(Yicai Global) May 11 -- Chinese power equipment supplier Sifang Automation has recently opted to withdraw from its joint venture with Zurich, Switzerland-based global power equipment giant Asea Brown Boveri after a nearly 10-year partnership to independently ply the high-voltage transmission business.

The Beijing-based firm will sell its 40 percent stake in the JV to ABB for CNY105 million (USD14.84 million) in September, the firm announced yesterday. ABB will wholly own the JV after the deal finalizes.

Sifang will not be obliged to abide by the non-competition agreement it previously concluded with ABB when the firm withdraws from the JV and thus can engage in the high-voltage direct current transmission converter station business, per the announcement.

Sifang’s stock [SHA:601126] opened up around 1.7 percent today, but then lost steam, and was trading 1.51 percent down at CNY6.52 (92A US cents) in mid-afternoon.

The pair set up the JV ABB Sifang Power System in 2011 to provide HVDC transmission services to the power market. The JV enjoys a high status in China’s ultra HVDC equipment market, especially in the core converter valve equipment field, and the country’s major grid companies such as State Grid Corp. of China, and China Southern Power Grid are its key clients, public data show.

The two invested USD11 million in the JV when it formed in 2011, and its registered capital was USD7 million, which they split 50-50. ABB invested another USD1.75 million in it at the end of October 2018, while Sifang passed on hiking its investment then, so their proportional stakes changed to 60 percent and 40 percent, respectively.

Sifang made no mention of the reason for its withdrawal in the announcement. The JV suffered a small deficit last year and reported CNY434,900 (USD61,417) in net losses after deducting non-recurring profits and losses and CNY457 million in operating revenue last year, per financial data the announcement referenced.

China’s major energy resources are generally far from major consumption areas, so high voltage and ultra-high voltage power transmission have been key energy engineering construction fields with large investment in recent years, and this has also fueled demand in the power transmission equipment market.

Editor: Ben Armour