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This paper presents the operating principle and steady-state analysis of a novel excitation scheme for a stand-alone three-phase induction generator that supplies single-phase loads. The phase windings and excitation capacitances are arranged in the form of the Smith connection and the excitation scheme is referred to as the SMSEIG. In addition to providing the reactive power for self-excitation, the capacitances also act as phase balancers. With this novel excitation scheme, isolated single-phase loads can be supplied with good phase balance in the induction machine, resulting in high efficiency, large power output, and quiet machine operation. Performance analysis is based on the method of symmetrical components, from which the input impedance of the generator can be determined. Numerical solution of a simplified equivalent circuit for the machine variables, namely the excitation frequency and magnetizing reactance, enables the generator performance to be evaluated for any load and speed. With the aid of a phasor diagram, the conditions for achieving perfect phase balance are deduced and a method to compute the capacitances required is developed. Experimental investigations on a 2.2-kW induction machine confirm the feasibility of the SMSEIG.