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ABB Wins Australian Contract

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ABB Ltd. (ABB) received a contract for seventeen distribution substations from Rio Tinto. The contract, valued at $100 million, will increase production at its iron ore mines in Western Australia.

With the upgrade and installation of new power infrastructure, the voltage level at the existing distribution substations will rise. Increased power supply will lead to the expansion of the existing iron ore mines in the Pilbara region.

There has been a rise in demand for steel as emerging markets are urbanizing and developing economically. Iron ore is the main component in the production of steel, used to build bridges, railways, ships, cars, buildings, and other infrastructure and industries. Rio Tinto’s efforts to increase electricity production and operating efficiency will be met by ABB’s expertise in building substations and high technologies.

The project is a part of Rio Tinto’s multi-stage Electrical Infrastructure Replacement (:EIR) project and is scheduled for completion by 2013.

Moving ahead, the emerging markets will be a significant growth driver, with a need for high efficiency power transmission technologies. Demand in mature markets is also expected to improve.

Customer capital expenditures have increased with the rise in commodity prices. With this, investments to improve efficiency and productivity, including service, has also increased. There has been a continuous rise in utility spending power transmission to integrate renewable energy into existing grids and to interconnect national and regional power grids. The potential shift from nuclear power and high oil prices are expected to further increase the need for energy-efficient power and automation technologies.

Increased capacity in some later-cycle infrastructure-related businesses continues to exist.  In many sectors, price stability has been attained. ABB has increased its prices to offset increasing raw material costs

ABB Ltd. is a Zurich (Switzerland) based power and automation technology company. The company operates in approximately 100 countries, structuring its global organization into five regions: Europe, Americas, Asia, the Middle East and Africa. A major competitor of ABB Ltd. is Siemens AG (SI).

We maintain a Zacks #3 Rank (short-term Hold recommendation) on ABB Ltd.

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