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Jörgen Centerman President and CEO

Sustainability media briefing London, June 5, 2002. Jörgen Centerman President and CEO. Overview. ABB in the market Commitment to sustainability Examples of sustainable products Way forward and priorities. ABB’s focus. We focus on power and automation technologies ….

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Jörgen Centerman President and CEO

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  1. Sustainability media briefing London, June 5, 2002 Jörgen Centerman President and CEO

  2. Overview • ABB in the market • Commitment to sustainability • Examples of sustainable products • Way forward and priorities

  3. ABB’s focus We focus on power and automation technologies … … enabling utility and industrycustomers to improve performancewhile lowering environmental impacts Every single customer of ours needs both power and automation technologies

  4. ABBin the market Industry-specific power and automation products, solutions and services Generic power and automation products The customer-centric structure C U S T O M E R S Oil, Gas and Petrochem External Channel Partners External Channel Partners Utilities Industries G r o u p P r o c e s s e s Power Technology Products Automation Technology Products

  5. ABBin the market Optimization Integration Connectivity Information IndustrialIT key element in our sustainability • IndustrialIT – one architecture – common approach • Plug and produce for all power and automation offerings • Lower cost, higher quality, ease of use and integration • Environmental performance part of product offering • Four levels of IndustrialITcertification Almost 10,000 products and product groups certifiedAll relevant (40,000) by year-end

  6. ABBin the market IndustrialIT drives sustainability benefits • Less energy consumption • Less raw materials use • Lower environmental impact • Lower costs

  7. Overview • ABB in the market • Commitment to sustainability • Examples of sustainable products • Way forward and priorities

  8. Commitment to sustainability Our triple bottom line approach ABB’s pursuit of sustainability is to balance and continuously improve the three elements of our performance Economic A triple bottom linefocus on people, planet and profit Sustain- ability Social Environmental

  9. Commitment to sustainability Economic performance To ensure ABB’s sustainability, our economic performance is the top priority n EBIT 1.2% in 2001; 4.5% in Q1 2002; aiming for 4-5% in 2002 n Net debt US$2 billion reduction in Q4, 2001; cut by another US$1.5 billion in 2002 n Revenues 8% in 2001 (local currencies) maintain 6% average growth per year

  10. Commitment to sustainability Customers Recycling 10-30 years Gate 3 Grave A life cycle focus Environmental performance Suppliers ABB Weeks Environ- mental impact ABB Gate 1 Gate 2 Cradle

  11. Commitment to sustainability Environmental performance Suppliers and ABB nEnvironmental requirements communicated to all major suppliers, SQR (Suppliers’ Qualification Requirements) n Environmental Management Systems implemented in almost all manufacturing sites (531 in 50 countries) n Over 1,000 continual improvement projects at any point in time nEnvironmental Product Declarations for core products Pioneering environmental performance

  12. Commitment to sustainability Implementation of ISO 14001 600 500 400 300 200 100 0 (98%) 1997 1998 1999 2000 2001 ABB’s manufacturing sites ISO 14001

  13. Commitment to sustainability Environmental performance - Manufacturing Reducing hazardous waste in ABB Shanghai Transformer Co. Ltd, China (tons) 50% reduction in three years

  14. Commitment to sustainability Environmental performance - Manufacturing Reducing the consumption of electricity (MWh) for manufacturing of electrical machines at ABB Motors, Sweden 1994 1995 1996 1997 year 1998 1999 2000 2001 0,00 1,00 2,00 3,00 4,00 5,00 6,00 7,00 8,00 9,00 10,00 MWh of electricity per MW of machine size Target Result

  15. Commitment to sustainability Environmental performance Customers and ABB By continuously increasing the environmental performance of our products and services, we have even bigger impact on our customers’ performance n Increased capacity n Increased efficiency of industrial processes n Increased product performance n Less energy consumption

  16. Commitment to sustainability 100 95 90 85 80 75 Drive* Motor Total efficiency % 1981 1985 1995 2000 *Frequency converter & electronics Environmental performance • Improved efficiency of LV AC motors • Further improved by using electrical drives Industry uses 50% of all electricity - of which 65% for electrical motors

  17. Commitment to sustainability Social performance • New ABB social policy launched last year • Policy tested through stakeholder engagement (45 dialogues in 34 countries) • We acknowledge the social impacts of ABB’s transformation Social performance detailed in in our new Sustainability Report

  18. Commitment to sustainability Social policy focus • Employees • Occupational health and safety • Suppliers • Community involvement • Business ethics ABB is committed to corporate social responsibility Social performance as important as environmental

  19. Overview • ABB in the market • Commitment to sustainability • Examples of sustainable products • Way forward and priorities

  20. Examples of sustainable products Integrated energy systems ABB a key integrator and component supplier Small-scale, distributed and renewable sources of electricity are key additions

  21. Examples of sustainable products Windpower n ABB is world’s largest supplier of components for wind technology, e.g. generators, transformers, control systems, cables, substations n HVDC Light technology transmits power to the grid with low losses n ABB’s business for wind power has increased by 25% per year over the past few years

  22. Examples of sustainable products Microturbines n Demand for small-size power plants particulary where there is no grid n A microturbine comprises a high-speed gas turbine and a direct-driven generator n Hot gas from the turbine can be used as a resource for heating or cooling(co-generation) n 80% efficiency (50% for heat 30% for electricity) Quick and simple installation Short payback times

  23. Examples of sustainable products Motorformer - significant savings • Connects directly to the grid, eliminating ancillary components • Produces reactive power to support the network, i.e. less losses • Replacing a 20 MW conventional machine would reduce CO2 emission by 7,500 tons over 20 years (equals 3,000 households for one year)

  24. Examples of sustainable products Drives n Within industry, electrical motors consume 65% of all electricity n Conventional motors always run at their maximum capacity n 70% of the energy can be saved by varying the motor speed to the actual need for energy n ABB drives reduce global CO2 emissions by 50 million tons every year (equal to annual emission of a city of six million people)

  25. Overview • ABB in the market • Commitment to sustainability • Examples of sustainable products • Way forward and priorities

  26. Way forward and priorities Improve our economic performance n Deliver average revenue growth 6% per year n Increase EBIT to 9 – 10% by 2005 n Improve our balance sheet n Reduce and reschedule our net debt (2/3 long term; 1/3 short term) n Increase productivity, reduce costs

  27. Way forward and priorities Improve our environmental performance n Go beyond manufacturing and apply Environmental Management Systems to our non-manufacturing organizations n Continually improve our performance, e.g. by less use of hazardous material, less use of energy n Create more value for our customers by offering more sustainable solutions

  28. Way forward and priorities Improve our social performance • Implement our social policy worldwide with special emphasis on local needs • Measure continuous improvement by developing relevant indicators (guided by GRI triple bottom line reporting) • Increase focus on business ethics (”zero” tolerance for unethical behaviour) • Pursue high health and safety performance (”zero” target for serious accidents) • Apply our policy to suppliers (urge same standards as ABB)

  29. Way forward and priorities Common effortspriorities ABB advocates fair trade conditions and good development opportunities for everyone n World Energy Council CO2 emission reduction program, an ABB initiative n China Energy Technology Program, led by ABB n UN Global Compact, ABB an active, early supporter n “Access to Electricity” to provide electricity and enable development in poor communities

  30. Transform sustainability into customer value

  31. Operationalpriorities Asbestos – uncertain, but well-managed Q1 2001 Q2 2001 Q3 2001 Q4 2001 Q1 2002 * New claims Settled claims Pending claims Cash paid (pre insurance)*** 13,200 12,200 14,300 15,000 14,300 8,000 6,100 6,600 6,700 13,300 * * 71,400 77,500 85,200 93,500 94,500 $37,400 $29,000 $ 36,100 $ 33,200 $ 51,500 * Combustion Engineering considers that the full-year trends for 2002 as regards new claim filings, claims settled and cash settlement cannot be estimated reliably based on first quarter outcome * * Over 50% settled without payment * * * Thousand dollars

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