ABB to Form Joint Venture With SNC-Lavalin

By Alberto Delclaux Features Dow Jones Newswires

Swiss industrial conglomerate ABB Ltd (ABBN.EB) said Wednesday that it will form a joint venture with Canada's SNC-Lavalin Group Inc (SNC.T) to develop electric-substation infrastructure projects.

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SNC-Lavalin will have a majority and a controlling interest in the new business, ABB said, adding that the transaction is expected to close in 2018.

The company also said that the previously-announced integration of its oil-and-gas engineering, procurement and construction--or EPC--activities into a joint venture with Saudi Arabia's Arkad Engineering & Construction Company should be completed before the end of the year, representing a non-operational pre-tax charge of $75 million in fourth-quarter results.

Arkad will have a majority and a controlling interest in the new joint venture company.

ABB has revised its fourth-quarter target for operational earnings before interest, tax and amortization downward by approximately $150 million, it added.

"We are taking decisive actions to complete our EPC business model change as we end our transition year," said ABB Chief Financial Officer Timo Ihamuotila. "These actions are in line with our strategy to shift our center of gravity towards strengthened competitiveness, higher growth segments and lower risk."

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Turning to its robotics and motion unit, ABB said that it is winding down its full-train retrofit business beyond existing contractual commitments.

Write to Alberto Delclaux at alberto.delclaux@dowjones.com

Swiss industrial conglomerate ABB Ltd (ABBN.EB) said Wednesday that strategic measures to complete changes related to engineering, procurement and construction, or EPC, will weigh on its fourth-quarter results.

Among the measures, ABB said it would book a charge of $75 million on net income in the quarter related to the integration of its oil-and-gas EPC activities into a joint venture with Arkad Engineering & Construction Company, a transaction expected to close by year-end.

Changes at two other units--power grids, and the robotics and motion unit--will also result in a fourth-quarter hit of about $75 million in each unit on operational earnings before interest, tax and amortization, ABB said.

The news comes as ABB nears the end of what it calls a transition year, which started off with a new divisional structure. As part of its strategy, ABB is shifting focus to higher-growth segments, improving competitiveness and divesting noncore operations.

"We are taking decisive actions to complete our EPC business model change as we end our transition year," ABB Chief Financial Officer Timo Ihamuotila said. "These actions are in line with our strategy to shift our center of gravity toward strengthened competitiveness, higher growth segments and lower risk."

Among the changes detailed Wednesday, in the power grids segment, ABB plans to form a joint venture with Canada's SNC-Lavalin Group Inc (SNC.T) to develop electric-substation infrastructure projects. SNC-Lavalin will have a controlling interest in the new business and the transaction is expected to close next year, ABB said. The deal follows others that the company has undertaken in the unit, which is its least profitable, in order to share risk on projects and shift focus to product-supply rather than EPC activities.

At the same time, in its robotics and motion unit, ABB said it is winding down its full-train retrofit business beyond existing contractual commitments.

ABB said that in the future, the two joint ventures will be reported as noncore operations.

Write to Alberto Delclaux at alberto.delclaux@dowjones.com

(END) Dow Jones Newswires

December 20, 2017 05:27 ET (10:27 GMT)