Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Quanta Services Third Quarter Earnings Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. [Operator Instructions]. This conference is being recorded today, Wednesday, November 5, 2008. I’d like to turn the conference over to Mr. Kip Rupp, with DRG&E. Please go ahead, sir. Kip Rupp - DRG&E: Alright, thank you, Vince and welcome everyone to Quanta Services’ conference call to review 2008 third quarter results. Before I turn the call over to management, I have the normal housekeeping details to run through. If you’d like to be on the e-mail or fax distribution list to receive future press releases for Quanta, or if you had any technical difficulty this morning and did not receive your e-mail or fax, please call our offices at DRG&E, at 713-529-6600. Also, if you’d like to listen to a replay of today’s call, it will be available via webcast by going to Quanta’s website, at quantaservices.com. In addition, there is a telephonic recorded instant replay that will be available for the next seven days, 24 hours a day that can be accessed as set forth in the press release, by dialing 303-590-3000, and using the pass code 11122061#. Please remember that information reported on this call speaks only as of today, November 05, 2008 and therefore you’re advised that any time-sensitive information may no longer be accurate as of the time of any replay of this call. Also this conference will include forward-looking statements intended to qualify under the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, projected revenues, earnings per share,…

Good morning everyone and welcome to Quanta Services third quarter 2008 conference call. To start call this morning I will provide a general overview of the quarter, insight on developments in the industries we serve and perspectives on emerging opportunities. Our comments will be followed by an operational review by John Wilson, President of our Electric Power and Gas Operations and a review of financial results by James Haddox, our Chief Financial Officer. Jim O’Neil, Quanta’s newly appointed President and Chief Operating Officer along with Ken Trawick, President of Quanta’s Telecommunications and Cable Operations are also present. After our prepared remarks we will open the call for questions. The executive team is proud of Quanta’s third quarter results for many reasons. First, despite an incredibly challenge economic environment, our operations remained strong and operating margins were 10% and are inline with our operational objectives. It appears that the impact of the current economic condition on our top customer has been minimal to date. We believe our customers remain financially secure and committed to the maintenance and build up of their infrastructure. We recognized that some large utilities have recently announced reductions in capital spending. We believe that most of these reductions are related to generation and other areas and will not materially affect the transmission build out. Second, we continue to achieve internal revenue growth. Third, our capabilities are unique in the market place and continue to be on high demand in the industries we serve. And lastly, one of the most destructive hurricanes in US history Hurricane Ike devastated the Golf Coast region and directly impacted our corporate headquarters. Our emergency response plan operated seamlessly. Our customers received the services they required and we were able to focus on the immediate task at hand ensuring the safety of our…

Thank you, sir. [Operator Instructions]. Our first question comes from the line of Jamie Cook with Credit Suisse. Please go ahead.

Hi, good morning and congratulations on nice quarter. My first question relates to the fourth quarter guidance, I understand the fourth quarter is difficult of forecast given seasonality, it’s the winter months but even if you exclude storm work, the mid point assumes about 6% top line growth, I am wondering if there is any one segment that’s driving that and also and also it implies nice deterioration on the margin front. So, if you could just walk me through your thought process behind the guidance?

Sure I’ll start and maybe James can follow in there with some margin discussion. But, the telecom business is down as we indicated in our conference call from Verizon and from AT&T. we think that’s not strategic shift and direction for them but merely case out of casing situation with them. We think revenues will increase again in 2009. So, with that plus the difference between what we’re forecasting for storm and what we realized in storm in the fourth quarter of last year, pretty much makes up for any shortfall.

Same things applies to margins, Jamie, I mean margins, we expect margins to hold up on electric power and gas, but we are seeing a lower margins on the telecom and ancillary side than we did in the fourth quarter of last year.

So, you are still forecasting double-digit growth, top line growth on the electric power side?

Yes, we are and we are pretty entire company its for what I -- for my presentation earlier we believe that with spending returning from the telecom customers back in 2009 and along with extreme growth in the transmission business and the renewable business in ‘09 as the whole company will have 10% internal growth in ‘09.

Okay, so 10% internal growth in ‘09. And then you know, its interesting to hear your positive commentary on the transmission spend but you know, at the same time we have had seen some CapEx reduction announcement from utilities you know, I think for a power in way you know, so they are going to cut their CapEx by 25% some of that was going to come from wind or an environment where financing is more difficult so, I mean what type when we think about your backlog growth in 2009, do you think you can see double-digit backlog growth, do you think that projects while the transmission set will happen at some point does it gets push to the right and does it become more of a 2010 story?

Well certainly, transmission line always get pushed and that’s pretty normal. And in discussions so that as I mentioned earlier at the utilities perspective conference where we had a number of industry experts, Chairman of Merck, the Chairman of Texas PUC, 40 customers in discussions with them they were all fairly optimistic they guess it was going to be more expensive to continue to build the transmission because of the credit crisis but they were going forward with those plans. Now, things do change and have changed but that was just a little less than two weeks ago. So, I don’t think anything major changed since then. The thing is most of these utilities are regulated and they are getting a guaranteed return on their money and a guaranteed return of their money for these transmission projects, and so its going to be fairly easy for them to raise capital. So, these projects are going forward, we have seen announcements by said major customers that they are cutting back on CapEx but we think most of that CapEx is related and they are saying that most of the CapEx is related to generation and other things rather than the transmission projects.

Beside the CREZ award that we hope to be announced sometime late 2008, early 2009 are there any major projects that you expect to move forward in 2009 that we should be tracking or what’s your latest update I guess?

I don’t want to be too specific because we are of course talking to our customers about those projects and we don’t give our competition all the projects that we know are going. But we haven’t seen the cancellation of any of the projects that we’ve talked about in the past. Those projects are going forward pass as Wilson mentioned has been delayed but that’s not unusual for those kinds of things and it wasn’t delayed because of credit situation it was delayed because the PGM didn’t think that they needed it until 2013 -- complete at 2013.

Thanks guys. Okay, I’ll get back in queue. Thank you.

Thank you.

Thank you. Our next question comes from the line of Tahira Afzal with KeyBanc. Please go ahead.

Good morning, gentlemen.

Good morning.

Just wanted to go over a couple of projects I know off in the schedule sense, I know FPLE has cut their budgets on the wind side and so several other companies, but I believe there is another large project in -- that might be get awarded in the fourth quarter timeframe and you know, given your competitive advantage there I won’t give more details on it, is that still on track?

Well, I’m in a difficult situation because I have confidentiality agreement, but as far as I know everything is impact with the transmission group with FPLE.

And that would be -- from what I can gauge it’s a fairly projects, they are much larger than what you’ve being seeing in the sense?

Its -- I can’t comment really because of confidentiality agreements.

Okay, fair enough. Now the Pacific project that just got FERC approval for a higher rate that’s another $6 billion project?

I don’t know, Tahira I really don’t know what the size of it as far as dollar value but its very, very significant because the land now is in shallow.

Right, and I think the official number that given out is around $6 billion and do you have an idea of the timing on that by any chance?

Yeah, I really don’t, I’m thinking that its somewhere around 2010 events but I don’t have exact date on that one.

And, in terms of the sun rise power line cline it seems like an alternative line has been essentially, unofficially approved and that might go through, would that be a project that could potentially happen for you in 2009?

Tahira, as you mentioned remember that was one of the projects that we had listed several conference calls ago. But, one thing remember that everyday that goes by there continues to be reliability studies and focuses on these lines and these lines can shift in locations that could shift in magnitude, increasing in size and voltage. So, everything is not static just because something has been out there ones in the public domain it can change quite significantly. So, we are well aware of all of those projects that you mentioned, there are still on track as John said earlier. All the projects that we happened to be tracking we have mentioned we have not heard of any single cancellation of any of those projects and that happened to be one of them which you just mentioned.

Okay. So, if I want to step back and look, I have a list of $56 billion of high voltage projects over the next three four years that could potentially awarded versus around $4 billion or so that is currently under progress. But, if I look at what you are seeing in terms of what you are tracking right now was it what you were tracking let’s say three months ago, would you say that that list what you are seeing come up for bid that basket is increasing or decreasing?

I would say it’s probably increasing. Let me add a little bit of color to that the FERC filings for transmission lines have not decreased and in fact they have increased slightly over the past three months.

Right.

One thing that was brought out at our utility perspective symposium that I thought was interesting is that if there is a $100 billion of money spent on transmission lines it would increase the average rate payers bill by $2 a month. So, its fairly insignificant even at a $100 billion of spend on transmission.

And that would be incremental lines added or it just O&M?

The additional CapEx.

And just one last question, the loss that you mentioned on the telecom side in the third quarter was that -- would it be possible to get an idea of the size?

If you combine the losses on the telecom side and the ancillary side for those projects it was about $10 million, equal to about a 100 basis points of margin.

Right, okay and you said that it would be more like a one time issue could you provide some collar on that?

Well, we have some performance issues on those projects and those projects are pretty much down and they are substantially completed so we don’t expect any continuing deterioration on those projects.

As you looked at your fourth quarter guidance and you came up with it would you have assumed some kind of a cushion on projects of a similar profile in the fourth quarter?

No, no we don’t think the fourth quarter is less storm work, less telecom work.

So, I mean if I look at your margin then for third quarter it was more like a 11%, operating margin?

It hadn’t been for those losses but I have just mentioned it would have been closer to a 11%.

Okay. And then, so if I look at 2009 obviously your telecom work is going to ceasing much tougher comparisons but when I look at margins for next year given what you are seeing right now would we assume -- and assuming no execution issues should one assume that margins could go back to those levels ex-storm work?

Back to which levels?

Well let’s say that you take adjust numbers a bid for Storm work but whatever margins you saw in the third quarter underlying excluding Storm work?

Yes, there is no reason to think we have to exclude Storm work from that but there is no reason to think that they won’t. That is providing of course the telecom recovers.

Fine alright, okay. Thank you very much.

Thank you.

Thank you. Our next question comes from the line of Sanjay Shrestha with Lazard Capital Markets. Please go ahead.

Thank you. Good morning guys and good quarter. Kind of follow-up on that question so when you guys talk about 10% organic growth for 2009, so what is in an underlying assumption as to the growth dynamics that you guys see coming out of the electric, natural gas and telecom side of the business?

We are assuming that telecom will come back and be slightly positive and growth, we expect that our renewal revenues will double and we expect to electric utility to continue at the rights that it has over the past year.

Okay. And then in terms of – I think you guys made a comment here that there is a decrease in the distribution side related work and increase in the transmission line related work and historically obviously transmission has always been a higher margin business so it is fair to say that organic growth is what is going to be top line for `09 but we could also see even an additional margin expansion during 2009?

Now that is difficult to say the real difference between transmission and distribution wasn’t transmission or distribution, it was the type of contract whether it was a fixed price contract or whether it was cost plus contract and to begin with we are anticipating that there will be some falloff in distribution. We haven’t seen a lot yet but we are anticipating that. That is one of the messages that we received at the utilities symposium because maintenance, distribution, maintenance work is reliant somewhat on rate base and rate cases that the return on that investment is lower than transmission investment. Therefore in a limited capital environment, the utilities would focus more on transmission and less on distribution. So that was a forecast that distribution spending being reduced but the real difference between the two is cost plus work or fixed price work and we have been able to negotiate significant amounts of work based on a transmission work, based on some type of cost basis. So, it may not in itself the switch between transmission distribution mean increased margins.

Okay. Great that is very helpful. One last question then guys, with your balance sheet where it is and industry obviously you are in one of them, best position given your scale, reach and all that sort of stuff. So, what do you think is the appropriate use of that cash at this point for you guys, do you know, are you potentially evaluating some acquisition candidate, can you talk about that a little bit?

Certainly. It certainly feels nice to have that cash on the balance sheet and these are the difficult times but obviously we have too much cash on the balance sheet and we are looking at alternatives at this time there -- There are good -- are some attractive acquisition opportunities out there and we have to decide when the right time to acquire is and if that is the best use of the capital and there are other uses as well but if we don’t do acquisitions, there could be some other uses for the capital whether it be stock buybacks or evident we haven’t decided that at all yet either.

Okay that is terrific. Thanks a lot guys.

Thank you. Our next question comes from the line of Kurt Woodward with JP Morgan. Please go ahead.

Yes, hi good morning.

Good morning.

In terms of the distribution network for next year in terms of maybe the capital allocation shift to more transmission projects. Is your thinking right now and maybe what you are seeing in the fourth quarter, that distribution spending will be down for you guys?

In the fourth quarter?

In the fourth quarter and for 2009?

There was intensifying in the distribution spending for `09 will be down. I don’t think we are anticipating much of reduction distribution spending in the fourth quarter but `09 as I say that is kind of a forecast that, and it’s a theme that we heard from our customers and regulators in Washington D.C. two weeks ago.

And in terms of the telecom outlook for your ability to be positive on revenue growth’s in `09, you can face pretty difficult comparisons and it really feels like a next couple of quarters that at least in a spending it’s going to be you know, on a negative growth trajectory correct if me if I am wrong. So, you know, that would seem to imply you have to see pretty massive recovery in spending levels above where you are the first half of ‘08 to get positive in ‘09?

Yeah, we don’t expect to see telecom to be immensely positive in ‘09 but we expect revenue to come back to ‘08 levels in ‘09 and that’s what our customers are telling us. So, we don’t see a shift in strategic direction by our customers on the telecom side. We just see a cash allocation problem on that side. And they are telling us that the work is coming back next year, they don’t say that it is increasing an extreme amount, but we have been gaining market share in that field and we expect that what they’re this correct and that telecom may not have a lot of growth but it shouldn’t be negative.

Okay. And you know, if you look at -- if you take your telecom and distribution business together I think that’s about may be a little under 40% of your revenue, and if that’s going to be a kind of flattish next year the other 60% of the business would have to grow at a growth rate of roughly call it 33%, is that spare, and is that how you are coming up with your 10% forecast for ‘09?

Well, we -- there is a lot of moving parts in our forecast and we don’t want to get into the new shift, but the bottom line as we think that we can grow at double-digit level in 2009 and that’s because robust transmission growth plus renewal energy growth doubling the renewal energy as I said.

Okay, great. Thank you very much.

Thank you. Our next question comes from the line of Jeff Beach with Stifel Nicolaus. Please go ahead.

Good morning John and James.

Good morning.

Good morning.

Can you talk a little bit about your gas business you’ve been going through a shift from the utilities into the private sector and where you stand with that and is there some vulnerability in 2009 to the growth opportunities from seeing gas price come down in the market for the last few months?

We’ve done very well with that transition and we all know that that’s highly cyclical business. But, right now we are anticipating continued growth from that side of the business for the foreseeable future. It remains to be same whether there is going to be significant cut backs or not because of gas prices, but right now we have not see that.

All right. And the backlog is -- do you have a strong enough backlog in the natural gas business to give you good visibility ahead through 2009 for growth?

Yeah, we -- that natural gas backlog burns off very quickly because we bill those things -- those projects very quickly. But, their projects that we are seeing in our biding today and that we have end backlog give us fairly good confidence that pretty strong for the foreseeable future.

And then, just a little more expansion on the electric utility spending on distribution, maintenance you are saying is going to likely be reduced what about spending on the reliability aspect of this and if you look that combined spending and transmission and distribution next year do you see you know, a lower growth rate in ‘09 than you would have expected three to six months ago?

Yeah, probably we see lower than we expected six months ago, that lets talk a little more detail on the distribution business. Many of our customers will not be heading back but expect that some will because they have or dependent upon getting reimbursed through rate cases for some of that spending, others and others states and particularly California is one, that’s not the case that their distribution spending will probably be robust, Texas the same way. So, there are some space that won’t be true and if we are talking trying to be as honest and go forward as we can what heard at the conference and what we see going on.

And again, because some comments about the reliability part of this, is that becoming maybe less important in the near term?

Well, I think that. The maintenance can be put off for a period of time, months or maybe as much as a year, but certain reliability will catch up with you pretty quickly. And so, they can put off maintenance for a while but certainly not long term. And one came I should point out, wind business that we do particularly the gathering lines in wind-farms is very much like the underground distribution business. So, those assets can be transferred over to wind side fairly readily, pretty seamlessly actually.

Alright. Thank you.

Thank you.

Thank you. Your next question comes from the line of Alex Rygiel with FBR. Please go ahead.

Thank you. Good morning, gentleman.

Good morning Rig.

Few questions, first John or James. Could you run through your top five customers on the natural gas side of your business?

Do you get that James?

This is for nine months, enterprise products, energy transfer, down after that its, past our top 20 customers.

Prospects we have done it.

Prospects but I don’t know where they rank him the top five this year. We only have the top 20 in front of me and those two were in the top 20, the rest are outside the top 20.

And James can you possibly give us backlog by service type?

Yeah. We’ll may give you about 12 month in total? Or total or what?

Both would be great?

12 months, electric $1.424 billion, total (inaudible) gas 12 months, $482 million total $658 million, telecom $311 million 12 months, total $495 million, ancillary $140 million, 12 months, 226 total, dark fiber, $71 million 12 months, and $400 million in total.

Thank you. And John, you mentioned that the outlook for distribution Electric in 2009, would likely be down. What occurred with your Electrical distribution business in 08 versus 07?

It showed growth over ‘07.

Distribution was up in ‘08 versus ‘07 despite the headwind of the negative residential market?

That’s correct. A Part of that; remember most of the trends in increased outsourcing come from the distribution market. So, distributions’ spending throughout the 90s was relatively flat .If you look back and we had internal growth presently through increase outsourcing during that period of time. And also, remember that we didn’t have much residential impact to Quanta, very minimal.

Is that on a pro-forma basis that come in?

Yeah. Yes it is.

Okay. And than lastly few word of represent total revenue?

Fuel is down, so I don’t think we did a calculation this quarter I didn’t but it was running about 3% when the fuel was $3. And so, it has probably dropped down 2.5 to two and three quarter percent.

Great. Thank you.

Thank you. Our next question comes from the line of John Rogers with D.A. Davidson. Please go ahead.

Hi good morning. I was just curious, if you look out into especially in the ‘09 to ‘10 in the transmission becomes a larger portion of your revenue, will continue to be booked on a fixed price basis. Is that you’re expectation? And what are you thinking about in terms of the split there versus in the 46 year I guess 50:50 revenue levels is to evolve to.

What you are seeing is your smaller projects will probably still be bid on a lump-sum comp basis, but when you started get into your larger, what we call our mega-projects, we’re seeing those types projects that extend over several periods or several years, and sizable builds of being looked at differently in industry because of the amount of risk that we would have to put in them. So, we are looking at more hourly type work or guaranteed value return or something like. But you’re still going to see a lot of big basis on your smaller projects of say less in $5 million, $10 million maybe, but you start to get that 2,3,4 $600 million projects, it kind of takes on a little different perspective.

And With those larger projects, will we see more I mean higher margins but also more especially short-term volatility as a result of it?

I don’t necessarily, we see a little lumpiness in projects from time, you have one winding down and the other ready to start up or something like that, but I don’t see too much volatility. We mentioned we are getting ready to kick off the solid game line and you’ll see revenues building pretty significantly, that we just finished the Northeast utility. So, that job was ramping down, this one Quant hadn’t started yet. So, could be a little lumpiness, but not volatility.

Okay. I guess that’s what I meant, the lumpiness. In the terms of the mix between distribution in transmission work?

That is stands about the 50:50 at this point in time, the transmission has been growing rapidly, it used to be 70% distribution and 30% transmission and we are counting substations in the transmission number but it’s probably 50:50 and transmission I am sure we will pass it going forward.

Yeah I mean, John, could you go as for as 70/30?

Yes. We could.

Okay, okay great. Thank you.

Thank you. Our next question comes from the line of Steve Gambuzza with Longbow. Please go ahead.

Good morning.

Good morning.

Good morning.

On this distribution front, I think I’m overtime you guy’s have consistently been able to outgrow your end market in terms of the revenue growth, which is additional spending, do you expect that might be the case next year?

Yes I wouldn’t see any change in that at all.

Thanks, very much.

Thank you.

Thank you. Our next question is a follow up question from the line of Tahira Afzal with KeyBanc. Please go ahead.

Well. I forgot to ask you, your 9 to 12% operating margin range got you from on the long term indicated before hand, given the changing environment, would you like to stick to that?

Yes, we would.

And, I know that it was supposed to be 18 months back earlier on in the year as we now look on to 2009 coming on, would you still expect margins to potentially expand in the 2009 timeframe basis, what seems to be in line with a second kind of 8% operating margin for 2008?

If a Telecom comes back as we suspect, and if the wind and solar renewals come on as they are projected to along with the transmission market and we should continue to see margins expand they probably won’t in the first quarter of next as we start cranking up the telecom again and because of winter weather. But then I think we should start to see some margin expansion again.

Yes, I mean, if you look at, you are at 8% given based on what you implied for fourth quarter guidance, you are at 8% for 2008, and the lowest we can go within that guidance, would be 9% so would it be fair to say that in 2009 to expect 9% and then if you can -- I mean have you done any sensitivity analysis to see if it does not come back to the same extent what the impact could be?

Now we haven’t and we are not giving projections of ‘09 being 9% but we are still sticking with our goal of 9% to 12 % operating income margins.

That was sort of earlier on industry and that would imply it you sticking to the same time frame that you would be at least entering lower end of that for the full year by ‘09, would that kind of seem okay?

That’s very possible what we’re seeing now is the -- I’m just not making projections to that I want to make that clear.

Sure.

But the margins in our backlog higher than our existing margins so the both well for increases margin going forward that we can have a drag from significant part of margin like telecom business.

And I mean if you look at the backlog in your margin right now you’ve moved up around lets take a close to 100 basis points over the year in 2000 versus 2007 if you look back to your back log at this point last year was it similar move up as well. What you see your backlog margin today in terms of lag out from last year is that similar?

I don’t know if it is equated to that you have to also remember that we have storm works this year there was not in backlog last year. We did have higher margins in backlog than we were experiencing at this time last year, but I can’t tell you whether it was 100 basis points, I don’t recall. I just know it was higher.

Thank you. Our final question comes from the line of Kurt Woodward with JP Morgan. Please go ahead with your question.

Yeah hi, in terms of once the allocations are made for the transmission capacity in Texas, the Texas Commission signed off on that, what is the estimated time line between that point and when you would expect bidding to occur in terms of necessary permitting, citing and potentially some engineering work? Would that be like a six month process from that point in time? Or what would be your best guess?

I would say, you will see engineering work start fairly rapidly because I am assuming there is a lot of work going on behind the scenes already. Once those announcements are made it is going to be a pretty fast track project to get these things built and get them online. You might even see some engineering work preliminary engineering work start prior to any announcement and as soon as the announcements are made, I think they will evaluate the need put which individual line and it will be pretty much peddled to the metal have that point not because they already have the wind built, the constraint transmission system and they can’t get the load to the load setters. There are a lot of dynamics going on out in West Texas where generators even having to pay people to take their power because of the constraints on the system. It is going to be pretty fast track, fast moving.

But, we are into permitting and sightings still need to get completed before you could?

Once In Texas, it operates a little different. One thing you see, grant these allocations that process is over where the lips go.

Okay. Thanks and In terms of the telecom margins, what would those margins look like say now when you are running it little bit lower revenue levels in a 12 months ago. Like rough numbers from margin that?

Except for the losses we have shown in the quarter, they will be down a couple hundred, may be 300 basis points from what they would be normally.

So, normally they are around like 7% or 8%? Is that correct?

No, no I am saying that going forward margins will probably be less if you take out the losses, they probably 200/300, they have been running very well with electric power margins in the second quarter and first quarter of this year. Third quarter they were affected by losses as James mentioned. And as they are running right now there probably because telecom spending is stand if probably 2 or 300 points, lower eclectic utility margins.

Okay and the utility?

I guess 200 points.

Yeah okay.

And the utility margins are running here today around call it 8% or 9%?

No, they are better than that.

Okay.

Thank you. And at this time there are no additional questions, I would like to turn it back to management for any closing remarks.

Thank you very much for your attendance at our third quarter conference call. We look forward to seeing you at the next quarter call. Good bye for now.

Thank you, sir. Ladies and gentlemen that does conclude our conference for today. If you would like to listen to the replay of today’s conference please dial 303-590-3000 using the access code 11122061 followed by the pound key. ACT would like to thank you for your participation, you may now disconnect.