Servicing Utilities

Jan. 1, 2009
With all the talk about rebuilding the U.S. power grid, Quanta Services may be plugged into one of the hottest market segments over the next few years.

When the economy pulls out of this tailspin, distributors will be scrambling to find the contractors positioned to rebound the fastest. One company to get to know will be Quanta Services, Houston, a 15,000-plus employee hybrid contractor established in 1997 that offers a unique blend of services, including a billion-dollar specialty in the construction and maintenance of high-voltage transmission lines for utilities.

In its last full fiscal year, 57 percent of the company's total sales came from electric power work; other business came from the telecommunications and cable television markets (17 percent), and gas work markets (14 percent). Ancillary services such as inside electrical wiring, intelligent traffic networks, fueling systems, cable and control systems for light rail lines, airports and highways and specialty rock trenching, directional boring and road milling for industrial and commercial customers provided the remaining 12 percent of company's sales. Quanta's revenues for the first nine months of 2008 were $2.86 billion and included its InfraSource business, which it purchased in 2007. Total revenues in 2007 were $2.66 billion.

The company's current and recently completed projects offer a glimpse of its diverse interests — and a taste of the sheer size of the electrical sales opportunities that await in the build-out and refinement of the U.S. power grid and the growth of alternative energy sources such as utility-scaled wind farms and photovoltaic arrays. Here are a few of those projects:

  • A $750 million contract with Northeast Utilities to enhance and maintain New England's transmission infrastructure over the next six years.

  • A contract with Oklahoma Gas and Electric for the construction of approximately 120 miles of 345,000V transmission infrastructure.

  • A contract with the Lower Colorado River Authority (LCRA) worth up to $194 million over five years where the company's Irby Construction unit will build transmission lines and monitor environmental controls, structural foundations, installation, energizing of new transmission lines and the reconstruction of existing transmission lines.

  • A 75-mile 500,000V transmission line to link the Tehachapi wind project between Bakersfield and the Mojave Desert to California's electrical grid.

  • A 2 megawatt, ground-mounted solar system with more than 9,000 solar panels at the Denver International Airport that's projected to provide 40 percent of the power supply required to run the airport and save the airport an estimated $13 million over the next 20 years. Quanta provided site preparation and installation for the more than 9,000 panels required for the system. It's one of more than 30 renewable energy projects Quanta had in progress in mid-2008.

Overseeing all of this work is John Colson, the company's chairman and CEO, who was recently included in a Forbes magazine article entitled, “The Best CEOs You Don't Know.” Before taking over the top post at Quanta, Colson spent more than 30 years in the electrical contracting business, including approximately 20 years with PAR Electrical Contractors, Kansas City, Mo., now owned by Quanta. In his early years with Quanta, Colson built the company through several dozen contractor acquisitions.

Colson believes the company is well-positioned to take advantage of the Obama Administration's announced intentions to improve the nation's power grid. According to a January 2008 report by the Edison Electric Institute, investor-owned utilities plan to spend more than $38 billion in transmission system infrastructure over the next three years, a 60 percent increase over the amount invested between 2003 and 2006. According to Platts Research, currently more than 700 proposed transmission projects totaling over 23,700 miles are being planned.

Quanta (PWR) has a relatively high profile on Wall Street these days, and is on the buy lists for several prominent investment analysts. CEO Colson appeared twice in 2008 on Jim Cramer's “Mad Money” show on MSNBC. At presstime, Quanta's stock was trading at approximately $21 per share.