Long-term Strategies
Quanta needs to continue providing solutions to enable the long-term move towards a carbon-neutral economy. One way they can accomplish this is supporting the modernization of utility infrastructure. The existing grid for electric power and natural gas utility systems in North America is approaching or beyond its useful life (Quanta, 2021b). Many utilities are amid a long-term process of replacing, updating, building new and modernizing their infrastructure. Quanta can position themselves to assist utility customers in building these projects to improve reliability of the system and reduce carbon emissions and meet the needs of the future economy (Quanta, 2021b). In addition, capital investments in electric and gas utility infrastructure are large and growing, and these investments are non-discretionary/necessary (Quanta, 2021b). Over 70% of Quanta’s revenues are within these markets, and so they can expect further growth opportunities with expected market share gains and outsourcing trends (Quanta, 2021b).
Quanta needs to continue building its base business, further defined as contracts less than $100 million for electric power and less than $75 million for underground utility and infrastructure (Quanta, 2021b). The base business of Quanta is estimated to be over 90% of revenue in 2021 up from 79% in 2016. It resides in utilities, communications, and industrial customers with highly visible and growing multi-year capital investment programs (Quanta, 2021b). The base business follows industry drivers and customer investment trends and are longer term in nature whereas large projects are shorter-term and do not repeat and are much more difficult to replace. Growing the percentage of business in smaller contracts mitigates risk and diversifies Quanta’s portfolio to position them to adapt and grow as the infrastructure market changes.
Quanta needs to position itself to be a leading solutions provider in the renewable energy field. As economies move towards carbon-neutral or net zero emissions, more and more renewable energy resources will be required. States across North America are increasing renewable targets and/or establishing clean energy standards. Some utilities and corporations are moving without government action, committing to 100% clean energy or net-zero by 2050 (Quanta, 2021b). Renewable energy farms and fields for solar and wind power are often built-in remote locations, requiring the construction of large transmission lines and substations for delivering power to end users (Quanta, 2021b). Achieving these renewable energy goals set by corporations and governments will require substantial incremental transmission and substation investment, which Quanta is positioned well to capitalize on and provide support for these projects.
The power grid will require hardening to keep up with the trend towards electrification and increases in electric vehicle usage. The power grid will require significant investment to keep up with increases in demand. The change in power source from gas to electric for vehicles is estimated to require increased demand for electricity and require new power generation of 70 to 200 Gigawatts by 2030 and an additional 200 to 800 Gigawatts from 2030 to 2050, with 75 to 90% coming from renewables (Quanta, 2021b). This will lead to an estimated $30 to $90 billion of incremental transmission line investment by 2030 and an additional $200 to $600 billion from 2030 to 2050 (Quanta, 2021b). Quanta needs to continue to position itself to provide these solutions when utility companies are expanding their transmission lines and outsourcing their needs.
Other areas where Quanta can position itself to support in the long term is in the development of autonomous vehicles, smart cities, Internet of Things and connected objects and future technology innovations. For many of these advanced technologies to work, they require infrastructure. In many cases, the technology is developing faster than the infrastructure. Quanta can position themselves to provide critical infrastructure services that enable the new technologies of the future (Quanta, 2021b).
Lastly, there are over 544,000 miles hazardous liquids and gas pipelines in the U.S. With challenges in building new mainline pipeline projects, this could make maintaining existing pipeline systems more valuable (Quanta, 2021b). Quanta also needs to stay on-top of future pipeline safety rules and regulations, which will continue to drive investment in safety programs for pipelines over the next 15 years. Quanta should not seek to grow these operations, but instead offer this service to keep the solid cashflow from the pipeline construction business.
References
Cain, T. (2020, March 18). Brand Strategy: The Top 5 Benefits of Rebranding. Bluefrogdm.com. https://www.bluefrogdm.com/blog/brand-strategy-the-top-5-benefits-of-rebranding
Quanta Services Inc. (n.d.-a). All SEC Filings. Quanta Services, Inc. Retrieved November 5, 2021, from https://investors.quantaservices.com/sec-filings/all-sec-filings?form_type=10-K&year=#
Quanta Services Inc. (n.d.-b). Home. Quanta ESG. Retrieved December 6, 2021, from https://esg.quantaservices.com/
Quanta Services Inc. (2021a). Third Quarter 2021 Earnings Call Presentation. https://d1io3yog0oux5.cloudfront.net/_484af54680494e9c8ab2ca49168f5b9d/quantaservices/db/706/6487/pdf/Quanta+-+PWR_3Q21_Earnings_Deck_MASTER_vF.pdf
Quanta Services Inc. (2021b). Investor Presentation. https://d1io3yog0oux5.cloudfront.net/_484af54680494e9c8ab2ca49168f5b9d/quantaservices/db/706/6469/pdf/PWR+Investor+Deck+Aug-Sept+21+vF.pdf
Team, T. (2021, June 25). Why Quanta Services Stock Is A Solid Re-Opening Play. Forbes. https://www.forbes.com/sites/greatspeculations/2021/06/25/why-quanta-services-stock-is-a-solid-re-opening-play/?sh=5676c3625831