HOUSTON, June 22, 2020 /PRNewswire/ -- Quanta Services, Inc. (NYSE: PWR) announced today that LUMA Energy, LLC (LUMA), a joint venture between Quanta Services (Quanta) and Canadian Utilities Limited, an ATCO Ltd. Company (ATCO), in conjunction with Innovative Emergency Management, Inc. (IEM), has been selected by the Puerto Rico Public-Private Partnership Authority (P3) for a 15-year Operation and Maintenance Agreement (the O&M Agreement) with the Puerto Rico Electric Power Authority (PREPA). This O&M Agreement engages LUMA to operate, maintain and modernize PREPA's more than 18,000-mile electric transmission and distribution (T&D) system in Puerto Rico following a transition period. LUMA's selection by the P3 for the O&M Agreement has received all necessary final regulatory and government approvals and follows a competitive process that lasted for more than a year. In addition to delivering a more reliable and resilient power grid, LUMA believes its efforts will lead to the transformation of PREPA and deliver long-term social and economic benefits to the people of Puerto Rico. LUMA will not own the T&D assets nor own or operate the power generation assets. Quanta and ATCO each own 50% of LUMA.
Duke Austin, Quanta's President and Chief Executive Officer, commented, "We believe this opportunity is transformative for Quanta and supports our ongoing strategy of providing sophisticated and valuable solutions to the utility industry that benefit consumers. By bringing together Quanta's industry leading electric utility services and project execution, ATCO's operational excellence and customer service expertise as a utility provider and IEM's unparalleled experience in federal funds management, we have created a purpose-built and effective operator for the Puerto Rico T&D system and the people of Puerto Rico. We intend to invest our time, expertise and resources in LUMA to operate a world-class electric grid and to develop a modern, highly trained craft-skilled workforce for the future of Puerto Rico. Through a disciplined, committed approach, LUMA will have the benefit of Quanta's industry-leading craft-skilled workforce, as well as recognized experts in technical areas such as high-voltage transmission construction, distributed energy resources and microgrid integration. LUMA also will manage the disciplined implementation of targeted investments by PREPA and drive efficient operations to facilitate delivery of a modern, secure, resilient and affordable electric grid for the residents of Puerto Rico."
LUMA Overview and Value Proposition
LUMA is headquartered in San Juan, Puerto Rico and is in the process of mobilizing a talented team of experienced professionals to oversee and implement a tailored, community-first approach for the full transfer of PREPA's T&D operations to LUMA, which is expected to occur at the end of a transition period targeted for mid-2021. LUMA expects to capitalize on the strengths and proven expertise of its world-class organizations to deliver a unique infrastructure solution for Puerto Rico's electric T&D system. During the transition period, LUMA will work collaboratively with PREPA and the government of Puerto Rico to complete numerous steps necessary to ensure a smooth transfer and begin the historic opportunity to modernize the T&D system and transform PREPA. LUMA will receive a fixed Front-End Transition Service Fee and reimbursement of labor costs, third party consulting fees and out-of-pocket expenses incurred for transition services. Additional information can be found on the P3 website at http://www.p3.pr.gov/.
Key features of the LUMA value proposition include:
Additionally, LUMA's owners have committed to fund and open a state-of-the-art line worker and technical training campus in Puerto Rico, to be operated by Quanta's accredited postsecondary educational institution - Northwest Lineman College. This facility is intended to provide world class, customized curriculum and training to LUMA utility workers and the next generation of Puerto Rico's skilled workforce, contributing to sustainable economic development locally.
This Collaboration is Consistent with Quanta's Strategic Plan and is Expected to Provide Compelling and Visible Long-Term Financial Contributions
Quanta's ownership interest and participation in LUMA will be accounted for as an equity method investment due to Quanta's equal ownership in and management of LUMA with ATCO. Therefore, Quanta will not recognize revenues and operating expenses related to LUMA on its income statement, but will record its 50% portion of LUMA's earnings within "Equity in Earnings of Unconsolidated Affiliates" on its income statement. As a result of equity method accounting, Quanta does not expect to include LUMA's estimated future revenues, of which 50% would be Quanta's proportionate amount, in its remaining performance obligations and backlog.
Quanta anticipates providing its expectations of LUMA's financial contribution to the company in 2020 and 2021 as part of its second quarter of 2020 financial reporting, and in compliance with disclosure requirements of the P3. Quanta's visibility and expectations for 2021 will depend on a number of factors, some of which are not in LUMA's control, including the final timing and outcomes of the PREPA Title III process, and several conditions necessary for conclusion of the transition period, and commencement of the operations period. These conditions include completion of LUMA's preparation for operations, as well as the completion of certain governmental responsibilities related to the administration of the contract. Quanta anticipates providing supplemental information regarding its pro-rata portion of LUMA's operations in its future earnings releases and other public investor communications.
About Quanta Services
Quanta Services is a leading specialized contracting services company, delivering comprehensive infrastructure solutions for the utility, pipeline, energy and communications industries. Quanta's comprehensive services include designing, installing, repairing and maintaining energy and communications infrastructure. With operations throughout the United States, Canada, Australia and select other international markets, Quanta has the manpower, resources and expertise to safely complete projects that are local, regional, national or international in scope. For more information, visit www.quantaservices.com.
About Canadian Utilities.
With approximately 4,600 employees, assets of $20 billion, and two million customers around the world, Canadian Utilities Limited, an ATCO company, is a diversified global energy infrastructure corporation delivering essential energy services, service excellence and innovative business solutions in Utilities (electricity and natural gas transmission and distribution), Energy Infrastructure (electricity generation, energy storage, and industrial water solutions); and Retail Energy (electricity and natural gas retail sales). More information can be found at www.canadianutilities.com. .
Innovative Emergency Management (IEM) is a global homeland security and disaster management consulting firm dedicated to building a safe, secure and resilient world. As the largest woman-owned homeland security and emergency management firm in the world, IEM provides services and expertise at every stage of the emergency management cycle — from preparedness and prevention / protection to mitigation, response and recovery. IEM integrates science, technology and real-world experience to provide customers with solutions that work and outcomes that matter. For more information, please visit www.IEM.com.
Forward Looking Statements
This press release (and any oral statements regarding the subject matter of this press release) contains forward-looking statements intended to qualify for the "safe harbor" from liability established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements relating to projected revenues, net income, earnings, return on invested capital, margins, cash flows and other operating or financial results; potential management and incentive fees and the expected value of the O&M Agreement or Quanta's investment in LUMA; the anticipated scope, services, terms and results of the O&M Agreement and Quanta's investment in LUMA; the future performance, efficiency, safety or success of the operation, maintenance and transformation project and Quanta's investment in LUMA, including the expected economic, workforce and social impact on Puerto Rico and expectations regarding future performance of the Puerto Rican electrical grid and service; the successful transition of the transmission and distribution operations to LUMA and the anticipated completion date of such transition; the availability of, and ability to secure, governmental funding for opportunities associated with grid modernization; the ability to develop the technical training campus and any future impact on workforce development; expected performance obligations or backlog; trends, opportunities and economic and regulatory conditions in particular markets; expectations regarding Quanta's business or financial outlook, plans and strategies; the business plans or financial condition of PREPA, including its ability to emerge from bankruptcy; the potential benefits from the investment in LUMA; and the expected accounting treatment of Quanta's investment in LUMA; as well as statements reflecting expectations, intentions, assumptions or beliefs about future events and other statements that do not relate strictly to historical or current facts. Although Quanta's management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. These statements can be affected by inaccurate assumptions and by a variety of risks and uncertainties that are difficult to predict or beyond our control, including, among others, market conditions; the effects of industry, economic or political conditions outside of the control of Quanta, including the ongoing and potential impact to financial markets and worldwide economic activity resulting from the COVID-19 pandemic; successful performance and completion of the O&M Agreement; failure to realize the anticipated value of the O&M Agreement; delays, reductions in scope or cancellations related to the project and potential additional opportunities, including as a result of weather, regulatory or permitting issues, environmental processes, performance issues, claimed force majeure events, protests or other political activity, reductions or eliminations in governmental funding, legal challenges or customer capital constraints; the severity, magnitude and duration of the COVID-19 pandemic, including impacts of the pandemic and of business and governmental responses to the pandemic on Quanta's and LUMA's operations, personnel and supply chain; performance shortfalls by LUMA or any party's inability or failure to comply with the terms of the O&M Agreement, the joint venture agreement and other agreements associated with the arrangement, which may result in disputes, additional costs, unexcused delays, warranty claims, failure to meet performance guarantees, damages or termination; the potential for claims associated with schedule delays, performance shortfalls or inability or failure to comply with the contractual terms of the arrangement; estimates relating to accounting treatment of Quanta's investment in LUMA; adverse weather conditions or significant weather events, including, among others, hurricanes, tropical storms and floods; risks associated with operational hazards that arise due to the nature of LUMA's and Quanta's services and the conditions in which they operate, including, among others, explosions; LUMA's or Quanta's involvement in a catastrophic event (e.g., fire, explosion) or other negative incident in connection with the arrangement; unexpected costs or liabilities that may arise from legal proceedings, indemnity obligations, pension plans, environmental liabilities or other claims or actions asserted against LUMA or Quanta, including those not covered by, or in excess of, third-party insurance; the ability to attract and the potential shortage of skilled labor; the ability to retain key personnel and qualified employees for the successful management of LUMA; the successful negotiation, execution, performance and completion of anticipated, pending and existing contracts; the inability or refusal of PREPA to pay for Quanta's services, including as a result of its ongoing bankruptcy; the inability to secure existing or potential government funding in connection with the arrangement; the potential adverse impact resulting from uncertainty surrounding Quanta's investment in and operation of LUMA, including potential disagreements with respect to management or failure of parties to perform obligations required; the impact of a unionized workforce on operations, including labor stoppages or interruptions due to strikes or lockouts; the failure of suppliers, subcontractors or other third party contractors to perform their obligations, including warranty obligations, under their subcontracts; adverse changes in economic conditions and trends in relevant markets; cancellation and termination provisions present in the O&M Agreement; estimates and assumptions in determining financial results; and other risks and uncertainties detailed in Quanta's Annual Report on Form 10-K for the year ended Dec. 31, 2019, Quanta's Quarterly Report on Form 10-Q for the quarter ended Mar. 31, 2020 and any other documents that Quanta files with the Securities and Exchange Commission (SEC). For a discussion of these risks, uncertainties and assumptions, investors are urged to refer to Quanta's documents filed with the SEC that are available through the company's website at www.quantaservices.com or through the SEC's Electronic Data Gathering and Analysis Retrieval System (EDGAR) at www.sec.gov. Should one or more of these risks materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those expressed or implied in any forward-looking statements. Investors are cautioned not to place undue reliance on these forward-looking statements, which are current only as of this date. Quanta does not undertake and expressly disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Quanta further expressly disclaims any written or oral statements made by any third party regarding the subject matter of this press release.
Investors - Kip Rupp, CFA
Media – Jenna Jackson
Media – Bernardo Medina
Quanta Services, Inc.
Quanta Services, Inc.
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