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ABB forms holding company for power projects - Views on News from Equitymaster
 
 
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  • Nov 1, 1999

    ABB forms holding company for power projects

    Asea Brown Boveri (ABB) is setting up a holding company, ABB Power Investments (India) Ltd. and will transfer all its power projects under it. This was reported by a leading financial newspaper.

    ABB (India) is a subsidiary of ABB Switzerland. Earlier, ABB (India) was engaged in the business of power generation and manufacture of motors and generators. In July 1999, ABB (India) de-merged its power generation business. After the de-merger, ABB (India)'s business now consists only of power distribution and will, in the future also include equity stakes in projects developed by its customers.

    With the setting up of ABB Power Investments, ABB's stakes in projects like Bina in Madhya Pradesh, North Madras in Tamil Nadu, Neyveli Lignite in Tamil Nadu, and Jegurupada in Andhra Pradesh will be transferred to the new holding company.

    ABB proposes to bring in the required 50% equity in these projects before the financial closure. This is an attempt on the part of the company to demonstrate its confidence in these projects. However, despite having acquired the requisite clearances, the company's projects have tripped on one issue or the other.

    Bringing the projects under one holding company will enable the company to increase focus and will ensure better management of these projects. Even costing of these projects will become easier, and the company will be able to identify the cost and time overruns efficiently.

    Market view:
    ABB (India) has suffered due to delays in the financial closure of private power projects that it has bagged. This will further affect its growth prospects. For all these reasons, most analysts do not find ABB as profitable as it was before the de-merger. They have therefore flagged the company as a SELL.

     

     

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