Quanta results hurt by force majeure at Alaska power plant

Quanta Services (NYSE:PWR) said Aug. 4 that its quarterly results were hampered by a claimed force majeure event and continued engineering and production issues on a power plant construction project in Alaska.

Quanta’s operating results suffered a project loss of approximately $30.5m ($18.6m net of tax) in connection with the plant construction project, the company said in a quarterly earnings news release.

Operating results were also affected by lower than anticipated revenues and margins in the oil and gas segment, which were attributable to delayed project starts and, to a lesser extent, wildfires in Alberta, Canada.

In addition, Quanta’s operating results were hurt by a higher than anticipated tax rate as the percentage of earnings from jurisdictions with higher tax rates increased.

“The power plant project continues to distort the earnings of our core electric operations, which have performed well in the first six months of the year,” said Quanta Services President and CEO Duke Austin.

“Further, activity in the large electric transmission project market is building, as evidenced by the two new projects announced in this release, and we continue to see substantial bidding activity,” Austin said.

“Subsequent to the second quarter, we have mobilized and are preparing to mobilize on a number of large diameter pipeline projects, which support our expectations for meaningful increases in consolidated revenues, margins and earnings in the second half of this year,” Austin said. “We continue to have a positive multi-year view on the end markets we serve and believe we are well positioned to serve the expanding needs of our customers,” the CEO added.

Quanta released earnings results for the three and six months ended June 30.

The Quanta news release did not disclose the name of the power plant in Alaska. More than two years ago, a Quanta affiliate was awarded a contract to be the EPC contractor for the Anchorage Municipal Light & Power for a new 120-MW natural gas power unit.

Revenues in the second quarter of 2016 were $1.79bn and net income from continuing operations attributable to common stock was $16.6 m, or 11 cents per diluted share. Quanta’s operating results for the three months ended June 30. Revenues in the second quarter of 2015 were $1.87bn and net income from continuing operations attributable to common stock was $32m, or 15 cents per diluted share.

Quanta also announced two new wires contracts.

• In July 2016, Quanta was selected by a California-based utility for a large electric power transmission and distribution project located primarily in a national forest area in Southern California. The project is being overseen by Quanta affiliate CRUX Subsurface. Quanta’s scope of work includes the engineering, procurement and construction (EPC) of the project, including rebuilding and replacing about 145 miles of 12 and 69-kV underground and overhead electric power infrastructure.

Engineering and related services for the project have begun, and completion is anticipated in late 2019.

• In late June 2016, PAR Electrical Contractors (PAR), a Quanta Services company, began construction on a new 100-mile double-circuit 345 kV transmission line for a Midwest utility in its service territory. PAR’s scope of work includes access roads, foundations, steel pole erection, wire stringing and material management. The project is scheduled to be completed in the third quarter of 2018.

Quanta Services is a leading specialized contracting services company, delivering infrastructure solutions for the electric power and oil and gas industries.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.