Wind boom seen before bust at GE

General Electric (NYSE: GE) saw wind turbine orders skyrocket earlier this year as developers rushed to complete projects by year’s end, but that market had already plummeted in the third quarter.

In an earnings call with analysts on Oct. 19, the contrast was stark: 241 wind turbines were ordered in the recent quarter, down from 781 last year. For the entire year, GE shipped 1,014 vs. 633 a year ago.

The anticipated drop is severe enough for the company to estimate a 40% drop in wind revenue next year, with an earnings impact of 3 cents per share.

Wind was a serious drag on the overall energy segment at GE, CFO Keith Sherin said, while other segments in the energy segment are holding their own or were positive. According to a transcript of the earnings call from the Seeking Alpha website, GE officials said the Energy segment was hard-hit.

“Orders of $6.5 billion were down 17%. We’ve said it before, but the impact of Wind is huge here. Ex-Wind [excluding wind], Energy orders were flat year-over-year. Equipment orders of $3.4 billion were down 24%. Again, ex-Wind, equipment orders were up 11%. Thermal orders of $1 billion were up over 160% and we had orders for 29 gas turbines versus 16 last year,” Sherin said.

Total equipment order pricing was down 1.4% with Thermal down 2.6% and Renewables down 4.2%, according to the company.

“Now we’ve been breaking out the impact of wind because it masks the remaining business performance. If you take a look in the third quarter for energy x-wind in total, revenues would be up 8%, segment profits up 20% and margins would’ve been up 146 basis points,” Sherin said. Year-to-year, renewables orders of $518m were down 72%.

The production tax credit is set to lapse at the end of the year, and even with a possible extension after the election, wind orders will not recover until well into 2013.

GE and other turbine manufacturers have been seeking to expand markets in Canada and Latin America, but that cannot make up for lost orders.

In the rush to beat the deadline for wind plants to be in service, the American Wind Energy Association reported that capacity additions will exceed 12 GW this year, well above the 10 GW added in 2009 when the previous record was set.