Utility infrastructure company Quanta Services Inc. has paid about $300 million for a maker of power transformer, substation units and other components that executives say gives them another “important, secure and domestic supply chain solution” in a growing energy construction market.
Houston-based Quanta used both cash and stock to buy Pennsylvania Transformer Technology LLC, which was founded in 1996 but traces its transformers roots to 1929. The company has annual revenues of about $100 million and runs its main factory—an 18-building, 1 million-square-foot complex that formerly housed McGraw-Edison and Cooper Power Systems—southwest of Pittsburgh as well as a smaller plant in Raeford, North Carolina.
Austin said Quanta is planning to put some more capital to work to boost productivity in Pennsylvania, particularly when it comes to some component production lines. But building scale—or via other acquisitions of transformer companies—isn’t a goal by itself, he added.
“It’s really not about the manufacturing capacity,” Austin said. “It’s what we can do with it, the synergies we can get with it, with the client.”
Transformers have been a pain point for a number of utilities since COVID-19 began disrupting supply chains nearly four years ago. Early this year, several utility officials told T&D World they were being quoted multi-year wait times for new transformers. And with billions of dollars being funneled into the expansion of the country’s generation, transmission and distribution networks, the risk of persistent or recurring shortages of various parts and services has risen from its historical baseline.
Austin and his team have for several years been buying companies with ancillary services to address that risk: In 2020 and 2021, their acquisitions included a maker of personal protective breathing equipment, a provider of land services and a California helicopters venture.
For Austin and Quanta, such purchases—as well as the blockbuster $2.4 billion deal for Blattner in 2021—are about growing to meet the size of the energy sector’s megatrends. The company now employs roughly 56,000 people—some 7,000 more than just six months ago—and during the third quarter booked a profit of $274 million, up from $156 million in the same period of 2022. Revenues during the period climbed to $5.62 billion from $4.46 billion in the prior-year quarter.
On the back of those numbers, Austin and CFO Jayshree Desai raised their 2023 top-line guidance to a range of $20.1 billion to $20.4 billon. More telling about the future growth, though, is Quanta’s order backlog: That finished September at a record $30.1 billion, up nearly $4 billion from mid-year and more than $11 billion higher than a year ago.
Shares of Quanta (Ticker: PWR) finished Nov. 9 trading at $169.50, essentially flat on the day. They are also unchanged from six months ago—recent concerns about the financials of several renewable-energy projects have soured investor sentiment—which has left the company’s market capitalization around $25 billion.