QUANTA SERVICES INC, QUANTA SERVICES MANAGEMENT ...

anticipate continuing development of renewable energy projects in the near-term, primarily utility-scale solar
facilities, creating increased opportunities for our engineering, procurement and construction services for these
projects.
With respect to our electric power distribution services, we saw a slowdown in spending by our customers
for more than two years on their distribution systems, which we believe is due primarily to adverse economic and
market conditions. Some increase in distribution spending occurred in the latter part of 2010 and throughout
2011, but we are cautious with respect to the sustainability of the increase in distribution spending given
continued economic uncertainties. However, as a result of reduced spending by utilities on their distribution
systems for the past few years, we believe there is a growing need for utilities to resume sustained investment on
their distribution systems to properly maintain the system and to meet reliability requirements. We also anticipate
that utilities will continue to integrate “smart grid” technologies into their transmission and distribution systems
to improve grid management and create efficiencies. Development and installation of smart grid technologies and
other energy efficiency initiatives have benefited from stimulus funding under the American Recovery and
Reinvestment Act of 2009 (ARRA), as well as the implementation of grid management initiatives by utilities and
the desire by consumers for more efficient energy use.
Several existing, pending or proposed legislative or regulatory actions may also positively affect demand for
the services provided by this segment in the long term, particularly in connection with electric power
infrastructure and renewable energy spending. For example, legislative or regulatory action that alleviates some
of the siting and right-of-way challenges that impact transmission projects would potentially accelerate future
transmission line construction. The Federal Energy Regulatory Commission (FERC) recently issued FERC Order
No. 1000 to promote more efficient and cost-effective development of new transmission facilities. The order
establishes transmission planning and cost allocation requirements intended to facilitate multi-state electric
transmission lines and to encourage competition by removing, under certain conditions, federal rights of first
refusal from FERC-approved tariffs and agreements. We believe FERC Order No. 1000 will have a favorable
impact on electric transmission line development, although the impact of its implementation is not expected to
occur for several years. We also anticipate increased infrastructure spending by our customers as a result of
legislation requiring the power industry to meet federal reliability standards for its transmission and distribution
systems and providing incentives to the industry to invest in and improve maintenance on its systems. Certain
aspects of the ARRA have also provided various incentives, such as tax credits, grants and loan guarantees, for
renewable energy, energy efficiency and electric power infrastructure projects, although the feasibility of similar
projects in the future will be affected when or if these incentives are no longer in effect. The benefits of pending
or proposed legislation could also be impacted by the timing and scope of such legislation if and when enacted.
Several industry and market trends are also prompting customers in the electric power industry to seek
outsourcing partners. These trends include an aging utility workforce, increasing costs and labor issues. We
believe the economic recession in the United States slowed employee retirements by many utility workers,
causing the growth trend in outsourcing to temporarily pause. As the economy continues to recover, we believe
utility employee retirements could return to normal levels, which should result in an increase in outsourcing
opportunities. The need to ensure available labor resources for larger projects also drives strategic relationships
with customers.
Natural Gas and Pipeline Infrastructure Services Segment
We see strong potential growth opportunities over the long-term in our natural gas and pipeline operations,
primarily in the installation and maintenance of natural gas and oil pipelines, gathering systems and related
facilities, as well as pipeline integrity and specialty services such as horizontal directional drilling. We believe
opportunities for this segment exist as a result of the increase in the ongoing development of unconventional
shale formations that produce natural gas and/or oil, as well as the development of Canadian oil sands, which will
require the construction of transmission pipeline infrastructure to connect production with demand centers and
the development of midstream gathering infrastructure within areas of production. We also believe the goals of
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