Rajesh Kumar Singh Singh, Liz Hampton

(Reuters) – General Electric Financial experts say that Co’s plans to separate energy units and create a new company may attract investors who are looking for a name in renewables. However, they must be able to overlook the legacy fossil fuel operations.

On Tuesday the conglomerate, which is 129 years old, announced plans to separate into three publicly-traded companies, each focusing on healthcare, aviation and energy.

It will incorporate existing services and energy businesses, as well as wind and gas-fired generators. GE stated that the spinoff will be completed in 2024.

Larry Culp, chief executive officer of GE said that customers require GE to perform at its best in order to navigate the energy transition. This refers to utilities as well as other organizations moving toward solar, wind, or hydropower.

It is similar in concept to the plan of GE rival Siemens AG, (OTC:), who has since 2020 spun off their power division and created Siemens Energy. Similar to electric utilities, it is also the same. Enel ()And Iberdrola (OTC) ()Renewable power should be preferred to fossil fuels.

GE believes the divestment will unlock value in component businesses. Investors are more likely to be interested in pure-play than conglomerates and this is what Dan Pickering of Pickering Energy Partners, chief investment officer, stated.

CREDIBLE PLAYER

Pickering stated that “investors will be pleased with a well-known franchise.” He said that the GE Energy unit’s large size and reputation would make the spinoff “a significant and credible player” in the industry.

Colin Scarola from investment firm CFRA Research is an equity analyst. He added that the spinoff might lead to value creation in companies that had been “in general shrinking and losing cash both before and after the pandemic.”

On the breaking up, shares rose 2.6% to $111.29. That compares with the 0.3% drop in the.

Equipment and services related to gas, coal, wind turbines, and hydro-, nuclear, and electric power generation would be included in the energy business. It would also include digital software operations and renewable energy.

Some investors may have difficulty servicing coal-fired power plant, which GE considers steam.

“We’d like to see some resolution for what they’re going to do with their steam business,” said Matt Breidert, managing director for energy transition investing at fund manager Ecofin. GE, he said, needs “to be a market leader in sustainability, and they’re not there yet.”

A loss-making business in renewables, including wind turbines, is also a problem. The unit did not achieve an annual profit for the past three quarters, and suffered a loss in third quarter of $151 million. This is in contrast to a 204 million profit made by GE’s power segment which also includes gas turbines.

Baker Hughes Co, an oilfield services company that Baker Hughes acquired in 2017, has a 16% remaining. Baker Hughes will offer energy transition and other services that could be competitive with the future GE spinoff.

However, the potential market size could be even more appealing. According to the UN-backed International Renewable Energy Agency, (IRENA), annual spending for global warming mitigation could exceed $3 trillion by 2050.