GE Joins High-Voltage Big Leagues With China XD

General Electric just closed a deal meant to buy it a seat at the table of the world’s biggest high-voltage transmission grid players. On Tuesday, GE announced the completion of a long-awaited investment and joint venture with China XD Electric Co., one of the world’s biggest transmission equipment makers in a country that’s leading the world in new high-voltage power lines.

GE will spend $552.2 million to buy a 15 percent stake in XD, in a plan it first announced last year. The two will also form a joint venture to combine their respective technology and services strengths — transmission for XD, and distribution grid automation equipment, software and services for GE — to go after markets in China and around the world.

Bob Turko, GE’s general manager of high-voltage solutions, said the joint venture is aimed at doubling GE Digital Energy’s revenues from $2 billion to $4 billion over the next eight to ten years. It’s also aimed at filling out a gap in GE’s grid business, which includes generation assets from gas turbines to wind and solar power, as well as equipment and technology for medium and low-voltage grids.

While GE and XD haven’t done any projects together yet, Turko said they’ve already booked a pipeline of some $400 million in projects from as-yet unnamed customers, starting in the U.S. and Europe. Most of those are utilities and grid operators, though the JV is also expecting to do work in heavy manufacturing and the oil and gas industry as well, he added.

“By taking our grid automation solutions and software, and combining this with this expanded and complete portfolio of high-voltage equipment, we can provide solutions for our customers, from point of generation to point of consumption,” he said. That, in turn, could place the GE/XD joint venture in more direct competition with the European and Asian companies that now dominate the high-voltage transmission space.

Those companies, which include Siemens, ABB and Alstom in Europe and Toshiba and Mitsubishi in Japan, are all vying for a share of what GE estimates to be a $100 billion industry worldwide. The world’s burgeoning need for transmission and distribution (T&D) infrastructure is being driven both by the burgeoning population and economic growth in markets such as China, Africa and Latin America, as well as the need to replace and reinforce aging infrastructure in the U.S. and Europe.

Out of that global market, China is the big dog, with massive high-voltage transmission projects underway and on the drawing boards that could allow it to account for about one-quarter of the world’s T&D needs over the coming years. As GTM Research has pointed out, China’s overall transmission line investments for 2015 are approximately $269 billion, and GE projects that China will spend $600 billion over the next decade on T&D projects. Indeed, China has struggled to build transmission lines fast enough to connect its massive new wind farms and solar power facilities to its population and industrial centers.

“Our view is that we were a modest player in the Chinese market previously, in terms of grid automation equipment,” Turko said. “In order to be a bigger player, we needed to have a partner.” That’s also an imperative for all of GE’s grid competitors, which are forming their own partnerships in China, along with vendors of new transmission technologies such as high-efficiency conductors and high-voltage direct current technologies.

At the same time, “For XD, clearly they are gaining GE technology to drive growth in grid automation in China, which they didn’t do previously — and GE, in a big way, can take them outside of China,” he said. Some target markets include Latin America, which is engaged in building lots of new transmission capacity to bring far-off hydropower and renewable energy resources to its population centers and across national borders.

“Whether it be Latin America, up and down the spine of Vietnam, or the Western United States, many utilities are facing the same challenges,” he said. GE’s services and consulting strengths, as well as its financing arm, will be put to use in supporting the new JV, he said. GE cites figures indicating that the United States will need $673 billion in electric infrastructure investments by 2020, while Europe will require some $100 billion in investments through 2022, and Latin America will invest about $100 billion through 2035.