ABB Ltd. (ABB - Analyst Report) received a contract from Jurong Shipyard Pte Ltd. for the design, supply, supervision of installation, testing and commissioning of the main electrical systems for seven next generation drill ships. The contract is valued at $160 million.
The ships will operate in the deep water oil and gas fields off the coast of Brazil. Bookings in this contract were made in the fourth quarter of 2012 and first quarter of 2013.
As per the plan, wells will be drilled in the offshore pre-salt fields off the southeast coast of Brazil with the help of these drill ships. These high-efficiency drill ships are the first of its type and will be using the integrated electrical package of ABB to maximize energy efficiency.
Estaleiro Jurong Aracruz plans to build seven such vessels for ultra-deep water operations at their shipyard on the central eastern coast of Espirito Santo, Brazil. The shipyard is wholly owned by Singapore-based Jurong Shipyard.
ABB will be providing electrical systems including generators, distribution switchboards, transformers, drives and motors to power the ships’ thrusters and drilling systems for this project. The solutions to be provided by ABB are as per IEC (International Electrotechnical Commission) and IMO (International Maritime Organization) regulations.
The equipment will be delivered to the shipyard in 2013 and the first vessel will be delivered in the second quarter of 2015. Sete Brazil, a company established in 2010 by various Brazilian and international investors, will receive the ships.
ABB’s expertise and its ability to provide locally produced content for this project along with the the skill of its local organization give ABB the advantage to execute this contract successfully. The company has worked on a number of such projects with Jurong’s shipyard in Singapore. In addition, the contact also provides ABB a good opportunity to enter the high potential Brazilian market.
Moving ahead, the emerging markets will be a significant growth driver for ABB. Demand in mature markets is also expected to improve. Customer capital expenditures have soared with the rise in commodity prices.
Increased capacity in some later-cycle infrastructure-related businesses continues to exist. In many sectors price stability has been attained and ABB has escalated its prices to counter rising raw material costs.
However, ABB Ltd's results are likely to be adversely impacted by macroeconomic weakness as more than 80% of the company's orders are derived from outside the US.
ABB Ltd. currently has a Zacks #3 Rank (Neutral). Its close rivals such as Siemens AG and Tyco International Inc. both have Zacks Rank #2 (Buy).