The People's Republic of China has experienced phenomenal growth during the past 20 years as its industrial base has grown to be one of the world leaders-if not the leader-in the manufacturing sector. This growth has, of course, spurred on a greater demand for energy. During the past five years, China has experienced an annual growth rate of 11.2%, while the demand for energy has grown by 6.6% annually during that same time period. China is also deeply cognizant of the fact that it must reduce its carbon emissions as it is generally believed that the country is the largest contributor to global pollution. China has made the rapid growth of clean energy capacity a major goal for its most recent Five-Year Plan, which was announced at the beginning of August.
In a bid to help China meet these energy goals, The General Electric Company (NYSE:GE) announced on Tuesday that it had received contracts to supply capital equipment for several major power projects throughout that country. The equipment GE will be supplying will introduce new environmental power production technology to China that will help to lower the nation's pollution levels. The contracts also represent a significant increase in GE's activity in the Chinese energy market which, until now, had supplied equipment to the country that produced a total of approximately 15,000 megawatts.
GE will supply three of their 9FB gas-driven electric turbines for the new Datang Gaojing currently being built in Beijing. The plant, which will have a generating capacity of 1,378 megawatts, is expected to help meet the greatly increased demand for energy in the burgeoning Chinese capital. The new 9FB turbines have never been used in China before, but both GE and China hope to expand the use of cleaner, more efficient technology. GE is supplying the equipment to business partner Harbin Electric International Company, Ltd. (Hong Kong Stock Exchange: 1133), which is building the plant for owner and operator China Datang Corporation (Hong Kong Stock Exchange: 1798). The Datan plant is expected to be the most efficient and environmentally safe plant ever built in China.
On the same day, GE also announced that it will provide five gas turbine-generators for an electric power plant in China's Zhejiang Province, operated by Wanxiang Group Company, Ltd. (privately held), that will replace coal-fired generators that operate at less than 40% of efficiency of the GE turbine-generators. This plant will help meet the energy needs of a province that is increasing its power consumption at a rate higher than the Chinese national average, while also helping to meet the Province's goal of significantly reducing carbon emissions. In addition, GE will provide additional gas turbine-generators for an electric power plant in the city of Huzhou, operated by Amber Energy Company, Ltd. (Berlin Stock Exchange: 9AE), that will supply power to the local rapidly developing manufacturing zone. The GE equipment supplied to the Zhejiang and Huzhou projects will add an additional 575 megawatts of power to the Chinese electric grid.
GE's announcements on Tuesday indicate to investors that the company is making a strong commitment to playing a major role in the exploding Chinese energy market. Its main competitor for providing generation equipment in the country, Siemens, N.G. (SI), has been selling equipment to Chinese energy companies and authorities for over a decade. GE is clearly signaling to the Chinese as well as investors that it is not about to let the market go to Siemens. The Chinese market for power is large, with extensive unmet demand, and growing. This market presents a superb opportunity for GE's earnings potential for many years to come. SI, in turn, will have to defend its position in a market that it seems to have considered, far too casually, as its own.
GE's stock price has experienced a good trend upward since early June of this year after a drop in late spring that was not typical for the stock. During the past year, GE's value has grown by approximately 25%, with much of that growth coming from GE's renewed focus on its core business of energy generation and its pursuit of energy markets in Asia, Europe, and Latin America.
I believe that GE presents a good, solid investment opportunity. The company is clearly focused on making a major push in the dynamic Chinese energy market-the announcements this week alone represent an expansion of GE's presence in China by approximately 13% and the company has indicated that more projects in China are in the pipeline. GE has always been known as a solid, but unexciting stock. However, GE's business and China's market appear to be made for each other. Therefore, I believe that GE's push in China make it a far more exciting stock-and a far more lucrative one for both earnings and growth.