Like a physician with her stethoscope at the outset of a check-up, astute shareholders and directors should use the level and trend of a utility’s market-to-book ratio (MtB) as one of the first...
The Big Build
Utility infrastructure projects face high costs, labor shortages and global competition for resources.
the Teq to provide training for students and professors, internship opportunities, and we’re donating a variety of robotics and other equipment to the Teq’s labs. Our hope is these steps will make ABB an attractive option for Teq grads. In fact, we’ve already hired around 25 of them to work in a temporary space we have set up near the construction site.
Fortnightly: What does the market look like for ABB? How deep is your backlog for utility infrastructure projects or projects in general?
Barnoski: Our backlog is the highest it’s been for many years. And the outlook is robust in all areas, with the possible exception of distribution substations due to the slowdown in residential construction. The Edison Electric Institute estimates transmission spending will increase from $6.9 billion in 2006 to over $10 billion in 2010.
Fortnightly: Are you seeing more interest in new utility infrastructure construction or in refurbishment of older facilities?
Barnoski: Both newer utility infrastructure projects and refurbishment of older facilities are getting attention equally. Refurbishment is driven by aging infrastructure and the needs for greater efficiency and capacity.
Fortnightly: What types of utility infrastructure projects has your company recently been awarded?
Barnoski: We have contracts for engineering, procurement and construction work for distribution and transmission substations, as well as FACTS (flexible AC transmission system) devices and HVDC converter stations, and also next-generation power and automation technology. In addition, ABB is involved in state-of-the-art development of new products and systems through initiatives like our recent AEP alliance agreement for 765-kV transmission.
Just this past December, ABB commissioned the world’s largest SVC (Static Var Compensator) for Allegheny Power at its Black Oak Substation in western Maryland. The Black Oak SVC turnkey project was completed in just 14 months, a world record given its size, complexity and scope.
In November 2007, we commissioned a back-to-back HVDC station for Sharyland Utilities. ABB was selected in 2005 by Sharyland Utilities to design and build a new high-voltage direct current (HVDC) intertie between the United States and Mexico. The system connects the Texas utility with Mexico’s CFE, enabling both transmission grids to share reserves and ultimately facilitate cross-border trading.
Black & Veatch: Global Leverage
Fortnightly: What market trends does Black & Veatch see evolving in construction of utility infrastructure?
Smith: The current market trends are being driven to an increasing extent by environmental issues and agendas. Other factors are escalating costs, resource limitations, manufacturing over-capacity and the inevitable impacts on schedule, price and quality. The global demand for raw materials such as copper, lead, zinc, chrome and iron have dramatically increased the cost of manufactured equipment and material and placed “commodity” type material including steel, pipe, forgings and castings on the critical path to an extent we haven’t seen before. The unknown effects regarding future demand and the ability of the various industries have continued the pressure to compensate with significant escalation and contingency reserves.
Although coal has been a significant driver of new utility plants, the environmental agenda has impacted the ability to permit new units and driven the industry to short-term