General Electric (GE) is well known for its expansion plans and policies. It seems like the company never grows tired of expanding into new markets and segments. This is one of the reasons that make the company's stock so lucrative. Lately, the company has been showing an unusual amount of interest in Canada. This leaves investors speculating about what the company has in mind for Canada and what the impacts of this planning will be for the investors of the company worldwide.
Being one of the largest technology infrastructure firms in the world, it is no surprise that General Electric (NYSE:GE) has managed to find a place for itself in Canada where a lot of investment is being made in the development of oil sands. Oil sands are becoming an increasingly popular source of oil in the modern world. The only problem associated with this is the fact that this procedure, apart from being more complicated than regular oil extraction procedures, poses significantly higher threats to the environment thus attracting criticism from environmentalists all over the world. This is where the role of General Electric kicks in.
The company aims to make the oil sands of Canada 'cleaner'. This initiative will obviously have a number of impacts on the value of the firm in financial terms.
In order to reach lower emission targets, it is absolutely essential for the participants involved to collaborate with each other. Canada's Oil Sands Innovation Alliance (COSIA) has joined hands with General Electric to be able to develop technological solutions to counter the high emissions that are a result of the extraction of oil from sand. Over $18 million have been announced in investment for the improvement of the technology that is responsible for the extraction of oil to make it more efficient and environmentally friendly.
Earlier this month, General Electric purchased a $350 million portfolio that is associated with 16 Canadian mortgages revealing that the company has some solid plans in mind for Canada. It is crucial to keep in mind the fact that this is also a race for the company to be able to come up with innovative ideas to develop technology that can allow lower emissions in oil extraction at a global level. If it successfully manages to be a leader in this segment, the company's expansion policies will surely pay off.
What's in it for the investors?
First of all, the additional business means additional revenue generation. This can directly increase dividends for the investors and can allow for future growth opportunities for the firm. This is an excellent opportunity for investors who prefer long-term gains to invest in General Electric. However, another very important element at play here is the fact that General Electric will manage to enhance its reputation as an environmentally friendly company. With the current emphasis on environmental protection that can be seen globally, this move will result in the company managing to succeed in boosting its value which will prove to be beneficial for the company's investors in the long run.
What can be concluded?
Expanding into this segment comes with endless possibilities for General Electric. Canada has vast oil sand reserves with companies from all over the world trying to extract oil from these sands. Investing in Canada at present will also further create opportunities for the company at a global level. With numerous sand oil reserves present all over the globe, the technology developed for Canadian oil sands will then be demanded at a global level. The company's decision to collaborate with COSIA now will end in countless opportunities for the company in the years to come thus making this entire venture highly attractive.
Disclosure: The author is long GE. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.