ABB, a pioneering technology leader, said its industrial automation division has joined hands with Saudi-based Arkad Engineering and Construction to set up an oil and gas EPC (engineering, procurement and construction) venture.
As per the deal, ABB’s current oil & gas EPC business will be transferred into the new joint venture firm, in which, Arkad Engineering and Construction, a fully integrated EPC contractor for the energy sector based in Saudi Arabia, will have majority and controlling interest.
With the closing of the transaction by December 31, the new company, Arkad-ABB, will start providing the full range of integrated EPC services for oil and gas plants.
ABB said with this new venture it aims to build on more than 50 years of experience in oil & gas EPC and the successful delivery of more than 300 projects globally.
Besides the key development in its industrial automation wing, ABB has brought in the EPC business model change for its Power Grids and Robotics and Motion as well thus ending its transition year 2017 in style.
These decisions are fully in line with ABB’s strategy to shift the center of gravity towards strengthened competitiveness, higher growth segments and lower risk, said the company in a statement.
In the Power Grids sector, ABB has set up a joint venture with Canadian construction giant SNC-Lavalin for electrical substation EPC projects.
The new entity, in which SNC-Lavalin will have majority and controlling interest, will leverage ABB’s power technology leadership and the Canadian firm's project expertise to capture opportunities for profitable growth. The transaction is set for closing in 2018.
In the Robotics and Motion sector, ABB has decided to wind down its turnkey full train retrofit business, beyond meeting current contractual commitments. The sector will continue its strong role as innovation partner for the rail industry, the statement added.
“We are taking decisive actions to complete our EPC business model change as we end our transition year. These actions are in line with our strategy to shift our center of gravity towards strengthened competitiveness, higher growth segments and lower risk,” said
On the new developments, Timo Ihamuotila, the chief financial officer of ABB, said: "We will book the related charges in Q4 2017 and report the divisions starting in 2018 excluding these legacy businesses."
"The fourth quarter results of Power Grids and Robotics and Motion are each expected to be impacted by approximately $75 million on operational ebitda," stated Ihamuotila.
"The transfer of the turnkey oil & gas EPC business into the JV with Arkad is expected to result in a non-operational pre-tax charge to net income of approximately $75 million," he added.