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WIKI ANALYSIS
Quanta Services (PWR) installs and repairs infrastructure for the natural gas, electric, telecommunications, and cable industries. Its primary business is installing power lines and power distribution networks for companies that provide power, like gas and electric utilities.
The aging U.S. and Canadian power grid consisting of more than 200,000 miles of high-voltage lines now requires significant maintenance and expansion to handle the nation’s growing power needs. North American Electric Reliability Council (NERC) industry professionals currently recommend a complete electric infrastructural overhaul by 2014.[1] In addition, in conjunction with the 20% US Population growth since 1990, energy consumption has increased by a comparable 18%. [2] Increasing demand for electricity has resulted in increased spending on transmission and distribution systems. Quanta has been and continues to be a significant beneficiary of this global energy need.
Company Overview
Business Segments[3]
Quanta Services operates in four segments: electric power, telecommunications, natural gas, and ancillary services.[6]
- Electric Power Work (62% of 2009 revenue): In the electric power work segment, PWR installs and maintains power transmission lines and distribution networks.[7]
- Telecommunications (11% of 2009 revenue): In the telecommunications segment, PWR installs fiber optic and DSL networks for data transmission, builds wireless network towers, and leases telecom infrastructure through its dark fiber business.[8]
- Dark fiber refers to the leasing of as-yet-unused infrastructure; because of the substantial overhead required to install fiber optic lines, it makes sense to install more fiber in order to account for future expansion.[9]
- Natural Gas (24% of 2009 revenue): In the natural gas segment, PWR installs gas transmission and distribution systems and provides pipeline testing services.[10]
- Ancillary Services (3% of 2009 revenue): This segment provides specialized services, such as installing traffic lights for local governments and building wiring and automation systems for business customers.[11]
Business & Financial Metrics[12]
In 2009, PWR generated a net income of $162.2 million on $3.32 billion in total revenues. This represents a 2.9% increase in net income on a 12.2% decrease in revenues from 2008, when the company earned $157.6 million on revenues of $3.78 billion.
Trends and Forces
Aging U.S. and Canadian Infrastructure Will Need Renovation
The U.S. and Canadian electric power grid consists of more than 200,000 miles of high-voltage lines delivering electricity to over 300 million people.[13] The infrastructure is aging and requires significant maintenance and expansion to handle the nation's growing power needs. North American Electric Reliability Council (NERC) industry professionals estimate a complete electric infrastructural overhaul in the next 5-10 years in order to respond to the wavering reliability of the transmission system. In addition, NERC issued a report forecasting a 135,000 peak-megawatt consumption (ie consumption during summer) by 2017, a 17.7% increase over the next ten years. [14]. Lastly, the failure rate for an electricity transformer rises sharply 30 years after installation; the US' last major investment in transformers occurred in 1974, to accommodate a peak of 185 giga-voltage amperes. As a result, power companies throughout the United States are beginning to replace aging transformer units, which benefits PWR's Electric Works division.[15]5
Demand Spike In Energy as Result of 20% Domestic Population Growth
The U.S. population has increased by about 20% since 1990, with energy consumption increasing by a comparable 18%.[16]In addition, The EIA projects that U.S. electricity sales from producers to consumers will increase to 5168 billion kilowatt-hours in 2030.[17] Increasing demand for electricity has resulted in increased spending on transmission and distribution systems, as shown by increased investment spending by investor-owned utilities; as these utilities renovate their infrastructure to meet demand, specialized infrastructure companies such as Quanta reap the benefits.
Competition
Quanta Services competes with other specialized construction firms to acquire contracts from electric, telecommunications, and natural gas service providers. Some of its competitors include:
- Emcor Group (EME) specializes in lighting systems, data communication systems, ventilation systems, fire protection systems, and water treatment systems.[18]
- Integrated Electrical Services (IESC) is a U.S. provider of electrical contract services. IESC serves commercial, industrial, and residential markets.[19]
- Mastec. Corp specializes in the installation and maintenance of communications and utility infrastructure in the United States.[20]
- URS Corp., unlike Quanta, does most of its business through contracts with the U.S. federal government.[21]
References
- ↑ PWR 2007 10-K, Item 1: Business, page 4
- ↑ PWR 2007 10-K, Item 1: Business, page 4
- ↑ PWR 2009 10-K pg. 2
- ↑ PWR 2007 10-K, Item 1: Business, page 3
- ↑ PWR Google Finance July 4, 2008
- ↑ PWR 2007 10-K, Item 1: Business, page 3
- ↑ PWR 2007 10-K, Item 1: Business, page 6
- ↑ PWR 2007 10-K, Item 1: Business, page 6
- ↑ PWR 2007 10-K, Item 1: Business, page 3
- ↑ PWR 2007 10-K, Item 1: Business, page 6
- ↑ PWR 2007 10-K, Item 1: Business, page 6
- ↑ PWR 2009 10-K pg. 31
- ↑ PWR 2007 10-K, Item 1: Business, page 4
- ↑ PWR 2007 10-K, Item 1: Business, page 4
- ↑ SPX Annual Guidance Meeting 2008 pages 35-37, Source: Hartford Steam Boiler
- ↑ PWR 2007 10-K, Item 1: Business (Industry Overview), page 4
- ↑ PWR 2007 10-K, Item 1: Business (Industry Overview), page 4
- ↑ EME Google Finance, July 4,2008
- ↑ IESC Google Finance, July 4,2008
- ↑ MTZ Google Finance, July 4,2008
- ↑ URS Google Finance, July 4,2008
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