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ABB alters EPC business model

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Hydrocarbon Engineering,

ABB has announced actions across three divisions to complete a business model change for engineering, procurement and construction (EPC) as it ends its transition year 2017. Its decisions are in line with the company’s strategy to shift towards strengthened competitiveness, higher growth segments and lower risk.

In its Power Grids division, ABB has signed an agreement to form a joint venture (JV) with SNC-Lavalin for electrical substation EPC projects. SNC-Lavalin will have majority and controlling interest. This will complement the ongoing ‘Power Up’ programme; as part of this programme, ABB started to shift its focus towards solutions and service-based customer offerings.

In its Industrial Automation division, ABB has previously announced an oil and gas EPC JV with Arkad Engineering and Construction Ltd., a fully integrated EPC contractor for the energy sector based in Saudi Arabia. The closing of the transaction is now expected by 31 December 2017.

The company’s current oil and gas EPC business will be transferred into the new JV company, in which, Arkad will have majority and controlling interest. The new company, named Arkad-ABB S.p.A., will provide a full range of integrated EPC services for oil and gas plants.

In its Robotics and Motion division, the company has decided to wind down its turnkey full train retrofit business, beyond meeting current contractual commitments. Robotics and Motion will continue its strong role as innovation partner for the rail industry.

“We are taking decisive actions to complete our EPC business model change as we end our transition year. These actions are in line with our strategy to shift our center of gravity towards strengthened competitiveness, higher growth segments and lower risk,” said ABB CFO, Timo Ihamuotila “We will book the related charges in 4Q17 and report the divisions starting in 2018 excluding these legacy businesses.”

The 4Q17 results of Power Grids and Robotics and Motion are expected to be impacted by approximately US$75 million on operational EBITA. The transfer of the turnkey oil and gas EPC business into the JV with Arkad is expected to result in a non-operational pre-tax charge to net income of approximately US$75 million.

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