Orders Flow in for ABB - Analyst Blog

ABB Ltd. (ABB) recently received a number of impressive orders, the most recent one being a $39 million order from the Saudi Electricity Company (SEC) to upgrade the power transmission and distribution system in the Eastern region of Saudi Arabia.

The SEC, Saudi Arabia's national provider of electricity, is engaged in improving the efficiency of its power distribution system to minimize wastage of electricity and provide a stable and good power supply. In order to achieve this, ABB will be designing, engineering, supplying, installing and commissioning equipment including 13.8 kV (kilovolt) capacitor banks for the country's substation infrastructure in 40 places. The project is expected to be completed by mid-2011.            

A number of substations in Saudi Arabia have been effectively commissioned by ABB, aiding the country to restructure its power generation system efficiently. ABB's air- and gas-insulated substations cover a range of voltage levels up to 1,100 kV and are leaders in the world, facilitating efficient transmission and distribution of electricity.

Another order received by the company is to supply a new power transmission link between the Nordic and Baltic regions, valued at $580 million. The order has been awarded by Svenska Kraftnät of Sweden and LITGRID turtas AB of Lithuania. The European Union will be funding the project, which is expected to be completed by the end of 2015.

The project involves construction of a new transmission link covering a distance of above 248 miles with lowest amount of electricity wastage. This will be achieved through ABB's high-voltage direct current (HVDC) transmission system, comprising two converter stations and cable to transmit 700 MW (megawatts). HVDC light technology is environment- friendly, with oil-free cables, compact converter stations and neutral electromagnetic fields.

ABB's power and automation technologies offer a solution for sustainable development, thus helping to shield the world's resources. The company has a number of technologies for the solar power industry and also a growing installed base. ABB Ltd. has witnessed improving signs in late-cycle power, with some recent large contracts.

The increasing demand for energy-efficient motors favors the long-term prospects of the company. The acquisition of Baldor Electric Company (BEZ),  expected to close in the first quarter of 2011, will further enhance the company's scope in high-efficiency motors. The U.S. market for these motors is expected to grow 10% to15% in 2011.

However, ABB's results are likely to be adversely affected by macroeconomic weakness as more than 80% of its orders are derived from outside the US. A major competitor of ABB Ltd. is Siemens AG (SI).

ABB Ltd. is a Zurich (Switzerland) based power and automation technology company. The company operates in approximately 100 countries and is  globally structured into five regions: Europe, Americas, Asia, the Middle East and Africa.

We have a Zacks #3 Rank (short-term Hold recommendation) on ABB Ltd.