Zacks_Analysts' Blog : ABB to Acquire 35% Stake in Novatec - Analyst Blog

ABB Ltd. (ABB) entered into an agreement to acquire a 35% stake in Novatec Solar (previously known as Novatec Biosol), a Concentrated Solar Power (CSP) technology company based in Karlsruhe, Germany. The financial terms of the agreement were not disclosed.

As per the deal, ABB has an option to acquire a 100% stake in Novatec Solar and will also have to assist solar power plant projects to be undertaken in future. With the addition of Novatec Solar’s technology in CSP, ABB will be able to enhance its expertise in power plant automation, electrification and long-distance electricity transmission.

Novatec Solar’s Linear Fresnel CSP technology uses mirrors to concentrate the sun’s energy onto a receiver for producing steam. The technique is used in power stations, process plants and other industrial applications, where heat is required for complementing the use of fossil fuels with solar-produced steam.

This investment by ABB strengthens its focus on renewable energies and complements its power generation offering. It will help the company to expand its scope in the emerging markets with high demand for simple and economical technologies.

The emerging markets have been significant beneficiary for the company and expected to be a major driver of growth. With an increasing rate of industrialization in these regions, demand for energy efficient solutions like electrical grids, and productivity enhancing means is on the rise. In 2011, the company expects to benefit in the emerging markets as well as in other regions, aiding its customers to construct and improve power infrastructure and enhance industrial efficiency and productivity.

ABB Ltd.’s power and automation technologiesoffer a solution for sustainable development, thus helping to shield the world's resources. The company has a number of technologies for the solar power industry and also a growing installed base. ABB Ltd.has witnessed improving signs in late-cycle power, with some recent large contracts.

However, ABB's results are likely to be adversely affected by macroeconomic weakness as more than 80% of the company's orders are derived from outside the US. A major competitor of ABB Ltd. is Siemens AG (SI).

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.

We have a Zacks #2 Rank (short-term Buy recommendation) on ABB Ltd.