Ladies and gentlemen, thank you so much for standing by today and welcome to the Quanta Services Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Mr. Kip Rupp, Vice President and Investor Relations. Thank you, sir. Please, go ahead.

Thank you, and welcome everyone to the Quanta Services third quarter 2020 earnings conference call. This morning we issued a press release announcing our third quarter results, which can be found in the Investor Relations section of our website at quantaservices.com, along with a summary of our 2020 outlook and commentary that we will discuss this morning. Additionally, we'll use a slide presentation this morning to accompany our prepared remarks, which is viewable through the call's webcast and also available on the Investor Relations section of the Quanta Services website. Please remember that information reported on this call speaks only as of today, October 29, 2020, and therefore you're advised that any time-sensitive information may no longer be accurate as of any replay of this call. This call 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 include all statements reflecting Quanta's expectations, intentions, assumptions or beliefs about future events or performance that do not solely relate to historical or current facts. Forward-looking statements involve certain risks, uncertainties and assumptions that are difficult to predict or beyond Quanta's control and actual results may differ materially from those expressed or implied. For additional information concerning some of these risks, uncertainties and assumptions, please refer to the cautionary language included in today's press release, along with the company's periodic reports and other documents filed with the Securities and Exchange Commission, which are available on Quanta's or the SEC's website. You should not place undue reliance on forward-looking statements and Quanta does not undertake any obligation to update such statements and disclaims any written or oral statements made by any third-party regarding the subject matter of this call. Please also note that we will present certain historical and forecasted non-GAAP financial measures in today's call, including adjusted diluted EPS, backlog, EBITDA and free cash flow. Reconciliations of these measures to their most directly comparable GAAP financial measures are included in our earnings release. Lastly, if you would like to be notified when Quanta publishes news releases and other information, please sign up for e-mail alerts through the Investor Relations section of quantaservices.com. We also encourage investors and others interested in our company to follow Quanta IR and Quanta Services on the social media channels listed on our website. With that, I would like to now turn the call over to Mr. Duke Austin, Quanta's President and CEO. Duke?

Thanks, Kip. Good morning, everyone, and welcome to the Quanta Services third quarter 2020 earnings conference call. On the call today, I will provide operational and strategic commentary and we'll then turn it over to Derrick Jensen, Quanta's Chief Financial Officer, who will provide a review of our third quarter results and full year 2020 financial expectations. Following Derrick's comments, we welcome your questions. This morning, we reported strong third quarter results, including profitability that meaningfully exceeded our expectations. The performance of our field leadership and the people of this organization continue to be nothing short of impressive. They have successfully adapted to working through a pandemic, while continuing to restore critical infrastructure in extreme conditions. The strength of our performance was reflected in our Electric Power segment margins, including our communications operations and our Pipeline and Industrial segment margins. It is also reflected in our record earnings per share and backlog, which continues to demonstrate the resiliency of our business and the operational excellence of our people during extraordinary economic and operating conditions. In addition, we strengthened our financial position with the closing of our $1 billion senior notes offering, expansion of the capacity and extension of the term of our credit facility and our receipt of an investment-grade credit rating, all of which, we believe, points to the resiliency and sustainability of our business model and positive multiyear outlook. Derrick and our finance and treasury team did an outstanding job, managing the simultaneous and successful financing processes and we're able to secure capital at attractive rates and terms. And finally, an important part of our value proposition to all our stakeholders is Quanta's commitment to corporate responsibility and sustainability. To that end, during the third quarter we published our first corporate responsibility report, which focuses on our commitment…

Thanks, Duke, and good morning, everyone. Today we announced third quarter 2020 revenues to $3 billion. Net income attributable to common stock was $163 million or $1.13 per diluted share and adjusted diluted earnings per share a non-GAAP measure was $1.40. The third quarter was strong for Quanta with numerous consolidated and segment records and performance during the quarter aggregating to record EBITDA, adjusted EBITDA and adjusted EPS. Our Electric Power revenues excluding Latin America were $2.1 billion, a 14% increase when compared to the third quarter of 2019. This increase was primarily driven by increased contributions from larger projects, as well as continued growth from our communications operations, which are included within the Electric Power segment and delivered a 40% increase compared to the third quarter of 2019. Also contributing to the increase were approximately $65 million in revenues from acquired businesses. Additionally, we had a record amount of emergency restoration services in the quarter, primarily associated with efforts to restore infrastructure along the Gulf Coast. Our results included approximately $200 million of revenues from those efforts. However, those revenues came at the expense of other work in progress. Our distribution work decreased over 20% compared to 3Q 2019 and largely offset the increase in storm revenues driven in part by utilization of crews from existing work being reallocated to emergency restoration efforts but also due to lower levels of fire hardening work compared to 2019. Electric segment margins in 3Q 2020 were 12.7% and excluding our Latin American operations segment margins were a record 13.5% versus 9.6% in 3Q 2019. The robust operating margins were driven by increased profit contributions from emergency restoration efforts, which typically present opportunities for higher margins than our normal base business activities due to higher utilization. However, excluding revenues and profit from storm…

[Operator Instructions] Our first question today is coming from Andy Kaplowitz of Citigroup. Please go ahead.

Hey. Good morning, guys. Nice quarter. Duke, you mentioned that you're actively pursuing additional opportunities in renewables, especially, as offshore battery solar ramp up. As you look at your core transmission distribution business are you already seeing an acceleration in your business as the focus on renewables increases? And then maybe put in perspective the backlog growth you're seeing in Electric Power as your MSAs continue to grow. I think your 12-month backlog is up more than 10%. So can you talk about your confidence that Electric Power growth could actually follow your 12-month backlog as you go into 2021?

Yes. Thanks Andy for the comments. When we look at renewables in the spaces that we play mainly around the interconnections, I think, when we think about it the sentiment around a carbon-free environment -- getting to a carbon-free environment, while we may think it takes longer than what's being said there's no question around the need for transmission, the interconnections, the redundancy in the grid to support the intermittency of any renewables with -- either with batteries or however you do it. But all those things for us -- we're working with our customers on those on a daily basis whether it be offshore wind and over on the eastern seaboard or just in general across the board. It's still ongoing. The pace is about the same in my mind, maybe a little bit expedited in certain areas. But in general, that pace continues. And any compression of time on that the need for transmission, interconnections, redundancy is only greater. So if you moved it from 2050 to 2030, you said you wanted to go more carbon-free, it would take longer. That being said, the way that the transmission system works today there's a lot of work to be done to make that more redundant as well as more modern as we move into more of a renewable footprint.

Thanks for that Duke. And then maybe you can put the quarter the $1.40 you just did in perspective for us because it's, obviously, way larger than I think you've recorded in the quarter, and still as you said has Latin American drag doesn't really include much LUMA work. So again, as we go into 2021 maybe you can talk about -- I know you mentioned storms. So how much was storm work in Q3? And outside of storm what does the result tell you about the thought process in 2020 because you already mentioned the confidence in $4, but given some of these headwinds seem to be abating as you go into next year shouldn't you have confidence that maybe you can do decently over $4?

Yes. Thanks for the comments. I think in general, we've talked about the programmatic spends of our customers the capital spends that we see. The increasing backlog -- I failed to get to that answer a minute ago, but in general we see -- continue to see record backlog. The opportunity for additional programmatic spends are there. So that piece of business continues to grow underneath and we talk about 85% to 90% of the business being that base business that backs that up. It gives us a great deal of confidence of the resiliency of the model when we set out four or five years ago. Now we've set out to build this model to be resilient and to be able to give you guidance and be able to not be so choppy. So when we talk about $4, it's based on that kind of capital spend within our utility customer -- our customer base and that's why you're seeing our backlog increased. There's opportunities for these larger project dynamics. They're there. We booked some in the quarter. You saw that with the clean line in there in Maine. So in general, you're seeing us book-stacking. We talked about the stacking effect on the base, but the base continues to grow. We talked mid single to – mid single-digits. We've been growing past that. But that's there. The storms it was $200 million somewhere in there. It's less than 10% of the overall segment right in there on the top side. It's typically not meaningful, but it was meaningful in the quarter. That being said, there was still broad-based execution above what we would consider normal margins for us due to utilization. We're doing a nice job with cost in the field and execution in the field. So real proud of the organization on how we've adapted to the pandemic.

Thanks, Duke. Appreciate it.

Thank you.

Thank you. Our next question is coming from Andrew Wittmann of Baird. Please go ahead.

Great. Thanks and good morning, guys. Thank you for taking my question. I don't usually ask about telecom, but I feel like we're getting to the point where just talking a little bit more about your $1 billion in backlog, kind of, just struck me versus the $500 million of revenue that you guys are anticipating during this year and so given that the relationship between backlog and the revenues is pretty high here. I'm just wondering how do the visibility is shaping up for this business into 2021. I mean do you feel like the very strong growth rates that you saw here in 2020 off of a smaller base can these rates of growth continue? Or do they have to start to level? Just wondering how the amount of backlog that you have today informs that view.

Yes. I mean, I think you see the backlog increasing. And as we move into next year and later into this year, we had a record quarter for us this quarter. And I think we saw the margins at parity fairly close to the electric margins. And so, we're seeing double-digit margin profiles. We're doing the things that we said we would do from a scale standpoint in the field and our ability to execute. We needed to build the front side. We made an acquisition in the last quarter there on the front side of the business to help us gain traction there on the EPC side and also collaborate with the customer. That will benefit us as we move forward. We've talked about it being a $1 billion business. There's every opportunity for that to happen. The pace of growth will remain around the margin profile going forward. We want to continue the double-digit margin profile. And that's the -- that will pace our growth. But I'm optimistic that we'll continue to see these type of growth rates on a go-forward basis.

Okay. Great. And then I guess I wanted to just dig in a little bit more on the P&I segment as well. And I just wanted to make sure that I understand. We all understood that the nature of the disruptions that you're experiencing I think that was the term that you used. Early on it was disruption from site issues where with shelter-in-place orders you couldn't get to the site. It doesn't sound like that's the issue. It sounds like more of the disruption that you're experiencing is just weak oil prices demand for refined products on the industrial segment. I just want to make sure we understood that correctly. Maybe you could expand on that. But I guess there's also an implication here on the larger diameter pipeline work that you have done again a small piece of the business. It sounds like you executed some of that really well. Got it done in the quarter. So is large diameter basically kind of cleaned up for now inside of the portfolio I guess is the question? Is there not more -- is there not a lot of backlog really to work off anymore now that you're done early? Or do you think that there still can be some contribution from that in 2021 recognizing that yesterday there was an announcement from TC Energy setting you as a contractor on KXL?

Yes. So the P&I segment. When we look at the industrial side of the business, I think that's the biggest unknown for us is just when does the economy come back? We've talked about it and communicated it. We felt like it would be later in the third quarter or later half of next year when we talk about P&I. We're doing okay. We're not where we want to be there in order to get the margins where we want them to be. So I think in general that would be the P&I segment. If economy comes back it's kind of like an '08 '09 effect for that type of business a little bit greater. But in general, we have some critical path solutions there that are necessary. It allows us to do things that others can't. And I think in general the business is good. But for us to get to those -- the margins that we've stated that we want to be our goal we need that business to pick up in the later half of next year. We've contemplated all that in the $4 number that we've talked about. On the larger diameter pipe, we talked about a $500 million number in guidance next year. That's kind of how you should think about the business, when we think about it same thing whether you hear announcements or not as we stand that's what we see. It certainly has the ability to expand and we have the opportunity to expand it within Canada and other places. We'll look at it from a risk standpoint. And if we book-work we'll let you know. But in general in our mind the $4 number and everything we're talking about contemplates that business being around $500 million not to say, there's not smaller projects not to say there's not opportunity because there is. And we did execute well through the quarter. We went through and had some milestones and contingency releases on different things. It's due to execution.

All right. Thanks guys.

Our next question is coming from Sean Eastman of KeyBanc Capital Markets. Please go ahead.

Hi, good job this quarter. Thanks for taking my question. I just wanted to go back on the Electric Power margins. I mean that was the real eyepopper for me around the results. You spoke to some juice from the storm response you spoke to good execution good utilization. I'm just wondering, if there's anything structural in there. Maybe just around the growth here and Quanta size whether there's any pricing benefit. And then I'm also just curious about the mix. If we look at New England Clean Energy Connect coming into the mix next year still executing a lot here. Is that sort of mix dynamic going to be accretive going into next year? Just rounding that out would be great.

That's correct. We're doing a nice job executing on the Electric Power segment both from -- our telecom is starting to be additive to the segment as well. And we have broad base. Just -- it's a strategy we had five years ago. We said we'd build a base business. We've scaled the operations in the field and really worked with the customer to collaborate in order to build on these programmatic spends that we've been talking about for a long period of time in order to modernize the system harden the systems for the events that you're seeing now. You see it in California at the West on the wildfires you see it with the hurricanes derechos whatever it may be. These events happen. I think in general we've got our heads around hardening the systems and modernizing them. So you're seeing all that, you're seeing our capital, but we're supporting our customer at a very high level, taking more of the programmatic spends and it's showing up in the electric segment as we move forward. I think we have every opportunity to continue this. We talked about a kind of a double-digit margin there over time. We were working through it last year with California. You had some movement there with crews moving back and forth and it dragged margins down. Once we said, it would get stabilized and once it's stabilized you would see improvements. And I think we get set, we get things scaled and we can do our margins to improve. So we get better utilizations, better execution and that's what you're seeing today. Can we stack more larger projects on there? Sure. As they come we'll look at them. We won't win them all. We're not there to win them all. We're there to provide a service to the customer based on risk and we'll look at the risk and bid the work. But I like our chances.

Okay. That's helpful. And on the utility LDC business it's just interested to see the utilities talking about replacement of LDC infrastructure playing into those carbon emission-reduction goals. So just given that very broad-based trend from your customer base, I'm wondering if you're seeing acceleration in growth in terms of the pipeline of opportunity on that side of the business.

I think it's a broad-based growth. Most of the LDC -- most of our LDC customers have a replacement program due to prone leaks things like that and may be out there or regulatory requirements. So they're 30-year type builds and it's across the eastern seaboard of the West Midwest. Wherever you look there's replacement programs and we're involved in that. It's a really nice business. It has a really nice backdrop. And you can see it it's resilient. And so I think that part of the business continues to grow. We're performing nicely as we scale it. We like it a lot. We had -- in the second quarter you had this light switch effect in certain cities. But we've worked through those things as we stand today and I think they'll continue to build underneath the -- on that segment you'll continue to see that growth.

Got it. Helpful. Nice job again. Thanks for the time.

Thank you.

Thank you. Our next question is coming from Steven Fisher of UBS. Please go ahead.

Thanks. Good morning. So Duke, how well would you say the labor market is keeping up with all this utility work? And how much tighter do you think it's going to get over the next couple of years as you and your customers contemplate completing all that renewables work and all the programmatic spending that you're talking about?

Yes, Steven. Thank you. I think in general when we looked at it and when we have looked at it, we worked quite a bit with our clients on how do we meet the demands of not only what you see from a capital spend, but attrition within the utility workforce. And the company spent $100 million on training colleges three, four, five years ago to get ready for these type builds and to set the company on a path for a multiyear 10, 20, 30 years beyond. And so in general we're in a really good spot here. We're meeting the demand of our client. From a constructability standpoint, it's one thing to say look, I'm an engineer and I can build this, but I don't have construction. And it's another thing to say I can take it from the start and then finish it with some certainty -- with certainty for that matter. And that's a big deal as we move forward and we have the ability to do that. I think you'll continue to see us take more of the programmatic spend and market share as we move forward.

Okay. And then Derrick, the Q4 guidance was a little lighter than what the consensus had. And it seemed like it was more margin-related than revenues. I know you called out a few things when you gave your prepared remarks. Maybe you could just sort of revisit and summarize there. I mean, do you have any particular margin headwinds that you're calling out for the quarter other than maybe it seems like there's another $0.05 additional for Latin America exit that you hadn't contemplated before? But what are some of the other kind of things that you're baking in as cautionary items or things in the fourth quarter?

Yes, Steve. So exactly Latin America is probably the primary component of that equation upping those costs a little bit in the fourth quarter. It's putting that pressure. And then secondly, a little bit of downtick on the margins on pipeline and revenues on pipeline. As my prepared remarks commented, we had some acceleration of the work from the fourth quarter. Expectations originally pulled into the third quarter both on the revenue side and the completion of those projects. So therefore the margin relative to the year it's basically a flat level of contribution has just accelerated in the third. Then the last piece of it that's still on pipeline is the revenues are down just a little bit. We had some stuff pushed from kind of the fourth quarter into 2021, but nothing overall from a trend perspective changing, nothing from a margin perspective changing our expectations.

Got it. Thanks a lot.

Thank you. Our next question is coming from Jamie Cook of Crédit Suisse. Please go ahead.

Hi. Good morning. Nice quarter. I guess first question, Derrick, is there any way you can help us understand the downstream business Stronghold how that's in more detail performing this year relative to sort of a normalized basis is I guess is my first question. And then I guess my -- and then the -- I guess the follow-up question on that is I mean I think you said by the end of the year with LatAm you expect to be 80% of the projects to be done or something to that effect. What's the risk that that goes into 2021 at all? Because I guess as I look at it today my third question would be understanding you guys are putting out a $4-ish number, but if I do all these add-backs I don't know Derrick I'm getting more to mid-$4s relative to earlier in the year when I was saying sort of low $4s. So, I'm just trying to do the math there but correct me if I'm wrong. Thanks.

Hey Jamie, good morning.

Good morning.

The P&I segment I think when we look at the industrial we had a record first quarter really nice quarter. It tailed off after that due to COVID. We are in critical path and it's -- in my mind, it's mainly the strong whole piece of it. If you don't have the ancillary things around there, it's more of a breakeven type. Maybe make a little money as we move forward right now. And that's the issue that we have kind of guiding that when it becomes more profitable. There are other pieces of that our high-voltage business things like that. So, our total industrial business is a nice business. I'm not going to get into the margin profile of the whole thing but it's nice and that will be additive. So, net between the two it's good. I do -- I hear what you're saying. We need it to increase back to normalized levels. There's opportunities for that to happen. We're unwilling to get in front of that at this point and get formal guidance. But, in general, if you saw the economy pick back up, air travel pick back up, all those kind of things certainly that would increase. I'm on that. I want to talk a little bit about LatAm and I'll let Derrick. LatAm for us it was really about the COVID impact there. It's much greater than it is in the U.S. It really shuts our crews down. The testing that goes on there is much greater than we anticipated so it has affected the work and our ability to close it out faster. We've taken all that into account as we look at this year for the closeouts and anything going forward. Not to say something won't trickle in, but I think we have our hands around the COVID impact that's going on now and our ability to execute through that that we -- I'm not sure that we quite understood the difference between what's going on in LatAm versus what's going on in the States. So, we have that in our head now. And I think we have the right number on guidance. And I'll let Derrick comment on the rest.

Yes. So, I'll just jump in there on that last part in Latin America and to maybe expand on it. Just to touch that the effects on there were exacerbated. I mean it's more so that when we're having those shutdown dynamics there since we are dealing with a low revenue base at this stage the cost dynamic gets quite accelerated as we try to ramp up those projects and bringing them down. Relative to the 80% reduction what I would tell you is between now and the end of the year we think that we can probably get to a spot where at end of the year we have only a low kind of single-digit type number of projects open four, five, six projects. That's what we think we can get to. So, it still has a dramatic reduction. And there will be a few that have some layover into 2021, but we believe that that's what we're still looking at in the fourth quarter is our ability to bring that down and having so few contracts roll into a 2021 dynamic at this stage. Touching back just to touch on the industrial side. I mean I will say historically that business has been able to operate in a kind of a double-digit margin EBITDA profile double-digit EBITDA and at this stage, that's clearly not where we're at. We're probably much closer to a breakeven-type dynamic. And so as we go forward past 2021 into a 2022-type dynamic where we think that we can see that then we would have every anticipation of being back into a more double-digit EBITDA profile. Last, I think probably just coloring as Duke said multiple times on that $4, we were very comfortable with it being within the range, but there's just a lot of things we still have to digest between now and then as much focused on what's happening that's unique to that industrial market in 2021.

Thank you. I thought I'd try.

Thank you. Our next question is coming from Michael Dudas of Vertical Research. Please go ahead.

Good morning Duke, Derrick, Kip.

Good morning.

Duke you talked about a couple of your acquisitions you highlighted in the quarter. You have this recapitalized very strong balance sheet and cash flow. Do you anticipate given the strong outlook for programmatic and other type spending amongst specialty E&P and the telecom customers that that pace subject to negotiation may accelerate over the next six to 12 months given the long-term opportunities that you're seeing in front of you?

Mike, thank you. In general I don't think our strategy has changed at all. I think in general everything is -- we look at our stock first. And well actually we look at our working capital needs then we'll look at everything else that's against our stock and evaluation there. So -- and we don't -- we never have and nor will be out marketing for acquisitions. They come as the nice family business in the Carolina. It's long-standing. When we knew very well right in our space it allowed us to do some really nice things. The other ones are strategies around regionals or building the front side of the business that allows us to capture more construction, or develop more services within the client base that are necessary for us to stay ahead, and to help them with their capital spend to make sure there's certainty in that as well. So we're really working on strategies. If we see something, or we see holes within those strategies, certainly we'll look at those. But in general, I don't think you should expect the company to deviate from what you've seen in the past, with stock buybacks, with the things that we've done with acquisitions. It will level out as we move forward all against like I said the valuation of the stock.

So everything is opportunistic it still appears?

We've said we want to stay equity-neutral. And so you would anticipate us doing that year-over-year from a stock buyback standpoint. Derrick can comment more on that. But in general you should expect us to do that, and opportunistic, I would say, yes, that's a good word.

Duke, my second question would be maybe you could share a little bit of some thoughts. There's been some noise coming out of Puerto Rico with the upcoming -- the U.S. election the gubernatorial elections there. Maybe remind us the structure of the contract and any issues that could arise given the results of the election or most of the stuff we're hearing appears to be noise, but I just want to get you to maybe address that a little bit.

Yeah. The contract in Puerto Rico is from -- there's one piece of it that we're in a transformation period where we're evaluating the current -- PREPA current and then they'll transform into LUMA mid next year. We're still on pace to do that. We're performing nicely against the contract. I like where we sit. Yes, it's more an election just like here in the States it's noisy. The underlying principles around the contract and the contract we have are very good. We can make a difference on the island. We are. We're building the line school there. We're doing some really nice things that I think will transform the infrastructure on the island, which will allow the economy to do much better. There's a lot of pharmaceuticals. There's a lot of other things on the island that I think it's something that we believe to make a big difference over the time frame of the contract which is 15 years. That being said, there are out clauses that's extremely expensive for them to get out, I would say. It's public. You can look at it. But in general, we don't anticipate that. We anticipate the election is going along, and we'll work with the incumbent governor to do good things there, which we anticipate happening here in the mid next year.

Thanks, Duke.

Thank you. Our next question is coming from Chad Dillard of AllianceBernstein. Please go ahead.

Hi. Good morning guys.

Good morning, Chad.

So can you comment on the level of renewable energy-driven transmission activity you're currently seeing maybe compared to like a year -- sounds like how much of your project pipeline does it represent? And is there any difference between a traditional versus a renewable job? Just trying to understand like whether you approach it differently from like execution pricing risk perspective.

I mean, primarily we're working for the utility on interconnections whether it be renewables load growth, load from one area to another. We don't define it as primarily renewables. But what I would tell you in general these grids, we're enabling renewables is what we're doing. I mean, in general when you modernize them when we're doing the things we're doing it's all around enabling that. So I don't know I can't put a percentage on how much of that is happening. Most of the larger projects you're seeing in the states are moving renewables. So you're seeing a lot of that. But a lot of -- you're also seeing a lot of grid mod and a lot of hardening. So it's just hard to put a number on it. But in general, I would tell you any of the larger transmissions call it over $100 million is typically moving renewables from -- into load areas from other areas. And if that -- the way the structure of the grid is set up if you saw that compressed such as you see in the Biden Administration on the 2030-type plan, you would see a multitude of large projects come out. It would be necessary to move that load.

That's helpful. And then just to what extent have you started to see some of the distribution spending that got delayed in the first wave of the pandemic coming back? Maybe you can kind of compare where you are today versus March like a year ago. And to what extent are you thinking about a potential catch-up spend as we go into 2021? And then just secondly just going back to the Stronghold. Let's just assume activity doesn't come back like you expect in the second half of next year. What levers do you have to pull to bring cost out so you go from breakeven to the higher margins?

I think in general when we look at the distribution business both gas and electric you had the light switch effect in the second quarter, which is not there now. But on the electric side, we performed through that. If you look at the business 85%, 90% we'll grow at kind of mid single to double-digits. We'll continue to do that under these scenarios what we see today both distribution and transmission. There's a big spend out there. It's no surprise to anyone. We've talked about it. The backdrop of our customers continues to grow. We're seeing their capital budgets grow. We're right there with them, modernizing these systems, electric vehicles enabling that. It's just starting. So that's a lot at the distribution level. When you start to enable the EV or even your telecom, your 5G deployments that's all around that distribution level spend. And when that starts to move, it really presses on those things. You'll also start to see undergrounding at the distribution level and years to come. So I do think in the outer years, you're going to start to see a big initiative around undergrounding because it's still going to be necessary when you start looking at the events that we're having with ice or fire or hurricanes that also is something that needs to be done over time. So I think you'll see some of that as well.

Got it. And on Stronghold just what leverage do you have to pull to bring cost out?

I think we pulled the levers there to rightsize the business for what we see today. We have a great management team there. I think we'll come out stronger. As we look going in and we think of it a little bit worse than 2008 and 2009 and their best years were 2011 – 2010, 2011, 2012, 2013 had really nice years on through but in general if we go back to those time frames and look how history repeats itself. Refined products and things of that nature are still here whether you're in a renewable space or not, most of the things, batteries everything that we have today phones they're refined products and that's going to continue over time. The Gulf Coast has a really nice -- it's a really low base from a cost standpoint worldwide. We need the economy to pick back up, but you can only delay that stuff so much in general. And I do think it will pick up over time and catch back up and you'll see some robust years in the outer years.

Thank you. Our next question is coming from Noelle Dilts of Stifel. Please go ahead.

Hi, guys. Thanks for fitting me in, and congratulations on a good quarter. So for my first question I wanted -- I was wondering if you could expand a little bit just on fire hardening. Given the continued fires in California and Colorado, how is that impacting both your near-term expectations relative to what you're expecting early in the year? And then how are you thinking about the longer term opportunity and what this could lead to?

I think it's much like we see on the Gulf Coast now with hurricanes. In general, it's necessary to harden those systems. We went through a bankruptcy there with one of the large utilities in California. As that comes out this year and into next, you'll start to see more programmatic spends in a paced way that utilities normally operate. And we're seeing that now. But the issue is you have fires out there now, which delays anything you could do because of what you're in fire season. And so you're at the mercy of that. But in general so you're doing some emergency work and things like that but over time we'll continue to see the utilities in the west harden the system for fires over time. And it's a long multiyear process that all of them are going through and we're all working through that together in a collaborative manner. It's a big state for us. The west is big for us and we'll continue to build resources out there for what's necessary to harden those systems for fire.

Okay, great. Thank you. And then second I just had a couple of project specific questions. So first given TC Energy's announcement on the Keystone XL contractors, I'm just kind of curious how you're thinking about that project from -- in terms of just both going into backlog and just the probability of the project moving forward given that they're still in limbo with the NWP 12 issue and the upcoming elections? And then secondly on the New England Clean Power project. I know that's a very big project. Just curious again that's been a tough geography for permits. So maybe you could give us a sense of how comfortable you are that that job kind of moves forward on time.

Yeah. We're comfortable with the Queensland project up there in May. I think it moves on time. We've been with that project for a while. We think the permits are in pretty good shape and it will get moving here in next year sometime. But -- so that one’s that. And if not then there's a multitude more projects and I'm not concerned with that. The $4 that we contemplate, we think about all these kind of things. And in general when we look at big pipe, we have a customer base out there that we support. We'll continue to do so. We like the projects as they come. We talked about the business being around $500 million. We've transitioned the P&I segment away from big pipe as you know. I've stated it many times and I think we'll -- it can grow off the $500 million. It can be greater. But in general when we're talking about guidance and how to look at next year, you should think about the $500 million. If we start stocking projects, if things go our way, if things go good, we'll talk to you about it. And certainly that would be upside. But in general, we should look at $500 million in that piece of business. Yes we can expand it, but we're not going to take the risk. We're going to make sure it's risk -- the risk is conducive with the margins. And that's one of the things the company has been disciplined on and we'll stay that way.

Okay, great. Thanks very much.

Thank you. Our next question is coming from Alex Rygiel of B. Riley. Please go ahead.

Thank you. Nice quarter, gentlemen.

Hey, Alex.

Other than Puerto Rico and Canada, and your businesses in Latin America, do you have any interest in any other international markets at this time? Mexico comes to mind, because it's been talked about for years.

Alex, so we have the Australian business. I think in general you've seen us exit Lat Am and it would have to be following a customer in there, a U.S. customer. But I don't see that as being somewhat a priority for us. We can grow North America nicely. And I think for us right now with the builds that we see, with the ability to grow on our base business and things of that nature we'll stay within the states and within the areas that we're in call it North America, Puerto Rico as an island and Australia.

And then a number of years ago maybe it was six or eight years ago there was definitely a step-up in increased regulation that complicated some of your projects slowed your projects impacts profitability of your projects. How has that changed under the Trump administration? And if Biden should win, do you have any concerns that the regulatory environment becomes increasingly more challenging?

What I would say is that, I think under the administration, they want to create jobs and we've seen that. But in general, I don't think from our standpoint, when we look at it, when we look at what the Biden administration energy plan from a clean energy plan, all that bodes well for us. We didn't really have issues on the base load work that we're doing today. I think the sentiment around carbon-free and how we enabled that whether it be from a distribution level or a transmission level the jobs that we're trying to put forth in the capital spends that we see we don't believe that under either administration the regulatory impact would be something that would give us problems actually probably benefits us in my mind. On the pipe – the big pipe side, we transitioned the company away from it years ago five years ago. So when we talk about the $500 million, and those projects are where you see the most – where the issues are really to be honest. And so that's where they were and that's where it's tough even – under any administration. So that's the issue there Alex. But the company is enabling a lot of things. Technology is well on 5G deployment and things of that nature. So I think everyone sees – you can see our conference call today. The need for bandwidth, the need for technology, the need for the things that we do from an infrastructure standpoint will continue for some time. We're optimistic and feel real good about where we sit.

Helpful. Thank you.

Thank you.

Thank you. At this time, this brings us to the end of our question-and-answer session. I would like to turn the floor back over to management for any additional or closing comments.

Yeah. First, I would like to say thanks to people in the field that are working today restoring power. It's been a long run there, and a lot of people without electricity. So we're working diligently and safely as an industry to pick those things up. And it's no easy task under a pandemic. So real proud of the industry, as well as our people. And thank you all for participating in the third quarter conference call. We appreciate your questions and your ongoing interest in Quanta Services. This concludes our call.

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines at this time. And have a wonderful day.