec, and are excited to build on the 30-year foundation built to date. Turning to the next slide, customers should clearly benefit from our full ownership of Prolec GE. We anticipate being able to streamline the customer experience by fully integrating Prolec into GE Vernova’s commercial activities and product development.
This transaction removes existing contractual limitations and creates an opportunity to better serve customers in North America and across the world. Prolec is investing in its factories to meet the increasing need for transformers. For example, in North Carolina, a recently announced expansion is already underway, and Prolec has also completed expansions in Louisiana and in Mexico. Not only are there further opportunities to expand capacity at Prolec sites, we also expect to incorporate our lean culture into how we operate these facilities. Lean has helped GE Vernova expand capabilities in places like Charleroi, which makes circuit breakers outside of Pittsburgh, a facility where we are doubling output and adding jobs. We expect to drive attractive outcomes over time at the Prolec facilities. Longer term, we see a real potential to increase volume and improve lead times from executing on disciplined capacity additions and leveraging our global footprint.
We also expect to integrate parts of Prolec with GE Vernova’s existing businesses, and not just with our growing switchgear and transformer businesses within grid solutions, but also grid automation, which will help customers in the monitoring and performance management of their assets. Prolec also expands our product offerings within distribution transformers to customers outside of North America. We have talked recently about our expected higher R&D next year to develop and deliver more product to data centers and going beyond the transmission substations we provide today. Prolec will help deliver an even more robust range of product offerings. Today, GE Vernova’s electrification segment focuses primarily on transmission technologies, and Prolec’s North American factories could provide an opportunity to produce HVDC transformers locally. Moving to slide seven, we’ve discussed the attractiveness of the electrification equipment market.
In North America alone, we’re seeing significant investment in electrification, where we expect our combined serviceable, addressable market to grow at approximately 10% compounded growth rate, doubling in size by 2030. There are three primary drivers increasing demand for grid investment. First, electricity demand is increasing from expanded electrification needs, data center growth, and rising digitization levels. There is also a need for increased grid stability and flexibility, especially as more distributed resources come online and as voltage or frequency support becomes even more critical. Reliability is paramount, and maintaining reliability requires modernizing aging infrastructure. Finally, we see growing demand from the energy transition and increased national security interests. Now, I’ll hand it over to Ken to walk through the financial details. Thanks, Scott. On slide eight, let me highlight for you the financials of Prolec GE and our expectations for the next few years before synergies or integration costs.
The business has strong fundamentals and a sizable backlog. Prolec had an equipment backlog of approximately $4 billion at the end of the second quarter. In addition, they maintained frame agreements with their key customers, which are not in backlog, representing strong relationships that will continue to drive growth going forward. We expect low double-digit revenue growth driven by volume and pricing, with revenue increasing from $3 billion this year to over $4 billion in 2028. During the same timeframe, Prolec should see robust EBITDA growth to over $1 billion in 2028 before incorporating anticipated cost and revenue synergies. We include our 50% share of equity income in GE Vernova’s adjusted EBITDA. Consolidating Prolec will add an incremental $800 million for GE Vernova in 2028. The business also generates positive and growing free cash flow. Additionally, the numbers provided today include the estimated impact of tariffs as currently outlined.
We plan to fund the acquisition of Prolec using an equal mix of debt and cash on hand for the just under $5.3 billion payment. We remain committed to maintaining an investment-grade balance sheet. Even after issuing roughly $2.6 billion in debt resulting from the acquisition, we expect to remain below one times on a debt-to-adjusted EBITDA basis. Again, this is an immediately accretive transaction to EBITDA before synergies. On this next slide, I’ll walk through some of the expected synergies, starting with cost. We expect to apply proven practices that have helped GE Vernova across all three segments improve margins. For Prolec GE, we plan to implement common design practices in terms of how we develop and manufacture transformers, helping drive down cost and become even more efficient. We’ll also leverage our sourcing practices and expand lean to drive process improvements that will lead to increased productivity.
Many of you have heard us talk about the work we’ve done to improve output from our electrification facilities. We expect to take those learnings and best practices and incorporate them at the Prolec GE sites. Opportunities clearly exist to optimize R&D, especially as we integrate Prolec GE’s processes with the work our electrification team undertakes to design and deliver new technologies and product offerings. We also expect to realize G&A-related savings, both from process leveraging and the use of technology and systems. On the right-hand side of the page, we highlight the opportunities to drive revenue-related synergies, which provide upside to our financial outlook. For example, full ownership of Prolec GE enables GE Vernova to leverage our combined global factory footprint to provide even more transformers into North America. We also see opportunities to harmonize our go-to-market strategy and expand our services offerings in North America.
There are further investments that can drive future growth, such as opportunity to eventually market and sell Prolec GE’s transformers, including low to medium transformers outside of North America. We also anticipate expanding and improving our grid automation offerings with products Prolec GE provides today. In summary, we expect to realize $60 to $120 million of annualized cost synergies by 2028. As we integrate Prolec GE, we see real opportunities to drive additional revenue synergies ahead. We’re working hard to execute a smooth integration, which includes retaining talent and ensuring continuity, while also evaluating systems integrations and the sharing of best practices across engineering and operations to increase productivity, reduce cost, and leverage our scale, all to deliver value after the deal closes. With that, let me turn it back to Scott....
....MUCH MORE
We'll pause here to let him catch his breath. That is just one part of GEV's business and though transformers are a critical component of the electrical grid, and are in fact a chokepoint, they are just a small portion of what the company does.
Additionally the analyst Q&A is interesting:
Liz, Conference Coordinator: Ladies and gentlemen, if you wish to ask a question, please press star 11 on your telephone. If you wish to withdraw your question or your question has already been answered, please press star 11 again. Our first question comes from Mark Strauss with JPMorgan. Please proceed....
And away we go.
The stock is down $3.56 (-0.61%) at $581.77 with about nine minutes to the close.
Earlier:
GE Vernova Reports, Beats On Revenue, Light On Earnings Stock Bumps Higher (GEV)
GE Vernova Is DOWN $52.25, The Gap On The Chart Has Finally Been Filled (GEV)
$533.08 last, down $52.25 (-8.93%)
We didn't quite catch the low for the day, $532.72, but got close. From TradingView:
