ABB Strategy 2011: Zurich, Switzerland September 5, 2007

ABB Strategy 2011
Zurich,Switzerland September 5, 2007
Agenda
Introduction Market and competition Group portfolio Divisional strategies Regional opportunities Technology and energy efficiency Financial strategy and targets M&A strategy Organization and people Summary
ABB Group 2007
Fred Kindle
Ravi Uppal Peter Terwiesch Michel Demar Fred Kindle
Chart 2
Introduction
Safe-harbor statement
ABB Group 2007
This presentation includes forward-looking information and statements including statements concerning the outlook and targets for our businesses. These statements are based on current expectations, estimates and projections about the factors that may affect our future performance, including the economic conditions of the regions and industries that are major markets for ABB. These expectations, estimates and projections are generally identifiable by statements containing words such as aims, expects, believes, estimates, targets, plans or similar expressions. However, there are many risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking information and statements made in this presentation and which could affect our ability to achieve any or all of our stated targets. The important factors that could cause such differences include, among others, the amount of revenues we are able to generate from order backlogs and orders received, raw materials prices, market acceptance of new products and services, changes in governmental regulations and costs associated with compliance activities, interest rates, fluctuations in currency exchange rates and such other factors as may be discussed from time to time in ABBs filings with the U.S. Securities and Exchange Commission, including its Annual Reports on Form 20-F. Although ABB Ltd believes that its expectations reflected in any such forward-looking statement are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved.
Chart 3
Introduction
Establishing a track record of reliability

What we delivered
2004-06: 9% organic growth1, EBIT margin 5% 10%, ROCE 8% 20%
Building Systems, Equity Ventures & power lines units, Lummus announced
What we promised in Sept. 2005

Focus on profitable growth and capital efficiency Continued focus on automation and power portfolio Better business execution to deliver more reliable results Greater transparency Return to investment grade credit rating To be fully delivered by 2009
ABB Group 2007
17 consecutive quarters2 of performance improvement Clean results with few one-offs A- rating from Standard & Poors, Baa1 from Moodys Delivered 2 years early
Compound annual growth rate; 2 Up to Q2 2007
Chart 4
Introduction
Delivering on our growth and profitability promises

16%
30,000
14% 12%
EBIT margin (% revenues) H1 revenues 2005-2007
Revenues in $ million
10% 20,000 8% 6% 10,000 4% 2% 0

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 H1 2007
0%
Post-merger acquisition drive

ABB Group 2007
New Economy portfolio transactions
Crisis and turnaround
Profitable growth
Source: 1988-1993 and 1998-1999 as per respective annual reports; 1994-1997 as per 1997 annual report; 2000 to 2006 as per the corresponding Form 20-F filings with the U.S. Securities and Exchange Commission; 1999 EBIT includes major gains from divestitures; 2005-2007 includes ABB Lummus Global in continuing operations
Chart 5
Introduction
ABB strategy 2011 Key points
ABBs vision and mission: Power and productivity for a better world
Continued focus on power and automation Market outlook and ABBs leading positions allow for continued value generation we are in the right business! Increasing customer emphasis on environmental issues and energy efficiency opens new opportunities
ABBs current business portfolio is well suited for future value creation
Strong in utility and important industrial segments Significant links and synergies in technology, industries and customers served, product and service offering Attractive growth and profitability opportunities exist without diversification or further focusing
ABB Group 2007
Chart 6
Introduction
ABB strategy 2011 Key points (contd)
Significant opportunities for profitable growth

Organic growth opportunities across the portfolio Globally balanced portfolio with favorable exposure to emerging economies
Financial plan shows very attractive results

Aim to further improve growth, profitability and capital efficiency EPS expected to grow 15-20% CAGR by 2011
Opportunities for further value creation through acquisitions

Focus on filling some gaps and moving into adjacent areas Technology > market position > market share Ambitious but disciplined approach
ABB Group 2007
ABB is in the right business with ample opportunity to create more value
Chart 7
Introduction
New targets: More value to come

New target
Old target >5% 2005-09 >10% by 2009 Net margin >5% by 2009
Approaching
Revenue growth
(CAGR) 1
8-11% 11-16% corridor 15-20% Annual avg. 100% > 30% in 2011
Upside potential represents 3x global GDP growth and almost 2x market growth Further potential gains from both the market and internal improvements Driven by operating measures and financial improvements Higher capital expenditure to be offset
EBIT margin EPS2 growth

(CAGR)
Cash conversion3 Return on capital employed4

ABB Group 2007
100% per year by net working capital discipline 2005-09 Mid-teens in 2009
Sustained earnings generation on organic growth, efficient incremental capital expenditure and low tax rate
Compound annual growth rate 2007-11 (i.e., base year = 2006), excl. major acquisitions and divestments and at constant exchange rates 2 Earnings per share, undiluted 3 Free cash flow as % net income 4 After tax Chart 8
Agenda
ABB Group 2007
Chart 9
Market overview
Our growth ambition level

ABB market2 6%
Compound annual growth rates 2007-11
World GDP1 3.4%
4%
8%
ABBs revenues 8-11%

10%
2%
0%
ABB Group 2007
12%
We plan to outgrow the market

1 2
Source: Global Insight; Source: Global Insight, ABB estimates
Chart 10
Market overview
Power: Strong positive trend continues

Growing world economy needs increasing, reliable electricity supplies Need for more efficient power generation and T&D, further enhanced by environmental concerns Transmission taking a higher share of investments in electricity infrastructure
Aging grids in mature economies require upgrades Interconnectivity, especially in Europe Coping with new forms of electricity generation (e.g. further away from consumption, renewables)
Infrastructure build-up in emerging countries

1
ABB Group 2007
Total market size 2006: $75 billion Growth CAGR 2007-11: 6-8%
1
Source: Global Insight, ABB estimates
Chart 11
Market overview
Automation: Attractive, reliable sector

Drive for higher energy efficiency in rapidly growing world economy
To reduce costs and address environmental concerns
Increasing productivity and quality

To meet cost competition in a global market To improve industrial process and product quality
Improving living standards

Rapid electrification beyond major urban centers in emerging economies Automated buildings in OECD countries and economic centers of emerging economies
1
ABB Group 2007
Total market size 2006: $115 billion Growth CAGR 2007-11: 5-6%
1
Chart 12
Market & Competition
ABBs markets and positions today
Regional market sizes 2006 (in US$ billion) and market positions
Europe
$67 bn
#1 #1 #1 #1
Asia
#1 #1
Americas
$58 bn
$44 bn
#2 #2
$20 bn
Middle East and Africa
ABB Group 2007
Total market: $190 billion

1
Chart 13
Market & Competition
Market expected to grow 34% ($65 bn) by 2011
Regional market sizes 2011 in US$ billion, total growth vs 2006 in US$ and %
Europe
$83 bn
+$16 bn Americas
24%
Asia
$88 bn
$28 bn
$55 bn
+$11 bn
25%
+$29 bn
52%
+$8 bn
40% Middle East and Africa
ABB Group 2007
Total market: $255 billion

1
Chart 14
Market & Competition Potentials
Future market potential and risks

Risks
Economic risks
Considerable slowdown of Chinese and Indian economies US recession, followed by European and global decline
Faster economic growth

China and India to continue fast pace Emergence of new growth centers (Southeast Asia, Middle East, Latin America, Africa) Stronger recovery of mature economies (Western Europe, Japan, North America)
Political risks
Energy nationalism leading to price and supply disruptions Political instabilities (e.g. Middle East, Latin America)
Accelerating demand for energy efficiency

Public opinion Regulatory pressure Changing energy economics (scarcity, costs, prices, returns, alternative energy) Chart 15
ABB Group 2007
Sporadic catastrophic events, such as a global pandemic, largescale terrorist attacks, natural catastrophe
Market & Competition 1
Future competitive challenges
ABBs traditional competitors

Technology, market and cost position will remain key drivers Consolidation to continue, separating market into large/global and regional/niche players
2 New competitors from emerging economies

New players establishing strong bases in home countries Increasing presence in established markets in 3-7 years
ABB is prepared for both competitive challenges

Continue to invest in technology, R&D and service Fill gaps in geographic and product offering Improve cost position (e.g., global footprint, product design, EOS) Be the foremost competitor also in emerging economies
ABB Group 2007
Chart 16
Agenda
ABB Group 2007
Chart 17
Vision & portfolio
A focused power and automation company
2006 revenues (US$) and employees per division
Power Products
$7.4 bn 30,000 employees
High- and mediumvoltage products and transformers for switching, protecting, measuring and automating power transmission and distribution
ABB Group 2007
Power Systems
HVDC, FACTS, cables, network management, control & protection products and services, electrical balance of plant and control for power plants, complete turnkey substations, services
Automation Products
Low-voltage products and systems, drives, power electronics, motors and machines, instrumentation and product service
Process Automation
Process control and information management systems, industryspecific applications, component controls, maintenance and performance services
Robotics
Robots and robotic systems for painting, welding, packing and palletizing, material handling and assembling
Chart 18
Vision & portfolio
A portfolio of interconnected offerings
Example: Deliveries to the metals industry

Process Automation
Control systems Workstations Application software Full service
Automation Products
Power Products
Transformers Circuit breakers Aluminum smelter
Rectifiers Variable speed drives Motors Low-voltage panels
ABB Group 2007
Power Systems
Substations Long-term service support
Robotics
Palletizing robots
Chart 19
Vision & portfolio
Significant portfolio synergies

No. of divisions
Technology synergies
Switching and breaking Insulation and limiting Power electronics Control and protection Software and communications Sensing and analyzing
3/5 3/5 4/5 5/5 5/5 5/5
These technologies support ca. 70% of group revenues
Customer synergies
ABBs top 31 Global customers
The average customer buys from 4 of ABBs 5 divisions 7 of them buy from all 5 divisions
ABB Group 2007
8 of them buy from 3 or fewer divisions
Strong synergies already exist, but there is potential for much more
Chart 20
Agenda
ABB Group 2007
Chart 21
Divisional strategies
Power Products market position

Channels to market*
ABB 14% Resellers 8% OEMs 10% EPCs 13% Utilities 44%
Market outlook/drivers
Further enlargement, reinforcement of grids in emerging markets Reliability, aged infrastructure refurbishment and upgrade, interconnections, integration of renewables in North America, Europe
ABBs competitive advantages

Economies of scale: #1 in the industry, ca. twice the size of #2, global production base, market-leading cycle times Technology leadership: Complete welltuned portfolio, high innovation rate Leading market coverage: Global reach, #1 position in key markets, competitive cost position
ABB Group 2007
Industry 11%
* As a percentage of total 2006 Power Products orders
Market position
1 High-voltage products Medium-voltage products Transformers ABB ABB ABB 2 Siemens Schneider Siemens 3 Areva Siemens Areva
Top-of-mind brand: Clear leadership
Source: ABB, Goulden Reports, ABS, Bear Stearns
Chart 22
Targets 2007-11 Revenue growth
Power Products strategy

Strategic goal
Increase share in an attractive growth market by building on world #1 position, and further enhance profitability
10% revenue growth
Compound annual growth rate

6% market growth
Action plan
Maintain technology leadership Continue to focus on markets offering high growth potential
0%
12%
EBIT margin
17% EBIT margin corridor 12%
9.1%
Outgrow the market in all businesses Build the service business Order execution: quality, on-time delivery, capacity management Strengthen indirect channels to market Drive global footprint optimization, including the transformer consolidation
12.9%
ABB Group 2007
2004
2005
2006
2007
2008
2009
2010
2011
Chart 23
Power Systems market position

Channels to market*
EPCs 10% Industry 10% Utilities 80%
Industrialization and GDP growth in emerging markets (Asia, Middle East) Increasing demand in North America, Europe
Competitive advantages
Innovative solutions: High-efficiency bulk power transmission, offshore connections (e.g., oil & gas), connecting islands, integrating wind power, energy trading Superior market coverage: Global reach with unmatched solution capabilities and project management record #1 customer choice for large, sophisticated solutions
ABB Group 2007
* Expressed as percentage of total 2006 Power Systems orders
Market position
Business line
Grid systems Substations Network management Power generation
(electrical balance of plant)
1
ABB ABB ABB
Siemens
2
Siemens Siemens Siemens
3
Areva Areva Areva Areva
Economies of scope: Integration capabilities from engineered packages to full turnkey systems and services
ABB
Source: ABB, Goulden, ABS, ARC, Bear Stearns
Chart 24
Power Systems strategy

Strategic goal
Strengthen organic growth and focus on higher margin opportunities in attractive markets
11% revenue growth

8% market growth
Action plan
Maintain and strengthen overall market and technology leadership Push new applications and solutions, e.g., Ultra HVDC, offshore windfarms, oil platform connections Leverage installed base for service Focus on continuous operational improvements, including project execution Drive process and system standardization further
0%
12%
EBIT margin
10% EBIT margin corridor
6.1%
6%
3.2%
ABB Group 2007
2004
2005
2006
2007
2008
2009
2010
2011
Chart 25
Automation Products market position

Channels to market*
ABB internal 10% System integrators 10% OEMs 40%
Industrial growth, electricity consumption, degree of automation, construction General GDP development
Technology leadership: Continuous pipeline of advanced demand-driven technology Price/value: Economies of scale, smart design and global sourcing Global reach: Market penetration and above-average growth secured by global scope, large direct sales force, and premium channel partners Excellence: Products recognized for quality and reliability based on operational excellence in production, distribution and response time
Direct to end-users 20% Wholesalers & distributors 20%
* Expressed as percentage of total 2006 Automation Products orders
Market position1
Business line
Drives and power electronics Low-voltage systems2 Motors and machines Industrial low-voltage products Installation material2
1 ABB ABB ABB

Schneider Schneider Emerson
2
2
Siemens Schneider Siemens Siemens Legrand Yokogawa
IEC standard
3
Rockwell Siemens WEG Rockwell/
ABB ABB
ABB Group 2007
Instrumentation
1
Endress+H/
ABB
ABB estimates, based on orders received
Chart 26
Automation Products strategy

Strategic goal
Focus on sustained growth (organic and acquisitions) at high profitability

6% market growth
8% revenue growth
Action plan
Exploit regional growth opportunities (e.g., China, India and North America), and application areas (e.g., rail, water, oil & gas, power generation, incl. wind) Keep technology leadership, push smart design of standardized products (functionality and cost) Tap service opportunities Continue with global footprint and operational excellence
0%
12%
EBIT margin
19%
15.4%
EBIT margin corridor
12.5%
14%
ABB Group 2007
2004
2005
2006
2007
2008
2009
2010
2011
Chart 27
Process Automation market position

Business lines*
Performance services 13% Turbochargers 10% Metals 6% Chemicals & pharma 9% Marine 14% Minerals Pulp & paper 12% 10%
Other 4%
High energy prices GDP growth (esp. in emerging countries) Customer focus on productivity, reliability and longer equipment life
Oil & gas 22%
Technology leadership: System 800xA control platform offers state-of-the-art functionality, allows integration of existing control systems, reduces development costs for product variants Economies of scope: Broad industrial and geographic presence, industry expertise for tailor-made solutions in many sectors
ABB Group 2007
* Expressed as percentage of total 2006 Process Automation orders
Market position
Business line
Pulp & paper Marine Oil & gas (upstream) Turbocharging Minerals Metals Chemicals & pharma**
1 ABB ABB ABB ABB

Siemens Siemens Honeywell
2
METSO Siemens Siemens Mitsubishi
3
Honeywell Converteam Honeywell MAN FLS TMEIC Yokogawa
Captive service business: Largest installed base > $20 bn
ABB ABB
Emerson
Source: ABB, ARC Advisory Group 2005; Clarkson Research, Diesel and Gas Turbine & Motorship magazine ** ABB in 5th position
Chart 28
Process Automation strategy

Strategic goal
Focus on profitable growth (primarily organic with opportunistic acquisitions) and tap System 800xA opportunities in the industrys largest installed base

6% market growth
8% revenue growth
Action plan
0% 12%
EBIT margin
14% EBIT margin corridor 9%
5.8%
9.9%
Capture the continuing growth potential in Asia and the Middle East, and the service potential in Europe and the Americas Deliver higher product content in our system offerings Strengthen product sales Utilize more engineering and sourcing from low-cost countries Focus on risk management and project execution
2011
ABB Group 2007
2004
2005
2006
2007
2008
2009
2010
Chart 29
Robotics market position

Business lines*
Service 26%
Improved process quality Need for more flexible production Environmental issues, health & safety
Leading market position: Large installed base of industrial robots (145,000 units) Technology leadership: Best-in-class robot controller products, leading paint robots Service: Largest service network for robotics in the world Economies of scope: Integration capabilities from engineered packages to full turnkey systems, and services limited vertical integration enhances flexibility and ROCE
Systems 30%
Robotic products 44%
* Expressed as percentage of total 2006 Robotics orders
Market position
Business line Foundry Painting Plastics Metal fabrication Packaging Robotics systems
1 ABB ABB
Fanuc Yaskawa Fanuc
2
Fanuc Yaskawa
3
Kuka Fanuc Kuka Fanuc Kuka Eisenmann
ABB ABB ABB

Drr+Kuka +Comau
ABB Group 2007
ABB
Source: ABB, McKinsey, IFR, Company Reports
Chart 30
Robotics strategy
Strategic goal
Re-establish ABB among the top 2 suppliers in the industry Lift margins through operational excellence, tap selective growth opportunities

5% market growth
6% revenue growth
Action plan
0% 12%
EBIT margin
10% EBIT margin corridor
5.5%
Take advantage of global opportunities and trends, e.g., in China Expand further into non-automotive sectors Expand service portfolio Simplify product portfolio and implement product re-design to cost Standardize products further
2010 2011
5%
0.1%
ABB Group 2007
2004
2005
2006
2007
2008
2009
Accelerate global footprint, implementation of application lead centers Chart 31
Agenda
ABB Group 2007
Chart 32
Regional opportunities
Share of 2006 total Group orders received
Europe
44%
Market size 20061 Market growth 2007-111
$67 bn 4-5%
Connecting power grids, energy trading, utility consolidation, renewables, power plant improvements, e.g.
Linking offshore wind to mainland grids: a key opportunity for ABB
Germany to spend $110 bn on power plant upgrades and T&D by 2020 Wind power to grow from 3% of Europe total energy today to 16% by 2020
Further industrial automation to improve cost competitiveness, industrial growth to continue in eastern Europe on lower cost base, falling trade barriers, privatization
ABB Group 2007
Major opportunities in Russia linked to power and oil & gas

Priority European power interconnections Jan 07
1
Source: Global Insight
Chart 33
Americas
18%
Market size 2006 1 Market growth 2007-11 1
$44 bn 5%
Grid reliability concerns, U.S. Energy Bill and growth in renewables drive power investments
$56 bn investment in U.S. power generation and T&D over the next 10 years2
US grid upgrades to drive growth for several years
Need to upgrade aging power infrastructure in Brazil, Argentina and Chile is growing
U.S. industrial production expected to remain healthy, large market opportunity for ABB Automation needs also driven by oil & gas in Canada and Mexico, rapid growth in mining sector in South America
ABB Group 2007
e.g. worlds largest iron ore and copper reserves in Brazil and Chile
FACTS technology can reduce losses in existing lines by as much as 40%

1
Source: Global Insight; 2 Edison Electric Institute estimates
Chart 34
Middle East and Africa

13%
$20 bn 7%
Continued strong economic growth: Oil & gas (2/3 of world supply) to generate annual revenue of $325 bn Deregulation and privatization to accelerate, investments in further infrastructure upgrades (incl. desalination) and grid interconnections $100 bn investment in power capacity over the next 10 years (adding 80,000 MW) Industrial diversification beyond oil, esp. metals & mining and chemicals; rapid pace of construction to support economic growth
Construction boom fuels power expansion
ABB Group 2007
Oil & gas remains the key to growth

1
Chart 35
North Asia and China

20%
$40 bn 8%
Chinese utilities continue expansion plans as economy expected to grow 8-10% 2006-11
Increased investments in T&D to catch up with power generation capacity Greater local emphasis in JV structures
Construction in China drives growth for ABB low- and medium-voltage products
Additional $335 bn earmarked for major projects in rail, wind, oil & gas and water
Industrial production to continue robust growth

e.g., steel capacity to grow 45% to 600 mill. tons by 2015
Beijing
Focus on energy efficiency, productivity, quality
ABB Group 2007
Rapid urbanization fuels construction, better living standards, power distribution

800kV DC projects planned to be in operation before 2015
1
Chart 36
South Asia and India

5%
$18 bn 9%
Power and T&D investments in India: More than 100 GW new capacity expected by 2015
Per capita consumption to double (rural electrification and grid efficiency) Inter-regional connection capacity to triple by 2012
India expected to be the worlds fastest growing steel producer to 2015
Industrial automation demand led by

Metals (India steel output to grow 3.5x to >140 mill. tons by 2015) Minerals (Australia aluminum output = 30% of world total) Oil & gas (Malaysia, Vietnam, India)
Delhi
ABB Group 2007
HVDC back-to-back grid connections HVDC Bi-pole transmission lines
Inter-regional HVDC links planned for 2012 1

Chart 37
Global footprint
Key to ABBs competitive success
Seize opportunities to balance global footprint and managing global customer accounts to ensure ABBs long-term success
Drivers 1 operations with changes in the market

Continuous alignment of our engineering, production and supply Growth in emerging economies presents market opportunities and
2 therefore shifts the center of gravity for sales and operations
Emerging markets offer low-cost opportunities to establish a global 3 supply chain and manufacturing base to improve competitiveness, reduce export risks and increase operational flexibility
4
ABB Group 2007
Group Account Management seize significant profitable growth opportunities of successful cross-divisional account management with ABBs major customers this already accounts for 15% of ABBs business
Chart 38
Agenda
ABB Group 2007
Chart 39
Technology
Innovation key to competitive advantage

ABBs current strong market position has been built through consistent R&D investment
$1.1 billion* spent on research and order-related development in 2006, up 10% vs 2005
$540 million spent in 1st half of 2007
6,000 researchers and developers worldwide >50% of research efforts aimed at improving energy efficiency
Core technology areas serve both power and automation:

Switching and breaking Insulation and limiting Power electronics Control and protection Software and communications Sensing and analyzing Mechatronics
* Comprises Non-order related R&D and order-related development for ABBs five core division and excludes expenditures in Non-core activities
ABB Group 2007
Chart 40
Technology
ABB technology is at the cutting edge

Enormous power flows reliably stopped within a few milliseconds Temperatures of 20000 C and higher
Example: High-voltage current interruption
ABB Group 2007
Expertise and track record of success gives us a significant competitive advantage

Chart 41
Technology
Technology to meet global challenges
Conventional alternating current lines
HVDC Classic
Mitigating the environmental impacts of power while dramatically improving grid efficiency and reliability
HVDC Light
(underground)
Transmission capacity (MW)

4,000
Transmission capacity (MW)

800
2,000 ABB Group 2007
Technology leaps lead to exponential efficiency improvements

1990 2010
400
1970
2000
2010
Chart 42
Technology
Primary energy
Reducing losses along the energy chain

Transport Generation T&D Industrial processes Industrial production
Available energy
80% of energy is lost
ABB Group 2007
Chart 43
Technology
Primary energy
Reducing losses along the energy chain

Transport Generation T&D Industrial processes Industrial production
Available energy
Improved well efficiency
ABB technology can reduce losses by 20-30%

Higher pipeline flows More efficient fuel combustion Lower line losses, higher substation efficiency Improved productivity
More efficient motors & drives
ABB Group 2007
Process Automation
Marine & pipelines
Power plant automation
Grid operation
Process automation
Drives & motors
Chart 44
Technology
Latest technology for energy efficiency

Pump control (China Steel, Taiwan)
Replaced valves, added drives to fixed-speed pump motors Energy saving 2,930,000 kWh/yr (1,725 boe1)
Fan control (Cruz Azul plant, Mexico)

Installed AC drive control for two 1,000 hp fixed-speed fans Energy saving 5,500,000 kWh/yr (3,230 boe1)
Offshore platform power (Statoil, Norway)

Replaced gas turbines on North Sea platform with HVDC connection bringing hydropower from mainland Reduced CO2 emissions 130 million kg/yr
Ship propulsion (ShinNihonkai, Japan)

ABB Group 2007
Fitted two ferries with Azipod, eliminating need for propulsion motor, main propeller, rudder Reduced CO2 emissions 68 million kg/yr
1
Barrel of oil equivalent
Chart 45
Technology
Technology opportunities in wind power

Static var compensation
FACTS
(AC grid connection)
HVDC Light
(underground or subsea connections to the grid)
Power electronics
(control unstable power flows)
ABB Group 2007
Permanent magnet generators

(maintenance free)
Switches & breakers Control products Transformers
Converters Compact substations

(can also be used offshore) Transformers (handling intermittent power supply for storage, changing power frequency for conventional grids)
Chart 46
Agenda
Introduction Market and competition Group portfolio Divisional strategies Regional opportunities Technology and energy efficiency Industry initiatives M&A strategy Organization and people Summary
ABB Group 2007
Chart 47
Plan assumptions
Market conditions to remain favorable
World GDP to grow 3-3.5%1 per year over the 2007-11 period ABBs markets to grow ca. 6%1 over the period Commodity prices stabilizing at a high level Further benefits from operational improvements
Accelerate global footprint initiative (ca. $400 million benefit in last 2 yrs.) Positive impact from One Simple ABB G&A (excl. R&D) to grow much slower than revenues HQ costs to remain stable, well below 1% of revenues
ABB Group 2007
Chart 48
Financial targets
Review of ABBs value creation goals
The target rationale from 2005 proved to be appropriate

Measured value creation in terms of growth, operating profitability, net income, free cash flow and ROCE Gave the right signals, both internally and externally
For the 2007-2011 targets, only finetuning required

EPS growth replaces net margin Other parameters unchanged Target ranges/corridors replace point targets
Focus remains on sustainable, profitable growth and capital efficiency

ABB Group 2007
Chart 49
Target review
Revenue growth range: 8-11% (CAGR)

6% Power Products 8% Power Systems 6% Automation Products 6% 8% 11% 10%
Compound annual growth rates 2007-11
World GDP1 3%
2%
ABBs market 6%
6% 4% 8%
ABBs revenues 8-11%

10%
8%
0%
12%
Process Automation 5% Robotics

0% 12%
Forecast market growth ABB revenue target growth

ABB Group 2007
6%
Chart 50
Target review
EBIT margin corridor: 11-16%

EBIT margin Power Products Power Systems
16%
EBIT margin 2007-11

% revenues
12-17% 6-10% 14-19% 9-14% 5-10%
Automation Products Process Automation Robotics
Margin corridor
10.6% 8.1%
2005 2006 2007 2008 2009 2010 2011
11%
Drivers
Pricing culture Accelerated global footprint initiatives, incl. sourcing Convert fixed costs to variable costs Optimized G&A expenses Excellence in risk and quality management Standardized processes and systems: One Simple ABB
Chart 51
Range of potential performance depending on economic scenario

ABB Group 2007
Target review
Average EPS growth: 15-20% CAGR

Rationale
Push bottom-line focus further Align targets with most widely-used value metric Commit to continuous improvement independent of the cycle
Earnings per share

(undiluted)
15-20% CAGR1
0.65
0.36
Drivers
2011
2005
2006
Excluding the impact of potential acquisitions or stock buy-backs
ABB Group 2007
Positive impact from finance net reflecting healthy balance sheet Sustainable low tax rate (27% or lower) No surprises: Discontinued operations flat Higher EPS despite increasing minority interests on strong developing markets
Compound annual growth rate 2007-11
Chart 52
Target review Drivers
Cash conversion: 100% average
Capital expenditure expected to continue above depreciation (ca. 120%) Exponential output given the low cost of incremental capacity Higher capex to be offset by net working capital discipline (avg. 11% of revenues over the cycle) Capital employed to grow at only a fraction of revenue growth Asbestos payments will affect cash conversion ratio
2007: $350 million; 2008: $100 million; 2010-11: $50 million contingent
Capex1
Cash flow from operating activities
ABB Group 2007 incl. asbestos payments
Free cash flow
Net income
Incl. change in financing receivables
Chart 53
Target review
ROCE: Above 30% by 2011

Drivers
2011
Return on capital employed

(after tax)
2003 2004 2005 2006
Higher EBIT Lower taxes Strict discipline on net working capital
>30%
14% 8% 3%
20%
WACC1
Capital expenditure focus on emerging economies (higher output per dollar invested)
36% 32% 32% 29%

2003 2004 2005 2006
2003 2004 2005 2006
2003 2004 2005 2006
ABB Group 2007
EBIT
Tax rate
Capital employed
Higher returns on lower-cost, flexible incremental capacity
Weighted average cost of capital
Chart 54
Financial strategy
Balance sheet and investment priorities
We intend to re-leverage our balance sheet

Without putting our investment grade rating at risk With a maximum gearing1 of ca. 40%
Shareholders to share our success

Policy to distribute a steadily rising, sustainable dividend throughout the cycle Supported by higher earnings and/or rising payout ratio
Investment priorities 1 Organic growth, R&D, and operational excellence 2 Value-creating acquisitions
ABB Group 2007
3 Returning cash to shareholders
1 Total
debt divided by the sum of total debt plus equity, incl. minority interest
Chart 55
Agenda
ABB Group 2007
Chart 56
M&A
External and organic growth opportunities

Automation Products Power Products
External Growth Opportunity
Medium
High
Process Automation
Low
Power Systems Robotics
ABB Group 2007
Average
High
Very High
Organic Growth Potential

Chart 57
M&A
Criteria for assessing acquisitions
Acquisitions must create strategic and financial value, be sound in strategic concept, fair in price, and not too difficult to integrate Strategy
Target must fit into portfolio and business strategy Technology position > market position > market share
Operations
Sufficient internal capacity to integrate target Cultural compatibility preferred
Financial
ROI must meet target return (>WACC), NPV positive ROI target return to be achieved after 3 years Accretion/dilution relevant but not decisive Limited financial risk, maximum leverage within solid investment grade credit rating
Chart 58
ABB Group 2007
M&A
Acquisitions: ambition vs. discipline
Screened more than 100 large targets* Identified dozens of potentially attractive businesses Put most targets on hold for price reasons
We will continue to stay both ambitious and disciplined Value creation is at the center of our strategy
Acquisitions must create value; we would rather err on the conservative side Balance sheet needs to be optimized accordingly
The outcome remains open

ABB Group 2007
* Assessed within the past 18 months, large = companies valued at $500 million or above in mature economies, $200 million or above in emerging economies
Chart 59
Agenda
ABB Group 2007
Chart 60
Organization & people ABB people
Having the right organization and people
Our ambition is to employ the best people in the industry We plan to create 20,000 new jobs to execute our strategy ABB is considered a top employer in many countries We offer great development opportunities in a global, dynamic environment
ABB organization
Keep the structural organization clear and simple Strong focus on systems and processes (e.g. One Simple ABB) Focus shifting from corporate center* cost reduction to corporate center value creation (e.g., supply management)
ABB Group 2007
* Corporate costs (excl. R&D) at ca. 0.8% of 2006 revenues
Chart 61
Organization & people
Building a culture of excellence
ABBs culture and values

We are proud to be a truly global, dynamic, inclusive company We strive for excellence in every respect, i.e. not only financial results but also business ethics, occupational health & safety, people development
Business ethics as a priority

ABB wants to be a world leader when it comes to business ethics Instructing and supporting our people is key Clear message from the top: Setting the right examples and enforcing zero tolerance Systems and processes in place: Code of Conduct, mandatory training, hot-lines, compliance audits, robust compliance organization
ABB Group 2007
We have the organization, people and culture to succeed

Chart 62
Agenda
ABB Group 2007
Chart 63
Summary
ABB strategy 2011: Key messages
1 2
We have proven that we can deliver reliable, attractive results We are in the right markets for continued profitable growth, i.e., power infrastructure, energy efficiency, productivity investments in established and emerging economies ABBs vision, mission and portfolio are sound and provide ample opportunities to create value. Divisions follow clear and promising strategic roadmaps. We will make acquisitions that fit our strategy, can be successfully integrated and create financial value (focus on filling gaps and moving into adjacent areas, no diversification) Focus on business execution will continue, including systems and process improvements (e.g., One Simple ABB) and improving cost and market position by adjusting our global footprint
5
ABB Group 2007
Chart 64
Organization & people 6 7
ABB strategy 2011: Key messages (contd)
The organization is working well no major changes planned Our people strategy is becoming a central pillar for future success, e.g., the best people in the industry, global culture, truly inclusive, attractive development opportunities results but also in business ethics and occupational health and safety
8 Excellence in every dimension, not only with operations and financial
ABB Group 2007
Chart 65
Agenda
Introduction Market and competition Group portfolio Divisional strategies Regional opportunities Technology and energy efficiency Financial overview and targets M&A strategy Organization and people Summary Q&A
ABB Group 2007
Chart 67
New targets
Summary of ABB targets 2007-2011

Revenue growth1 EBIT margin 12-17% 6-10% 14-19% 9-14% 5-10%
Revenue growth
(CAGR) 1
8-11% 11-16% corridor 15-20% Annual avg. 100% > 30% in 2011
Power Products Power Systems Automation Products Process Automation Robotics
10% 11% 8% 8% 6%
EBIT margin EPS2 growth

(CAGR)
Cash conversion3 Return on capital employed4
ABB Group 2007
Compound annual growth rate 2007-11 (i.e., base year = 2006), excl. major acquisitions and divestments and at constant exchange rates 2 Earnings per share, undiluted 3 Free cash flow as % net income 4 After tax Chart 68
Target definitions
Revenue growth CAGR
Compound annual growth rate of revenues for the five years from 2007 to 2011 (i.e., starting point = 2006), excluding major acquisitions and divestitures and assuming constant exchange rates The minimum and maximum earnings before interest and taxes as a percentage of revenues expected for each year within the period 2007 to 2011 Compound annual growth rate of earnings per share (undiluted) from 2007 to 2011 (i.e., starting point = 2006) Free cash flow (cash flow from operating activities adjusted for changes in financing receivables as well as net investments in property, plant and equipment) as a percentage of net income EBIT (less tax), divided by the sum of fixed assets plus net working capital (at year end) EBIT (less tax) = EBIT x (1 tax rate) Tax rate = Provision for taxes / Income from continuing operations before taxes and minority interest
EBIT margin corridor EPS growth Cash conversion Return on capital employed
ABB Group 2007
Chart 69

ABB Strategy 2011: Zurich, Switzerland September 5, 2007

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ABB Strategy 2011: Zurich, Switzerland September 5, 2007

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ABB Strategy 2011

Zurich,Switzerland September 5, 2007

Ravi Uppal Peter Terwiesch Michel Demar Fred Kindle

ABB Group 2007

Establishing a track record of reliability

What we promised in Sept. 2005

Compound annual growth rate; 2 Up to Q2 2007

Delivering on our growth and profitability promises

10% 20,000 8% 6% 10,000 4% 2% 0

Post-merger acquisition drive

New Economy portfolio transactions

Crisis and turnaround

ABB strategy 2011 Key points

ABB Group 2007

ABB strategy 2011 Key points (contd)

Significant opportunities for profitable growth

Financial plan shows very attractive results

Opportunities for further value creation through acquisitions

ABB Group 2007

New targets: More value to come

EBIT margin EPS2 growth

Cash conversion3 Return on capital employed4

Our growth ambition level

Compound annual growth rates 2007-11

World GDP1 3.4%

ABBs revenues 8-11%

We plan to outgrow the market

Source: Global Insight; Source: Global Insight, ABB estimates

Power: Strong positive trend continues

Infrastructure build-up in emerging countries

ABB Group 2007

Source: Global Insight, ABB estimates

Automation: Attractive, reliable sector

Increasing productivity and quality

Improving living standards

ABB Group 2007

Source: Global Insight, ABB estimates

Market & Competition

ABBs markets and positions today

ABB Group 2007

Total market: $190 billion

Source: Global Insight, ABB estimates

Market & Competition

Market expected to grow 34% ($65 bn) by 2011

ABB Group 2007

Total market: $255 billion

Source: Global Insight, ABB estimates

Market & Competition Potentials

Future market potential and risks

Faster economic growth

Accelerating demand for energy efficiency

ABB Group 2007

Market & Competition 1

Future competitive challenges

ABBs traditional competitors

2 New competitors from emerging economies

ABB is prepared for both competitive challenges

ABB Group 2007

Vision & portfolio