ABB Secures $35M Order To Upgrade Substation In Germany

ABB Ltd. (NYSE:ABB) has secured a $35-million order from TransnetBW, a German transmission system operator, to upgrade a substation in Offenburg, which lies in the southwest German state of Baden-Wuerttemberg.

The German power system has been shifting from the traditional, coal-fired generation and getting highly reliant on “clean” forms of energy. In fact, Germany is in the process of executing an energy transition plan, under which it targets to meet at least its 80% of its energy needs through renewable sources by 2050.

As part of the preparation for the same, the voltage level of numerous power lines and substations is being elevated from 220 kilovolt (kV) to 380 kV, to gain more flexibility and higher capacity of the transmission network.

The existing 220 kV air-insulated switchgear (“AIS”) substation will be substituted by a compact 380 kV Gas-insulated switchgear (“GIS”) substation. Per the contract, ABB will design, supply and install a turnkey 380 kV indoor GIS system, along with the auxiliary equipment. ABB will also connect the substation to the 380 kV network and build a new terminal tower.

ABB’s GIS technology is highly compact and will translate into space-saving of up to 70%, relative to conventional AIS. Further, unlike AIS technology, GIS easily enables extensions and retrofitting in confined space conditions. GIS technology also boosts supply reliability and availability on one hand, while reducing maintenance needs on the other.

The upgraded substations will form part of the transmission network which plays an important role in European power trading, as numerous interconnectors integrate this network into the national and European grid.

The German transmission system will benefit from ABB’s dependable, efficient GIS technology, and enjoy higher capacity.

ABB LTD-ADR Price and Consensus

ABB is an established leader in air-insulated, gas-insulated and hybrid substations with voltage levels up to 1,200 kV. Its substations facilitate efficient transmission and distribution of electricity, with minimal environmental impact. They serve utility, industry and commercial consumers as well as industries like railways, urban transportation and renewables.

According to the Industrial Info Resources report, ABB is currently engaged in projects totaling $43 billion in some capacity. Over 90% of these high-value projects primarily belong to three major industries, namely Oil & Gas Production, Power, and Metals & Minerals.

However, ABB has suffered in recent times due to macroeconomic issues like geopolitical tensions, volatile oil prices as well as currency fluctuations. Softness in industrial production and the oil and mining industries, along with a projected slowdown, particularly in the emerging markets, has compelled the company to cut costs and increase efficiency.

However, we expect the company’s three major end markets – namely utilities, industry, and transport & infrastructure – to drive growth in the long run. Apart from this, positive development in electricity value chain, rapid progress of Internet of things, services and people, an anticipated Industry 4.0 revolution and a surge in energy-efficient transport and infrastructure bode well for the company.

ABB currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the same space include EnerSys (NYSE:ENS) , AO Smith Corp. (NYSE:AOS) and Schneider Electric (PA:SCHN) SE (OTC:SBGSY) , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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