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The analysis and performance of a three-phase synchronous generator with an inset permanent-magnet rotor is presented. Relevant performance equations are developed based on the two-axis model. The conditions for achieving zero voltage regulation, extremum points in the load characteristic and maximum power output, are deduced analytically. The finite-element method is used for computing the magnetic-field distribution, from which the effects of saturation on the synchronous reactances are quantified. Experiments performed on a 2.5 kVA prototype generator show that the saturated two-axis model gives a more accurate prediction of the load characteristics of the generator.