BKRBaker Hughes

In the United States, the U.S. Environmental Protection Agency ("EPA") has taken steps to regulate GHG emissions as air pollutants under the U.S. Clean Air Act of 1970, as amended. The EPA's Greenhouse Gas Reporting Rule requires monitoring and reporting of GHG emissions from, among others, certain mobile and stationary GHG emission sources in the oil and natural gas industry. The EPA released a final rule expanding the scope of the reporting rule, effective January 1, 2025, which in turn may impact (and include) data from our equipment or operations to the extent it remains in effect under the new administration. In addition, the U.S. government has proposed rules in the past setting GHG emission standards for, or otherwise aimed at reducing GHG emissions from, the oil and natural gas and power industries. International developments focused on restricting or otherwise disincentivizing GHG emissions include the United Nations Framework Convention on Climate Change, which includes implementation of the Paris Agreement and the Kyoto Protocol by the signatories; the Glasgow Climate Pact; the EU Emission and UK Emissions Trading System; Systems; the EU Methane Regulation; Article 8 of the EU Energy Efficiency Directive and the United Kingdom's UK's Streamlined Energy and Carbon Reporting framework; and the EU's EU and the UK's carbon border adjustment mechanism. mechanisms. Caps or fees on carbon emissions, including in the U.S. (such as methane fees imposed on emissions from certain oil and gas facilities under the Inflation Reduction Act), have been and may continue to be established and the cost of such caps or fees could disproportionately affect the fossil-fuel sectors. Newly enacted GHG emissions requirements have been subject to ongoing legal challenges in the U.S. which may delay the implementation or enforcement of such rules. Although a reduction in GHG reporting obligations in the U.S. may be possible at the federal level in the short-term with changing administrations, long-term regulatory trends suggest that federal regulation of GHG emissions is likely to increase over time. The implementation of these agreements and other existing or future regulatory mandates, may adversely affect the demand for our products and services, require us or our customers to reduce GHG emissions or impose taxes on us or our customers, all of which could have a material adverse effect on our results of operations. While the Supreme Court's decision in Loper Bright Enterprises v. Raimondo Regulatory disclosure requirements related to overrule Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., which ended the concept of general deference to regulatory agency interpretations of laws, introduces new complexity for federal agencies sustainability matters and administration of climate change policy and regulatory programs, many of these initiatives may continue. Consequently, future legislation and regulatory programs to address climate change or reduce emissions of GHGs may continue to increase our cost and burden of compliance or may subject us to potential legal and reputational risk, which could have an adverse effect on our business, financial condition and results of operations.

The Company files U.S. federal and state income tax returns which primarily includes its distributive share of items of income, gain, loss, and deduction of Prior to 2023, Baker Hughes Holdings LLC ("BHH LLC"), its the Company's wholly owned primary operating company and a wholly owned subsidiary of the Company since December 2022, which subsidiary, was treated as a partnership for U.S. tax purposes until December 30, 2023. Effective December 30, 2023, the Company and various subsidiaries completed a reorganization that resulted in BHH LLC no longer being treated as a partnership for U.S. tax purposes. As a partnership, BHH LLC was not subject to U.S. federal income tax under current tax. Effective December 30, 2023, the Company completed a reorganization that resulted in BHH LLC no longer being treated as a partnership for U.S. tax laws. However, as of December 31, 2023, BHH LLC purposes and is now included and taxed as part of the Company's consolidated U.S. tax return. Non-U.S. current and deferred income taxes owed by the subsidiaries of BHH LLC are reflected in the Company's financial statements.

In the normal course of business with customers, vendors vendors, and others, the Company has entered into off-balance sheet arrangements, such as surety bonds for performance, letters of credit, and other bank issued guarantees. The Company also provides a guarantee to GE Vernova on behalf of a customer who entered into a financing arrangement with GE Vernova. Total off-balance sheet arrangements were approximately $5.6 billion at December 31, 2024. It is not practicable to estimate the fair value of these financial instruments. As of December 31, 2024, none of the off-balance sheet arrangements either has, or is likely to have, a material effect on the Company's financial position, results of operations or cash flows. The Company also had commitments outstanding for purchase obligations for each of the five years in the period ending December 31, 2029 of $1,855

An accounting policy is deemed to be critical if the nature of the estimate or assumption it incorporates is subject to a material level of judgment related to matters that are highly uncertain and changes in those estimates and assumptions are reasonably likely to materially impact our consolidated financial statements. These estimates reflect our best judgment about current, and for some estimates, future, economic and market conditions and their potential effects based on information available as of the date of these financial statements. If these conditions change from those expected, it is reasonably possible that the judgments and estimates described below could change, which may result in future impairments of goodwill, or the establishment of valuation allowances on deferred tax assets and increased tax liabilities, among other effects. Also, see "Note 1. Summary of Significant Accounting Policies" of the Notes to Consolidated Financial Statements in Item 8 herein, which discusses our most significant accounting policies.