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Fresh hope for GE Power after Trump lobbies for major deal with Iraq

Despite the deteriorating financial health and operational challenges, General Electrical (GE) has remained buoyant about its turnaround strategy and issued a positive outlook in the June quarter. The company’s shareholders, who are particularly disappointed with its ailing power segment, continue to pin their hope on the ongoing restructuring program.

Shares of the engineering juggernaut made significant gains soon after trading started Wednesday, following reports that GE has grabbed a high-value power generation contract in the Middle East, outbidding its German rival Siemens.

The company has entered into a major power equipment contract with the Iraqi government, reportedly following an intervention by President Donald Trump. Siemens had been touted as the preferred bidder for the $15-billion deal that involves the supply of power-generation equipment of about 11 gigawatts.

Following reports of the Iraq deal, shares of the engineering juggernaut made significant gains in early trading Wednesday

The deal is expected to breathe new life into GE’s struggling electricity division, whose dismal performance in recent years had prompted the company to weigh the option of a write-down in the near term, most probably in the third quarter. While the contract is unlikely to rescue GE Power from the current lows, it will definitely reduce the segment’s losses.

Since GE has pitched in now, after Trump convinced the Iraqi administration by reminding it of America’s long-term political engagement with the country, Siemens will have to settle for a smaller pie of the lucrative contract.

General Electric gets an upgrade from Barclays

It needs to be noted that a non-binding agreement exists between Washington and Baghdad for co-operation in energy production, including electricity generation. Earlier, GE had secured a series of contracts from Iraq for the supply of power equipment, with hardly any rival bidder.

Last week, the management put off the announcement of GE’s third-quarter results to allow CEO Larry Culp, who assumed office recently, to complete certain business reviews. An official statement on the Middle East deal is expected when GE reports the results later this month.

GE shares plunged about 49% over the past twelve months and 33% since January this year, underperforming the market miserably. The stock gained about 4% in early trading Wednesday.

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