General Electric Co.'s offshore wind business recorded a roughly $1.1 billion loss in 2023 as the company's power and renewable energy divisions gear up to become a stand-alone company, GE Vernova, during the second quarter of this year.

Although inflation, high interest rates and supply chain bottlenecks have persisted into 2024, power and renewable division head Scott Strazik, who will take the reins at GE Vernova, anticipates that offshore wind's balance sheet will improve in 2025.

"We're starting 2024 with an equipment backlog down to roughly $4 billion, which we expect to largely complete over the next two years," Strazik said during General Electric's (GE's) Jan. 23 fourth-quarter earnings conference call. "We see a clear pathway in '24 to accrete margin but also then to continue to accrete margin beyond as we liquidate the rest of the tough economics with offshore in '25."

GE Vernova posted a fourth-quarter loss of $347 million, compared to $454 million a year ago. For full-year 2023, the segment lost $1.44 billion, improving on a $2.24 billion loss for 2022.

For 2024, GE Vernova expects $700 million to $1.1 billion of free cash flow, depending in part on "how quickly we install the wind turbines in both the Atlantic and the North Sea," according to Strazik.

GE's renewables segment recorded "just over $5 billion" of orders during the fourth quarter of 2023, despite Ørsted A/S canceling its Ocean Wind 1 offshore wind project in October 2023. GE Vernova was contracted to supply its Haliade-X 12-MW wind turbines for the Ocean Wind project.

"Profit improved over $100 million as onshore and grid more than offset pressure at offshore," Strazik told analysts and investors, noting that GE Vernova recently scored its largest-ever order to supply 674 onshore turbines for one of the largest wind energy projects in US history.

Pattern Energy Group LP will use GE Vernova's 3.6-154 onshore wind turbine model for the 3.5-GW SunZia wind project in the Southwest, which is under construction and expected to begin operations in 2026.

GE Vernova's onshore wind business recorded its second consecutive quarterly profit for the fourth quarter, Strazik noted.

"We see our customers actively investing and replenishing their project book right now," he said. "They really utilized all the projects they had prior to having clarity on the [production tax credit]."

GE reported fourth-quarter 2023 net earnings of $1.59 billion, compared with $2.10 billion in the year-ago period. GE's fourth-quarter 2023 adjusted EPS came in at $1.03, beating the S&P Capital IQ normalized EPS consensus estimate of 90 cents.