On Jul 2,
) announced that it has received a $78 million contract from Saudi
Electricity Company (SEC) for providing transformers for a couple
of new combined-cycle power plants that will enhance the
transmission capacity in the region. Though the order was booked in
the backlog of second-quarter 2014, its financial terms are kept
Following the news, the company's shares edged up 0.4% to $23.02
on Jul 3. However, the momentum could not be sustained and the
shares fell again to $22.93 on Jul 7.
Transformers are critical for any power grid as they ensure a
safe and reliable conversion of electricity from one voltage system
to another. The scope of the contract requires ABB to provide SEC
with generator step-up (GSU) transformers, power transformers as
well as station service transformers for its power plants. These
transformers are expected to boost the electricity supply in the
capital - Riyadh and nearby regions to aid the rising demand for
both industrial and household purposes.
The petrochemicals driven growth coupled with a steadily
increasing population are the key factors behind the increasing
demand for electricity in Saudi Arabia. The country has been
taking persistent efforts to boost power-generation capacity. It
aims to increase the short-run capacity by as much as 50% to
produce about 91 gigawatts (GW) by 2020. In the long run, this
national power transmission and distribution operator of Saudi
Arabia intends to increase the capacity by 100%.
ABB has expertise in producing a range of high-capacity
transformers including 1200 kV power transformers, transformers
that support dry- and liquid-distribution, traction and special
application transformers. These apart, ABB provides relevant
components and related services.
ABB currently has a Zacks Rank #3 (Hold). Some better-ranked
stocks that can be considered at present include
AO Smith Corp.
ESCO Technologies Inc.
). While EnerSys and AO Smith sport a Zacks Rank #1 (Strong Buy),
ESCO Technologies carries a Zacks Rank #2 (Buy).
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