ABB debt cloud looms
ABB, the debt-laden Swiss-Swedish engineering firm, is likely to come under growing pressure to renegotiate its short-term borrowings following a downgrade by Moody’s, the US credit rating agency.
Moody’s announced that it had cut ABB’s long-term debt rating from A2 to A3. It has also been damaged by the public row over excessive pension payments to Percy Barnevik, its former chairman, and Goran Lindahl, former chief executive, which had highlighted the group’s lax internal controls.
ABB’s financial stability rests heavily on a recently arranged $3bn unsecured revolving credit facility, which was set up to cushion it against problems tapping the commercial paper market.
ABB has $2bn of equity, $3.3bn of goodwill and assets of $32.3bn. Its net debt more than doubled last year to $4.1bn as it completed a share buy-back programme that analysts viewed as ill judged.
Enel expects growth
The Italian energy group Enel is expected to achieve profit growth of eight to nine per cent in the period to 2006, according to its managing director Franco Tato.
Sales growth in 2001 was over seven per cent with 18 per cent of profits going to develop new business. Enel’s liberalized Energy Management sector has confirmed investment is going into the conversion of some 4500 MW of installed capacity into combined cycle operation and conversion of a further 5200 MW from coal and orimulsion firing.
The group’s industrial plan envisages a cost of generation in the medium term aligned with best practice (32 per cent), thermal efficiency rising by nine per cent in the period to 2006 and cost reductions of 30 per cent.
Tato said that overall the aim was to reduce transmission costs by 25 per cent, distribution costs by 15 per cent and natural gas costs by 17 per cent.
Vattenfall profits climb
Sweden’s state-owned energy group Vattenfall, Europe’s fifth largest utility, announced a profit rise due to acquisitions in Germany.
The company, which last year decided it would develop into a leading energy company, said its 2001 profit before tax and minority interest rose to $706.9m from $492.5m in 2000. Its operating profit margin fell to 14.4 per cent last year from 21.1 per cent in 2000.
Vattenfall, with a power output of 141 TWh, last year splashed out in the German market, buying a majority stake in Hamburg utility HEW, which in turn purchased ruling stakes in east German power producer Veag and coal merchant laubag.
The new group, Vattenfall Europe, is due to start operations at the end of 2002 and aims to rival Germany’s established utilities E.On, RWE and EnBW.
Mitsubishi joins Toshiba in power transmission and distribution business
Mitsubishi Electric Corporation and Toshiba Corporation announced that they will integrate their power transmission and distribution businesses in a joint venture company that will be incorporated in April 2002 and start business on October 1 this year.
The new joint venture will bring together the sales, engineering, development and manufacturing functions of the parent companies for Japan’s largest company dedicated to power transmission and distribution. The scale and business volume of the combined operation will match those of the world’s top three companies in the business and allow the new company to implement an operating structure that leads a global presence.
Alstom hires ‘debt master’
Alstom, the French power and transport equipment group, unveiled a three-year reform plan to boost cashflow, improve profit margins and strengthen its balance sheet.
Pierre Bilger, chief executive, said there would be “significant and even drastic” measures to cut debt. The plan, dubbed “Restore Value”, is aimed at soothing investor concerns about Alstom’s recent troubles, including technical problems with its advanced gas turbines.
Alstom plans to unlock a cumulative €1.3bn of operational free cashflow over three years, after taking care of continuing problems such as underperforming models. Bilger said the company would not pay a dividend for the current year and intended to launch a rights issue next month.
General Electric said it was sticking with estimates that it will achieve double-digit growth for 2003, in spite of the possibility of further cancellations of gas turbine orders.
At a meeting of analysts, the group reassured investors about its solidity, integrity and financial controls. The finances of large companies have come under increased scrutiny since the collapse of Enron.
Last December GE said it had requests for 250 turbines in 2003. Requests have since slipped to 200 and Keith Sherin, GE’s CFO, said the company needed to reflect the chance that there could be between 25 and 50 further cancellations.
Alkane success: Alkane Energy, the UK’s leading commercial producer of coal mine methane from abandoned mines, now has five operational sites compared to last year’s three. The company made a profit on ordinary activities before tax of £407 223 ($580 800) compared to a loss of £1 184 709 in 2000.
American Superconductor: American Superconductor Corporation and Pirelli Energy Cables and Systems announced a new agreement that allows AMSC to sell its high temperature superconductor wire to other cable manufacturers around the world for cable applications.
Diamond buy: Diamond Power Speciality, a leader in advanced boiler cleaning technology, has announced the acquisition of Strum-Industrieservice Vertriebs, a sootblower aftermarket company in Germany.
EnronOnline trades: Enron Online, the defunct energy trader now known as UBSWenergy.com, is attempting to entice its customers back. The move has been criticized as the 630 UBS staff seeking business for the new venture are the same group who were unable to make good on deals when they worked for Enron.
H Power product: H Power Corporation, a fuel cell development company, has introduced a pre-commercial version of its new EPAC500 fuel cell-based power product at the Touchstone Energy New and Emerging Technologies Conference and Expo in Tucson, Arizona.
Mott MacDonald buys: Mott MacDonald has acquired specialist electricity information company Power Ink in a move aimed at expanding and developing its power market consultancy and e-business expertise.
Proton Agreement: Proton Energy Systems, a Proton Exchange Membrane application specialist, has signed of a joint agreement with Sumitomo Corporation to develop, sell and service PEM-based regenerative fuel cell and hydrogen generation systems.
Williams debt: A $1.4bn off-balance-sheet commitment was taken on by Williams Companies from its former telecommunications arm, Williams Communications. While assuming the $1.4bn of bonds from its former subsidiary, Williams added that it had won a two-year stay of execution before it would have to repay the debt, reducing the danger of an immediate liquidity crisis that would reduce it to junk bond status.
Westinghouse hooks Entergy: Westinghouse Electric announced a multi-year agreement designating it as the exclusive provider of a range of engineering services for Entergy’s nuclear reactors.