Power Sector Shakeup: CG Power and Hitachi Energy Plunge as Centre Allows Chinese Firms to Bid on Govt Projects

Power Sector Shakeup: CG Power and Hitachi Energy Plunge as Centre Allows Chinese Firms to Bid on Govt Projects​

Shares of two key power equipment firms, CG Power and Hitachi Energy, saw significant declines following the government's decision to allow four specifically identified Chinese-linked manufacturers to bid for critical public power projects. The development, confirmed by an order from the Ministry of Finance dated June 24, has sent ripples through the Indian energy stock market.

Allowing Chinese Firms to Bid on Government Tenders​

The exemption permits TBEA Energy, Nanjing Electric India, New Northeast Electric India, and Taikai Electric (India) to participate in government tenders for critical power infrastructure. The order, which came after the Power ministry had sought the exemption in January, outlines the parameters of this revised policy.

Previously, since a major border clash in 2020, Indian regulatory requirements mandated that Chinese bidders must register with a governmental panel and secure political and security clearances before they could compete for any state contract. The current move relaxes these constraints selectively.

Market Reaction to Government Order​

Stock exchanges witnessed considerable volatility following the announcement. As of 10:55 am on July 3, Hitachi Energy shares were trading down by 7.7%, reaching Rs 31,180 apiece. CG Power also experienced a sharp fall, with its stock trading 6% lower at Rs 900.75 apiece.

The negative impact was widely felt across the midcap segment of the sector. GE Vernova T&D emerged as the top midcap laggard, falling by 7.83%, closely followed by Hitachi Energy. Thermax and BHEL also registered notable declines, dropping by 4.2% and 2.4%, respectively.

Broader Implications for Renewable Expansion​

The relaxation is set against a backdrop of India aggressively expanding its transmission network. This infrastructure boost is necessary to support the country's growing electricity demand and the increasing integration of renewable energy sources into the grid.

Nifty Energy was observed trading nearly 1% lower by 11 am on July 3, reflecting market nervousness. Smaller segment stocks were also affected; GE Power India and TD Power System registered losses of 5% and 4.08%, respectively.

Terms and Timeline of the Exemption​

The Ministry of Finance order stipulates that this exemption will be valid for a period of two years starting from the date of issuance. It is crucial to note that the document explicitly states this particular exemption should not be treated as a precedent for other firms seeking similar changes in regulatory standing.