Buoyed by the billions of dollars being steered to strengthening the grid and other elements of the energy ecosystem, the leaders of Quanta Services Inc. say their infrastructure services company can grow revenues by $9 billion in the next five years without any acquisitions – although they plan to continue to be in the market for deals.
Quanta President and CEO Earl ‘Duke’ Austin Jr. and CFO Derrick Jensen last October completed their purchase of renewable generation infrastructure specialists Blattner Holding Co. for more than $2.7 billion, Quanta’s largest ever acquisition and one that helped 2021 sales grow to nearly $13 billion. But, speaking to analysts and investors April 5, Jensen said the market shouldn’t expect Houston-based Quanta to take a break from M&A. He pointed to four bolt-on acquisitions (for about $230 million in all) the company has completed since Blattner, deals that bring with them an annual revenue run rate of between $200 million and $250 million.
“We think that those type of transactions still exist,” Jensen said while also noting the Quanta team won’t shy from other big-dollar deals if they make sense. “We think we can still [complete] transactions that are additive, value-creating and differentiating between us and our competitors and to our customers […] We like those transactions.”
For all of 2021, Quanta bought nine businesses for $345 million in addition to Blattner – which should generate about $2.6 billion in sales this year. Those deals built up the company’s presence in its core electric power segment, which even after rolling Blattner will account for more than half of 2022 revenues, but also pushed it further into the communications and refining/petrochemicals sectors.
Still, Austin and Jensen – who have both been with Quanta for more than two decades – made the company’s case to investors in large part by saying it doesn’t need M&A to be at “the tip of the spear” of the energy transition that has utilities budgeting billions annually in generation, transmission, distribution, storage and hardening projects. They said those megatrends will, despite shorter-term bumps such as a shortage of solar panels, proceed as forecast – if not more quickly than expected – for the rest of this decade and beyond. Austin added that many of Quanta’s utility customers can juggle short-term priorities between solar, wind or transmission projects to adjust to supply chain snarls.
As a way of showing how those megatrends are feeding into Quanta’s business, its executives noted that, from 2016 to 2021, Quanta’s base business revenues from its 20 largest customers grew to roughly $6 billion from about $2.5 billion. Its backlog of business, meanwhile, finished 2021 at more than $19 billion, up from $15.1 billion 12 months earlier and $11.2 billion at the end of 2017.
Austin pointed to undergrounding as one example where Quanta stands to generate a lot of business in its gas and telecom businesses as well as its electric work.
“Ten years ago, we would’ve said, ‘Hey, you can’t go underground. It’s too expensive.’ Now you say, ‘Well, the loss of life on the West Coast, the amount of insurance that is spent on fires, storms, all those things… You can’t afford not to underground in many areas,’” Austin said. “I think you’ll see it across the coastlines. You’ll see it here in New York as we bring wind on. You’ll see more and more undergrounding across the system.”
Quanta shares (Ticker: PWR) fell slightly April 6 to about $129. They have risen more than 10% over the past six months, growing the company’s market capitalization to about $18.5 billion.
