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GE Plans to Expand Ship Finance Business

General Electric CompanyOn Tuesday, General Electric Co. revealed plans to diversify its ship finance business, which is worth $48 billion.

GE’s marine business, which was launched in January, provided services and engines to foreign energy companies. The company’s GE Capital Aviations Services (Gecas) will now be used to finance ships that mostly comprise GE components. Once Gecas sells assets worth billions of dollars held by GE Capital Corporation, it will become GE’s biggest finance company. It will also be used to boost sale of a wide range of GE’s industrial products.

Originally, GE Capital was formed to supply funds to marine companies, but GE decided to link industrial sales to finance business, shifting GE Capital’s focus on supporting sales related to its core energy, aerospace, and health care products.

Speaking at an investor event held on the sidelines of Paris Air Show, Norman Liu, the president of Gecas, said:

The real play is to support the GE Marine effort here.

Revealing further details, Liu said that the company does not plan to rent any ships. Instead, it will recruit teams to finance commercial ships for energy companies. He said that GE’s products account for up to 20% of the contents of a $50 million worth oil support vessel.

The ship finance unit is targeting the international market worth $700 billion to supply finance products to oil support ships carrying chemicals, liquefied natural gas, coal, and iron ore.

According the Liu, the company has grabbed an opportunity that was created when several European banks quit the market owing to capital constraints.

Gecas entered the helicopter leasing sector when it purchased Milestone Aviation Group for $1.8 billion in January, and today is the owner of 2,200 aircraft. Liu said that the company has plans to take over the corporate jet finance business of GE Capital and to double assets belonging to Milestone over the years to follow.

Since Asia is giving greater priority to the commercial aerospace sector, Liu has decided to move to Asia later this year. In 2010, John Rice, the vice chairman of GE, had moved to Hong Kong to handle GE’s international operations.

The focus of Gecas is on purchasing new jets from Boeing Co. and Airbus Group SE, but according to Liu, the demand for the conversion of older jets into cargo jets is on the rise. Rapidly expanding Chinese online retailers are demanding timely delivery of products by air, he said.