A new US order targeting certain foreign-made power equipment could turn into an unexpected opportunity for Indian grid equipment makers.
Macquarie believes the move could accelerate a China+1 shift in bulk-power systems, potentially giving companies such as GE Vernova T&D, Hitachi Energy, Siemens Energy and CG Power more room to expand exports to the US.
Analyst Rahul Gajare said the executive order signed by US President Donald Trump on August 26 restricts certain foreign supplies of bulk-power system equipment, citing national security, foreign policy and economic interests. The brokerage sees the order as “generally more an opportunity than a threat” for Indian grid companies.
Why India Could Be In A Sweet Spot
The order covers equipment used in bulk-power systems, including transformers, reactors, generation equipment and control systems deployed across power plants, substations and transmission networks of 69kV or above.
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The US Energy Secretary has been authorised to prohibit transactions involving foreign-produced equipment where the equipment is linked to a “Covered Foreign Entity” and is deemed to pose national-security, critical-infrastructure or economic risks.
Countries subject to US arms embargoes or sanctions, including Russia, China, Iran, North Korea and Syria, fall within the covered category, along with entities controlled by them and other foreign actors that the US government determines could pose risks to national security or foreign policy.
India, however, is not subject to US arms embargoes or sanctions and is a strategic partner of the US. Macquarie also pointed out that Indian grid companies are already supplying equipment to the US.
GE Vernova, Hitachi, Siemens, CG Power In Focus
Macquarie believes Indian grid equipment manufacturers could benefit as US buyers look to diversify their supply chains.
GE Vernova T&D, Hitachi Energy, Siemens Energy and CG Power are all in the middle of major expansion programmes, giving them scope to potentially ramp up exports to the US.
Their existing export exposure also provides a base from which to build.
GE Vernova currently exports 33% of its production from India, although this includes markets beyond the US. The corresponding figure is 26% for Hitachi Energy and 29% for Siemens Energy, while CG Power's exports are below 5%.
Could China+1 Reach Bulk-Power Equipment?
The bigger opportunity, according to Macquarie, is the possibility that the China+1 strategy could now extend deeper into bulk-power systems.
The brokerage believes the US order could strengthen the case for sourcing critical grid equipment from India, particularly as Indian manufacturers expand their production capabilities.
Indian companies already supply a range of equipment to the US, including large power transformers, switchgear and circuit breakers, HVDC and grid-control systems, protection and automation systems, and data-centre power transformers.
What Investors Should Watch
The potential opportunity is therefore less about an immediate change in demand and more about where the next wave of US grid procurement gets sourced from.
With Indian companies already having a presence in the US market and expanding capacity, Macquarie believes the latest policy shift could provide an additional tailwind.
The brokerage therefore continues to like Indian grid companies, with the Trump administration's latest move potentially giving India's power-equipment manufacturing push another export-led growth opportunity.
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