ABB Ltd.’s ABB – the Swiss power and automation technology multinational – name has almost become synonymous with the vision of countries that aim to develop a robust infrastructure. After helping multiple European countries to comply with their respective government’s stringent energy-initiative programs, the company is now ready to aid the economy of Qatar to rise up in the scale of fine infrastructures.
In particular, the company has won an $85-million contract to develop turnkey substations that will be capable of amalgamating electricity from a new independent water and power plant (“IWPP”) with existing grids. Per the contract, ABB is saddled with the responsibility to design, engineer, supply, install and commission 3 turnkey substations in Qatar.
Powered with gas-insulated switchgears, advanced control & protection equipments, and telecommunication systems, the 400 kilovolt (kV) and 220/132 kV substations will improve power supply in new development areas. The IWPP can not only generate 2,520 megawatts (MW) of power by deploying natural resources, but also create desalination of 600 million liters of water on a regular basis; thereby addressing the dual problems of renewable power generation and clean drinking water.
These developments are in sync with Qatar government’s ambition to create world-class infrastructure including rail, energy and water desalination facilities. A thriving economy, coupled with strong demographic surge three times higher than other gulf neighboring countries, calls for such improvements. ABB’s excellent track record of turnkey project deliveries as well as a long-standing relationship with Qatar helped it secure the contract.
Nevertheless, despite the contract-wins, the Zacks Rank #4 (Sell) company bears the risk of cost-overruns, as a significant portion of its contracts are fixed-price in nature. Also, some projects like turnkey products are usually long-cycle schemes that could be delayed or cancelled. Moreover, currency fluctuations, obtaining necessary governmental permits, supply bottlenecks and changes in government policies add to the company’s woes.
However, ABB’s continued contract-wins, albeit a poor Zacks Rank, are encouraging. Few notable orders received in the second quarter of 2015 are a $20-million order from Dubai Electricity & Water Authority (“DEWA”), a large infrastructure contract with Rampion Offshore Wind Farm in the UK and orders worth $85 million from Stadler Rail, a renowned Swiss train manufacturer. These will likely help the company turn the tables in its favor, going forward.
Better-ranked stocks in the broader industrial goods sector include AO Smith Corp. AOS, AZZ incorporated AZZ and Dycom Industries Inc. DY. While both AO Smith Corp and AZZ incorporated carry a Zacks Rank #2 (Buy), Dycom Industries sports a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment