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General Electric Co. will start 2023 by splitting off its healthcare unit, completing a key step in the slow-motion breakup of the industrial giant . For the rest of the year it will face questions about the next big step: shedding its power businesses.

GE HealthCare Technologies Inc. will start trading this week , leaving the once-sprawling conglomerate with three divisions: jet engines, natural gas-powered turbines and wind turbines. The gas and wind turbines are expected to be combined with other GE energy businesses into a new company called GE Vernova that will split off in early 2024.

The power-generation business, which dates to the origins of GE and was once a fountain of profit , has produced losses, accounting headaches and concerns about its fossil-fuel burning future in recent years as the world moves toward greener sources of energy. The onshore wind-turbine business, meanwhile, has struggled with cost inflation and supply-chain problems.

"The breakup is the ultimate and perhaps only way to simplify the GE equity story," said Nigel Coe, an analyst with Wolfe Research. The question for investors is whether GE will be seen as an "investable aviation story" early in the year, or do risks from GE Vernova keep investors sidelined through 2023, he said.

GE Chief Executive Larry Culp says the spinoffs will bring more focus and accountability to the business he has revamped since 2018 . Mr. Culp plans to stay on as CEO of GE Aerospace, the biggest and most profitable unit.

Scott Strazik, CEO of GE Vernova, has about a year to get it ready to be its own public company. He has already reversed the cash flow of the power business, which burned through about $2.7 billion during 2018. It is now cash-flow positive. He is now restructuring the renewables business, which is expected to post a loss of about $2 billion this year.

"Within gas power, we're really on the other side of the journey," Mr. Strazik said in an interview. For wind, "I see a similar dynamic with gas, where in the first year you ground yourself. In the second year, you work towards a material improvement."

The Boston conglomerate's three-way split follows years of restructuring that sold entire divisions and remade the management philosophy of the former American icon. The spinoffs are designed to simplify its operations and make the assets more attractive to investors.

"Once they are separate they will get a new set of investors," said Scott Davis, an industrial analyst and CEO of Melius Research who has covered GE for more than 20 years. He said that overall investor interest in GE has been low going into the breakup, but he expects the spinoffs may change that.

Based on his forecasts for 2024 earnings, Mr. Davis estimates that GE Aerospace could fetch an enterprise value of $94 billion, while GE HealthCare would be valued at around $48 billion and GE Vernova at less than $13 billion.

"Even if healthcare doesn't trade well, it will be fine. It is a solid business and known brand," Mr. Davis said. "Aerospace has obvious value and it will attract investor interest," he said, "but GE power has very limited interest."

The new GE HealthCare shares will officially begin trading on Jan. 4, but the stock has recently been trading on a "when issued" basis around $60. When-issued trading allows market participants to seek out the market value for spinoff stocks ahead of the official split.

All of this turns attention to GE's power business, a little-discussed part of the company on conference calls in the past year. GE says it expects the gas market to remain stable over the next decade and for gas to play a key role in any transition to renewable energy sources. In the meantime, the division has become more selective about undertaking projects rather than simply focusing on grabbing market share.

David Giroux, chief investment officer of T. Rowe Price Investment Management Inc., said the leadership of the gas power division has succeeded in turning around the operations, and he is hopeful that a similar turnaround will happen in the renewables business. His company said it held 2.1% of GE shares outstanding at the end of September.

After the GE HealthCare split, Mr. Giroux expects most investor attention will remain on Aerospace. "Whatever is left, more than 80% of the enterprise value is going to be aerospace," he said. "There is a very powerful recovery story in the core aerospace business over the next five years."

Mr. Strazik, GE Vernova's leader, said the business will benefit from the Inflation Reduction Act, which provides years of tax credits for wind-power producers. He expects orders to increase in 2023 from the law and revenue to grow in 2024 from those orders.

GE's fleet of installed gas turbines provide steady business for servicing and they also allow for conversations with utilities as they upgrade equipment to be more efficient and incorporate wind or small-scale nuclear into their power production, Mr. Strazik said.

"The reality is these investments are complex, and infrastructure investments don't always work in a straight line," Mr. Strazik said. "We can cover the spectrum of technologies in a way few companies in the world could do."

Combining the gas-power operations with renewables has merit, said Evelyn Chow, a senior research analyst at investment-management firm Neuberger Berman, because they sell to the same customers. But the market for gas-power turbines has declined in the past 10 years.

"As an investor, I think the idea of having a pure play renewables company is easier to swallow," said Ms. Chow, whose firm owns about 1.8 million GE shares, or 0.2% of the shares outstanding. "Power is the price you have to pay to get renewables."

Another challenge for GE Vernova is Wall Street's increased focus on ESG, which factors environmental, social and governance criteria into investing decisions. GE is no longer involved in building new coal-burning power plants, but the power business still sells machines that burn large amounts of natural gas.

GE is trying to cut its machines' role in pollution. The gas-power division is working to run existing natural-gas turbines with hydrogen through a retrofit process and also offers services to capture carbon at natural-gas power plants.

Regardless, Ms. Chow said that many asset managers, including Neuberger Berman, have signed commitments to decarbonize their portfolios. "How do you own a potential enabler of decarbonization like GE," she said, when "owning it will also increase your portfolio's carbon intensity significantly?"

Write to Thomas Gryta at Thomas.Gryta@wsj.com

General Electric Set to Spin Off Health UnitPutting Focus Back on Power Division

Credit: By Thomas Gryta

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