Global power company ABB has announced the finalization of its acquisition of the General Electric Industrial Solutions branch (GEIS). The move marks the financial closing of a deal first announced in September 2017.
Additionally, ABB has announced details as to its ongoing cooperation with Italian-based digital green utility Be Power. The cooperation sees the integration of ABB's digital energy management platforms to synergize energy markets and e-mobility.
On Monday, both GEIS and ABB state that the cost of acquisition was $2.6 billion, a figure approaching GEIS' annual revenues in 2016. The acquisition establishes a supply relationship from ABB to GE Industrial Solutions. Reportedly, this results in annual cost reductions of around $200 million – within five years.
GEIS will integrate into ABB's Electrification Products division, which creates a global portfolio with a comprehensive offering in the North-American market, the companies state. The management team of GEIS will be retained by ABB, as it seeks to build upon their experience in sales in the North American market.
After closing, the transaction will have an initial dampening effect to EP's operational EBITA margin. ABB commits to returning EP to its target margin corridor of 15-19 percent during 2020.
ABB itself says that it seeks to establish access to the North American market. Thereby, the company will benefit from what it describes as deep customer relationships, a large installed base, and GEIS' distribution networks. With the acquisition, ABB has acquired the long-term usage of the GE Industrial Solutions brand.
“We are committed to servicing the GEIS installed base and will now be able to provide a more technologically advanced and digitally-connected offering to our customers around the world,” said ABB's Tarak Mehta in a statement. “Together we will strengthen ABB's #2 position in electrification globally and expand our access to the attractive North American market.”
ABB specified in its announcement that the acquisition creates substantial growth potential as it intends to bring its digital solution ABB Ability to GEIS' installations. The resulting cost synergies and growth are expected to bring GEIS to peer performance.
ABB Ability is a digital solution connecting value chains within and across industrial sectors. Through data gathering and management, the company says operators of infrastructure assets can reduce O&M costs in the two-digit percentage margin. For the power sector, ABB Ability works among other things as a centrally controlled virtual power plant and asset management system, allowing for predictive maintenance.
The supplier of technology products further signed a deal with an Italian utility to integrate its ABB Ability solution into the utility’s plan to synergize e-mobility and energy markets. The Italian grid operator launched a project whereby dispatching services of energy resources ought to be optimized. The project sets out to allow consumption and production units of any size and technology to provide dispatching services. To this, the grid operator planned the establishment of aggregators.
Be Power is entering this market for dispatching services as an aggregator, through its subsidiary 4energia. According to the announcement, ABB would deploy its ABB Ability solution to create, qualify and manage Aggregated Virtual Unit (UVA) which are part of the market for dispatching services. ABB would gather data through different access points to and generate comprehensive analyses of the grid.
“This pilot project fully understands the essence of the ABB Ability Collaborative Operations, a true evolution in the data analysis and aggregation,” Danilo Moresco, Head of the Power Generation & Water Unit in Southern Europe said “This new approach is able to gather in a unique circular flow the plant data as well as both the Be Power and the ABB control centers in an ongoing exchange of accurate and timely pieces of information to optimize the performance of the monitored assets”.