Arab Spring Effects on General Electric

Arab Spring effects: Throughout the last two years the Arab Spring has wreaked havoc in the north of the African continent and the Middle East. Mass protests across the region followed Mohammed Bouazizi’s immolation, opening the door to regime changes in Tunisia, Egypt, Libya, and Yemen.

In Algeria, protests lasted less than a month, and were quelled with the lift of the 19-years old state of emergency. Hence, there is a big difference between Algeria, its neighbors who suffered regime changes, and others who continue to grieve in the hands of sectarian violence and political instability. For example, security risks for foreign companies remain high in Libya and Egypt, and in Mali an international intervention had been carried out after rebels took hostages at a BP plc (ADR) (NYSE:BP).

General Electric Company (NYSE:GE) has taken the hint and decided to avoid countries troubled by political unrest. According to the company’s website, one of the largest power agreements in its history has been signed. The deal features three contracts with SPE, an affiliate of Sonelgaz –Algeria’s state electricity and gas company- said to be worth approximately $2.7 billion. The firm will be responsible for adding to the current electrical grid 9 gigawatts, through the provision of heavy-duty gas turbine combined-cycle and aero-derivative gas turbine technology.

The contracts imply that activities should be completed in stages by 2017. The project long-term projects aims at increasing current capacity by 70%, to a total of 20 megawatts. The first part of the project is the construction of two fast-track plants in order to add a total 1056 megawatts to the current grid before the summer starts. Mid-term goals aim at the installation of an additional 370 megawatts through a new simple-cycle power plant. In the long-term, GE will develop six new combined-cycle power plants, equipped with the 9F 3-Series gas turbine.

The deal has to be understood as part of Algerian authority´s political program to avoid further protests. Hence, if GE plans to stay in Algeria beyond the current projects, meeting established deadlines is the first sufficient. However, installing successful plants will be necessary for the firm to continue doing business, regardless of the Arab Spring effects.

Disclosure: Jodor Jalit holds no position in any of the mentioned stocks.

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