General Electric Company (GE) recently formed a joint venture with leading Chinese transformer manufacturing firm XD Electric Group to be one of the premier global providers of comprehensive transmission and distribution (T&D) technology solutions. At the same time, General Electric paid $552.2 million (3.38 billion yuan) for a 15% ownership stake in XD Electric along with a seat in the management board.
The transaction took 15 months for completion since its initial announcement in May 2012 due to pending regulatory approvals. The partnership combined General Electric’s state-of-the-art grid automation capabilities and global energy presence with XD Electric’s comprehensive portfolio of high-voltage (:HV) power equipment to capitalize on the strong growth dynamics of a $100-billion-worth industry.
The JV will offer end-to-end T&D solutions across the globe and facilitate emerging countries to meet the demand-supply imbalance for electricity due to rapid demographic and urbanization trends. In addition, the JV will also provide an opportunity to customers in developed countries with HV solutions to upgrade their aging grids with more efficient and reliable electrical power systems.
The aggregate electricity demand across the globe is expected to increase by over 70% by 2035, while global grid modernization investments are expected to rise by 10% over the next five years. As such, the JV will provide a lucrative proposition to prospective customers to upgrade and expand their electrical infrastructure driven by the skilled expertise and technical know-how of both the participating companies.
General Electric further anticipates doubling sales of power transmission products and services in digital energy business to $4 billion annually in the next decade. Moreover, the JV broadens General Electric’s customer and geographical footprint by leveraging XD Electric’s strong regional presence. On the other hand, XD Electric will benefit its strategic objective of fast globalization to become a stronger force to reckon with, in the global T&D segment.
General Electric is one of the largest and most diversified technology and financial services corporations in the world. With products and services ranging from aircraft engines, power generation, water processing, and security technology to medical imaging, business and consumer financing, media content and industrial products, the company serves over 100 million customers worldwide.
General Electric currently has a Zacks Rank #3 (Hold). Other companies in the industry that are worth mentioning include Federal Signal Corp. (FSS) and ITT Corporation (ITT), both having a Zacks Rank #2 (Buy), while Hutchison Whampoa Ltd (HUWHY) holds a Zacks Rank #1 (Strong Buy).
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