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ABB Gets $33M Service Deal from QGC

Zacks Equity Research

Leading automation and power technology group ABB Ltd (ABB) and Australia-based QGC, a wholly-owned subsidiary of BGC Group, have recently signed a long-term service agreement (:LTSA). Under this LTSA, ABB will provide maintenance services for facilities at Queensland Curtis Liquefied Natural Gas (:QCLNG) project in Queensland, Australia. The contract is valued at $33 million for a four-year period and will be booked in the third and fourth quarters of the company.

The scope of this agreement requires ABB to maintain both planned and unplanned maintenance at QCLNG, which is pioneering a process to convert coal-steam gas to liquefied natural gas. ABB will be providing integrated services to maintain its Extended Automation System 800xA Integrated Control and Safety Systems (:ICSS) for the up-stream and mid-stream facilities of the project.

The deal also entails ABB to take care of the spare parts required for the upstream collection, transportation, and liquefaction in midstream along with the exportation. The contract can be extended up to 10 years.

QCLNG is of significant importance for QGC as it is aimed to expand exploration and development in major areas of Queensland that include its southern and central regions. Coal steam gas is a better substitute for coal as energy production is same from both the sources but with a comparatively 40% lesser carbon dioxide emission. The coal steam gas is collected at the upstream facility in Surat basin located in eastern Australia from where it is transported to the LNG plant on Curtis Island via a 540 Km underground pipe.

Prior to this, ABB had also received a $58 million contract from QGC in 2011. It was selected as the Main Automation Contractor (MAC) for providing diverse services including integrated automation, safety and telecommunications systems along with providing the equipments required for the upstream coal-seam gas project.

ABB currently carries a Zacks Rank #3 (Hold). Other stocks worth considering at the moment include EnerSys (ENS) and AO Smith Corp. (AOS), bothof which haveaZacks Rank #1 (Strong Buy), and Rexnord Corp. (RXN) that carries a Zacks Rank #2 (Buy).

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