GE 2BPresentation 2B Group 2B8

Topics: Natural gas, South Africa, Economic growth Pages: 20 (1264 words) Published: April 13, 2015
PRESENTATION TO GENERAL ELECTRIC

Team 8
January 25, 2013
Consulting

Agenda
Executive Summary

Page
4

General Electric Overview

Page
6

Economy and Outlook

Page
11

Valuation Considerations: Fracking

Page
17

Potential Exit Strategies & Risk Assessment

Page
22

2

EXECUTIVE SUMMARY

3

Executive Summary
Overview

South
Africa
Overview
Industry
Update
Strategic
Initiative
Assessme
nt
Our
Perspect
ive



General Electric has requested a prospective review of potential foreign direct investment opportunities



Included are perspectives on a potential investment in Hydraulic Fracturing in South Africa



Country currently dependent primarily on coal for energy



South Africa is starting to see economic growth pick up, 3.8% annualized growth in Q4




Karoo region is ripe for fracking to drive industrial growth and diversify energy sources
Generated $8.0bn in Revenue



5.8% annual growth from 2008-2013 in the Fracking market



The Hydraulic Fracturing market is expected to grow to $15.5bn in the US alone by 2018

Determine appropriate course of action
 Acquire Fracking License


Start-up costs and NPV analysis



Potential exit opportunity analysis



General Electric should pursue a Hydraulic Fracking operation in the Karoo region of South Africa, where massive profits can be had



The company could then pursue a sale of the venture, or spin-off the venture to lock in profits while maintaining a stake in the business
4

GENERAL ELECTRIC COMPANY OVERVIEW

5

General Electric Company Overview
Background & Strategic Positioning
 General Electric’s eight business units generated a combined revenue of $146.0bn in 2012
 The Company employs 307,000 employees worldwide and manufactures products across 170 countries
 The majority of revenues come from the Financing and Power & Water Segments, accounting for 47.1% of total revenue
 The Company’s has focused on simplification of the business, divesting non-core assets and focusing on growth in core businesses
 Since FY2012 GE has seen negative growth in its GE Capital Business as it tries to eliminate the risk inherent in financial services
Revenue Growth by Segment
FY2013 Revenue Mix by Segment
(FY2013)
2.0%
Total Revenue:
Power & Water
$146.0bn
Oil & Gas

1.0%

0.0%

1.2%

Energy
Man agemen t

0.2%0.3%

0.1%
1.4%0.0%

0.0%

(0.7%)

-1.0%

Aviation
Health care
Transportation
Applian ces &
Ligh tin g
GE Capital

-2.0%

(2.4%)

30%

17%

11%
5%
12%15%

6%
4%

Power & Water

Oil & Gas

Energy Man agement

Aviation

Health care

Tran sportation

Applian ces & Ligh tin g

GE Capital

Oth er

Oth er

-3.0%

Sources: FactSet, Company Filings, and Morgan Stanley

6

ECONOMY AND OUTLOOK

7

Economy and Outlook
GDP Growth

Global Economy





Consumer Confidence





Business Confidence






Sources: Bloomberg, Trading Economics, WSJ, Reuters

The IMF has reported that public debt in
the world’s richest nations has stabilized,
but remains at historic highs as pressure
mounts on nations to increase spending
U.S. equities have waded through turbulent
markets amid concerns regarding emerging
markets and fear of a Tech Bubble
Euro-Zone industrial output rose 0.2% from
January and 1.7% from February 2013,
meeting expectations
Mario Draghi upped warnings about the
strong euro, saying further rise in the
exchange rate would trigger additional
easing to boost inflation
South African Economy
The Congressional Budget Office projected
today
that the
2014elections
deficit will
be the
With South
African
approaching
lowest
in 6 years
next month,
the ruling party has shifted
their political agenda towards economic
growth
GDP grew at an annualized rate of 3.8% in
the fourth quarter, up sharply from the
0.7% annualized...
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