GE Vernova : Bernstein 40th Annual Strategic Decisions Conference 2024GE Vernova 1st Quarter 2024 Earnings Webcast2024 GE Vernova Investor Day Download Transcript

GE Vernova

May 30, 2024

03:30 PM EDT

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	GE Vernova
	May 30, 2024
	03:30 PM EDT
Chad Dillard:	Okay. Good afternoon, everyone. My name is Chad Dillard. I'm the Lead Analyst here at
	Bernstein covering the machinery and the engineering and construction sector. And I'd
	say I'm really excited to have GE Vernova with us. And joining us is Scott Strazik, who
	is the CEO of the company. And so we'll begin with him doing a quick just introduction
	of GE Vernova, and then we'll dive into just general Q&A. For those of you out in the
	audience that want to ask any questions, please go onto Pigeonhole, log your questions,
	and I'll be happy to ask on your behalf. Without further ado, let me pass it over to Scott.
Scott Strazik:	Chad, thank you, and thanks everybody for giving us a few minutes this morning. This is
	an exciting day for us. This is our first time at this conference as a public company. We
	spun out from General Electric on April 2nd, and it's been a busy couple months for us
	really with customers, with investors. We had our first earnings call in April. We just had
	our first meeting where we had our top 180 leaders together since we announced the spin
	in '21, and there's a lot of energy and enthusiasm for what Vernova can become.
	But for those in the room that don't know a lot about GE Vernova, we're unique in the
	sense that we really are a 133-year old startup. We come from the history of GE and
	electrifying the world, while at the same time the world was changing and we need to
	change with it. And that's also where the branding of Vernova comes from, kind of verde
	green, nova new. New green innovation. We're very proud of the role we've been in
	electrifying the world. We're going to continue to do that while we simultaneously
	decarbonize it.
	Our installed base today powers somewhere between 25% and 30% of the electric power
	system today. Big Power businesses with Gas and Nuclear, Wind, Onshore and Offshore,
	and Electrification business that really focuses on both the modernization of the grid,
	expansion of the grid and the brains of the grid, with things like grid software.
	Now on the market, and just a few thoughts on what we're seeing today. I've been in these
	businesses for over 10 years, and from a load demand cycle perspective, we're going into
	one of the more exciting markets that we've seen. And that's really been driven from a
	number of factors. It starts with industries that historically have been powered with fossil
	fuels to going forward are electrifying, EVs, home heating, heavy industrial. It's also just
	in places in the U.S. from stuff like U.S. manufacturing growth. It's chip factories. It's
	data centers and AI. And all of that's driving an increased demand cycle at the exact same
	time we need to simultaneously decarbonize the electric power system. So both create
	real opportunities for us.

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	Very quickly on how we run the business. We talk a lot about the lean operating system,
	and for us, that really means how do we prioritize the critical few KPIs that matter most
	to our customers everyday while simultaneously protecting for the long-term
	breakthroughs. And that's very much what we're doing every day as we cut in lean lines
	to our gas factories while simultaneously protecting for long-term breakthroughs like our
	300-megawatt small modular reactor. Like our running direct air capture prototype. Like
	our grid orchestration system software that we think has a real possibility to become for
	utilities very equivalent to what Microsoft Office is for office applications. So the blend:
	focus on the short term while investing in the long term.
	As I said before on our business segments, Power is primarily a services business. Big
	installed base. $17 billion of revenue last year. Generating a lot of cash with real growth
	potential, especially in today's market as you see customers investing in the installed base
	more, both Gas and Nuclear. About a $10 billion Wind business. That's $8 billion
	Onshore, $2 billion Offshore. Our Onshore business has a clear path to high-single digit
	EBITDA margins in 2024 with the second half of the year being a lot better than the first
	half of the year. And then our much smaller Offshore wind business is a book that's in the
	red right now. We're not profitable with the backlog that we have, but we also see our
	ability to purge 100% of that backlog, or materially all of it, by the end of 2025. And
	when you get to the other side of that, we see a very profitable wind business going
	forward.
	And then our third segment is Electrification. Again, Electrification is our fastest growing
	segment, both expanding and modernizing the grid, but also grid software. And we do
	follow these things together. We're really excited about the opportunity that GE Vernova
	has to serve the market and create real value over the long term.
	So with that, Chad, I think I'll hand it back to you. We'll go to Q&A.
Chad Dillard:	Let's do it. Okay. So there are a number of long-term trends out there. So can you talk
	about how GE Vernova's business is aligned with that and what your right to win is on
	that? And what your right to win is on that?
Scott Strazik:	Chad, I think by default, when you today are generating 25% to 30% of the existing
	electrical power load and you look at, take the U.S., which has really had limited load
	growth for 20 years, limited demand growth for 20 years. We have the infrastructure to
	serve what's very quickly becoming a changing market that can grow, whether that be
	with Gas, whether that be with Onshore Wind, whether it be with ultimately connecting
	those things together with the Grid business.
	So that is there, but at the same time, some of the most efficient ways to decarbonize the
	existing system is to go back to what's already been built with the installed base. So we're
	spending a lot of capital today on how do we decarbonize gas. And that's with hydrogen.
	That's with carbon capture. When you think about wind turbines and all of the
	interconnect challenges wind turbines have, one of the most efficient ways to add zero
	carbon power into the system is to repower the wind turbines that have already been built
	but were built 20 years ago with much smaller blades, with much less power capacity.
	So with our positioning with the installed base we have, especially in a market like the
	U.S., we're just incredibly well positioned to serve both that load growth, demand
	growth, but also making that existing installed base much more decarbonized and
	efficient every day.
Chad Dillard:	Got it. Okay. So okay. So for the last 20 years, load growth has been effectively zero, and

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	now we're at this inflection point right now. So how do you think about the role of GE
	Vernova as we're kind of hitting that inflection point? How do you think about the growth
	algorithm today versus let's even say three to five years ago before we actually had that
	load growth?
Scott Strazik:	Unrecognizable, honestly, having been in these businesses during that period of time.
	We've spent many years kind of driving to having a more efficient footprint at a period of
	time now that you can look at gas or look at grid and our challenge is very different. It's
	really how do we meet the growing demand that's coming in these business segments.
	Specifically for Gas and Grid, it's just a materially different market environment than
	we've experienced in at least the last 10 years. And the good news for us in that is it
	doesn't require us to lean into greenfield operations. We have a lot of industrial footprint
	that we can leverage. We've got the factories. They're next to the railroads. We've got the
	cranes. But I don't have operating teams in those businesses that have lived through
	growth cycle, not like we're starting to lean into. So it's helping to customize that team's
	readiness to serve that market to do it in the most profitable way that we can, but it's
	unrecognizable to any period of time we've had in the last decade. So that's exciting in
	those segments.
	And then in a business like Wind, which is a big, important business for us, that one's still
	a little bit more -- requires a little bit more caution. We're not seeing the same growth
	inflection yet in Wind. And we're working to serve that market, but it's going to take a
	little bit longer to materialize than our other two segments.
Chad Dillard:	Got it. Okay. So I guess we have to talk about data centers. That's an area where it sounds
	like you're seeing just an inflection in activity over the last several months.
Scott Strazik:	Yes.
Chad Dillard:	So maybe you can share with us when you talk to the hyperscalers, can you talk about
	what their challenges are, how you can help support them.
Scott Strazik:	There's clearly a race to gain access to more power, and it's power that's needed at scale.
	The reality is, I think data centers, once we were talking about 100 megawatt data center,
	load need for data centers, big data centers. And now you sit down with customers that
	are talking about power parks to support data center parks that are in gigawatt level size.
	That's not an easy thing to do today. And it's not something easy to do in '26, '27, '28
	really with any technology other than gas, because there aren't a lot of load sources at that
	scale that can meet the reliability needs of those data center parks in that timeframe.
	So admittedly, that isn't a customer set -- if you go back five years ago, we were spending
	a lot of time talking about gas power. We've been spending a lot of time with the
	hyperscalers, helping them understand not just the fulfilment needs for gas, but then also
	how we decarbonize gas the 10 years afterwards with hydrogen and carbon capture.
	Because clearly, not only does it have power needs this decade, but they have
	sustainability commitments they plan on hitting. So where we are in the cycle of
	conversations with them is much more focused on how do we meet the demand load this
	decade while giving them a roadmap to decarbonize that over a 10-year period of time.
	And that's a lot of discussions that are happening today.
Chad Dillard:	Got it. So can you actually go a little bit further on that roadmap? Like what does that
	look like? Is there some carbon capture? I'm assuming SMR might be an opportunity as
	well. Can you talk a little bit more about that?

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Scott Strazik:	Mid to late this decade, you're most apt to start with more unabated gas. Then as you get
	into the next decade, you're going to add zero carbon wind that by then can catch up
	because you'll have added the transmission, and the transmission, to a large extent, grid
	connections you need that you may just not be able to build for phase 1. You're going to
	add SMR. We will commission our first 300-megawatt small modular reactor in Canada
	with Ontario Power Generation in 2029. Our launch customer in the U.S. is TVA,
	Tennessee Valley Authority. But into the 2030s, this is a very good application to add to
	those data center power parks and 300-megawatt blocks of power. So I think you're going
	to go gas, then wind, then SMR. And then you're going to come back full circle and start
	blending into those gas turbines more hydrogen and ultimately more carbon capture.
	And I think those factors are likely going to also play a role on where the data centers get
	built, because the ease of being able to build the wind and decarbonize gas is somewhat
	dependent on the environment. Where are the carbon sinks? Where is the land that can
	take on the wind capability? Where is the land that can add the green hydrogen
	production capability? That is all strategically where the discussions are sitting right now
	in I think this next chapter of data center growth.
Chad Dillard:	Got it. Okay. So speaking of growth, when you talk about capacity as well, can you lay
	out your plans for capacity addition? And how are you thinking about -- I guess you have
	the long-term plans I'm sure the hyperscalers are giving you, but you need to balance just
	the tightness of the market to make sure that you're generating appropriate pricing and all
	of that. So walk us through how you're thinking about that over the next '26, '25, I guess
	through the end of the decade.
Scott Strazik:	You bet. An element that has been a legacy financial challenge for what was GE, now GE
	Vernova, is we have had factory capacity for a long time. Because in many of our
	businesses, we've had peak volume that has been much higher than where we've been
	sitting over the last five years. So if you visited our Gas factory in Greenville, South
	Carolina, we'd walk the factory and you would believe appropriately, we could ramp up
	considerably for Gas growth. If you think about Wind, this year we're shipping just north
	of 2,000 wind turbines. But in 2021, we did 4,000. So the capacity exists.
	With gas, the challenge is less our ability to ramp and it more comes down to the
	forgings. It comes down to the castings. Some of the same challenges that my brother
	sister company in aircraft engines is kind of battling through to meet the aircraft engine
	load growth that we're partnering with the similar or the exact same suppliers to solve
	that supply constraint.
	So it's less about us needing to add a factory. Certainly, there's no greenfield investments
	planned inside Vernova, even with this growth. But it is requiring us in an entrepreneurial
	way to go back to our supply chain and have adult conversations on how we get the
	supply we need to meet this demand. That's most pressing in Gas. It's very doable in
	Wind, but the Wind orders outlook remains a bit cautious for the moment.
	And then with things like transformers and switchgears, it's not a sub-supplier challenge.
	But that is the one business of the three that we probably will have a reinvestment ratio
	greater than 1. Because the market dynamics are very strong. The markets will end up
	paying for it. It continues to be a healthy price environment for us. But we haven't
	invested in capacity growth and are in the process of doing that. And that is factory
	expansion, although not really greenfields, per se.
Chad Dillard:	Got it. Okay. So I guess on the Electrification side and also on the Gas side, how far out

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	are you taking orders? And then also I guess on the capacity side, how far out are you
	actually setting plans to actually build?
Scott Strazik:	In Gas, you're very quickly into '27 today before you have access to new gas turbines. So
	we're to a large extent booked until '27 today. And it's not a very different answer with
	things like transformers and switchgears. So we're in a 36 to 48 month cycle at the
	moment that we're working to improve, but it's not going to materially improve. What
	will happen is we hope to add more ability to grow into this cycle by '27, but it's not
	going to change '25 or '26 very much.
	Wind we can still -- the cycle time's less. If in Grid and in Gas it's 36 to 48 months, in
	Wind it can be 12 to 18 months. Shorter cycle, but the end markets are more complicated
	there right now. So as there's an orders tipping point forward for Wind, the good news is
	we're going to be able to convert that to revenue at a much faster cycle than with Grid or
	Gas.
Chad Dillard:	Got it. Okay. So let's talk about SMR. You touched upon it really quickly. Can you just
	frame for us just how big of an opportunity that could potentially be and what do you
	think is GE Vernova's right to win in this space?
Scott Strazik:	You bet. We've got 60 operating nuclear plants today in the U.S., and globally, a
	modestly larger number than that. I sat in a room at Dubai at COP28 in which 22 heads of
	state talked about tripling nuclear capacity between now and 2050. And if you had asked
	me whether that room would have existed two years prior, I would have told you no way.
	So the sentiment shift acknowledging the role that nuclear can play in the energy
	transition is very real.
	That said, not every country is at the same place on the journey towards allowing the
	ramp to happen quickly. Canada's further along. That's why we'll commission the first
	plant there. We're working very hard with an amazing customer in TVA to have our
	launch in the U.S. be in Tennessee at a site called Clinch River. We're making real
	progress in Poland with our third partner with Synthos Green Energy. And there's other
	markets like the UK that have active conversations.
	But for us, this really becomes a 2030 and beyond investment. In the 2030s, I have a high
	degree of confidence we should be adding 3 gigawatts of new nuclear SMRs very
	credibly for a better part of the next decade. And if you start doing an extra 3 gigawatts of
	new capacity, you're adding $2 billion to $4 billion of incremental revenue to the
	business that starts to become material. But it really is a next decade thing than this
	decade. But that's the counterbalance of how you become a great company. You serve the
	near-term installed base while protecting for the growth cycles that need to follow.
Chad Dillard:	Got it. Okay. And just sticking with the power business. Can you talk a little bit more
	about your growth strategy on the services side?
Scott Strazik:	Yeah. The good news in that is we have a customer sentiment dynamic where they're
	investing in the fleet. They need every ounce of performance they can get from our
	traditional power installed base today, and that's leading to a real uptick in upgrade
	demand, as an example. It's looking at retrofitting existing nuclear to get as much output
	as we possibly can. And I think we're going to see that play through on our financials
	over the next half decade.
	So ultimately, that comes back to being a very lean company that services the fleet very,
	very well. If I take Gas as an example, we invested heavily in what we call live outage.

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	And the live outage is then applying a number of lean principles to eliminate waste in
	how we service the gas turbine outage event. It's a lot of simple examples. It's things like
	we brought the craft labor from our outage team to our Greenville factory and had them
	explain to the factory why it takes so long to work through an outage. And some simple
	examples would be the packaging the parts would lead to a very expansive laydown area
	at the outage site. What did we do? We repackaged all the parts so now there is no
	laydown area. They can take the parts right from the truck and put them on the gas
	turbine pedestal.
	We see real potential to take 50% of the cycle time out of our gas turbine outages. That
	matters. It matters in a world where our customers don't like having the gas turbines off
	because they're so critical to the infrastructure. So we're making a lot of investments like
	that to really serve our customers effectively to ensure that existing installed base runs, it
	runs well in a cycle where our customers are much more leaning into investment in that
	fleet that's giving us a real opportunity to serve.
Chad Dillard:	Got it. Okay. So you're taking 50% of the cycle time out. That's probably a savings on a
	lot of downtime.
Scott Strazik:	Yes.
Chad Dillard:	So how are you thinking about your ability to price for that value? And then maybe we
	can go into that conversation about what that ultimately means for margins for the
	business.
Scott Strazik:	You bet. It's price. It's also the fact that peak outage season is fairly narrow. And if you
	can do twice as many outages conceptually in that same peak outage cycle, then you can
	make a lot more money in the spring and the fall when our customers are okay with their
	gas turbines being in an outage event.
	But we are in a healthy price environment in Gas, both on the new unit side and on
	upgrades into the fleet, because the reality is, from the macro dynamics we talked about
	earlier, the supply-demand dynamics are shifting in Gas right now. And because of the
	capacity constrained nature of forgings and castings, we need to maximize every slot we
	have. And to some extent, those slots are the same for servicing an existing gas turbine as
	it is building a new one. And that is a different cycle than my Gas team has been in
	before when we've gone through cycles over the last 10 years of being at over capacity,
	which gives us a real shot to drive towards a much more profitable business.
	So if you look at this business today, it's a low-double digit EBITDA margin business.
	We see very little reason that we're not materially accreting margin every year for the
	next five years that take a low-double digit EBITDA margin business and certainly takes
	it to mid-teens or better. And we're running the business to that expectation, primarily on
	the strength of our Gas services book, but with all the businesses contributing, including
	Nuclear.
Chad Dillard:	Got you. Okay. So actually, can we please walk through that margin bridge? How much
	comes from just backlog, up-pricing backlog versus some of the efficiencies you're
	talking about on service and like if there's anything else that you'd want to lay out to be
	there?
Scott Strazik:	To get to the low-double digits, we've done a lot of, call it, the structural cost work
	already. We've normalized for a more boring equipment book, let's say, that is more
	steady. And a lot of the growth that takes us from low to mid-teens is really high services

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	margin growth.
	Now later in the decade, the reality is if the gas new capacity additions really come from
	things like the data centers, that doesn't even really start to convert into revenue in the
	business until late in the decade because the cycle time we talked about before. But that
	would be another catalyst of opportunity for this business to be even more profitable if
	we can gain even more volume leverage through a larger equipment business than where
	we've been. Because the reality is, whether it be gas work or equipment work, that
	volume's going to the same factories. And that arbitrage or leverage that gets created in
	our supply chain is very, very real.
	Now, I think that takes us a few years. I think the more near-term catalyst to margin
	accretion growth is going to be high margin services growth. And then if you then skip
	ahead three to four years, as the load growth is clearly coming into focus, if the orders
	materialize to the extent they could this year and in '25, you then could have another
	margin uplift with a much more profitable book of equipment revenue that can get us to a
	point that our Power business can be a really exciting business for all of our stakeholders.
Chad Dillard:	Got it. Okay. So it sounds like a lot of the growth comes from services. Is that already in
	the backlog right now, or is that something you need to actually go out and capture?
Scott Strazik:	We have very healthy visibility over the next three years of services events. Whether it's
	in backlog explicitly or we see it coming and it will be ours, we have a very high degree
	of conviction on this Gas services growth that's going to come throughout the next three
	to five years.
Chad Dillard:	Got it. Okay. Should we switch over to Wind?
Scott Strazik:	Sounds good. Love to.
Chad Dillard:	All right. Yeah, maybe you can talk about your strategy for the Wind business. I think
	that's an area where you can improve your margins. Maybe you can kind of walk through
	your plans there.
Scott Strazik:	You bet. Our Power businesses I've been involved in since 2013. I took on our wind
	businesses after we announced the spin in the beginning of '22. And at the start, I'll say
	I'm really proud of the work that the teams have been doing over the last couple years to
	get to where we are today. And it hasn't been easy work. We've had to really reorganize
	our businesses. In our Onshore Wind business, we took out about 40% of our headcount.
	We took out over $0.5 billion of structural cost to change the profitability hurdle that we
	had to get over every year in this business. We prioritized a different set of countries that
	we were going to do business in. When I took on Wind in early '22, we were bidding into
	30 some odd countries. Today that number is more like mid-teens. Focus on where we
	can get scale.
	We've been working really hard on driving towards a more homogenous workhorse
	product to get scale because the wind industry in total went through way too many serial
	number introductions of modest changes that led to a very difficult fulfilment challenge
	for the industry, both in quality in the field and product cost. And through that hard work
	of the Onshore Wind business, we've got a business this year that'll be high-single digit
	EBITDA margins.
	For Wind in total in 2024, unfortunately, that high-single digit EBITDA margin business
	gets consumed, to a large extent, with an unprofitable Offshore Wind backlog. And we

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	have about a $4 billion backlog we're still executing on that is all in the red. This is
	backlog that was booked a number of years ago that ultimately got upside down post-
	Ukraine with the inflation pressures without the best commercial terms. And it's fairly
	new for us, and we've been less effective coming down the product cost curve than we
	maybe originally anticipated.
	So for '24, we have a business in total that's approaching profitability. Onshore Wind
	high-single digit EBITDA margins. Offshore Wind consuming most of that. Even within
	Onshore Wind, the second half of the year is much more profitable than the first half of
	the year. And the second half of the year is a better representation of what '25 will look
	like.
	So we've done a lot of the hard work. We project into '25 a business that gets back into
	profitability on even better margins in Onshore Wind, but still a fairly flat top line
	business and a fairly flat Offshore business, but that will be better in '25 than '24 but still
	losing money.
	Then you get to '26, and in the Wind bridge, at that point I think we've got a more
	credible chance to believe that the Onshore Wind growth will come. We'll start to see the
	orders materialize in '25 for '26 revenue with an even better margin profile than what
	we're talking about the second half of this year, but materially, the Offshore Wind
	backlog will be gone. So the margin uplift that we expect to see in Wind in total will be
	better '23 to '24 and '24 to '25, but the exciting year is really '25 to '26.
	And especially if the volume materializes Onshore, there's going to be a lot to like in our
	Onshore Wind business. And I was with our team last week. They're doing the right
	work. I'm proud of what they're doing. And over the next 18 months, I think we're going
	to really transform this business to be a really attractive part of GE Vernova. But it is the
	part of Vernova of our three segments that has the most work ahead of it to be accretive
	to our overall margins versus being a little bit of a laggard here.
Chad Dillard:	Okay. So you're pretty optimistic about '25, '26.
Scott Strazik:	There's a clear margin expansion story here that is very much in our control. The growth
	trajectory, we've got to see it materialize. We're a little bit more cautious on exactly when
	the growth comes, but the margin expansion track, it's right there, it's in our control, and
	we're going to deliver it.
Chad Dillard:	Okay. So I guess on the, I guess, as-bid margins versus as, I guess, recognized margins.
Scott Strazik:	Yeah.
Chad Dillard:	Can you share with us, what does that look like today versus -- maybe like what does that
	look like for what's in backlog today versus what you're recognizing in revenue versus
	maybe even like two years ago?
Scott Strazik:	Prior to two years ago in our Onshore Wind business, or Offshore for that matter, we
	were bidding activity on a forward cost curve, assuming cost productivity. And the team
	struggled to reach the cost productivity estimates and often saw as-sold to as-executed
	margin dilution.
	In Gas, going back to '19 when I started running that business, we underwrite every new
	deal at actual cost today. That doesn't mean we're not assuming accountability for our
	product management, supply chain, engineering team to drive cost productivity, but the

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	bidding is on actual cost today. That's where Wind is now. The orders that we've been
	booking in '22 and '23 are on today's costs with an expectation from our fulfilment teams
	that we make them better over time. And there's nothing I've seen over the last 18 months
	that says we won't accrete margin on a go-forward basis in Onshore Wind relative to
	what we sold them at.
	Now that's part of why the second half of '24 margin profile is much better than the first
	half of '24 because we're starting to see that. We're starting to see that margin accretion
	from when we did the original order. While in the first half of this year, we're still
	purging some of the backlog from yesterday where we were bidding things with a
	forward cost curve that simply isn't as profitable as what you should expect and we will
	deliver the second half of this year into '25 and beyond.
Chad Dillard:	Got it. Okay. So it sounds like on the backlog, that layers into revenue. Margins are
	higher. Second half of the year, you're in like upper single digit margins, right?
Scott Strazik:	Well, we are going to deliver a year of high-single digit margins with the second half
	better than the first half, which really has the second half margins even better than that.
Chad Dillard:	Okay. And so as we kind of think forward, how do you think about the margin algorithm
	beyond '25?
Scott Strazik:	I think by default, you have a little bit of addition by subtraction because you lose the
	negative Offshore Wind revenue. So that's going to lead to the Wind segment in total
	looking like the Onshore Wind margins, which we're kind of walking ourselves low
	double digit EBITDA margins based on what we're saying. And then the real question
	comes with how much volume leverage do you get from there. And for it to be a business
	segment that's more than that, we need a bigger business than what we have today.
	And at this moment, we're cautious on exactly when that inflection point comes. We still
	see soft orders in Onshore Wind today. We expect that to continue in the near term. I do
	think in '25, I'm hopeful that we'll have an orders inflection point that then translates to
	revenue growth in '26. But relative to the compare contrast with Gas and Grid, there's the
	most open field running to get there right now with Wind.
Chad Dillard:	Got it.
Scott Strazik:	So I like our chances of getting to what we just said. And just for illustrative purposes,
	when we did our Capital Markets Day in March, we explained that in 2023, our backlog
	accreted margin 10 points in Onshore Wind. And that was with our backlog growing
	from about $6 billion to $9 billion. So when you grow your backlog 50% and accrete 10
	points of margin, that's indicative of what's going to be a more profitable business. And
	that's what you're starting to see flow through to revenue second half of this year into '25.
	Similar dynamic in Grid, except there we doubled the backlog from $6 billion to north of
	$12 billion and we accreted margin 5 points. So these are businesses that we don't need to
	hope to see the margin get better. The margin is better. In our backlog, we're running the
	company with a passionate view that every 90 days within the rounds, we're going to
	scrutinize our future. And our future is the profitability of our backlog and accreting
	margin every 90 days.
Chad Dillard:	So from an order perspective, you mentioned that you're hopeful for orders. Can you talk
	a little bit more about like what's giving you that hope? Maybe you can actually even
	weave in is there anything from the Inflation Reduction Act that should drive a step

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	change?
Scott Strazik:	You bet. The Inflation Reduction Act is important. It certainly is a material economic
	contributor to my customer's business case. It's also a material contributor towards
	incentives to buy from us. Because the reality is, there's real domestic content incentives
	for our customers to buy U.S. content in which we have the largest U.S. content for wind
	of any of the large OEMs.
	So the IRA is important, and that's why we do see a very healthy, what we call tech-select
	backlog of deals that we've won in technology selection. But now the projects need to
	work through the interconnect queue. They need to know their greenfield has a slot to
	sign up to the grid. They need the transmission and distribution equipment to bring it all
	together. They need to work their capital structure and get these deals financed in what
	has been a higher rate environment for a longer period of time than they probably
	underwrote their original greenfield investment when they started working on the project
	two or three years ago.
	So all of those things are slowing down things getting to close. None of those things
	reduce our confidence that the deals will ultimately close. But they're things that are
	somewhat out of our control, because it's not as if we're at a point where we're
	negotiating the last point of price with them. It's these are complicated projects to get
	from development to financial close. There's a very healthy queue of pipeline, but it's not
	an easy environment right now to get them across the line. And we're very supportive and
	very connected with our customer base, but it's tough to call that inflection point today.
Chad Dillard:	Got it. Okay. So you're just talking about domestic manufacturing content. You have
	domestic manufacturing capacity.
Scott Strazik:	Yes.
Chad Dillard:	Can you get price for that?
Scott Strazik:	Yes. And I think you see that in the backlog. And I think you see that in what we talked
	about in Capital Markets and that trend of Onshore Wind getting 10 points of price, Grid
	getting 5 points of -- not price, margin and backlog. Gas is a real opportunity to accrete
	margin, partly by price. Across all three of our segments right now, I have real
	confidence that we can play this chess game effectively and serve our customers while
	using the precious capacity we have in the smartest way possible. And part of that comes
	down to the price.
Chad Dillard:	Got it. Okay. So let's talk a little bit about the Offshore Wind business.
Scott Strazik:	Sounds good.
Chad Dillard:	So how are you thinking about the cost structure of that business? Where does that need
	to be versus where it is today?
Scott Strazik:	Yeah. So there's a lot of dynamics we're working through with Offshore. The reality is,
	the strike zone for what we will do in new business going forward is just materially
	different than the backlog we're executing on today. And that's a combination of price,
	terms and conditions, scope of supply, scope of what we'll execute on relative to our
	customers. And there's still a distance to travel between our strike zone for adding to the
	backlog and where we are with the customers.