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The transient energy function method is usually used to assess the stability of a power system without considering the effect of control devices. A modification of the method is proposed to determine the first-swing stability limit of a power system in the presence of a static VAR compensator (SVC). The effect of the SVC is carefully incorporated in determining the value of critical energy needed for system separation. The unstable equilibrium point at which the critical energy is to be evaluated is determined by considering that the SVC operates at its full capacitive rating. A recent control strategy of SVC proposed to maximise the first-swing stability limit can justify the use of such an unstable equilibrium point. The above technique of determining the first-swing stability limit of a power system in the presence of a SVC is tested on both single- and multimachine systems. The results obtained by the proposed technique are also compared with the corresponding actual values found through repetitive time-domain simulations of system dynamic equations.