GE Energy Building a Profitable Wind Business Vic Abate July 26, 2006 This document contains "forward-looking statements" - that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," or "will." Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties which could adversely or positively affect our future results include: the behavior of financial markets, including fluctuations in interest rates and commodity prices; strategic actions, including dispositions; future integration of acquired businesses; future financial performance of major industries which we serve, including, without limitation, the air and rail transportation, energy generation, media, real estate and healthcare industries; unanticipated loss development in our insurance businesses; and numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive and regulatory nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.
GE Energy Global Power Generation Thermal Nuclear Renewables Gas turbines Aeroderivative CC Systems Coal IGCC Steam Turbines Generators Nuclear ABWR ESBWR Advanced Fuels Wind Solar Hydrogen Hydro Biomass 2005 revenue $16.5B Over 34,000 employees 700 locations over 100 countries ~$1.5B new technology spend 04-06 2
Growing Demand for Renewables Renewables only 3% of electricity production today But, strong historical and projected growth ~25% CAGR ( 95 13) Driving 39% global power sector capital spending Wind Solar Geothermal Biopower Small Hydro Global Renewable Installed Capacity (GWs) 179 160 Wind 12GW >50% of Growth 04 05 Aggressive Global Targets US 20 % Wind 20 UK 20% Renewables 20 Germany 20% Renewables 15 EU 12% Renewables 10 China 30 GW Wind 20 Spain 20 GW Wind 11 India 12 GW Wind 12 World Requiring Renewable Energy Solutions 3
Wind Most Viable Solution Industry Installation Forecast (GWs) 8.1 17% CAGR 11.8 ~15.3 04 05 08E ROW Asia - 19% North America 77% Europe 4% COE nearing mainstream Cost of Electricity 20 year levelized per kwhr ~7 O&M Fuel Capital costs ~4.5 ~4.0 Gas Coal Nuclear Wind Biomass Solar Basis: $8.00/MMBtu NG ~7 20 year fixed cost electricity Energy security ~10 ~36 Source: EER - 02/ 06 Domestic solution Carbon-free generation 4
GE and Wind Combining Our Strengths GE Energy Controls, materials, technology Fulfillment & logistics capability Efficient supply chain management GE Energy Financial Services Energy investing and financing GE Aviation Aerodynamic and aeroacoustic modeling expertise Wind Product Strategy 1. Highest Reliability 2. Capacity Factor Leadership Most Efficient 3. Advanced Logistics GE Global Research Centers China, India, US and Europe GE Advanced Materials Resins, plastics, metals GE Transportation Gearbox and power converter technologies GE Oil & Gas Offshore platforms/experience 5
Technology Differentiation Core Advantage Utilizing GE Technology Pitch Control Availability Gearbox & Drivetrain Reliability & efficiency 85% Availability 97%+ 02 Today Blades Increasing wind capture Power Electronics Grid operability CoE ( /kwh) 12 Technology Impact 8 4 0 85 90 95 00 05 10 $250MM R&D Since Acquisition 6
Creating the Industry Workhorse GE 1.5 MW Technology Infusion Reliability High Capacity factor Advanced Logistics 85 m 100 m 110 m 1.5 Workhorse 02 06 08 Acquisition Today Future Rotor Diameter (m) 77 82.5 ~85 Capacity factor (%) 38 47 +9 Pts >50 Availability % 85% 97% +12 Pts 97%+ Additional Customer Value ($MM/GW) _ $450MM $800MM Installed Base 1000 5000 10,000+ 55% CAGR Creating customer value: $450MM since 02 Additional $350MM by 08 7
Capital Efficient Growth Model GE - Shared Facility GE - Wind Only Facility Key Suppliers 04-06 Volume up 3x P&E Flat Land Turbines Service Owner Development System Des. Gearbox Generator Controls WTG Mfg Rotor/ Blade Tower Logistics Warranty Parts / O&M Wind Farm Assets Industry : ~70% Vertical Integration GE : ~10% Vertical Integration High ROTC Model 8
Fulfillment Changing the Industry 70 Expanding Supply Base 111 5 11 02 06 Lean Execution Major Suppliers Suppliers per Key Component Driving quality First piece qualifications 20 year gearboxes Build to print critical components ~300 in 06 Leveraging GT tools 2 day manufacturing cycle Inventory turns Tripled 90% local content in China 80% Ensuring fulfillment Integrated supplier LOBs On-site audits Global blade production ~1 /Hour Lean commissioning Mean: Mean: 1.6 14 Days Days 0 14 30 days 0 5 days Cycle reduction - 14 to 1.6 days 89% Applying Gas Turbine Operational Rigor to Wind 9
Advanced Logistics Logistics Friendly 1.5 Workhorse Rail capability ~$10-25k/unit cost out Lowest site prep cost ~$20k/unit customer savings Reusable double blade fixtures ~30%/unit savings Customer Value Predictive cost / supplier allocation model Firm price quote capabilities (cost & schedule) Strategic global sourcing & production locations $50MM/Year Savings Opportunity 10
Wind Strategy Driving Growth & Margin Acquired & Integrated Industry Leading Driving Value Up 50 % ~3.4 07 Dynamics Technology differentiation Sales ($B) 0.5 2.3 Units ~+20% Revenue ~+30% OP Rate ~+3pts ROTC ~30%+ Operational excellence GE s broad expertise '02 '05 '06E Units 440 1,580 ~2,000 ~$0.2B Margin Increase Driving Growth & Op Margin Expansion Penetration 9% 18% ~24% Creating Value for Customers & Shareholders 11
Growth & Margin Expansion Analyst Meeting July 26, 2006 12