No. 1 public company: Quanta Services
In a constantly changing energy world, giving customers solutions early is key
Updated 8:15 pm, Saturday, June 22, 2013
In an energy landscape undergoing rapid changes, Quanta Services has tried to predict the future.
The Houston-based builder of energy transmission systems and pipelines has paid close attention to changing regulations, renewable energy projects and the trends that led to the shale boom.
That has helped Quanta become an early mover, one that was as ready to link cities with newly constructed wind turbines as it was to connect prolific shale plays with refineries, CEO Jim O'Neil said.
The approach has ushered in an era of surging earnings and growth for Quanta, which tops this year's Houston Chronicle 100 list of the area's best-performing public companies. Last year, it ranked 76th.
Quanta led with strong results in several categories, including revenue growth of 41 percent, to $5.9 billion. Its earnings per share jumped 143 per-cent, to $1.36.
Another indicator of the company's growth is its rapid expansion, O'Neil said. Quanta has ballooned to more than 20,000 employees from 12,000 in about two years, he said.
The employee ranks expanded as Quanta followed a strategy of preparing to take on new work faster and more efficiently than competitors, O'Neil said.
After noticing regulations across the United States that called for more renewable power generation, for instance, Quanta built up the capabilities to traverse forests and quickly install equipment in an environmentally safe way, he said. The same capability to anticipate industry developments has given Quanta a head start on replacing aging transmission lines and building pipelines for shale plays.
"Really, we're trying to stay two to three years ahead of our customers, to have solutions for our customers before they get there," O'Neil said.
Quanta had no significant pipeline construction business before 2009, when it projected growing pipeline demand from shale plays and decided to acquire Houston-based Price Gregory Services, a leader in oil and gas pipeline building, O'Neil said.
"We had zero presence in the shales two years ago," he said. Now, he added, "close to 20 per- cent of our revenues are generated from shale work specifically. So it's been a huge growth driver for us."
Looking ahead pays off
Though Quanta's positioning for growing pipeline demand is expected to pay off big, shale was not the main source of its growth in 2012.
Quanta's efforts to build major electrical transmission lines, including its role in a massive effort to connect 85 megawatts of wind power in Texas, were key for the company, said John Rogers, an analyst for investment firm D.A. Davidson & Co.
Quanta's operating income from its electric power business jumped 54 percent in 2012, to $521 million.
"This goes back a decade or more," Rogers said. "They've built that company to work on the transmission market and take advantage of growth in that market. ... With so many contractors, the successful ones are able to see market trends or prospects early and position themselves to take advantage of that rather than just chasing the next hot market."
Quanta's forward-looking approach led it to invest more in its skilled laborers, who make up the bulk of its workforce. It did so during the economic downturn, when other companies were not spending on such efforts.
"We knew we couldn't afford (not) to because we could see what was going to happen in '11, '12 and '13," O'Neil said. "And it played out that way. So we had a competitive advantage because we did have the skilled people."
Big and complex
Another key to the company's growth has been its ability to quickly build large-scale projects that are often complicated and extremely difficult. Some have involved helicopters working to move and install power lines and towers while not disrupting fragile environments, O'Neil said.
"It's extremely challenging, but that's what differentiates us from everyone else because we have a track record of reliably performing those jobs," he said.