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Quanta-Sempra Settle Sunrise Powerlink Project Dispute - Analyst Blog

Zacks Equity Research
Updated

Quanta Services Inc.’s (PWR) subsidiary, PAR Electrical Contractors, Inc., penned a settlement deal with San Diego Gas and Electric related to the change order dispute associated with the Sunrise Powerlink Transmission Line project in California. Per the agreement, PAR Electrical Contractorswill get cash payment of $65 million from the latter. This amount denotes the final compensation to Quanta Services’ subsidiary for its unpaid share of cost incurred on the project.

Specifically, the dispute was regarding the work performed by PAR Electrical Contractors for the Sunrise Powerlink Transmission Line project of San Diego Gas and Electric – an operating arm of Sempra Energy (SRE). This project was completed in 2012.

With the cracking of the settlement deal, Quanta Services projects its provision for long-term contract receivable to incur a charge of $50 million in fourth-quarter 2014. The company’s fourth-quarter results are anticipated to have an impact of about 14 cents per share (an after tax reduction) from this provision.

The settlement of dispute between the two parties is noteworthy and promises scope for contracts for future projects, going forward. As a matter of fact, Quanta Services has been benefiting from increased spending in the Electric Power segment on projects to upgrade and deploy electric power transmission infrastructure. Recently, the company’s Alberta PowerLine won one of the largest engineering, procurement and construction (EPC) electric transmission project contracts of North America (Shares of Quanta Services Rise on Canadian Project Win).

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Quanta currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include Willdan Group, Inc. (WLDN) and AECOM Technology Corp. (ACM). Both stocks carry a Zacks Rank #1 (Strong Buy).


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