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Charles Kennedy

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Ventures in China, Japan to Spur Power Transmission

Two major ventures for power transmission and distribution systems got off the ground last week in an indication that “energy freeways” are about to take off in a bigger way than anyone had imagined—and faster.

One of those ventures is between Toshiba Corp and Tokyo Electric Power Co. (Tepco) and another between General Electric (GE) and China’s HD Electric.

The Toshiba-Tepco venture began on 2 September, and will see Toshiba with an 85.1% stake, with Tepco taking the rest. The idea is to hit the markets hard outside Japan, using Toshiba’s power transformation and power grid solutions technology and Tepco’s grid-planning experience and operational know-how. They are eyeing key markets such as India, Latin America and South Asia.

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Then we have the new partnership announced by GE and XD Electric, announced in May 2012 and finally realized last week. The two will develop and market high-voltage transmission and distribution technology, eyeing a bigger market share than Toshiba and Tepco—worldwide.

This deal will see GE acquire 15% of China’s XD for $552.2 million and the venture will give GE access to XD’s high-voltage power equipment to complement its grid-automation capabilities and its global energy presence.   

While the goal is the global market, the venture will also offer customers in China GE’s localized grid automation equipment and services. It is in China, after all, where much of the transmission and development growth is expected to continue as China represents around 25% of projected global expansion for the sector.

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Overall, the plan is to meet growing demand in emerging economics under demographic and urbanization strains. Big industry—especially oil and gas, mining and petrochemicals--in emerging countries will welcome the deal as well because it will aid them in energy-intensive production boosting.

"Our investment in XD Electric is core to our long-term strategy to build a world-class T&D franchise and become a leading provider of grid modernization solutions. By combining the strengths of both GE and XD Electric, we will offer full-scope solutions to customers in the rapidly growing T&D industry," Dan Janki, president and CEO of GE Energy Management, said in a statement. "The partnership will enhance our ability to compete in fast-growing regions such as China where XD Electric has a strong presence."

The market will like these ventures, especially when considering that transmission and distribution is a $100 billion industry with explosive growth potential.

By. Charles Kennedy of Oilprice.com




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