THE ENERGY INDUSTRY TIMES - MAY 2018
Companies News 9
ABB hints at return to
long-term growth
Having gone through a year of transition, ABB says it is set for growth on the back of improving economic
conditions and increasing electrification.
Junior Isles
Promising first quarter results indicate
that Swiss engineering company ABB
is returning to long-term growth.
The company reported first-quarter
orders at $9.8 billion, 6 per cent higher
than a year earlier on a comparable
basis.
The growth figure, which compared
with declines of 3 per cent in the previous
quarter and in the first quarter
of 2017, has been attributed to improving
global economic conditions. This
has boosted demand across the company’
power grids, electrification,
automation and robotics businesses.
Growth was strongest in ABB’s robotics
business, which reported an 11
per cent rise in orders. Sales had been
boosted especially by demand for robots
in China, but also from the global
car industry as production shifted
towards electric vehicles, said ABB
Group’s Chief Executive, Ulrich
Spiesshofer.
Spiesshofer has streamlined ABB to
focus on higher growth markets and
to cut costs but has struggled to reverse
declines in sales. The group’s products
and services are based on automating
industries and delivering electricity
from power stations to final users,
with much of its revenue dependent on
investment spending by governments
and utilities.
Now with all divisions showing order
growth, and operating profits up
4 per cent at $1.1 billion, Spiesshofer
said: “The transition year 2017 is behind
us.”
Speaking on the sidelines of the Italian
Formula-E Championship in
Rome, which the company now sponsors,
he told TEI Times: “We have
streamlined ABB both from a portfolio
perspective and operationally and
have strengthened the company significantly…
We took out more than
$1.3 billion of white collar costs and
today run the company with a much
more simplified business model and a
new performance management system
tied to a new compensation system.”
Spiesshofer said the changes had
produced a steady top line result for
the full year, despite a difficult market
in parts of the portfolio and the company’s
transition programme.
He said that with the transition year
behind it, ABB was now “clearly focused
on the future”.
According to Spiesshofer, the
growth in renewables will mean more
feed-in points on the supply side, longer
transmission distances and greater
volatility, which will call for skills
and capabilities in transporting electricity,
as well as more grid control
products. He also added that growing
consumption, including more electric
vehicles, will drive the need for more
electricity off-take points.
“If you take these two drivers, on the
supply and demand side, which will
require digitalisation and enhanced
control of the grid… it presents a tremendous
opportunity for us in the
future,” he said.
BP has pledged to limit its methane
emissions and invest in carbon offsetting
as part of a new commitment to
reduce its carbon footprint.
The company has set out an ambitious
and wide-ranging strategy with
near-term, specific targets for reducing
carbon emissions associated with its
business as well as encouraging customers
and suppliers to do the same.
The strategy, it says, will help to meet
the dual challenge of increasing world
energy demand and reducing greenhouse
gas emissions.
“The world is growing like never
before, creating opportunity for billions
of people,” said Bob Dudley, BP
group CEO. “And all this growth requires
energy. But as the world demands
more energy it also demands
that it be produced and delivered in
new ways, with fewer emissions.”
Among BP’s plans are targets to keep
net greenhouse gas emissions from its
operations at or below 2015 levels out
to 2025 and to generate sustainable
reductions of 3.5 million tonnes of annual
CO2 equivalent greenhouse gas
emissions throughout its businesses by
2025. It says it will use new technology
to improve energy efficiency as well as
limit the emissions intensity of methane
and reduce flaring of oil and gas.
It added in a statement that it would
invest in carbon offsetting programmes
if it fails to achieve the targets
on emissions it has set.
BP is also growing the low-carbon
side of its business with annual investments
of $500 million in renewable
energy and clean technologies. This
includes building more wind and solar
farms as well as new battery storage
capacity.
Rolls-Royce is continuing to refocus
its business on core segments with the
sale of L’Orange to Woodward Inc.
The €700 million deal will result in
Woodward taking control of fuel injection
system supplier L’Orange, and
integrating it into its Industrial business
segment. The move will help
Rolls-Royce to simplify its business,
while enabling Woodward to expand
into key industrial segments.
Warren East, CEO of Rolls-Royce,
said: “This transaction builds on the
actions we have taken over the last two
years to simplify our business. The
divestiture of L’Orange enables Rolls-
Royce Power Systems to focus on
other long term, high growth opportunities
and our company to allocate our
capital to core technologies and businesses
that drive greater returns for the
group.”
L’Orange’s 2017 pro forma sales
were €244 million, with pro forma
underlying EBITDA of €74 million
and pro forma underlying operating
profit of €64 million.
Thomas A. Gendron, Chairman and
Chief Executive Officer of Woodward,
said: “L’Orange is an excellent strategic
and financial fit for Woodward, and this
transaction exemplifies our acquisition
strategy to invest in markets with solid
long-term fundamentals. The acquisition
of L’Orange brings innovative
technology, bolsters relationships with
key customers and enhances the profitability
of our Industrial segment.”
Its fuel injection technology is used
in engines that power industrial applications
including marine power and
propulsion systems, special-application
vehicles, oil and gas processing,
and power generation.
Rolls-Royce said it would continue
to be a key customer of L’Orange after
the acquisition through its MTU and
Bergen brands. The sale follows a strategic
review of the L’Orange business
earlier this year.
Total
accelerates
utility
ambition
Total’s acquisition of Direct Energie shows that the company
is serious about its ambition to build value across the
electricity value chain, analysts say.
Siân Crampsie
Total says that an agreement to purchase
a majority stake in Direct Energie
will help it to establish itself as a
leading alternative supplier of energy
for French and Belgian customers.
The French energy giant has agreed
a friendly takeover of Direct Energie
in a €1.4 billion deal that will see it
purchase around 75 per cent of the
company’s share capital. The takeover
will help to shake up the energy market
in France, which is dominated by EDF
and Engie.
“Through this transaction, Total is
actively pursuing its development in
electricity and gas generation and distribution
in France and Belgium,” said
Patrick Pouyanné, Chairman and
CEO of Total.
“This friendly takeover is part of the
group’s strategy to expand along the
entire gas-electricity value chain and
to develop low-carbon energies, in
line with our ambition to become the
responsible energy major.”
The deal will enable Total to add Direct
Energie’s 2.6 million client portfolio
to its own portfolio of 1.5 million.
It will set Total well on its way to
achieving a target of over 6 million
customers in France and more than 1
million customers in Belgium by
2022.
The acquisition of Direct Energie
will also expand Total’s generating
portfolio by adding 1.35 GW of installed
capacity to its existing 900
MW asset base. Direct Energie’s portfolio
includes 800 MW of gas fired
power plant and 550 MW of renewables.
The utility also has a 400 MW
gas fired power plant under construction
and a 2 GW pipeline of renewables
projects in France.
Total is aiming to have an installed
capacity of 10 GW within five years,
it said.
The deal follows Total’s entry into
the residential retail market in 2016,
when it acquired Belgian firm Lampiris.
Other oil and gas firms have also
moved into electricity and gas retail
in an effort to diversify their businesses
away from fossil fuels.
Last year Shell agreed a deal to buy
UK retailer First utility, which serves
around 825 000 homes in the UK with
energy and broadband services.
In France, Engie has 3.5 million electricity
customers while state-owned
EDF has 25.6 million, more than 80
per cent of the total. However, EDF
lost 1 million customers last year as
competition intensified.
“Total’s acquisition of Direct Energie
shows that the company is serious
about its ambition to build value
across the electricity value chain, with
both gas and renewables playing a key
role,” said Valentina Kretzschmar,
research director, corporate analysis,
at global natural resources consultancy
Wood Mackenzie. “The $1.7
billion acquisition of Direct Energie
is Total’s largest investment in lowcarbon
assets to date.”
BP pledges action on emissions
Rolls-Royce simplifies
with L’Orange sale
n Woodward buys fuel injection unit
n Sale follows strategic review